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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| R.e.a. Holdings Plc | LSE:RE. | London | Ordinary Share | GB0002349065 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 0.68% | 74.00 | 73.00 | 75.50 | 74.00 | 74.00 | 74.00 | 92,025 | 15:20:59 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Chemicals & Chem Preps, Nec | 208.78M | 27.78M | 0.6318 | 1.22 | 33.85M |
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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Half yearly results
18-Sep-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
R.E.A. HOLDINGS PLC (the "company")
HALF YEARLY REPORT 2020
HIGHLIGHTS
Overview
· Oil palm cultivation deemed an essential industry by the Indonesian
government, allowing operations to continue normally, albeit with certain
changes to working practices because of Covid-19
· CPO and CPKO markets and prices in the first half of 2020 adversely
affected by the pandemic but now recovering
Financial
· Revenue up 10 per cent to $62.4 million (2019: $56.6 million),
benefitting from higher average selling prices for CPO of $527 (2019:
$430) per tonne
· Estate operating costs reduced to $28.4 million (2019: $32.6 million)
and administrative costs to $6.2 million (2019: $8.4 million) following
2019 cost saving initiatives
· EBITDA increased to $11.2 million (2019: loss of $0.1 million)
· Pre-tax loss decreased 76 per cent to $7.2 million (2019: loss of $29.5
million), assisted by a $10.7 million positive swing in foreign exchange
· Debt repayment of $50.0 million (GBP30.9 million sterling notes and $11.1
million loan from PT Dharma Satya Nusantara Tbk ("DSN"), the group's local
15 per cent partner in REA Kaltim) rescheduled in March 2020 from August
2020 to August 2025
Agricultural operations
· FFB production increased to 349,087 tonnes (2019: 335,177 tonnes);
overall crop for 2020 expected to be weighted to the second half
· Small reduction in third party FFB purchased to 91,861 tonnes (2019:
94,680 tonnes), with the group no longer processing crop from the formerly
owned PBJ estate
· CPO extraction rates averaged 22.9 per cent (2019: 22.9 per cent) with
operational improvements to come through as the mill works (extended by
delays with contractors and supplies of materials) complete
Stone and coal interests
· ?Stone concession holding company close to concluding agreements to
permit evacuation of stone once quarrying commences
· Recommencement of coal production by IPA on hold due to Covid-19 and
weak coal prices
Sustainability
· Recertification audits successfully concluded and licences renewed
despite logistical constraints due to Covid-19 travel restrictions
· Proposals regarding compensation arrangements in respect of two HCV
assessments approved by the RSPO
· Recycling centres established in housing areas under new government
initiative to reduce volume of waste from employee households
Outlook
· Firmer prices for CPO and CPKO should continue as a consequence of
recent low levels of planting and replanting in Indonesia and reduced
fertiliser applications by some growers, resulting in slower growth in
production
· Current higher prices for CPO and CPKO and the benefit of the cost
saving and efficiency measures implemented in 2019 to impact positively
results for the year overall, subject to risks of Covid-19
· $7.5 million reduction in net indebtedness since 30 June 2020 by a
capitalisation as equity of DSN's loan to REA Kaltim
· Provided that current product pricing and good crops continue, extended
credit from suppliers and customers can be progressively reduced to normal
levels
· Liquidity to improve if better operating performance and higher CPO
prices maintained and current bank discussions successfully concluded so
as to permit resumption of preference dividends in 2021
SUMMARY OF RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
6 months to 6 months to
30 June 30 June
2020 2019
Results $'000 $'000
Revenue 62,356 56,584
Earnings before interest, tax, 11,242 (110)
depreciation and amortisation*
Loss before tax (7,231) (29,496)
Loss attributable to ordinary (7,881) (19,143)
shareholders
Cash generated by operations** 29,810 5,278
Return per ordinary share
Loss (US cents) (17.9) (47.3)
* See note 5
** See note 16
INTERIM MANAGEMENT REPORT
Results
?Average selling prices and key components of the income statement for the
six months to 30 June 2020, with comparative figures for 2019, were as
follows:
6 months 6 months Year to
to 30 June to 30 31 December
June
2020 2019 2019
Average selling prices per $ $ $
tonne:
CPO 527 430 453
CPKO 616 590 533
_______ _______ _______
$'m $'m $'m
Revenue 62.4 56.6 125.0
Operating loss (2.9) (13.7) (9.1)
Loss before tax (7.2) (29.5) (43.7)
?Results for the six-month period to 30 June 2020 benefitted from a
combination of higher average selling prices, lower estate operating costs
due to cost reduction initiatives, a significant reduction to cost of sales
arising from the stock movement at historic cost and a $10.7 million
positive swing in the effect of foreign exchange. Taken together, this
resulted in a reduced loss before tax for the first half of 2020 of $7.2
million (2019: loss of $29.5 million).
Crops are normally weighted to the second half of each year so results for
the full year should reflect the benefit of increased sale volumes in the
second half without proportionately higher costs.
Earnings before interest, depreciation, amortisation, and tax amounted to
$11.2 million for the six months to 30 June 2020 (2019: loss of $0.1
million).
Specific components of the results
Sales volumes in the first half of 2019 included sales of an unusually large
carry over of stock from 2018. This meant that, although the average price
realised for CPO sales in the six months to 30 June 2020 was some 23 per
cent higher than in the corresponding period of 2019, revenue increased by
only 10 per cent. However, the corollary of this was a much lower charge to
cost of sales in respect of movement in stock.
Cost of sales for the six months to 30 June 2020, with comparative figures
for 2019, was made up as follows:
6 months 6 months Year to
to 30 June to 30 31 December
June
2020 2019 2019
$'m $'m $'m
Purchase of external FFB 10.4 8.2 17.8
Estate operating costs 28.4 32.6 67.6
Depreciation and amortisation 14.1 13.6 27.3
Stock movement at historic cost 1.0 8.8 9.1
_______ _______ _______
53.9 63.2 121.8
?Cost of sales was $9.3 million lower than for the corresponding period in
2019. This was principally due to the much lower charge in respect of stock
movement for the reasons noted above. There was also a $4.2 million
reduction in estate operating costs reflecting a combination of the cost
saving initiatives and some changes to the phasing of fertiliser
applications.
The cost of purchases of third party FFB increased by 27 per cent reflecting
higher average CPO and CPKO prices for the period.
Administrative expenses charged in the income statement amounted to $6.2
million against the $8.4 million charged in 2019, again reflecting the cost
saving initiatives and in particular the closure of the Singapore office.
Finance costs, comprising interest and other finance charges, amounted,
before capitalisation, to $4.6 million for the period to 30 June 2020 (2019:
$16.3 million). The principal component of the reduction of $11.7 million
was, as mentioned above, the $10.7 million positive swing in foreign
exchange as a result of weakening of both the rupiah and sterling against
the dollar. This resulted in foreign exchange profits in the period of $5.7
million (2019: loss $5.0 million).
The tax charge for the period was $0.8 million against a deferred tax credit
of $5.0 million in the corresponding period of 2019.
Dividends
?As stated in the company's 2019 annual report published on 7 May 2020, with
the disruption wrought by Covid-19 and the consequential collapse in the
global economy and CPO prices, the directors put on hold their previous
intention of recommencing payments of dividends on preference shares during
2020 and starting progressively to catch up the preference dividend arrears.
The directors recognise the importance of dividends to holders of preference
shares and aim to recommence payments of preference dividends as soon as
circumstances prudently permit. If the current better operating performance
and higher CPO prices are maintained, and current bank discussions are
successfully concluded, liquidity will improve so as to permit the
resumption of preference dividends in 2021. In the meantime, the half yearly
payment on the preference shares that falls due on 31 December 2020 will be
deferred and the half yearly payments on the preference shares that were due
on 30 June 2019, 31 December 2019 and 30 June 2020 will also continue to be
deferred.
While the dividends on the preference shares are more than six months in
arrears, the company is not permitted to pay dividends on its ordinary
shares.
Agricultural operations
Key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2020 2019
FFB?harvested (tonnes)
Group 349,087 335,177
Third party 91,861 94,680
_______ _______
Total 440,292 429,857
Production (tonnes)
Total FFB processed 430,292 421,527
FFB sold 11,514 7,440
CPO 98,652 96,514
Palm kernels 21,444 18,882
CPKO 6,912 5,547
Extraction rates (percentage)
CPO 22.9 22.9
Palm kernel 5.0 4.5
CPKO 39.8 39.9
Rainfall (mm)
Average across the estates 1,543 2,039
?Crops in the first half of 2020 started out strong with the late onset of
the peak cropping period in the last quarter of 2019 spilling over into the
first months of 2020 and Covid-19 having little discernible impact on group
production. In common with other plantation companies in the region, the
group then experienced some slowdown in cropping from May onwards but
production has now picked up. The group expects to achieve healthy levels of
FFB for 2020 overall, with total production weighted to the second half of
the year.
Third party FFB purchased in the first half of 2020 was marginally lower
than in 2019 when the group was still processing some crop from the formerly
owned PBJ estate as well as crop from a neighbouring company's estate.
Despite the persistently weak CPO prices throughout most of 2019, the group
maintained its standard level of fertiliser applications during 2019 and
aims to do so again in 2020. Because of Covid-19, many harvesters were
unable to travel home for the traditional Ramadan holiday period in the
middle of the year allowing productivity levels to be maintained.
Estate management continues to focus on improvements in loose fruit
collection, greater efficiency of FFB transport to the mills for processing
and tighter disciplines in the mills. Driven by the recently restructured
management team, the modifications, upgrading and implementation of more
rigorous maintenance programmes across all three mills are approaching
completion so that extraction rates can be optimised and the design
throughput in each mill can be achieved.
Significant uncertainties still remain regarding the Covid-19 pandemic and
its economic impact and the group is anyway only just emerging from a period
of considerable financial challenges. The directors are therefore continuing
to adopt a cautious approach with expenditure being minimised throughout the
group. Some additional measures are being taken to reduce costs without
compromising operational performance, including a headcount reduction of
some 200 (mostly in the temporary workforce) since the beginning of the year
as a further step in the cost saving programme initiated in 2019.
Agricultural selling prices
After a firm start to 2020, CPO prices (CIF Rotterdam) fell sharply from
$860 per tonne on 1 January to a low for the year to date of $510 per tonne
in mid May. Since then, on the back of restocking in India and China
combined with lower production reflecting reduced fertiliser applications by
smallholders and others in the recent past, labour shortages because of
Covid-19 travel restrictions and the much reduced rate of extension planting
of recent years, there has been a recovery to the current level of $750 per
tonne.
The average selling price for the group's CPO for the six months to the end
of June 2020, on an FOB basis at the port of Samarinda, net of export levy
and duty, was $527 per tonne (2019: $430 per tonne). The average selling
price for the group's CPKO, on the same basis, was $616 per tonne (2019:
$590 per tonne).
There have been reports that the Indonesian government is contemplating
increases in the export levy on sales of CPO and CPKO in order to provide
increased support to Indonesian biodiesel producers. Whilst such additional
support would be helpful in underpinning the current level of CPO prices,
the increase in the levy (said to be $20 per tonne at current CPO and CPKO
prices) is likely to reduce by that amount the prices that the group can
obtain for its sales of CPO and CPKO.
Stone and coal interests
Following the previously reported conclusion of an agreement with a
neighbouring coal company on quarrying the andesite stone concession earlier
in 2020, the coal company in question commenced preparations for building
the road through the group's estates utilising stone sourced at least in
part from the concession. This augurs well for the commencement of stone
production, although activity has been delayed by the Covid-19 pandemic and
is unlikely to commence in earnest until 2021. In the meanwhile, the stone
concession holding company is close to agreeing easements with neighbouring
properties to permit evacuation of stone once quarrying commences.
Continuing weakness in coal prices in the wake of the Covid-19 pandemic has
also meant a further delay to the planned recommencement of coal production
by the concession holding company, PT. Indo Pancadasa Agrotama ("IPA").
The merits hearing in the arbitration in respect of certain claims made
against IPA by two claimants (connected with each other), with whom IPA
previously had conditional agreements relating to the development and
operations of the IPA coal concession, took place by way of a virtual
hearing at the end of June 2020. The arbitrators had joined the company as a
party to the arbitration on a prima facie basis and without prejudice to any
final determination of jurisdiction. The company, which was never a party to
any of the agreements between IPA and the claimants, declined to accept
jurisdiction or participate in the arbitration. Further related potential
claims made or threatened in respect of, inter alia, alleged tortious
conduct by the company, its subsidiary, REAS, and its managing director have
been stayed pending a conclusion of the arbitration hearing. The outcome of
the arbitration is not expected until the end of 2020 at the earliest. None
of the claims is considered to have any merit.
Sustainability
?Several certification and re-certification audits for the ISCC, RSPO, RSPO
SCCS and ISPO schemes were successfully completed during the first half of
2020, with all queries satisfactorily resolved and licences renewed.
The annual audit for ISCC re-certification took place before the Covid-19
travel restrictions were implemented. Certificates for each of the three
mills and the bulking station were renewed and remain valid until March
2021.
The RSPO annual surveillance audit for the Perdana oil mill ("POM") and its
supply base also was completed before the Covid-19 travel restriction and
lockdown period and certification remains valid until June 2021. However,
surveillance audits for Cakra oil mill ("COM") and its supply base (in
accordance with SCCS) and for the kernel crushing plant ("KCP") at COM had
to be conducted either remotely or partly remotely. This resulted in the
PalmTrace licence for COM being temporarily extended until later in 2020
pending completion of the onsite audit work. The PalmTrace licence for the
Cakra KCP, however, has been renewed until July 2021.
The RSPO has completed its review of compensation liabilities in respect of
two small areas of land within SYB that were cleared in 2008 prior to
conducting HCV ("High Conservation Value") assessments. The group's proposal
in respect of some 129 hectares of land at Satria estate was approved by the
RSPO in March 2020 and the group is now developing a concept note for a
conservation programme in accordance with the RSPO's Remediation and
Compensation Procedure. Once completed, the Satria oil mill ("SOM") can be
audited to secure re-certification. As regards the 44 hectares at SYB's
Tepian estate that were excised from the POM supply base in 2019, the final
HCV compensation liability was also approved by the RSPO in January 2020.
The group is developing another concept note in respect of this area so
that, in due course, the area will be reinstated within the POM certificated
supply base.
The social impact assessment ("SIA") required to be conducted by third party
consultants in respect of 959 hectares cleared at CDM has been delayed owing
to Covid-19 travel restrictions. It is intended that the SIA will take place
later in 2020. A compensation plan has already been agreed in principle with
the RSPO and payments will be settled over a period of several years.
The RSPO is also reviewing certain incidences of land clearing prior to HCV
assessments in respect of two plasma cooperatives which could result in a
small compensation liability. These were reported to the RSPO under a land
use change assessment late in 2019, with additional supporting materials
provided by the group regarding the environmental and social impact
assessments, free prior and informed consent, participatory land use maps,
the land acquisition process, any unresolved land disputes, corporate social
responsibility activities and consultation with the relevant communities
demonstrating that the group has no social liability in respect of the areas
in question.
The annual renewal under ISO 14001, the international standard for effective
environmental systems, for the REA Kaltim and SYB estates and mills and the
bulking station was also successfully completed in the first quarter of
2020.
The group has continued to address the traceability of its FFB supply chain
to ensure traceability to source for external FFB that is processed in the
group's mills. Mapping of smallholdings supplying FFB to the group's mills
was initially completed in 2018 and the group maintains a database of all
smallholder land within its supply base. FFB suppliers are registered
through their local cooperatives and each delivery to the group's mills is
recorded and its origin verified. This data is also used for analysis in
connection with the group's programme of support to local farmers with field
and management training in a drive to improve their productivity, fruit
quality and sustainable practices.
Since the beginning of the year, the company has been working with the local
government and communities to develop a network of trained community groups
to promote fire prevention and develop fire-fighting capabilities in,
initially, eight neighbouring villages. The groups are intended to encourage
efforts in the local communities to reduce the traditional reliance on fire
for clearing village land and work in parallel with other company-funded
community development initiatives to promote forest and habitat
conservation. This project will be extended into additional villages.
Under another new government initiative, the company has recently
established waste and recycling centres in the housing areas for each estate
and mill. The centres collect waste from employees and their households and
the waste is then collected by local district bodies as part of the
inorganic waste management programme sponsored by the regional Environment
and Forestry Service. Households receive financial compensation based on the
volume of waste deposited and the group benefits from the reduction in waste
collected for landfill.
Since January 2020, the conservation department has planted approximately
1,200 seedlings from its nursery of over 4,000 forest fruit and timber trees
for restoration at various sites, including the regeneration of conservation
reserves, and for the benefit of local communities and the group's
employees.
The biodiversity team's programme of mapping the locations of all Critically
Endangered, Endangered and Vulnerable species within the group's
conservation reserves has identified 469 species (mostly birds) so far in
2020. Programmes to promote conservation to the local communities have had
to be put on hold because of the Covid-19 pandemic, but the conservation
department has continued to work with estate employees throughout the
period.
Financing
?At 30 June 2020, the group continued to be financed by a combination of
debt and equity (comprising ordinary and preference share capital). There
was a decrease in total equity including non-controlling interests to $245.7
million from $252.7 million at 31 December 2019.
Group indebtedness at 30 June 2020 totalled $206.0 million against $217.3
million at 31 December 2019. Against this indebtedness, the group held cash
and cash equivalents of $6.3 million (31 December 2019: $9.5 million). The
composition of the resultant net indebtedness of $199.7 million was as
follows:
$'m
7.5 per cent dollar notes 2022 26.9
("2022 dollar notes") ($27.0 million nominal)
8.75 per cent guaranteed sterling notes 2025
("2025 sterling notes") (GBP30.9 million nominal) 37.1
Loan from related party 1.8
Loans from non-controlling shareholder 24.6
Indonesian term bank loans 110.7
Drawings under working capital lines 4.9
-------
206.0
Cash and cash equivalents (6.3)
-------
Net indebtedness 199.7
?On 31 March 2020, a meeting of holders of the sterling notes agreed
proposals to extend the repayment date of the sterling notes to 31 August
2025. As consideration for this, the sterling notes are now repayable at
GBP1.04 per GBP1.00 nominal on 31 August 2025 and the company has issued to
noteholders 4,010,760 warrants with each such warrant entitling the holder
to subscribe, for a period of five years, one new ordinary share in the
capital of the company at a subscription price of GBP1.26 per share.
Subsequently, the repayment due on the loan to CDM made by a subsidiary of
DSN has also been rescheduled to 2025.
The group net indebtedness at 30 June 2020 of $199.7 million represents a
reduction of some $8.1 million from the group net indebtedness at 31
December 2019 of $207.8 million. This reduction has been achieved by the
combination of continued repayments of local bank borrowings and a fall in
dollar terms of rupiah and sterling indebtedness as a result of both the
rupiah and sterling weakening against the dollar. Since 30 June 2020, group
indebtedness has been further reduced by $7.5 million representing the
capitalisation as equity of DSN's 15 per cent share of loans to REA Kaltim
(the balance of capitalised loans comprising loans from the company to REA
Kaltim, the capitalisation of which does not affect group indebtedness).
Moreover, since 30 June 2020 the rupiah has weakened and currently stands at
Rp 14,844 = $1. At that level, the Indonesian bank indebtedness at 30 June
2020 would have been reduced in dollar terms by some $4.2 million.
As noted under "Results" above, earnings before interest, tax, depreciation
and amortisation for the six months to 30 June 2020 amounted to $11.2
million which was insufficient to cover interest payments of $9.8 million,
the outflow on investing activities of $9.4 million and the repayments of
bank loans. The shortfall was funded from a combination of related party
loans, pre-sale advances from customers and supplier credit with the major
component of such funding provided by customers keen to secure supplies of
CPO and CPKO as industry stocks diminish. Pre-sale advances from customers
entail forward commitments of CPO and CPKO on the basis that pricing is
fixed at the time of delivery by reference to prices then prevailing.
Provided that current higher CPO and CPKO prices and good crops continue,
the group believes it will be able progressively to reduce to normal levels
the extended credit secured from suppliers and customers while continuing to
meet its other commitments. However, reliance on such credit can restrict
the group's operational flexibility and leave it with little reserve against
another downturn in its cash flows.
Accordingly, the group is continuing financing discussions with its
Indonesian bankers, PT Bank Mandiri (Persero) Tbk. The logistics of such
discussions have been and continue to be complicated by Covid-19
restrictions in Jakarta which means that the discussions are taking longer
than expected. Following advice from the bank not to seek a restructuring of
existing group loans, the group has reverted to applying for new loans from
the bank to be drawn down over 2020 and 2021 in amounts broadly equivalent
to the repayments to be made to the bank over the two years in respect of
the group's existing loans. Notwithstanding the logistical challenges, this
application has now reached an advanced stage and the bank remains
supportive of REA Kaltim and its subsidiaries.
Outlook
?While CPO consumption is likely to remain restrained and may even decline
in the very short term, the long term growth trend is likely to be resumed
before long. Production and stock levels across the industry are generally
expected to continue to be impacted by lower yields as a consequence of
reduced fertiliser applications by some producers, slower growth in mature
plantings and increasing age profiles due to a lack of replanting, as well
as constraints on the availability of labour. This bodes well for future
prices and the directors, therefore, look forward to a more positive outlook
as cash flows improve.
Approved by the board on 17 September 2020 and signed on its behalf by
DAVID J BLACKETT
Chairman
RISKS AND UNCERTAINTIES
?The principal risks and uncertainties, as well as mitigating and other
relevant considerations, affecting the business activities of the group as
at the date of publication of the 2019 annual report (the "annual report")
were set out on pages 36 to 42 of that report, under the heading "Risks and
uncertainties". A copy of the report may be downloaded from the company's
website at www.rea.co.uk. Such risks and uncertainties in summary comprise:
Agricultural operations
Climatic factors Material variations from the
norm
Cultivation Impact of pests and diseases
Other operational factors Logistical disruptions to the
production cycle, including
transportation and input
shortages or cost increases
Produce prices Consequences of lower
realisations from sales of CPO
and CPKO
Expansion Delays in securing land or
funding for extension planting
Environmental, social and
government practices
Failure to meet expected
standards
Community relations Disruptions arising from issues
with local stakeholders
Stone and coal interests
Operational factors Failure by external contractors
to achieve agreed targets
Prices Consequences of lower prices
and variations in quality of
deposits
Environmental, social and
government practices
Failure to meet expected
standards
General
Currency Adverse exchange movements
between sterling or rupiah
against the dollar
Funding Meeting liabilities as they
fall due in periods of weaker
produce prices
Counterparty Default by suppliers, customers
or financial institutions
Regulatory and country exposure Failure to meet or comply with
expected standards or
applicable regulations; adverse
political, economic, or
legislative changes in
Indonesia
?
The risks as relating to "Agricultural operations - Expansion" and "Stone
and coal interests" are prospective rather than immediate material risks
because the group is currently not expanding its agricultural operations and
the stone and coal concessions in which the group holds interests are not
currently being mined. However, such risks will apply when, as is
contemplated, expansion and mining are resumed or commenced. The effect of
an adverse incident relating to the stone and coal interests could impact
the ability of the stone and coal companies to repay their loans.
In addition to the foregoing risks, the Covid-19 pandemic continues to
represent a significant risk to the group. Following an assessment of this
risk and in light of local and international regulations and guidelines in
respect of the movement of people and quarantine, the group implemented
certain changes to working practices from March 2020 to seek to mitigate the
impact of such risk on the group, its operations and its employees. Such
measures include the introduction of new shift patterns and work rotas in
the offices, where working from home is not practicable, as well as on the
estates and in the mills. In addition, leave arrangements have been varied
to minimise movement to and from the group's estates and a testing regime
has been introduced for all employees and contractors prior to travel to the
estates and on-site after arrival. Scaled up hygiene measures, social
distancing and wearing of masks have been implemented throughout the group
and there is an ongoing campaign to raise awareness about Covid-19.
To date, Covid-19 has had a minimal impact on production and the estate
operations generally, which are based in a remote location. Similarly, the
group's finance and administrative departments have continued to function
effectively, notwithstanding the changes made to working practices. Palm oil
cultivation is categorised as an essential industry by the Indonesian
government and the group suffered only minor operational delays in the
movement of palm oil, supplies and spare parts to and from the estates in
the early weeks of the lockdown that was implemented in April 2020 and
extended until July 2020.
However, the initial impact on the CPO?price of the Covid-19 pandemic and
consequential disruption to the global economy significantly constrained
revenue in the first half of 2020. With prices having made some recovery
since June 2020, the group can expect a lesser impact over the remainder of
the year. Nevertheless, operational disruption and global economic factors
associated with Covid-19 continue to represent a risk to the group and the
directors are seeking to address and mitigate such risk by, wherever
possible, minimising costs without compromising the operations or the
group's financial position.
The directors have considered the potential impact on the group of global
climate change. Between 5 and 10 per cent of the group's existing plantings
are in areas that are low lying and prone to ?ooding if not protected by
bunding. Were climate change to cause an increase in water levels in the
rivers running though the estates, this could be expected to increase the
requirement for bunding or, if the increase was so extreme that bunding
became impossible, could lead to the loss of low lying plantings. Changes to
levels and regularity of rainfall and sunlight hours could also adversely
affect production. However, it seems likely that any climate change impact
negatively affecting group production would similarly affect many other oil
palm growers in South East Asia, leading to a reduction in CPO and CPKO
supply. This would be likely to result in higher prices for CPO and CPKO
which should provide at least some offset against reduced production.
The directors have carefully reviewed the potential impact on its operations
of the various possible outcomes to the current discussions on the
termination of UK membership of the European Union ("Brexit"). The directors
expect that certain outcomes may result in a movement in sterling against
the dollar and rupiah with consequential impact on the group dollar
translation of its sterling costs and sterling liabilities. The directors do
not believe that such impact (which could be positive or negative) would be
material in the overall context of the group. Considering that the group's
entire operations are in Indonesia, the directors do not see Brexit as
posing a signi?cant risk to the group.
At the date of the annual report, in addition to the Covid-19 pandemic,
risks assessed by the directors as being of particular signi?cance were
those as detailed under Agricultural operations (Produce prices, Climatic
factors and Other operational factors) and General (Funding).
The directors' assessment, as respects produce prices and funding, re?ects
the key importance of those risks in relation to the matters considered in
the "Viability statement" in the "Directors' report" on page 44 of the
annual report and under "Financing" above and, as respects climatic and
other factors, the extent of the negative impact that could result from
adverse incidence of such risks.
The directors consider that the principal risks and uncertainties for the
second six months of 2020 continue to be those set out in the annual report
and as summarised above.
GOING CONCERN
?In the statements regarding viability and going concern on pages 45 and 46
of the 2019 annual report, the directors set out considerations with respect
to the group's capital structure and their assessment of liquidity and
financing adequacy.
Since publication of the 2019 annual report, CPO prices have seen some
recovery from $525 per tonne to $750 per tonne, the cost saving and
efficiency measures implemented in 2019 have positively impacted financial
performance in 2020 to date (and should continue to do so) and the group's
operating performance has remained sound, with the Covid-19 pandemic so far
having had minimal impact on the operations.
As noted under "Financing" in the Interim management report, negotiations
with the group's Indonesian bankers, PT Bank Mandiri (Persero) Tbk, have
been progressing, albeit slowly owing to logistical consequences of
Covid-19. Discussions are now at an advanced stage and the bank remains
supportive of REA Kaltim and its subsidiaries.
The group's net indebtedness reduced over the six months to 30 June 2020 and
has subsequently continued to reduce. The group has been able to achieve
such reduction by funding its cash flow requirements from improved operating
cashflows, and increased credit from suppliers and customers. Provided that
current higher CPO and CPKO prices and good crops continue, the group
believes that, even without new additional bank facilities, it will be able
progressively to reduce such extended credit to normal levels while
continuing to meet its other commitments.
Palm oil cultivation continues to be categorised as an essential industry by
the Indonesian government. Subject to any further disruption wrought by the
Covid-19 pandemic, provided that the recent recovery in CPO prices is
sustained and the group's operating performance continues to be maintained,
the directors have a reasonable expectation that the company will be able to
continue its operations and meet its liabilities as they fall due over the
period of twelve months from the date of approval of the accompanying
financial statements and they continue to adopt the going concern basis of
accounting in preparing these statements.
DIRECTORS' RESPONSIBILITIES
The directors are responsible for the preparation of this half yearly
report.
The directors confirm that to the best of their knowledge:
· the accompanying set of condensed consolidated financial statements has
been prepared in accordance with IAS 34 "Interim Financial Reporting;"
· the "Interim management report" and "Risks and uncertainties" sections
of this half yearly report include a fair review of the information
required by rule 4.2.7R of the Disclosure and Transparency Rules of the
Financial Conduct Authority, being an indication of important events that
have occurred during the first six months of the financial year and their
impact on the set of condensed consolidated financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
· note 18 in the notes to the condensed consolidated financial statements
includes a fair review of the information required by rule 4.2.8R of the
Disclosure and Transparency Rules of the Financial Conduct Authority,
being related party transactions that have taken place in the first six
months of the current financial year and that have materially affected the
financial position or performance of the group during that period, and any
changes in the related party transactions described in the 2019 annual
report that could do so.
The current directors of the company are as listed on page 43 of the
company's 2019 annual report.
Approved by the board on 17 September 2020
DAVID J BLACKETT
Chairman
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHSED 30 JUNE 2020
6 6 Year to
months months
to to
30 June 30 June 31
Decembe
r
2020 2019 2019
Note $'000 $'000 $'000
Revenue 2 62,356 56,584 124,986
Net (loss) / gain arising from
changes in fair value of
agricultural produce inventory
4 (4,701) 1,911 5,127
Cost of sales:
Depreciation and amortisation (14,097 (13,584 (27,287
) ) )
Other costs (39,825 (49,612 (94,495
) ) )
_______ _______ _______
Gross profit / (loss) 3,733 (4,701) 8,331
Distribution costs (421) (592) (1,348)
Administrative expenses 5 (6,167) (8,401) (16,097
)
)
_______ _______ _______
Operating loss (2,855) (13,694 (9,114)
)
Investment revenue 2 143 176 595
Impairment of non-current - - (3,267)
assets
Finance costs 6 (4,519) (15,978 (31,890
) )
_______ _______ _______
Loss before tax (7,231) (29,496 (43,676
) )
Tax 7 (808) 5,044 22,303
_______ _______ _______
Loss for the period (8,039) (24,452 (21,373
) )
_______ _______ _______
Attributable to:
Ordinary shareholders (7,881) (19,143 (17,814
) )
Preference shareholders - - -
Non-controlling interests (158) (5,309) (3,559)
_______ _______ _______
(8,039) (24,452 (21,373
) )
_______ _______ _______
Basic and diluted loss per 25p
ordinary share
9 (17.9) (47.3) (43.1)
(US cents)
All operations in all periods
are continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHSED 30
JUNE 2020
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Loss for the period (8,039) (24,452) (21,373)
_______ _______ _______
Other comprehensive income
Items that may be
reclassified to profit or
loss:
Exchange differences on - (29) 59
translation of foreign
operations
Deferred tax on exchange 1,148 125 1,589
differences
_______ _______ _______
1,148 96 1,648
Items that will not be
reclassified to profit or
loss:
Actuarial gains / (losses) 268 (105) (316)
Deferred tax on actuarial (67) 25 79
gains / (losses)
_______ _______ _______
201 (80) (237)
_______ _______ _______
Total comprehensive income (6,690) (24,436) (19,962)
for the period
_______ _______ _______
Attributable to:
Ordinary shareholders (6,532) (19,127) (16,403)
Preference shareholders - - -
Non-controlling interests (158) (5,309) (3,559)
_______ _______ _______
(6,690) (24,436) (19,962)
_______ _______ _______
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2020
30 June 30 June 31 December
2020 2019 2019
Note $'000 $'000 $'000
Non-current assets
Goodwill 12,578 12,578 12,578
Intangible assets 10 1,613 2,155 2,135
Property, plant and 11 384,922 404,083 394,356
equipment
Land 12 40,348 41,592* 38,598
Financial assets: stone and 14 53,930 48,444 50,329
coal interests
Deferred tax assets 13,001 15,669 12,642
Non-current receivables 3,889 2,178* 3,889
_______ _______ _______
Total non-current assets 510,281 526,699 514,527
_______ _______ _______
Current assets
Inventories 12,947 18,607 18,565
Biological assets 1,514 3,564 2,764
Trade and other receivables 50,242 44,415 53,760
Cash and cash equivalents 6,337 9,923 9,528
_______ _______ _______
Total current assets 71,040 76,509 84,617
_______ _______ _______
Total assets 581,321 603,208 599,144
_______ _______ _______
Current liabilities
Trade and other payables (46,510) (58,733) (63,452)
Current tax liabilities (960) - -
Bank loans (21,007) (9,652) (19,168)
Sterling notes - - (38,996)
Other loans and payables (7,541) (5,513) (14,457)
_______ _______ _______
Total current liabilities (76,018) (73,898) (136,073)
_______ _______ _______
Non-current liabilities
Bank loans (94,530) (119,821) (107,757)
Sterling notes (37,130) (38,706) -
Dollar notes (26,851) (23,763) (26,804)
Deferred tax liabilities (51,580) (79,244) (51,941)
Other loans and payables (49,480) (30,938) (23,879)
_______ _______ _______
Total non-current (259,571) (292,472) (210,381)
liabilities
_______ _______ _______
Total liabilities (335,589) (366,370) (346,454)
_______ _______ _______
Net assets 245,732 236,838 252,690
_______ _______ _______
Equity
Share capital 133,586 132,528 133,586
Share premium account 47,358 42,401 47,358
Translation reserve (24,519) (42,470) (26,032)
Retained earnings 76,831 95,233 84,779
_______ _______ _______
233,256 227,692 239,691
Non-controlling interests 12,476 9,146 12,999
_______ _______ _______
Total equity 245,732 236,838 252,690
_______ _______ _______
* Restated, see note 12
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED 30 JUNE
2020
Non-
Share Share Translation Retained Sub controlling Total
capital premium reserve earnings total interests Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 132,528 42,401 (42,470) 114,360 246,8 14,455 261,27
January 19 4
2019
Loss for - - - (19,143) (19,1 (5,309) (24,45
the period 43) 2)
Other - - - 16 16 - 16
comprehens
ive income
for the
period
_____ _____ _____ _____ _____ _____ _____
At 30 June 132,528 42,401 (42,470) 95,233 227,6 9,146 236,83
2019 92 8
Profit for - - - 1,329 1,329 1,750 3,079
the period
Other - - 987 (195) 792 603 1,395
comprehens
ive income
for the
period
Adjustment
in respect
of
deferred
- - 15,451 (11,588) 3,863 - 3,863
tax
provision
Issue of 1,058 5,079 - - 6,137 - 6,137
new
ordinary
shares
(cash)
Costs of - (122) - - (122) - (122)
issue
New equity - - - - - 1,500 1,500
from
non-contro
lling
shareholde
r
_____ _____ _____ _____ _____ _____ _____
At 31 133,586 47,358 (26,032) 84,779 239,6 12,999 252,69
December 91 0
2019
Loss for - - - (7,881) (7,88 (158) (8,039
the period 1) )
Other - - 1,513 (67) 1,446 (365) 1,081
comprehens
ive income
for the
period
_____ _____ _____ _____ _____ _____ _____
At 30 June 133,586 47,358 (24,519) 76,831 233,2 12,476 245,73
2020 56 2
_____ _____ _____ _____ _____ _____ _____
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHSED 30 JUNE 2020
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
Note $'000 $'000 $'000
Net cash from / (used 16 14,433 (5,545) 2,185
in) operating
activities
_______ _______ _______
Investing activities
Interest received 143 176 595
Proceeds on disposal of 3 - 7,639
property, plant and
equipment
Purchases of property, (4,179) (7,651) (18,133)
plant and equipment
Purchases of intangible - - (20)
assets
Expenditure on land (1,750) (316) (4,552)
Investment in stone and (3,600) (2,433) (4,319)
coal interests
_______ _______ _______
Net cash used in (9,383) (10,224) (18,790)
investing activities
_______ _______ _______
Financing activities
Repayment of bank (6,867) (4,649) (14,512)
borrowings
New bank borrowings - - 4,999
drawn
New borrowings from 1,816 3,750 5,437
related party
Repayment of borrowings - - (5,437)
from related party
New borrowings from - 300 1,758
non-controlling
shareholder
New equity from - - 1,500
non-controlling
shareholder
Proceeds of issue of - - 6,015
ordinary shares, less
costs of issue
Proceeds of issue of - - 3,000
2022 dollar notes
Expenses of extension (425) - -
of maturity of 2020
sterling notes
Repayment of lease (1,147) - (2,303)
liabilities
_______ _______ _______
Net cash (used in) / (6,623) (599) 457
from financing
activities
_______ _______ _______
Cash and cash
equivalents
Net decrease in cash (1,573) (16,368) (16,148)
and cash equivalents
Cash and cash 9,528 26,279 26,279
equivalents at
beginning of period
Effect of exchange rate (1,618) 12 (603)
changes
_______ _______ _______
Cash and cash 6,337 9,923 9,528
equivalents at end of
period
_______ _______ _______
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of accounting
?The condensed consolidated financial statements for the six months ended 30
June 2020 comprise the unaudited financial statements for the six months
ended 30 June 2020 and 30 June 2019, neither of which has been reviewed by
the company's auditor, together with audited financial statements for the
year ended 31 December 2019.
The information shown for the year ended 31 December 2019 does not
constitute statutory accounts within the meaning of section 435 of the
Companies Act 2006, and is an abridged version of the group's published
financial statements for that year which have been filed with the Registrar
of Companies. The auditor's report on those statements was unqualified and
did not contain any statements under section 498(2) or (3) of the Companies
Act 2006.
The condensed consolidated financial statements for the six months ended 30
June 2020 have been prepared in accordance with IAS 34, "Interim Financial
Reporting" as adopted by the European Union, and should be read in
conjunction with the annual financial statements for the year ended 31
December 2019 which were prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union.
Going concern
The directors are satisfied that the group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than
12 months from the date of this report. Accordingly, they continue to adopt
the going concern basis in preparing the consolidated financial statements.
Adoption of new and revised standards
In respect of new standards and amendments to IFRSs issued by the
International Accounting Standards Board ("IASB") that are mandatorily
effective for an accounting period beginning on 1 January 2020, none have
been adopted by the group as they have no impact on the disclosures or on
the amounts reported in these condensed consolidated financial statements.
Accounting policies
The accounting policies and methods of computation adopted in the
preparation of the condensed consolidated financial statements for the six
months ended 30 June 2020 are the same as those set out in the group's
annual report for 2019.
The condensed consolidated financial statements for the six months ended 30
June 2020 were approved by the board of directors on 17 September 2020.
2. Revenue
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Sales of goods 61,795 56,217 124,000
Revenue from services 561 367 986
_______ _______ _______
62,356 56,584 124,986
Investment revenue 143 176 595
_______ _______ _______
3. Segment information
?The group continues to operate in two segments, being the cultivation of
oil palms and the stone and coal interests. In the period ended 30 June
2020, the relevant measures for the stone and coal interests continued to
fall below the quantitative thresholds set out in IFRS8. Accordingly no
segment information is included in these financial statements.
4. Agricultural produce movement
?The net (loss) / gain arising from changes in fair value of agricultural
produce inventory represents the movement in the carrying value of such
inventory after reflecting the movement in the fair value of the fresh fruit
bunch input into that inventory (measured at fair value at point of harvest)
less the amount of the movement in such inventory at historic cost (which is
included in cost of sales).
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Profit on disposal of (3) - (707)
property, plant and
equipment
Indonesian operations 5,203 6,220 13,480
Head office and other 1,957 3,417 5,928
corporate functions
_______ _______ _______
7,157 9,637 18,701
Amount included as additions (990) (1,236) (2,604)
to property, plant and
equipment
_______ _______ _______
6,167 8,401 16,097
_______ _______ _______
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Earnings before interest,
tax, depreciation and
amortisation:
Operating loss (2,855) (13,694) (9,114)
Depreciation and 14,097 13,584 27,287
amortisation
_______ _______ _______
11,242 (110) 18,173
_______ _______ _______
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Interest on bank loans and 6,488 7,375 14,664
overdrafts
Interest on dollar notes 1,014 901 1,859
Interest on sterling notes 1,656 1,717 3,462
Interest on other loans 644 554 1,539
Interest on lease 171 91 311
liabilities
Change in value of sterling (2,696) 123 1,357
notes arising from exchange
fluctuations
Change in value of loans (2,967) 4,927 7,246
arising from exchange
fluctuations
Other finance charges 310 567 1,488
_______ _______ _______
4,620 16,255 31,926
Amount included as additions (101) (277) (36)
to property, plant and
equipment
_______ _______ _______
4,519 15,978 31,890
_______ _______ _______
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Current tax:
UK corporation tax - - -
Overseas withholding tax 370 536 1,289
Foreign tax 75 6 737
_______ _______ _______
Total current tax 445 542 2,026
_______ _______ _______
Deferred tax:
Current year 363 (5,940) (24,329)
Prior year - 354 -
_______ _______ _______
Total deferred tax 363 (5,586) (24,329)
_______ _______ _______
Total tax (credit) / charge 808 (5,044) (22,303)
_______ _______ _______
?Taxation is provided at the rates prevailing for the relevant jurisdiction.
For Indonesia, the current and deferred taxation provision is based on a tax
rate of 25 per cent (2019: 25 per cent) and for the United Kingdom, the
taxation provision reflects a corporation tax rate of 19 per cent (2019: 19
per cent) and a deferred tax rate of 19 per cent (2019: 17 per cent).
8. Dividends
As stated in the company's 2019 annual report published on 7 May 2020, with
the disruption wrought by Covid-19 and the consequential collapse in the
global economy and CPO prices, the directors put on hold their previous
intention of recommencing payments of dividends on preference shares during
2020 and starting progressively to catch up the preference dividend arrears.
The directors recognise the importance of dividends to holders of preference
shares and aim to recommence payments of preference dividends as soon as
circumstances prudently permit. If the current better operating performance
and higher CPO prices are maintained, and current bank discussions are
successfully concluded, liquidity will improve so as to permit the
resumption of preference dividends in 2021. In the meantime, the half yearly
payment on the preference shares that falls due on 31 December 2020 will be
deferred and the half yearly payments on the preference shares that were due
on 30 June 2019, 31 December 2019 and 30 June 2020 will also continue to be
deferred. Total deferred preference dividends at 30 June 2020 are $11.9
million (31 December 2019:?$8.5 million, 30 June 2019: $4.1 million).
While the dividends on the preference shares are more than six months in
arrears, the company is not permitted to pay dividends on its ordinary
shares.
9. Loss per share
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Basic and diluted loss for (7,881) (19,143) (17,814)
the purpose of calculating
loss per share*
_______ _______ _______
'000 '000 '000
Weighted average number of
ordinary shares for the
purpose of basic and diluted
loss per share
43,951 40,510 41,358
_______ _______ _______
* Being net loss attributable to ordinary shareholders
10. Intangible assets
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Cost:
Beginning of period 5,430 5,410 5,410
Additions - - -
Reclassifications and adjustments - - 20
_______ _______ _______
End of period 5,430 5,410 5,430
Depreciation:
Beginning of period 3,295 2,829 2,829
Additions 522 426 466
_______ _______ _______
End of period 3,817 3,255 3,295
Carrying amount:
End of period 1,613 2,155 2,135
_______ _______ _______
Beginning of period 2,135 2,581 2,581
_______ _______ _______
Development expenditure on computer software that is not integral to an item
of property, plant and equipment is recognised separately as an intangible
asset.
11. Property, plant and equipment
Plantings Buildings Plant, Construction Total
and equipment in progress
structures and
vehicles
$'000 $'000 $'000 $'000 $'000
Cost:
At 1 January 2019 182,549 236,930 114,963 7,242 541,6
restated* 84
Additions 2,340 172 503 4,636 7,651
Reclassifications - 144 2,109 (2,109) 144
and adjustments
Disposals - - - - - -
property, plant
and equipment
_____ _____ _____ _____ _____
At 30 June 2019 184,889 237,246 117,575 9,769 549,4
79
Additions 27 2,896 5,015 2,639 10,57
7
Reclassifications (7,012) 10,083 1,416 (4,749) (262)
and adjustments
Disposals - (2,575) (4,436) (1,799) - (8,81
property, plant 0)
and equipment
_____ _____ _____ _____ _____
At 31 December 175,329 245,789 122,207 7,659 550,9
2019 84
Additions 505 1,349 371 1,954 4,179
Reclassifications (1) 240 374 (906) (293)
and adjustments
Disposals - - - (506) - (506)
property, plant
and equipment
_____ _____ _____ _____ _____
At 30 June 2020 175,833 247,378 122,446 8,707 554,3
64
_____ _____ _____ _____ _____
Accumulated
depreciation:
At 1 January 2019 36,565 37,821 57,852 - 132,2
restated* 38
Charge for period 4,817 3,360 4,881 - 13,15
8
Reclassifications - - - - -
and adjustments
Disposals - - - - - -
property, plant
and equipment
_____ _____ _____ _____ _____
At 30 June 2019 41,482 41,181 62,733 - 145,3
96
Charge for period 4,817 3,544 5,302 - 13,66
3
Reclassifications - 414 (854) - (440)
and adjustments
Disposals - (91) (124) (1,776) - (1,99
property, plant 1)
and equipment
_____ _____ _____ _____ _____
At 31 December 46,208 45,015 65,405 - 156,6
2019 28
Charge for period 5,083 3,636 4,856 - 13,57
5
Reclassifications (1) (216) (38) - (255)
and adjustments
Disposals - - - (506) - (506)
property, plant
and equipment
_____ _____ _____ _____ _____
At 30 June 2020 51,290 48,435 69,717 - 169,4
42
_____ _____ _____ _____ _____
Carrying amount:
At 30 June 2020 124,543 198,943 52,729 8,707 384,9
22
_____ _____ _____ _____ _____
At 31 December 129,121 200,774 56,802 7,659 394,3
2019 56
_____ _____ _____ _____ _____
At 30 June 2019 143,407 196,065 54,842 9,769 404,0
83
_____ _____ _____ _____ _____
* Balances at 1 January 2019 have been restated to include right of use
assets
12. Land
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Cost:
Beginning of period 42,920 45,657* 45,657*
Additions 1,750 316 4,552
Reclassifications and adjustments - - (2,155)
Disposals - - (112)
Impairment - - (5,022)
_______ _______ _______
End of period 44,670 45,973 42,920
Amortisation:
Beginning of period 4,322 4,381 4,381
Reclassifications and adjustments - - (59)
_______ _______ _______
End of period 4,322 4,381 4,322
Carrying amount:
End of period 40,348 41,592 38,598
_______ _______ _______
Beginning of period 38,598 35,890 35,890
_______ _______ _______
* Balances at 1 January 2019 were restated following a review of all
arrangements having the potential to be classified as operating leases as
part of the adoption of IFRS16 and now include costs previously referred to
as deferred charges and disclosed within non-current receivables
13. Capital commitments
??Capital commitments contracted, but not provided for by the group as at 30
June 2020, amounted to $1.7 million (31 December 2019: $3.4 million, 30 June
2019: $4.4 million).
14. Financial assets: stone and coal interests
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Stone company 23,444 22,196 22,843
Coal companies 33,486 29,248 30,486
Provision against loans to companies (3,000) (3,000) (3,000)
_______ _______ _______
53,930 48,444 50,329
_______ _______ _______
Interest bearing loans have been made to two Indonesian companies that,
directly and through a further Indonesian company, own rights in respect of
certain stone and coal concessions in East Kalimantan Indonesia. Pursuant to
the arrangements between the group and its local partners, the company's
subsidiary, KCC Resources Limited ("KCC"), has the right, subject to
satisfaction of local regulatory requirements, to acquire the three
concession holding companies at original cost on a basis that will give the
group (through KCC) 95 per cent ownership with the balance of 5 per cent
remaining owned by the local partners. Under current regulations such rights
cannot be exercised. In the meantime, the concession holding companies are
being financed by loan funding from the group and no dividends or other
distributions or payments may be paid or made by the concession holding
companies to the local partners without the prior agreement of KCC. A
guarantee has been executed by the stone concession company in respect of
the amounts owed to the group by the two coal concession companies.
The arbitration in respect of certain claims made against IPA by two
claimants (connected with each other), with whom IPA previously had
conditional agreements relating to the development and operations of the IPA
coal concession, took place by way of a virtual hearing at the end of June
2020. The arbitrators had joined the company as a party to the arbitration
on a prima facie basis and without prejudice to any final determination of
jurisdiction. The company, which was never a party to any of the agreements
between IPA and the claimants, declined to accept jurisdiction or
participate in the arbitration. Further related potential claims made or
threatened in respect of, inter alia, alleged tortious conduct by the
company, its subsidiary, REAS, and its managing director have been stayed
pending a conclusion of the arbitration hearing. The outcome of the
arbitration is expected before the end of 2020. None of the claims is
considered to have any merit.
15. Fair values of financial instruments
?The table below provides an analysis of the book values and fair values of
financial instruments, excluding receivables and trade payables and
Indonesian stone and coal interests, as at the balance sheet date. Cash and
deposits, dollar notes and sterling notes are classified as level 1 in the
fair value hierarchy prescribed by IFRS 13 "Fair value measurement" (level 1
includes instruments where inputs to the fair value measurements are quoted
prices in active markets). All other financial instruments are classified as
level 3 in the fair value hierarchy (level 3 includes instruments which have
no observable market data to provide inputs to the fair value measurements).
No reclassifications between levels in the fair value hierarchy were made
during 2020 (2019: none).
30 June 2020 30 June 2019 31 December 2019
Book value Fair Book Fair Book Fair
value value value value value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and 6,337 6,337 9,923 9,923 9,528 9,528
deposits
*
Bank (21,007) (21,007) (9,652) (9,652) (19,168) (19,168)
debt
within
one
year**
Bank (94,530) (94,530) (119,821 (119,821 (107,757 (107,757
debt ) ) ) )
after
more
than one
year**
Loans - - - - (11,091) (11,091)
from
non-cont
rolling
sharehol
der
within
one
year*
Loans (24,630) (24,630) (23,239) (23,239) (13,539) (13,539)
from
non-cont
rolling
sharehol
der
after
more
than one
year**
Loan (1,847) (1,847) (3,750) (3,750) - -
from
related
party
within
one
year*
Dollar (26,851) (25,143) (23,763) (22,172) (26,804) (20,817)
notes
repayabl
e 2022**
Sterling - - - - (38,996) (36,416)
notes
within
one year
repayabl
e 2020**
Sterling (37,130) (34,064) (38,706) (34,450) - -
notes
after
one year
repayabl
e
2025/202
0**
______ ______ ______ ______ ______ ______
Net debt (199,658) (194,884 (209,008 (203,161 (207,827 (199,260
) ) ) ) )
______ ______ ______ ______ ______ ______
* Bearing interest at floating rates
** Bearing interest at fixed rates
?The fair values of cash and deposits, loans from non-controlling
shareholder and bank debt approximate their carrying values since these
carry interest at current market rates. The fair values of the dollar notes
and sterling notes are based on the latest prices at which those notes were
traded prior to the balance sheet dates.
16. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Operating loss (2,855) (13,694) (9,114)
Amortisation of intangible 522 426 466
assets
Depreciation of property, 13,575 13,158 26,821
plant and equipment
Decrease / (increase) in 4,701 (1,911) (5,127)
fair value of agricultural
produce inventory
Decrease / (increase) in 1,250 (938) (138)
value of growing produce
Amortisation of sterling and - 417 -
dollar note issue expenses
Profit on disposal of (3) - (707)
property, plant and
equipment
_______ _______ _______
Operating cash flows before 17,190 (2,542) 12,201
movements in working capital
Decrease in inventories 687 6,142 9,547
(excluding fair value
movements)
Decrease / (increase) in 53 (632) (18)
receivables
Increase in payables 9,962 3,778 6,954
Exchange translation 1,917 (1,468) (2,179)
differences
_______ _______ _______
Cash generated by operations 29,810 5,278 26,505
Taxes paid (5,534) (115) (541)
Tax refunds received - 220 -
Interest paid* (9,842) (10,928) (23,779)
_______ _______ _______
Net cash from / (to) 14,433 (5,545) 2,185
operating activities
_______ _______ _______
* Of which $171,000 is in respect of lease liabilities
17. Movements in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2020 2019 2019
$'000 $'000 $'000
Change in net borrowings
resulting from cash flows:
Decrease in cash and cash (3,191) (16,356) (16,751)
equivalents, after exchange
rate effects
Net decrease in bank 11,388 4,649 4,409
borrowings
Increase in borrowings from - - (1,711)
non-controlling shareholder
Increase in related party (1,816) (3,750) -
borrowings
_______ _______ _______
6,381 (15,457) (14,413)
Issue of dollar notes - - (3,000)
Amortisation of sterling (159) (377) (420)
note issue expenses
Amortisation of dollar note (47) (40) (80)
issue expenses
_______ _______ _______
6,175 (15,874) (17,913)
Currency translation 1,994 (3,583) (363)
differences
Net borrowings at beginning (207,827) (189,551) (189,551)
of period
_______ _______ _______
Net borrowings at end of (199,658) (209,008) (207,827)
period
_______ _______ _______
18. Related parties
?Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Loan from related party
During the period, R.E.A. Trading Limited ("REAT"), a related party, made
unsecured loans to the company on commercial terms. REAT?is owned by Richard
Robinow (a director of the company)?and his brother who, with members of
their family, also own Emba Holdings Limited, a substantial shareholder in
the company. The maximum amount loaned during the period to, and outstanding
at, 30 June 2020 is $1.8 million. This disclosure is also made in compliance
with the requirements of Listing Rule 9.8.4.
19. Rates of exchange
30 June 2020 30 June 2019 31 December 2019
Closing Average Closing Average Closing Average
US 14,302 14,622 14,141 14,229 13,901 14,158
dollar
to
Indonesi
an
rupiah
Pound 1.2268 1.27 1.2728 1.29 1.3115 1.28
sterling
to US
dollar
20. Events after the reporting period
?There have been no material post balance sheet events that would require
disclosure in, or adjustment to, these financial statements.
22. Cautionary statement
This document contains certain forward-looking statements relating to the
REA group. The group considers any statements that are not historical facts
as "forward-looking statements". They relate to events and trends that are
subject to risk and uncertainty that may cause actual results and the
financial performance of the group to differ materially from those contained
in any forward-looking statement. These statements are made by the directors
in good faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
?References to group companies in this report are defined below:
?CDM PT Cipta Davia Mandiri
KKS PT Kartanegara Kumalasakti
KMS PT Kutai Mitra Sejahtera
PBJ PT Putra Bongan Jaya - now divested
PBJ2 PT Persada Bangun Jaya
REA Kaltim PT REA Kaltim Plantations
SYB PT Sasana Yudha Bhakti
PU PT Prasetia Utama
The terms "FFB", "CPO" and "CPKO" mean, respectively, "fresh fruit bunches",
"crude palm oil" and "crude palm kernel oil".
References to "dollars" and "$" are to the lawful currency of the United
States of America.
References to "rupiah" are to the lawful currency of Indonesia.
References to "sterling" or "pound sterling" are to the lawful currency of
the United Kingdom.
ISIN: GB0002349065
Category Code: IR
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 84389
EQS News ID: 1133173
End of Announcement EQS News Service
(END) Dow Jones Newswires
September 18, 2020 02:00 ET (06:00 GMT)
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