DJ R.E.A. Holdings plc: Half yearly results
R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Half yearly results
20-Sep-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
R.E.A. HOLDINGS PLC (the "company")
HALF YEARLY REPORT 2019
?Despite continuing good production, the financial results for the six
months to 30 June 2019 were severely depressed by weak CPO and CPKO prices.
With FFB production for the full year expected to be at record levels for
the second year running, recent cost reduction initiatives and CPO prices
rising as surplus stocks are absorbed globally, results for the second half
of 2019 should show a material improvement.
HIGHLIGHTS
?Financial
· Average selling prices (FOB Samarinda) 22 per cent lower for CPO at $430
per tonne (2018: $549 per tonne) and 40 per cent lower for CPKO at $590
per tonne (2018: $977 per tonne)
· Revenue up 17 per cent to $56.6 million (2018: $48.2 million), re?ecting
in part the sale of excess inventory carried forward at the end of 2018 -
had prices remained at 2018 levels, revenue would have been $72.5 million
in the ?rst half
· Underlying operating costs in the ?rst half of 2019 in line with 2018,
although cost of sales of $63.2 million (2018:$42.8 million) distorted by
stock movements, re?ecting the temporary stock build up due to logistical
problems in the comparative period in 2018
· Pre-tax loss of $29.5 million (2018: profit of $1.3 million), due to the
impact of depressed CPO and CPKO prices exacerbated by the strengthening
of the Indonesian rupiah against the dollar, which resulted in a negative
$16.0 million foreign exchange swing
Agricultural operations
· FFB production increased 3 per cent to 335,177 tonnes (2018: 324,955
tonnes) in the period
· Increase in third party FFB purchased to 94,680 tonnes (2018: 80,463
tonnes)
· CPO extraction rates consistent in the ?rst half of the year averaging
22.9 per cent (2018: 22.8 per cent)
· Capital expenditure focused on mill works and maintaining existing
plantings
Coal operations
· ?Good progress as IPA expects to recommence mining at its Kota Bangun
concession in the near future by appointing a contractor who will also
manage the port facility
· The contractor will fund all further expenditure required for
infrastructure, land compensation and mobilisation in exchange for a
participation in the pro?ts from the mine
Outlook
· CPO prices expected to increase further as global demand for vegetable
oils increasingly outstrips supply
· Resumption of planting of the group's undeveloped land bank remains on
hold pending a sustained recovery in the CPO price and a stronger
financial performance
· Recent cost reduction and improved ef?ciency measures, including
workforce reductions, across the operations and support departments,
expected to achieve some savings in the second half of 2019
notwithstanding associated one-off costs and, additionally, savings of not
less than $10 million per annum from 2020 onwards
SUMMARY OF RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 months to 6 months to
30 June 30 June
2019 2018
$'000 $'000
Revenue 56,584 48,170
Earnings before interest, tax, (110) 10,947
depreciation and amortisation
(Loss)/profit before tax (29,496) 1,336
Loss for the period (24,452) (635)
Loss attributable to ordinary (23,267) (4,514)
shareholders
Cash generated by operations 5,278 9,565
Loss per share (US cents) (57.4) (11.1)
INTERIM MANAGEMENT REPORT
Results
?Key components of the income statement for the six months to 30 June 2019,
with comparative figures for 2018, were as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
Average selling price $ $ $
CPO 430 549 472
CPKO 590 977 1,067
_______ _______ _______
$'m $'m $'m
Revenue 56.6 48.2 105.5
Operating loss (13.7) (0.3) (10.7)
(Loss)/profit before tax (29.5) 1.3 (5.5)
?The six month period to 30 June 2019 was a particularly challenging period
for the group. Poor CPO and CPKO prices meant that revenues were some $15.9
million lower than they would have been had prices been at the same levels
(themselves depressed) as in the corresponding period of 2018. In addition,
strengthening of the Indonesian rupiah against the dollar resulted in a
$16.0 million negative swing in the effect of foreign exchange on the income
statement (made up of a loss of $4.9 million in the period to 30 June 2019
against a pro?t of $11.1 million in the comparative period).
As discussed below, the directors expect that the ?rst six months of 2019
will represent the nadir of the group's fortunes. Crops are usually weighted
to the second half of each year so that, other things being equal, results
for the full year should re?ect the bene?t of better revenues in the second
half without proportionately additional costs. Moreover, revenues going
forward will be helped by recent increases in CPO and CPKO prices, while
cost reduction initiatives are already having a positive impact and will
result in material savings from 2020 onwards.
Earnings before interest, depreciation, amortisation and tax amounted to a
loss of $0.1 million for the six months to 30 June 2019 (2018: profit of
$10.9 million).
Specific components of the results
Cost of sales for the six months to 30 June 2019, with comparative figures
for 2018, was made up as follows:
6 months 6 months Year to
to 30 June to 30 31 December
June
2019 2018 2018
$'m $'m $'m
Depreciation and amortisation 13.6 11.3 23.0
Purchase of external FFB 8.2 8.9 18.4
Stock movement at historic cost 8.8 (8.4) (10.2)
Estate operating costs 32.6 31.0 68.4
_______ _______ _______
63.2 42.8 99.6
?Whilst cost of sales at $63.2 million showed a substantial increase on the
preceding year ($42.8 million), the major part of the increase was accounted
for by changes in stock levels. These re?ected the build up of stocks that
occurred during 2018 (the result of logistical problems in transferring
stocks from the estates downriver to Samarinda and Balikpapan) followed by a
reduction in stocks to more normal levels during the early months of 2019.
When increases in volumes are taken into account, actual operating costs
were in line with those of the comparative period.
Purchases of third party FFB increased by some 18 per cent, but the
see-through effect of lower CPO and CPKO prices on FFB pricing meant that
the overall cost of external FFB at $8.2 million was lower than the $8.9
million incurred in the comparative period.
Administrative expenses charged in the income statement amounted to $8.4
million against the $6.8 million charged in 2018. Substantially all of the
increase re?ected a lower rate of capitalisation, PBJ having been disposed
of in the prior period. Before capitalisation, administrative expenses
amounted to $9.6 million against $9.5 million in the comparative period.
As noted above, strengthening of the Indonesian rupiah against the dollar in
the six months to 30 June 2019 resulted in mark to market losses on rupiah
balances of $4.9 million against a gain in the comparative period of $11.1
million. These and other exchange differences (principally arising from
movement in sterling against the dollar) have been reported within ?nance
costs. Other ?nance costs, comprising interest and other ?nance charges,
amounted, before capitalisation, to $11.2 million for the period to 30 June
2019, slightly lower than the $11.8 reported in 2018.
The tax credit of $5.0 million (2018: charge of $2.0 million) has been
stated after providing $0.4 million (2018: $0.9 million) against deferred
tax credits previously recorded against losses which may not now be capable
of use prior to time expiry.
Dividends
?It was announced on 5 June 2019, that the directors had concluded that the
half yearly payment of dividend on the group's preference shares that was
due on 30 June 2019 should be deferred pending an improvement in CPO prices.
Since then, prices have improved and, as noted under "Results" above, this
improvement, combined with the bene?t of the normal weighting of crops to
the second half of the year, should mean that results for the six months to
June 2019 are not representative of the likely outturn for 2019 as a whole.
However, the directors are conscious of the fact that very substantial
losses were incurred in the ?rst half of the year and, for that reason, now
expect that, not only will the 30 June dividend have to continue to be
deferred, but that it will also be necessary to defer payment of the
dividend falling due on 31 December 2019.
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The directors recognise the importance of dividends to holders of preference
shares. Once it has become clear that the recovery in CPO prices will
continue and can reasonably be expected to be sustained, the directors plan
to submit proposals to preference shareholders to deal with the arrears of
preference dividend and to resume payment of cash dividends.
In view of the ?nancial performance of the group in 2019 to date, the
directors do not intend to declare or recommend the payment of any ordinary
dividends in respect of 2019.
Agricultural operations
The key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2019 2018
FFB?crops (tonnes) *
Group 335,177 324,955
Third party 94,680 80,463
Total 429,857 405,418
Production (tonnes) *
Total FFB processed 421,527 393,382
FFB sold 7,440 9,548
CPO 96,514 89,638
Palm kernels 18,882 18,649
CPKO 5,547 7,456
Extraction rates (percentage)
CPO 22.9 22.8
Palm kernel 4.5 4.7
CPKO 39.9 40.3
Rainfall (mm)
Average across the estates 2,039 1,673
* 2018 crops and production include PBJ (FFB crop 4,146 tonnes; FFB sold
3,045 tonnes) which was disposed of on 31 August 2018.
?With greater consistency in field disciplines and supervision, the
production recovery seen in 2018 continued into the first half of 2019. Some
harvesting days were lost during the festive holiday period in June, but
production has subsequently picked up with FFB harvested in the eight months
to August 2019 totalling 493,651 tonnes (2018: 494,932 tonnes, including
5,782 tonnes from PBJ which was disposed of on 31 August 2018). Bunch counts
indicate good crop availability through to the end of 2019, but an industry
wide decline in production as palms enter a resting phase following the
bountiful cropping in 2018 means that the group's FFB production in 2019,
albeit at record levels for the second consecutive year, may fall short of
the original target of 900,000 tonnes.
Maintenance work in the mills led to a temporary reduction in CPKO
production in the first half of 2019 with some palm kernels being sold
uncrushed to third party processors. Full CPKO production capacity is being
restored. Extraction rates are generally being maintained and targeted
improvements are being achieved as major mill works are completed.
As noted under "Results" above, the positive impact of a good operational
performance in the first half of 2019 was dampened by persistently low CPO
prices. Having fallen by some 17 per cent in 2018 to reach a 10 year low of
$439 per tonne, CIF Rotterdam, in November 2018, prices appeared to be on
the road to recovery at the start of 2019. This recovery then stalled, with
prices falling again to $501 per tonne at the end of June 2019 and
continuing to a low for the year to date of $480 per tonne in mid July. The
widely anticipated increase in the supply deficit then started to manifest
itself in a much needed price recovery during August and the CPO price now
stands at $570 per tonne.
CPKO prices have been more fickle, increasing from $770 per tonne, CIF
Rotterdam, at the start of 2019 to reach a high of $818 per tonne in mid
January before falling to a 12 year low of $529 per tonne in early June. The
average premium over CPO was unusually low during the first half 2019, at
less than $50 per tonne reflecting subdued demand generally and good
availability of the competitor coconut oil. Prices are now a little
stronger, currently standing at $625 per tonne.
The average selling price for the group's CPO for the six months to the end
of June 2019, on an FOB basis at the port of Samarinda, net of export levy
and duty, was $430 per tonne (2018: $549 per tonne). The average selling
price for the group's CPKO, on the same basis, was $590 per tonne (2018:
$977 per tonne).
Against this background, the group has been taking steps to conserve cash by
limiting capital expenditure and reducing costs. Accordingly, capital
expenditure in 2019 is directed almost entirely at maintaining immature
plantings planted in earlier years and completing works to ensure resilience
and availability of sufficient capacity in the group's mills. Resumption of
planting of the group's undeveloped land bank remains on hold pending a
sustained recovery in the CPO price and a stronger financial performance.
Measures initiated during the first half of 2019 to maximise efficiencies
and reduce costs, without compromising operational performance, are
continuing as planned. Such measures have been to an extent facilitated by
the concentration of estate operations in one locality following the sale in
2018 of PBJ and by the lower staffing that deferral of the group's expansion
programme permits. Various operational economies are being implemented,
including the gradual reduction in the number of temporary workers employed
for remedial upkeep as the work undertaken by these workers is progressively
completed. The regional office in Singapore has been closed and
administrative and support departments in Indonesia are also being slimmed
down.
Coal and stone operations
As previously indicated, to the extent that any further capital is to be
committed to its coal and stone interests, the group is giving priority to
investment that will offer quicker returns with lower risk. To this end, the
group's recent concentration has been on recovering amounts already invested
by way of loans in the Kota Bangun coal concession company, PT Indo
Pancadasa Agrotama ("IPA") which is owned by the group's local partners.
Good progress has been made and the company has been informed that IPA will
be recommencing mining of the concession by appointing a contractor to,
amongst others, provide mining services and to manage the port facility
adjacent to the concession. To minimise the requirement for further funding,
it has been agreed that the contractor will fund all further expenditure
needed on infrastructure, land compensation and mobilisation in exchange for
a participation in profits from the mine. The extent of the participation
will be dependent upon prevailing coal prices but is expected to average 30
per cent.
It is hoped that the reopening of the port facility for evacuation of IPA's
own coal production will encourage adjacent third party mining companies to
utilise the port facility. This could provide useful revenues to IPA
additional to its profits from mining.
The Indonesian government has recently announced plans to establish a new
Indonesian Capital City on a site in East Kalimantan lying between
Balikpapan and Samarinda. Whilst this will be a long term project, the civil
works involved are likely to require large quantities of crushed stone.
Although development of the andesite stone concession has been viewed by the
group as a lower priority than development of the IPA concession, efforts
have continued to seek interest from contractors in commencing quarrying
operations on the concession. It is hoped that the prospect of much greater
local demand for crushed stone will facilitate a successful conclusion to
these efforts.
Sustainability
?The RSPO annual surveillance audits for the group's two older mills, the
bulking station and supply bases have again successfully concluded in 2019.
In each case there was a signi?cant reduction in the number of issues raised
at the commencement of the audit and subsequently addressed as compared with
previous years.
Work to evaluate the outstanding High Conservation Value ("HCV")
compensation liability in respect of a small area of some 20 hectares in the
SYB northern estate has been completed. The results of the independent
third-party analysis to assist in determining the ?nal compensation
liability were submitted to the RSPO in May 2019. Feedback is now awaited.
There is a further RSPO review outstanding in respect of historic land
clearing of an area in the SYB southern estate. The company submitted the
results of its HCV analysis earlier in 2019 and, pending the outcome of the
review, has excluded this estate from supplying the Perdana oil mill so that
certi?cation of the mill can be retained.
The response from RSPO in respect of the compensation plan for CDM remains
outstanding, although the group's proposal has been agreed in principle.
In April 2019, the group retained its certi?cation under the recently
updated international standard for environmental management systems, ISO
14001:2015. This covers the mills and estates of REAK and SYB as well as the
group's bulking station. Certi?cation is valid for three years.
Following 2018 surveys among smallholder oil palm farmers in the vicinity of
the group's estate, the in-house team dealing with local communities is now
focusing on methods to improve the productivity and fruit quality of these
farmers. This includes further surveys to assess whether villagers would be
interested in business development and diversi?cation, so that they can
become more resilient and less dependent on oil palm cultivation. In
addition, this exercise is designed to assess demands for produce by the
villages, as well as by the company, its employees and families, and to
establish how best these demands can be met, given the remote location.
The conservation department has now fully implemented its long-held plan to
map the locations of endangered species, such as orangutans, within the
group's estate boundaries, based on GPS records of individual animals
photographed by camera traps set throughout the group's forested
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conservation reserves. During the ?rst half of 2019, the population of
orangutans and other species were monitored by cameras at 111 sites in the
conservation areas of the estates. Bird surveys and herpetology transect
walks were also conducted throughout this period.
The bi-weekly updates from the Satelligence system that is being used to
monitor the status of forest cover and land clearing activities within and
around the group's estates is soon to be upgraded to an online platform that
will be readily accessible by the group's conservation and survey
department. This will facilitate rapid investigation of illegal activity
that may be damaging to the environment.
Financing
?At 30 June 2019, the group continued to be ?nanced by a combination of debt
and equity (comprising ordinary and preference share capital). There was a
decrease in total equity including non-controlling interests to $236.8
million from $261.3 million at 31 December 2018.
Group indebtedness and related engagements at 30 June 2019 totalled $218.9
million against $215.8 million at 31 December 2018. Against this
indebtedness, the group held cash and cash equivalents of $9.9 million (31
December 2018: $26.3 million). The composition of the resultant net
indebtedness of $209.0 million was as follows:
$'m
7.5 per cent dollar notes 2022
("2022 dollar notes") ($24.0 million nominal) 23.8
8.75 per cent guaranteed sterling notes 2020
("2020 sterling notes") (GBP31.9 million nominal) 38.7
Loan from related party 3.7
Loans from non-controlling shareholder 23.2
Indonesian term bank loans 124.6
Drawings under working capital lines 4.9
__ ______
218.9
Cash and cash equivalents (9.9)
__ ______
Net indebtedness 209.0
?The group's annual strategic report noted that the group was in discussions
with its Indonesian bankers regarding the provision of an additional loan of
$11.0 million to fund 2019 capital expenditure on the group's mills and, in
effect, re?nance bank loan repayments falling due in 2019. Unfortunately,
these discussions had to be temporarily suspended pending receipt by the
bank of the 2018 audited accounts of REAK and its subsidiaries, which REAK
has only very recently been able to submit to the bank. This is because the
unexpected dissolution of the group's former Indonesian audit ?rm and
transfer of the REAK audit to a successor ?rm signi?cantly delayed
completion of the audit of the accounts in question. Discussions with the
bank regarding the group's future funding are now being resumed.
In the meanwhile, the group has been engaged in discussions with its
customers regarding the provision of funding in exchange for forward
commitments of CPO and CPKO (but on a basis that pricing will be fixed at
time of delivery on an agreed basis by reference to then prevailing prices).
Supply arrangements recently agreed with one customer will result in that
customer subscribing to $3 million of new 2022 dollar notes for a total
consideration of $3 million in cash reflecting the value of the notes, the
value of the CPO supply arrangements agreed by the group and an agreement by
the company to repurchase the notes should the supply arrangements
terminate. It is expected that formal agreements in relation to these
arrangements will be executed, and that the new dollar notes will be issued,
before 31 October 2019. Discussions regarding arrangements for other
customer funding are continuing.
Once the customer funding arrangements referred to above have been
concluded, the group intends to formulate proposals for the re?nancing of
the GBP31.9 million nominal of sterling notes 2020 which fall due for
repayment in August 2020. Provided that CPO prices continue to recover, the
group also plans, as noted under "Dividends" above, to be able to submit
proposals to preference shareholders to deal with the arrears of preference
dividend and to resume payment of cash dividends.
The group recognises that implementation of the above proposed transactions
will require additional equity.
Outlook
?The rate of growth in demand for vegetable oils is now exceeding the rate
of growth in supply. This situation is expected to continue with increasing
use of bio-diesel in vegetable oil producing countries, a number of
different factors limiting supplies of the principal vegetable oils and, in
particular, as respects palm oil, increasing constraints on the expansion of
oil palm hectarage as a result of sustainability concerns. CPO stocks are
being absorbed and this is already being re?ected in an improvement in the
CPO price. The group agrees with the view of professional commentators that
CPO prices are likely to go higher.
The cost reduction initiatives referred to under "Agricultural operations"
above are expected to result in some savings in the second half of 2019, but
those savings will be limited as the initiatives are being implemented over
a period of several months and, in some cases, result in immediate one off
costs. Nevertheless, those savings that are achieved, combined with the
normal weighting of annual crops to the second half and the higher CPO
prices currently prevailing, are expected to result in a material
improvement in the results reported by the group for the second half,
subject to CPO prices remaining at current levels for the remainder of 2019.
For 2020 and subsequent years, the group is aiming to achieve savings, when
measured against 2019 budgeted costs, of not less than $10 million per
annum.
With good crop levels and yields being maintained, some potential for
further improvements to extraction rates and the impact of increased prices
on a lower cost base, the directors look forward to the group's return to
pro?tability.
Approved by the board on 19 September 2019 and signed on its behalf by
DAVID J BLACKETT
Chairman
RISKS AND UNCERTAINTIES
?The principal risks and uncertainties, as well as mitigating and other
relevant considerations, affecting the business activities of the group as
at the date of publication of the 2018 annual report (the "annual report")
were set out on pages 35 to 41 of that report, under the heading "Risks and
uncertainties". A copy of the report may be downloaded from the company's
website at www.rea.co.uk. Such risks and uncertainties in summary comprise:
Agricultural operations
Climatic factors Material variations from the norm
Cultivation risks Impact of pests and diseases
Other operational factors Logistical disruptions to the production cycle,
including transportation and input shortages or cost increases
Produce prices Consequences of lower realisations from sales of CPO and CPKO
Expansion Delays in securing land or funding for the extension planting
programme
Environmental, social and
government practices Failure to meet expected standards
Community relations Disruptions arising from issues with local stakeholders
Coal and stone operations
Operational factors Failure by external contractors to achieve agreed
targets
Prices Consequences of lower coal or stone prices
Environmental, social and
government practices Failure to meet expected standards
General
Currency risk Adverse exchange movements between sterling or the rupiah and
the dollar
Funding Meeting liabilities as they fall due in periods of weaker produce
prices
Counterparty risk Default by suppliers, customers or financial institutions
Regulatory and country exposure Failure to meet or comply with expected
standards or applicable regulations; adverse political or legislative
changes in Indonesia
Systems access and controls Weakness in IT controls and financial reporting
system
?
The risks as relating to "Agricultural operations - Expansion" and "Coal and
stone operations" are prospective rather than immediate material risks
because the group is currently not expanding its agricultural operations and
not yet mining its coal and stone concessions. However, such risks will
apply when, as is contemplated, expansion and mining are resumed. The effect
of an adverse incident relating to the coal and stone operations could
impact the ability of the coal and stone companies to repay their loans.
The directors have carefully reviewed the potential impact on its operations
of the various possible outcomes on the termination of UK membership of the
European Union ("Brexit"). The directors expect that certain outcomes may
result in a movement in sterling against the US dollar and Indonesian rupiah
with consequential impact on the group dollar translation of its sterling
costs and sterling liabilities. The directors do not believe that such
impact (which could be positive or negative) would be material in the
overall context of the group. Were there to be an outcome that resulted in a
reduction in UK interest rates, this may negatively impact the level of the
technical provisions of the REA Pension Scheme but given the Scheme's
estimated funding position, the directors do not expect that this impact
would be material in the overall context of the group. Beyond this and
considering that the group's entire operations are in Indonesia, the
directors do not see Brexit as posing a signi?cant risk to the group.
The directors have considered the potential impact on the group of global
climate change. Between 5 and 10 per cent of the group's existing plantings
are in areas that are low lying and prone to ?ooding if not protected by
bunding. Were climate change to cause an increase in water levels in the
rivers running though the estates, this could be expected to increase the
requirement for bunding or, if the increase was so extreme that bunding
became impossible, could lead to the loss of low lying plantings, the
percentage of which could be expected to increase. Changes to levels and
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regularity of rainfall and sunlight hours could also adversely affect
production. However, it seems likely that any climate change impact
negatively affecting group production would similarly affect many other oil
palm growers in South East Asia leading to a reduction in CPO and CPKO
supply. This would be likely to result in higher prices for CPO and CPKO
which should provide at least some offset against reduced production.
At the date of the annual report, risks assessed by the directors as being
of particular signi?cance were those as detailed under:
· "Agricultural operations - Produce prices"
· "General - Funding"
· "Agricultural operations - Climatic factors"
· "Agricultural operations - Other operational factors".
The directors' assessment, as respects produce prices and funding, re?ects
the key importance of those risks in relation to the matters considered in
the "Viability statement" in the "Directors' report" on page 43 of the
annual report and, as respects climatic and other factors, the negative
impact that could result from adverse incidence of such risks.
The directors consider that the principal risks and uncertainties for the
second six months of 2019 continue to be those set out in the annual report
as summarised above.
GOING CONCERN
?In the statements regarding viability and going concern on pages 43 and 44
of the 2018 annual report, the directors set out considerations with respect
to the group's capital structure and their assessment of liquidity and
?nancing adequacy.
Since publication of the 2018 annual report, CPO prices have increased (with
an expectation that they will increase further) while cost reduction
measures are already resulting in savings and are projected to save at least
$10 million per annum from 2020 onwards. Crops have remained at good levels
and care has been taken that the cost reduction measures will not impact
agricultural performance. The group can therefore expect progressive
improvement in its trading cash ?ows going forward.
The group has been conducting discussions with its principal customers.
These have already resulted in an agreement by one customer to subscribe $3
million nominal of dollar notes 2022 for a total consideration of $3 million
in cash reflecting the value of the notes, the value of the CPO supply
arrangements agreed by the group and an agreement by the company to
repurchase the notes should the supply arrangements terminate. Discussions
regarding arrangements for other customer funding are continuing. Once such
arrangements have been concluded, the group intends to formulate proposals
for the re?nancing of the GBP31.9 million nominal of sterling notes 2020 which
fall due for repayment in August 2020.
For the reasons explained under "Financing" in the Interim management report
above, REAK has only recently been able to submit 2018 audited accounts of
REAK and its subsidiaries to its Indonesian bank. This has delayed
discussions regarding the group's future bank funding but such discussions
are now being resumed. REAK has maintained regular contact with its bank and
is con?dent that the bank will continue to be supportive of REAK and its
subsidiaries.
As noted under "Financing" in the Interim management report, the company
recognises that additional equity capital may be required and has been
assured of support from its largest shareholder.
Accordingly, the directors have a reasonable expectation that the company
will be able to continue in operation and meet its liabilities as they fall
due over the period of twelve months from the date of approval of the
accompanying ?nancial statements and they continue to adopt the going
concern basis of accounting in preparing those statements.
DIRECTORS' RESPONSIBILITIES
The directors are responsible for the preparation of this half yearly
financial report.
The directors confirm that to the best of their knowledge:
* the accompanying condensed set of ?nancial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting"
* the "Interim management report" and "Risks and uncertainties" sections of
this half yearly report include a fair review of the information required by
rule 4.2.7R of the Disclosure and Transparency Rules of the Financial
Conduct Authority, being an indication of important events that have
occurred during the first six months of the financial year and their impact
on the condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of the year;
and
* note 19 in the notes to the consolidated financial statements includes a
fair review of the information required by rule 4.2.8R of the Disclosure and
Transparency Rules of the Financial Conduct Authority, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the group during that period, and any changes in the related
party transactions described in the 2018 annual report that could do so.
The current directors of the company are as listed on page 42 of the
company's 2018 annual report.
Approved by the board on 19 September 2019
*DAVID J BLA*CKETT
Chairman
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 6 Year to
months months
to to
30 June 30 June 31
Decembe
r
2019 2018 2018
Note $'000 $'000 $'000
Revenue 2 56,584 48,170 105,479
Net gain arising from changes
in fair value of agricultural
produce
4 1,911 1,557 305
Cost of sales:
Depreciation and amortisation (13,584 (11,281 (23,014
) ) )
Purchase of external FFB (8,186) (8,945) (18,446
)
Stock movement at historic cost (8,810) 8,416 10,243
Estate operating costs (32,616 (30,993 (68,368
) ) )
_______ _______ _______
Gross (loss) / profit (4,701) 6,924 6,199
Distribution costs (592) (502) (1,258)
Administrative expenses 5 (8,401) (6,756) (15,668
)
)
_______ _______ _______
Operating loss (13,694 (334) (10,727
) )
Investment revenues 2 176 135 292
Profit on disposal of - - 10,373
subsidiary
Finance costs 6 (15,978 1,535 (5,412)
)
_______ _______ _______
(Loss) / profit before tax (29,496 1,336 (5,474)
)
Tax 7 5,044 (1,971) (12,734
)
_______ _______ _______
Loss for the period (24,452 (635) (18,208
) )
_______ _______ _______
Attributable to:
Ordinary shareholders (23,267 (4,514) (22,021
) )
Preference shareholders 4,124 4,260 8,353
Non-controlling interests (5,309) (381) (4,540)
_______ _______ _______
(24,452 (635) (18,208
) )
_______ _______ _______
Loss per 25p ordinary share (US 8 (57.4) (11.1) (54.4)
cents)
All operations in all periods
are continuing
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2019
30 June 30 June 31 December
2019 2018 2018
Note $'000 $'000 $'000
Non-current assets
Goodwill 12,578 12,578 12,578
Intangible assets 10 2,155 3,063 2,581
Property, plant and 11 404,083 414,017 407,164
equipment
Land titles 12 36,206 32,848 35,890
Coal and stone interests 14 48,444 41,342 46,011
Deferred tax assets 15,669 11,116 10,088
Non-current receivables 7,564 4,354 7,544
_______ _______ _______
Total non-current assets 526,699 519,318 521,856
_______ _______ _______
Current assets
Inventories 18,607 19,421 22,637
Biological assets 3,564 3,226 2,589
Trade and other receivables 44,415 36,000 50,714
Assets available for sale 15 - 56,423 -
Cash and cash equivalents 9,923 2,269 26,279
_______ _______ _______
Total current assets 76,509 117,339 102,219
(MORE TO FOLLOW) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
DJ R.E.A. Holdings plc: Half yearly results -5-
_______ _______ _______
Total assets 603,208 636,657 624,075
__ __ _______ __ __
Current liabilities
Trade and other payables (58,733) (89,769) (59,779)
Current tax liabilities - (13) -
Bank loans (9,652) (27,996) (13,966)
Other loans and payables (5,513) (10,239) (718)
__ __ _______ __ __
Total current liabilities (73,898) (128,017) (74,463)
__ __ _______ __ __
Non-current liabilities
Bank loans (119,821 (64,145) (117,008)
)
Sterling notes (38,706) (40,823) (38,213)
Dollar notes (23,763) (23,686) (23,724)
Deferred tax liabilities (79,244) (81,017) (79,247)
Other loans and payables (30,938) (29,681) (30,146)
__ __ _______ __ __
Total non-current (292,472 (239,352) (288,388)
liabilities )
__ __ _______ __ __
Total liabilities (366,370 (367,369) (362,801)
)
__ __ _______ __ __
Net assets 236,838 269,288 261,274
__ __ _______ __ __
Equity
Share capital 132,528 132,528 132,528
Share premium account 42,401 42,401 42,401
Translation reserve (42,470) (56,003) (42,470)
Retained earnings 95,233 133,717 114,360
__ __ _______ __ __
227,692 252,643 246,819
Non-controlling interests 9,146 16,645 14,455
_______ _______ _______
Total equity 236,838 269,288 261,274
_______ _______ _______
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2019
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss for the period (24,452) (635) (18,208)
_______ _______ _______
Other comprehensive income
Items that may be
reclassified to profit or
loss:
Actuarial (losses) / gains (105) (219) 1,732
Deferred tax on actuarial 25 55 (425)
(losses) / gains
_______ _______ _______
(80) (164) 1,307
Items that will not be
reclassified to profit or
loss:
Exchange differences on
translation of foreign
operations
(29) 1,933 14,087
Exchange differences on 125 (4,321) 3,110
deferred tax
_______ _______ _______
16 (2,388) 18,504
_______ _______ _______
Total comprehensive income (24,436) (3,187) 296
for the period
_______ _______ _______
Attributable to:
Ordinary shareholders (23,251) (7,066) (3,517)
Preference shareholders 4,124 4,260 8,353
Non-controlling interests (5,309) (381) (4,540)
_______ _______ _______
(24,436) (3,187) 296
_______ _______ _______
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2019
Non-
Share Share Translation Retained Sub controlling Total
capital premium reserve earnings total interests Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 132,528 42,401 (50,897) 135,074 259,1 17,629 276,73
January 06 5
2018
Total - - (5,106) 2,903 (2,20 (984) (3,187
comprehen 3) )
sive
income
Dividends
to
preferenc
e
sharehold - - - (4,260) (4,26 - (4,260
ers 0) )
_____ _____ _____ _____ _____ _____ _____
At 30 132,528 42,401 (56,003) 133,717 252,6 16,645 269,28
June 2018 43 8
Total - - 20,937 (15,264) 5,673 (2,190) 3,483
comprehen
sive
income
Disposal - - (7,404) - (7,40 - (7,404
of 4) )
subsidiar
y
Dividends
to
preferenc
e
sharehold - - - (4,093) (4,09 - (4,093
ers 3) )
_____ _____ _____ _____ _____ _____ _____
At 31 132,528 42,401 (42,470) 114,360 246,8 14,455 261,27
December 19 4
2018
Total - - (19,127) (19,1 (5,309) (24,43
comprehen 27) 6)
sive
income
_____ _____ _____ _____ _____ _____ _____
At 30 132,528 42,401 (42,470) 95,233 227,6 9,146 236,83
June 2019 92 8
_____ _____ _____ _____ _____ _____ _____
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS
ENDED 30 JUNE 2019
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
Note $'000 $'000 $'000
Net cash (used in) /
from operating
activities
17 (5,545) 2,381 (26,861)
_______ _______ _______
Investing activities
Interest received 176 135 94
Purchases of property, (7,651) (13,959) (23,793)
plant and equipment
Purchases of intangible - - (33)
assets
Expenditure on land (316) - (1,005)
titles
Investment in coal and (2,433) (3,595) (5,593)
stone interests
Proceeds of disposal of - - 2,793
subsidiary
_______ _______ _______
Net cash used in (10,224) (17,419) (27,537)
investing activities
_______ _______ _______
Financing activities
Preference dividends - (4,260) (8,353)
paid
Repayment of bank (4,649) (7,933) (105,768)
borrowings
New bank borrowings - 4,973 119,847
drawn
New borrowings from 3,750 8,227 13,440
related party
Repayment of borrowings - - (13,440)
from related party
Repayment of borrowings
from non-controlling
shareholder
- - (6,469)
New borrowings from
non-controlling
shareholder
300 - -
Redemption of 2020 - - (1,307)
sterling notes
Proceeds of sale of - 2,730 2,730
investments
Deposit received
relating to sale of
subsidiary
- 8,000 -
Repayment of balances
from divested
subsidiary
- - 50,027
Settlement of bank loan
by purchaser of
subsidiary
- - 24,748
_______ _______ _______
Net cash from financing (599) 11,737 75,455
activities
_______ _______ _______
Cash and cash
equivalents
Net (decrease) /
increase in cash and
cash equivalents
(16,368) (3,301) 21,057
Cash and cash
equivalents at
beginning of period
26,279 5,543 5,543
Effect of exchange rate 12 27 (321)
changes
_______ _______ _______
Cash and cash 9,923 2,269 26,279
equivalents at end of
period
_______ _______ _______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of accounting
?The condensed consolidated financial statements for the six months ended 30
June 2019 comprise the unaudited financial statements for the six months
ended 30 June 2019 and 30 June 2018, neither of which has been reviewed by
the company's auditor, together with audited financial statements for the
year ended 31 December 2018.
The information shown for the year ended 31 December 2018 does not
constitute statutory accounts within the meaning of section 435 of the
(MORE TO FOLLOW) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
DJ R.E.A. Holdings plc: Half yearly results -6-
Companies Act 2006, and is an abridged version of the group's published
financial statements for that year which have been filed with the Registrar
of Companies. The auditor's report on those statements was unqualified and
did not contain any statements under section 498(2) or (3) of the Companies
Act 2006.
The condensed consolidated financial statements for the six months ended 30
June 2019 have been prepared in accordance with IAS 34, "Interim Financial
Reporting" as adopted by the European Union, and should be read in
conjunction with the annual financial statements for the year ended 31
December 2018 which were prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union.
The accounting policies and methods of computation adopted in the
preparation of the condensed consolidated financial statements for the six
months ended 30 June 2019 are the same as those set out in the group's
annual report for 2018.
For the reasons given under "Going concern" above, the financial statements
have been prepared on the going concern basis.
The condensed consolidated financial statements for the six months ended 30
June 2019 were approved by the board of directors on 19 September 2019.
2. Revenue
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Sales of goods 56,217 47,516 105,297
Revenue from services 367 654 182
_______ _______ _______
56,584 48,170 105,479
Investment revenue 176 135 292
_______ _______ _______
Total revenue 56,760 48,305 105,771
_______ _______ _______
3. Segment information
?The group continues to operate in two segments, being the cultivation of
oil palms and the coal and stone operations. In the period ended 30 June
2019, the relevant measures for the coal and stone operations continued to
fall below the quantitative thresholds set out in IFRS 8. Accordingly, no
segment information is included in these financial statements.
4. Agricultural produce movement
?The net gain arising from changes in fair value of agricultural produce
represents the movement in the fair value of that inventory less the amount
of the movement in such inventory at historic cost (which is included in
cost of sales), together with movements in the value of current biological
assets, which represents growing produce on oil palm trees.
5. Administrative expenses
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss on disposal of - 207 10
property, plant and
equipment
Indonesian operations 6,220 5,923 14,728
Head office 3,417 3,326 5,696
_______ _______ _______
9,637 9,456 20,434
Amount included as additions (1,236) (2,700) (4,766)
to fixed assets
_______ _______ _______
8,401 6,756 15,668
_______ _______ _______
Earnings before interest, tax depreciation and amortisation ("EBITDA") is
calculated to show the effect on the group's operating loss of excluding
depreciation and amortisation, which are significant non-cash movements.
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Earnings before interest,
tax, depreciation and
amortisation:
Operating loss (13,694) (334) (10,727)
Depreciation and 13,584 11,281 23,014
amortisation
_______ _______ _______
(110) 10,947 12,287
_______ _______ _______
6. Finance costs
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Interest on bank loans and 7,375 7,107 15,485
overdrafts
Interest on dollar notes 901 901 1,877
Interest on sterling notes 1,717 1,832 4,085
Interest on other loans 554 1,317 2,549
Interest on lease 91 - -
liabilities
Other finance charges 567 694 1,022
_______ _______ _______
11,205 11,851 25,018
Change in value of sterling
notes arising from exchange
fluctuations
123 740 (2,297)
Change in value of bank
loans and other items
arising from exchange
fluctuations
4,927 (11,142) (12,547)
_______ _______ _______
16,255 1,449 10,174
Amount included as additions
to property, plant and
equipment
(277) (2,984) (4,762)
_______ _______ _______
15,978 (1,535) 5,412
_______ _______ _______
7. Tax
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Current tax:
UK corporation tax - - -
Overseas withholding tax 536 638 1,552
Foreign tax 6 7 9
_______ _______ _______
Total current tax 542 645 1,561
_______ _______ _______
Deferred tax:
Current year (5,940) 449 10,628
Prior year 354 877 545
_______ _______ _______
Total deferred tax (5,586) 1,326 11,173
_______ _______ _______
Total tax (credit) / charge (5,044) 1,971 12,734
_______ _______ _______
?The tax credit for the period of $5.0 million (30 June 2018: charge of $2.0
million) is based on the reported results of the operations in each
jurisdiction, using relevant rates of tax, adjusted for items which include
non-taxable income/expense, prior year reduction in the carrying value of
Indonesian tax losses and Indonesian withholding taxes not utilisable in the
UK. If the income mix in the second half of 2019 differs materially from
that of the first half, it may result in a disproportionate movement in the
effective rate of taxation for the full year.
8. Loss per share
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Loss for the purpose of (23,267) (4,514) (22,021)
calculating loss per share*
_______ _______ _______
* being net loss
attributable to ordinary
shareholders
'000 '000 '000
Weighted average number of
ordinary shares for the
purpose of loss per share
40,510 40,510 40,510
_______ _______ _______
9. Dividends
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Amounts recognised as
distributions to equity
holders:
Preference dividends of 9p
per share per annum (2018:
9p per share)
- 4,260 8,353
_______ _______ _______
- 4,260 8,353
_______ _______ _______
The half yearly payment of the dividend on the group's preference shares due
on 30 June 2019 ($4.1 million) has been deferred pending an improvement in
CPO prices. The directors now expect that, not only will the 30 June
dividend have to continue to be deferred, but that it will also be necessary
to defer payment of the dividend falling due on 31 December 2019. Once it
has become clear that the recovery in CPO prices will continue and can
reasonably be expected to be sustained, the directors plan to submit
proposals to preference shareholders to deal with the arrears of preference
(MORE TO FOLLOW) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
DJ R.E.A. Holdings plc: Half yearly results -7-
dividend and to resume payment of cash dividends.
10. Intangible assets
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Cost:
Beginning of period 5,410 5,377 5,377
Additions - - 33
_______ _______ _______
End of period 5,410 5,377 5,410
Depreciation:
Beginning of period 2,829 1,900 1,900
Additions 426 414 929
_______ _______ _______
End of period 3,255 2,314 2,829
Carrying amount:
Beginning of period 2,581 3,477 3,477
_______ _______ _______
End of period 2,155 3,063 2,581
_______ _______ _______
Computer software and proprietary technology that are not integral to an
item of property, plant and equipment are recognised separately as
intangible assets.
11. Property, plant and equipment
Plantings Buildings Plant, Construction Total
and equipment in progress
structures and
vehicles
$'000 $'000 $'000 $'000 $'000
Cost:
At 1 January 201,369 274,640 112,749 5,076 593,8
2018 34
Additions 5,217 6,190 830 1,611 13,84
8
Transfers to
/ (from)
construction
in progress
- 59 - (59) -
Disposals - - (482) - (482)
Transferred (25,650) (43,181) (1,731) (1,437) (71,9
to assets 99)
available for
sale
_____ _____ _____ _____ _____
At 30 June 180,936 237,708 111,366 5,191 535,2
2018 01
Additions 2,400 6,038 1,715 4,554 14,70
7
Disposals -
property,
plant and
equipment
- (6,000) 224 - (5,77
6)
Transferred 25,650 43,181 1,731 1,437 71,99
from assets 9
available for
sale
Disposal of (26,437) (47,075) (1,730) (1,487) (76,7
subsidiary 29)
Transfers to
/ (from)
construction
in progress
- 2,435 18 (2,453) -
_____ _____ _____ _____ _____
At 31 182,549 236,287 113,324 7,242 539,4
December 2018 02
Right-of-use
assets
opening
balance
adjustment - 666 1,760 - 2,426
Additions 2,340 172 503 4,636 7,651
Transfers to
/ (from)
construction
in progress
- - 2,109 (2,109) -
_____ _____ _____ _____ _____
At 30 June 184,889 237,125 117,696 9,769 549,4
2019 79
_____ _____ _____ _____ _____
Accumulated
depreciation:
At 1 January 26,961 32,379 52,153 - 111,4
2018 93
Charge 4,947 2,811 3,109 - 10,86
7
Disposals -
property,
plant and
equipment
- - (274) - (274)
Transferred (257) (209) (436) - (902)
to assets
available for
sale
_____ _____ _____ _____ _____
At 30 June 31,651 34,981 54,552 - 121,1
2018 84
Charge 4,914 2,840 3,390 - 11,14
4
Disposals -
property,
plant and
equipment
- - 25 - 25
Transferred 257 209 436 - 902
from assets
available for
sale
Disposal of (257) (209) (551) - (1,01
subsidiary 7)
_____ _____ _____ _____ _____
At 31 36,565 37,821 57,852 - 132,2
December 2018 38
Charge 4,917 3,360 4,881 - 13,15
8
_____ _____ _____ _____ _____
At 30 June 41,482 41,181 62,733 - 145,3
2019 96
_____ _____ _____ _____ _____
Carrying
amount:
At 30 June 143,407 195,944 54,963 9,769 404,0
2019 83
_____ _____ _____ _____ _____
At 31 145,984 198,466 55,472 7,242 407,1
December 2018 64
_____ _____ _____ _____ _____
At 30 June 149,285 202,727 56,814 5,191 414,0
2018 17
_____ _____ _____ _____ _____
Additions during the period to property, plant and equipment amounted to
$7.7 million (year to 31 December 2018: $28.6 million, six months to 30 June
2018: $13.8 million).
Disposals during the period of property, plant and equipment amounted to
$nil (2018: $0.5 million) and gave rise to a loss on disposal of $nil (2018:
$0.2 million).
Leased assets that do not meet the definitions of planting, buildings and
structures, or construction in progress have been classed among plant,
equipment and vehicles.
12. Land titles
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Cost:
Beginning of period 40,271 39,851 39,851
Additions 316 111 9,605
Disposal - - (2,600)
Disposal of subsidiary - (2,733) (6,585)
_______ _______ _______
End of period 40,587 37,229 40,271
Amortisation:
Beginning of period 4,381 4,673 4,673
Disposal of subsidiary - (292) (292)
_______ _______ _______
End of period 4,381 4,381 4,381
Carrying amount:
Beginning of period 35,890 35,178 35,178
_______ _______ _______
End of period 36,206 32,848 35,890
_______ _______ _______
13. Capital commitments
??Capital commitments contracted, but not provided for by the group as at 30
June 2019, amounted to $4.4 million (31 December 2018: $1.1 million, 30 June
2018: $4.5 million).
14. Coal and stone interests
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Coal companies 29,248 24,031 27,291
Stone company 22,196 20,311 21,720
Provision against loans to companies (3,000) (3,000) (3,000)
_______ _______ _______
48,444 41,342 46,011
_______ _______ _______
Interest bearing loans have been made to two Indonesian companies that,
directly and through a further Indonesian company, own rights in respect of
certain coal and stone concessions in East Kalimantan, Indonesia, together
with related balances; such loans are repayable not later than 2020.
Pursuant to the arrangements between the group and its local partners, the
company's subsidiary, KCC Resources Limited ("KCC"), has the right, subject
to satisfaction of local regulatory requirements, to acquire the three
concession holding companies at original cost on a basis that will give the
group (through KCC) 95 per cent ownership with the balance of 5 per cent
remaining owned by the local partners. Under current regulations such rights
cannot be exercised. In the meantime, the concession holding companies are
being financed by loan funding from the group and no dividends or other
distributions or payments may be paid or made by the concession holding
companies to the local partners without the prior agreement of KCC. A
guarantee has been executed by the stone concession company in respect of
the amounts owed to the group by the two coal concession companies.
As noted in the group's 2018 annual report published in April 2019, IPA has
been served with an arbitration claim by two parties (connected with one
another) (the "claimants") with whom IPA previously had conditional
agreements to, amongst other things, fund the development of, and operate,
the IPA concession. IPA believes that these agreements did not become
effective as respects the claimants because, inter alia, certain
pre-conditions were never satisfied. Since April, the claimants' detailed
claim has been received and the claimants now seek to hold the company
liable for any damages awarded against IPA and to seek damages for alleged
(MORE TO FOLLOW) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
DJ R.E.A. Holdings plc: Half yearly results -8-
tortious conduct by the company in conjunction with IPA. Whilst the
appointed arbitrators have joined the company as a party to the arbitration
on a prima facie basis and without prejudice to any final determination of
jurisdiction (or lack thereof), the company, which was never a party to any
of the agreements between IPA and the claimants, has declined to accept
jurisdiction or participate in the arbitration. Both IPA and the company
(without prejudice to its position concerning the arbitrators' jurisdiction)
consider the claims being made to be without merit.
15. Assets available for sale
During the six months to 30 June 2018, the group decided to sell its
operating subsidiary, PBJ. The sale completed during the second half of
2018. Accordingly, certain assets and liabilities were temporarily
reclassified as available for sale as at 30 June 2018. There are no assets
classified as available for sale at 30 June 2019. The amounts reclassified
as available for sale at 30 June 2018 were as follows:
30 June
2018
$'000
Non-current assets
Property, plant and equipment 71,097
Land titles 2,441
Deferred tax assets 532
Non-current receivables 1,254
Current assets
Inventories 691
Trade and other receivables 6,540
Cash and cash equivalents 2,753
Current liabilities
Trade and other payables (3,788)
Bank loans (25,097)
_______
Reclassified as available for sale 56,423
_______
16. Fair values of financial instruments
?The table below provides an analysis of the book values and fair values of
financial instruments, excluding receivables and trade payables and
Indonesian coal and stone interests, as at the balance sheet date. Cash and
deposits, dollar notes and sterling notes are classified as level 1 in the
fair value hierarchy prescribed by IFRS 7 "Financial instruments:
disclosures". (Level 1 includes instruments where inputs to the fair value
measurements are quoted prices in active markets). All other financial
instruments are classified as level 3 in the fair value hierarchy. (Level 3
includes instruments which have no observable market data to provide inputs
to the fair value measurements.) No reclassifications between levels in the
fair value hierarchy were made during 2019 (2018: none).
30 June 2019 30 June 2018 31 December 2018
Book value Fair Book Fair Book Fair
value value value value value
$'000 $'000 $'000 $'000 $'000 $'000
Cash and 9,923 9,923 2,269 2,269 26,279 26,279
deposits
*
Bank (9,652) (9,652) (833) (833) (13,966) (13,966)
debt
within
one
year**
Bank - - (27,163) (27,163) - -
debt
within
one
year*
Bank (119,821) (119,821 (16,176) (16,176) (117,008 (117,008
debt ) ) )
after
more
than one
year**
Bank - - (47,969) (47,969) - -
debt
after
more
than one
year*
Loan (3,750) (3,750) (8,227) (8,227) - -
from
related
party
within
one
year*
Loans
from
non-cont
rolling
sharehol (23,239) (23,239) (29,681) (29,681) (22,919) (22,919)
der
after
more
than one
year*
Dollar (23,763) (22,172) (23,686) (23,254) (23,724) (22,833)
notes
repayabl
e 2022**
Sterling (38,706) (34,450) (40,823) (42,948) (38,213) (39,735)
notes
repayabl
e 2020**
______ ______ ______ ______ ______ ______
Net debt (209,008) (203,161 (192,289 (193,982 (189,551 (190,182
and ) ) ) ) )
related
engageme
nts
______ ______ ______ ______ ______ ______
* bearing interest at floating rates
** bearing interest at fixed rates
?The fair values of cash and deposits, bank debt and loans approximate their
carrying values since these carry interest at current market rates. The fair
values of the dollar notes and sterling notes are based on the latest prices
at which those notes were traded prior to the balance sheet dates.
A one per cent increase in interest applied to those financial instruments
shown in the table above which carry interest at floating rates would have
resulted over a period of six months in a pre-tax profit (and equity)
decrease of approximately $0.2 million (year to 31 December 2018: pre-tax
profit (and equity) decrease of $nil; six months to 30 June 2018: $0.6
million).
17. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Operating loss (13,694) (334) (10,727)
Amortisation of intangible 426 414 929
assets
Depreciation of property, 13,158 10,867 22,011
plant and equipment
Increase in fair value of (1,911) (258) (305)
agricultural produce
Increase in value of growing (938) (1,299) (662)
produce
Amortisation of sterling and
dollar note issue expenses
417 237 572
Loss on disposal of - (207) 10
property, plant and
equipment
_______ _______ _______
Operating cash flows before
movements in working capital
(2,542) 9,420 11,828
Decrease / (increase) in
inventories (excluding fair
value movements)
6,142 (8,357) (11.623)
Increase in receivables (632) (17,132) (25,000)
Increase in payables 3,778 26,304 1,053
Exchange translation (1,468) (670) 13,931
differences
_______ _______ _______
Cash generated / (utilised) 5,278 9,565 (9,811)
by operations
Taxes paid (115) (34) (1,771)
Tax refunds received 220 - 1,504
Interest paid (10,928) (7,150) (25,018)
Realised exchange - - 8,235
differences
_______ _______ _______
Net cash (to) / from (5,545) 2,381 (26,861)
operating activities
_______ _______ _______
18. Movements in net borrowings
6 months to 6 months to Year to
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Change in net borrowings
resulting from cash flows:
(Decrease) / increase in (16,356) (3,274) 20,736
cash and cash equivalents
Net decrease / (increase) in 4,649 2,960 (14,079)
borrowings
Net (increase) / decrease in
related party borrowings
(3,750) (8,227) 6,469
_______ _______ _______
(15,457) (8,541) 13,126
Redemption of 2020 sterling - - 1,307
notes
Amortisation of sterling (377) (200) (497)
notes expenses
Amortisation of dollar notes (40) (37) (75)
expenses
Transferred to assets - 22,344 -
available for sale
_______ _______ _______
(15,874) 13,566 13,861
Currency translation (3,583) 8,610 11,053
differences
Net borrowings at beginning (189,551) (214,465) (214,465)
of period
_______ _______ _______
Net borrowings at end of (209,008) (192,289) (189,551)
period
_______ _______ _______
19. Related parties
?Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
During the period R.E.A. Trading Limited ("REAT"), a related party, made
unsecured loans to the company on commercial terms. REAT is owned by Richard
Robinow (a director of the company) and his brother who, with members of
their family, also own Emba Holdings Limited, a substantial shareholder in
the company. The maximum amount loaned during the period to, and outstanding
at, 30 June 2019 is $3.7m. This disclosure is made in compliance with the
requirements of Listing Rule 9.8.4.
20. Events after the reporting period
?There have been no material post balance sheet events that would require
disclosure in, or adjustment to, these financial statements.
21. Rates of exchange
30 June 2019 30 June 2018 31 December 2018
Closing Average Closing Average Closing Average
Indonesian 14,141 14,229 14,404 13,813 14,481 14,215
rupiah to
US dollar
US dollar 1.2728 1.29 1.3203 1.37 1.2689 1.33
to pound
sterling
Reference to "dollars" and "$" are to the lawful currency of the United
States of America. References to rupiah are to the lawful currency of
Indonesia.
22. Cautionary statement
(MORE TO FOLLOW) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
This document contains certain forward-looking statements relating to R.E.A.
Holdings plc (the "group"). The group considers any statements that are not
historical facts as "forward-looking statements". They relate to events and
trends that are subject to risk and uncertainty that may cause actual
results and the financial performance of the group to differ materially from
those contained in any forward-looking statement. These statements are made
by the directors in good faith based on information available to them and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors, underlying
any such forward-looking information.
Press enquiries to:
R.E.A. Holdings plc
Tel: 020 7436 7877
?References to group companies in this report are defined below:
?CDM PT Cipta Davia Mandiri
KKS PT Kartanegara Kumalasakti
KMS PT Kutai Mitra Sejahtera
PBJ PT Putra Bongan Jaya - now divested
PBJ2 PT Persada Bangun Jaya
REAK PT REA Kaltim Plantations
SYB PT Sasana Yudha Bhakti
PU PT Prasetia Utama
The terms "FFB", "CPO" and "CPKO" mean, respectively, "fresh fruit bunches",
"crude palm oil" and "crude palm kernel oil".
References to "dollars" and "$" are to the lawful currency of the United
States of America.
References to "rupiah" are to the lawful currency of Indonesia.
ISIN: GB0002349065
Category Code: IR
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 20714
EQS News ID: 876957
End of Announcement EQS News Service
(END) Dow Jones Newswires
September 20, 2019 02:00 ET (06:00 GMT)
© 2019 Dow Jones News
