REG - Anglo-Eastern Plant - Final Results for year ended 31 December 2021
29/04/2022 09:00
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RNS Number : 8559J Anglo-Eastern Plantations PLC 29 April 2022
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Final results for year ended 31 December 2021
The group comprising Anglo-Eastern Plantations Plc ("AEP") and its
subsidiaries (the "Group"), is a major producer of palm oil and to a lesser
extent rubber with plantations across Indonesia and Malaysia, amounting to
some 128,000 hectares, has today released its results for the year ended 31
December 2021.
Financial Highlights
The Group key performance indicators ("KPI") as required in accordance with
the requirements of s414C, Companies Act 2006 are as follows:
Continuing operations 2021 2020 Change
$m $m %
Revenue 433.4 263.8 +64
Profit before tax:
- before biological asset ("BA") movement 132.7 56.9 +133
- after BA movement 137.1 58.1 +136
Basic Earnings per ordinary share ("EPS"):
- before BA movement 235.25cts 89.31cts +163
- after BA movement 242.34cts 91.82cts +164
Dividend (cents) 5.0cts 1.0cts
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 Statement
I am pleased that the UK has lifted all the restrictions relating to Covid-19
and that Malaysia is in a state of endemic rather than pandemic resulting in
its borders being open to foreign visitors and a more relaxed set of Standard
Operating Procedures ("SOPs"). All these have been made possible due to the
very high fully vaccinated rate of the adult population of both these
countries, who are now focusing on vaccinating the population of children.
Indonesia is lagging slightly behind in its vaccination programme with about
76% of its adult population fully vaccinated due to an earlier reported
shortage of vaccines. There is also a stark gap in vaccination rates among the
34 provinces in Indonesia with the population in remote and less developed
regions having difficulty in reaching vaccination centres. I am confident that
the Indonesian government will achieve full vaccination for its adult
population within a reasonable time.
Many countries have witnessed the effect that the prolonged lockdown has
caused on mental and financial distress and are now adapting to coexist with
Covid-19 rather than a zero tolerance strategy of eliminating Covid-19.
Borders are beginning to open with the focus on reviving the economy which in
turn leads to a gradual return of international air travel.
2021 was a year in which Indonesia and Malaysia went through either full
lockdowns or partial lockdowns and the Group was fortunate that it was allowed
to continue its operations as the food industry was an essential service.
During this time management has drawn up strict SOPs for the staff to work
safely and I am pleased to say that there was no major outbreak of Covid-19
cases in any of the plantations. However, we did have 5 fatalities due to
Covid-19 in four of our plantations which must have been traumatic for the
deceased loved ones and their colleagues. I and the rest of the Board shared
their grief and we have ensured that the welfare of the affected families were
appropriately looked after. The emergence of a new variant, Omicron, which is
more transmissible but less deadly may, however, set back the progress made to
date. Our management remains watchful and continues to observe strict safety
protocols in its operations.
I am pleased that given the plantations have to operate within the constraints
of Covid-19, the management and staff have delivered a very good set of
results, partly due to the high price of Crude Palm Oil ("CPO") for the year
and I thank them for their diligence and effort. Having said that the Group
has been hampered for a number of years by three plantations in South Sumatera
which have not contributed to the profitability of the Group, notwithstanding
the time and investments incurred over the years. Accordingly, the Board has
made a commercial decision to sell PT Riau Agrindo Agung, PT Empat Lawang Agro
Perkasa and PT Karya Kencana Sentosa Tiga, all in South Sumatera, as going
concern at a realistic achievable price. The Board is working with a
consulting firm in Indonesia with a view to conclude the sale by the end of
2022.
The Group's fresh fruit bunches ("FFB") production in 2021 reached 1.19
million mt, 8% higher than last year of 1.10 million mt due to improved
weather. Other than South Sumatera, rainfalls were satisfactory in all regions
that the Group operated in. With mostly favourable weather, all regions except
for Malaysia reported higher FFB production of between 1% to 28%. FFB
bought-in from surrounding smallholders and plasma was 1.14 million mt (2020:
913,200 mt), 25% more than 2020. The mills processed a combined 2.31 million
mt of FFB, 17% more than last year of 1.97 million mt. CPO production, as a
result, was 17% higher at 473,200 mt, compared to 406,100 mt in 2020.
CPO prices had been on a tear for most of the year. The surge in prices was
unprecedented especially when consumption of palm oil was expected to be
weaker due to the economic lockdown caused by the Coronavirus. A combination
of factors however contributed to the spectacular rise in prices. Unfavourable
weather conditions in prime soybean producing countries, which had adversely
affected the supply of soybean oil, of which palm oil is the closest
substitute was a likely cause. This together with a tight supply of palm oil
due to labour, fertiliser issues and improved demand prospects for vegetable
oils as global economies reopen drove CPO prices higher. A more detailed
explanation is provided in the Strategic Report under Commodity Prices. The
average CPO price ex-Rotterdam ended the year 67% higher at $1,211/mt,
compared to $723/mt in 2020.
The higher FFB production and elevated CPO prices meant that the Group's
revenue from continuing operation reached a record high of $433.4 million, 64%
higher compared to $263.8 million achieved in 2020. The operating profit for
the Group from continuing operations in 2021, before biological asset ("BA")
movement more than doubled to $129.3 million, from $54.6 million reported in
2020. The earnings per share, before BA movement from continuing operations,
increased by 163% to 235.25cts, from 89.31cts in 2020. The Group's operating
profit after BA movement from continuing operation for 2021 was at $133.7
million after an upward BA movement of $4.3 million as compared to 2020
operating profit of $55.8 million after an upward BA movement of $1.2 million.
The mills briefly enjoyed improved processing margins as the Indonesian
government lowered the CPO export tax in July 2021 from $255/mt to $175/mt
when the CPO price exceeded $1,000/mt. However, in November 2021 the export
tax was revised upwards to $200/mt when the CPO price exceeded $1,283/mt. The
Indonesian government in its effort to curb soaring prices of domestic cooking
oil in February 2022 imposed a domestic market obligation ("DMO") rule which
made it mandatory for palm oil producers to sell 20% (and then subsequently
30%) of their output to domestic refiners at fixed prices representing a steep
discount to the current CPO price, eroding the profit margin of planters. The
DMO has since been aborted and replaced by a maximum CPO export tax and levy
at $575/mt. Furthermore, on 27 April 2022 the Indonesian government banned the
export of CPO to try to stem the rising cost of cooking oil in Indonesia. News
reports have generally indicated that this is a temporary measure as CPO is
one of Indonesia's largest export revenues, and also Indonesia cannot consume
or utilise all the CPO it produces. The ban on the export of CPO, whilst it is
in place, will affect the tender price AEP will achieve as the CPO is sold
locally.
The Group's new planting for oil palm including plasma for 2021 totalled 1,701
ha compared to 2,190 ha last year. The new planting was mostly concentrated in
the Kalimantan regions where negotiations with owners over land compensation
were concluded more efficiently. The land compensation process suffered as the
pandemic restricted travel and social contact. Many landowners also demanded
better land prices due to record CPO prices. Furthermore, the local
authorities stopped all land compensation for three months in Bangka to
resolve some complaints from local villages. Replanting of some 900 ha of oil
palms in Bengkulu was accelerated during the year to replace trees with poor
yield. In 2022, the Group plans to plant 2,500 ha of oil palm which includes
replanting of another 1,200 ha in Bengkulu. Plasma planting for 2022 is
estimated at 400 ha.
The Group has four biogas plants with a combined capacity of slightly above
five megawatts. The Group sold surplus electricity of 20,300 MWh in 2021
compared to 18,900 MWh last year in our efforts to reduce the Group's carbon
footprint. The biogas plants help trap and burn the more toxic methane gas
emission from palm oil mill effluent ("POME") to generate green electricity
and produce less harmful carbon dioxide. Methane has a higher heat-trapping
potential than carbon dioxide and cutting its emission can have a positive
impact on reining in global warming. The revenue from the sale of surplus
electricity to the national grid was $999,000 (2020: $970,000)
EU threat to reduce the use of palm oil for biofuel in 2024 and to completely
phase it out by the year 2030 remains a potential risk. The adverse perception
of palm oil as an environmentally unfriendly and non-renewable source
particularly in the EU has continued to feature in recent years, touching on
issues including deforestation, emission of greenhouse gases, planting on
peatland and land rights, most of which affect climate change. AEP remains
committed to No Deforestation, No Peatland, No Exploitation ("NDPE") policies.
All supplies of FFB to our mills are traceable to their origins of supply
chains and are not linked to illegal deforestation. We are aware of growing
pressure from buyers to avoid CPO with NDPE and High Conservation Values
("HCV") issues.
A resurgence of the Covid-19 and its variants including Omicron, remains a
potential major risk to palm oil demand in both the food and energy sectors.
Inequitable access to vaccines, tests and treatments amongst the rich and poor
countries could possibly prolong the pandemic and continue to hurt the
economies, risking the emergence of more dangerous variants resulting in
weaker trade and commodity prices.
The war in Ukraine has caused another round of global uncertainty. Any further
escalation of the war in Ukraine will no doubt create additional uncertainties
impacting the major economies of the world which in turn could affect the
demand for palm oil in both the food and energy sectors.
In determining the amount of dividends to be paid to our shareholders, the
Board in previous years had been consistent with a balanced approach to the
requirement of funds in the Company in order to expand and enhance
shareholders' value but at the same time cognisant of shareholders' wishes to
have dividends as a form of income. As with last year the Board continues to
have regulatory obligation to ensure that the Group has adequate funds to
continue as a going concern for the foreseeable future in a near worst-case
scenario because of the uncertainty due to Covid-19 and to a lesser extent the
war in Ukraine. With the rising Coronavirus cases in Europe in early 2022,
the Board felt justified in its opinion that the pandemic is far from over
especially in the region where the Group's operations are, due to the
mutations and variants more infectious than the initial virus that the world
has been combating. With this in mind the Board continues to adopt a prudent
view and in the light of the exceptional profit achieved in the year has
declared a final dividend of 5.0cts per share, in line with our reporting
currency, in respect of the year to 31 December 2021 (2020: 1.0cts). In the
absence of any specific instructions up to the date of closing of the register
on 10 June 2022, shareholders with addresses in the UK will be deemed to have
elected to receive their dividends in Pounds Sterling and those with addresses
outside of UK will be deemed to have elected to receive their dividends in US
Dollars. Subject to the approval by shareholders at the AGM, the final
dividend will be paid on 15 July 2022 to those shareholders on the register on
10 June 2022.
On behalf of the Board of Directors, I would like to convey our sincere thanks
to our management and employees of the Group for their dedication, loyalty,
resourcefulness, commitment and contribution to the preservation of the
Group's operation as a going concern during this extremely difficult and
trying period.
I would also like to take this opportunity to thank shareholders, business
associates, government authorities and all other stakeholders for their
continued confidence, understanding and support for the Group.
Madam Lim Siew Kim
Chairman
29 April 2022
Strategic Report
Introduction
The Strategic Report has been prepared to provide shareholders with
information to complement the financial statements. This report may contain
forward-looking statements, which have been included by the Board in good
faith based on information available up to the time of approval of this
report. Such statements should be treated with caution going forward given the
uncertainties inherent with the economic and business risks faced by the
Group.
Business Model
The Group will continue to focus on its strength and expertise, which is
planting more oil palms and production of CPO. This includes replanting old
palms with low yield, replacing old rubber trees with palm trees and building
more mills to process the FFB. The Group has, over the years, created value to
shareholders through expansion in a responsible manner.
The Group remains committed to use its available resources to develop the land
bank in Indonesia as regulatory constraints permit. The Indonesian government
has, in recent years, passed laws to prioritise domestic investments and to
limit foreign direct investments over national interest, including a limit of
20,000 ha per province and a national total of 100,000 ha on the licensed
development of oil palms for companies that are not listed in Indonesia or
with less than a majority local ownership.
The Group's objectives are to provide returns to investors in the long-term
from its operations as well as through the expansion of the Group's business,
to foster economic progress in localities of the Group's activities and to
develop the Group's operations in accordance with the best corporate social
responsibility and sustainability standards.
We believe that sustainable success for the Group is best achieved by acting
in the long-term interests of our shareholders, our partners and society.
Our Strategy
One of the Group's objectives is to provide an appropriate level of return to
the investors and to enhance shareholder value. Profitability, however, is
very much dependent on the CPO price, which is volatile and is determined by
supply and demand as well as the weather. The Group believes in the long-term
viability of palm oil as it can be produced more economically than other
competing oils and remains the most productive source of vegetable oil in a
growing population. Soybean crops would require up to ten times as much land
to produce an equivalent weight of palm oil. It has been reported that one
hectare of land can produce up to 4 mt of CPO, much higher than rapeseed of
0.7 mt, sunflowers of 0.6 mt or even soybeans of 0.4 mt. In this regard, palm
oil is far more sustainable than other edible vegetable oils.
The Group's strategies, therefore, focus on maximising yield per hectare above
22 mt/ha, minimum mill production efficiency of 110%, minimising production
costs below $300/mt and streamlining estate management. For the year under
review, the Indonesian operations achieved an FFB yield of 19.8 mt/ha, 155%
mill efficiency and production cost of $296/mt. This compared favourably to
2020 where the Group achieved a yield of 18.9 mt/ha, 133% mill efficiency,
except for production cost which was lower at $280/mt. Despite stiff
competition for external crops from surrounding millers, the Group is
committed to purchasing more external crops from third parties at competitive,
yet fair prices, to maximise the production efficiency of the mills. With
higher throughput, the mills would achieve economies of scale in production. A
mill is deemed to achieve 100% mill efficiency when it operates 16 hours a day
for 300 days per annum.
In line with the commitment to reduce its carbon footprint, the Group plans to
construct, in stages, biogas plants at all its mills to trap the methane gas
emitted from the treatment of palm mill effluents to generate electricity to
power its boilers to reduce the consumption of fossil fuel. It plans to sell
the surplus electricity and progressively reduce the greenhouse gas emissions
per metric ton of CPO produced in the next few years. It is commonly accepted
that failure to address growing calls to reduce greenhouse gas emissions could
threaten the long-term social acceptability and profitability of a palm oil
company. The Group is looking at more biogas projects as demand for
electricity recovered after the pandemic.
The Group will continue to engage and offer competitive and fair compensation
to the villagers so that land can be cleared and be planted.
Non-financial reporting statement
The Group has complied with the requirements of Section 414CB of the Companies
Act 2006 by providing a wide range of non-financial information about
employees, environmental and social matters in the table below and in our
website:
Non-financial matter Policies and standards which govern our approach
Business model Business model and strategy
Principal risks and uncertainties
Environmental matters Principal risks and uncertainties: Country, regulatory and governance
practices
Principal risks and uncertainties: Weather and Environmental and conservation
practices
Indonesian Sustainable Palm
Oil
Environmental, Social and Governance practices
Management of Climate Risks
Decarbonisation modelling and high level target setting
Carbon Reporting
Corporate Governance: Environmental and corporate responsibility
Other responsible agricultural practices and sustainable policies can be found
on our website
Employees and Employees: Employment policies
Health & Safety Directors' Remuneration Report: Employees engagement
Workers are protected from exposure to occupational health and safety hazards
that are likely to pose immediate risk of permanent injury, illness or
fatality. Proper signages are in place at relevant spots to alert employees of
safety. Workshops and training sessions on occupational safety and health care
are regularly conducted.
Social matters Principal risks and uncertainties: Covid-19
AEP has established clear policies and strict protocols for the control and
prevention of the spread of Covid-19 within the workplace environment. There
are requirements for mask wearing, social distancing and sanitising of the
workplace regularly. AEP also privately funded vaccination programme within
its plantations and employees are required to be compulsorily vaccinated. AEP
also has strict procedures on testing at work and self isolation of its
employees when necessary, together with home support for the affected ones to
ensure full recovery before they resumed work.
Respect for human rights AEP has clear policies of no exploitation of its employees, including
complying with paying minimum wage. It does not practise child or forced
labour in line with the Modern Slavery Statement referred to on its website.
In addition, a whistle blowing policy is in place to allow any employee to
raise concerns about unethical, illegal or questionable practices without the
risk of reprisal and in full confidence.
Anti-corruption and anti-bribery matters Directors' report: Political donations, anti-corruption and anti-bribery
matters
Financial Review
Performance of the business during the year
For the year ended 31 December 2021, revenue for the Group from continuing
operation was $433.4 million, 64% higher than $263.8 million reported in 2020
due primarily to the higher CPO prices and higher production.
The Group's operating profit from continuing operation for 2021, before
biological asset movement, was $129.3 million, 137% better than last year of
$54.6 million.
FFB production for continuing operations for 2021 reached 1.15 million mt, 7%
higher than the 1.07 million mt produced in 2020. The overall yield for the
Indonesian plantations was higher at 21.1 mt/ha (2020: 20.4 mt/ha) due to more
consistent and better rainfall throughout the year coupled with an increase in
matured areas to harvest. Except for Malaysia, all regions in Indonesia in
which the Group operated show improvement in crop harvest. Young matured oil
palms in North Sumatera and Kalimantan grew well and reported a 13% higher
crop production. With replanting in progress, crop production in Bengkulu
region, increased marginally by 1%.
FFB bought-in from local smallholders and plasma in 2021 was 1.14 million mt
(2020: 913,200 mt), 25% more compared to 2020. As explained earlier, a more
consistent weather with no extended period of dryness meant that there was an
abundance of external crops to purchase especially in the first half of the
year. Crop purchases by our mills in North Sumatera, Riau, Bengkulu and
Kalimantan grew by between 9% and 64% in comparison to last year. During the
year, the Group's mills processed a combined 2.31 million mt of FFB, 17% more
than last year of 1.97 million mt. CPO production, as a result, was 17% higher
at 473,200 mt, compared to 406,100 mt in 2020.
Profit before tax and after BA movement from continuing operation for the
Group was $137.1 million, 136% higher compared to a profit of $58.1 million in
2020. The BA movement was a credit of $4.3 million, compared to a credit of
$1.2 million in 2020. The BA movement was mainly due to higher FFB price in
2021. The profit before tax included a reversal of impairment charge on
plantations and impairment of land amounting to $5.0 million compared to a
reversal of impairment on land amounting to $2.2 million in 2020. Net finance
income recognised in the income statement increased from $2.6 million in 2020
to $3.2 million in 2021 due to higher time deposits and absence of interest
expense. The tax expense increased from $15.2 million in 2020 to $25.7 million
in 2021 due to the increase in profit before tax.
The total loss on the discontinued operations during the year was $28.5
million, made up of operating loss of $6.7 million and a further write down of
the three plantations assets net of liabilities of $21.8 million. The loss
from the discontinued operation was also impacted by the expected credit loss
from Plasma receivables amounting to $1.2 million in 2021 (2020: $1.4 million)
attributed to the additional amounts allocated for plasma development during
the year.
The average CPO price ex-Rotterdam for 2021 was $1,211/mt, 67% higher than
2020 of $723/mt. The ex-mill price for 2021 averaged $776/mt, 37% higher than
last year of $567/mt.
Earnings per share before BA movement from continuing operations increased by
163% to 235.25cts compared to 89.31cts in 2020. Earnings per share after BA
movement from continuing operations increased from 91.82cts to 242.34cts.
Earnings per share have increased mainly due to the increase in profit after
tax.
There was a loss of exchange in translation of foreign operations, recognised
in other comprehensive income, totalling $6.3 million for 2021 against an
exchange loss of $5.4 million in the previous year due to the slight weakening
of the Indonesian rupiah at the year end. The retirement benefits due to the
employees at 31 December 2021, as calculated by a third party actuary,
decreased to $11.5 million from $13.4 million last year due to the impact from
the job creation law.
Position of the business at the end of the year
The Group's statement of financial position remains strong, with a cash and
cash equivalents balance of USD218.2 million and no external borrowing at the
end of 2021. All material changes in statement of financial position and cash
flows are listed in the following table:
Note 31.12.2021 31.12.2020
$000 $000
Property, plant and equipment i 260,532 280,831
Deferred tax assets ii 4,324 14,389
Income tax liabilities iii (13,139) (5,981)
Cash and cash equivalents v, vi, vii 218,249 115,211
Assets in disposal groups classified as held for sale iv 13,210 -
Net cash generated from operating activities v 131,346 65,353
Purchase of property, plant and equipment vi (26,374) (18,965)
Net cash used in financing activities vii (1,028) (9,039)
i. The reduction in property, plant and equipment from $280.8 million in
2020 to $260.5 million was due to the reclassification of the assets in South
Sumatera to assets held for sale in current assets.
ii. The movement in deferred tax assets was due to the utilisation of some of
the losses against taxable profits during the year.
iii. The income tax liabilities are higher principally as a result of higher
profits in 2021.A detailed explanation of income tax, including other taxes,
is provided in note 9.
iv. Assets in disposal groups classified as held for sale reflects the
reclassification of the assets in South Sumatera, net of an impairment
adjustment.
v. As at 31 December 2021, the Group had cash and cash equivalents of $218.2
million (2020: $115.2 million). The cash position was higher in 2021
principally due to the significant increase in profitability during the year
and to a lesser extent the recovery of $14.8 million from the over payment of
VAT, together with the benefit of part of the current year corporate income
tax of $13.1 million being retained as at year end. The net cash inflow from
operating activities during the year was higher at $131.3 million by 101%
compared to $65.4 million in 2020 mainly due to the more robust CPO prices and
higher production.
vi. The higher additions to development costs for property, plant and
equipment ("PPE") amounting to $26.4 million in 2021 (2020: $19.0 million) was
due to increase in construction costs.
vii. The net cash used in financing activities during the year was lower by
89% at $1.0 million compared to $9.0 million in 2020 due to no repayment of
borrowings during the year.
Viability Statement
The viability assessment considers solvency and liquidity over a longer period
than for the purposes of the going concern assessment made. Inevitably, the
degree of certainty reduces over a longer period.
The Group's business activities, financial performance, corporate development
and principal risks associated with the local operating environment are
covered under the various sections of this strategic report. In undertaking
the review of the Group's performance in 2021, the Board considered the
prospects of the Company, focusing on the strategy for growth via the
expansion of its planted area in tandem with forecasting demand for CPO, over
one to five-year periods. The process involved a detailed review of the 2022
detailed budget and the five-year income and cash flow projection. The
one-year budget has a greater level of certainty and is used to set detailed
budgetary targets at all levels across the Group. It is also used by the
Remuneration Committee to set targets for the annual incentive. The five-year
income and cash flow projection contains less certainty of the outcome but
provides a robust planning tool against which strategic decisions can be made.
The Board believes that to project beyond five years has more elements of
uncertainties and therefore less reliable for making informed decisions.
The Board also considered the five-year cash flow projection under various
severe but plausible scenarios, including the financial impact on the Group
due to partial or total shutdown of its operations and the contraction of
demand for palm oil resulting from the Coronavirus pandemic, as outlined in
the Strategic Report under Going Concern, and the need to support if any
financially loss-making newly matured estates, together with the projected
capital expenditure. The Group also factored in the impact of the price
increase of materials and fertilisers primarily as a result of the conflict in
Ukraine. In arriving at the conclusion that the Group has adequate resources
to continue in operation and meet its liabilities in the next five years the
Board has assumed a worst case scenario of CPO price at its lowest average of
$500/mt and that demand for CPO dropped by 50%. The Board has also factored in
that half of the total plantations could be shut down for six months due to
infectious disease such as Covid19. The assumptions applied are linked to risk
of CPO price fluctuation, risk of a substitute for oil palm and a pandemic
from an infectious disease. On this basis and other matters considered and
reviewed by the Board during the year, the Board has a reasonable expectation
that the Group has adequate resources to continue in operation and meet its
liabilities over the five years from 2022 to 2026.
Going Concern
As the Group is still facing a period of uncertainty due to the Coronavirus
pandemic, the Directors carried out stress tests as required, to ensure that
the Group has adequate resources in a worst-case scenario to remain as a going
concern for at least twelve months from the date of this report.
The Directors have a reasonable expectation, having made the appropriate
enquiries, that the Group has control of the monthly cash flows and that the
Group has sufficient cash resources to cover the fixed cash flows for a period
of at least twelve months from the date of approval of these financial
statements. For these reasons, the Directors adopted a going concern basis in
the preparation of the financial statements. The Directors have made this
assessment after consideration of the Group's budgeted cash flows and related
assumptions including appropriate stress testing of identified uncertainties,
specifically on the potential shut down of the entire operations from three to
twelve months if all the plantations are infected with Coronavirus as well as
the impact on the demand for palm oil with decreases of 50% to 100%. Stress
testing of other identified uncertainties and risks such as commodity prices
and currency exchange rates were also undertaken.
Business Review
Indonesia
The performance of the Indonesian operations is divided into six geographical
regions.
North Sumatera
FFB production in North Sumatera, which aggregates the estates of Tasik, Anak
Tasik, Labuhan Bilik ("HPP"), Blankahan, Rambung, Sg Musam and Cahaya Pelita
("CPA") produced 400,800 mt in 2021 about 13% above last year (2020: 354,900
mt). The increase in matured areas to 18,047 ha from 16,238 ha contributed to
this higher production. A more consistent rainfall pattern with no prolonged
period of dryness and better harvest from young matured palms in Tasik also
improved the annual yield to 22.2 mt/ha from the previous year of 21.6
mt/ha.
Higher production can be expected in the coming years due to new planting and
recently replanted areas of 546 ha maturing next year and starting to bear
fruits.
In 2021, the two mills in North Sumatera produced 136,900 mt of CPO
(2020:124,900 mt) from a throughput of 698,800 mt (2020: 629,200 mt). Tasik
Raja mill had another stellar year, processing 10% more FFB in 2021 at 501,900
mt (2020: 455,000 mt) due mainly to better internal crop production, raising
the mill utilization to 174% from 158% the previous year. Oil extraction rate
("OER"), however, was lower at 19.9% (2020: 20.0%) possibly due to the dura
contamination from external crops that made up 35% of the total crops
processed. Dura crops with thinner mesocarp normally have an oil content of
18% or lower. The Blankahan mill showed some improvement by processing 13%
more FFB at 196,900 mt (2020: 174,200 mt) due to higher external crop
purchases increasing mill utilization from 91% to 103% this year. Outside
crops that made up 58% of the total crops processed by the mill in the
previous year increased to 61% in 2021. Internal crop production was
marginally higher as the average age of trees reached 27 years with replanting
to be carried out when necessary. Replanting in Blankahan was delayed as the
yield had been consistently high in the past years averaging 26 mt/ha due to
good soil condition.
The two biogas plants in North Sumatera did not perform as expected in 2021,
but are expected to perform better going forward. The state electric company
resumed the uptake of electricity from the Blankahan biogas plant in 3Q 2021
as commercial activities pick-up steam. It sold about 1,900 MWh (2020: 2,500
MWh) of surplus electricity and generated $114,100 (2020: $151,800) in
revenue. The contract to supply electricity was finally signed for two years.
As for Tasik biogas plant, the authorities are currently evaluating its power
production capacity and the local consumption. There is a realistic chance
that the authorities will purchase the surplus electricity as the economy
recovers from the lockdown. It also helps that the Indonesian government is
promoting the use of green energy going forwards as part of its efforts to
achieve the climate change mitigation promises.
The sales from the biomass plant were lower in 2021 at $335,800 compared to
$427,100 last year, as the plant exported 4% less dried long fibres at 4,710
mt compared to 4,930 mt last year. Average selling prices had fallen by 18% as
foreign buyers had to contend with lack of containers as well as higher
shipment costs. The production at the plant was temporarily halted in the last
month of the year as it ran out of storage facilities as inventory built up
due to logistic problems. This was the second time in the year where
production had to stop due to high inventory and storage constraint.
Bengkulu
FFB production in Bengkulu, which aggregates the estates of Puding Mas ("MPM")
and Alno produced 307,400 mt (2020: 304,000 mt), 1% more than 2020. Production
from Bengkulu region has improved despite some areas being recently replanted
as rainfall normalised to 3,500 mm in 2021 (2020: 4,000mm) with higher yield
at 19.6 mt/ha from 18.2 mt/ha last year.
MPM and Sumindo mills processed a combined 807,000 mt (2020: 672,200 mt) of
FFB in 2021 due to higher internal crop production as well as higher external
crop purchases. External crop purchases increased by 35% to 464,800 mt from
344,700 mt last year due to better weather conditions increasing mill
utilization to 160% from 133% in the prior year. CPO production for the year
was 19% higher at 164,300 mt (2020: 138,200 mt) with OER for the two mills
averaging 20.4%, lower from 20.6% last year. External crops made up 58% of the
throughput compared to 51% in 2020. The remaining processed crop was purchased
from other group companies.
900 ha palms were replanted in 2021 with good planting material. Another 3,200
ha of palms will be replanted from 2022 to 2024 as the matured palms in Alno
and MPM reached the average age of 18 and 22 years respectively. The
replanting is also fast tracked as the dura palms constituted a significant
portion of the planted areas. Fruits from dura palms have thin mesocarp which
ultimately produce less oil.
The MPM biogas plant sold over 10,300 MWh (2020: 9,600 MWh) of surplus
electricity, 7% higher and generated $484,900 in revenue (2020: $444,300). One
of the engines in the plant was shut down for up to two months for repairs as
delivery of service parts was delayed due to Covid-19 travel restriction.
Occasional breakdown of transmission lines also meant that the biogas plant
did not perform to its optimum capacity of two megawatt.
South Sumatera
FFB production in South Sumatera, which aggregates the estates of Karya
Kencana ("KKST"), Empat Lawang ("ELAP") and Riau Agrindo ("RAA") produced
37,200 mt (2020: 34,200 mt), 9% higher than 2020. Better rainfall and more
matured palms contributed to a higher harvest. While rainfall during the year
improved in KKST and South ELAP, low annual moisture remains a real threat in
this region which retards growth as the plantations are located behind a
mountain range sheltered from the Indian Ocean. Annual rainfall in North ELAP
decreased to 1,095 mm (2020: 1,861 mm) which also experienced ten months where
rainfall fell below the minimum of 150 mm per month for healthy crop
production. The yield of 6.5 mt/ha in South Sumatera reflected the improved
conditions from 6.3 mt/ha the previous year.
During the year about 17,100 new palms were spot planted in South Sumatera
boosting the stems per hectare to 103 trees from the target of 105 trees. It
incurred higher planting cost as frequent resupply of young palms was needed
due to damage incurred by the freely roaming cattle owned by local villagers.
Trenching and fencing the plantation were explored but were deemed
uneconomical. Discussions with the local villagers were not productive and to
avoid any strained relationship which can be detrimental in the long run,
management decided instead to fence individual young plants to protect them
from the cattle. With higher CPO prices, more FFB thefts were reported in 2021
as the region faced high unemployment during the pandemic. The management
has also stepped-up security patrols.
With the inherent problems of rainfall, terrains, security and non productive
dialogues with the local villages, the Board arrived at a decision in the last
quarter of 2021 to discontinue its operations in South Sumatera and has put
the three plantations for sale in the open market as a going concern during
the 1Q of 2022. The Board has arrived at its decision as a result of the low
crop yield which is unlikely to improve and the continuing losses incurred in
the region, notwithstanding the significant investments and efforts over the
years.
Riau
FFB production in the Riau region, comprising Bina Pitri estates, produced
139,600 mt in 2021 (2020: 133,200 mt) 5% higher than 2020. Rainfall was lower
at 2,620 mm (2020: 2,850 mm) but was consistently above 150 mm per month
except for February 2021. The yield for the year was slightly higher at 28.7
mt/ha from last year of 27.3 mt/ha. As 78% of the palms are between the ages
of 24 to 27 years, there is a planned replanting process of 2,800 ha of palms
from 2023 to 2026.
The mill external crop purchase was higher by 18% at 266,600 mt compared to
225,300 mt last year, with the mill utilization rate improved to 141% from
125% last year. Overall the CPO production was higher by 12% to 77,500 mt
compared to 69,100 mt in 2020. Despite the high yield, the region is
contaminated by dura palms which made up 66% of the crops processed by the
mill. The mill therefore had a low OER of 19.1% compared to 19.3% in the
previous year.
Bangka
FFB production in the Bangka region, comprising Bangka Malindo Lestari
estates, produced 11,100 mt in 2021 (2020: 8,700 mt), 28% higher than 2020.
Higher crop was due to a larger harvestable area and more palms having reached
peak maturity. Rainfall averaged 2,370 mm in the year compared to 3,043 mm
previous year. Yield declined slightly from 13.5 mt/ha to 13.4 mt/ha in 2021.
With new planting in 2021 totalling 160 ha (2020: 706 ha), the total planting
including plasma in Bangka has reached 3,036 ha (2020: 2,856 ha). The land
compensation dialogue in Bangka was briefly interrupted for three months after
local authorities requested the company to stop the process to facilitate an
investigation following complaints against the village head.
Kalimantan
FFB production in Kalimantan which comprises the Sawit Graha Manunggal ("SGM")
and Kahayan Agro Plantation ("KAP") estates was 281,500 mt in 2021 (2020:
249,500 mt) 13% higher than 2020 as more palms matured and reached the peak
production age. The average age of palms in SGM and KAP were nine and five
years respectively. During the year 767 ha of palms matured in SGM and KAP
leading to its first harvest. The yield in Kalimantan recovered to 19.8 mt/ha
from 18.6 mt/ha last year. Wetter-than normal weather prevailed in KAP at
4,490 mm (2020: 4,350 mm) while rainfall in SGM was lower at 2,320 mm (2020:
2,870 mm).
New planting in SGM and KAP is expected to reach 1,000 ha next year. The
long-term prospect for Kalimantan remains bright.
The purchase of external and plasma crops in SGM reached 112,800 mt in 2021
which was higher by 64% compared to 68,900 mt last year. The total external
and plasma crop at the SGM mill made up 29% of the total crops processed from
22% last year. With the throughput at the mill reaching 393,300 mt (2020:
312,000 mt), the mill utilization rate increased to 182% from 144% last year
producing 94,500 mt of CPO, 28% more than 2020 of 73,900 mt. OER for the mill
averaged 24.0% for the year compared to 23.7% last year and continue to
outperform the rest of the mills in the Group.
The SGM biogas plant generated 19% more electricity in 2021 at over 8,100 MWh
(2020: 6,800 MWh) worth $399,900 (2020: $373,700). Negotiation has started
with the state authorities to extend the contract to sell electricity, which
is due to expire before the 2Q of 2022.
As international borders remained mostly closed to non-essential travelling
during the year, the Malaysian based agronomist could not make monthly field
visits to underperforming estates in Indonesia to provide advice on optimizing
field disciplines and improving crop yields.
Overall bought-in crops for Indonesian operations including plasma were 25%
higher at 1.14 million mt for the year 2021 (2020: 913,200 mt). The average
OER for our mills was marginally lower in 2021 at 20.5% in 2021 (2020: 20.6%).
Malaysia
The La Nina weather pattern towards the end of 2020 caused massive flooding
and landslides which affected the evacuation of crops for the 1Q 2021 as
internal roads and bridges badly damaged were repaired. FFB production in 2021
was 35% lower at 12,000 mt, compared to 18,600 mt in 2020. The plantation
continued to experience a substantial shortage of workers which hampered not
only field maintenance and application of fertilisers but harvesting resulting
in crop losses. Due to international border closure throughout the year the
attrition of workers for the past two years since the pandemic started could
not be replaced. In addition, the under application of fertilisers at 10% of
the recommended dosage resulted in undernourished plants and poor yield. To
compound the problem further, supplier of fertilisers could not deliver for
most part of the year as their manufacturing activities were forced to shut
down during the lockdown. Although there was a partial lifting of the freeze
on recruitment of foreign workers in late 2021, it will still take some time
before any replacement workers can be found. In December 2021, parts of the
plantation were closed for three weeks as seven of its foreign workers were
infected with the Coronavirus. The palms, with an average age of 24 years,
faced declining yield and stems per hectare steadily declined due to damage by
wild elephants. The Malaysian plantation in 2021 generated a profit before tax
after BA movement of $0.4 million compared to a marginal loss in 2020. The
plantation obtained its mandatory Malaysian Sustainable Palm Oil ("MSPO")
certification in January 2021.
The financial performance of the various regions is reported in note 7 on
segmental information.
Commodity Prices
The CPO ex-Rotterdam price started the year at $1,014/mt (2020: $878/mt) and
trended upwards for most part of the year. The price was lowest at the
beginning of March 2021 at $900/mt and peaked in November 2021 at $1,435/mt
before ending the year at $1,305/mt (2020: $1,014/mt), averaging $1,211/mt for
the year, 67% higher than last year (2020: $723/mt).
While the FFB production in Indonesia as a country was marginally down from
last year, the Malaysian's palm oil yields as a country dropped to nearly
40-year lows in 2021 as the plantation industry struggled with a shortage of
workers and devastating floods in several parts of the country. It was
reported that the Food and Agriculture Organisation's global edible oil index
was up 91% and is expected to climb further as economies reopen following the
Covid-19 lockdowns, boosting food and fuel consumption of edible oils. Besides
labour shortages, many producers at the same time have been battling a range
of impediments including heatwaves and vermin infestation that is driving
collective stocks of world's most consumed edible oils - palm, soybean, canola
and sunflower seed to their lowest levels in a decade. The pressure on stocks
led to higher consumer prices. In the last one year, India has revised
downwards its taxes on CPO, palm products and other vegetable oils several
times to tame domestic inflation caused by rising prices of edible oils.
The current market prices have been shaped by higher anticipated demand,
slower growth in palm oil production and market dynamics of vegetable oils.
Ukraine and Russia are major producers of sunflower oil and jointly export up
to 70% of the worldwide production. The disruption in harvesting and planting
caused by the current conflict between Ukraine and Russia would likely result
in a higher demand for CPO and would sustain the current high prices.
The export and movement in CPO prices are also influenced by Indonesian
government policies.
Over a period of ten years, CPO price has touched a monthly average high of
$1,395/mt in November 2021 and a monthly average low of $472/mt in November
2018. The monthly average price over the ten years is about $779/mt.
Rubber prices averaged $1,637/mt for 2021 (2020: $1,356/mt). Our small area of
262 ha of mature rubber contributed a revenue of $0.7 million in 2021 (2020:
$0.6 million). Rubber continues to struggle with low prices. Lower tappable
trees due to wind damage and dry bark were the main cause for lower rubber
production.
Corporate Development
In 2021, the Group opened up new land and planted 1,701 ha (2020: 2,190 ha) of
oil palm mainly in Kalimantan and South Sumatera, boosting planted area
including the smallholder cooperative scheme, known as Plasma, by 2% to 75,204
ha (2020: 73,600 ha). Another 900 ha was replanted in Bengkulu. In 2022, the
Group plans to plant 2,500 ha of oil palm which includes replanting of 1,200
ha in Bengkulu. Opening of new land for planting can be cumbersome and
requires written approval from local authorities, submission of environment
impact assessments and meetings with local communities.
Old quarters for workers throughout the plantations will be upgraded in 2022.
New quarters together with recreation facilities will be added to accommodate
more workers and families at the cost of $2.3 million. A further $420,000 will
be spent to connect the plantations in Bina Pitri, MPM and SGM to the national
electric grids as part of the Group's effort to reduce carbon emissions. This
is expected to reduce fossil fuel consumed by the generators in the remote
plantations.
The construction of the seventh mill in HPP, North Sumatera has been delayed
by frequent lockdowns caused by the pandemic, affecting the deployment of
manpower at the construction site, as well as fabrication of mechanical works,
interruption of supply chain and the transport of building materials. During
the year, the concrete pilling has completed together with the fabrication of
a loading ramp, clarification tanks and conveyors. Cost of construction has
spiralled to about $22 million as the mill, located on peat area, has to be
built according to strict specifications laid out by environmental laws in
Indonesia. The conventional anaerobic lagoon constructed from earth is not
permitted on peat land due to possible seepage of effluent and contamination
of ground water. A purpose-built treatment plant is required to treat the
effluent from the mill to a quality specified for discharge to the water
course. The effluent plant also includes two 4,000 mt anaerobic digesters and
two 1,200 mt aeration tanks. A decanter for solid removal and oil recovery was
also added to reduce the number of tanks required which in turn reduced the
high cost of concrete piles for its foundation. Steel, which constituted a
major part of the building and equipment appreciated by 15% during the
construction period putting further pressure on project costs. The project is
earmarked for completion by the 3Q of 2022.
Our feasibility study concluded that it is more profitable to build a mill in
KAP in Kalimantan to support its operation due to high logistic costs. KAP is
currently transporting the FFB some 600km to SGM mill or, when this becomes
too arduous during the monsoon season, the fruits are sold locally to third
parties. The Group plans to build a 45 mt/hr mill with two storage tanks of
4,000 mt each with minimum spare machineries at an estimated cost of $13
million. Due to the hilly terrain and steep ravines, the choice for a mill
site is limited. Nevertheless a few possible sites were identified and
geological survey and onsite inspections are in progress. Construction is
expected to start next year as soon as formal approval from the authorities is
received.
To improve transport of FFB in our plantations and help deliver the FFB to the
mills, the Group has budgeted to buy more dump trucks costing more than $1
million in 2022. This is necessary amidst rising logistic cost as independent
transport companies especially in Kalimantan cannot supply adequate trucks to
transport our harvest as many trucks are diverted to carry coal which pay
better transport rates. In addition, the Group is expected to spend $1.2
million to improve the field roads and connectivity between estates and mills
by building new bridges.
The two vertical sterilisers/pressure vessels in Bina Pitri mill are 12 years
old and are scheduled to be replaced, for safety reasons, at a cost of
$370,000 in 2022.
The fabrication and installation of an additional 45,000 kg/hour steam boiler
in SGM mill costing $980,000 is expected to be completed in 2022 after a long
delay caused by the pandemic. A second boiler is required to back-up the mill
operation and to avoid any disruption as it enters its sixth year of
operation. The mill is projected to process up to 380,000 mt of FFB in 2022.
Upgrading works at SGM and Sumindo mills which started three years ago
involving the addition of boilers, steam turbines, screw press, digester, CPO
and kernel storages, clarification station, water and effluent treatment
plants and sterilizer at a combined cost of $4.5 million are expected to be
completed this year increasing their milling capacity to 60 mt/hr from 45
mt/hr.
The Group plans to install an oil recovery system for its MPM mill at a cost
of $1 million. This system extracts oil from its raw effluent as well as
reducing the solid content of the effluent. The system, when fully operational
is reportedly able to improve the OER by 0.2% to 0.3%. As the mill processes
up to 420,000 mt of FFB annually, it could potentially recover up to 1,000 mt
of CPO per year. Reducing the solids in the raw effluent will result in less
silting in the ponds after extraction of biogas in the anaerobic lagoon.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
29 April 2022
Directors' Responsibilities
The Directors are responsible for preparing the annual report and the
financial statements in accordance with UK adopted international accounting
standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the Group
financial statements in accordance with UK adopted International Accounting
Standards ("IAS") and have elected to prepare the company financial statements
in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law) ("UK GAAP"). Under
company law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss for the Group for that
period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with UK adopted
international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and the Company will continue in
business; and
· prepare a Directors' Report, a Strategic Report and Directors'
Remuneration Report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, are fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the group's performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with the legislation in the UK
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rules 4
("DTR4")
The Directors confirm to the best of their knowledge:
· The financial statements have been prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Group.
· The annual report includes a fair review of the development and
performance of the business and the financial position of the Group and
Company, together with a description of the principal risks and uncertainties
that they face.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate
Affairs
29 April 2022
Consolidated Income Statement
For the year ended 31 December 2021
(Restated)
2021 2020
Result before Result before
BA movement* BA movement*
BA movement BA movement
Note Total Total
$000 $000 $000 $000 $000 $000
Continuing operations
Revenue 4 433,421 - 433,421 263,818 - 263,818
Cost of sales (300,354) 4,349 (296,005) (203,326) 1,203 (202,123)
Gross profit 133,067 4,349 137,416 60,492 1,203 61,695
Administration expenses (8,764) - (8,764) (7,768) - (7,768)
Reversal of impairment 6, 13 5,437 - 5,437 2,165 - 2,165
Impairment losses 6, 13 (585) - (585) (188) - (188)
Reversal / (Provision) for expected credit loss 6, 18 177 - 177 (102) - (102)
Operating profit 129,332 4,349 133,681 54,599 1,203 55,802
Exchange gains / (losses) 212 - 212 (269) - (269)
Finance income 5 3,214 - 3,214 2,873 - 2,873
Finance expense 5 (24) - (24) (292) - (292)
Profit before tax 6 132,734 4,349 137,083 56,911 1,203 58,114
Tax expense 9 (24,784) (958) (25,742) (15,103) (55) (15,158)
Profit for the year from continuing operations 107,950 3,391 111,341 41,808 1,148 42,956
(Loss) / gain on discontinued operation, net of tax 10 (28,471) 50 (28,421) (5,275) 60 (5,215)
79,479 3,441 82,920 36,533 1,208 37,741
Profit for the year attributable to:
- Owners of the parent 65,485 2,856 68,341 30,653 1,051 31,704
- Non-controlling interests 13,994 585 14,579 5,880 157 6,037
79,479 3,441 82,920 36,533 1,208 37,741
Profit for the year from continuing operations attributable to:
- Owners of the parent 93,245 2,809 96,054 35,399 994 36,393
- Non-controlling interests 14,705 582 15,287 6,409 154 6,563
107,950 3,391 111,341 41,808 1,148 42,956
Earnings per share attributable to the owners of the parent during the year
Profit
- basic and diluted 11 172.42cts 79.99cts
Profit from continuing operations
- basic and diluted 11 242.34cts 91.82cts
* The total column represents the IFRS figures and the result before BA
movement is an Alternative Performance Measure ("APM") which reflects the
Group's results before the movement in fair value of biological assets has
been applied. We have opted to additionally disclose this APM as the BA
movement is considered to be a fair value calculation which does not
appropriately represent the Group's result for the year.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
(Restated)
2021 2020
$000 $000
Profit for the year 82,920 37,741
Other comprehensive expenses:
Items may be reclassified to profit or loss:
Loss on exchange translation of foreign operations (5,429) (4,801)
Net other comprehensive expenses may be reclassified to profit or loss (5,429) (4,801)
Items not to be reclassified to profit or loss:
Remeasurement of retirement benefits plan, net of tax 1,086 (649)
Net other comprehensive income / (expenses) not being reclassified to profit 1,086 (649)
or loss
Total other comprehensive expenses for the year, net of tax (4,343) (5,450)
Total comprehensive income for the year 78,577 32,291
Total comprehensive income for the year attributable to:
- Owners of the parent 64,993 27,269
- Non-controlling interests 13,584 5,022
78,577 32,291
Consolidated Statement of Financial Position
As at 31 December 2021
Company Number: 1884630
(Restated)* (Restated)
Note 31.12.2021 31.12.2020 1.1.2020
$000 $000 $000
Non-current assets
Property, plant and equipment 13 260,532 280,831 281,287
Investments 31 49 - -
Receivables 14 22,000 22,236 16,500
Deferred tax assets 15 4,324 14,389 17,807
286,905 317,456 315,594
Current assets
Inventories 16 14,316 12,541 8,752
Income tax receivables 9 5,072 10,071 14,348
Other tax receivable 9 45,423 41,618 35,179
Biological assets 17 12,803 8,783 7,574
Trade and other receivables 18 5,182 4,693 5,774
Short-term investments 1,439 1,957 -
Cash and cash equivalents 19 218,249 115,211 84,846
302,484 194,874 156,473
Assets in disposal groups classified as held for sale 10 13,210 - -
315,694 194,874 156,473
Current liabilities
Loans and borrowings - - (8,203)
Trade and other payables 20 (32,533) (26,310) (16,110)
Income tax liabilities 9 (13,139) (5,981) (1,512)
Other tax liabilities 9 (1,615) (1,089) (1,386)
Dividend payables (25) (24) (23)
Lease liabilities 21 (240) (236) (222)
(47,552) (33,640) (27,456)
Net current assets 268,142 161,234 129,017
Non-current liabilities
Deferred tax liabilities 15 (1,330) (782) (442)
Retirement benefits - net liabilities 22 (11,499) (13,383) (11,338)
Lease liabilities 21 (110) (217) (456)
(12,939) (14,382) (12,236)
Net assets 542,108 464,308 432,375
Issued capital and reserves attributable to owners of the parent
Share capital 23 15,504 15,504 15,504
Treasury shares 23 (1,171) (1,171) (1,171)
Share premium 23,935 23,935 23,935
Capital redemption reserve 1,087 1,087 1,087
Exchange reserves (241,907) (237,599) (233,723)
Retained earnings 642,582 573,677 542,730
440,030 375,433 348,362
Non-controlling interests 102,078 88,875 84,013
Total equity 542,108 464,308 432,375
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Note Share capital Treasury shares Share premium Capital redemption reserve Revaluation reserves Exchange reserves Retained earnings Total Non-controlling interests Total equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 31 December 2019 15,504 (1,171) 23,935 1,087 48,413 (229,026) 542,415 401,157 94,661 495,818
Restatement (note 3) - - - - (48,413) (4,697) 315 (52,795) (10,648) (63,443)
Balance at 31 December 2019 after restatement 15,504 (1,171) 23,935 1,087 - (233,723) 542,730 348,362 84,013 432,375
Items of other comprehensive expenses
-Remeasurement of retirement benefit plan, net of tax 22 - - - - - - (559) (559) (90) (649)
-Loss on exchange translation of foreign operations - - - - - (3,876) - (3,876) (925) (4,801)
Total other comprehensive expenses - - - - - (3,876) (559) (4,435) (1,015) (5,450)
Profit for the year - - - - - - 31,704 31,704 6,037 37,741
Total comprehensive (expenses) / income for the year - - - - - (3,876) 31,145 27,269 5,022 32,291
Dividends paid - - - - - - (198) (198) (160) (358)
Balance at 31 December 2020 after restatement 15,504 (1,171) 23,935 1,087 - (237,599) 573,677 375,433 88,875 464,308
Items of other comprehensive (expenses) / income
-Remeasurement of retirement benefit plan, net of tax 22 - - - - - - 960 960 126 1,086
-Loss on exchange translation of foreign operations - - - - - (4,308) - (4,308) (1,121) (5,429)
Total other comprehensive (expenses) / income - - - - - (4,308) 960 (3,348) (995) (4,343)
Profit for the year - - - - - - 68,341 68,341 14,579 82,920
Total comprehensive (expenses) / income for the year - - - - - (4,308) 69,301 64,993 13,584 78,577
Dividends paid - - - - - - (396) (396) (381) (777)
Balance at 31 December 2021 15,504 (1,171) 23,935 1,087 - (241,907) 642,582 440,030 102,078 542,108
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
(Restated)
2021 2020
$000 $000
Cash flows from operating activities
Profit before tax from continuing operations 137,083 58,114
Adjustments for:
BA movement (4,349) (1,203)
Loss / (Gain) on disposal of property, plant and equipment 24 (20)
Depreciation 16,994 16,177
Retirement benefit provisions 103 1,564
Net finance income (3,190) (2,581)
Unrealised (gain) / loss in foreign exchange (212) 269
Property, plant and equipment written off 72 274
Reversal of impairment (4,852) (1,977)
(Reversal) / Provision for expected credit loss (177) 124
Operating cash flows before changes in working capital 141,496 70,741
Increase in inventories (2,649) (3,945)
Increase in non-current, trade and other receivables (517) (13,246)
Increase in trade and other payables 6,683 10,485
Cash inflows from operations 145,013 64,035
Retirement benefits paid (487) (352)
Overseas tax paid (12,359) (8,559)
Operating cash flows from continuing operations 132,167 55,124
Operating cash flows (used in) / from discontinued operations (821) 10,229
Net cash generated from operating activities 131,346 65,353
Investing activities
Property, plant and equipment
- purchases (26,374) (18,965)
- sales 413 27
Interest received 3,214 2,873
Increase in receivables from cooperatives under plasma scheme (1,985) (3,826)
Investment in share equity (49) -
Placement of fixed deposits with original maturity of more than three months (1,439) (1,957)
Withdrawal of fixed deposits with original maturity of more than three months 1,957 -
Cash used in investing activities from continuing operations (24,263) (21,848)
Cash used in investing activities from discontinued operations (1,594) (2,990)
Net cash used in investing activities (25,857) (24,838)
Financing activities
Dividends paid to the holders of the parent (395) (197)
Dividends paid to non-controlling interests (381) (160)
Interest paid - (258)
Repayment of existing long-term loans - (8,167)
Repayment of lease liabilities - principal (228) (223)
Repayment of lease liabilities - interest (24) (34)
Cash used in financing activities from continuing operations (1,028) (9,039)
Cash used in financing activities from discontinued operations - -
Net cash used in financing activities (1,028) (9,039)
Net increase in cash and cash equivalents 104,461 31,476
Cash and cash equivalents
At beginning of year 115,211 84,846
Exchange losses (1,423) (1,111)
At end of year 218,249 115,211
Comprising:
Cash at end of year 19 218,249 115,211
Notes
1 Basis of preparation
AEP is a company incorporated in the UK under the Companies Act 2006 and is
listed on the London Stock Exchange. The registered office of AEP is located
at Quadrant House, 6(th) Floor, 4 Thomas More Square, London E1W 1YW, UK. The
principal activity of the Group is plantation agriculture, mainly in the
cultivation of oil palm in Indonesia and Malaysia, of which Indonesia is the
principal place of business.
The financial information does not constitute the company's statutory accounts
for the years ended 31 December 2021 or 2020. Statutory accounts for the years
ended 31 December 2021 and 31 December 2020 have been reported on by the
Independent Auditor. The Independent Auditor's Reports on the Annual Report
and Financial Statements for the years ended 31 December 2021 and 31 December
2020 were 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.
Statutory accounts for the year ended 31 December 2020 have been filed with
the Registrar of Companies. The statutory accounts for the year ended 31
December 2021 will be delivered to the Registrar in due course.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all years presented, except as detailed in note 3.
Basis of preparation
The consolidated financial statements have been prepared in accordance with UK
adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into the UK law and became UK adopted International Accounting
Standards, with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK adopted International
Accounting Standards in its consolidated financial statements on 1 January
2021. There was no impact or changes in accounting from the transition.
The Directors have a reasonable expectation, having made the appropriate
enquiries, that the Group has control of the monthly cash flows and that the
Group has sufficient cash resources to cover the fixed cash flows for a period
of at least twelve months from the date of approval of these financial
statements. For these reasons, the Directors adopted a going concern basis in
preparation of the financial statements. The Directors have made this
assessment after consideration of the Group's budgeted cash flows and related
assumptions including appropriate stress testing of identified uncertainties,
specifically on the potential shut down of the entire operations from three to
twelve months if all the plantations are infected with Coronavirus as well as
the impact on the demand for palm oil with decreases of 50% to 100%. Stress
testing of other identified uncertainties and risks such as commodity prices
and currency exchange rates were also undertaken.
Changes in accounting standards
a) New standards, interpretations and amendments effective in the
current year
There are no new and amended standards and Interpretations that apply for the
first time in these financial statements.
b) New standards, interpretations and amendments not yet effective.
The following new standards, interpretations and amendments are effective for
future periods (as indicated) and have not been applied in these financial
statements:
• Annual improvements to IFRS Standards 2018-2020 (1 January
2022, not yet adopted)
• IAS 1 (amendments) Classification of liabilities as current
or non-current (1 January 2023, not yet adopted
• IAS 1 (amendments) and IFRS Practice Statement 2 Disclosure
of Accounting Policies (1 January 2023, not yet adopted)
• IAS 8 (amendments) Definition of Accounting Estimates (1
January 2023, not yet adopted)
• IAS 12 (amendments) Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (1 January 2023, not yet
adopted)
None of the above new standards, interpretations and amendments are expected
to have a material effect on the Group's future financial statements.
2 Accounting policies
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. The Company controls a subsidiary if all three of
the following elements are present; power over the subsidiary, exposure to
variable returns from the subsidiary, and the ability of the investor to use
its power to affect those variable returns. The financial statements of
subsidiaries are included in the consolidated financial statements from the
date that control commences until the date control ceases. In respect of
cooperatives under the Plasma scheme, the Group has not consolidated these
results on the basis that the Company does not have control over those
entities.
(b) Business combinations
The consolidated financial statements incorporate the results of business
combinations using the purchase method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. Acquisitions of entities that comprise principally land with
no active plantation business do not represent business combinations, in such
cases, the amount paid for each acquisition is allocated between the
identifiable assets/liabilities at the acquisition date.
(c) Foreign currency
The individual financial statements of each subsidiary are presented in the
currency of the country in which it operates (its functional currency), being
the currency in which the majority of their transactions are denominated, with
the exception of the Company and its UK subsidiaries which are presented in US
Dollar. The presentation currency for the consolidated financial statements is
also US Dollar, chosen because, as internationally traded commodities, the
price of the bulk of the Group's products are ultimately linked to the US
Dollar.
On consolidation, the results of overseas operations are translated into US
Dollar at average exchange rates for the year unless exchange rates fluctuate
significantly in which case the actual rate is used. All assets and
liabilities of overseas operations are translated at the rate ruling at the
balance sheet date. Exchange differences arising on re-translating the opening
net assets at opening rate and the results of overseas operations at actual
rate are recognised directly in equity (the "exchange reserves"). Exchange
differences recognised in the income statement of Group entities' separate
financial statements on the translation of long-term monetary items forming
part of the Group's net investment in the overseas operation concerned are
reclassified to the exchange reserves if the item is denominated in the
presentational currency of the Group or of the overseas operation concerned.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the exchange reserves relating to that operation up to the date
of disposal are transferred to the income statement as part of the profit or
loss on disposal.
All other exchange profits or losses are credited or charged to the income
statement.
(d) Revenue recognition
The Group derives its revenue from the sale of CPO, palm kernel, FFB, shell
nut, biomass products, biogas products and rubber slab. Revenue for CPO, palm
kernel, FFB, shell nut, biomass and biogas products are recorded net of sales
and related taxes and levies, including export taxes and recognised when the
customer has taken delivery of the goods. The collection/delivery of the goods
will not take place until the goods are paid for. Sales of rubber slab are
recognised on signing of the sales contract, this being the point at which
control is transferred to the buyer.
The transacted price for each product is based on the market price or
predetermined monthly contract value. There is no right of return nor warranty
provided to the customers on the sale of products and services rendered.
Advance receipts represent the Group's obligation to transfer goods to a
customer for which the Group has received consideration but the goods have yet
to be delivered to/collected by the customer.
(e) Tax
UK and foreign corporation tax are provided at amounts expected to be paid or
recovered using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
The directors consider that the carrying amount of tax receivables
approximates its fair value.
(f) Dividends
Equity dividends are recognised when they become legally payable. The Company
pays only one dividend each year as a final dividend which becomes legally
payable when approved by the shareholders at the next annual general meeting.
(g) Property, plant and equipment
All items of property, plant and equipment are initially measured at cost.
Cost includes expenditure that is directly attributable to the acquisition of
the items. After initial recognition, all items of property, plant and
equipment except some land and construction in progress, are stated at cost
less accumulated depreciation and any accumulated impairment losses.
Plantations comprise of the cost of planting and development of oil palm and
other plantation crops. Costs of new planting and development of plantation
crops are capitalised from the stage of land clearing up to the stage of
maturity. The costs of immature plantations consist mainly of the accumulated
cost of land clearing, planting, fertilising and maintaining the plantation
and other indirect overhead costs up to the time the trees are harvestable and
to the extent appropriate. Oil palm plantations are considered mature within
three to four years after planting and generating average annual CPO of four
to six metric tons per hectare. Immature plantations are not depreciated.
The Indonesian authorities have granted certain land exploitation rights and
operating permits for the estates. The land rights are usually renewed without
significant cost subject to compliance with the laws and regulations of
Indonesia therefore, the Group has classified the land rights as leasehold
land. The leasehold land is recognised at cost initially and is not
depreciated except the leasehold land in Malaysia which is depreciated over
the term of the lease as its renewal cannot be guaranteed. Costs include the
initial cost of obtaining the location permits and subsequent payments to
compensate existing land owners plus any legal costs incurred to acquire the
necessary land exploitation rights.
Construction in progress is stated at cost. The accumulated costs will be
reclassified to the appropriate class of assets when construction is completed
and the asset is ready for its intended use. Construction in progress is also
not depreciated until such time when the asset is available for use.
Plantations, buildings and oil mills are depreciated using the straight-line
method. The yearly rates of depreciation are as follows:
Leasehold land in Malaysia - over the term of the lease
Plantations - 5% per annum
Buildings - 5% to 10% per annum
Oil Mill - 5% per annum
Estate plant, equipment & vehicle - 12.5% to 50% per annum
Office plant, equipment & vehicle - 25% to 50% per annum
(h) Biological assets
Biological assets comprise an estimation of the fair value less costs to sell
of unharvested FFB at balance sheet date. Changes in the fair value of
biological assets are charged or credited to the income statement within the
cost of sales.
(i) Leases
The Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments), less any
lease incentives receivable.
The lease liability is presented as a separate line in the consolidated
statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are presented together in property, plant and
equipment in the consolidated statement of financial position. The Group
applies IAS 36 to determine whether a right-of-use asset is impaired and
accounts for any identified impairment loss as described in the "Impairment"
policy.
Land rights are recognised at historical cost without depreciation at the
balance sheet date except for leasehold land in Malaysia is recognised at
historical cost and depreciated over the term of the lease. The details of the
change in accounting policy are disclosed in note 3.
(j) Impairment
An assessment of indicators of impairment over the Group's assets is
undertaken annually on 31 December. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value in use or fair value,
less costs to sell), the asset is written down accordingly. Impairment charges
are included in the income statement, except to the extent they reverse gains
previously recognised in other comprehensive income. Reversal on impairment
loss would be recognised if, and only if, there has been a change in the
estimates used to determine the asset's recoverable amount since the last
impairment test was carried out. Reversal on impairment losses will be
immediately recognised in the income statement.
(k) Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
cost and net realisable value. In the case of processed produce for sale which
comprises palm oil and kernel, cost represents the monthly weighted-average
cost of production and appropriate production overheads. Estate and mill
consumables are valued on a weighted average cost basis.
(l) Financial assets
The Group's financial assets measured at amortised cost comprise trade and
other receivables and cash and cash equivalents in the consolidated statement
of financial position. All the Group's receivables and loans are
non-derivative financial assets with cash flows that are solely payments of
principal and interest. They are recognised at fair value at inception and
subsequently at amortised cost as this is what the Group considers to be most
representative of the business model for these assets.
Cash and cash equivalents consist of cash in hand and short-term deposits at
banks with an original maturity not exceeding three months. Bank overdrafts
are shown within loans and borrowings under current liabilities on the
statement of financial position.
The Group considers a trade receivable or other receivable as credit impaired
when one or more events that have a detrimental impact on the estimated cash
flow have occurred. Trade and other receivables are written off when there is
no expectation of recovery based on the assessment performed. If the
receivables are subsequently recovered, these are recognised in income
statement.
The Group use three categories for those receivables which reflect their
credit risk and how the loss provision is determined for those categories.
These include trade receivables using the simplified approach and debt
instruments at amortised costs other than trade receivables and financial
guarantee contracts using the three-stage approach.
(m) Financial liabilities
All the Group's financial liabilities are non-derivative financial
liabilities.
Bank borrowings and long-term development loans are initially recognised at
fair value and subsequently at amortised cost, which is the total of proceeds
received net of issue costs. Finance charges are accounted for on an accruals
basis and charged in the income statement unless capitalised according to the
policy as set out in the property, plant and equipment policy.
Trade and other payables are shown at fair value at recognition and
subsequently at amortised cost.
(n) Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs from
its tax base except for differences in the initial recognition of an asset or
liability in a transaction which is not a business combination and at the time
of the transaction affects neither accounting nor taxable profit.
The Group recognises deferred tax liabilities arising from taxable temporary
differences on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary differences and it is probable that the
temporary difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is possible that taxable profit will be available against which the difference
can be utilised.
Deferred tax is recognised on temporary differences arising from property
revaluation surpluses or deficits.
Deferred tax is determined using the tax rates that are enacted or
substantively enacted at the balance sheet date. Deferred tax is charged or
credited in the income statement, except when it relates to items charged to
other comprehensive income, such as revaluations, in which case the deferred
tax is also dealt with in other comprehensive income.
(o) Retirement benefits
Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the
consolidated income statement in the year to which they relate.
Defined benefit schemes
The Group operates a number of defined benefit schemes in respect of its
Indonesian operations. These schemes' surpluses and deficits are measured at:
• The fair value of plan assets at the reporting date; less
• Plan liabilities calculated using the projected unit credit method
discounted to its present value using yields available on Indonesian
Government bonds that have maturity dates approximating to the terms of the
liabilities; plus
• Past service costs; less
• The effect of minimum funding requirements agreed with scheme
trustees.
Remeasurements of the net defined benefit obligation are recognised in other
comprehensive income. The remeasurements include:
• Actuarial gains and losses;
• Return on plan assets (interest exclusive); and
• Any asset ceiling effects (interest inclusive).
Service costs are recognised in the income statement and include current and
past service costs as well as gains and losses on curtailments.
Net interest expense / (income) is recognised in the income statement, and is
calculated by applying the discount rate used to measure the defined benefit
obligation / (asset) at the beginning of the annual period to the balance of
the net defined benefit obligation / (asset), considering the effects of
contributions and benefit payments during the period.
Gains or losses arising from changes to scheme benefits or scheme curtailment
are recognised immediately in the income statement. Settlements of defined
benefit schemes are recognised in the period in which the settlement occurs.
(p) Treasury shares
Consideration paid or received for the purchase or sale of the Company's own
shares for holding in treasury is recognised directly in equity, where the
cost is presented as the treasury shares. Any excess of the consideration
received on the sale of treasury shares over the weighted average cost of
shares sold is taken to the share premium account.
Any shares held in treasury are treated as cancelled for the purpose of
calculating earnings per share.
(q) Financial guarantee contracts
Where the Company and its subsidiaries enter into financial guarantee
contracts and guarantee the indebtedness of other companies within the Group
and/or third party entities, these are accounted for under IFRS 9. The
details of financial guarantee contracts are disclosed in note 27.
(r) Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held for sale when:
• They are available for immediate sale;
• Management is committed to a plan to sell;
• It is unlikely that significant changes to the plan will be made
or that the plan will be withdrawn;
• An active programme to locate a buyer has been initiated;
• The asset or disposal group is being marketed at a reasonable
price in relation to its fair value; and
• A sale is expected to complete within 12 months from the date of
classification.
Non-current assets and disposal groups classified as held for sale are
measured at the lower of:
• Their carrying amount immediately prior to being classified as
held for sale in accordance with the group's accounting policy; and
• Fair value less costs of disposal.
Following their classification as held for sale, non-current assets (including
those in a disposal group) are not depreciated.
A discontinued operation is a component of the Group's business that
represents a separate major line of business or geographical area of
operations or is a subsidiary acquired exclusively with a view to resale, that
has been disposed of, has been abandoned or that meets the criteria to be
classified as held for sale.
Discontinued operations are presented in the consolidated statement of
comprehensive income as a single line which comprises the profit or loss after
tax of the discontinued operation along with the gain or loss after tax
recognised on the re-measurement to fair value less costs to sell or on
disposal of the assets or disposal groups constituting discontinued
operations.
(s) Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Judgements
• Assessment of de-facto control of cooperatives under Plasma
scheme (see note 2(a) and note 29)
• Classification of land as leasehold with no depreciation
charged (see note 13)
• Classification of assets as held for sale and discontinued
operations (see note 10)
Estimates and assumptions
• Impairment of plantation assets - estimate of future cash
flows and determination of the discount rate and other assumptions (see note
13)
• Expected credit losses ("ECL") on amounts due from
cooperatives under Plasma scheme - determination of possible outcomes and
their weighted probability (see note 14)
• Carrying value of income tax receivables - determination of
historic recovery rates (see note 9)
• Income taxes and deferred tax - provisions for income taxes in
various jurisdictions (see note 9 and note 15)
• Valuation of assets classified as held for sale (see note 10)
• Recognition of deferred tax on losses - estimate of future
profitability of respective entities (see note 15)
• Retirement benefits - actuarial assumptions (see note 22)
• Fair value measurement - a number of assets and liabilities
included in the Group's financial statements require measurement at, and/or
disclosure of, fair value. The fair value measurement of the Group's financial
and non-financial assets and liabilities utilises market observable inputs and
data as far as possible. Inputs used in determining fair value measurements
are categorised into different levels based on how observable the inputs used
in the valuation technique utilised are (the 'fair value hierarchy'):
- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 - inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly or
indirectly; and
- Level 3 - unobservable inputs for the asset or liability.
The classification of an item into the above levels is based on the lowest
level of the inputs used that has a significant effect on the fair value
measurement of the item. Transfers of items between levels are recognised in
the period they occur.
The Group measures the following assets at fair value:
Biological assets (note 17)
The Group measures the following assets at amortised cost, however disclosure
of fair value is given in accordance with IFRS7 and IFRS 13:
- Non-current receivables due from non-controlling interests (note
14)
- Non-current receivables due from cooperatives under Plasma
scheme (note 14)
For more detailed information in relation to the fair value measurement of the
items above, please refer to the applicable notes.
3 Prior year restatement
With effect from 31 December 2021 and applied retrospectively, the Group have
opted for a change in accounting policy in respect of the treatment of land in
the Group's financial statements which is accounted for in accordance with IAS
16 Property, Plant and Equipment. The Group has historically recognised land
under the revaluation model however, following an analysis of the Group's
peers in the UK, it was apparent that the majority reported their land at
historical cost and therefore the decision was made to change the accounting
policy to make the financial information more comparable and provide a more
relevant result. Land has always been recognised in the local Indonesian
financial statements at historical cost. The Group now recognises land at
cost initially and is not depreciated except for the land in Malaysia as
the possibility to renew the leasehold land in Malaysia is minimal, the
details are disclosed in note 13.
The effects of the restatements are summarised as follows:
2020
$000
Impact on consolidated income statement
Profit for the year before restatement 37,943
Effect of change in restatement:
Cost of sales (124)
Tax expense (78)
(202)
Profit for the year after restatement 37,741
The effect of the prior year adjustments had a negative impact on the earnings
per share before BA of 0.33cts and a negative impact on the earnings per share
after BA of 0.33cts for the year to 31 December 2020.
2020
$000
Impact on consolidated statement of comprehensive income
Other comprehensive expenses for the year before restatement (4,830)
Effect of change in restatement:
Unrealised loss on revaluation of leasehold land, net of tax (1,309)
Gain on exchange translation of foreign operations 689
(620)
Other comprehensive expenses for the year after restatement (5,450)
The following table summarises the impact of this prior year restatement on
the Consolidated Statement of Financial Position:
Balance as reported Restated balance at
31 December 2020 31 December 2020
$000 Effect of restatement $000
$000
Impact on consolidated statement of financial position
Property, plant and equipment 365,353 (84,522) 280,831
Deferred tax assets 8,817 5,572 14,389
Deferred tax liabilities (15,467) 14,685 (782)
Revaluation reserves 49,367 (49,367) -
Exchange reserves (233,534) (4,065) (237,599)
Retained earnings 573,493 184 573,677
Non-controlling interests 99,892 (11,017) 88,875
Balance as reported Restated balance at
1 January 2020 1 January 2020
$000 Effect of restatement $000
$000
Impact on consolidated statement of financial position
Property, plant and equipment 367,891 (86,604) 281,287
Deferred tax assets 11,251 6,556 17,807
Deferred tax liabilities (17,047) 16,605 (442)
Revaluation reserves 48,413 (48,413) -
Exchange reserves (229,026) (4,697) (233,723)
Retained earnings 542,415 315 542,730
Non-controlling interests 94,661 (10,648) 84,013
The restatement of land from fair value to historical cost has decreased the
value of the property, plant and equipment and eliminated the revaluation
reserves. Deferred tax liabilities previously recognised on the revaluation of
land have been reversed resulting in a decrease in deferred tax liabilities,
but also an increase in deferred tax assets where individual entities have
moved from a net deferred tax liability position to a net deferred tax asset
position. Depreciation of the land in Malaysia recognised retrospectively and
the reversal of the deferred tax liabilities previously recognised has
resulted in a small increase in retained earnings. All entities for which
these adjustments relate have non-controlling interests and therefore the
impact on those non-controlling interests has also been recognised.
4 Revenue
Disaggregation of Revenue
The Group has disaggregated revenue into various categories in the following
table which is intended to:
• Depict how the nature, amount and uncertainty of revenue and cash
flows are affected by timing of revenue recognition; and
• Enable users to understand the relationship with revenue segment
information provided in note 7.
There is no right of return and warranty provided to the customers on the sale
of products and services rendered.
CPO, palm kernel and FFB Shell nut Biomass products Biogas products Total
Year to 31 December 2021 Rubber Others
$000 $000 $000 $000 $000 $000 $000
Contract counterparties
Government - - - - 999 - 999
Non-government
- Wholesalers 426,436 695 4,036 336 - 919 432,422
426,436 695 4,036 336 999 919 433,421
Timing of transfer of goods
Delivery to customer premises 4,995 695 - - - - 5,690
Delivery to port of departure - - - 336 - - 336
Customer collect from our mills / estates
421,441 - 4,036 - - - 425,477
Upon generation / others - - - - 999 919 1,918
426,436 695 4,036 336 999 919 433,421
Year to 31 December 2020
Contract counterparties
Government - - - - 970 - 970
Non-government
- Wholesalers 257,282 631 3,959 427 - 549 262,848
257,282 631 3,959 427 970 549 263,818
Timing of transfer of goods
Delivery to customer premises 4,052 631 - - - - 4,683
Delivery to port of departure - - - 427 - - 427
Customer collect from our mills / estates 253,230 - 3,959 - - - 257,189
Upon generation / others - - - - 970 549 1,519
257,282 631 3,959 427 970 549 263,818
5 Finance income and expense
2021 2020
$000 $000
Finance income
Interest receivable on:
Credit bank balances and time deposits 3,214 2,873
Finance expense
Interest payable on:
Development loans - (257)
Interest expense on lease liabilities (note 21) (24) (35)
(24) (292)
Net finance income recognised in income statement 3,190 2,581
6 Expenses by nature
(Restated) 2020
2021 $000
$000
Expenses by nature:
Purchase of FFB 191,915 110,225
Depreciation (note 13):
- continuing operations 16,994 16,177
- discontinued operations 1,978 2,090
18,972 18,267
Reversal of impairment (note 13):
- continuing operations (5,437) (2,165)
- discontinued operations - (31)
(5,437) (2,196)
Impairment losses (note 13):
- continuing operations 585 188
- discontinued operations 716 -
1,301 188
Impairment loss on adjustment to fair value 21,772 -
Provision for expected credit loss (note 18):
- continuing operations (177) 102
- discontinued operations 1,231 1,383
1,054 1,485
Exchange (gains) / loss (213) 268
Legal and professional fees 945 834
Staff costs (note 8) 51,431 48,103
Remuneration received by the Group's auditor or associates of the Group's
auditor:
- Audit of parent company 5 5
- Audit of consolidated financial statements 209 146
- Audit of consolidated financial statements (prior year) - -
- Audit related assurance service 7 6
- Audit of UK subsidiaries 13 13
Total audit services 234 170
Audit of overseas subsidiaries
- Malaysia 22 21
- Indonesia 116 76
Total audit services 138 97
Total auditor's remuneration 372 267
7 Segment information
Description of the types of products and services from which each reportable
segment derives its revenues
In the opinion of the Directors, the operations of the Group comprise one
class of business which is the cultivation of plantation in Indonesia and
Malaysia. From the cultivation of plantation, the Group produced the crude
palm oil and associated products such as palm kernel, shell nut, biomass
products, biogas products and rubber.
Factors that management used to identify reportable segments in the Group
The reportable segments in the Group are strategic business units based on the
geographical spread. Operating segments are consistent with the internal
reporting provided to the Board of Directors. The Board of Directors is
responsible for allocating resources and assessing the performance of the
operating segments. The Board decision is implemented by the Executive
Committee, that is made up of a Senior General Manager in Malaysia, the
President Director, the Chief Operating Officer, Finance Director and the
Engineering Director.
Measurement of operating segment profit or loss, assets and liabilities
The Group evaluates segmental performance on the basis of profit or loss
before tax calculated in accordance with IFRS but excluding BA movement.
Inter-segment transactions are made based on terms mutually agreed by the
parties to maximise the utilisation of Group's resources at a rate acceptable
to local tax authorities. This policy was applied consistently throughout the
current and prior period.
The Group's assets are allocated to segments based on geographical location.
North Sumatera Bengkulu Riau Bangka Kalimantan Total Indonesia Malaysia UK Total from continuing operations South* Sumatera
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2021
Total sales revenue (all external)
- CPO, palm kernel and FFB 127,216 141,070 73,827 2,178 79,470 423,761 2,675 - 426,436 7,999
- Rubber 695 - - - - 695 - - 695 -
- Shell nut 1,173 1,191 1,440 - 232 4,036 - - 4,036 -
- Biomass products 336 - - - - 336 - - 336 -
- Biogas products 114 485 - - 400 999 - - 999 -
- Others 93 20 89 16 583 801 27 91 919 270
Total revenue 129,627 142,766 75,356 2,194 80,685 430,628 2,702 91 433,421 8,269
Profit / (loss) before tax 40,160 35,769 20,555 553 37,539 134,576 (517) (1,325) 132,734 (4,786)
BA movement 1,660 700 574 111 1,273 4,318 31 - 4,349 64
Profit / (loss) for the year before tax per consolidated income statement
41,820 36,469 21,129 664 38,812 138,894 (486) (1,325) 137,083 (4,722)
Interest income 2,323 720 133 1 22 3,199 15 - 3,214 5
Interest expense (15) - - - - (15) (9) - (24) -
Depreciation (5,270) (4,132) (905) (356) (5,660) (16,323) (671) - (16,994) (1,978)
Reversal of impairment - - - - 5,437 5,437 - - 5,437 -
Impairment losses - - - - (452) (452) (133) - (585) (716)
(Provision) / Reversal for expected credit loss (4) - - - 180 176 - 1 177 (1,231)
Inter-segment transactions 902 (2,001) (11,754) (282) (1,934) (15,069) 476 74 (14,519) 14,519
Inter-segmental revenue 42,566 2,641 - - 9,431 54,638 - - 54,638 7,438
Tax expense (8,939) (7,831) (2,153) (109) (6,379) (25,411) (112) (219) (25,742) (1,927)
Total assets 252,633 117,748 34,580 17,095 145,578 567,634 13,758 7,152 588,544 14,055
Non-current assets 77,170 42,027 8,751 14,960 108,844 251,752 8,780 - 260,532 27,425
Non-current assets - additions 8,490 4,727 608 1,600 7,072 22,497 517 - 23,014 3,424
North Sumatera Bengkulu Riau Bangka Kalimantan Total Indonesia Malaysia UK Total from continuing operations South* Sumatera
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2020 (restated)
Total sales revenue (all external)
- CPO, palm kernel and FFB 81,764 82,194 46,865 1,026 43,103 254,952 2,330 - 257,282 5,066
- Rubber 631 - - - - 631 - - 631 -
- Shell nut 1,232 956 1,586 - 185 3,959 - - 3,959 -
- Biomass products 427 - - - - 427 - - 427 -
- Biogas products 152 444 - - 374 970 - - 970 -
- Others 60 105 - 16 355 536 6 7 549 176
Total revenue 84,266 83,699 48,451 1,042 44,017 261,475 2,336 7 263,818 5,242
Profit / (loss) before tax 18,916 16,809 12,341 (76) 11,174 59,164 (806) (1,447) 56,911 (6,640)
BA movement 550 130 126 36 344 1,186 17 - 1,203 71
Profit / (loss) for the year before tax per consolidated income statement
19,466 16,939 12,467 (40) 11,518 60,350 (789) (1,447) 58,114 (6,569)
Interest income 2,121 670 34 - 25 2,850 22 1 2,873 3
Interest expense (25) - - - (257) (282) (10) - (292) -
Depreciation (4,741) (4,253) (886) (308) (5,387) (15,575) (602) - (16,177) (2,090)
Reversal of impairment - - - - 2,165 2,165 - - 2,165 31
Impairment losses - - - - - - (188) - (188) -
Reversal / (Provision) for expected credit loss 65 (1) - (1) (167) (104) 1 1 (102) (1,383)
Inter-segment transactions 4,744 (1,966) (564) (195) (1,913) 106 467 168 741 (741)
Inter-segmental revenue 27,668 3,293 - - 4,167 35,128 - - 35,128 3,505
Tax expense (6,734) (3,218) (2,742) 25 (1,665) (14,334) (737) (87) (15,158) 1,354
Total assets 194,269 83,338 25,798 15,872 135,624 454,901 14,405 5,978 475,284 37,046
Non-current assets 75,004 42,178 9,184 13,872 104,098 244,336 9,390 - 253,726 27,105
Non-current assets - additions 4,582 2,413 342 4,474 6,868 18,679 127 - 18,806 2,319
* South Sumatera represents the operations which have been discontinued and
have therefore been separated from the continuing operations. The details of
discontinued operations for South Sumatera are disclosed in note 10.
Below is an analysis of revenue from the Group's top 4 customers,
incorporating all those contributing greater than 10% of the Group's external
revenue in accordance with the requirements of IFRS 8. In year 2021, revenue
from top 4 customers of the Indonesian segment represents approximately
$266.3m (2020: $130.8m) of the Group's total revenue. Although Customer 1 to 4
made up over 10% of the Group's total revenue, there was no over reliance on
these Customers as tenders were performed on a weekly basis. Two of the top
four customers were the same as in the prior year.
North Sumatera Bengkulu Riau Bangka Kalimantan Total Indonesia Malaysia UK Total South Sumatera Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2021
Customer 1 2,203 36,104 36,909 - 45,655 120,871 - - 120,871 - 120,871
Customer 2 - 31,431 - - 19,335 50,766 - - 50,766 - 50,766
Customer 3 48,333 - - - - 48,333 - - 48,333 - 48,333
Customer 4 - 46,324 - - - 46,324 - - 46,324 - 46,324
50,536 113,859 36,909 - 64,990 266,294 - - 266,294 - 266,294
2020
Customer 1 819 22,558 7,164 - 23,075 53,616 - - 53,616 - 53,616
Customer 2 31,556 - - - - 31,556 - - 31,556 - 31,556
Customer 3 - - 25,042 - - 25,042 - - 25,042 - 25,042
Customer 4 - 15,977 - - 4,584 20,561 - - 20,561 - 20,561
32,375 38,535 32,206 - 27,659 130,775 - - 130,775 - 130,775
% % % % % % % % % % %
2021
Customer 1 0.5 8.2 8.4 - 10.3 27.4 - - 27.4 - 27.4
Customer 2 - 7.1 - - 4.4 11.5 - - 11.5 - 11.5
Customer 3 10.9 - - - - 10.9 - - 10.9 - 10.9
Customer 4 - 10.5 - - - 10.5 - - 10.5 - 10.5
11.4 25.8 8.4 - 14.7 60.3 - - 60.3 - 60.3
2020
Customer 1 0.3 8.4 2.7 - 8.6 20.0 - - 20.0 - 20.0
Customer 2 11.7 - - - - 11.7 - - 11.7 - 11.7
Customer 3 - - 9.3 - - 9.3 - - 9.3 - 9.3
Customer 4 - 5.9 - - 1.7 7.6 - - 7.6 - 7.6
12.0 14.3 12.0 - 10.3 48.6 - - 48.6 - 48.6
Save for a small amount of rubber, all the Group's operations are devoted to
oil palm. The Group's report is by geographical area, as each area tends to
have different agricultural conditions.
8 Employees' and Directors' remuneration
2021 2020
Number Number
Average numbers employed (primarily overseas) during the year:
- full time 7,618 7,242
- part-time field workers* 6,191 7,208
13,809 14,450
* Part-time field workers headcounts based on full time equivalent of 8 hours
per day.
2021 2020
$000 $000
Staff costs (including Directors and discontinued operations) comprise:
Wages and salaries 47,628 43,129
Social security costs 3,342 2,921
Retirement benefit costs
- United Kingdom - -
- Indonesia (note 22) 411 2,003
- Malaysia 50 50
51,431 48,103
2021 2020
$000 $000
Directors emoluments 187 200
2021 2020
$000 $000
Remuneration expense for key management personnel comprise:
Short-term employee benefits 1,835 1,499
Post-employment benefits - -
1,835 1,499
The Executive Director, Non-Executive Directors and senior management (general
managers and above) are considered to be the key management personnel.
9 Tax expense
2021 (Restated) 2020
$000 $000
Foreign corporation tax - current year 20,404 9,920
Foreign corporation tax - prior year 258 287
Deferred tax adjustment - origination and reversal of temporary differences 5,080 4,264
(note 15)
Recognition of previously unrecognised deferred tax (note 15) - 687
Total tax charge for year 25,742 15,158
Corporation tax rate in Indonesia is at 22% (2020: 22%) whereas Malaysia is at
24% (2020: 24%). The standard rate of corporation tax in the UK for the
current year is 19% (2020: 19%). The Group's charge for the year differs from
the standard Indonesian rate of corporation tax as explained below:
2021 (Restated)
$000 2020
$000
Profit before tax from continuing operations 137,083 58,114
Profit before tax multiplied by standard rate of Indonesia corporation tax of 30,158 12,785
22% (2020: 22%)
Effects of:
Rate adjustment relating to overseas profits (30) (17)
Group accounting adjustments not subject to tax (1,023) (19)
Expenses not allowable for tax 263 640
Deferred tax assets not recognised (10) -
Income not subject to tax (659) (646)
Under provision of prior year income tax 258 287
Utilisation of tax losses not previously recognised (3,215) -
Under provision of prior year deferred tax - 687
Change in tax rate - 1,431
Total tax charge for year 25,742 15,158
The above reconciliation has been prepared by reference to the Indonesian tax
rate rather than the UK tax rate as, in accordance with IAS 12, this is the
applicable tax rate that provides the most meaningful information, given this
is the country in which the majority of tax arises.
The tax receivables represent the corporate income tax ("CIT") and value added
tax ("VAT") that have yet to be refunded by the Indonesia tax authority. The
tax receivables relating to CIT arose due to over payment of tax. The tax
receivables relating to VAT arose because the majority of the Groups' CPO was
sold to bonded zones which do not attract output VAT and thus the input VAT
incurred is claimable. Upon submission of a tax return (for CIT) or a request
letter (for VAT refund), a tax audit will be conducted by the tax authority
and whilst every effort is made to resolve this quickly, the process can
sometimes take more than 12 months.
The breakdown of the tax receivables and tax liabilities is as follows:
2021 2020
$000 $000
Tax Receivables
Income tax 5,072 10,071
Other taxes 45,481 41,618
50,553 51,689
Transfer to assets held for sale (note 10) (58) -
50,495 51,689
Tax Liabilities
Income tax (13,139) (5,981)
Other taxes (1,615) (1,089)
(14,754) (7,070)
10 Assets held for sales and discontinued operations
In October 2021, the Board approved to dispose of the operations of KKST, ELAP
and RAA to cut losses. The Group has engaged Helios Capital as our Financial
Advisor for disposal of the three companies and an active programme to locate
a buyer was initiated. The proposed disposal of the operations are expected to
be completed within 12 months and as a result the assets of KKST, ELAP and RAA
have been classified as held for sale in the consolidated statement of
financial position from 31 December 2021.
The entire operations of the disposal group are presented within the South
Sumatera operating segment disclosed in Note 7 and represent a separate
geographical area of operations. The activities for the financial years ending
31 December 2021 and 31 December 2020 have been classified as discontinued
operations in the consolidated income statement as a single line.
The post-tax loss on disposal of discontinued operations was determined as
follows:
2021 2020
Result before Result before
BA movement BA movement
BA movement BA movement
Total Total
$000 $000 $000 $000 $000 $000
Discontinued operations
Revenue 4 8,269 - 8,269 5,242 - 5,242
Cost of sales (11,052) 64 (10,988) (10,168) 71 (10,097)
Gross (loss) / profit (2,783) 64 (2,719) (4,926) 71 (4,855)
Administration expenses (62) - (62) (366) - (366)
(Impairment loss) / Reversal of impairment 13 (716) - (716) 31 - 31
Provision for expected credit loss 18 (1,231) - (1,231) (1,383) - (1,383)
Operating (loss) / profit (4,792) 64 (4,728) (6,644) 71 (6,573)
Exchange gains 1 - 1 1 - 1
Finance income 5 - 5 3 - 3
Finance expense - - - - - -
(Loss) / Profit before tax 6 (4,786) 64 (4,722) (6,640) 71 (6,569)
Tax expense (1,913) (14) (1,927) 1,365 (11) 1,354
(Loss) / Profit for the year from discontinued operations (6,699) 50 (6,649) (5,275) 60 (5,215)
Impairment loss on adjustment to fair value
(21,772) - (21,772) - - -
(28,471) 50 (28,421) (5,275) 60 (5,215)
Attributable to:
- Owners of the parent (27,760) 47 (27,713) (4,746) 57 (4,689)
- Non-controlling interests (711) 3 (708) (529) 3 (526)
(28,471) 50 (28,421) (5,275) 60 (5,215)
Earnings per share attributable to the owners of the parent during the year
- Basic and diluted EPS before BA movement (69.92)cts (11.83)cts
- Basic and diluted EPS after BA movement (69.92)cts (11.83)cts
Statement of cash flows
The statement of cash flows includes the following amounts relating to
discontinued operations:
2021 2020
$000 $000
Operating activities (821) 10,229
Investing activities (1,594) (2,990)
Financing activities - -
Net increase in cash and cash equivalents from discontinued operations (2,415) 7,239
The following major classes of assets relating to the discontinued operations
have been classified as held for sale in the consolidated statement of
financial position on 31 December:
2021
$000
Property, plant and equipment (note 13) 27,425
Impairment loss on adjustment to fair value (21,772)
Property, plant and equipment net of impairment losses 5,653
Non-current receivables (note 14) 3,338
Deferred tax assets (note 15) 3,124
Inventories (note 16) 729
Income tax receivable (note 9) 46
Other tax receivable (note 9) 12
Biological assets (note 17) 303
Trade and other receivables (note 18) 68
Exchange differences (63)
Total assets held for sale 13,210
An impairment loss of $21,772,000 on the measurement of the disposal group to
fair value less cost to sell has been recognised and is included in
discontinued operations. The fair value less cost to sell has been determined
from a valuation range obtained through the sales marketing process, through
discussion with potential buyers and review of internal forecasts. Management
do not expect the final amount realised to be materially different from this.
They are categorised as level 3 non-recurring fair value measurements. The
fair value measurement is based on the above items' highest and best uses,
which do not differ from their actual use.
At 31 December 2021, the expected loss provision for receivables in assets
held for sale is as follows:
Gross carrying amount Loss provision Net carrying amount
$000 $000 $000
2021
Trade receivable 12 - 12
Other receivables (note 18) 23 - 23
Receivables: non-current (note 14)
- Due from cooperatives under Plasma scheme 12,136 (8,798) 3,338
12,171 (8,798) 3,373
11 Earnings per ordinary share ("EPS")
(Restated) 2020
2021 $000
$000
Total operations
Profit for the year attributable to owners of the Company before BA movement 65,485 30,653
BA movement 2,856 1,051
Earnings used in basic and diluted EPS 68,341 31,704
Continuing operations
Profit for the year attributable to owners of the Company before BA movement 93,245 35,399
BA movement 2,809 994
Earnings used in basic and diluted EPS 96,054 36,393
Discontinued operations
Profit for the year attributable to owners of the Company before BA movement (27,760) (4,746)
BA movement 47 57
Earnings used in basic and diluted EPS (27,713) (4,689)
Number Number
'000 '000
Weighted average number of shares in issue in the year
- used in basic EPS 39,636 39,636
- dilutive effect of outstanding share options - -
- used in diluted EPS 39,636 39,636
Total operations
- Basic and diluted EPS before BA movement 165.22cts 77.34cts
- Basic and diluted EPS after BA movement 172.42cts 79.99cts
Continuing operations
- Basic and diluted EPS before BA movement 235.25cts 89.31cts
- Basic and diluted EPS after BA movement 242.34cts 91.82cts
Discontinued operations
- Basic and diluted EPS before BA movement (70.04)cts (11.97)cts
- Basic and diluted EPS after BA movement (69.92)cts (11.83)cts
12 Dividends
2021 2020
$000 $000
Paid during the year
Final dividend of 1.0cts per ordinary share for the year ended 31 December
2020
396 198
(2019: 0.5cts)
Proposed final dividend of 5.0cts per ordinary share for the year ended 31
December 2021 (2020: 1.0cts)
1,982 396
The proposed dividend for 2021 is subject to shareholders' approval at the
forthcoming annual general meeting and has not been included as a liability in
these financial statements.
13 Property, plant and equipment
Mill Leasehold Buildings Estate plant, Office plant, Right-of-use assets Construction Total
Plantations land equipment & vehicle equipment & vehicle in progress
$000 $000 $000 $000 $000 $000 $000 $000 $000
Cost
At 1 January 2020 (restated) 214,050 78,359 56,978 62,828 17,990 1,277 846 1,061 433,389
Exchange translations (2,486) (1,085) (321) (774) (209) 5 (5) (28) (4,903)
Reclassification - 70 - 2,572 - - - (2,642) -
Additions 167 1,946 3,821 496 816 109 - 2,263 9,618
Development costs capitalised 10,451 - 1,037 - - 19 - - 11,507
Disposal / Written off (2,447) (510) (243) (239) (563) (5) - (12) (4,019)
At 31 December 2020 (restated) 219,735 78,780 61,272 64,883 18,034 1,405 841 642 445,592
Exchange translations (2,753) (899) (957) (768) (242) (30) (15) 7 (5,657)
Reclassification - (19) - 2,909 19 - - (2,909) -
Additions - 2,495 3,512 114 1,041 592 133 8,095 15,982
Development costs capitalised 10,456 - - - - - - - 10,456
Disposals / Written off (1,684) (700) (379) (208) (814) (5) - - (3,790)
Transfer to assets held for sale (note 10) (31,888) - (10,963) (6,067) (2,191) - - (127) (51,236)
At 31 December 2021 193,866 79,657 52,485 60,863 15,847 1,962 959 5,708 411,347
Accumulated depreciation and impairment
At 1 January 2020 (restated) 84,834 25,843 5,646 21,288 13,295 1,009 187 - 152,102
Exchange translations (639) (272) (56) (165) (122) 3 11 - (1,240)
Reclassification - - - - - - - - -
Charge for the year 9,450 3,587 124 3,476 1,400 82 148 - 18,267
(Reversal of impairment) / Impairment losses - - (2,196) - - - 188 - (2,008)
Disposal / Written off (1,166) (509) - (143) (539) (3) - - (2,360)
At 31 December 2020 (restated) 92,479 28,649 3,518 24,456 14,034 1,091 534 - 164,761
Exchange translations (1,297) (318) (108) (296) (191) (24) (11) - (2,245)
Reclassification - - - - - - - - -
Charge for the year 9,907 3,873 125 3,523 1,309 82 153 - 18,972
(Reversal of impairment) / Impairment losses (5,437) - 1,168 - - - 133 - (4,136)
Disposal / Written off (1,313) (455) - (155) (798) (5) - - (2,726)
Transfer to assets held for sale (note 10) (19,225) - (957) (1,782) (1,847) - - - (23,811)
At 31 December 2021 75,114 31,749 3,746 25,746 12,507 1,144 809 - 150,815
Carrying amount
At 31 December 2019 (restated) 129,216 52,516 51,332 41,540 4,695 268 659 1,061 281,287
At 31 December 2020 (restated) 127,256 50,131 57,754 40,427 4,000 314 307 642 280,831
At 31 December 2021 118,752 47,908 48,739 35,117 3,340 818 150 5,708 260,532
The Group had changed the measurement of leasehold land from fair value to
historical cost, the details are disclosed in note 3.
The capitalisation rate used to determine the amount of borrowing costs
eligible for capitalisation is based on the percentage of immature area of
each estate against total planted area in the estate. The average
capitalisation rate was 0% (2020: 8.6%) due to no borrowing cost in 2021.
The estates included $nil (2020: $24,000) of interest and $181,000 (2020:
$64,000) of overheads capitalised during the year in respect of expenditure on
estates under development.
The Indonesian authorities have granted certain land exploitation rights and
operating permits for the estates. In the case of established estates in North
Sumatera, these rights and permits expire between 2023 and 2056 with rights
of renewal thereafter. As of estates in Bengkulu land titles were issued
between 1994 and 2016 and the titles expire between 2028 and 2051
with rights of renewal thereafter for two consecutive periods of 25 and 35
years respectively. In Riau, land titles were issued in 2003 and expire in
2033 with rights of renewal thereafter. In Kalimantan, land titles were
issued between 2015 and 2020 and expire between 2049 and 2054 with rights of
renewal thereafter. In Bangka, land titles were issued in 2018 and expire in
2053. The rights and permits for South Sumatera were renewed in 2020. Some of
the land is still in application progress to obtain the land title.
Subject to compliance with the laws and regulations of Indonesia, land rights
are usually renewed. The cost of renewing the land rights is not significant.
On the basis that the Group has an indefinite right to renew, leasehold land
is not depreciated except leasehold land in Malaysia.
The land title of the estate in Malaysia is a long-term lease expiring in
2084.
There is an impairment of land for $1,168,000 recognised in 2021 based on the
land valuation in 2020, which there is no material change within one year. The
total value of the Group's land carried at fair value which was lower than
original cost was $13,861,000 (2020: $9,584,000). The land cost of $6,450,000
relates to the land which has been transferred to assets held for sale, the
details are disclosed in note 10. The total value of the Group's right-of-use
assets carried at value in use which was lower than original cost was $322,000
(2020: $196,000). For right-of-use assets, the impairment is recognized for
$133,000 (2020: $188,000) due to no future economic benefits.
Impairment for plantations is measured by comparing its carrying amount with
its recoverable amount, which is the higher of the fair value less cost to
sell and its value in use. The impairment assessment is based on each cash
generating unit ("CGU") which is defined as each estate. The reversal of
impairment loss of $5,437,000 recognised in 2021 was primarily due to the
increase in CPO price. In 2020, no impairment loss or reversal of impairment
loss of plantations had been recognised.
The recoverable amount of the Group's plantations in 2021 was based on value
in use calculations, which due to the nature of the cashflows, will be higher
than fair value less cost to sell. The total value of the Group's plantations
carried at value in use which was lower than original cost was $12,899,000
(2020: $33,429,000). The plantations cost of $12,663,000 relates to the
plantations which have been transferred to assets held for sale, the details
are disclosed in note 10.
The value in use, computed by the professional valuer MBPRU using a discounted
cash flow ("DCF") model, is the net present value of the projected future cash
flows over the expected 20-year economic life of the asset discounted at 14.8%
(2020: 16.0%). Projected future cash flows are calculated based on historical
data, industry performance, economic conditions and any other readily
available information including the impact of climate change. The compliance
with changing regulations, changes in buyer preferences, development of new
products and use of lower emission sources of energy will affect the
FFB production, CPO price and its growth. Heavy rainfall & flooding,
droughts and fires will have an effect on company specific risk within the
calculation of our discount rate as well as potential impacts on the ability
of our plants to produce FFB. Pests & disease will impact the upkeeping
cost.
The sensitivity analysis below has been performed to show the reasonably
possible changes in the key assumptions which would have a material impact on
the impairment losses:
2021
Assumption applied Increase in impairment
$000
CPO price - decrease of 8% $1,000/mt 1,325
Pre-tax discount rate - increase by 300 bps 14.76% 1,771
Inflation rate - increase by 200 bps 2.73% 1,152
2020
Assumption applied Increase in impairment
$000
CPO price - decrease of 1% $650/mt -
Pre-tax discount rate - increase by 100 bps 15.98% 383
Inflation rate - increase by 100 bps 3.12% 609
14 Receivables: non-current
2021 2020
Book value Fair value Book value Fair value
$000 $000 $000 $000
Due from non-controlling interests 5,459 3,042 5,493 3,050
Due from cooperatives under Plasma scheme 19,879 13,122 16,743 14,857
25,338 16,164 22,236 17,907
Transfer to assets held for sale (note 10) (3,338) (2,079) - -
22,000 14,085 22,236 17,907
The non-controlling interests in PT Chaya Pelita Andhika, PT Sawit Graha
Manunggal, PT Empat Lawang Agro Perkasa, PT Karya Kencana Sentosa Tiga, PT
Riau Agrindo Agung and PT Kahayan Agro Plantation have acquired their
interests on deferred terms (see note 28, Credit risk).
Plasma scheme is an initiative by the Indonesian Government that mandated
plantation owners to allocate a percentage of their land acquired to the
surrounding community and to further provide financial and technical
assistance to cultivate oil palm on that land to improve the income and
welfare of the community or cooperatives. During the year, certain subsidiary
companies have funded plasma with a cumulative gross amount before ECL for
$16,612,000 (2020: $24,632,000) which is recoverable from the cooperatives,
the details with ECL are disclosed in note 10 and note 18.
The fair values disclosed above are for disclosure purposes and all
non-current receivables 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, 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
Due from non-controlling interests Based on cash flows discounted using current lending rate of 6% (2020: 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 Discount rate The higher the discount rate, the lower the fair value.
7.00% (2020: 6.75%).
15 Deferred tax
The movement on the deferred tax account as shown below:
(Restated)
2021 2020
$000 $000
At 1 January 13,607 17,365
Recognised in income statement from continuing operations (7,005) (3,597)
Recognised in other comprehensive income (306) 130
Transfer to assets held for sale (note 10) (3,124) -
Exchange differences (178) (291)
At 31 December 2,994 13,607
The most significant movement in deferred tax was due to the utilisation of
some of the losses against taxable profits during the year.
The deferred tax asset and liability, together with the amounts recognised in
income statement and other comprehensive income are detailed as follows:
(Charged)/
credited to (Charged)/
income statement credited
Asset Liability Net $000 to equity
$000 $000 $000 $000
2021
Impairment of land 139 - 139 100 -
Retirement benefits 2,304 - 2,304 (78) (280)
BA movement - (2,819) (2,819) (957) -
Unutilised tax losses 3,713 - 3,713 (4,303) -
Unremitted earnings - (132) (132) - -
Other temporary differences - (211) (211) 158 -
Tax assets / (liabilities) 6,156 (3,162) 2,994 (5,080) (280)
Set off of tax (1,832) 1,832 - - -
Net tax assets / (liabilities) 4,324 (1,330) 2,994 (5,080) (280)
2020 (restated)
Impairment of land 92 - 92 (468) -
Retirement benefits 2,944 - 2,944 13 116
BA movement - (1,934) (1,934) (51) -
Unutilised tax losses 11,360 - 11,360 (3,780) -
Unremitted earnings - (343) (343) - -
Other temporary differences 1,488 - 1,488 (665) -
Tax assets / (liabilities) 15,884 (2,277) 13,607 (4,951) 116
Set off of tax (1,495) 1,495 - - -
Net tax assets / (liabilities) 14,389 (782) 13,607 (4,951) 116
2021 2020
$000 $000
A deferred tax asset has not been recognised for the following items:
Unutilised tax losses 16,780 15,532
The Group had recognised tax assets arising from the unutilised tax losses of
certain subsidiaries as the Group believes that the tax assets of these
subsidiaries can be realised in the future periods based on their budget, due
to their respective plantation assets becoming more mature and historically
this resulting in the companies becoming profitable. However, the Group does
not recognise the tax losses in certain companies within the Group as tax
assets as the future recoverability of losses of these companies cannot be
certain. The time limit on utilisation of tax losses is subject to the tax
laws in various countries. As of 31 December 2021, the relevant time limits
are 5 years in Indonesia, 7 years in Malaysia and unlimited in UK. At 31
December 2021, all unutilised tax losses were recognised in Indonesia. The
unutilised tax losses will expire as per below:
Year $000
2022 91
2023 651
2024 2,495
2025 476
3,713
At the balance sheet date, the aggregate amount of temporary differences
associated with undistributed earnings of subsidiaries for which deferred tax
liabilities have not been recognised was $750,462,000 (2020: $689,666,000).
No liability has been recognised in respect of these differences because
either the Group is in a position to control the timing of the reversal of the
temporary differences, or such a reversal would not give rise to an additional
tax liability. The deferred tax liability on unremitted earnings recognised at
the balance sheet date was related to the estimated dividend declared for 2021
by the subsidiaries.
16 Inventories
2021 2020
$000 $000
Estate and mill consumables 8,433 6,873
Processed produce for sale 6,612 5,668
15,045 12,541
Transfer to assets held for sale (note 10) (729) -
14,316 12,541
17 Biological assets
2021 2020
$000 $000
At 1 January 8,783 7,574
Fair value gain recognised in the income statement for continuing operations 4,349 1,203
Fair value gain recognised in the income statement for discontinued operations 64 71
Transfer to assets held for sale (note 10) (303) -
Exchange translations (90) (65)
At 31 December 12,803 8,783
Following a review of its industry peers and the available research data, the
Group has decided to refine the valuation technique applied to its biological
assets in order to provide a more comparable result. The refinement recognises
that there is insignificant value in the FFB prior to 4 weeks before harvest
and therefore the weight of FFB has been calculated based on one month's
production rather than two. The impact of this change is immaterial and has
been applied prospectively. The valuation of the unharvested FFB was carried
out internally for each plantation of the Group. It involved an estimation of
the weight of unharvested FFB at balance sheet date multiplied by the sum of
average FFB selling price less average harvesting cost of the last month prior
to the balance sheet date. The weight was derived from the computation of the
percentage of growth based on the data extracted from the research reference
"The Reflection of Moisture Content on Palm Oil Development during the
Ripening Process of Fresh Fruits" multiplied with the estimated FFB harvested
one month after the balance sheet date. The impacts of climate change on the
weather will impact the levels and quality of production of FFB so this has
been taken into consideration when determining the fair value of biological
assets.
The fair value of biological assets is classified as Level 3 in the fair value
hierarchy.
The valuation techniques and significant unobservable inputs used in
determining the fair value measurement of biological assets, 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
Biological assets - Unharvested produce Based on FFB weight multiplied by the sum of FFB selling price less harvesting FFB weight The higher the weight, the higher the fair value
cost
FFB selling price The higher the selling price, the higher the fair value
Harvesting cost The higher the harvesting cost, the lower the fair value
The key assumptions are considered to be FFB weight, selling price less
harvesting costs and FFB production and a decrease of 1% in any of these would
result in an $131,000 decrease in the valuation.
18 Trade and other receivables
2021 2020
$000 $000
Trade receivables 1,308 1,354
Other receivables 1,457 1,551
Prepayments and accrued income 2,485 1,788
5,250 4,693
Transfer to assets held for sale (note 10) (68) -
5,182 4,693
The carrying amount of trade and other receivables classified as amortised
cost approximates fair value.
Trade receivables
The Group applies the IFRS 9 simplified approach to measure ECL using a
lifetime ECL provision for trade receivables. To measure ECL on a collective
basis, trade receivables are grouped based on similar credit risk and age.
The expected loss rate is based on a combination of the Group's historical
credit losses experienced over the 5-year period prior to the year end and
forward-looking information on macroeconomic factors affecting the Group's
customers. The ECL has been calculated at 1% on trade receivables balances.
Other receivables
The Group assesses the ECL associated with its debt instruments carried at
amortised cost on a forward-looking basis using the three stage approach. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk.
The Group considers the probability of default upon initial recognition of an
asset and whether there has been significant increase in credit risk on an
on-going basis at each reporting date. To assess whether there is a
significant increase in credit risk, the Group compares the risk of default
occurring on the asset as at the reporting date with the risk of default as at
the date of initial recognition. The Group considers available, reasonable and
supportable forward-looking information, such as:
- internal credit rating;
- external credit rating (as far as available);
- actual or expected significant adverse changes in business,
financial or economic conditions that are expected to cause a significant
change to the debtor's ability to meet its obligation;
- significant changes in the value of the collateral supporting
the obligation or in the quality of third-party guarantees or credit
enhancements; or
- significant changes in the expected performance or behaviour of
the debtor, including changes in the payment status of the debtor.
There has not been a significant increase in credit risk since initial
recognition on any of the group's financial assets therefore 12-month ECL have
continued to be recognised on all balances other than trade receivables which
are discussed above.
Due from cooperatives under Plasma scheme
The Group assesses the ECL on amounts due from cooperatives under Plasma
scheme by considering various probability weighted outcomes. The three
possible outcomes are considered to be:
- recovery is limited to the value of the land and bearer plants
on which the plantation is situated;
- recovery is limited to the future cashflows of the cooperative,
being the FFB revenue less development costs; and
- recovery in full via bank financing obtained by the cooperative.
Movements on the Group's loss provision on current and non-current other
receivables and financial guarantee contracts are as follows:
2021 2020
$000 $000
At 1 January 8,011 6,273
Loss provision during the year 1,054 1,485
Transfer to assets held for sale (note 10) (8,798) -
Exchange difference (87) 253
At 31 December 180 8,011
At 31 December 2021, the expected loss provision for receivables and financial
guarantee contracts is as follows:
Gross carrying amount Net carrying amount
$000 Loss provision $000
$000
2021
Trade receivable 1,301 (5) 1,296
Other receivables (note 18) 1,448 (14) 1,434
Receivables: non-current (note 14)
- Due from non-controlling interests 5,514 (55) 5,459
- Due from cooperatives under Plasma scheme 16,612 (71) 16,541
24,875 (145) 24,730
Financial guarantee contracts (note 27) - (35) (35)
24,875 (180) 24,695
Gross carrying amount Net carrying amount
$000 Loss provision $000
$000
2020
Trade receivables 1,363 (9) 1,354
Other receivables (note 18) 1,566 (15) 1,551
Receivables: non-current (note 14)
- Due from non-controlling interests 5,548 (55) 5,493
- Due from cooperatives under Plasma scheme 24,632 (7,889) 16,743
33,109 (7,968) 25,141
Financial guarantee contracts (note 27) - (43) (43)
33,109 (8,011) 25,098
19 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash flows
comprised:
2021 2020
$000 $000
Cash at bank available on demand 43,464 41,029
Short-term deposits 174,766 74,164
Cash in hand 19 18
As reported in statement of financial position 218,249 115,211
Significant non-cash transactions from investing activities are as follows: 2021 2020
$000 $000
Property, plant and equipment purchased but not yet paid at year end 222 160
Repaid through purchase of FFB 6,374 3,849
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions as follows:
Current loans and borrowings Non-current lease liabilities Current lease liabilities
Total
$000 $000 $000 $000
At 1 January 2021 - (217) (236) (453)
Cash Flows - 167 85 252
Non-cash flows
- Effect of foreign exchange - 4 4 8
- New lease - (110) (113) (223)
- Lease liabilities classified as non-current at 31 December 2020 becoming
current during 2021
- 46 (46) -
- Interest accruing during the year - - (24) (24)
- Write off - 90 90
- (110) (240) (350)
Current loans and borrowings Non-current lease liabilities Current lease liabilities
Total
$000 $000 $000 $000
At 1 January 2020 (8,203) (456) (222) (8,881)
Cash Flows 8,167 - 257 8,424
Non-cash flows
- Effect of foreign exchange 36 3 - 39
- New lease - - - -
- Loans and borrowings classified as non-current at 31 December 2019
becoming current during 2020
- 236 (236) -
- Interest accruing during the year - - (35) (35)
- (217) (236) (453)
20 Trade and other payables
2021 2020
$000 $000
Trade payables 8,821 6,254
Other payables 1,305 1,387
Advance receipts 10,237 7,070
Accruals 12,170 11,599
32,533 26,310
The carrying amount of trade and other payables classified as financial
liabilities measured at amortised cost approximates fair value. Advance
receipts from customers increased significantly due to logistic problem in
Bengkulu and Kalimantan and it is expected to be recognised in full as revenue
in the subsequent year. The advance receipts at 31 December 2020 have been
recognised in revenue in the current period.
21 Leases
2021 2020
$000 $000
Lease liabilities analysed as:
Non-current (110) (217)
Current (240) (236)
(350) (453)
The weighted average incremental borrowing rate per annum was 5.5% (2020:
6.8%).
Maturity analysis for the lease liabilities has been given in note 28.
Amounts recognised in income statement:
2021 2020
$000 $000
Depreciation expense on right-of-use assets (note 13) (153) (148)
Interest expense on lease liabilities (24) (35)
Expense relating to short-term leases (353) (386)
Expense relating to leases of low value assets (6) (6)
(536) (575)
At 31 December 2021, the Group is committed to $0.01 million (2020: $0.01
million) for short-term leases.
All the leases are fixed payments. The total cash outflow for leases amount to
$0.62 million (2020: $0.65 million).
The Group leases a piece of land and office under the right-of-use assets. The
lease term is between 3 to 4 years. (2020: 3 to 4 years). On expiry the Group
has the options to renew based on mutually agreed future rental. The
right-of-use assets is classified as part of property, plant and equipment in
note 13.
Right-of-Use assets
Land Building Total
$000 $000 $000
At 1 January 2021 - 307 307
Additions 133 - 133
Amortisation - (153) (153)
Impairment losses (133) - (133)
Effect of foreign exchange - (4) (4)
At 31 December 2021 - 150 150
Land Building Total
$000 $000 $000
At 1 January 2020 193 466 659
Additions - - -
Amortisation - (148) (148)
Impairment losses (188) - (188)
Effect of foreign exchange (5) (11) (16)
At 31 December 2020 - 307 307
Lease liabilities
Land Building Total
$000 $000 $000
At 1 January 2021 (126) (327) (453)
Additions (133) - (133)
Interest expense (9) (15) (24)
Lease payments 81 171 252
Effect of foreign exchange 4 4 8
At 31 December 2021 (183) (167) (350)
Land Building Total
$000 $000 $000
At 1 January 2020 (196) (482) (678)
Additions - - -
Interest expense (10) (25) (35)
Lease payments 84 173 257
Effect of foreign exchange (4) 7 3
At 31 December 2020 (126) (327) (453)
The tables above do not include the leasehold land which is also classified as
a right of use asset as this information is already presented in Note 13.
22 Retirement benefits
The Group provides Post-Employment Benefit plans to its employees in Indonesia
in accordance with Job Creation Law No.11/2020, Government Regulation
No.35/2021 effective since February 2021 and Collective Labour Agreements. The
impact of the implementation of this regulation based on the calculation by
actuarial is reduction in retirement benefits of $2,212,000 due to change on
benefit scheme of post-employment benefit program for non-staff employee.
These are defined benefit plans and provide lump sum benefits to employees on
retirement, death, disability and voluntary resignation. There is no
requirement for the Group to advance fund these benefits.
The Group has set up a separate fund with PT Asuransi Allianz Life Indonesia
to fund the Post-Employment Benefit plan obligation for Staff employees. The
assets in the fund can only be used to pay the employees' benefits.
Up until 2020, the Non-Staff employees of five of the Group's subsidiaries in
Indonesia participated in the SKU UKINDO Pension Fund, a defined benefit plan.
On retirement, death, disability or voluntary resignation, participating
employees would receive the higher of the benefit from the Pension Fund and
the Post-Employment Benefit plan. In early 2020, the SKU UKINDO Pension Fund
was liquidated. Its assets were transferred to a new defined contribution plan
managed by Dana Pension Lembaga Keuangan AIA Financial ("DPLK AIAF") and
allocated to the individual participants. From 2020 onwards, these employees
will receive the higher of the benefit from DPLK AIAF and the Post-Employment
Benefit plan. The liquidation of the SKU UKINDO Pension Fund led to a
settlement gain of $930,000 in 2020. It also resulted in a past service cost
of $569,000 in 2020 in the Post-Employment Benefit plan for Non-Staff
employees, as the DPLK AIAF plan covers a smaller proportion of the overall
Post-Employment Benefit obligation than was previously provided by the SKU
UKINDO Pension Fund.
The Group provides other long-term employee benefits in the form of Long
Service Awards for Staff and Non-Staff employees in Indonesia. The Long
Service Awards are for amounts of up to 2 months of basic salary, paid on
completion of 10 or 20 years' continuous service (Staff) and on completion of
25, 30, 35, and 40 years' continuous service (Non-Staff). These benefits are
unfunded.
The defined benefit plans are valued by an actuary at the end of each
financial year. The major assumptions used by the actuary were:
2021 2020
Rate of increase in wages 8.0% 8.0%
Discount rate 7.5% 7.0%
Mortality rate* 100% TMI4 100% TMI4
Disability rate 10% TMI4 10% TMI4
2021 2020
$000 $000
Service cost
Current service cost 1,660 1,555
Past service cost (2,121) 313
Settlement (gain) / loss - (930)
Net interest expense 735 825
Actuarial (gain) / loss (102) 30
Total employee benefits expense 172 1,793
The reconciliation on the remeasurement of retirement benefit plan as shown
below:
2021 2020
$000 $000
Included in other comprehensive income:
Continuing operations 995 (613)
Discontinued operations 91 (36)
Remeasurement of retirement benefit plan, net of tax recognised in other
comprehensive income
1,086 (649)
Included in other comprehensive income:
Remeasurement of retirement benefit plan 1,392 (779)
Deferred tax on retirement benefits (306) 130
Remeasurement of retirement benefit plan, net of tax recognised in other
comprehensive income / (expenses)
1,086 (649)
(i) Reconciliation of defined benefit obligation and fair value of scheme
assets including discontinued operations
Defined benefit obligation Fair value of scheme assets Net defined scheme liability
Funded Unfunded Funded Unfunded Funded Unfunded
scheme scheme Total scheme scheme Total scheme scheme Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 January 2020 (9,366) (7,144) (16,510) 5,172 - 5,172 (4,194) (7,144) (11,338)
Service cost - current (393) (1,162) (1,555) - - - (393) (1,162) (1,555)
Service cost - past 256 (569) (313) - - - 256 (569) (313)
Settlement gain 4,742 - 4,742 (3,812) - (3,812) 930 - 930
Interest (cost) / income (307) (609) (916) 91 - 91 (216) (609) (825)
Actuarial loss - (30) (30) - - - - (30) (30)
Included in income statement 4,298 (2,370) 1,928 (3,721) - (3,721) 577 (2,370) (1,793)
Remeasurement (loss) / gain
Actuarial (loss) / gain from:
Adjustments (experience) 245 37 282 - - - 245 37 282
Demographic assumptions 89 207 296 - - - 89 207 296
Financial assumptions (334) (1,004) (1,338) - - - (334) (1,004) (1,338)
Return on plan assets (exclude interest) - - - (19) - (19) (19) - (19)
Included in other comprehensive income - (760) (760) (19) - (19) (19) (760) (779)
Effect of movements in exchange rates 282 9 291 (198) - (198) 84 9 93
Benefits paid 112 322 434 - - - 112 322 434
Other movements 394 331 725 (198) - (198) 196 331 527
At 31 December 2020 (4,674) (9,943) (14,617) 1,234 - 1,234 (3,440) (9,943) (13,383)
Defined benefit obligation Fair value of scheme assets Net defined scheme liability
Funded Unfunded Funded Unfunded Funded Unfunded
scheme scheme Total scheme scheme Total scheme scheme Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 January 2021 (4,674) (9,943) (14,617) 1,234 - 1,234 (3,440) (9,943) (13,383)
Service cost - current (439) (1,221) (1,660) - - - (439) (1,221) (1,660)
Service cost - past (91) 2,212 2,121 - - - (91) 2,212 2,121
Interest (cost) / income (290) (532) (822) 87 - 87 (203) (532) (735)
Actuarial gain - 102 102 - - - - 102 102
Included in income statement (820) 561 (259) 87 - 87 (733) 561 (172)
Remeasurement (loss) / gain
Actuarial (loss) / gain from:
Adjustments (experience) 452 370 822 - - - 452 370 822
Financial assumptions 180 450 630 - - - 180 450 630
Return on plan assets (exclude interest) - - - (60) - (60) (60) - (60)
Included in other comprehensive income 632 820 1,452 (60) - (60) 572 820 1,392
Effect of movements in exchange rates 54 119 173 (14) - (14) 40 119 159
Benefits paid 239 266 505 - - - 239 266 505
Other movements 293 385 678 (14) - (14) 279 385 664
At 31 December 2021 (4,569) (8,177) (12,746) 1,247 - 1,247 (3,322) (8,177) (11,499)
(ii) Disaggregation of defined benefit scheme assets
The fair value of the funded assets is analysed as follows:
2021 2020
$000 $000
Bonds
- Government bonds 275 -
- Corporate bonds 2 7
- Mutual fund bonds - 282
277 289
Cash / deposits 970 945
1,247 1,234
None of the plan assets are invested in the Group's own financial instruments,
property or other assets used by the Group. All plan assets invested in bonds
which have a quoted market price in an active market.
(iii) Defined benefit obligation - sensitivity analysis
The following table exhibits the sensitivity of the Group's retirement
benefits to the fluctuation in the discount rate, wages and mortality rate:
Reasonably Defined benefit obligation
Possible Increase Decrease
Change $000 $000
Discount rate (+ / - 1%) (1,192) 1,384
Growth in wages (+ / - 1%) 1,421 (1,244)
Future mortality rate (+ / - 10%) 63 (63)
The weighted average duration of the defined benefit obligation is 11.10 years
(2020: 15.57 years).
The total contribution paid into the defined contribution plan in 2021
amounted to $239,000. The Group expects to pay contributions of $202,000 to
the funded plans in 2022. For the unfunded plans, the Group pays the benefits
directly to the individuals; the Group expects to make direct benefit payments
of $330,000 for defined benefit plan and $246,000 for defined contribution
plan in 2022.
23 Share capital and treasury shares
Issued and Issued and Issued and
Authorised fully paid Authorised fully paid Authorised fully paid
Number Number £000 £000 $000 $000
Ordinary shares of 25p each
Beginning and end of year 60,000,000 39,976,272 15,000 9,994 23,865 15,504
Cost Cost
2021 2020 2021 2020
Treasury shares: Number Number $'000 $'000
Beginning of year 339,900 339,900 (1,171) (1,171)
Share options exercised - - - -
End of year 339,900 339,900 (1,171) (1,171)
Market value of treasury shares: $'000
Beginning of year (583.0p/share) 2,705
End of year (720.0p/share) 3,298
No treasury share was purchased in 2021 (2020: Nil).
All fully paid ordinary shares have full voting rights, as well as to receive
the distribution of dividends and repayment of capital upon winding up of
company.
24 Ultimate controlling shareholder
At 31 December 2021, Genton International Limited ("Genton"), a
company registered in Hong Kong, held 20,247,814 (2020: 20,247,814) shares of
the Company representing 51.1% (2020: 51.1%) of the issued share capital of
the Company. Together with other deemed interested parties, Genton's
shareholding totals 20,551,914 or 51.9%. Madam Lim Siew Kim, a Director of
the Company, has advised the Company that she is the controlling shareholder
of Genton International Limited.
25 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
An office premises lease agreement was entered with Infra Sari Sdn Bhd, a
company controlled by Madam Lim Siew Kim. The rental paid during the year was
$352,180 (2020: $345,559). There was no balance outstanding at the year end
(2020: Nil).
In 2019, a land lease agreement was entered with Kuang Rong Holdings Sdn Bhd,
company controlled by Madam Lim Siew Kim. The lease agreement was terminated
in 2021. The rental paid during the year was $33,589 (2020: $79,914). There
was no balance outstanding at the year end (2020: Nil).
In 2021, a land lease agreement was entered with Hana Bestari Sdn Bhd, company
controlled by Madam Lim Siew Kim. The rental paid during the year was $46,325.
There was no balance outstanding at the year end.
In 2021, the final dividend paid to Genton International Limited, a company
controlled by Madam Lim Siew Kim, was $202,478 for the year ended 31 December
2020 (2020: $107,239 for the year ended 31 December 2019). The final dividend
paid to other companies controlled by Madam Lim Siew Kim was $3,041 for the
year ended 31 December 2020 (2020: $1,521 for the year ended 31 December
2019). There was no balance outstanding at the year end (2020: Nil).
26 Reserves
Nature and purpose of each reserve:
Share capital
Amount of shares subscribed at nominal value.
Share premium Amount
subscribed for share capital in excess of nominal value.
Capital redemption reserve Amounts transferred from share
capital on redemption of issued shares.
Treasury shares Cost of
own shares held in treasury.
Revaluation reserves Gains/losses
arising on the revaluation of the Group's property, net of tax.
Exchange reserves Gains/losses
arising from translating the net assets of overseas operations into US Dollar.
Retained earnings Cumulative
net gains and losses recognised in the consolidated income statement.
27 Guarantees and other financial commitments
2021 2020
$000 $000
Capital commitments at 31 December
Contracted but not provided - normal estate operations 979 29
Contracted but not provided - mill development 22,352 -
Authorised but not contracted - plantation and mill development 26,517 49,721
A subsidiary company, PT Sawit Graha Manunggal ("SGM") has provided a
corporate guarantee to Koperasi Bartim Sawit Sejahtera ("KBSS"), a party under
Plasma scheme as disclosed in note 14, in relation to a loan taken by KBSS
from PT Bank Mandiri (Persero) Tbk. of Rp226.02 billion ($15.8
million) (2020: Rp226.02 billion, $16.0 million). The corporate guarantee
remains until the loan is fully settled by 23 December 2027. The HGU (land
right) that belongs to the Plasma scheme is currently held under SGM's master
title. An application to separate the HGU was submitted to the Land Office
and the land and its plantation with a total carrying amount of $11.7
million as at 31 December 2021 will be pledged to the bank as security once
the title separation approval is obtained. In addition, the terms and
conditions of the loan agreement also require KBSS to sell all its FFB produce
to SGM and the plantation estate is to be managed by SGM. In view of these,
the Group exposure to this contingent liability is minimised.
On 3 February 2017, a subsidiary company, PT Alno Agro Utama and Koperasi
Perkebunan Plasma Maju Sejahtera ("KPPM") signed a Refinancing Agreement with
PT Bank Syariah Mandiri ("BSM") to fund its plasma development. The Agreement
provides a loan of Rp 8.75 billion ($0.6 million) (2020: Rp8.75 billion, $0.6
million), with 10 (Ten) years maturity period effective from 24 July 2017 with
an interest rate of 13.25% per annum and in 2021 decreased to 12.5% per
annum. This loan is collateralized by 125.4 hectares of KPPM's land located
in Desa Serami Baru, Kecamatan Malin Deman, Kabupaten Mukomuko, Bengkulu and
its plantation with a carrying amount of $0.7 million as at 31 December 2021
as security under the agreement while the Company provides corporate guarantee
amounting to Rp 8.75 billion ($0.6 million).
The Group's loss provision on these financial guarantee contracts was $35,000
(2020: $43,000). The details of the ECL were disclosed in note 18.
28 Disclosure of financial instruments and other risks
The Group's principal financial instruments comprised cash, short and
long-term bank loans, trade receivables and payables excluding advance
receipts and receivables from local partners in respect of their investments.
The Group's accounting classification of each class of financial asset and
liability at 31 December 2021 and 2020 were:
Financial
Amortised cost liabilities at Total carrying value
$000 amortised cost $000
$000
2021
Non-current receivables 22,000 - 22,000
Trade and other receivables 2,730 - 2,730
Short-term investments 1,439 - 1,439
Cash and cash equivalent 218,249 - 218,249
Trade and other payables - (22,296) (22,296)
244,418 (22,296) 222,122
Financial
liabilities at amortised cost Total carrying value
Amortised cost $000 $000
$000
2020
Non-current receivables 22,236 - 22,236
Trade and other receivables 2,905 - 2,905
Short-term investments 1,957 - 1,957
Cash and cash equivalent 115,211 - 115,211
Trade and other payables - (19,240) (19,240)
142,309 (19,240) 123,069
Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash
equivalents, trade and other receivables, trade and other payables, borrowings
due within one year and non-current receivables.
Due to their short-term nature, the carrying value of cash and cash
equivalents, trade and other receivables, trade and other payables
approximates their fair value. The non-current receivables were measured at
cost less ECL however disclosure of fair value has been given in note 14 for
comparison purposes.
Please refer to the applicable notes for details of the fair value hierarchy,
valuation techniques, and significant unobservable inputs related to
determining the fair value of the following items:
- Non-current receivables (note 14); and
The principal financial risks to which the Group is exposed are:
- commodity selling price changes; and
- exchange movements;
which, in turn, can affect financial instruments and/or operating
performance.
The Company does not hedge any of its risks. Its trade credit risks are low.
There are no financial assets or liabilities that are held at fair value
through the profit or loss.
The Board is directly responsible for setting policies in relation to
financial risk management and monitors the levels of the main risks through
review of regular operational reports.
Commodity selling prices
The Group does not normally contract to sell produce more than
one month ahead.
Currency risk
Most of the Group's operations are in Indonesia. The Company and Group
accounts are prepared in US Dollar which is not the functional currency of the
operating subsidiaries. The Group does not hedge its net investment in its
overseas subsidiaries and is therefore exposed to a currency risk on that
investment. The historical cost of investment (including intercompany loans)
by the parent in its subsidiaries amounted to $52,710,000 (2020: $54,573,000),
while the statement of financial position value of the Group's share of
underlying assets at 31 December 2021 amounted to $440,030,000 (2020:
$375,433,000).
All the Group's sales are made in local currency and any trade receivables are
therefore denominated in local currency. No hedging is therefore necessary.
Selling prices of the Group's produce are directly related to the US Dollar
denominated world prices. Appreciation of local currencies, therefore, reduces
profits and cash flow of the Indonesian and Malaysian subsidiaries in US
Dollar terms and vice versa.
All remaining borrowings of the Group's subsidiaries had been fully paid in
2020 and therefore there was no longer any currency risk for the Group in
respect of this. The average interest rate on local currency deposits was
2.74% higher (2020: 4.02% higher) than on US Dollar deposits. The unmatched
balance at 31 December 2021 is represented by the $13,504,000 shown in the
table below (2020: $13,803,000).
The table below shows the net monetary assets and liabilities of the Group as
at 31 December 2021 and 2020 that were not denominated in the operating or
functional currency of the operating unit involved.
Net foreign currency assets/(liabilities)
US Dollar Sterling Total
Functional currency of Group operation $000 $000 $000
2021
Rupiah 12,397 - 12,397
US Dollar - 996 996
Ringgit 1,107 - 1,107
Total 13,504 996 14,500
2020
Rupiah 12,086 - 12,086
US Dollar - 259 259
Ringgit 1,717 - 1,717
Total 13,803 259 14,062
The following table summarises the sensitivity of the Group's financial assets
and financial liabilities to foreign exchange risk. The impact on profit
before tax and equity if Ringgit or Rupiah strengthen or weaken by 10% against
US Dollar is:
2021 2020
Carrying -10% in +10% in Carrying -10% in +10% in
Amount US$ Rp : $ and Rp : $ and Amount Rp : $ and Rp : $ and
RM : $ RM : $ US$ RM : $ RM : $
$000 $000 $000 $000 $000 $000
Financial Assets
Non-current receivables 22,000 (1,504) 1,838 22,236 (1,522) 1,860
Trade and other receivables 2,730 (244) 298 2,905 (261) 319
Short-term investments 1,439 (131) 160 1,957 (178) 217
Cash and cash equivalents 218,249 (19,695) 24,072 115,211 (10,433) 12,752
Financial Liabilities
Trade and other payables (22,296) 1,914 (2,339) (19,240) 1,636 (2,000)
Total (decrease) / increase (19,660) 24,029 (10,758) 13,148
Liquidity risk
Profitability of new sizable plantations normally requires a
period of between six and seven years before cash flow turns positive. Because
oil palms do not begin yielding significantly until four years after planting,
this development period and the cash requirement is affected by changes in
commodity prices.
The Group attempts to ensure that it is likely to have either self-generated
funds or further loan/equity capital to complete its development plans and to
meet loan repayments. Long-term forecasts are updated twice a year for review
by the Board. In the event that falling commodity prices reduce self-generated
funds below expectations and to a level where Group resources may be
insufficient, further new planting may be restricted. Consideration is given
to the funds required to bring existing immature plantings to maturity.
The Group's trade and tax payables are all due for settlement within a year.
At 31 December 2021, the Group had no external loans and facilities.
The following table sets out the undiscounted contractual cashflows of
financial liabilities:
Less than 1 year Between 1 and 2 years Between 2 and 5 years More than 5 years
Total
$000 $000 $000 $000 $000
At 31 December 2021
Trade and other payables (10,013) (31) (22) (60) (10,126)
Accruals (8,450) (135) (243) (3,343) (12,171)
Lease liabilities (252) (81) (34) - (367)
(18,715) (247) (299) (3,403) (22,664)
Financial guarantee contracts
provided to Plasma
- loan repayment by Plasma (1,142) (1,759) (628) - (3,529)
(19,857) (2,006) (927) (3,403) (26,193)
At 31 December 2020
Trade and other payables (7,641) - - - (7,641)
Accruals (7,850) (112) (243) (3,394) (11.599)
Lease liabilities (257) (222) - - (479)
(15,748) (334) (243) (3.394) (19,719)
Financial guarantee contracts provided
to Plasma
- loan repayment by Plasma (773) (2,535) (928) (107) (4,343)
(16,521) (2,869) (1,171) (3,501) (24,062)
The figures for trade and other payables excludes accruals and advance
receipts.
The Group does not face a significant liquidity risk with regard to its
financial liabilities.
Interest rate risk
Both the Group's surplus cash and its borrowings are subject to variable
interest rates. The Group had net cash throughout 2021, so the effect of
variations in borrowing rates is more than offset. A 1% change in the
deposit interest rate would not have a significant impact on the Group's
reported results as shown in the table below.
2021 2020
Carrying amount -1% in interest rate +1% in interest rate Carrying amount -1% in interest rate +1% in interest rate
$000 $000 $000 $000 $000 $000
Financial Assets
Short-term investments 1,439 (12) 14 1,957 (18) 16
Cash and cash equivalents 218,249 (2,112) 2,135 115,211 (1,102) 1,118
Total (decrease) / increase (2,124) 2,149 (1,120) 1,134
There is no policy to hedge interest rates, partly because of the net cash
position and the net interest income position of the Group.
Interest rate profiles of the Group's financial assets (comprising non-current
receivables, trade and other receivables, cash and cash equivalent and
short-term investments) at 31 December were:
Variable rate No interest
Total Fixed rate
$000 $000 $000 $000
2021
Sterling 996 - 63 933
US Dollar 18,504 5,459 9,131 3,914
Rupiah 220,238 - 202,442 17,796
Ringgit 4,680 - 3,250 1,430
Total 244,418 5,459 214,886 24,073
2020
Sterling 259 - 21 238
US Dollar 17,805 5,493 8,782 3,530
Rupiah 119,483 - 101,089 18,394
Ringgit 4,762 - 3,546 1,216
Total 142,309 5,493 113,438 23,378
Long-term receivables of $5,514,000 (2020: $5,548,000) comprise US Dollar
denominated amounts due from non-controlling interests as described in note 14
on which interest is due at a fixed rate of 6%.
Average US Dollar deposit rate in 2021 was 0.30% (2020: 1.75%) and Rupiah
deposit rate was 3.04% (2020: 5.77%).
Interest rate profiles of the Group's financial liabilities (comprising bank
loans and other financial liabilities and trade and other payables excluding
advance receipts) at 31 December were:
Variable rate No interest
Total Fixed rate
$000 $000 $000 $000
2021
Sterling - - - -
US Dollar (1,110) - - (1,110)
Rupiah (20,864) - - (20,864)
Ringgit (322) - - (322)
Total (22,296) - - (22,296)
2020
Sterling - - - -
US Dollar (1,109) - - (1,109)
Rupiah (17,676) - - (17,676)
Ringgit (455) - - (455)
Total (19,240) - - (19,240)
Weighted average interest rate on variable rate borrowings was nil in 2021
(2020: 6.75%).
Credit risk
The Group has two types of financial assets that are subject to the ECL model:
• Trade receivables for sales of goods and services; and
• Current and non-current receivables carried at amortised
cost.
The Group also has financial guarantee contracts for which the ECL model is
also applicable.
While cash and cash equivalents are also subject to the impairment
requirements as set out in IFRS 9, there is no impairment loss identified
given the financial strength of the financial institutions in which the Group
have a relationship with. Credit risk arises from cash and cash equivalents
and deposits with banks and financial institutions. The Group has taken
necessary steps and precautions in minimising the credit risk by lodging cash
and cash equivalents only with reputable licensed banks, and particularly in
Indonesia, independently rated banks with a minimum rating of "A". The cash
and cash equivalents are in US dollars, Rupiah, Ringgit and Sterling according
to the requirements of the Group. The list of the principal banks used by the
Group is given on the inside of the back cover of this report.
The Group use three categories for those receivables which reflect their
credit risk and how the loss provision is determined for those categories.
(i) Trade receivables using the simplified approach
The Group applies the simplified approach under IFRS 9 to measure ECL, which
uses a lifetime expected loss provision for all trade receivables. To measure
the expected losses, trade receivables have been grouped based on shared
credit risk characteristics and days past due.
The expected loss rates are based on historical payment profiles of sales and
the corresponding historical credit losses experienced during these periods.
The historical loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors (such as palm product prices and crude
oil price) affecting the ability of the customers to settle the receivables.
The historical loss rates will be adjusted based on the expected changes in
these factors. No significant changes to estimation techniques or assumptions
were made during the reporting period.
In determining the expected loss rates, the Group also takes into
consideration the collateral or payments received in advance, as set out
below:
Receivables are generally collected within the credit term and therefore there
is minimal exposure to doubtful debts. Upfront payments are also collected for
certain sales made by the Group's subsidiaries in Indonesia.
The Group's maximum exposure to credit risk and loss provision recognised as
at 31 December 2020 is disclosed in note 18. The ECL has been calculated at 1%
on trade receivables balances while the remaining amount in which no ECL
provision was recognised is deemed to be recoverable, with low probability of
default. Default is defined by the management as the non-repayment of the
balance.
(ii) Debt instruments at amortised costs other than trade receivables
using the three-stage approach
All of the Group's debt instruments at amortised costs other than trade
receivables are considered to have a low credit risk, except amount due from
cooperatives under Plasma scheme are considered to have higher credit risk, as
these were considered to be performing, have low risks of default and
historically there were minimal instances where contractual cash flow
obligations have not been met. There has not been a significant increase in
credit risk since initial recognition.
The 12-month ECL has been calculated at 1% on the majority of balances (unless
it has been considered there to be no ECL), with the exception of amounts due
from cooperatives under Plasma scheme where the ECL is largely calculated,
having considered various probability weighted outcomes, as being the balance
of the receivable in excess of the value of the associated land and plantation
assets on which the Plasma land resides which effectively would be returned to
the Company if the receivable is not repaid.
The maximum exposure to credit risks for debt instruments at amortised cost
other than trade receivables are represented by the carrying amounts
recognised in the statements of financial position.
(iii) Financial guarantee contracts using the three-stage approach
All of the financial guarantee contracts are considered to be performing, have
low risks of default and historically there were no instances where these
financial guarantee contracts were called upon by the parties of which the
financial guarantee contracts were issued. Accordingly,12-month ECL have been
recognised at 1% on the financial guarantee contracts and disclosed in note
27.
Information regarding other non-current assets and trade and other receivables
is disclosed in notes 14 and 18 respectively. Amounts receivable from local
partners before ECL, amounting to $5,514,000 (2020: $5,548,000), in relation
to their investments in operating subsidiaries are secured on those
investments and are repayable from their share of dividends from those
subsidiaries.
Amounts receivable due from cooperatives under Plasma scheme, as disclosed in
note 14, are unsecured and are to be repaid from FFB supplied by the
cooperatives. The provision of ECL for amounts receivable due from
cooperatives under Plasma scheme had been disclosed in note 18 and note 10.
Deposits with banks and other financial institutions and investment securities
are placed, or entered into, with reputable financial institutions or
companies with high credit ratings and no history of default.
As the Group does not hold any collateral, the maximum exposure to credit risk
for each class of financial instrument is the carrying amount presented on the
statement of financial position, except in the case of the financial guarantee
contracts offered by two subsidiaries to cooperatives in order for them to
obtain bank loans in 2013 and 2017, which are not held on the statement of
financial position of the Group. See note 27.
Capital
The Group defines its Capital as Share capital and Reserves, shown in the
statement of financial position as "Issued capital attributable to owners of
the parent" and amounting to $440,030,000 at 31 December 2021 (2020:
$375,433,000).
Group policy presently attempts to fund development from self-generated funds
and loans and not from the issue of new share capital. At 31 December 2021,
the Group had no borrowings (2020: Nil) but, depending on market conditions,
the Board is prepared for the Group to have net borrowings.
Plantation industry risk
Please refer to principal and emerging risks and uncertainties in the
Strategic Report.
29 Subsidiary companies
The principal subsidiaries of the Company all of which have been included in
these consolidated financial statements are as follows:
Name Country of incorporation and principal place of business Proportion of ownership interest at 31 December Non-controlling interests ownership / voting interest at 31 December
2021 2020 2021 2020
Principal sub-holding company
Anglo-Indonesian Oil Palms Limited United Kingdom 100% 100% - -
Management company
Indopalm Services Limited United Kingdom 100% 100% - -
Anglo-Eastern Plantations Management Sdn Bhd Malaysia 100% 100% - -
PT Anglo-Eastern Plantations Management Indonesia Indonesia 100% 100% - -
Operating companies
Anglo-Eastern Plantations (M) Sdn Bhd Malaysia 55% 55% 45% 45%
All For You Sdn Bhd Malaysia 100% 100% - -
PT Alno Agro Utama Indonesia 90% 90% 10% 10%
PT Anak Tasik Indonesia 100% 100% - -
PT Bangka Malindo Lestari Indonesia 95% 95% 5% 5%
PT Bina Pitri Jaya Indonesia 80% 80% 20% 20%
PT Cahaya Pelita Andhika Indonesia 90% 90% 10% 10%
PT Empat Lawang Agro Perkasa Indonesia 95% 95% 5% 5%
PT Hijau Pryan Perdana Indonesia 80% 80% 20% 20%
PT Kahayan Agro Plantation Indonesia 78% 78% 22% 22%
PT Karya Kencana Sentosa Tiga Indonesia 95% 95% 5% 5%
PT Mitra Puding Mas Indonesia 90% 90% 10% 10%
PT Musam Utjing Indonesia 75% 75% 25% 25%
PT Riau Agrindo Agung Indonesia 95% 95% 5% 5%
PT Sawit Graha Manunggal Indonesia 82% 82% 18% 18%
PT Simpang Ampat Indonesia 100% 100% - -
PT Tasik Raja Indonesia 80% 80% 20% 20%
PT United Kingdom Indonesia Plantations Indonesia 75% 75% 25% 25%
Dormant companies
The Ampat (Sumatra) Rubber Estate (1913) Limited United Kingdom 100% 100% - -
Gadek Indonesia (1975) Limited United Kingdom 100% 100% - -
Mergerset (1980) Limited United Kingdom 100% 100% - -
Musam Indonesia Limited United Kingdom 100% 100% - -
The principal United Kingdom sub-holding company, UK management company and UK
dormant companies are registered in England and Wales and are direct
subsidiaries of the Company. The Malaysian operating companies and management
company are incorporated in Malaysia and are direct subsidiaries of the
Company. The Indonesian operating companies and management company are
incorporated in Indonesia and are direct subsidiaries of the principal
sub-holding company. The principal activity of the operating companies is
plantation agriculture. The registered office of the principal subsidiaries
are disclosed below:
Subsidiaries by country Registered address
UK registered subsidiaries Quadrant House, 6(th) Floor
4 Thomas More Square
London E1W 1YW
United Kingdom
Malaysia registered subsidiaries 7(th) Floor, Wisma Equity
150 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Indonesia registered subsidiaries 3(rd) Floor, Wisma HSBC, Jalan Diponegoro, Kav 11
Medan 20152
North Sumatera
Indonesia
30 Non-controlling interests
The Group identified subsidiaries with material non-controlling interests
("NCI") based on the total assets in relation to the Group. A subsidiary's NCI
is material if the subsidiary contributed more than 10% of the Group's total
assets. The subsidiaries identified and their summarised financial
information, before intra-group eliminations, are presented below:
Entity PT Tasik Raja PT Mitra Puding Mas PT Alno Agro Utama PT Bina Pitri Jaya PT Sawit Graha Manunggal
18%
NCI percentage 20% 10% 10% 20%
Summarised income statement
For the year ended 31 December 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Revenue 91,945 59,166 64,374 37,492 87,259 51,944 73,827 46,865 79,728 42,782
Profit after tax 16,771 8,554 12,276 5,236 15,747 6,381 7,192 9,162 22,384 6,394
Other comprehensive (expense) / income (1,623) (1,845) (878) (960) (695) (1,028) (1,722) (1,950) 15 100
Total comprehensive income 15,148 6,709 11,398 4,276 15,052 5,353 5,470 7,212 22,399 6,494
Profit allocated to NCI 3,354 1,711 1,228 524 1,575 638 1,438 1,832 4,075 1,164
Other comprehensive (expenses) / income allocated to NCI (325) (369) (88) (96) (70) (103) (344) (390) 3 18
Total comprehensive income allocated to NCI 3,029 1,342 1,140 428 1,505 535 1,094 1,442 4,078 1,182
Dividends paid to NCI 17 3 144 35 12 2 46 24 - -
Summarised statement of financial position
As at 31 December 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Non-current assets 73,334 102,162 64,458 69,152 51,237 50,533 123,967 127,717 80,093 81,287
Current assets 78,140 32,177 27,153 11,033 48,527 32,217 25,392 16,029 19,394 16,456
Non-current liabilities (749) (1,122) (1,329) (1,405) (2,759) (2,912) (1,251) (1,470) (52,557) (74,902)
Current liabilities (7,555) (5,395) (6,263) (4,801) (9,829) (7,670) (5,873) (5,593) (9,567) (7,896)
Net assets 143,170 127,822 84,019 73,979 87,176 72,168 142,235 136,683 37,363 14,945
Accumulated NCI 28,634 25,564 8,402 7,398 8,718 7,217 28,447 27,337 6,800 2,720
Summarised cash flows
For the year ended 31 December 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Cash flows from operating activities 25,736 8,297 19,297 1,850 16,547 10,133 7,282 3,792 27,075 15,853
Cash flows (used in) / from investing activities (1,221) 2,641 (1,707) (996) (3,028) (2,559) (587) (344) (4,355) (4,145)
Cash flows from / (used in) financing activities 22,413 (13) (1,553) (343) (41) (483) (150) (33) (21,689) (11,297)
Net cash inflows 46,928 10,925 16,037 511 13,478 7,091 6,545 3,415 1,031 411
31 Investments
2021
$000 2020
$000
Financial assets at fair value through profit or loss (listed)
At 1 January - -
Addition 49 -
Revaluation gain - -
Exchange differences - -
At 31 December 49 -
32 Events after the reporting period
On 27 April 2022 the Indonesian government banned the export of CPO to try to
stem the rising cost of cooking oil in Indonesia. This export ban will be
reviewed monthly, or as often as needed, and whilst in place, will affect the
tender price AEP will achieve as the CPO is sold locally.
Note: The information communicated in this announcement is
inside information for the purposes of Article 7 of Market Abuse Regulation
596/2014.
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