LONDON, April 30, 2003 (PRIMEZONE) -- Highlights from the chairman's statement and preliminary announcement for the year ended 31 December 2002 are as follows: (All Figures given in Pounds unless otherwise stated)
-- Profit before tax 6,698,000 Pounds (2001 3,192,000), an
increase of 110%
-- Operating cash flows 2,751,000 (2001 1,573,000)
-- Dividend increased to 4.75p per share (2001 - 4.25p)
-- Substantially improved palm oil prices in 2002 primarily
responsible for increased profits
-- Crops of oil palm fresh fruit bunches ("f.f.b.") lower
than expected as the palms went through a cyclical
downturn
-- Crops from newly-acquired 64% subsidiary, PT Sembada
Sennah Maju, made a useful contribution
-- Share of associates' profits before tax 3,540,000 (2001
2,405,000 before exceptional costs), an increase of 47%
mainly due to the strong palm oil price
-- PT Agro Muko (30.43% owned) has, in 2003, purchased 3.48%
of its own shares and paid a dividend in April 2003.
Prospects good for continuing strong cash flows
-- Contracts out to tender re construction of palm oil mill
on Pangkatan Estate. Work expected to commence mid-2003
with completion end 2004
-- Palm oil prices, although slightly down from year-end
level of US$460/tonne, still at satisfactory level of
around US$420
-- Crops so far in 2003 ahead of the same period last year
-- Transfer to AIM successfully completed in 2002
Extract from the chairman's statement
INTRODUCTION
Results and dividend
"I am delighted to report a profit before taxation for the year of 6,698,000, which compares with 3,192,000 for 2001. The 110% increase in profits was primarily due to much improved palm oil prices during the year, offset by lower-than-expected crops and the strengthening of the Indonesian Rupiah. The Group generated operating cash flows of 2,751,000 (2001 1,573,000). Your board recommends that the dividend is increased to 4.75p per share from last year's 4.25p.
REVIEW OF THE YEAR: The palm oil market
"During the year continued strong demand for palm oil worldwide resulted in lower stocks despite increased production and, as a consequence, prices increased. Vegetable oils in general experienced the same conditions but, with palm oil enjoying a price advantage, demand was particularly strong, especially from the traditional markets of India, the EU and China. The palm oil price climbed steadily throughout the year from around US$300 per tonne at the beginning to some US$460 at the year end. The price has weakened a little since the year end but still remains around US$420.
Exchange rates
"During the year most currencies, including Sterling and the Indonesian Rupiah, strengthened against the US Dollar. With the average Sterling/Rupiah rate for the year at 1 = Rp13,976 compared with 2001's Rp14,666, this had a marginally negative effect on Group earnings as palm oil sales originate in US Dollars whilst a significant proportion of estate costs are Rupiah based.
Results for the year:
Estate profit
"The overriding influence on the year's results was the strength of the palm oil price. The average price that we received for our oil palm fresh fruit bunches ('f.f.b.') in local currency was Rp599,000 per tonne in 2002 compared with Rp397,000 per tonne in 2001, a 51% increase. The crop of oil palm f.f.b. was, however, a little disappointing with production for the year, of 131,000 tonnes (which includes some 11,000 tonnes from the new estate, Sennah), somewhat behind the estimate of 142,000 tonnes and indeed was lower (with Sennah excluded) than 2001's crop. 2002 was a dry year with rainfall in North Sumatra and Aceh, where our estates are located, some 20% below normal. This may to some extent have affected the yield but generally it is also likely that the palms were experiencing a cyclical downturn after the good crops achieved in 2000. It is hoped that an upturn will take place in 2003.
"With regard to rubber, the crop was ahead of expectations and much in line with last year - some 560,000 kgs were also contributed by Sennah. After a long period of poor prices, rubber finally picked up in 2002 and the average that we received for the year was Rp7,083/kg, compared with last year's Rp5,404, a 31% increase.
"As a result of the above, the estate profit for the year amounted to 3,339,000, a 106% increase over 2001's profit of 1,620,000 before exceptional items.
Associated companies
"The Group's share of the profits before taxation of the associated companies was 3,540,000 compared with 2001's profits before exceptional items of 2,405,000, an increase of 47%.
Indonesia
PT Agro Muko (30.43% owned)
"f.f.b.. crops, although they recovered to some extent from 2001's low levels, were nevertheless somewhat below expectations although this was more than compensated for by the effect of the significantly improved palm oil price, referred to above. As a result, PT Agro Muko reported substantially higher profits.
PT Kerasaan Indonesia (36.00% owned)
"An improved f.f.b. crop, albeit slightly behind expectations, coupled with the substantially stronger palm oil prices resulted in markedly higher profits during 2002.
Malaysia - Bertam Holdings PLC (46.46% held)
"The Bertam Holdings PLC Group reported sharply increased plantation earnings in Malaysia, primarily resulting from the strength of the palm oil price. Its share of its associates was lower as its 40%-owned Bertam Properties Sdn. Berhad did not repeat the property disposals achieved in 2001 and the Malaysian property market remained subdued. Exceptional investment-disposal gains were recorded in both 2001 and 2002, whilst there were exceptional net costs in 2001 arising mainly from the substantial merger costs in that year. Overall, Rowe Evans Investments PLC's share of Bertam Holdings PLC's profits in 2002 was some 20% higher than the previous year.
"During 2002, and continuing in 2003, Bertam Holdings PLC purchased a considerable number of its own shares with the result that the shares held by Rowe Evans Investments PLC, which represented 43.41% at 1 January 2002, represented 46.46% at the year end. As at the date of this report that percentage is 46.73%.
Australia - Lendu Holdings PLC (35.11% owned)
"The Australian irrigated cotton farm owned by Lendu Holdings PLC achieved a record crop in 2001/02 of 18,350 bales, sold at reasonably good prices. This, together with higher profits from the cattle operations and gains from investment sales, resulted in a marked improvement in the profit when compared with last year's loss.
Review of operating activities: Group companies
Pangkatan Estate " Whilst the f.f.b. crop in 2002 was similar to the previous year, it did not match up with original expectations but it is hoped that yields will improve in 2003. The rubber areas performed well, achieving a similar crop to 2002 but pleasingly somewhat ahead of the budget for the year.
"With regard to the proposed construction of the palm oil mill, good progress has been made. A loan facility of US$3 million has been agreed with the German development bank, DEG, and this will be drawn down when required, probably in the latter part of 2003. The building of the mill will be overseen by our managing agents, PT Tolan Tiga Indonesia, and the construction contracts have gone out to tender. As soon as they have been awarded, work will commence on the ground, expected to be in July. As originally anticipated, it is hoped that the mill will be commissioned at the end of 2004. Until the contracts have been awarded, the exact cost will not be known but it is anticipated that it will be up to approximately US$6 million.
Simpang Kiri Estate
"Although not achieving its budget for the year, the estate did well to improve on 2001's f.f.b. crop. The security problems in Aceh have been well documented and, although a tentative ceasefire was implemented towards the end of 2002, there was an atmosphere of high tension throughout the province during the year. Fortunately, most of the problems have been further north than the estate which is on the southern border with North Sumatra. In the circumstances, management did well to keep the estate running normally. During 2002 66 hectares were replanted and 79 are scheduled for 2003.
Bilah Estate
"The crop for the year was slightly lower than both budget and last year but yields were nevertheless reasonably good. 10 hectares of low-lying land were planted in 2002 and the remaining 10 will be dealt with in 2003 after which the estate will be fully planted.
Sennah Estate
"64% of PT Sembada Sennah Maju, the company owning Sennah Estate, was acquired in March 2002. The strong palm oil prices that prevailed during 2002 meant that our ownership of this estate got off to a good start. I mentioned last year that it was our intention to replant the rubber areas straightaway and, accordingly, the programme for 2003 is for 295 hectares. The remaining 251 hectares of rubber will be replanted in 2004 and then it will be decided how best to tackle the oil palm - some areas are substandard and it may be deemed sensible to replant them earlier than normal.
Associated companies
Indonesia: PT Agro Muko
"Although the f.f.b. crop was higher in 2002 than the previous year, it did not reach expectations but this was more than compensated for by the strength of palm oil prices during the year. At the end of 2002, the company's planted area consisted of some 15,000 hectares of oil palm and 1,800 hectares of rubber. By 2005 the area under oil palms will be around 16,500 hectares.
"Now that the borrowings have been cleared, the company is set for a period of positive cash flows. Using its own resources, the company was able, in early 2003, to purchase 3.48% of its own shares from a shareholder who had decided to divest. As a result, the Group's holding has increased to 31.53%. A US$1 million dividend was paid in April 2003 and it has been intimated that henceforth there will be a regular programme of dividend payments.
PT Kerasaan Indonesia
"This well-established estate continues to generate good cash flows and profits. Indeed, the Group received some 430,000 by way of dividends after Indonesian withholding tax during 2002.
Malaysia - Bertam Holdings PLC
"Bertam Holdings PLC's assets consist primarily of Malaysian land with varying degrees of development potential and investments in land-based companies. Although the property market in Malaysia is somewhat subdued at the moment, the value of raw land has, by and large, held up and in the meantime the plantation activities have benefited from the strength of the palm oil price.
"The investment that the group has made in Asia Green Environmental Sdn. Berhad has much promise. A great deal of interest has been expressed in the company's system of processing liquid and solid waste from palm oil mills into nutritious compost which can be returned to the field. One of these systems will be installed at the Pangkatan mill.
Australia - Lendu Holdings PLC
"After a record cotton crop was achieved by the group in 2001/02 one of the severest droughts in living memory hit large parts of Australia, including Southern Queensland and Northern New South Wales where the farms are located. As a result, the planting for the 2002/03 season had to be restricted and the company reported that a reduced crop is therefore expected for the current year.
"In August 2002 another cotton farm with 8 water licences was acquired. The total water available from these licences is more than that required by the new farm and the surplus can be utilised for the group's existing areas.
"The company has also reported that it has changed its strategy with regard to its cattle operations. Instead of tying up capital in running a breeding herd, it has been decided to sell the herd and undertake "backgrounding" cattle from outside sources. These cattle will be fattened on the company's upgraded pastures and the owners will be charged a fee related to the weight gain achieved.
CURRENT TRADING
"Crops have, to date, been at improved levels compared with the same period last year. Palm oil prices have fallen back a little to around US$420 a tonne from the level of US$460 at the year end but are still well above the levels of a year ago, whilst rubber prices have maintained the improvement of the second half of 2002. Sterling has weakened slightly from the year-end level against the Indonesian Rupiah of 1 = Rp14,338 to the current level of around Rp13,900.
INVESTMENTS IN ASSOCIATED UNDERTAKINGS
"During the year a detailed review of the consolidation accounting process was carried out. As a result, an adjustment has been made to the Group's share of the reserves of its associated undertakings which reflects the retranslation of the Group's share of the net assets of those associates, using the exchange rates at 31 December 2002. This adjustment has no impact on either the profit and loss account or the value of the associates but it has had the effect of reducing their book value by 3,241,000. At 31 December 2002 the market value of the listed associates was 31,511,000 compared with 21,043,000 at the end of 2001, and the directors' valuation of the unlisted associates was 24,000,000 compared with 2001's 22,100,000.
THE ALTERNATIVE INVESTMENT MARKET (AIM)
"As foreshadowed in the 2002 interim report, the Company transferred trading in its shares to AIM on 28 October 2002. The volume of shares traded has increased and your board is confirmed in its opinion that the AIM listing is more appropriate for a small company like Rowe Evans Investments PLC."
Preliminary results (unaudited)
The board announces the following unaudited results and proposed dividend for the year ended 31 December 2002:
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended
31 December 2002
Pounds'000
2002 2001
Total Total
------ ------
Turnover 6,399 3,775
Cost of sales (3,060) (2,450)
------ ------
Estate profit 3,339 1,325
Administrative expenses (557) (410)
Exchange (losses)/gains (60) 129
------ ------
Group operating profit 2,722 1,044
Share of operating profit
in associates 3,540 2,255
------ ------
Total operating profit 6,262 3,299
Exceptional items (note3)
Net gains on sale of fixed assets 316 109
Fundamental reorganisation of associated
undertaking 34 (381)
------ ------
Profit on ordinary activities
before interest 6,612 3,027
Interest receivable and similar income 86 165
------ ------
Profit on ordinary activities before
taxation 6,698 3,192
Tax charge on profit on ordinary
activities (note 2) (1,887) (837)
------ ------
Profit on ordinary activities after
taxation 4,811 2,355
Equity minority interests (535) (212)
------ ------
Profit on ordinary activities
attributable to the members of
Rowe Evans Investments PLC 4,276 2,143
Equity dividend proposed (note 1) (2,284) (2,057)
------ ------
Profit retained for the financial year 1,992 86
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Basic earnings per 10p share
- pence (note 4) 8.84 4.43
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Diluted earnings per 10p share
- pence (note 4) 8.80 4.43
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All operations are classed as continuing.
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