DJ REA Finance B.V.: Half yearly results
REA Finance B.V. (RE20) REA Finance B.V.: Half yearly results 27-Sep-2022 / 07:00 GMT/BST Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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REA Finance B.V., Amsterdam
HALF YEARLY REPORT 2022
Management presents herewith to the shareholder the half yearly report and condensed accounts of REA Finance B.V. (the "Company") for the six month period ended 30 June 2022.
General
The Company is a private company with limited liability incorporated under the laws of the Netherlands and acts as a finance company. The immediate parent and ultimate holding company is R.E.A. Holdings Plc ("REAH"), located in London, United Kingdom.
These condensed accounts have been prepared in pounds sterling ("GBP") instead of euros since the majority of the transactions within the Company occur in pounds sterling, which is the Company's functional currency.
Management of the Company resides with the management board, Apex Financial Services B.V., a corporate director. The Company has no employees. The Company relies on the policies and procedures of REAH as respects governance and risk. The audit committee of REAH supervises the Company pursuant to the terms of reference of the audit committee and reports to the management and board of REAH as respects risks and internal controls. Responsibility for environmental, social and corporate governance matters for the group and its subsidiaries, including the Company, resides with the management and board of REAH.
Overview of activities
The Company issues sterling notes and uses the proceeds to issue loans to its parent company, REAH, on the same terms as the sterling notes save for a margin on the rate of interest. The Company receives all of its income from REAH through intercompany financing of its foreign subsidiaries. The REAH group is principally engaged in the cultivation of oil palms in the province of East Kalimantan in Indonesia and in the production and sale of crude palm oil ("CPO") and crude palm kernel oil ("CPKO").
At 1 January 2022, the Company had outstanding: GBP30,852,000 nominal of sterling notes (amortised cost GBP31,753,177) bearing interest at 8.75 per cent and repayable on 31 August 2025; and a loan of GBP31,327,000 to REAH (amortised cost GBP32,220,069) bearing interest at 9.007 per cent repayable to the Company on 20 August 2025.
During the period under review the Company received interest on the loan from the Company to REAH and
paid interest to the noteholders of the sterling notes.
GBP39,102 was charged in the profit and loss account in the period in respect of the premium payable on the sterling notes, which premium now totals GBP940,280. GBP39,889 was credited in the profit and loss account in the period in respect of the premium on the loan, which premium now totals GBP932,957.
At 30 June 2022, the Company had outstanding: GBP30,852,000 nominal of sterling notes (amortised cost GBP31,792,280) bearing interest at 8.75 per cent and repayable on 31 August 2025; and the loan of GBP31,327,000 to REAH (amortised cost GBP32,259,957) bearing interest at 9.007 per cent repayable to the Company on 20 August 2025.
Results
The net asset value of the Company as at 30 June 2022 amounts to GBP1,175,489 (31 December 2021: GBP1,130,097; 30 June 2021: GBP1,087,539). The net result for the six month period ended 30 June 2022 is a profit of GBP45,391 (31 December 2021: GBP83,013; 30 June 2021: GBP40,455).
Principal risks and uncertainties
The principal risks and uncertainties facing the Company relate to the due performance by REAH of its obligations under the loan agreement with the Company. Any shortfall in performance would impact negatively on the Company's ability to meet its obligations to the holders of the sterling notes. The exposure of the Company towards the noteholders in the event of any shortfall in the collection of the loan to REAH is limited by:
-- the guarantee given by REAH and R.E.A. Services Limited ("REAS"), a subsidiary company of REAHincorporated in the United Kingdom, in favour of the noteholders; and
-- the Limited Recourse Agreement (the "LRA") dated 29 November 2010 made between the Company, REAH andREAS.
Payment of the principal, premium and interest by the Company in respect of the sterling notes is irrevocably and unconditionally guaranteed by REAH (the "guarantor") and REAS (the "co-guarantor"). The full terms of the guarantee are set out in the trust deed constituting the sterling notes.
The LRA reflects the intention of the parties thereto that the Company, in relation to its financing activities, should (i) meet the minimum risk requirements of article 8c, paragraph 2, of the Dutch Corporate Income Tax Act and (ii) not be exposed to risk in excess of the Minimum Risk Amount ("MRA"). For these purposes the MRA is 1 per cent of the aggregate amounts outstanding under the loan agreement between the Company and REAH. As respects (i) above, the Company's capital and reserves as at 31 December 2021 and 2020 complied with the minimum risk requirements of article 8c, paragraph 2, of the Dutch Corporate Income Tax Act. In addition, pursuant to the LRA, REAH and REAS limited their rights of recourse to the Company in respect of any calls upon their guarantee of the sterling notes.
Going concern and other risks
Management has made a considered assessment of going concern of the Company, including in-depth reviews of group projections and detailed cashflow forecasts.
The Company's income is mainly derived from the group plantation companies in Indonesia and is therefore materially dependent upon selling prices for CPO and CPKO over which it has no control. In 2022 the group has also received significant loan repayments from a coal concession holding company.
With recovering prices and higher crops, stronger cash generation can be expected from the agricultural operations, notwithstanding the significant inflationary pressures, particularly as respects fertiliser and fuel. With the expectation that loan repayments by the stone and coal concession holding companies will continue, the group believes that cash available should be sufficient to meet the debt repayments falling due in the period to 30 June 2023.
Having regard to the foregoing, the directors expect that, based on the group's forecasts and projections (taking into account reasonable possible changes in trading performance and other uncertainties) and having regard to the group's cash position and available borrowings, the group and therefore Company should be able to operate for at least 12 months from the date of approval of the financial statements.
Further details of risks and uncertainties were set out on pages 5 to 8 of the Company's annual report and accounts for the year ended 31 December 2021 (the "2021 Annual Report"), a copy of which is available on REAH's website at www.rea.co.uk.
To date there has been no subsequent change in the principal risks and uncertainties facing the business, or in the arrangements designed to limit the extent of the principal risks.
Further information regarding the principal risks and uncertainties as respects the REAH group are set out on page 38-44 of the REAH annual report and accounts 2021.
Related parties
There has been no change to related parties since 31 December 2021.
Statement of directors' responsibilities
The sole director of the Company is Apex Financial Services B.V. The director confirms that this set of condensed accounts has been prepared in accordance with Dutch Generally Accepted Accounting Principles as applicable to interim reports, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Conduct Authority, paragraph DTR 4.2.7.
Amstelveen, 26 September 2022
Apex Financial Services B.V. Balance Sheet as of 30 June 2022
30 June 2022 30 June 2021 31 December 2021
Notes GBP'000 GBP'000 GBP'000
ASSETS
Fixed assets
Financial fixed assets
Loan to parent company 1 32,260 32,181 32,220
32,260 32,181 32,220
Current assets
Receivables
Receivable from parent company 639 600 587
Prepayments 15 15 -
Taxes - 7 -
654 622 587
Cash 64 70 85
Total assets 32,978 32,873 32,892
SHAREHOLDER'S EQUITY AND LIABILITIES
Shareholder's equity 3
Issued share capital 15 15 15
Share premium reserve 475 475 475
Other reserves 640 557 640
Unappropriated results 45 40 -
1,175 1,087 1,130
Long term liabilities
Other debts - sterling notes 2 31,792 31,715 31,753
Current liabilities
Accounts payable 2 11 1
Taxes 6 - 5
Accrued liabilities 3 60 3
11 71 9
Total shareholder's equity and liabilities 32,978 32,873 32,892
Profit and loss account for the period of six months ended 30 June 2022
30 June 2022 30 June 2021 31 December 2021
Notes GBP'000 GBP'000 GBP'000
Financial income 1,470 1,505 2,946
Financial expenses (1,389) (1,386) (2,774)
Gross financial result 81 119 172
Administrative expenses (28) (71) (74)
Result before taxation 53 48 98
Taxation 4 (8) (8) (15)
Result after taxation 45 40 83
GENERAL INFORMATION
REA Finance B.V. (the "Company") is a private company with limited liability, incorporated under Dutch law on 7 November 2006, having its corporate seat at Amsterdam, the Netherlands, with offices at Van Heuven Goedhartlaan 935A, 1181 LD Amstelveen. The Company has been registered at the Chamber of Commerce under file number 34259527. The principal activity of the Company is to act as a finance company. The Company receives all of its income from its parent company, R.E.A. Holdings plc ("REAH"). The Company has received proceeds from the issue of sterling notes which have been used to grant a loan to REAH.
100 per cent of the shares of the Company are held by REAH. REAH is a public listed company located in the United Kingdom and the ultimate parent company of a group (the "group") which is principally engaged in the cultivation of oil palms in the province of East Kalimantan in Indonesia and in the production and sale of crude palm oil ("CPO") and crude palm kernel oil ("CPKO").
The financial information of the Company is included in the consolidated financial statements of REAH.
Basis of preparation
The condensed financial information for the period of six months ended 30 June 2022 comprise the results for the six months ended 30 June 2022 and 30 June 2021 together with abridged annual accounts for the year ended 31 December 2021.
The condensed accounts for the period of six months ending 30 June 2022 have been prepared in accordance with accounting principles generally accepted in the Netherlands and in conformity with provisions governing annual accounts as contained in Part 9 of Book 2 of the Dutch Civil Code and should be read in conjunction with the annual accounts for the year ended 31 December 2021.
The same accounting policies, presentation and methods of computation are followed in this set of condensed accounts as applied in the Company's latest annual accounts.
Exchange rates
The exchange rates used are:
30 June 2022 30 June 2021 31 December 2021 1 GBP (pound sterling) = EUR (EURuro) 1.17 1.17 1.19
Notes to the condensed accounts for the period of six months ended 30 June 2022
1. Loan to parent company
30 June 2022 30 June 2021 31 December 2021 R.E.A. Holdings Plc GBP'000 GBP'000 GBP'000 Financial fixed assets - due after one year Balance at 1 January 32,220 32,145 32,145 Adjustment to present value of premium 40 36 75 Balance at 30 June/31 December 32,260 32,181 32,220 Total loan to parent company 32,260 32,181 32,220
The loan to REAH bears interest at 9.007 per cent (2021: 9.007 per cent). The effective rate for 2021 was 9.007 per cent (2021: 9.007 per cent).
A premium of 4p per GBP1 nominal of notes is payable on redemption of the notes on 31 August 2025 (or earlier in the event of default) or on surrender of the sterling notes in satisfaction, in whole or in part, of the subscription price payable on exercise of warrants issued by REAH on the final subscription date. As a consequence, the Company has agreed with REAH that an amount equivalent to the premium, if any, payable on redemption of the sterling notes shall be aggregated with the loan which is repayable on 20 August 2025.
2. Other debts - sterling notes
30 June 2022 30 June 2021 31 December 2021 Sterling notes 2025 GBP'000 GBP'000 GBP'000 Long term liabilities - due after one year Balance at 1 January 31,753 31,679 31,679 Adjustment to present value of premium 39 36 74 Balance at 30 June/31 December 31,792 31,715 31,753 Total other debts - sterling notes 31,792 31,715 31,753
The sterling notes bear interest at 8.75 per cent (2021: 8.75 per cent) which is the effective rate. The interest rate was determined by the Company and its advisers after comparing similar listed instruments and is considered to be a market rate.
2. Other debts - sterling notes (continued)
A premium of 4p per GBP1 nominal of notes is payable on redemption of the notes on 31 August 2025 (or earlier in the event of default) or on surrender of the sterling notes in satisfaction, in whole or in part, of the subscription price payable on exercise of warrants issued by REAH on the final subscription date. The premium is applied to the sterling notes over their remaining term and calculated at the rate of 8.75 per cent. Up to the date of signing these condensed accounts, no sterling notes have been surrendered in satisfaction of the subscription price on exercise of the warrants.
3. Shareholder's equity
The authorised share capital of the Company amounts to EUR90,000 divided into 90,000 shares of EUR1 each, of which 18,000 shares have been issued and fully paid-up. The share capital is recorded at the rate of exchange at the balance sheet date. At 30 June 2022 the rate was 1 GBP = EUR1.17 (31 December 2021: 1 GBP = EUR1.19; 30 June 2021: 1 GBP = EUR1.17).
Share capital Share premium Other reserves Unappropriated results
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 30 June 2021 15 475 557 40
Result for the period - - 43 -
Appropriation of result - 40 (40)
Balance as at 31 December 2021 15 475 640 -
Result for the period - - - 45
Balance as at 30 June 2022 15 475 640 45
4. Corporate income tax
30 June 2022 30 June 2021 31 December 2021
GBP'000 GBP'000 GBP'000
Corporate income tax - current period (8) (8) (15)
OTHER INFORMATION
Shareholder information
The Company's half yearly report and condensed accounts for the six months ended 30 June 2022 is available for downloading from REAH's website at www.rea.co.uk.
Statutory rules relating to the appropriation of results
In accordance with article 18 of the Company's articles of association, and Book 2 of the Dutch Civil Code, the allocation of profits accrued in a financial year shall be determined by the general meeting. If the general meeting does not adopt a resolution regarding the allocation of the profits prior to or at latest immediately after the adoption of the annual accounts, the profits will be reserved.
The general meeting has the authority to make distributions. If the Company is required by law to maintain reserves, this authority only applies to the extent that the equity exceeds these reserves. No resolution of the general meeting to distribute shall have effect without the consent of the management board. The management board may withhold such consent only if it knows or reasonably should expect that after the distribution, the Company will be unable to continue the payment of its debts as they fall due.
Subsequent events
No events have occurred since the balance sheet date which would change the financial position of the Company and which would require adjustment of or disclosure in, the half yearly report and condensed accounts now presented.
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ISIN: GB00BYY8MM32 Category Code: IR TIDM: RE20 LEI Code: 2138008NELEFK21TEZ94 Sequence No.: 190416 EQS News ID: 1450149 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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September 27, 2022 02:00 ET (06:00 GMT)
