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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Panther Metals Plc | LSE:PALM | London | Ordinary Share | IM00BRF2WV49 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 90.50 | 88.00 | 93.00 | 90.50 | 90.50 | 90.50 | 1,890 | 08:00:03 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gold Ores | 0 | -953k | -0.2355 | -3.84 | 3.66M |
From Jul 2019 to Jul 2024
TIDMPALM
RNS Number : 1709B
Asian Plantations Limited
12 April 2012
12 April 2012
Asian Plantations Limited
("APL" or the "Company")
Final Results for the year ended 31 December 2011
Notice of Annual General Meeting
Asian Plantations Limited (LSE: PALM), a palm oil plantation company with operations in Malaysia, is pleased to announce its audited results for the year ended 31 December 2011.
Highlights
-- Total titled agricultural land resource increased to 20,770 hectares in Sarawak, Malaysia, exceeding the Company's original listing target.
-- Approximately 9,322 hectares of land planted as at year-end, with a further 157 hectares being used for the mill site, seedling nurseries, staff housing, quarry and related infrastructure works.
-- Development of processing mill on track and scheduled to open in Q4 2012, enabling the Company to maximise its operating margins.
-- Successful equity and equity-linked fundraisings totalling approximately USD47.4 million; USD45.3 million via equity and USD2.1 million via a convertible bond.
-- Issuance of proposed bank guaranteed medium term notes programme of up to RM255 million (USD82.8 million), expected to complete in Q2 2012.
Post Balance Sheet events
-- Completion of the acquisition of 5,000 hectares of semi-developed plantation land in Sarawak, Malaysia for a total consideration of RM102 million (USD34.4 million).
Hot Features
Premium
-- APL granted membership to the Roundtable on Sustainable Palm Oil ("RSPO").
Graeme Brown, APL's Joint Chief Executive Officer, commented:
"2011 represents another year of significant progress for the Company. We have continued to expand our land bank and are particularly pleased with the development of our own processing mill, which we believe will be one of the most innovative in the global palm oil industry.
"During the remainder of the current year, we will continue to assess potential acquisition opportunities whilst also focusing our efforts on significantly increasing the production of fresh fruit bunches as our estates begin to mature, and I look forward to providing shareholders with further updates as we continue to execute on our development strategy."
In addition to its final results for 2011, the Company announces that the Annual General Meeting ("AGM"), relating to its financial year ended 31 December 2011, will be held at The American Club at 10 Claymore Hill, Singapore 229573 on 27 April 2012 at 11.00 a.m. The AGM notice has been published and is available for download from the Company's website at www.asianplantations.com.
For further information contact:
Asian Plantations Limited Graeme Brown, Joint Chief Executive Tel: +65 6325 0970 Officer Dennis Melka, Joint Chief Executive Officer Strand Hanson Limited James Harris Tel: +44 (0) 20 7409 3494 Paul Cocker Panmure Gordon (UK) Limited Tom Nicholson Tel: +65 8614 7553 Callum Stewart Tel: +44 (0) 20 7459 3600 Macquarie Capital (Europe) Limited Steve Baldwin Tel: +44 (0) 20 3037 2000 Dan Iacopetti Bankside Consultants Simon Rothschild Tel: +44 (0) 20 7367 8871
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors, I am pleased to present the 3rd Annual Report and Financial Statements of Asian Plantations Limited, for the financial year ended 31 December 2011.
As per previous Annual Statements, we will update the Company's shareholders with some macro level observations which, in our opinion, create and validate the investment thesis for our corporate investment activities.
SOUTHEAST ASIAN PALM OIL AS AN ESSENTIAL FOOD INGREDIENT TO THE WORLD
Humans require edible oils and fats to survive (in particular saturated fats). In the simplest of terms, as the world's human population continues to rise, so does demand for edible oils; a process further accelerated by rising income levels. This equation has driven the global vegetable oil industry for the last 40 years, particularly as butter and animals fats have been proven insufficient to meet demand or are shunned by consumers in the post-WWII period. In 1970, based on the USDA's annual reports (which detail the world's nine major edible oils), there were 3.7bn humans consuming 15.7m tonnes of vegetable oil (of which 1.9m was palm oil, approximately 13% market share). In 2011, 6.9bn humans consumed 144.6m tonnes of vegetable oils (of which 52.1m was palm oil, now approximately 36% market share). This represents a compound annual growth rate ("CAGR") for the edible oil sector of 5.5% over 41 years, versus a population growth CAGR of 1.5%. Interestingly, with the exception of one year (1984), the edible oil sector has grown continually for more than 40 years.
Whilst palm oil's continual growth and increase in market share is impressive, it is important to realize the crop's critical importance in the export markets. Palm oil now dominates over 60% of the world's trade in edible oil, virtually all of which originates from Malaysia and Indonesia. These two countries are essential to the world supply chain for edible oils and fats and provide a reliable, naturally produced source of cost-effective calories for billions of people annually.
Whilst critics of our industry live comfortably in their city homes, far from the realities of the many working poor seeking a better life and improved diets in the emerging markets, we continually remind people that we are fundamentally in the business of producing affordable food for the world in a socially responsible and environmentally sustainable manner. Palm oil is: (i) largely produced on land owned by small-holders (over 50%), contrary to public opinion, with the remainder in corporate ownership such as Asian Plantations' estates; (ii) not subsidized by the government (compared with western agriculture which often relies heavily on redistributive government policies to survive), and is furthermore a significant taxpayer to the Malaysian government; (iii) non-genetically modified ("GM"), as there is no GM in the palm oil industry compared with the western cereal crops; (iv) naturally irrigated, compared with many forms of agriculture which deplete natural aquifiers; (v) non-mechanized, thereby creating tremendous employment requirements (a 10,000 ha palm oil estate will create on average 1,500 direct full-time positions, compared with a mechanized corn or soya farm which will employ less then 20 staff); and (vi) environmentally sustainable in that one hectare of mature palm can annually produce over 6 tonnes of oil per hectare, compared with a half tonne of oil from competing cereal crops - per tonne, palm oil has the smallest environmental footprint with respect to land, fertilizer and chemical usage.
THE GLOBAL LOW COST COMPETITOR
As mentioned above, the palm oil tree's immense productivity gives it the lowest cost of production for all edible oil crops. The cash cost of production is approximately USD350 to USD375 per tonne of crude palm oil (based on current brent oil prices, as mineral oil impacts fertilizer prices), compared with a current market selling price in excess of USD1,100 per tonne of crude palm oil. It is for this reason that palm oil plantations in Southeast Asia have a global competitive and comparative advantage in the production of edible oils.
IN 10 YEARS FROM NOW
By 2021, the United Nations estimates that the global population will rise to 7.7bn, an increase of over 750m people. Based on the historic correlation between population, emerging market incomes and edible oils, edible oil production would need to rise to over 230m tonnes in 2021 of which palm oil be over 100m tonnes, and this assumes soya oil would be over 60m tonnes. In our opinion, these future production requirements are staggering in the context of current 30 year lows in global edible oil inventories, a struggling 2012 soya crop and a dramatic reduction in planting rates of palm oil across the industry. To put these figures in context, all of Malaysia produced approximately only 18.9m tonnes of palm oil in 2011 on exactly 5m hectares of palm oil estates. Thus, in less than 10 years the world needs the productive palm oil output of more than two additional "Malaysias" - implying a planting requirement rate of over 1m hectares per annum.
Historically, Malaysia has planted over 100,000 hectares per annum for the last 30 years, but this is widely acknowledged to be likely to fall to negligible levels in the next few years as Malaysian agricultural land inventories near depletion. Indonesian planting rates have historically been over 350,000 per annum for the last decade but have recently reset to a 250,000 - 200,000 hectares per annum rate due to increased environmental protection and government regulation. We are of the opinion that a serious imbalance is building in the global edible oil complex in favour of the producers, particularly the low cost palm oil producers in Southeast Asia.
The human population continues to grow and palm oil is the only crop which can satisfy our society's requirements for edible oils. We remain confident that patient investors will be well rewarded in our industry.
INVESTMENT THESIS & STRATEGIC OBJECTIVES
Due to Malaysia's strict land titling and zoning regulations, which protect over 60% of the country's land mass as a Forest or Forest Reserve, the supply of agriculturally titled land for the development of palm oil is nearly exhausted in Malaysia. There is some titled land available for purchase in the State of Sarawak; yet, we estimate this purchasable supply will also be depleted by 2015, resulting in a situation similar to that of peninsular Malaysia and the State of Sabah.
Due to our on-the-ground presence in Kuching (the capital of the State of Sarawak), we have a unique opportunity to acquire, consolidate and develop this remaining land supply in Sarawak. All land parcels that we purchase are mineral soil and have full agriculture title (i.e. "bankable" titles). We will not consider peat soil opportunities due to the higher development costs and negative environmental impact. Since our Admission on the London Stock Exchange's AIM Market ("AIM") on 30 November 2009, we have completed three acquisitions, taking our total land resource to 20,770 hectares (51,322 acres) and exceeding our original listing target. We continue to review select acquisition opportunities which will complement the Group's existing estates.
We are of the opinion that the development of properly titled green-field palm oil estates provides a highly attractive return on equity over the medium term. Current all-in-cost of acquisition, ownership and development in Sarawak, over a three year period, is approximately USD9,000 per hectare (excluding mill construction costs). Of this gross investment per hectare, we are able to leverage approximately two- thirds from the local banks in local currency under long term (+10 years) financing arrangements.
Research shows that well-run, mature Malaysian palm oil plantations are valued at up to USD30,000 per hectare in the public equity markets; this presents a meaningful premium when compared to valuations in other palm oil producing countries. As such, the Directors believe that green- field land acquisition in Malaysia, at valuations of approximately USD2,500 per hectare, are highly accretive in value to all shareholders of the Company.
We intend to be a global leader in fresh fruit bunch ("FFB") processing technology via the construction of our vertical sterilizer crushing mill with clean energy components. We have already initiated the planning and approval process for a 120 tonne vertical sterilizer mill at our estates. At completion, this mill will be among the largest in Malaysia. The mill will incorporate a proprietary sterilization process and methane recapture facility. We expect the mill to be operational in the fourth quarter of 2012 and we also intend to process third party crop from the smaller, independent operators in the area.
MALAYSIA
We are of the opinion that Malaysia represents a superior location for the development of palm oil estates due to a variety of legal, operational, financial and valuation considerations. Malaysia is an "A-" rated country that has welcomed foreign investment since the 1960s. It benefits from a stable, multi-racial democratic system and an advanced land titling system for agriculture that protects the nation's forest reserves and indigenous land rights. Malaysia's banking system is generally regarded as stable and liquid; for example, no Malaysian bank was bailed-out by the government in the last global financial crisis. Borrowing costs are approximately 5% - 6% for our loan facilities compared with corporate borrowing costs of mid-teens in Indonesia and the non-availability of leverage in other countries on the Equator. The Group enjoys strong relations with its funding banks, with certain of the Company's borrowings personally guaranteed by the Executive Directors and Chairman. The availability of low cost bank finance for plantation development in Malaysia dramatically enhances the Group's long-term equity returns, comparing most favourablywith alternative destinations in the emerging markets suitable for the cultivation of palm oil.
FINANCIAL PERFORMANCE
The Administrative Expenses for 2011 include 9,891,000 of non-cash charges related to the Company's ESOS approved by Shareholders at the Company's EGM on 22 February 2011.
31.12.11 (USD) 31.12.10 (USD)
------------------------- --------------- ---------------
Revenue 578,000 314,000
------------------------- --------------- ---------------
Other Income 4,190,000 71,000
------------------------- --------------- ---------------
Administrative Expenses 12,676,000 2,207,000
------------------------- --------------- ---------------
Other Expenses 819,000 811,000
------------------------- --------------- ---------------
Finance Expenses 1,732,000 893,000
------------------------- --------------- ---------------
Loss before Taxation 10,833,000 3,796,000
------------------------- --------------- ---------------
Income Tax (Expense)
/ Benefit (722,000) 185,000
------------------------- --------------- ---------------
Loss for the Year 11,555,000 3,611,000
------------------------- --------------- ---------------
Loss per share Basic
and diluted 28.2 11.6
FINANCIAL POSITION
The Group is pleased to report revenue of USD578,000 in 2011, an increase of 84% over 2010. The Group's balance sheet as at 31 December 2011 shows a net assets position of USD59,122,000 compared to USD18,002,000 on 31 December 2010. The Group has gross loans and borrowings with local Malaysian banks of USD44,342,000 compared to USD38,571,000 in 31 December 2010. Cash balances were USD28,052,000 at year-end 2011.
FINANCING ACTIVITIES
Subsequent to a Company EGM, on 28 February 2011, we completed a placing of 7,272,728 shares at a price of 220 pence per share, resulting in net proceeds after fees and commissions of approximately GBP15,400,000 (USD24,800,000) in new equity capital.
On 17 August 2011, we executed a Company sponsored placing of a USD2,100,000 four year, 2.50% coupon, unsecured convertible bond. These bonds can convert into a maximum of 434,700 shares of the Company implying a current conversion price of approximately 304 pence per share.
On 11 October 2011, we completed a Company sponsored placing (without the use of placement agents and brokers) of 5,457,271 shares at a price of USD3.75 per share (approximately 241 pence per share on the day of issuance), resulting in USD20,500,000 of new equity capital before expenses. This placing was carried out during extremely volatile market conditions at a 221% premium to the Company's AIM Admission on 30 November 2009.
This last placing increased the total cash equity invested in the Company, including convertible bond issuance, by approximately 40% from USD50.9 million to USD71.4 million. By year-end 2012, we expect the Company to have gross cash (equity and long term debt) invested in excess of USD200 million.
OPERATIONS & PLANTING STRATEGY
We have four wholly-owned estates:
BJ Corporation 4,795 hectares
--------------- ------- --------------------------------------
Incosetia 5,839 hectares (acquired 30th December
2009)
--------------- ------- --------------------------------------
Fortune 5,136 hectares (acquired 30th December
2010)
--------------- ------- --------------------------------------
Dulit 5,000 hectares (acquired 28th February
2012)
--------------- ------- --------------------------------------
Total 20,770 hectares (approximately 51,322 acres)
--------------- ------- --------------------------------------
As at year-end 2011, including the pro-forma effect of the Dulit acquisition, the Company had approximately 9,322 hectares of land planted as at year-end 2011, with a further 157 hectares being used for the mill site, seedling nurseries, staff housing, quarry and related infrastructure works essential for plantation operations. This compares favourably with 4,051 hectares planted as at year-end 2010.
Management anticipates planting an additional 5,500 hectares of palm oil by the end of this calendar year, with the remaining plantable area of 3,200 hectares being planted during 2013. The Company currently has three nurseries with over 500,000 seedlings prepared for short term field plantings, with the intention to open a fourth nursery in 2012 in anticipation of any potential additional land acquisitions and to maintain APL's desired total annual planting rate in excess of 5,000 hectares per annum for both 2013 and 2014.
In addition to the above palm planting, the Company expects to plant a total of approximately 300 hectares of rubber trees by the end of 2013, located in certain buffer areas of the Company's land bank which have steeper gradients that are not suitable for palm oil cultivation. Accordingly, the Company's rubber nursery is progressing well and seedlings are being grown for first plantings expected in the second half of 2012. This rubber initiative has been introduced in order to maximise the value of the Company's land bank.
Our processing mill is scheduled to open in the fourth quarter of 2012, thereby enabling the Group to maximise operating margins. The mill complex is under construction and on-schedule and will have a total capacity of 120 tonnes per hour, provided via two lines of 60 tonnes per hour. The first line will open in this year and the second line will be turned on, with minimal additional capital expenditures, once fruit volumes are sufficient which is most likely in 2014. We are using vertical sterilizer technology, with certain proprietary elements, coupled with methane recapture for processing of the effluent water. Through the combination of these two technologies, we are of the opinion that the Group will have the most advanced processing mill complex in the palm oil plantation industry globally. Compared to the industry standard "horizontal sterilizer" mill (which is effectively pre-WWII British era technology), the Group's mill is expected to have a lower all-in construction cost and higher oil extraction ratio ("OER").
It is important to note that the Group's estates are in close proximity to each other, thereby simplifying operations and management. Further, the estates are only 2.5 hours away, on a combination of paved and unpaved roads, from the deep-water port of Bintulu. This port is the only deep-water port in Sarawak and the transit point for virtually all of Sarawak's CPO exports and refining.
CLOSING COMMENTS
We wish to thank all our staff, who have worked to make the Group the success that it is today. We wish to thank our shareholders, who share our vision of creating a best-of-breed, sustainable palm oil company in Malaysia, and we also take this opportunity to thank our bankers at Malayan Banking Berhad for their continued support of our operations.
Founded in 2008, the Group is now in its fifth year of heavy capital investment. We expect this investment to yield substantial cash flows to shareholders in the medium to long term, as our planting works are completed and estates mature.
The remainder of 2012 will be an exciting period for the Group, as we continue to selectively consolidate neighbouringland parcels, complete the planting works on our existing parcels and open our milling complex. We look forward to updating you on our process in the months ahead.
TAN SRI DATUK LINGGI Non-Executive Chairman 10 April 2012
Corporate Social Responsibility
CORPORATE PHILOSOPHY
As a Company, we are committed to improving the lives of the rural communities living in the general vicinity of our estates, with approximately three villages and 200 people within 20km of the Group's plantations. It is important to note that no native communities live, or previously lived, on the Group's land.
Malaysia has an advanced titling regime, established by the British government prior to Malaysia's independence, which protects local and indigenous peoples' land rights under Native Customary Rights ("NCR") zoning. Agriculturally titled land in Malaysia dedicated for palm oil development cannot overlap with NCR Land.
In addition, Malaysia has protected, via federal zoning, over 60% of its entire land mass as a "Forest" or "Forest Reserve". In Western European countries, such as the United Kingdom or France, less than 30% of land is protected under a similar designation. "Forest" and "Forest Reserve Land" does not overlap with agricultural land and it is illegal to plant an agricultural crop, such as palm oil, on "Forest" land. As such, we feel it is important to re-iterate that there is no "clearing the virgin rainforest for palm oil" in Malaysia - this practice stopped well over 15 years ago.
Further to adhering fully with the agricultural regime outlined above, we have undertaken a variety of CSR initiatives:
MEDICAL SERVICES
The Group's medical specialist visits each community on a monthly basis. Services provided include general medical treatment, vaccinations for newborns, provision of antibiotics and emergency medical evacuation when required. Prior to the Group's involvement, there was no regular medical service in these communities.
CLEAN WATER SUPPLY
Each of the communities now has a consistent, year-round, clean water supply for the first time in their existence due to our construction of clean water systems in 2010. In 2011, we continued to maintain these systems and constructed an additional system in April. Our gravity-fed water system utilizes mini-reservoirs and a piping system to the villages. The Group provides all equipment and materials to staff, who work hand-in-hand with the residents to build and maintain the water delivery system.
EMPLOYMENT OPPORTUNITIES & OTHER
We employ all village residents who seek to work with the Group. Approximately 40 residents are currently employed in a variety of field and office roles.
SUSTAINABLE COMMUNITY DEVELOPMENT THROUGH AGRICULTURE
As part of Company's continued efforts to combat rural poverty and to improve the lives of smallvillages in the vicinity of our estates, the Company has developed an innovative joint-venture model with several indigenous Kenyah villages. With local native rights lawyers, we have assisted two Kenyah villages in forming their first-ever palm oil co-operative, entitled Koperasi Majumung Luyang Lemeting Baram Berhad ("Koperasi"). On 23 February 2012, the Company signed a joint venture agreement (the "JV Agreeement") with Koperasi to develop 500 hectares of palm oil estate on native owned land (the "Koperasi Estate") which was witnessed by nearly all members of the villages, community leaders, state officials and representatives of the Company.
The innovative joint venture is 60% owned by the Company and 40% by Koperasi, which has contributed the land for development for minimal financial consideration. Under the JV Agreement, the Company is required to develop the land and, accordingly, APL intends to plant 200 hectares in 2012 and the remainder in 2013, with land works having already been initiated on the Koperasi Estate. The Company believes that the Koperasi Estate is an important development that will substantially improve the lives of several hundred rural families and assist with the Company's RSPO certification process. The Company retains the option to expand the joint venture to several thousand hectares over the medium term. This planting is in addition to the Company's primary and proprietary planting programme described above.
Our staff are regularly invited to all local celebrations and community events; some of the residents have also participated in a video documentary which is available on www.asianplantations.com.
We strongly believe the foundation has been laid for closer cooperation in the years ahead. All aspects of our community outreach have been and will be guided by our desire to improve local lives in a sustainable and respectful manner.
Our Community Outreach Programme is also important for the Group as it prepares for the Roundtable on Sustainable Palm Oil ("RSPO") certification process. RSPO certification is a multi-year process which includes many audits, including on the Group's community and village relations.
ROUNDTABLE ON SUSTAINABLE PALM OIL
On 15 March 2012, the Executive Board of the Roundtable on Sustainable Palm Oil accepted Asian Plantations Limited as an Ordinary Member. The Company is committed to ensuring best practice at its estate with a view towards eventually securing field level certification of its estates.
Consolidated Income Statement
For the year ended 31 December 2011
Note 2011 2010
USD'000 USD'000
Revenue 5 578 314
Cost of sales (374) (270)
Gross profit 204 44
Other operating income 6 4,190 71
Administrative expenses 7 (12,676) (2,207)
Other operating expenses 8 (819) (811)
Operating loss (9,101) (2,903)
Finance costs 9 (1,732) (893)
Loss before tax (10,833) (3,796)
Income tax (expense)/benefit 10 (722) 185
Loss for the year (11,555) (3,611)
Attributable to:
Owners of the Company (11,555) (3,611)
Loss per share attributable to owners
of the Company (cents per share)
Basic 11 (28.2) (11.6)
Diluted 11 (28.2) (11.6)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2011
2011 2010
USD'000 USD'000
Loss for the year (11,555) (3,611)
Other comprehensive income
Foreign currency translation adjustments (1,978) 1,453
Total comprehensive income for the
year, net of tax (13,533) (2,158)
Attributable to:
Owners of the Company (13,533) (2,158)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Consolidated Statement of Financial Position
As at 31 December 2011
Note 2011 2010
USD'000 USD'000
Assets
Non-current assets
Property, plant and equipment 12 15,600 9,576
Biological assets 13 22,811 11,022
Land use rights 14 32,158 33,546
Goodwill on consolidation 15 7,335 7,560
77,904 61,704
Current assets
Inventories 16 345 122
Trade and other receivables 17 4,780 193
Income tax recoverable 7 26
Prepayments 18 1,575 139
Cash and bank balances 19 28,052 1,247
34,759 1,727
Total assets 112,663 63,431
Equity and liabilities
Equity
Issued capital 20 87,321 42,211
Accumulated losses (16,769) (5,214)
Other reserves 21 (11,430) (18,995)
Total equity 59,122 18,002
Non-current liabilities
Loans and borrowings 22 38,942 36,304
Convertible bonds 23 2,681 -
Deferred tax liabilities 10 6,325 5,810
47,948 42,114
Consolidated Statement of Financial Position
As at 31 December 2011 (cont'd)
Note 2011 2010
USD'000 USD'000
Current liabilities
Trade and other payables 24 1,271 795
Other current financial liabilities 25 1,086 243
Income tax payable - 10
Loans and borrowings 22 2,719 2,267
Derivative financial instruments 23 517 -
5,593 3,315
Total liabilities 53,541 45,429
Total equity and liabilities 112,663 63,431
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2011
Attributable to the owners of the Company
----------------------------------------------------
Issued Accumulated
capital Other reserves losses Total equity
USD'000 USD'000 USD'000 USD'000
(Note 20) (Note 21)
As at 1 January 2011 42,211 (18,995) (5,214) 18,002
Loss for the year - - (11,555) (11,555)
Other comprehensive income
Foreign currency translation
adjustments - (1,978) - (1,978)
Total comprehensive income
for the year - (1,978) (11,555) (13,533)
Issuance of ordinary shares
for cash 46,252 - - 46,252
Share issuance expenses (1,142) - - (1,142)
Share-based payment transactions
(Note 26) - 9,543 - 9,543
At 31 December 2011 87,321 (11,430) (16,769) 59,122
Consolidated Statement of Changes in Equity
For the year ended 31 December 2011 (cont'd)
Attributable to the owners of the Company
----------------------------------------------------
Issued Accumulated
capital Other reserves losses Total equity
USD'000 USD'000 USD'000 USD'000
(Note 20) (Note 21)
As at 1 January 2010 35,459 (20,448) (1,603) 13,408
Loss for the year - - (3,611) (3,611)
Other comprehensive income
Foreign currency translation
adjustments - 1,453 - 1,453
Total comprehensive income
for the year - 1,453 (3,611) (2,158)
Issuance of ordinary shares
for cash 6,752 - - 6,752
At 31 December 2010 42,211 (18,995) (5,214) 18,002
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2011
2011 2010
USD'000 USD'000
Operating activities
Loss before tax (10,833) (3,796)
Non-cash adjustment to reconcile loss before
tax to
net cash flows:
Amortisation of land use rights 624 406
Depreciation of property, plant and equipment 140 43
Gain arising on fair value changes in biological
assets (3,499) -
Gain arising from changes in fair value
of embedded derivative of the convertible
bonds (109) -
Gain on disposal of property, plant and
equipment (6) -
Impairment of goodwill 37 -
Interest income (93) (42)
Interest expense 1,732 893
Share-based payment transaction expense 9,866 -
Unrealised loss on foreign exchange 191 -
Working capital adjustments:
Increase in inventories (223) (77)
(Increase)/decrease in trade and other receivables
and prepayments (6,030) 179
Increase/(decrease) in trade and other payables 1,314 (5,302)
(6,889) (7,696)
Income taxes paid, net of refund (1) -
Interest received 93 42
Interest paid (2,879) (893)
Net cash flows used in operating activities (9,676) (8,547)
Investing activities
Net cash outflow arising from acquisition
of a subsidiary (Note 1(b)) - (8,084)
Purchase of property, plant and equipment (6,423) (2,630)
Proceeds from disposal of property, plant
and equipment 18 -
Additions to land use rights (196) -
Additions to biological assets (6,932) (3,809)
Net cash flows used in investing activities (13,533) (14,523)
Consolidated Statement of Cash Flows
For the year ended 31 December 2011 (cont'd)
2011 2010
USD'000 USD'000
Financing activities
Proceeds from issuance of ordinary shares 46,252 6,752
Share issuance expenses (1,142) -
Repayment of term loan (5) -
Drawdown of term loans 3,111 12,569
Repayment of finance lease liabilities (128) (103)
Proceed from issuance of convertible bonds 3,100 -
Issuance expense on liability component
of convertible bonds (27) -
Net cash flows from financing activities 51,161 19,218
Net increase in cash and cash equivalents 27,952 (3,852)
Net foreign exchange difference (1,497) 697
Cash and cash equivalents at 1 January 1,019 4,174
Cash and cash equivalents at 31 December
(Note 19) 27,474 1,019
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
Notes to the Consolidated Financial Statements
1. General
(a) Corporate information
Asian Plantations Limited (the "Company") is a limited liability company incorporated and domiciled in the Republic of Singapore and listed on the Alternative Investment Market ("AIM") of the London Stock Exchange.
The registered office of the Company is located at No. 14 Ann Siang Road, #02-01, Singapore 069694.
The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are as disclosed in Note 1(b).
(b) Subsidiaries
As of 31 December 2011, the details of subsidiaries are as follows:
Proportion
of ownership
interest
---------------
Country
Subsidiaries of incorporation Activities 2011 2010
---------------------------- ------------------ ------------ ------- ------
% %
Asian Plantations (Sarawak) Investment
Sdn. Bhd. ("APS") (1) Malaysia holding 100 100
Asian Plantations (Sarawak)
II Sdn. Bhd. ("APS II") Investment
(1) Malaysia holding 100 -
Asian Plantations (Sarawak)
III Sdn. Bhd. ("APS Investment
III") (1) Malaysia holding 100 -
Held through APS:
BJ Corporation Sdn. Oil-palm
Bhd. ("BJ") (1) Malaysia plantation 100 100
Jubilant Paradise Sdn.
Bhd. ("JP") (1) Malaysia Dormant - 100
Incosetia Sdn. Bhd. Oil-palm
("Incosetia") (1) Malaysia plantation 100 100
Fortune Plantation Sdn. Oil-palm
Bhd. ("Fortune") (1) Malaysia plantation 100 100
Asian Plantations Milling Oil-palm
Sdn. Bhd. ("APM") (1) Malaysia milling 100 100
Held through APS II
:
Kronos Plantation Sdn.
Bhd. ("KP") (1) Malaysia Dormant 100 -
Held through APS III
:
Jubilant Paradise Sdn.
Bhd. ("JP") (1) Malaysia Dormant 100 -
(1) Audited by member firm of Ernst & Young Global in Malaysia.
1. General (cont'd) (b) Subsidiaries (cont'd)
As disclosed in the Group's annual financial statements as at 31 December 2010, the Group acquired 100% equity interest in Fortune, a company incorporated in Malaysia, on 31 December 2010 and the goodwill on acquisition of USD2,712,000 has been determined based on a provisional basis. The purchase price allocation exercise was completed during the year and there is no adjustment to goodwill on acquisition.
The acquisition of Fortune provided the Group with additional 5,000 hectares land for oil palm development.
On date of acquisition, the fair values of the identifiable assets and liabilities of Fortune were:
Recognised Carrying
on date amount before
of acquisition acquisition
USD'000 USD'000
Assets
Property, plant and equipment 1,286 1,286
Land use rights 10,702 1,584
Receivables 44 44
Cash and bank balances 116 116
12,148 3,030
Liabilities
Payables (4,736) (4,736)
Deferred tax liabilities (1,924) -
(6,660) (4,736)
Net identifiable assets/(liabilities) 5,488 (1,706)
USD'000
Consideration paid for the 100%
interest acquired 8,200
Goodwill is computed as follows:
Consideration paid 8,200
Share of net identifiable assets
acquired (5,488)
Goodwill on acquisition (Note 15) 2,712
The cash outflow on acquisition is as
follows:
Purchase consideration 8,200
Cash and cash equivalents of the
subsidiary acquired (116)
Net cash outflow on acquisition 8,084
1. General (cont'd)
(b) Subsidiaries (cont'd)
Transaction costs relating to the acquisition of USD234,000 have been recognised in the "other operating expenses" line item in profit or loss in 2010.
Goodwill of USD2,712,000 comprise the fair value of land use rights acquired.
If the acquisition had occurred on 1 January 2010, the Group's revenue and loss for the year would have been USD314,000 and USD4,909,000, respectively.
During the financial year, the Group acquired three new subsidiaries, APS II, APS III and KP. The acquisition dates are 17 March 2011, 21 April 2011 and 25 October 2011, respectively. The three new subsidiaries are dormant companies at acquisition date and therefore do not have a material effect on the financial results and financial position of the Group. There is no acquisition related expenses arising from the acquisition of these subsidiaries. There is no fair value adjustment as these companies are dormant. Goodwill arising on initial recognition of USD37,000 was subsequently impaired in view of the inactivity of these subsidiaries.
Subsequent to financial year end, the Company incorporated a new subsidiary in Singapore under the name APL II Pte Ltd. Currently, the principal activity of this subsidiary is dormant.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements have been prepared on a historical cost basis, except as disclosed in the accounting policies below.
The consolidated financial statements are presented in United States Dollars ("USD") to facilitate the comparison of financial results with companies in the oil-palm industry and all values are rounded to the nearest thousand ("USD'000"), except when otherwise indicated.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2011.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.
Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.
2.2 Basis of consolidation (cont'd)
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
- Derecognises the assets (including goodwill) and liabilities of the subsidiary - Derecognises the carrying amount of any non-controlling interest - Derecognises the cumulative translation differences recorded in equity - Recognises the fair value of the consideration received - Recognises the fair value of any investment retained - Recognises any surplus or deficit in profit or loss
- Reclassifies the Company's share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.
2.3 Summary of significant accounting policies a) Business combinations and goodwill
Other than business combinations involving entities under common control, business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in other operating expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
2.3 Summary of significant accounting policies (cont'd) a) Business combinations and goodwill (cont'd)
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit is retained.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.3(c).
Business combinations involving entities under common control: Pooling of interest method
Business combinations involving entities under common control are accounted for by applying the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. No adjustments are made to reflect the fair values or recognise any new assets or liabilities. No goodwill is recognised as a result of the combination. Any difference between the consideration paid and the equity of the "acquired" entity is reflected within equity as "merger reserve". The statement of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination took place. Comparatives are presented as if the entities had always been combined since the date the entities had come under common control.
2.3 Summary of significant accounting policies (cont'd) b) Transactions with non-controlling interests
Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company.
Changes in the Company owners' ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
c) Foreign currency translation
Management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be in Ringgit Malaysia ("RM"). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group has elected to recycle the gain or loss that arises from the direct method of consolidation, which is the method the Group uses to complete its consolidation.
i) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange at the reporting date.
All differences arising on settlement or translation of monetary items are taken to the income statement with the exception of monetary items that are designated as part of the hedge of the Group's net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed, at which time, the cumulative amount is reclassified to the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).
2.3 Summary of significant accounting policies (cont'd) c) Foreign currency translation (cont'd) i) Transactions and balances (cont'd)
Prior to 1 January 2005, the Group treated goodwill, and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition, as assets and liabilities of the parent. Therefore, those assets and liabilities are already expressed in the functional currency or are non-monetary items and no further translation differences occur.
ii) Group companies
On consolidation the assets and liabilities of foreign operations are translated into USD at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement.
Rates used in the translation of results and financial position of the Company and its subsidiaries from its functional currency to its presentation currency at the end of the reporting period are as follows:
2011 2010
RM/USD
Assets and liabilities 3.1766 3.0835
Income and expenses 3.0555 3.2133
Any goodwill arising on the acquisition of foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.
In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss.
d) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding discounts, rebates, and sales taxes or duty. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The specific recognition criteria described below must also be met before revenue is recognised:
2.3 Summary of significant accounting policies (cont'd) d) Revenue recognition (cont'd)
Sale of goods
Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
Interest income
For all financial instruments measured at amortised cost and interest bearing financial assets, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in other operating income in profit or loss.
e) Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Group operates and generates taxable income.
Current income tax is recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the end of reporting period.
Deferred tax liabilities are recognised for all temporary differences, except:
- when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
2.3 Summary of significant accounting policies (cont'd) e) Taxes (cont'd)
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
- where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has became probable that future taxable profits will allow the deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exist to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it incurred during the measurement period or in profit or loss.
2.3 Summary of significant accounting policies (cont'd) e) Taxes (cont'd)
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax, except:
- when the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable; and
- receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.
f) Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 2.3(h). The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset at the following annual rates:
Building - 1.67% to 20% Renovation - 20% Infrastructure - 4% Office equipment, computers, furniture and fittings - 10% to 20% Plant and machinery - 20% Motor vehicles - 20% 2.3 Summary of significant accounting policies (cont'd) f) Property, plant and equipment (cont'd)
Depreciation of property, plant and equipment related to the plantations are allocated proportionately based on the area of mature and immature plantations.
Assets under construction included in property, plant and equipment is stated at cost and not depreciated as these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
The asset's residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
g) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
Group as a lessee
Finance leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent rents, if any, are charged as expenses in the period in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an operating expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
2.3 Summary of significant accounting policies (cont'd) h) Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
i) Financial instruments - initial recognition and subsequent measurement i) Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
The Group has only one class of financial assets, namely loans and receivables.
Subsequent measurement
The subsequent measurement of loans and receivables is as follows:
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in the income statement in finance costs for loans and in cost of sales or other operating expenses for receivables.
2.3 Summary of significant accounting policies (cont'd) i) Financial instruments - initial recognition and subsequent measurement i) Financial assets (cont'd)
Derecognition
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
- The rights to receive cash flows from the asset have expired
- The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group's continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.
2.3 Summary of significant accounting policies (cont'd) i) Financial instruments - initial recognition and subsequent measurement (cont'd) ii) Impairment of financial assets
The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.
2.3 Summary of significant accounting policies (cont'd) i) Financial instruments - initial recognition and subsequent measurement (cont'd) ii) Impairment of financial assets (cont'd)
Financial assets carried at amortised cost (cont'd)
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in profit or loss.
iii) Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, other financial liabilities, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus, in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.
2.3 Summary of significant accounting policies (cont'd) i) Financial instruments - initial recognition and subsequent measurement (cont'd) iii) Financial liabilities (cont'd)
Subsequent measurement
The measurement of financial liabilities depends on their classification as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in profit or loss
Financial liabilities designated upon initial recognition at fair value through profit and loss so designated at the initial date of recognition, and only if criteria of IAS 39 are satisfied.
Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss.
Other financial liabilities
After initial recognition, other financial liabilities are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.
2.3 Summary of significant accounting policies (cont'd) i) Financial instruments - initial recognition and subsequent measurement (cont'd) iii) Financial liabilities (cont'd)
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.
iv) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:
- There is a currently enforceable legal right to offset the recognised amounts; and
- There is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
v) Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:
- Using recent arm's length market transactions
- Reference to the current fair value of another instrument that is substantially the same
- A discounted cash flow analysis or other valuation models.
An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 29.
2.3 Summary of significant accounting policies (cont'd) j) Inventories
Inventories are valued at the lower of cost and net realisable value.
Inventories comprise consumable supplies, chemicals and fertilisers. Cost is determined using the weighted average method. The cost of the consumable supplies, chemicals and fertilisers includes expenses incurred in bringing them into store.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
k) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses, are recognised in profit or loss in expense categories consistent with the function of the impaired asset.
2.3 Summary of significant accounting policies (cont'd) k) Impairment of non-financial assets (cont'd)
For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.
The following asset has specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
l) Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the cash management.
m) Convertible bonds and embedded derivatives
When convertible bonds are issued, the total proceeds are allocated to the liability component and conversion option, which are separately presented on the statements of financial position. The conversion option is recognised initially at its fair value and is accounted for as a derivative liability. The difference between the total proceeds and the conversion option is allocated to the liability component. The liability component is subsequently carried at amortised cost using EIR method until the liability is extinguished on conversion or redemption of the bonds.
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivative financial instruments are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gain or losses arising from changes in fair value on derivative financial instruments are taken to profit or loss for the financial year.
2.3 Summary of significant accounting policies (cont'd) n) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. If the effect of time value of money is material, provisions are discounted using a current pre tax rate that, reflects where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
o) Employee benefits i) Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore company in the Group makes contribution to the Central Provident Fund scheme in Singapore, a defined contribution scheme. Subsidiary companies in Malaysia make contribution to the Employees Provident Fund. Such contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.
ii) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they accrue to the employees. The estimated liability for leave is recognised for services rendered by employees up to each reporting date.
iii) Bonus plans
The expected cost of bonus plans is recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by the employees and a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 12 months of each reporting date and are measured at the amounts expected to be paid when they are settled.
2.3 Summary of significant accounting policies (cont'd) p) Share-based payment transactions
Directors, employees and consultants of the Group receive remuneration in the form of share-based payment transactions, whereby the directors, employees and consultants render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised, depending on type of services rendered, as part of professional fees or employee benefits expense, and if related to the development of biological assets, the expense are allocated proportionately based on the area of mature and immature plantations.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transaction for which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in Note 11).
2.3 Summary of significant accounting policies (cont'd) q) Biological assets
Biological assets, which include mature and immature oil palm plantations, are stated at fair value less estimated costs to sell. Gains or losses arising on initial recognition of plantations at fair value less estimated costs to sell and from the changes in fair value less estimated costs to sell of plantations at each reporting date are included in profit or loss for the period in which they arise.
Oil palm trees have an average life of 28 years; with the first three as immature and the remaining as mature. Oil palm plantation is classified asmature when 60% of oil palm per block is bearing fruits with an average weight of 3 kilograms or more per bunch. Biological assets also include land preparation costs which is the cost incurred to clear the land and to ensure that the plantations are in a state ready for the planting of seedlings.
The fair value of the oil palm plantation is estimated by using the discounted cash flows of the underlying biological assets. The expected cash flows from the whole life cycle of the oil palm plantations is determined using the market price and the estimated yield of the agricultural produce, being fresh fruit bunches ("FFB"), net of maintenance and harvesting costs and any costs required to bring the oil palm plantations to maturity. The estimated yield of the oil palm plantations is affected by the age of the oil palm trees, the location, soil type and infrastructure. The market price of the fresh fruit bunches is largely dependent on the prevailing market price of the processed products after harvest, being crude palm oil and palm kernel.
Cost is taken to approximate fair value when little biological transformation has taken place since initial cost incurrence and the impact of the biological transformation on price is not expected to be material. Cost includes employee benefits expenses and depreciation of certain property, plant and equipment.
r) Land use rights
Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation. The land use rights are amortised on a straight line basis over the period of 60 years.
s) Share capital and share issuance expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.
t) Segment reporting
The Group is organised and managed as one segment and the Chief Operating Decision Makers ("CODM") reviews profit or loss of the entity as a whole. Thus it does not present separate segmental information.
2.3 Summary of significant accounting policies (cont'd) u) Contingencies
A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
(b) a present obligation that arises from past events but is not recognised because:
(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) The amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the statement of financial position, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.
v) Related parties
A related party is defined as follows:
(a) A person or a close member of that person's family is related to the Company if that person:
(i) Has control or joint control over the Company; (ii) Has significant influence over the Company; or
(iii) Is a member of the key management personnel of the Company or of a parent of the Company.
2.3 Summary of significant accounting policies (cont'd) v) Related parties (cont'd) (b) An entity is related to the Company if any of the following conditions applies:
(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
2.4 Changes in accounting policies and disclosures
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of 1 January 2011:
-- IAS 24 Related Party Disclosures (amendment) effective 1 January 2011 -- IAS 32 Financial Instruments: Presentation (amendment) effective 1 February 2010
-- IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011
-- Improvements to IFRSs (May 2010) 2.4 Changes in accounting policies and disclosures (cont'd)
New and amended standards and interpretations (cont'd)
The adoption of the standards or interpretations is described below:
IAS 24 Related Party Transactions (Amendment)
The IASB issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.
IAS 32 Financial Instruments: Presentation (Amendment)
The IASB issued an amendment that alters the definition of a financial liability in IAS 32 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity's non-derivative equity instruments, to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. The amendment has had no effect on the financial position or performance of the Group because the Group does not have these types of instruments.
IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)
The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset. The Group is not subject to minimum funding requirements, therefore the amendment of the interpretation has no effect on the financial position nor performance of the Group.
Improvements to IFRSs (issued May 2010)
In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies, but no impact on the financial position or performance of the Group.
2.4 Changes in accounting policies and disclosures (cont'd)
New and amended standards and interpretations (cont'd)
Improvements to IFRSs (issued May 2010) (cont'd)
-- IFRS 3 Business Combinations: The measurement options available for non-controlling interest (NCI) were amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entity's net assets in the event of liquidation should be measured at either fair value or at the present ownership instruments' proportionate share of the acquiree's identifiable net assets. All other components are to be measured at their acquisition date fair value.
-- IFRS 7 Financial Instruments - Disclosures: The amendment was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context.
-- IAS 1 Presentation of Financial Statements: The amendment clarifies that an entity may present an analysis of each component of other comprehensive income maybe either in the statement of changes in equity or in the notes to the financial statements. The Group provides this analysis in the statement of changes in equity.
Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:
-- IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008))
-- IFRS 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards)
-- IAS 27 Consolidated and Separate Financial Statements -- IAS 34 Interim Financial Statements
The following interpretation and amendment to interpretations did not have any impact on the accounting policies, financial position or performance of the Group:
-- IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits) -- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 3. Significant accounting judgements and estimates
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future period.
3. Significant accounting judgements and estimates (cont'd) 3.1 Judgements made in applying accounting policies
In the process of applying the Group's accounting policies, management has made the following judgements,apart from those involving estimations, which has the most significant effect on the amounts recognised in the consolidated financial statements:
(a) Determination of functional currency
The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiaries. In determining the functional currencies of the entities in the Group, judgement is required to determine the currency that mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the Group, which have been determined to be RM, are based on management's assessment of the economic environment in which the entities operate and the entities' process of determining sales prices.
(b) Fair value of biological assets (nursery)
The biological assets are stated at fair value. Management made the judgement that cost approximates fair value of the biological asset for nursery because little biological transformation has taken place since its initial cost incurrence. The carrying amount of nursery as at 31 December 2011 is USD1,053,000 (2010: USD1,155,000).
3.2 Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
(a) Biological assets (mature and immature plantation)
As at 31 December 2011, the Group measured its mature and immature plantation included in the biological assets at fair value less estimated costs to sell, based on a discounted cash flow model by engaging a professional valuer. The inputs to the cash flow model are derived from the professional valuer's assumptions of the crude palm oil prices, fresh fruit bunches yield and oil extraction ratio based on observable market data over the remaining useful life of the mature and immature plantation. The cash flow model does not include cash flows from financing assets, taxation or re-establishing biological assets after harvest.
3. Significant accounting judgements and estimates (cont'd) 3.2 Estimates and assumptions (cont'd) (a) Biological assets (mature and immature plantation) (cont'd)
The amount of changes in fair values would differ if there are changes to the assumptions used. Any changes in fair values of these plantations would affect the profit or loss and equity. The total carrying amount of the mature and immature plantation as at 31 December 2011 was USD1,628,000 and USD20,130,000 respectively. Further details of the key assumptions used are disclosed in Note 13.
As at 31 December 2010, the Group measured its mature plantation at fair value less estimated costs to sell, based on a discounted cash flow model whereas for immature plantation management made the judgement that cost approximates fair value in view of new oil palm plantation and that little biological transformation has taken place since its initial cost incurrence. The carrying amount of mature and immature plantation as at 31 December 2010 was USD940,00 and USD8,927,000, respectively.
(b) Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over the property, plant and equipment's estimated economic useful lives. Management estimates the useful lives of these property, plant and equipment to be within 5 to 60 years. These are common life expectancies applied in the oil palm industry. Changes in the expected level of usage and technological developments could impact the economic useful lives of these assets, therefore, future depreciation charges could be revised. The carrying amount of the property, plant and equipment as at 31 December 2011 is disclosed in Note 12.
(c) Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from projected net cash flows over a period of 25 productive years of oil palms from financial budgets approved by management and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. Further details of the key assumptions applied in the impairment assessment of goodwill, are
given in Note 15.
3. Significant accounting judgements and estimates (cont'd) 3.2 Estimates and assumptions (cont'd) (d) Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company's domicile. As the Group assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised.
The carrying amount of income tax recoverable at 31 December 2011 was USD7,000 (2010: USD26,000).
Deferred tax assets are recognised for all unused tax losses, unabsorbed capital and agricultural allowances to the extent that it is probable that taxable profit will be available against which the losses, unabsorbed capital and agricultural allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Further details on taxes are disclosed in Note 10.
(e) Share-based payment transactions
The Group measures the cost of equity-settled transactions with directors, employees and consultants by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 26.
4. Standards issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the consolidated financial statements are listed below. This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.
IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income
The amendments to IAS 1 change the grouping of items presented in Other Comprehensive Income ("OCI"). Items that could be reclassified (or 'recycled') to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group's financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012.
IAS 12 Income Taxes - Recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 always be measured on a sale basis of the asset. The amendment becomes effective for annual periods beginning on or after 1 January 2012.
IAS 19 Employee Benefits (Revised)
The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IAS 27 Separate Financial Statements (as revised in 2011)
As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The Group does not present separate financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
4. Standards issued but not yet effective (cont'd)
IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements
The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group's financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognised assets to enable the user to evaluate the nature of, and risks associated with, the entity's continuing involvement in those derecognised assets. The amendment becomes effective for annual periods beginning on or after 1 July 2011. The amendment affects disclosure only and has no impact on the Group's financial position or performance.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The completion of this project is expected over the course of 2011 or the first half of 2012. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation - Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27.
This standard becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers.
IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.
This Group currently does not have any JCEs.
4. Standards issued but not yet effective (cont'd)
IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2013.
5. Revenue
2011 2010
USD'000 USD'000
Sale of fresh fruit bunches 578 314
6. Other operating income
2011 2010
USD'000 USD'000
Interest income 93 42
Gain on disposal of property, plant
and equipment 6 -
Net foreign exchange gain 413 3
Sale of seedlings 70 -
Sundry income - 26
Gain arising on fair value changes
in biological assets 3,499 -
Gain arising from changes in fair
value of embedded derivative of the
convertible bonds 109 -
4,190 71
7. Administrative expenses
2011 2010
USD'000 USD'000
Professional fees:
* audit fee 74 125
* acquisition advisory fee - 355
* share-based payment transaction for consultants (Note
26) 147 -
* others 405 353
Stamp duty on agreements - 200
Bank charges 59 54
Employee benefit expenses 11,075 603
Directors' fees (Note 28) 172 82
Depreciation of property, plant and
equipment 50 43
Others 694 392
12,676 2,207
Employee benefit expenses comprise:
2011 2010
USD'000 USD'000
Salaries, bonus and allowances 2,585 1,302
Contributions to defined contribution
plans 212 108
Social security costs 10 6
Share-based payment transaction (Note
26) 9,744 -
12,551 1,416
Less: Capitalised to biological assets
(Note 13) (1,476) (813)
11,075 603
8. Other operating expenses
2011 2010
USD'000 USD'000
Amortisation of land use rights (Note
14) 624 406
Repair and maintenance 104 123
Motor vehicle running expenses 3 -
Cost of seedlings sold 51 -
Costs associated with the acquisition
of subsidiaries - 234
Impairment of goodwill (Note 1(b)) 37 -
Others - 48
819 811
9. Finance costs
2011 2010
USD'000 USD'000
Interest expense on loans and borrowings 1,476 893
Interest expense on convertible bonds 38 -
Accretion of interest on the convertible
bonds 218 -
1,732 893
10. Income tax expense/(benefit)
Major components of incometax expense/(benefit)
The major components of income tax expense/(benefit) for the financial years ended 31 December are as follows:
2011 2010
USD'000 USD'000
Income tax:
* Based on current year results 20 10
* Over provision in prior year (10) -
10 10
Deferred tax:
* relating to origination and reversal of temporary
differences 601 (195)
* Under provision in prior year 111 -
712 (195)
722 (185)
10. Income tax expense/(benefit) (cont'd)
Relationshipbetween tax expense/(benefit) and accounting loss
The reconciliation between income tax expense/(benefit) and the product of accounting loss multiplied by the applicable corporate tax rate for the financial years ended 31 December is as follows:
2011 2010
USD'000 USD'000
Accounting loss before tax (10,833) (3,796)
Tax benefit at domestic rate applicable
to losses
in the countries where the Group operates (1,791) (838)
Adjustments:
Income not subject to tax (94) -
Non-deductible expenses 2,506 653
Over provision of income tax in prior
year (10) -
Under provision of deferred tax in
prior year 111 -
722 (185)
For the current financial year, the corporate income tax rate applicable to the Singapore and Malaysian companies in the Group was 17% (2010: 17%) and 25% (2010: 25%) respectively.
The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.
Included in non-deductible expenses is the tax effects of share-based payment transaction of USD1,677,000 (2010: Nil).
10. Income tax expense/(benefit) (cont'd)
Deferred tax
Deferred tax relates to the following:
Consolidated statement Consolidated income
of financial position statement
2011 2010 2011 2010
USD'000 USD'000 USD'000 USD'000
Accelerated depreciation
for tax purposes (2,055) (1,016) 1,111 672
Biological assets (4,372) (1,794) 2,734 892
Revaluation of land
use rights to fair
value (7,108) (7,460) (139) (92)
Unutilised tax losses 2,593 1,581 (1,100) (970)
Unabsorbed capital
and agricultural
allowances 4,617 2,879 (1,894) (697)
Deferred tax expense/
(benefits) 712 (195)
Net deferred tax
liabilities (6,325) (5,810)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority. The following amounts, determined after appropriate offsetting, were shown in the statement of financial position.
2011 2010
USD'000 USD'000
Deferred tax liabilities (6,325) (5,810)
Reconciliation of deferred tax liabilities net
2011 2010
USD'000 USD'000
Opening balance as of 1 January (5,810) (3,682)
Recognised in profit or loss (712) 195
Deferred taxes acquired in business combination - (1,924)
Exchange differences 197 (399)
Closing balance as at 31 December (6,325) (5,810)
10. Income tax expense/(benefit) (cont'd)
Deferred tax (cont'd)
The Group has unutilised tax losses and unabsorbed capital and agricultural allowances totaling USD28,800,000 (2010: USD18,100,000). The availability of the unutilised tax losses and unabsorbed capital and agricultural allowances for offsetting against future taxable profits of the subsidiaries are subject to the provisions of the Malaysian Income Tax Act, 1967.
11. Loss per share
Basic loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.
Diluted loss per share amounts are calculated by dividing loss for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There is no dilutive potential ordinary share as at year ended 2011 and 2010.
The following tables reflect the loss and share data used in the computation of basic loss and diluted per share for the years ended 31 December:
2011 2010
USD'000 USD'000
Loss, net of tax, attributable to
owners of the Company (11,555) (3,611)
-
============= =============
No. of shares No. of shares
'000 '000
Weighted average number of ordinary
shares for basic and diluted loss
per share computation* 40,937 31,084
-
============= =============
* The weighted average number of ordinary shares takes into account the weighted average effect of changes in ordinary shares transactions during the year.
The potential ordinary shares from unsecured convertible bonds and options granted pursuant to the Company's share option scheme have not been included in the calculation of diluted loss per share because they are anti-dilutive.
12. Property, plant and equipment
Office
equipment,
computers,
furniture
Motor and Plant and Assets under
Building vehicles fittings Renovation machinery Infrastructure construction Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January 2010 356 140 55 - 182 154 4,254 5,141
Acquisition of
subsidiaries 76 4 16 - 10 1,172 140 1,418
Additions 367 233 171 33 317 406 1,423 2,950
Exchange
differences 51 25 13 - 30 181 362 662
At 31 December
2010 and 1
January 2011 850 402 255 33 539 1,913 6,179 10,171
Additions 139 267 92 6 1,115 3,526 2,193 7,338
Disposal - - (3) - (34) - - (37)
Reclassifications 1,378 45 4 - - 5,045 (6,414) 58
Exchange
differences (29) 7 (8) - (72) (311) (102) (515)
At 31 December
2011 2,338 721 340 39 1,548 10,173 1,856 17,015
12. Property, plant and equipment (cont'd)
Office
equipment,
computers,
furniture
Motor and Plant and Assets under
Building vehicles fittings Renovation machinery Infrastructure construction Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Accumulated
depreciation
At 1 January 2010 16 23 9 - 30 - - 78
Acquisition of
subsidiaries 9 2 1 - 3 117 - 132
Charge for the
year 33 58 28 1 67 168 - 355
Exchange
differences 3 10 3 - 6 8 - 30
At 31 December
2010 and 1
January 2011 61 93 41 1 106 293 - 595
Charge for the
year 112 128 54 8 179 352 - 833
Disposals - - (1) - (22) - - (23)
Reclassifications 3 45 4 - - 6 - 58
Exchange
differences (6) (17) (2) - (1) (22) - (48)
At 31 December
2011 170 249 96 9 262 629 - 1,415
Net carrying
amount
At 31 December
2011 2,168 472 244 30 1,286 9,544 1,856 15,600
At 31 December
2010 789 309 214 32 433 1,620 6,179 9,576
12. Property, plant and equipment (cont'd)
Assets held under finance leases
During the financial year, the Group acquired property, plant and equipment at an aggregate cost of USD7,338,000 (2010: USD2,950,000) of which USD915,000 (2010: USD320,000) were acquired by means of finance leases arrangements. Net carrying amount of property, plant and equipment held under finance leases arrangements which comprise plant and machinery and motor vehicles amounted to USD1,063,000 (2010: USD250,000) and USD269,000 (2010: USD232,000) respectively.
Leased assets are pledged as security for the related finance lease liabilities.
Assets pledged for banking facilities
A building of the Group with net carrying amount of USD229,000 (2010: USD240,000) is pledged for banking facilities as disclosed in Note 22.
Assets under construction
The Group's assets under construction mainly included workers quarters, terraces, roads and bridges/culverts with net carrying amount of USD1,856,000 (2010: USD6,179,000).
Depreciation capitalised to biological assets
Depreciation of property, plant and equipment of the Group capitalised to biological assets for the financial year ended 31 December 2011 amounted to USD693,000 (2010: USD312,000) (Note 13).
13. Biological assets
Biological assets comprise primarily development activities for oil palm plantations and maintenance of nurseries with the following movements in their carrying value:
2011 2010
USD'000 USD'000
At fair value
At 1 January 11,022 6,093
Additions 9,011 4,121
Gain arising from changes in fair
value 3,499 -
Exchange differences (721) 808
At 31 December 22,811 11,022
Represented by:
Mature plantation 1,628 940
Immature plantation 20,130 8,927
Nursery 1,053 1,155
Total 22,811 11,022
13. Biological assets (cont'd)
Mature oil palm trees produce FFBs which are used to produce Crude Palm Oil ("CPO"). The fair values of oil palm plantations are determined by using the discounted future cash flows of the underlying plantations. The expected future cash flows of the oil palm plantations are determined using the projected selling prices of CPO in the market.
Significant assumptions made in determining the fair values of the mature and immature oil palm plantations (2010: mature plantation), using a discounted cash flow model, are as follows:
(a) no new planting or re-planting activities are assumed;
(b) oil palm trees have an average life that ranges from 28 years (2010: 28 years), with the first three years as immature and the remaining years as mature;
(c) discount rate used for the Group's plantation operations which is applied in the discounted future cash flows calculation range from 10.0% to 11.0% (2010:9.6%);
(d) FFB price is derived by applying the oil extraction rate to the estimated CPO price of USD867 (2010: USD741) per metric tonne; and
(e) yield per hectare of oil palm trees is based on the standard yield profile of the industry.
Gain arising from changes in fair value less estimated costs to sell during the financial year ended 2011 amount to USD3,499,000 (2010: nil).
2011 2010
Hectares Hectares
Planted area:
Mature plantation 230 200
Immature plantation 4,180 3,851
Total 4,410 4,051
Depreciation of property, plant and equipment capitalised to biological assets for the financial year ended 31 December 2011 amounted to USD693,000 (2010: USD312,000) (Note 12).
Employee benefit expenses capitalised to biological assetsfor the financial year ended 31 December 2011 amounted to USD1,476,000 (2010: USD813,000) (Note 7).
The plantations have not been insured against the risks of fire, diseases and other possible risks.
The Group is exposed to a number of risks related to its oil-palm plantations:
Regulatory and environmental risks
The Group is subject to laws and regulations in Malaysia. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.
13. Biological assets (cont'd)
Climate and other risks
The Group's oil palm tree plantations are exposed to the risk of damage from climatic changes, diseases and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular tree health inspections and industry pest and disease surveys.
14. Land use rights
2011 2010
USD'000 USD'000
At 1 January 33,546 20,950
Additions 196 -
Arising from acquisition of subsidiary - 10,702
Amortisation charge for the year
(Note 8) (624) (406)
Exchange differences (960) 2,300
At 31 December 32,158 33,546
Amount to be amortised
- Not later than one year 535 605
- Later than one year but not more
than five years 2,140 2,419
* Later than five years 29,483 30,522
32,158 33,546
Land use rights are in respect of:
(a) cost of land use rights over five pieces (2010: three pieces) of long-term leasehold land owned by the Group, for the oil palm plantation development activities of the Group. The land use rights are transferable and have a remaining tenure of 52 to 60 years (2010: 53 to 57 years). The Group were granted a provisional registered lease in accordance with the provisions of the Land Code of Sarawak, Malaysia, for the use of the agricultural land for a period of 60 years by the relevant government agency. As has been the practise in East Malaysia to date, registered leases are able to be renewed at expiry for a further period of 60 years with the payment of a modest land premium per acre set annually by the State Government of Sarawak.
(b) deferred land rights acquisition costs representing the cost associated with the legal transfer or renewal for titles of land rights such as, among others, legal fees, land survey and re-measurement fees, taxes and other related expenses. Such costs are also deferred and amortised on a straight-line basis over the terms of the related land rights.
Assets pledged as security
The land use rights were pledged to secure the bank overdraft, short term revolving credit and term loans facilities as mentioned in Note 22.
15. Goodwill on consolidation
2011 2010
USD'000 USD'000
At 1 January 7,560 4,365
Arising from the acquisition of a
subsidiary (Note 1(b)) 37 2,712
Impairment of goodwill (37) --
Exchange differences (225) 483
At 31 December 7,335 7,560
Goodwill has an indefinite useful life and is subject to annual impairment testing.
(a) Impairment testing of goodwill
Goodwill arising from business combinations is allocated to the cash-generating unit for the purpose of impairment testing. The cash-generating unit is as follows:
2011 2010
USD'000 USD'000
Plantation Estates
Goodwill 7,335 7,560
The recoverable value of the goodwill of plantation estates as at 31 December 2011 was determined based on value-in-use calculations using cash flow projections, covering a period of 25 productive years of oil palms, from financial budgets approved by management. The calculations were based on the following key assumptions:
2011 2010
Discount rate (pre-tax) 10.0% to 11.0% 9.6%
Projected CPO price USD867/tonne USD741/tonne
(b) Key assumptions used in value-in-use calculations
The calculations of value-in-use are most sensitive to the following assumptions:
CPO price - The CPO price is based on Peninsula Malaysia delivered price as published by the Malaysia Palm Oil Board.
Discount rate - The discounted rate reflects the current market assessment of the risk specific to palm oil industry. The discount rate applied to the cash flow projection is pre-tax and derived from the weighted average cost of equity and cost of debt, calculated based on the subsidiaries' actual composition of the equity and debt of the plantation estates.
Based on the above analysis, management has assessed that the goodwill is not impaired as at 31 December 2011 and 2010.
15. Goodwill on consolidation (cont'd) (b) Key assumptions used in value-in-use calculations (cont'd)
Detailed sensitivity analysis has been carried out and management is confident that the carrying amount of the asset will be recovered in full, even if the present value of estimated future cash flows decreased by 20% from management's estimate.
(c) Impairment loss recognised
During the financial year, an impairment loss was recognised on the initial recognition of goodwill due to the inactivity of newly acquired subsidiaries as described in Note 1 (b).
16. Inventories
2011 2010
USD'000 USD'000
At cost:
Chemicals and fertilisers 140 64
Consumable supplies 205 58
345 122
17. Trade and other receivables
2011 2010
USD'000 USD'000
Trade receivables 49 48
Other receivables:
Deposits 4,529 72
Sundry receivables 202 73
Total trade and other receivables 4,780 193
Add: Cash and bank balances (Note 19) 28,052 1,247
Total loans and receivables carried
at amortised cost 32,832 1,440
Trade receivables
Trade receivables are non-interest bearing and are generally 30 days' (2010: 7 to 15 days') terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.
17. Trade and other receivables (cont'd)
Deposits
Included in deposits is deposit of USD4,351,000 (2010: Nil) paid for the proposed acquisition of a Malaysian company and land use rights as disclosed in Note 33.
Other receivables that are not denominated in the functional currencies of the respective entities are as follows:
2011 2010
USD'000 USD'000
Singapore Dollars ("SGD") 22 33
Other information on financial risk of trade and other receivables is disclosed in Note 30(a).
18. Prepayments
Prepayments comprise prepaid operating expenses.
19. Cash and bank balances
2011 2010
USD'000 USD'000
Cash on hand and at banks 28,052 1,247
Cash at banks earn interest at floating rates based on daily bank deposit rates.
As at 31 December 2011, the amount of undrawn borrowing facilities that may be available in the future amounts to USD7,176,000 (2010: USD14,489,000).
Cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows:
2011 2010
USD'000 USD'000
SGD 308 184
USD 17,499 1
GBP 7,239 5
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the following at the end of the reporting period:
2011 2010
USD'000 USD'000
Cash on hand and at banks 28,052 1,247
Bank overdraft (Note 22) (578) (228)
27,474 1,019
20. Issued capital
2011 2010
No. of shares No. of shares
'000 USD'000 '000 USD'000
Issued and fully
paid ordinary shares
At 1 January 33,445 42,211 29,577 35,459
Additions during
the year 12,730 46,252 3,868 6,752
Share issuance
expenses - (1,142) - -
At 31 December 46,175 87,321 33,445 42,211
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. Each ordinary share carries one vote per share without restriction. The ordinary shares have no par value.
Issuance of shares
On 28 February 2011, the Company has issued an additional 7,272,728 ordinary shares amounting to GBP16,000,001 (equivalent to USD25,752,000) via shares placement.
On 3 October 2011, the Company has issued an additional 5,457,271 ordinary shares amounting to USD20,500,027 via shares placement.
21. Other reserves
The composition of other components of other reserves is as follows:
2011 2010
USD'000 USD'000
Merger reserve (20,256) (20,256)
Foreign currency translation reserve (717) 1,261
Share-based payment transaction reserve
(Note 26) 9,543 -
(11,430) (18,995)
Merger reserve
Pursuant to an agreement dated 9 November 2009, the Company acquired the entire issued and paid-up capital of APS at par, comprising 22,500,000 ordinary shares of RM 1 each, in exchange for 22,500,000 shares of the Company. As this arrangement constitutes a combination of entities under common control, the pooling of interest method of accounting was adopted in the preparation of the consolidated financial statements of the Group. Under this method of accounting, the results and cash flows of the Company and its subsidiaries and their assets and liabilities are combined at the amounts at which they were previously recorded as if they had been part of the Group for the whole of the current and preceding periods.
21. Other reserves (cont'd)
Merger reserve (cont'd)
Merger reserve represents the difference between the consideration paid and the share capital of the "acquired" entity, APS.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of companies in the Group whose functional currencies are different from that of the Group's presentation currency.
2011 2010
USD'000 USD'000
At 1 January 1,261 (192)
Foreign currency translation adjustments (1,978) 1,453
At 31 December (717) 1,261
Share-based payment transaction reserve
The share-based payment transaction reserve is used to recognise the value of equity-settled share-based payment transaction provided to directors, employees and consultants as part of their remuneration or compensation for services rendered. Refer Note 26 for further details of these plans.
22. Loans and borrowings
2011 2010
USD'000 USD'000
Bank overdraft 578 228
Short term revolving credit 1,889 1,946
Term loans 38,007 35,956
40,474 38,130
Add: Obligations under finance
leases
(Note 27(c)) 1,187 441
41,661 38,571
22. Loans and borrowings (cont'd)
2011 2010
Maturity USD'000 USD'000
Current
Bank overdraft BLR* + 1.0%
p.a. On demand 578 228
Short term revolving credit
COF** + 2.5% p.a. (2010: 1.75%
p.a.) On demand 1,889 1,946
Term loan BLR -1.5% 2012 5 6
Obligations under finance
leases
(Note 27(c)) 2012 247 87
2,719 2,267
Non-current
2013 -
Term loans BLR -1.5% p.a. 2031 177 187
2013 -
Term loans BLR +1.0% p.a. 2020 25,106 25,864
2014 -
Term loans COF + 2.0% p.a. 2020 2,268 649
Term loans COF + 2.5% p.a. 2013 -
(2010: 1.75% p.a.) 2019 10,451 9,250
Obligations under finance
leases 2013 -
(Note 27(c)) 2017 940 354
38,942 36,304
Total loans and borrowings 41,661 38,571
* BLR refers to Base Lending Rate
** COF refers to Cost of Fund
22. Loans and borrowings (cont'd)
Details of the loans and borrowings, which are all denominated in RM, are as follows:
Obligations under finance leases
These obligations are secured by a charge over the leased assets (Note 12). Interest rates of the leases range from 4.97% to 7.95% (2010: 4.96% to 7.95%). Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are disclosed Note 27(c).
Short-term revolving credit COF + 2,5% (2010: 1.75% p.a.)
The short-term revolving credit is repayable on demand with a six months rollover period. It is secured over a leasehold land of the Group in which it has prepaid the rights to use the land as disclosed in Note 14.
Bank overdrafts BLR + 1% p.a.
There are two (2010: one) bank overdrafts which bear interest of BLR + 1% p.a. The bank overdrafts are secured over leasehold lands of the Group in which it has prepaid the rights to use the lands as disclosed in Note 14.
Term loan BLR - 1.5% p.a.
This term loan is secured over a building as disclosed in Note 12 and is repayable over a period of 22 years.
Term loans BLR + 1% p.a.
There are two term loans which bear interest of BLR + 1% p.a. The timing of repayment of one of the term loan was restructured in year 2010 and as a result, the first instalment will commence in year 2013, instead of year 2010. The other term loan will commence repayment from the year 2014. Both term loans are repayable over a period of six years and are secured over a leasehold land of the Group in which the Group has prepaid the rights to use the land as disclosed in Note 14.
Term loan COF + 2% p.a
The amount of loan obtained for this term loan is USD4.7 million and the Group has only drawn down a total of USD2.3 million (2010: USD0.6 million) as at the reporting date. The balance of this loan is available for further draw down until 31 December 2016. The repayment period will commence in Year 2014 for a period of six years. The term loan issecured over a leasehold land of the Group in which the Group has prepaid the rights to use the land as disclosed in Note 14.
Term loans COF + 2.5% p.a
There are two term loans which bear interest of COF + 2.5% p.a. (2010: COF + 1.75% p.a.). The amount of loan obtained for one of the term loans is USD9.8 million and the Group has fully drawn down this amount as at the reporting date (2010: USD8.3 million). The other term loan of USD0.7 million was fully drawn down in prior years. The repayment of both term loans will commence in year 2013. Both term loans are repayable over a period of six years and are secured over a leasehold land of the Group in which the Group has prepaid the rights to use the land as disclosed in Note 14.
23. Convertible bonds
2011 2010
Maturity USD'000 USD'000
USD1.0 million 18 November 2014 926 -
USD2.1 million 8 August 2015 1,755 -
2,681 -
The unsecured convertible bonds of USD1 million and USD2.1 million, which bear a cash interest coupon of 1.75% and 2.5% per annum, respectively, is payable semi-annually and has a maturity period of three to four years from the end of reporting period. The convertible bonds may be converted, in whole only, into 313,383 and 434,700 new ordinary shares, respectively, of no par value in the Company. This represents a conversion price of 201 pence and 294 pence per share, respectively, at any time until the maturity date at the bondholder's election. In the event of non-conversion, the Company shall redeem the convertible bonds, in whole, on maturity date such that the amount paid by the Company on redemption results in the bondholder having achieved, in respect of the convertible bonds, including coupon payments, an internal rate of return of 10%.
The carrying amount of liability component of the convertible bonds at reporting date is as follows:
2011 2010
USD'000 USD'000
Face value of the convertible bonds 3,100 -
Less: Embedded derivative (606) -
Less: Transaction costs on liability
component (27) -
Liability component at initial recognition 2,467 -
Add: Accretion of interest on the convertible
bonds 214 -
2,681 -
Embedded derivative relating to the conversion option of the convertible bond is recorded as a "fair value through profit or loss" financial instrument with a balance of USD517,000 as at 31 December 2011.
24. Trade and other payables
2011 2010
USD'000 USD'000
Trade payables 784 470
Other payables 487 325
Total trade and other payables 1,271 795
Add:
* Other liabilities (Note 25) 1,086 243
* Loans and borrowings (Note 22) 41,661 38,571
* Convertible bonds (Note 23) 2,681 -
Total financial liabilities carried
at amortised cost 46,699 39,609
Other payables that are not denominated in the functional currencies of the respective entities are as follows:
2011 2010
USD'000 USD'000
SGD 68 14
USD 3 -
GBP 1 -
Trade and other payables
These amounts are non-interest bearing. Trade payables are normally settled on 60 days (2010: 60 days) terms while other payables have an average term of 150 days (2010: 180 days).
Other information on financial risks of trade and other payables is disclosed in Note 30(b).
25. Other current financial liabilities
2011 2010
USD'000 USD'000
Accrued operating expenses 785 158
Retention monies 285 69
Deposits received 16 16
1,086 243
Retention monies represent a 5% deduction of each progress payment claimed by contractors and it shall be payable to the contractors four months after completion of work, less any deductions for breaches of contracts.
26. Share-based payment plans
The Company's share option scheme (the "Scheme"), as outlined and adopted in the Extraordinary General Meeting on 22 February 2011 (the "Adoption Date"), is a share incentive scheme to retain and to give recognition to employees, consultants and directors of the Group, and to recognise their contributions to the success and development of the Group. The Scheme also promotes an ownership culture by giving employees, consultants and directors an opportunity to have a real and personal direct interest in the Group and to align the interests of such persons with those of the shareholders so as to motivate them to contribute to the future growth and profitability of the Group. There are no cash settlement alternatives for this Scheme.
The Scheme will be administered by a committee comprising directors of the Company, duly authorised and appointed by the Board of Directors (the "Committee"). There are two categories of options namely Initial Option and Additional Option. Initial Option refers to options that are to be granted to the directors, employees, and consultants to subscribe for up to 3,568,000 shares whereas Additional Option refers to the additional options granted or to be granted pursuant to the Scheme subsequent to the grant of the Initial Option.
The aggregate amount of shares granted under the Scheme, when added to the amount of shares issued and issuable in respect of all options granted under the Scheme, shall not exceed 10% of the issued share capital of the Company (on a fully diluted basis) on the day preceding the Date of Grant.
Subscription Price for each share underlying the Initial Options shall equal SGD1.55 (approximately the equivalent of 75 pence). Subject to a non-cash variation condition in the issued ordinary share capital of the Company, Subscription Price for each share underlying the Additional Options shall be the higher of:
(i) the prevailing Market Price (converted to Singapore Dollars on the relevant date at the prevailing spot rate) on the Date of Grant of such Additional Options; and
(ii) the aggregate of (a) 1 pence and (b) the highest placement price per share (converted to Singapore Dollars on the relevant date at the prevailing spot rate) of any placement effected by the Company.
The Scheme shall continue to be in force at the absolute discretion of the Committee, subject to a maximum period of 10 years, commencing on the Adoption Date, provided always that the Scheme may continue beyond the above stipulated period with the approval of the Shareholders by ordinary resolution in a general meeting and of any relevant authorities which may then be required.
The vesting conditions for the grant of Additional Options shall be determined by the Committee prior to the Date of Grant of Additional Options. Vesting conditions on Initial Options are outlined as follows:
26. Share-based payment plans (cont'd)
Vesting conditions
(a) Directors
The Option to each director, executive and non-executive, shall subject to certain performance criteria being fulfilled, be granted in four tranches as follows:
1) the first tranche of the Initial Options comprising 25% of the award shall vest to such director when
a) the average market price of the Shares is not less than 205 pence for 30 consecutive Market Days; and
b) the CPO Crushing Mill license has been issued to the Company by the Malaysian Palm Oil Board, or similar related regulatory authority, in the course of 2011.
2) the second tranche of the Initial Options comprising a further 25% of the award shall be granted to such director when
a) the average Market Price of the Shares is not less than 205 pence for 30 consecutive Market Days; and
b) the BJ Plantation is fully planted by 31 March 2012;
3) the third tranche of the Option comprising a further 25% of the Earmarked Director Shares shall be granted to such director when, in 2012, the average Market Price of the Shares is not less than 225 pence for 30 consecutive Market Days; and
4) in relation to each director, the fourth tranche of the Option comprising the final 25% of the Earmarked Director Shares shall be granted to such director when the average Market Price of the Shares is not less than 300 pence for 30 consecutive Market Days.
Irrespective of the above, there is a selling restriction on the above shares until 31 March 2012.
(b) Employees
Any confirmed full time employee of the Group, excluding executive directors, the Initial Option which is granted to an employee are exercisable on or after 1 January 2015; however options granted based on the past performance are exercisable on or after 31 January 2013 if the BJ, Fortune and Incosetia estates are fully planted by end of calendar year 2012.
(c) Consultants
An Option granted to a consultant is exercisable in accordance with the Scheme after such grant based on such conditions as may be determined by the Committee at its sole discretion.
26. Share-based payment plans (cont'd)
Fair value of share options
The fair value of share options granted is estimated at the date of the grant using a Monte-Carlo simulation model, taking into account the terms and conditions upon which the share options were granted. The model takes into account historic and expected dividends, and share price fluctuations covariance of the Group and companies in similar industries to predict the distribution of relative share performance.
The expense recognised for this equity-settled share-based payment transaction amount to USD9,891,000, of which USD25,000 has been capitalised to biological assets.
There has been no cancellation or modification to the Scheme during the year ended 31 December 2011.
Movements in the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:
2011 2011 2010 2010
Number WAEP Number WAEP
USD USD
Outstanding at 1 January - - - -
Granted during the year 3,747,000 1.83 - -
Exercised during the - -
year - -
c
Outstanding at 31 December 3,747,000 1.83 - -
Exercisable at 31 December 761,500 1.19 - -
The weighted average remaining contractual life for the share options outstanding as at 31 December 2011 is 8.29 years.
The exercise price for options outstanding at the end of the year was SGD1.55 (approximately USD1.19) per share.
The weighted average fair value of options granted during the year, estimated by using a Monte-Carlo simulation model was USD1.96 (2010: Nil).
26. Share-based payment plans (cont'd)
The following table list the inputs to the Monte-Carlo simulation model:
2011 2010
Dividend yield (%) 0 -
Expected volatility (%) 35.9 - 41.3 -
Risk-free rate * -
Expected life of share options (years) 5 - 10 -
Share price (pence) (%) 249 - 278.5 -
* Based on GBP Libor rates and Swap rates at valuation date.
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.
27. Commitments and contingencies (a) Capital commitments
Capital commitments contracted for at the end of the reporting period not recognised in the financial statements are as follows:
2011 2010
USD'000 USD'000
Approved and contracted for:
* property, plant and equipment 3,526 337
* biological assets - -
Approved and not contracted
for:
* property, plant and equipment 40,910 17,157
* biological assets 7,975 6,546
52,411 24,040
(b) Operating lease commitments
As lessee
In addition to the land use rights disclosed in Note 14, the Group has no other operating leases.
27. Commitments and contingencies (cont'd) (c) Finance leases
As lessee
The Group has finance leases for certain property, plant and equipment. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.
Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:
2011 2010
Present Present
value of value of
Minimum minimum Minimum minimum
lease payments lease payments lease payments lease payments
USD'000 USD'000 USD'000 USD'000
Not later than
one year 318 248 115 87
Later than one
year but not more
than five years 952 844 329 287
More than five
years 99 95 67 67
Total minimum
lease
payments 1,369 1,187 511 441
Less: Amount representing
finance charges (182) - (70) -
Present value
of minimum lease
payments 1,187 1,187 441 441
28. Related party disclosures
In addition to those related party information provided elsewhere in the relevant notes to the consolidated financial statements, the following are the significant transactions between the Group and related parties (who are not members of the Group) that took place during the financial years ended 31 December 2011 and 2010 at the terms agreed between the parties, which are conducted at arm's length.
2011 2010
USD'000 USD'000
Transactions with related parties
* Construction of building 308 643
* Administrative costs charged 124 113
Related parties represent companies in which certain directors of the Group have financial interest and are also directors of these companies.
Compensation of key management personnel
2011 2010
USD'000 USD'000
Directors' salaries 662 338
Directors' fees (Note 7) 172 82
Short term employee benefits 376 189
Contributions to defined contribution
plans 44 23
Share-based payment transactions 9,735 -
10,989 632
Compensation comprise
Amounts paid to:
- Directors of the Company 827 414
- Directors of a subsidiary company 6 6
- Other key management personnel 421 212
1,254 632
Share-based payment transactions
expense:
- Directors of the Company 9,716 -
- Other key management personnel 19 -
9,735 -
10,989 632
28. Related party disclosures (cont'd)
Compensation of key management personnel (cont'd)
The amounts disclosed above are the amounts recognised as an expense during the reporting period related to key management personnel.
Directors' and other key management personnel interests in the Company's share option scheme ("the Scheme") (Note 26):
Share options held by directors under the Scheme have the following expiry dates and exercise price:
Expiry date Exercise price 2011
Directors Number outstanding
Issue date:
- 2011 2021 USD1.19 2,850,000
- 2011 2021 USD3.90 800,000
Other key management
personnel
Issue date:
- 2011 2021 USD1.19 32,000
29. Fair value of financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques that use inputs that have a significant effect on the recorded fair value
that are not based on observable market data
As at 31 December, the Group held the following financial instruments carried at fair value in the statements of financial position:
(a) Fair value of financial instruments that are carried at fair value
The Group does not have any financial instruments carried at fair value other than the derivative component of the unquoted convertible bonds. Fair value of the derivative component is valued using a binomial model based on observable market data (level 2).
29. Fair value of financial instruments (cont'd)
(b) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value
Trade and other receivables, Cash and bank balances, Trade and other payables, Other liabilities and Loans and borrowings (excluding obligations under finance leases).
The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period.
(c) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value
The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value are as follows:
Carrying Amount Fair Value
2011 2010 2011 2010
USD'000 USD'000 USD'000 USD'000
Financial liabilities:
* Obligations under finance leases 1,187 441 1,194 463
* Convertible bonds 2,681 - * -
* It is not practicable and cost outweighs benefits to determine the fair value of the unquoted convertible bonds.
30. Financial risk management objectives and policies
The Group is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and interest rate risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks. It is, and has been throughout the current and previous financial year, that the Group's policy is that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient.
The following sections provide details regarding the Group's exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.
There has been no change to the Group's exposure to these financial risks or the manner in which it manages and measures the risks.
30. Financial risk management objectives and policies (cont'd) (a) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group's exposure to credit risk arises primarily from trade receivables and deposits.
The Group currently does not have significant exposure to credit risk in trade receivables as majority of the oil palm plantation is still in development stage. There is minimal credit risk arising from other receivables as the amount is mainly on advance of diesel to contractors and will be set off against services provided by those contractors (or debtors) to the Group. Deposits placed have minimal credit risk as these are placed with creditworthy counterparties and are refundable. Cash at banks are placed in accounts with licensed banks.
Exposure to credit risk
At the end of the reporting period, the Group's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position.
Credit risk concentration profile
The Group determines concentrations of credit risk by monitoring individual customers' outstanding balances on an ongoing basis. The trade receivables at the end of reporting period relates to two customers (2010: one customer).
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are due from creditworthy debtors with good payment record with the Group. Cash at banks that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired
The Group does not have any financial assets that are either past due or impaired.
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.
The Group's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities.
30. Financial risk management objectives and policies (cont'd) (b) Liquidity risk (cont'd)
To manage the liquidity risk, the Group actively monitors its cash flows and reduces unnecessary operational expenditure and limits capital expenditure to key assets. Sufficient banking facilities are maintained to meet the Group's liquidity requirements. The Group is given four years moratorium period for its loan repayment which will only commence when the Group is able to generate steady income from crop sale in the fifth year from planting. Short term revolving credit was drawn for a period of six months and can be rolled over upon maturity as it is an ongoing working capital facility offered by the bank. In addition, the Company will increase equity through share placement as and when required.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the financial assets and liabilities at the end of the reporting period based on contractual undiscounted repayment obligations.
1 year 1 to 5 Over 5
or less years years Total
USD'000 USD'000 USD'000 USD'000
2011
Financial assets:
Trade and other receivables 4,780 - - 4,780
Cash and bank balances 28,052 - - 28,052
Total undiscounted
financial assets 32,832 - - 32,832
Financial liabilities:
Trade and other payables (1,271) - - (1,271)
Other liabilities (1,086) - - (1,086)
Loans and borrowings* (5,630) (29,879) (19,346) (54,855)
Derivative financial
instruments (517) - - (517)
Convertible bonds** - (3,319) - (3,319)
Total undiscounted
financial liabilities (8,504) (33,198) (19,346) (61,048)
Total net undiscounted
financial assets/(liabilities) 24,328 (33,198) (19,346) (28,216)
30. Financial risk management objectives and policies (cont'd)
(b) Liquidity risk (cont'd)
Analysis of financial instruments by remaining contractual maturities (cont'd)
1 year 1 to 5 Over 5
or less years years Total
USD'000 USD'000 USD'000 USD'000
2010
Financial assets:
Trade and other receivables 193 - - 193
Cash and bank balances 1,247 - - 1,247
Total undiscounted
financial assets 1,440 - - 1,440
Financial liabilities:
Trade and other payables (795) - - (795)
Other liabilities (253) - - (253)
Loans and borrowings* (2,304) (6,561) (30,291) (39,156)
Total undiscounted
financial liabilities (3,352) (6,561) (30,291) (40,204)
Total net undiscounted
financial assets/(liabilities) (1,912) (6,561) (30,291) (38,764)
* The contractual undiscounted repayment obligations is assumed based on the bankers' BLR and COF as at the reporting date.
** Assuming the convertible bonds are redeemed on maturity rather than converted to shares during period of issue.
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate because of changes in market interest rates.
The Group's exposure to interest rate risk mainly arises from its financial assets and liabilities which bear interest at floating rates.
Borrowings with floating interest rates expose the Group to certain elements of risk when there are unexpected adverse interest rate movements. The Group's policy is to manage its interest rate risk on an on-going basis, decision on whether to borrow at fixed or floating interest rates depends on the situation and the outlook of the financial market.
30. Financial risk management objectives and policies (cont'd) (c) Interest rate risk (cont'd)
Sensitivity analysis for interest rate risk
As at 31 December 2011, had the interest rates of the financial assets and liabilities which are at floating rates been 1% higher/lower (2010: 1%), ceteris paribus, the impact would be as follows:
2011 2010
USD'000 USD'000
Effect on total borrowing cost:
- +1% 314 291
- -1% (314) (291)
The assumed movement in percentage for interest rate sensitivity analysis is based on the currently observable market environment.
(d) Commodity price risk
The Group's fair value measurement of its biological assets is susceptible to the volatility in the crude palm oil ("CPO") prices in Malaysia. The Group's policy in measuring fair value of the biological assets is to adopt an average CPO price over a period of five years given CPO trend over the last 30 years which has been significantly volatile. This average CPO price will also be more relevant as it is reflective of the increase in production cost and impact of inflation in recent years.
Sensitivity analysis for commodity price risk
As at 31 December 2011, had the average CPO price used in measuring fair value of the biological assets been 3% higher/lower (2010: 3%), ceteris paribus, the impact would be as follows:
2011 2010
USD'000 USD'000
Effect on fair value changes in
biological assets:
- +3% 3,057 184
- -3% (3,057) (184)
31. Capital management
The primary objective of the Group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.No changes were made in the objectives, policies or processes during the financial years ended 31 December 2011 and 2010.
The Group monitors capital using a gearing ratio, which is loans and borrowings divided by total equity plus loans and borrowings. The Group's policy is to keep the gearing ratio below 75%
2011 2010
USD'000 USD'000
Loans and borrowings (Note 21) 41,661 38,571
Total equity 59,122 18,002
Gearing ratio 41% 68%
32. Segment information
The Group is organised and managed as one segment and the CODM reviews the profit or loss of the entity as a whole, which is the plantation segment and in one geographical location, Malaysia. Accordingly, no segmental information is prepared based on business segment or on geographical distribution as it is not meaningful.
33. Events occurring after the reporting period (a) Proposed acquisition of semi-developed plantation land
On 28 February 2012, a subsidiary of the Group completed the acquisition of 5,000 hectares of semi-developed plantation land (the "Dulit Estate"), pursuant to a conditional agreement entered into on 25 August 2011, for a total consideration of RM102 million (USD34.4 million). The Dulit Estate shares a common border with the Company's Incosetia Estate, and consists of planted area of approximately 2,500 hectares with palms that are approximately 3 to 5 years old, with the remainder unplanted.
33. Events occurring after the reporting period (b) Proposed acquisition of 100% equity interest in a Malaysian company
On 21 September 2011, a subsidiary of the Group entered into a conditional agreement for the proposed acquisition of a Malaysian company (the "Proposed Target"), which holds a 60 per cent equity interest in a joint venture company that will have ownership over two distinct land parcels in Sarawak, Malaysia (the "Proposed Acquisition"). Both land parcels, with an estimated aggregate of 16,000 hectares, are to be jointly developed pursuant to a joint venture agreement between the Proposed Target and a Sarawak Government-linked entity. As a condition to enter into the Proposed Acquisition, the Group paid a refundable deposit of RM7.9 million (USD2.5 million) to the vendor of the Proposed Target.
The Group has completed its due diligence exercise and considering its findings, is currently in negotiation with the vendor to fine-tune the terms of sale. It is envisaged that all parties to the Proposed Acquisition will be able to reach an agreement to proceed with this transaction in the near future, and as such the Group will seek to secure the required funding via a combination of an equity fund raise and/or a new debt facility.
(c) Proposed bank guaranteed medium term notes programme ("MTN Programme") of up to RM255 million in nominal value and proposed bank guarantee facility of RM255 million from Malayan Banking Berhad to BJ Corporation to guarantee the full principal redemption of the MTN Programme of up to RM255 million and one semi-annual coupon payment ("Guarantee Facility").
The Group is currently undertaking an exercise for a proposed MTN Programme and Guarantee Facility under the name of a subsidiary, BJ Corporation Sdn. Bhd ("BJ"). The proceeds from this programme will be utilised towards the construction of the Group's first vertical steriliser oil palm mill, refinancing of the Group's certain loans and borrowings that are due for repayment, and to also finance the plantation development expenditure including capital working requirements for BJ.
The lead arranger of the MTN Programme obtained approval for the programme from the Securities Commission in Malaysia on 16 March 2012.
34. Authorisation of financial statements for issue
The consolidated financial statements for the financial year ended 31 December 2011 were authorised for issue in accordance with a resolution of the Directors on 12 April 2012.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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