Anglo-Eastern Plantations PLC

('AEP', 'Group' or 'Company')

Announcement of interim results for the six months ended 30 June 2019

The group comprising Anglo-Eastern Plantations PLC and its subsidiaries (the 'Group'), is a major producer of palm oil and rubber with plantations across Indonesia and Malaysia, amounting to some 128,200 hectares, and has today released its results for the six months ended 30 June 2019.

Financial Highlights

2019
6 months
to 30 June
$m

(unaudited)

2018
6 months
to 30 June
$m

(unaudited)

2018
12 months
to 31 December
$m

(audited)

Revenue

97.9

133.3

250.9

(Loss) / Profit before tax

- before biological assets ('BA') movement

(0.2)

21.7

33.2

- after BA movement

1.6

22.0

30.9

Basic Earnings per ordinary share ('EPS')

- before BA movement

(6.72)cts

30.37cts

32.50cts

- after BA movement

(3.74)cts

30.90cts

28.79cts

Total net assets

472.7

463.8

464.6

Enquiries:

Anglo-Eastern Plantations PLC

Dato' John Lim Ewe Chuan

+44 (0)20 7216 4621

Panmure Gordon (UK) Limited

Dominic Morley

+44 (0)20 7886 2954

Chairman's Interim Statement

The interim results for the Group for the six months to 30 June 2019 are as follows:

Revenue for the six months to 30 June was $97.9 million, 27% lower than $133.3 million reported for the first six months of 2018. The Group's gross profit was $5.3 million compared to $25.2 million for the first six months of 2018. Overall profit before tax for the first half of 2019 decreased by 93% to $1.6 million (after BA movement) versus $22.0 million for the corresponding period in 2018. This was attributed mainly to lower Crude Palm Oil ('CPO') prices.

Fresh Fruit Bunches ('FFB') production for the first half of 2019 was 1% lower at 470,300mt compared to 477,400mt in the same period last year. The decrease in production was due to a lower production trend observed in Riau, Bengkulu and South Sumatera which was similarly experienced by other planters in the region. Bought-in crops, however, decreased by 15% to 402,900mt from 473,100mt consistent with lower crop production by other planters in Riau and Bengkulu.

Operational and financial performance

For the six months ended 30 June 2019, gross profit margin decreased to 5.4% from 18.9% as the Group experienced lower CPO, palm kernel and rubber prices. Higher operational costs and the increase in newly matured areas also compressed the operating profit margin.

CPO price ex-Rotterdam averaged $527/mt for the first six months to 30 June 2019, 20% lower than $661/mt over the same period in 2018. Our Group's average ex-mill price for CPO was lower at $466/mt for the same period (1H 2018: $564/mt).

Profit after tax for the six months ended 30 June 2019 was $0.3 million, 98% lower compared to a profit of $16.2 million for the first six months of 2018.

The resulting basic earnings per share for the period decreased by 112% to a loss of 3.74cts (1H 2018: 30.90cts).

The Group's balance sheet remains strong. Net assets as at 30 June 2019 were $472.7 million compared to $463.8 million as at 30 June 2018 and $464.6 million as at 31 December 2018. The increase in net assets was attributed to a $10.5 million exchange translation gain for the first half of 2019 and similar gain of $8.1 million for the twelve months since June 2018. The Indonesian Rupiah has appreciated by 2% against the US dollar in each of the two respective periods.

As at 30 June 2019, the Group had cash and cash equivalents of $100.1 million (1H 2018: $130.1 million) and borrowings of $16.1 million (1H 2018: $25.6 million), giving it a net cash position of $84.0 million, compared to $104.5 million as at 30 June 2018.This is largely due to further investment in new planting, maintenance of immature areas and repayment of loans.

Operating costs

Operating costs per hectare for the Indonesian operations were higher in the first half of 2019 compared to the same period in 2018 mainly due to an increase in wages, estate upkeep and mill maintenance. Higher operating costs were also partly attributed to a 5% increase in newly matured areas where the yield remains relatively low.

Production and Sales

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

mt

mt

mt

Oil palm production

FFB

- all estates

470,300

477,400

1,035,800

- bought-in from third parties

402,900

473,100

1,010,000

Saleable CPO

177,500

193,800

418,800

Saleable palm kernels

42,300

46,700

99,200

Oil palm sales

CPO

182,600

195,500

418,800

Palm kernels

41,200

45,000

99,900

FFB sold outside

23,300

14,000

24,700

Rubber production

202

291

637

The Group's six mills processed a total of 849,900mt in FFB for the first half of 2019, a 9% decrease compared to 936,500mt for the same period last year. The lower throughput was mainly due to lower production trend in Riau and Bengkulu. Production in Riau moderated after a bumper harvest last year when yield peaked at 29.4mt/ha while lower production in Bengkulu was likely weather induced. As a result of the low FFB prices, AEP estates in South Sumatera have started to sell their crops to local millers to save on the high transport costs to their own mills.

Overall CPO produced for the first half of 2019 was 8% lower at 177,500mt from 193,800mt. The oil extraction rate for the first half of 2019 improved marginally to 20.9% from 20.7% in the same period last year.

The Group continues to reduce its greenhouse gas ('GHG') emissions by capturing the methane gas released from its effluent treatment plants to produce electricity. The three biogas plants in the Group produced over 7,470 MWh of electricity compared to 7,060 MWh in the same period last year. The third biogas plant located in Kalimantan began commercial operation in February this year.

Commodity prices

The CPO price ex-Rotterdam for first half of 2019 averaged$527/mt, 20% lower than last year (1H 2018: $661/mt). The price has gradually trended downwards from the start of the year at $517/mt to close at $501/mt on 28 June 2019 and has since increased to $522/mt as at 14 August 2019.CPO prices are expected to remain subdued in the coming months due to oversupply, competitive pricing of other vegetable oils and projection of higher production in the second half of 2019.

Rubber price averaged $1,315/mt, 1% lower than 2018 (1H 2018: $1,329/mt).

Development

The Group's planted areas at 30 June 2019 comprised:

Total

Mature

Immature

ha

ha

Ha

North Sumatera

19,194

15,311

3,883

Bengkulu

16,981

16,981

-

Riau

4,873

4,873

-

South Sumatera

6,271

5,344

927

Kalimantan

15,118

12,858

2,260

Bangka

1,183

538

645

Plasma

3,423

1,818

1,605

Indonesia

67,043

57,723

9,320

Malaysia

3,460

3,460

-

Total: 30 June 2019

70,503

61,183

9,320

Total: 31 December 2018

69,792

57,909

11,883

Total: 30 June 2018

68,703

58,266

10,437

The Group's new planting for the first six months of 2019 totalled 481ha compared to 427ha for the same period last year. New planting is delayed as the Group awaits results of a peer review of high carbon stock sustainability study which will determine areas in Central Kalimantan which cannot be planted with oil palm due to high conservation and high carbon stock values.

The Group remains optimistic that planting will continue to pick up in the second half of 2019. The Group's total landholding comprises some 128,200ha, of which the planted area stands around 70,503ha (1H 2018: 68,703ha) with the balance of estimated plantable land at 21,000ha.

The earthwork for the fourth biogas reactor lagoon has been completed. The contractor will begin civil works and the lining of the lagoon membrane which are expected to be completed by the fourth quarter of 2019.The sinking and uneven settlement of soil which have affected the progress of the construction of the seventh mill in North Sumetera have been addressed and the need for additional filling is being monitored. Tenders will be invited for the civil and mechanical works by the third quarter of 2019. The mill is scheduled for completion by 2021.

Dividend

As in previous years, no interim dividend has been declared. A final dividend of 3.0 cents per share in respect of the year ended 31 December 2018 was paid on 12 July 2019.

Outlook

The Group expects CPO prices to remain subdued due to likely higher output and inventories across the market in the second half of 2019. Analysts also highlighted the spread between CPO futures and spot prices has narrowed over the past months signalling the market's negative sentiments on CPO prices going forward. We expect production volumes in the second half of the year to improve.

Principal risks and uncertainties

We believe that the potential impact on the Group of Britain's vote to leave the European Union is limited, unless Brexit causes a worldwide recession. Other than maintaining its corporate presence and listing in United Kingdom, all plantation and mill operations together with marketing are primarily based in Indonesia. The principal risks and uncertainties have broadly remained the same since the publication of the annual report for the year ended 31 December 2018.

A more detailed explanation of the risks relevant to the Group is on pages 21 to 25 and from pages 92 to 97 of the 2018 annual report which is available at https://www.angloeastern.co.uk/.

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014.

Madam Lim Siew Kim

Chairman

20 August 2019

Responsibility Statements

We confirm that to the best of our knowledge:

a) The unaudited interim financial statements have been prepared in accordance with IAS34: Interim Financial Reporting as adopted by the European Union;

b) The Chairman's statement includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year); and

c) The interim financial statements include a fair review of the information required by DTR 4.2.8R (material related party transactions in the six months ended 30 June 2019 and any material changes in the related party transactions described in the last Annual Report) of the Disclosure and Transparency Rules of the United Kingdom Financial Services Authority.

By order of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

20 August 2019

Condensed Consolidated Statement of Cash Flows

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

$000

$000

$000

Cash flows from operating activities

Profit before tax

1,600

22,020

30,929

Adjustments for:

Biological assets movement

(1,845)

(332)

2,286

Gains on disposal of property, plant and equipment

(21)

(8)

(21)

Depreciation

8,511

8,375

16,752

Retirement benefit provisions

764

878

1,250

Net finance income

(1,688)

(1,581)

(3,537)

Unrealised (gains) / losses in foreign exchange

(163)

1,222

1,250

Property, plant and equipment written off

46

17

620

Impairment losses

2,337

-

4,339

Operating cash flows before changes in working capital

9,541

30,591

53,868

Increase in inventories

(246)

(1,877)

(746)

Increase in non-current, trade and other receivables

(3,383)

(1,062)

(2,173)

(Decrease) / Increase in trade and other payables

(2,774)

4,629

4,148

Cash inflows from operations

3,138

32,281

55,097

Interest paid

(569)

(793)

(1,511)

Retirement benefits paid

(103)

(83)

(257)

Overseas tax paid

(162)

(19,636)

(36,508)

Net cash flows from operating activities

2,304

11,769

16,821

Investing activities

Property, plant and equipment

- purchases

(15,992)

(13,279)

(30,282)

- sales

52

41

42

Interest received

2,257

2,374

5,048

Net cash used in investing activities

(13,683)

(10,864)

(25,192)

Financing activities

Dividends paid to the holders of the parent

-

-

(1,585)

Dividends paid to non-controlling interests

(57)

(73)

(73)

Repayment of existing long-term loans

(3,219)

(2,313)

(8,594)

Net cash used in financing activities

(3,276)

(2,386)

(10,252)

Net decrease in cash and cash equivalents

(14,655)

(1,481)

(18,623)

Cash and cash equivalents

At beginning of period

112,212

139,489

139,489

Exchange gains / (losses)

2,566

(7,881)

(8,654)

At end of period

100,123

130,127

112,212

Comprising:

Cash at end of period

100,123

130,127

112,212

Notes to the interim statements

1. Basis of preparation of interim financial statements

These interim consolidated financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2018 Annual Report. The financial information for the half years ended 30 June 2019 and 30 June 2018 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and has been neither audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.

Basis of preparation

The annual financial statements of Anglo-Eastern Plantations PLC are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2018 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2018 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2018 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Changes in accounting standards

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on 1 January 2019 and will be adopted in the 2019 annual financial statements. The new standard impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2019, and which has given rise to changes in the Group's accounting policies is IFRS 16 Leases.

Details of the impact of this standard are given below. Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

IFRS 16 Leases

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a leased liability representing its obligation to make lease payments. The impact to the Group is immaterial.

2. Foreign exchange

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

Closing exchange rates

Rp : $

14,141

14,404

14,481

$ : £

1.27

1.32

1.28

RM : $

4.13

4.04

4.13

Average exchange rates

Rp : $

14,197

13,753

14,246

$ : £

1.29

1.38

1.33

RM : $

4.12

3.94

4.04

3. Finance expense

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

$000

$000

$000

Payable

569

793

1,511

5. Tax expense

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

$000

$000

$000

Foreign corporation tax - current year

6,087

9,043

16,852

Foreign corporation tax - prior year

-

6

70

Deferred tax adjustment - origination and reversal of temporary differences

(4,822)

(3,227)

(3,860)

1,265

5,822

13,062

6. Dividend

The final and only dividend in respect of 2018, amounting to 3.0 cents per share, or $1,189,091 was paid on 12 July 2019 (2017: 4.0 cents per share, or $1,585,455, paid on 13 July 2018). As in previous years, no interim dividend has been declared.

7. Earnings per ordinary share ('EPS')

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

$000

$000

$000

(Loss) / Profit for the period attributable to owners of the Company before BA movement

(2,664)

12,037

12,882

BA movement

1,181

209

(1,469)

Earnings used in basic and diluted EPS

(1,483)

12,246

11,413

Number

Number

Number

'000

'000

'000

Weighted average number of shares in issue in the period

- used in basic EPS

39,636

39,636

39,636

- dilutive effect of outstanding share options

-

33

-

- used in diluted EPS

39,636

39,669

39,636

Basic EPS before BA movement

(6.72)cts

30.37cts

32.50cts

Basic EPS after BA movement

(3.74)cts

30.90cts

28.79cts

Dilutive EPS before BA movement

(6.72)cts

30.34cts

32.50cts

Dilutive EPS after BA movement

(3.74)cts

30.87cts

28.79cts

8. Fair value measurement of financial instruments

The carrying amounts and fair values of the financial instruments which are not recognised at fair value in the Statement of Financial Position are exhibited below:

2019

2018

2018

6 months

6 months

Year

to 30 June

to 30 June

to 31 December

(unaudited)

(unaudited)

(audited)

Carrying amount

Fair value

Carrying amount

Fair value

Carrying amount

Fair value

$000

$000

$000

$000

$000

$000

Non-current receivables

Due from non-controlling interests

3,022

1,850

2,977

1,837

2,965

1,833

Due from cooperatives under Plasma scheme

10,321

7,407

5,769

5,495

8,055

6,240

13,343

9,257

8,746

7,332

11,020

8,073

Borrowings due after one year

Long-term loan

2,734

2,473

13,719

13,403

8,203

7,742

Financial instruments not measured at fair value include cash and cash equivalents, trade and other receivables, trade and other payables, and borrowings due within one year.

Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, trade and other payables and borrowings due within one year approximates their fair value.

All non-current receivables and long-term loan are classified as Level 3 in the fair value hierarchy.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of non-current receivables and borrowings due after one year, as well as the inter-relationship between key unobservable inputs and fair value, are set out in the table below:

Item

Valuation approach

Inputs used

Inter-relationship between key unobservable inputs and fair value

Non-current receivables

Due from non-controlling interests

Based on cash flows discounted using current lending rate of 6% (1H 2018 and 2018: 6%).

Discount rate

The higher the discount rate, the lower the fair value.

Due from cooperatives under Plasma scheme

Based on cash flows discounted using an estimated current lending rate of 6.58% (1H 2018: 6.05%, 2018: 6.58%).

Discount rate

The higher the discount rate, the lower the fair value.

Borrowings due after one year

Long-term loan

Based on cash flows discounted using an estimated current lending rate of 6.58% (1H 2018: 6.05%, 2018: 6.58%).

Discount rate

The higher the discount rate, the lower the fair value.

9. Report and financial information

Copies of the interim report for the Group for the period ended 30 June 2019 are available on the AEP website at https://www.angloeastern.co.uk/.

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Anglo-Eastern Plantations plc published this content on 20 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 August 2019 16:37:01 UTC