Annual report 2012
(cid:1) BERTAM
(cid:1) SIMPANG KIRI
(cid:1) MEDAN
KERASAAN (cid:1)
(cid:1) KUALA LUMPUR
SENNAH (cid:1) (cid:1) BILAH
(cid:1) PANGKATAN
(cid:1) SINGAPORE
SUMATRA
(cid:1) PADANG
BANGKA
ISLAND
(cid:1)
(cid:1) AGRO MUKO
(cid:1)
(cid:1) BENGKULU
KALIMANTAN
NEW PROJECTS
(cid:1)
(cid:1)
SAMARINDA
MALAYSIA
PROPERTY
MAJORITY HELD 70 ha
MINORITY HELD 453 ha
(cid:1)
JAKARTA
JAVA
INDONESIA
PLANTATIONS
M AJORITY HELD 22,600 ha OIL PALM
M INORITY HELD 20,200 ha OIL PALM
AND 1,600 ha RUBBER
Location of the Group’s properties
and those of its associated companies
as at 31 December 2012
AUSTRALIA
BEEF-CATTLE FARMING
MAJORITY HELD 31,000 ha
MINORITY HELD 5,800,000 ha
(cid:1) DARWIN
AREA OF NAPCo
BREEDING AND
GROWING-OUT
PROPERTIES
(cid:1) MOUNT ISA
AREAS OF NAPCo
BACKGROUNDING
PROPERTIES
NAPCo
FEEDLOT
WOODLANDS AGGREGATION (cid:1)
BRISBANE (cid:1)
SYDNEY (cid:1)
MELBOURNE
(cid:1)
The M.P. Evans Group is
committed to producing
environmentally-
sustainable palm oil and
adopting the highest
standards of animal
welfare
LAND ASSETS BY VALUE
31 DECEMBER 2012
10%
19%
71%
(cid:0) INDONESIA (cid:0) AUSTRALIA (cid:0) MALAYSIA
PORTFOLIO OF ASSETS AS AT 31 DECEMBER 2012
22,600 planted hectares of majority-held,
established oil-palm plantations in Indonesia
plus a 40-tonne-per-hour mill in Sumatra and a
60-tonne-per-hour mill in Kalimantan
5,600 hectares of associated smallholder co-
operative schemes
21,800 planted hectares of minority-held (of
which Group’s share 8,000 hectares) established
oil-palm and rubber plantations in Sumatra,
Indonesia plus two 60-tonne/-per-hour palm-oil
mills and a crumb-rubber factory
31,000 hectares of cattle-backgrounding land in
southern Queensland, Australia
34.4% interest in a leading Australian cattle
company, NAPCo, owning 5.8 million hectares
in Queensland and the Northern Territory
70 hectares of plantation land in Peninsula
Malaysia, with property-development premium
40% share of a substantial property-
development company, Bertam Properties, near
Penang Island, Malaysia with a land bank of
some 453 hectares
Net current assets of US$42.57 million as at
31 December 2012
CONTENTS
1
2
3
Portfolio of assets
Summary of results
Group highlights
4 Market information
6
Chairman’s statement
Review of 2012
9
– Results
12 – Indonesian palm oil
18 – Australian beef cattle
22 – Malaysian property
24 – Risk management
27 Environmental, corporate and
social responsibility
32 Board of directors
32 Report of the directors
37 Corporate governance
39 Report of the board to the shareholders
on directors’ remuneration
41 Independent auditors’ report to the
members of M. P. Evans Group PLC
42 Consolidated income statement
43 Consolidated statement
of comprehensive income
70 Independent auditors’ report to the
members of M. P. Evans Group PLC,
parent-Company
71 Parent-Company balance sheet
72 Notes to the parent-Company
balance sheet
75 Subsidiary and associated undertakings
76 Analysis of land areas
77 5-year summary
44 Consolidated balance sheet
78 Notice of meeting
45 Consolidated statement
of changes in equity
80 Professional advisers and representatives
46 Consolidated cash-flow statement
47 Notes to the consolidated accounts
The map of the venue of the annual general
meeting is shown on the inside back cover
1
2012 ANNUAL REPORT
Summary of results
FOR THE YEAR ENDED 31 DECEMBER 2012
Revenue
Gross profit
Group-controlled profit before tax
Profit for the year
Equity attributable to the owners
of M. P. Evans Group PLC
Net cash inflow generated by operating activities
Basic earnings per 10p share (continuing operations)
Dividend per 10p share in respect of the year
2012
US$ million
2011
US$ million
83.21
23.04
16.70
21.55
57.76
25.92
24.35
39.70
351.08
337.98
33.90
US Cents
32.51
Pence
8.00
48.34
US Cents
66.39
Pence
8.00
Managing director’s statement
Philip A Fletcher, FCA
The Group’s Indonesian palm-oil operations
performed well and the results were similar to last
year. By contrast, the Australian cattle operations
recorded a loss, as did the Malaysian property
business. As a result, the Group’s profit for the year
was 46% lower than that for 2011.
As expected, f.f.b. crops on the new Indonesian
projects continued their sharp upward trend in
2012 and the total crop from the Group’s majority-
owned estates comfortably exceeded the 300,000
tonnes that had been foreshadowed in previous
reports to shareholders. It is pleasing to report that,
despite a marked fall-off in the palm-oil price during
the year, the gross profit from the Indonesian palm-
oil operations was similar to that achieved in 2011.
The Indonesian associated companies, with similar
crops to 2011, achieved lower profits than in the
previous year.
The Australian cattle operations, both on
Woodlands and in the associate, NAPCo,
experienced lower year-end cattle prices and lower
weight gains than in 2011. In Malaysia, the number
of completed land and developed-property sales by
Bertam Properties was less than in 2011. There are,
however, a number of such disposals in the pipeline.
Planting continues on the remainder of the new
projects in Indonesia and, as announced in
November 2012, a further piece of land, Musi
Rawas, was acquired for palm-oil development in
South Sumatra. It is too early to tell exactly how
much of this 20,000-hectare area will be able to be
developed but this is first-class land which should
produce exciting long-term results.
2012 ANNUAL REPORT
2
Group highlights
A good year for the plantation business which saw the first full
year in operation of the Group’s palm-oil mill in East Kalimantan.
The Group exceeded its targeted crop of 300,000 tonnes of f.f.b.
in 2012 and remains on track for 500,000 tonnes in 2015.
Financial
Profit for the year US$21.56 million
(2011 US$39.70 million)
Earnings per share US Cents 32.51
(2011 US Cents 66.39)
Dividend for the year maintained at 8.00
pence (2.25 pence interim already paid)
Indonesian palm oil
Plantation profits similar at US$25.16
million (2011 US$25.83 million)
Indonesian crops of f.f.b. 27% higher
than in 2011 as crops increased on new
projects and established estates;
unchanged crop on associates’ estates
Palm-oil price averaged US$998 per
tonne (2011 US$1,123 per tonne)
Group’s total planted area, including its
share of associates’ areas, increased to
30,700 hectares (2011 - 29,800 hectares)
Palm-oil price has edged higher in 2013,
currently around US$830 per tonne
Initial work has commenced on the
newly-acquired land in South Sumatra,
Musi Rawas
Australian beef cattle
NAPCo achieved higher sales whilst
maintaining its herd size
Despite strong operating cash flows,
NAPCO made a loss following weak year-
end cattle prices and a modest property
write down
Difficult season for Woodlands led to
loss but good rainfall in early 2013 has
enabled substantial rebuilding of herd
Malaysian property
Few sales of land or developed properties
completed by associate Bertam
Properties, leading to a small loss
Bertam Estate benefiting from Bertam
Properties’ development activity
3
2012 ANNUAL REPORT
Market information
Palm oil The average palm-oil price
(Rotterdam c.i.f.) was substantially lower, at
US$998 per tonne, compared with US$1,123 in
2011. Although strong during the first quarter of
2012, prices began to fall in May, a trend which
accelerated in September when concerns about
rising stock levels led the price to fall to around
US$800 per tonne. Prices have strengthened
gradually from this level in early 2013 to their
current level of around US$830.
Palm oil is used mainly as a cooking oil
but also in margarine, shortenings (cakes,
biscuits), soap, cosmetics, lubricants and
more recently in bio-diesel.
Palm oil has the lowest cost of production
and is the most productive of all the major
vegetable oils. Over 5.5 tonnes per hectare
per annum can be produced, compared
with around 0.5 tonnes for its main rival,
soybean oil.
Palm oil is now the world’s largest vegetable
oil, with production in 2012 of 53.2 million
tonnes and 35% of the global production of
the major vegetable oils. Soybean oil is
the second largest with 41.8 million tonnes
and 27%. Palm-kernel oil accounts for
a further 6.0 million tonnes (4%).
(SOURCE: OIL WORLD)
<5
6-10
11-15
16-20
21-25
>25
<5
6-10
11-15
16-20
21-25
>25
AGE PROFILE OF THE GROUP’S OIL PALMS
DISTRIBUTION OF PLANTED HECTARAGE
BY AGE INTERVAL AS AT 31 DECEMBER 2012
SUBSIDIARIES – AVERAGE AGE 7.4 YEARS
Age in years
0
10
20
30
40
50
60
70
ASSOCIATES – AVERAGE AGE 13.7 YEARS
Age in years
0
10
20
30
40
50
60
70
%
55
23
3
8
6
5
%
13
15
29
16
27
0
CROPS OF OIL-PALM FRESH FRUIT BUNCHES ‘000 TONNES
MAJORITY-OWNED ESTATES IN INDONESIA (cid:0) AND MALAYSIA (cid:0)
317
2
249
2
196
2
171
2
145
17
ASSOCIATED-COMPANY ESTATES
409
2
401
3
366
3
380
4
350
5
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
420
2012 ANNUAL REPORT
4
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
Beef cattle Australian beef-cattle
prices fell in 2012, notably for backgrounded
cattle destined for feedlot “finishing”. A strong
Australian Dollar offset the positive impact of
further reductions in the US herd.
Australia is one of the world’s largest beef
exporters with some 20% of global trade.
Australia is well placed geographically to
serve Asia – the world’s fastest-growing beef
consumer.
NAPCo (34.37% held) is one of Australia’s
leading beef-cattle companies with fifteen
properties covering an area of 5.8 million
hectares.
EASTERN YOUNG CATTLE
INDICATOR (EYCI) – WOODLANDS
A$ per kg carcass weight
PALM-OIL PRICE US$ PER TONNE
Rotterdam c.i.f.
MAIN PRODUCERS OF PALM OIL – 2012
4
4
4
4
4
,
,
,
,
,
3
3
3
3
3
6
6
6
6
6
0
0
0
0
0
9
9
9
9
9
9
9
9
9
9
7
7
7
7
7
4
4
4
4
4
3
3
3
3
3
01,6
01,6
01,6
01,6
01,6
0
0
0
0
0
0
0
0
0
0
(cid:127)26,500
(cid:127)26,500
(cid:127)26,500
26,500
26,500
5
5
5
5
5
8
8
8
8
8
8 , 7
8 , 7
8 , 7
8 , 7
8 , 7
1
1
1
1
1
Thousand tonnes
(cid:0) INDONESIA 26,500 (50%)
(cid:0) MALAYSIA 18,785 (35%)
(cid:0) THAILAND 1,600 (3%)
(cid:0) NIGERIA 973 (2%)
(cid:0) COLOMBIA 940 (2%)
(cid:0) OTHER COUNTRIES
4,360 (8%)
TOTAL 53,158
MAIN USERS OF PALM OIL – 2012
1
6,7
3
2
4
4
(cid:127)1,3 3 5
(cid:127) 9
(cid:127)1,760
5
2
(cid:127)2,0
7
6
2
,
2
5
8
(cid:127)7,5
(cid:127) 6 , 1 0 7
(cid:127)7,0
9
2
5
,
8
0
1
Thousand tonnes
(cid:0) INDIA 7,585 (15%)
(cid:0) INDONESIA 7,092 (14%)
(cid:0) CHINA 6,107 (12%)
(cid:0) EU 5,801 (11%)
(cid:0) MALAYSIA 2,267 (4%)
(cid:0) PAKISTAN 2,025 (4%)
(cid:0) NIGERIA 1,760 (3%)
(cid:0) THAILAND 1,335 (3%)
(cid:0) USA 944 (2%)
(cid:0) OTHER COUNTRIES
16,732 (32%)
TOTAL 51,648
100-DAY GRAIN-FED CATTLE
– NAPCo
A$ per kg carcass weight
D
L
R
O
W
L
I
O
:
E
C
R
U
O
S
D
L
R
O
W
L
I
O
:
E
C
R
U
O
S
5
2012 ANNUAL REPORT
Chairman’s statement
The Group’s crops more than trebled in
Kalimantan and, overall, exceeded the targeted
volume of 300,000 tones.
OVERALL RESULTS
The profit for 2012 was US$21.55 million in a year
when excellent crop increases were unable to make
up for the falling prices of crude palm oil (“CPO”)
and beef cattle, leading to a reduction in profit of
US$18.14 million compared with 2011. Earnings per
share fell to US cents 32.51 (2011 US cents 66.39).
The principal reason for the lower results was a
reduction in the Group’s share of profits from its
associated companies of US$13.76 million, flowing
from both plantation and beef-cattle operations.
DIVIDEND
The board is recommending a final dividend for the
year of 5.75p per share, the same as for 2011.
Together with the interim dividend of 2.25p per share
paid in November 2012, the same as the interim
dividend paid in November 2011, the total dividend
for the year is unchanged at 8.00p. A scrip-dividend
alternative is again being offered.
OPERATIONS
Indonesia
In 2012, increased crops resulted in a gross profit
from the Group’s majority-owned Indonesian
plantations of US$25.16 million, only marginally less
than in 2011, despite an 11% fall in the price of CPO.
In what signals an important point in the Group’s
development, I am able to report that the crop of oil-
palm fresh fruit bunches (“f.f.b.”) harvested during
2012 from these plantations exceeded the targeted
volume of 300,000 tonnes by 17,000 tonnes. This is
a significant milestone in the Group’s strategy of
expanding its output, which stood at only 145,000
tonnes in 2008. The Group remains on track to
achieve its target of 500,000 tonnes in 2015. These
increased crops will generate significantly-higher
revenues, profits and cash flow, although by how
much depends on the level of CPO prices.
Whilst, as is to be expected, the main increase in
crops came from the Group’s new project in
Kalimantan, where crops more than trebled, it is very
encouraging that the Group was also able to record
an increase of more than 4% in the crops from its
mature North Sumatran estates through improved
supervision and careful attention to field standards
and maintenance of plantation infrastructure.
2012 was the first full year of operation of the palm-oil
mill, bulking and warehouse installation and the jetty in
Kalimantan. The mill processed the Group’s own,
burgeoning, crop and that of the smallholder co-
operative schemes attached to the project, and
successfully bought in significant quantities of good-
quality fruit from nearby commercial operations without
their own mills. Whilst this opportunity is not expected
to persist, the Group was able to take advantage of its
position as the first mill operating in the area to extract
good margins from buying additional fruit, as well as to
benefit from the increased volumes processed by
lowering its unit cost of production. Given the presence
of third-party crop in its production and, indeed, crops
from its own recently-matured areas, it is especially
pleasing that the new mill achieved a CPO extraction
rate of more than 24% during 2012.
The Group’s major plantation associate, PT Agro
Muko, saw its crops increase by 4%, although it
produced less CPO than in 2011 since extraction rates
at its two mills fell as unusually-dry conditions,
beneficial to oil extraction, experienced in 2011 were
not repeated. In these circumstances, a fall in the
CPO price also led to a fall in profits. Rubber output
and profits fell too, since significant areas of rubber
were felled for replanting, as planned, in 2012. At the
Group’s other plantation associate, PT Kerasaan
Indonesia, crops fell as the estate brought an attack by
leaf pests under control.
I am delighted to report that in October 2012 the
Group’s Pangkatan mill in North Sumatra was
accredited by the Roundtable on Sustainable Palm Oil
(“RSPO”). This accreditation incorporates the crops
produced on the Group’s Pangkatan, Bilah and
Sennah Estates, and recognises the CPO produced by
the Pangkatan mill as being derived from a
sustainable source. The RSPO audit process has
already begun at the Group’s palm-oil mill in
Kalimantan and accreditation is expected towards the
end of 2013 or the first part of 2014.
2012 ANNUAL REPORT
6
Australia
Despite selling significantly more cattle than in
previous years, and generating a strong operating cash
inflow, The North Australian Pastoral Company Pty
Limited (“NAPCo” – 34.37% held) recorded a loss, the
Group’s share of which amounted to US$2.01 million
(2011 US$4.23 million profit). This loss was
predominantly due to a reduced (unrealised) year-end
herd valuation, resulting from lower cattle prices and
lighter average weights per head than in 2011,
following a poor end to the season, and to a modest
reduction in the value of the company’s property
portfolio. Notwithstanding higher sales made in 2012,
herd numbers, at 197,300 head, were very similar to
those at the end of 2011, an outcome bolstered by a
good increase in the number of brandings which, at
62,500, were the highest since 2008.
On Woodlands, promising rains early in 2012 were
not supplemented later in the year, with the
consequence that the crop of forage oats did not
become fully established and it was not possible to
plant any additional forage crops. As a result, cattle
could not be fattened as quickly as expected and
overall weight gains during the year were 19% lower
than in 2011. This, combined with a serious decline
in the prices of the lighter-weight and the grass-
finished cattle produced on Woodlands, led to a farm
loss of US$2.19 million in 2012 (2011 US$0.11
million profit).
STRATEGIC DEVELOPMENTS
In Indonesia, the Group added 1,020 hectares of
planting on its new projects during the course of
2012, with an additional 600 hectares planted for the
smallholder co-operative schemes. The rate of
planting on any project inevitably slows down as the
area still to be planted diminishes and this is now the
case in Kalimantan, where the development of the
area is in its final stage. Negotiations with local
people for land compensation become more intricate
and so take longer to conclude and, along with our
consistent policy of ensuring open and accurate
documentation of the resulting agreement, the time
taken to release land for development has lengthened.
Our current estimate is that the areas on these two
new projects that may ultimately be planted is 15,000
hectares in Kalimantan and 10,000 hectares on
Bangka, of which 10,600 hectares and 6,000 hectares
respectively relate to the Group and the balance to
smallholder co-operative schemes.
I am pleased to report that, as announced on
27 November 2012, the Group has acquired the rights
to develop 20,000 hectares of land at Musi Rawas,
an area near Lubuk Linggau in South Sumatra. The
process of agreeing terms of compensation with local
people who currently occupy or farm the land has
already begun but, at this stage, it is still too early to
know with any accuracy how much of the land will be
released to the Group and what area will ultimately be
planted. The Group has given an undertaking that
30% of the total land planted will be developed as
smallholder co-operative schemes. It has become
increasingly difficult to find areas of environmentally-
suitable land of this sort. The acquisition of these rights
is expected to lead to significant increases in the
Group’s crops in the latter part of the decade.
In Australia, in order to improve the capacity and
efficiency of its grain-farming operation at Wainui,
NAPCo purchased an adjoining 450-hectare irrigated
farm at the end of 2012. The programme of investing
in additional boreholes on NAPCo’s main breeding
property, Alexandria, has continued, thereby
increasing carrying capacity but also mitigating the
impact of dry seasons on the herd size. No further
shares in NAPCo were acquired during the year. The
board will continue to review any opportunities that
arise in respect of the Group’s shareholding.
On Woodlands, the infrastructure installation of
fencing and watering points together with pasture-
improvement work has now been largely completed.
This is expected to result in the ability to carry larger
numbers of cattle. It nonetheless remains the board’s
intention to dispose of Woodlands when market
conditions are suitable.
7
2012 ANNUAL REPORT
Chairman’s statement
CONTINUED
In Malaysia, the Group’s two principal remaining
interests are the 74-hectare Bertam Estate and its 40%
share of Bertam Properties Sdn. Berhad (“Bertam
Properties”). Whilst the board ultimately plans to sell
both of these, this is not considered an urgent priority
since it is expected that, in the short term (the next two
to three years), Bertam Properties will continue to
generate significant cash flows from land sales and from
its successful property-development activities. As usual,
surplus cash flows will be distributed by way of
dividend. The value of Bertam Estate is likely to continue
to escalate as a result of the continuing development of
the (adjoining) Bertam Properties project.
PALM-OIL AND BEEF-CATTLE MARKETS
2012 started well with CPO prices reaching towards
historical highs and, for the first three quarters of the
year, prices remained at or above US$1,000 per
tonne. However, at this point the rising global supply
of palm oil supported by good weather in the main
producing countries, combined with lower-than-
anticipated rates of growth in demand for vegetable
oils, led to an accumulation of CPO stocks that
eventually triggered a sudden fall in the price to
around US$800 per tonne.
Prices for lighter-weight, grass-fed and grain-finished
cattle all fell in 2012, although the prices of lighter-
weight cattle intended for sale to feedlots for grain
finishing fell most as grain prices rose, reducing the
profitability of feedlot operations. The strength of the
Australian Dollar negatively affected export demand
from both Japan and Korea, traditionally important
markets for Australian beef, but this had begun to
recover by the end of the year. A further decline in the
US cattle herd provided some support, although not
enough to prevent the market from weakening over
the year.
CURRENT TRADING AND PROSPECTS
Crops of f.f.b. have continued in 2013 on the upward
trajectory recorded in 2012 with 78,700 tonnes
having been harvested in the first quarter of the year,
an increase of 19% compared with last year.
Prices of crude palm oil (Rotterdam c.i.f.) have edged
higher from the US$810 level at which they closed at
the end of 2012 to bring them to their current level of
around US$830 per tonne. Good crops expected from
increased plantings of soybeans in South America, a
competing source of vegetable oil, may be offset by
falling palm-oil yields in Southeast Asia, with palm-oil
prices further underpinned by a continuing
historically-large discount to soybean oil. There seems
to be little prospect of an immediate return to the
levels of CPO prices seen in the early part of 2012,
with growth in demand for vegetable oils looking set
to rise at lower levels than in recent years. However,
market sentiment appears to support further gradual
strengthening in CPO prices, suggesting a mildly-
encouraging price outlook for the remainder of 2013.
Cattle prices have stabilised following the year end as
some welcome rainfall has been received in some
areas of Australia. Woodlands has benefited
significantly from this and the scheduled planting of
forage oats into a full moisture profile is under way.
Cattle numbers on Woodlands have now returned to
more than 10,000 head, half of which are being
fattened on behalf of other commercial operators, for
a fee linked to weight gain. Some NAPCo properties
have also received rain, whilst others are
experiencing drier-than-usual conditions. In the
longer term, the prospects for the Australian beef-
cattle market appear favourable, not least as the US
cattle herd now stands at its lowest level for 60 years.
BOARD APPOINTMENT
Shareholders will note the resolution to appoint a new
independent non-executive director. Having
considered a short list of possible candidates, the
board is pleased to recommend the appointment of
Jock Green-Armytage, who brings long experience of
the plantation sector, having served on the boards of
Guthrie Corporation PLC, REA Holdings PLC and,
indeed, of this company for five years in the late
1980’s. He has also either chaired or served on the
boards of a number of companies in other sectors,
including NM Rothschild & Sons Limited, Kelt Energy
plc, William Baird PLC and Amec plc, and he is
currently chairman of JZ International and Star Capital
Partners.
ACKNOWLEDGEMENTS
It has proved to be an important year in the Group’s
development and this progress would not have been
possible without the hard work and loyalty of the
Group’s managers, staffs and workers in our
operations worldwide to whom, on behalf of the
board, I should like to express my thanks.
Peter Hadsley-Chaplin
Chairman
24 April 2013
2012 ANNUAL REPORT
8
Review of 2012
Results
GROSS PROFIT FROM
AGRICULTURAL ACTIVITIES
Strong growth in the crop of oil-palm f.f.b., which
increased by some 68,000 tonnes, and
consequently sharply-rising revenue was not
enough to prevent a slight fall in the gross profit of
the Indonesian plantation operations to
US$25.16 million, 2.6% lower than the US$25.83
million achieved in 2011. Overall, the impact of
higher crops was offset by lower prices for both
CPO and palm kernels, and a sizeable increase in
the local cost of operating in Indonesia. Wage and
salary costs and the costs of bought-in services,
such as the contractors engaged in developing new
areas of oil palm, have grown at an accelerating
pace.
Excellent extraction rates and fast-growing yields
on the Group’s project in Kalimantan caused the
project to break even during 2012 after the
biological-asset adjustment. This is encouraging so
early in its development.
At Woodlands, the Group’s Australian cattle
operation, dry conditions led to a reduction in its
herd and hence lower total weight gains than were
recorded in 2011. Combined with a significant fall
in cattle prices, which affected the value of the
herd at the year end, this resulted in a gross loss for
the year of US$2.19 million (2011 US$0.11 million
profit).
As a result of the above, the Group’s gross profit
amounted to US$23.04 million (2011US$25.92
million). A detailed analysis of this is given in note
4 to the accounts on pages 52 to 53. The results of
the Group’s palm-oil and cattle operations are
reviewed in the reports commencing on pages 12
and 18 respectively.
BEARER BIOLOGICAL-ASSET
ADJUSTMENT
Notwithstanding the fall in the price of CPO, notably
during the last quarter of 2012, prices remain at high
levels seen in an historical context. As a result, the
20-year average price for CPO used in the valuation
of the Group’s plantation assets rose from US$572 at
the end of 2011 to US$602 at the end of 2012. The
resultant increase in biological value was, however,
held back by an increase in costs, partly arising from
the continuing improvement in field standards that
has taken place over the last three years. Since it is a
three-year basis period that is used to establish the
costs applied in the valuation of biological assets, the
pronounced negative effect of cost increases this
year should be attenuated in future years’ valuations.
Taken together, the increase in selling prices
outweighed the increase in costs, and the value of
palms already planted at the beginning of the year
rose by US$8.62 million, to which was added
US$3.29 million in respect of plantings carried out in
2012. In sum, therefore, US$11.91 million was
added to the value of the Group’s biological assets
during the year (2011 US$16.57 million).
OTHER ADMINISTRATIVE
EXPENSES
A sharp increase of US$1.59 million is reported in
other administrative expenses, to US$4.29 million.
This reflects both the absence of a credit for
US$0.96 million that occurred in 2011 in respect
of the reduction in provisions against loans made to
smallholder co-operatives, and an impairment
provision of US$0.26 million made exceptionally in
2012 against the value of the beef-cattle operation at
Woodlands. Furthermore, the Group’s share price
was 53 pence higher at the end of 2012 than it had
been at the end of 2011, resulting in a provision of
US$0.15 million against employers’ National
Insurance contributions which would fall due on
unexercised executive share options as against a
credit on the same item of US$0.13 million in 2011,
an adverse swing of US$0.28 million.
9
2012 ANNUAL REPORT
Review of 2012 Results
CONTINUED
ASSOCIATED COMPANIES
The Group’s share of its associated companies’ profits,
including the share of the Indonesian companies’
biological-bearer-asset adjustment, compared with
last year, was as follows:
2012 2011
POST-TAX POST-TAX POST-TAX POST-TAX)
PROFIT BEFORE PROFIT AFTER PROFIT BEFORE PROFIT AFTER
BIOLOGICAL BIOLOGICAL BIOLOGICAL BIOLOGICAL BIOLOGICAL BIOLOGICAL
BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET
% ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT
HELD US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
PT Agro Muko 36.84 12,015 (26) 11,989 13,912 2,357 16,269
PT Kerasaan Indonesia 38.00 1,246 6 1,252 1,880 472 2,352
Total Indonesia 13,261 (20) 13,241 15,792 2,829 18,621
NAPCo 34.37 (2,012) — (2,012) 4,231 — 4,231
Bertam Properties 40.00 (347) — (347) 1,786 — 1,786
Total 10,902 (20) 10,882 21,809 2,829 24,638
The results of the Indonesian, Australian and
Malaysian associated companies are described below
and reviewed in more detail on pages 12 to 23.
INDONESIA
PT Agro Muko had a good year, although it was
unable to match the outstanding year it had in 2011.
Its results before the bearer-biological-asset
adjustment were, at US$12.02 million, 14% lower
than in 2011. This was despite continuing good
progress in crops, with f.f.b. from its own operations
increasing by 3.8%, compared with 2011, to a record
367,400 tonnes. Unusually dry weather in 2011
resulted in a high extraction rate that was not
maintained as a more normal pattern of weather
asserted itself, leading to a small fall in production of
CPO in 2012. The replanting of rubber areas, delayed
in 2011 to take advantage of the then-high rubber
prices, finally took place in 2012 and, in conjunction
with lower rubber prices, resulted in a significantly
weaker performance by PT Agro Muko’s rubber
operations. PT Kerasaan Indonesia recorded a 12.5%
reduction in its crop during 2012 as it experienced
a severe leaf-pest attack, undermining its results for
Oil-palm nursery
NAPCo cattle
2012 ANNUAL REPORT
10
the period. As a result of the above, the Group’s
combined share of the post-tax, pre-bearer-biological-
asset-adjustment profit of these two associated
companies in 2012 was US$13.26 million, 16%
lower than in 2011’s US$15.79 million.
As with the Group’s own areas, the valuation of
biological assets in the associated plantation
companies benefited from an increase in the long-
term CPO price. Improvement in yields further
strengthened biological values although, as in the
Group’s own estates, increases in the costs of field
maintenance worked in the opposite direction.
Overall, there was little change in the value of PT
Agro Muko’s biological assets. There was a similar
outcome in respect of PT Kerasaan Indonesia’s
biological assets, with the reduction of crop arising
from the leaf-pest attack not expected to be
permanent.
The Group’s share of the post-tax, post-biological-
bearer-asset-adjustment profit of the Indonesian
associates amounted to US$13.24 million (2011
US$18.62 million), a reduction of some 29%. The
Group received gross dividends of US$9.21 million
from PT Agro Muko in 2012 (2011 US$16.58 million,
gross). Gross dividends from PT Kerasaan Indonesia
were US$1.03 million (2011 US$2.01 million).
AUSTRALIA
NAPCo followed the excellent year it enjoyed in 2011
with a loss, despite significantly increasing brandings
and the herd remaining stable at 197,300 head.
Relatively low rainfall resulted in lower weight gains,
and a reduction in cattle prices towards the end of the
year, albeit not as pronounced as for the type of cattle
produced on the Group’s Woodlands operation,
adversely affected the result. As a result of this, the
Group’s share of NAPCo’s loss in 2012 amounted to
US$2.01 million (2011 US$4.23 million profit). The
Group’s share of NAPCo’s gross dividends amounted
to US$0.93 million (2011 US$0.96 million, gross).
MALAYSIA
Whilst the Malaysian property market remains
reasonably robust, slower completion of sales of
developed properties during the first half of 2012 than
in 2011 persisted through to the end of the year. As a
result, the Group’s share of Bertam Properties’ post-tax
loss for the year amounted to US$0.35 million,
compared with a profit of US$1.79 million in 2011.
There were two small land sales during the year,
amounting to 2.6 hectares, which generated a profit
of US$0.91 million, and between them the small
remaining plantation operations and golf resort broke
even. Neither sales of land, nor of developed
properties, are brought to account until they are fully
completed. Bertam Properties has a number of
partially-completed sales that are expected to be
reflected in the results for 2013.
The Group’s share of Bertam Properties’ dividends
amounted to US$2.59 million (2011 US$2.61
million).
PROFIT FOR THE YEAR
As a result of all the above, the Group profit for the year
amounted to US$21.55 million, a reduction of US$
18.15 million compared with the US$39.70 in 2011.
11
2012 ANNUAL REPORT
Palm oil
An excellent extraction rate of more than 24% at the
Group’s mill in Kalimantan, only commissioned in December 2011,
augurs well for the future.
PALM-OIL MARKET
Prices finished 2012 significantly lower than they
started the year. For the first three quarters, the CPO
price remained at or above US$1,000 per tonne
(Rotterdam c.i.f.), before an increase in stocks
occasioned by a pronounced recovery in Malaysian
yields caused the price to recede to a level of around
US$800 per tonne during the last quarter of the year.
Increasing global supply of CPO was generally
underpinned by benign weather conditions in producer
countries, with Indonesia, the largest producer, seeing
production increase by 10% compared with 2011.
Whilst demand for palm oil continues to rise, by an
estimated 2.9 million tonnes in 2012 according to Oil
World, supply increased by more than this, particularly
during the last quarter, leading to an accumulation of
stocks which put pressure on prices. In addition, ample
supplies of sunflower-seed oil and news of increased
plantings of soybeans in South America further limited
the scope for increases in the price of CPO,
notwithstanding its historically-high discount of more
than US$300 to soybean oil.
The factors which bore down on the CPO price
during the last quarter of 2012 have persisted into
2013. Whilst there is evidence that the price incentive
is leading demand to switch away from other
vegetable oils towards palm oil, the weight of market
opinion believes that the high level of CPO stocks will
moderate any increase in the current price of
approximately US$830 per tonne until the latter part
of the year.
Workers’ housing behind oil-palm nursery
MAJORITY-OWNED ESTATES
CROPS AND PRODUCTION
Maturing plantings on the Group’s new projects and
the benefits of improved infrastructure and field
standards on the Group’s established North Sumatran
estates resulted in f.f.b. crops for the year of 317,000
tonnes; an increase of 27% on the previous year and
well ahead of the Group’s targeted crop of 300,000
tonnes. A good extraction rate was maintained at
Pangkatan, and an excellent rate of more than 24% at
the Group’s mill in Kalimantan, only commissioned in
December 2011, augurs well for the future.
2012 INCREASE 2011
TONNES % TONNES
Crops
Own crops
Pangkatan group 157,000 149,300
Simpang Kiri 51,300 50,200
208,300 4.4 199,500
Kalimantan 73,700 219.0 23,100
Bangka 35,000 31.1 26,700
317,000 27.2 249,300
Smallholder co-operative crops
Kalimantan 29,800 173.4 10,900
Bangka 19,700 29.6 15,200
49,500 89.7 26,100
Outside crop purchased
Kalimantan 60,100 — —
Production
Crude palm oil
Pangkatan 35,900 34,700
Kalimantan 39,500 900
75,400 111.8 35,600
Palm kernels
Pangkatan 8,700 8,500
Kalimantan 6,100 200
14,800 70.1 8,700
Extraction rates % %
Crude palm oil
Pangkatan 23.1 23.2
Kalimantan 24.1 23.2
Palm kernels
Pangkatan 5.6 5.7
Kalimantan 3.7 4.4
2012 ANNUAL REPORT
12
REVIEW OF OPERATIONS
Sumatra
The drive to improve infrastructure and field standards
in the established Sumatran estates continued to bear
fruit during 2012 in the shape of increasing crops of
f.f.b. (4.4%) on top of the increases recorded in 2011.
Encouraging increases in yields per hectare are
expected to continue as a result of more intensive
supervision in addition to recent improvements in the
road network and drains that have been carried out
over the last two years. Whilst yields per hectare are
expected to continue rising, the total crop in Sumatra
is expected to remain approximately at the current
level in the short term as the age of the palms on
these estates means they are entering a period of
sustained replanting.
The composting facility next to the Pangkatan mill
saw its production of compost increase during the
year by 17% to 31,100 tonnes. In addition to this
nutritious compost, rich in potassium, some 52
hectares are now supplied by “land application”. This
is a system whereby mill effluent is applied directly to
palms in the field through a network of pipes and
trenches. This reduces the requirement for compost or
inorganic fertilizer. Furthermore, the land-application
system acts as a safety valve ensuring that, in the
event of extreme rainfall, no effluent reaches local
water courses.
Young oil-palms on the Kalimantan project
The replanting programme that recommenced in
2011, after a pause for detailed evaluation in 2010,
continued in 2012 with 421 hectares replanted during
the year. This programme is set to continue with an
average of 450 hectares annually due to be planted
over the next seven years. A sustained programme of
improvements to workers’ housing began on all the
Sumatran estates during 2012, and is expected to be
completed in 2013.
At 35,900 tonnes of CPO, production at the
Pangkatan mill was similar to that in the previous
year. The extraction rate of 23.1% was marginally
lower than in 2011, and represents a good rate for the
area in which the mill is operating. Average extraction
is constrained by the presence of poorer-quality
planting material that was known to be present on
Sennah Estate at the time of its acquisition by the
Group in 2002. In due course, these areas will be
replanted using higher-quality planting material but,
for the time being, the Group’s ability to extract very
good crops has led it to defer replanting and accept
the lower average extraction rate that this entails.
During the year, the Group announced that it had
acquired a permit to develop 20,000 hectares at
Grading f.f.b. on the mill ramp
13
2012 ANNUAL REPORT
Review of operations
Palm oil
CONTINUED
Musi Rawas in South Sumatra, at a cost of US$275
per hectare. Planting is not expected to begin until
2014, but a senior manager and small team are on the
ground to begin the process of agreeing terms of
compensation with local people who currently
occupy or farm the land. At this early stage, it is
impossible to predict with any accuracy how much of
the land will be released to the Group and what area
will ultimately be planted. The Group has given an
undertaking that 30% of the total land planted will be
developed as smallholder co-operative schemes.
The Group was pleased that the Pangkatan mill was
accredited by the Round Table on Sustainable Palm
Oil (“RSPO”) in October 2012. This will enable the
Group to market its oil as fully-certified “mass-
balance” CPO (essentially a system of credits for
sustainable oil that can be purchased by
environmentally-concerned buyers of CPO), although
Pangkatan does not produce CPO in sufficient
volumes to harbour hopes of selling its output as
“fully-segregated” oil.
A fine fruit set
Kalimantan
A more-than-trebling of crops on the Group’s
Kalimantan project signals that the expected phase of
strong crop growth has begun, as the yield from
newly-mature areas rapidly rises. The pace of crop
growth in the smallholder co-operative schemes
attached to the project has risen at a similar rate. The
crop amounted to 73,700 tonnes; that of the
smallholder co-operative schemes to another 29,800
tonnes. As the remaining area available for planting
has shrunk, the attention of senior agricultural
managers has shifted towards achieving excellent
field standards. The soils in this area are good and the
effort invested in high-quality planting and
maintaining good field standards on the project are
being rewarded with very satisfactory yields.
A total of 900 hectares was planted in 2012, of which
520 related to the Group and 380 to the smallholder
co-operative schemes, bringing the total areas planted
to 9,680 hectares and 4,000 hectares respectively.
Inevitably, the rate of planting on any project slows
2012 ANNUAL REPORT
14
down as the remaining area to be planted diminishes.
This is now the case in Kalimantan, where the
development of the area is in its final stage when
negotiations with local people for land compensation
typically become more intricate and hence take longer
to conclude. Management conducts its negotiations in
a fair and open manner, in which any agreement is
properly documented. This too lengthens the time it
takes to release land for development. Whilst
uncertainty still clouds any prediction of the total land
that will be planted on this project, it remains possible
that a total of 15,000 hectares may ultimately be
planted, comprising 10,600 for the Group and 4,400
for the smallholder co-operative schemes.
The project borders the Mahakam river. The Group
has built a jetty that has allowed it to bring purchases
such as fertilizer into the project by river rather than
road, resulting in significant cost savings, and it has
also been able to dispatch by barge CPO and palm
kernels from the new mill. The high standard of the
facilities and the fact that the Group is amongst the
first to develop infrastructure of this kind in the area
has enabled the Group to earn good returns by
renting out spare capacity in its bulking tanks that
form a part of the complex. Indeed, the returns on this
activity were sufficiently attractive for a planned,
third, 5,000-tonne, bulking tank to be constructed
early to take advantage of this opportunity.
As the Group’s mill was one of the first to be
completed in the area, the Group was able to buy
good-quality fruit from other plantations to
supplement its own crop and that of the smallholder
co-operatives attached to the project. During the year
under review, 60,100 tonnes of crop were purchased
from other commercial operations. Tough quality
standards applied to f.f.b. purchased from third parties
and a rigorous approach to training the Group’s own
harvesters to harvest crop at the correct standard of
ripeness have resulted in excellent oil extraction for
the mill during only its first year of operation. The
purchase of outside fruit has also improved the
capacity utilization of the mill, helpfully lowering its
unit cost of production.
In October 2012, the Group commissioned a gas
engine attached to the mill in Kalimantan which
produces electricity out of methane derived from part
of the mill effluent. This power is used by the mill and
neighbouring workers’ and staff housing. The power
output and costs of this facility will be carefully
monitored with a view to adding a biogas facility to
the Pangkatan mill if it is commercially attractive.
Following the commissioning of the Kalimantan mill,
the Group has pursued its certification by the RSPO.
Preparatory work on this took place during 2012, and
the first step towards certification took place at the end
of February 2013. Final certification is expected
towards the end of 2013 or the early part of 2014.
Bangka
The areas first planted on the Group’s Bangka project
are entering a phase of quickly-improving yields. For
the project as a whole, crops increased by 31.1%,
compared with 2011, to 35,000 tonnes. As would be
expected, given that the Group was responsible for
planting and managing the plantings, crops from the
smallholder co-operative schemes attached to the
project grew at a similar rate. There was a continued
focus on field standards and improving drainage, but
it is worth noting that the f.f.b. yields from some fields
of the 2006 plantings touched 30 tonnes per hectare
during 2012. The mature areas on the project now
consist of 3,020 hectares, of which 1,970 relate to the
Group and 1,050 to the smallholder co-operative
schemes.
The total area planted at the end of 2012 amounted to
5,100 hectares, of which 3,500 related to the Group
and 1,600 to the smallholder co-operative schemes.
Progress on planting was slower than expected with
720 hectares planted during the year, of which 500
related to the Group. Whilst disappointing in total, the
pattern of progress is encouraging with a faster pace
of planting achieved in the last quarter and a
constant, if low, weekly rate. Management remains
optimistic that the success of existing smallholder
co-operatives attached to the Bangka project is
encouraging local people to agree compensation with
the Group to release more land and that the low-but-
steady rate of planting experienced in the latter part of
2012, will accelerate. Whilst the human factors make
it difficult to predict the areas that will eventually be
planted, management believe it is possible that these
may ultimately reach 6,000 hectares for the Group
and 4,000 for the smallholder co-operative schemes.
With planting progressing and the volume of crop
increasing, the Group has considered again the
appropriate time to build a mill on the Bangka
project. No final decision has been taken, but it is
currently planned to begin building a mill in
15
2012 ANNUAL REPORT
Review of operations
Palm oil
CONTINUED
2014, with a view to it becoming operational at the
end of 2015. In the meantime, there is good
competition between third-party mills to buy f.f.b. and
the Group is able to sell its fruit at acceptable prices.
OPERATING COSTS
The Indonesian palm-oil industry has been subject to
increased cost pressures, notably through increased
wage costs. Good agricultural managers attract good
salaries in an expanding industry. In relation to workers,
increases in the legislated minimum wage, such as the
newsworthy rates of up to 49% published at the end of
2012 to take effect in 2013, also have an impact on the
Group’s costs. However, increases in the minimum
wage do not translate fully into cost increases for the
Group, since a large proportion of its employees are
already paid at a higher rate than the minimum,
although it undoubtedly results in upward pressure on
this cost. In US Dollar terms, this increase was mitigated
during 2012 by the weakening of the Rupiah against the
US Dollar. The unit costs of its CPO and palm kernels
remain at competitive levels, although the effect of the
depreciation charge on the new mill in Kalimantan
make its costs higher than those of the Pangkatan mill.
The Group is vigilant in minimising its costs. It has
established a specialist purchasing and procurement
team in its Jakarta office, with satellite staff in North
Sumatra and Kalimantan. Management takes every
opportunity to drive down the cost of its inputs and
obtain the maximum advantage from combining the
orders of its different operating units to obtain bulk
discounts.
New plantings on the Bangka project
ASSOCIATED-COMPANY ESTATES
CROPS AND PRODUCTION
An increase of 4% in PT Agro Muko’s crop to 367,400
tonnes bears witness to the effectiveness of the
programme of agricultural improvement that has taken
place over the last few years, including the infilling of
previously-unplanted areas and heavy investment in
road building. As expected, the rubber crop fell
markedly as the delayed felling and replanting of rubber
took place during the year. Crops on Kerasaan Estate fell
by 5,900 tonnes as the estate suffered a severe leaf-pest
attack, which has largely been brought under control.
INCREASE
2012 (DECREASE) 2011
TONNES % TONNES
F.f.b. crops
PT Agro Muko
- own 367,400 3.8 354,100
- outgrowers 8,600 (40.3) 14,400
376,000 2.0 368,500
PT Kerasaan Indonesia 41,200 (12.5) 47,100
417,200 0.4 415,600
Production (PT Agro Muko)
Crude palm oil 87,100 (1.2) 88,200
Palm kernels 19,700 2.6 19,200
Extraction rates % %
Crude palm oil 23.2 23.9
Palm kernels 5.2 5.2
Rubber crops TONNES TONNES
PT Agro Muko - own 1,340 (13.5) 1,550
2012 ANNUAL REPORT
16
Management monitors and assesses the performance
of the development of the new plantings by means of
key performance indicators which identify the area to
be planted in a given year and also the cost per
hectare of that planting. Programmes for planting are
set, with sufficient planting material in place in the
previous year. This type of activity is normally
undertaken by contractors and management monitors
the progress achieved on the contracted areas. As
with other plantation activities, costs per hectare are
determined by such factors as the weather pattern, the
soil type and the terrain. They are monitored by
management for each individual estate.
With regard to mill production, the key performance
indicators are the extraction rate of palm oil and palm
kernels per tonne of f.f.b., percentage of free fatty
acids, oil losses and dirt and moisture content.
Extraction rates vary according to factors such as the
type and quality of planting material, the age profile
of plantings, rainfall, etc. Rates of up to 25% for palm
oil and over 5.5% for palm kernels can be achieved
in some parts of Indonesia. Oil losses, dirt and
moisture content are expressed in terms of
percentages and actual achievement against
maximum permitted levels is monitored by
management.
PLANTATION AND MILL COSTS
Management monitors and assesses the efficiency of
plantation operations in terms of cost by means of key
performance indicators which identify field costs per
hectare and per kilogramme of f.f.b. and factory costs
per tonne of palm products (palm oil plus palm
kernels). A significant proportion of costs both in the
field and in the factory are fixed and therefore vary
little with different levels of throughput. Field costs
also vary from estate to estate depending upon such
factors as terrain and rainfall pattern and the key
performance indicators are monitored by
management for each individual estate.
Inspecting mature oil palms
REVIEW OF OPERATIONS
Whilst previous investment in planting and roads
underpinned strong crop growth in PT Agro Muko,
benign weather conditions also played their part.
Although its own crops increased by 13,300 tonnes,
the company bought in less outside fruit as
competition from other mills was driving up the price
paid, rendering it insufficiently profitable to justify
maintaining these purchases, with a consequential
reduction of 5,800 tonnes of f.f.b. from this source.
Unusually dry conditions in 2011 were not repeated
in 2012, which led to a fall in PT Agro Muko’s oil-
extraction rate from 23.9% to 23.2% with, as a
consequence, marginally lower production of CPO
than in the previous year. Rubber output too fell, as
foreshadowed in the 2011 annual report, since
unsustainably-intensive tapping during 2011 came to
an end when the trees were felled in 2012 for
replanting.
On Kerasaan Estate, intensive management effort
arrested the leaf-pest attacks that had taken hold. This
has involved repeated leaf spraying and trunk
injection. Action on these multiple fronts has been
effective, but nonetheless it is expected that the crops
on the estate will be adversely affected for at least the
next three years.
PERFORMANCE EVALUATION
PLANTATION AND MILL OPERATIONS
Management monitors and assesses the efficiency of
operations with regard to crops and production by
means of performance indicators. The assessment of
crops is measured for each year’s planting on each
estate in terms of yield per hectare. The yield per
hectare on each individual estate, indeed on each
year’s planting on each estate, is recorded and
monitored. Yields can vary widely because of factors
such as soil type, terrain, sunshine hours, rainfall,
distribution of rainfall and the fertility cycle of the
palms. Because of this, monitoring is not carried out
on a Group basis but rather takes into account the
conditions on each estate. Key factors which are
under management’s control are husbandry standards,
fertiliser application, harvester numbers and
productivity, and the quality of infrastructure (estate
roads and drains, for example). These are monitored
by management on the ground and, in some cases,
independently verified and advised upon. Decisions,
such as when and how to replant, are taken based on
local conditions.
17
2012 ANNUAL REPORT
Beef cattle
NAPCo achieved higher sales and brandings,
and a significantly-improved cash inflow.
THE BEEF MARKET
MAJORITY-OWNED OPERATIONS
Prices for lighter-weight cattle, such as those
produced on Woodlands, declined sharply, by some
14%, during the year, whilst prices for the heavier,
grain-finished cattle, such as those produced by
NAPCo, fell less steeply, by some 5%. The decline in
both markets followed a general softening in demand
from two of Australia’s traditional export markets,
Japan and Korea, although demand from these
markets started to improve in the second half of the
year. Export demand was also negatively influenced
by the continuing strength of the Australian Dollar.
Prices for the lighter-weight, domestic cattle were
further affected by the dry conditions which prevailed
in many parts of Australia in the second half of the
year.
NAPCo steers feeding on leguminous crop on Gordon Downs
WOODLANDS
Woodlands recorded a farm gross loss of US$2.19
million (2011 US$0.11 million profit), which was
caused by volatile seasonal conditions. There were
good rains in February and up to June, although they
were not sustained into the second half of the year
which suffered rainfall well below average. This
meant that forage oats did not become fully
established and finished earlier than normal, resulting
in fewer cattle being fattened and cattle being sent to
market at lower weights than projected. It also
proved impossible to plant the intended area
of forage sorghum and other fodder crops.
Consequently, the farm could not fatten cattle as
quickly as planned during this period. At the
2012 ANNUAL REPORT
18
NAPCo Wainui feedlot
A reduction in the value of the company’s major
assets, brought about by a revaluation of its cattle and
land, negatively affected its financial result. In 2012,
the revaluation of all the company’s stations saw a
4.5% reduction in their total value, US$4.90 million
of which was treated as an impairment in the income
statement, the Group’s share of which was US$1.68
million. However, the impact has been less than that
on others in the industry, owing not only to the
quality of the assets but also to regular maintenance
and improvements.
NAPCo Wainui feedlot
beginning of the year there were 10,391 cattle on
hand. During the year, 5,278 head were sold but,
because of the dry period, only 540 head were
purchased. After allowing for a small number of
deaths, there were 5,562 head on hand at the end of
the period.
PERFORMANCE EVALUATION
Management monitors and assesses the efficiency of
operations with regard to cattle fattening by means of
performance indicators. This assessment involves the
establishment of weight gain per beast per day.
Depending upon the weather and pasture/forage-crop
conditions, management would generally aim for 0.6
kg per day for grass-fed steers and 1.0 kg per day for
forage-crop steers.
The ability to maximise the weight gain in any one
year will be determined by the amount of rainfall.
This, in turn, determines both the quality of the
existing pastures and what areas of forage crops can
be planted. Whilst rainfall is clearly not a factor
under management’s control, the area of forage crops
that can be both planted and brought ahead to a state
that can sustain cattle is crucial to the operations of
the company. The area planted, and the cost, is
therefore a performance indicator that is under
constant review by management.
ASSOCIATED COMPANY - NAPCo
RESULTS FOR THE YEAR
The company recorded a loss of US$5.85 million, of
which the Group’s share amounted to US$2.01 million.
This compares with a profit after tax in 2011, of which
the Group’s share amounted to US$4.23 million.
Notwithstanding the overall loss, the company
achieved a significantly-improved cash inflow of A$
12.26 million compared with A$5.26 million in 2011
despite lower cattle sale prices. Whilst these lower
prices were partly attributable to deteriorating seasonal
conditions throughout the second half of the year, they
were also the result of the ongoing impact of a very
high Australian dollar and the continuing lacklustre
demand from Australia’s major export markets.
19
2012 ANNUAL REPORT
NAPCo PROPERTIES
Beef cattle
CONTINUED
SEASONAL CONDITIONS
Seasonal conditions were mixed for the first part of
the year, with some properties receiving plentiful
rainfall and others receiving well below-average
levels. However, in the latter part of the year, an
exceptionally hot and dry spell of several months set
in across the majority of the company’s properties,
which took its toll on weight gains.
COMPANY OPERATIONS
The 62,506 brandings recorded in 2012 were the
highest since 2008. The growing and backgrounding
NAPCo cattle on Goldsborough
properties were again able to accommodate all the
weaners transferred off the breeder properties without
recourse to agistment or custom feeding as has been
the case several times in the past. At the end of the
year, the herd stood at 197,309 head, only marginally
below last year’s figure. However, unlike 2011, when
the herd size was preserved with the assistance of
8,422 purchased cattle, the 2012 result was achieved
after purchasing only 1,876 cattle.
After several years of low sales (driven mainly by the
retention of females to rebuild the breeding herd), in
2012 the company sold 59,489 cattle, an increase on
each of the last three years.
2012 ANNUAL REPORT
20
CATTLE SALES AND BRANDINGS
(cid:0) SALES (cid:0) BRANDINGS (cid:0) CLOSING STOCK
2012
2011
59,489
62,506
57,155
54,695
2010
36,844
61,456
40,337
44,090
2009
2008
96,552
67,599
2007
49,725
65,510
2006
41,868
57,408
197,309
197,590
195,342
160,622
162,336
198,262
184,309
‘000 HEAD
20
40
60
80
100
120
140
160
180
200
Cattle on Woodlands
In the current year, the company expects to
sell approximately 61,000 head,
approximately two thirds of which will be
grain finished at Wainui.
Throughout 2012, the Wainui farming
aggregation produced 13,750 tonnes of silage,
4,750 tonnes of sorghum and 1,500 tonnes of
wheat, the majority of which was of premium
quality and sold externally at a premium price,
rather than being used for feeding to cattle.
PROPERTY ACQUISITION AND DEVELOPMENT
Late in 2012, the company purchased
“Munro”, a 450-hectare irrigated cultivation
farm which adjoins Wainui. The purchase will
create greater efficiencies in the Wainui
farming enterprise, enabling the extra country
to be farmed with existing staff numbers and
plant infrastructure.
A further five boreholes were drilled on
Alexandria in 2012. A total of 40 new waters
have been developed on the property since
2006, not only increasing carrying capacity
but also mitigating the impact of dry seasons
on the herd size.
The expanded Wainui feedlot performed well
since having been commissioned in February
2012. However, owing to the high cost of
grain, the expanded feedlot was not fully
utilised, peaking at 77% utilisation in
December 2012. Over 42,500 cattle were
turned off Wainui during the year, a 40%
increase in throughput over the previous five-
year average.
The annual NAPCo Station Challenge
21
2012 ANNUAL REPORT
Property
The Group’s investment in Bertam Properties
remains a very valuable asset.
MAJORITY-OWNED OPERATIONS
BERTAM ESTATE
It is intended that Bertam Estate will be sold when the
board deems that market conditions are suitable. Based
on independent advice, the land is estimated to be
worth more than US$13.5 million. In the meantime, the
Group continues to harvest the 65 hectares of mature oil
palms on the estate. This yielded a crop of 1,600 tonnes
in 2012 (2011 - 1,600 tonnes). No replanting has taken
place since 1997.
ASSOCIATED COMPANY
BERTAM PROPERTIES
Unlike many of their counterparts elsewhere, Malaysian
banks continue to make credit available for housing and
land purchases. This has underpinned continuing
buoyancy in the Penang property market. Land prices
have continued to rise and, whilst regulatory, labour and
material costs have also risen, property development has
remained an attractive sector.
New development on the Bertam Properties project
Against a positive economic background, however,
Bertam Properties had a disappointing year as
measured under International Financial Reporting
Standards (“IFRS”). The application of IFRS has had a
negative effect on Bertam Properties’ reported results
in respect of property development. Whilst, under
local accounting standards, property-development
revenue and gross-profit margin increased, under
IFRS, Bertam Properties reported a substantial fall in
revenue to US$1.68 million (2011 US$22.35 million),
on which it made a small loss of US$0.68 million
(2011 US$3.92 million profit). It is anticipated that the
profit reported in 2012 under local accounting
standards will be reported under IFRS in 2013.
Plantation activities continue to shrink as the land
available for agriculture is given over to property
development. At the end of 2012, 147 hectares
(2011 - 171 hectares) of oil palm remained.
The f.f.b. crop fell by 24% to 2,200 tonnes
(2011 - 2,600 tonnes), although profits fell by less as
reduced costs outweighed the effects of the falling
price of CPO.
At the end of 2012, Bertam Properties owned 453
2012 ANNUAL REPORT
22
Recently-constructed houses at Bertam Properties
Penang Golf Resort at Bertam Properties
hectares, including 143 hectares covered by the golf
course and 41 hectares already under development,
leaving 269 hectares undeveloped. This remains a
very valuable asset. The Group’s investment in
Bertam Properties is estimated to be worth in excess
of US$30 million.
As set out in previous annual reports, it is the Group’s
intention to dispose of the Group’s share in Bertam
Properties in due course. For the time being, Bertam
Properties distributes the proceeds of its land sales
and property development by way of dividends,
which the board regards as a satisfactory way to
extract value from its shareholding. Over time, Bertam
Properties will reduce in size to a point where the
Group’s shareholding becomes more readily
marketable. The board’s strategy continues to be that
it will use funds received from dividends or any sale
of its shares to finance its current investments in
Indonesian palm-oil.
Children’s play area at Bertam Properties
23
2012 ANNUAL REPORT
Risk management
The board reviews risk management on an
annual basis. Set out below is the board’s
evaluation of the principal areas of potential
risk and the steps taken, where appropriate,
to mitigate that risk.
INDONESIA COUNTRY RISK
The Group relies on the continuing ability to acquire
and enforce property rights in Indonesia. The country
has recently benefited from a period of political
stability, economic growth and exchange-rate
stability. The board perceives a very low risk of the
imposition of exchange controls, and the attendant
risk that the Group will be unable to extract profits
from its subsidiaries and associated companies in
Indonesia.
Security of land tenure is a matter of fundamental
concern to plantation operators. The Group holds its
land under 25 or 30-year renewable leases (HGU’s)
which have, to date, been renewed when falling due
without difficulty. A variation on this risk is that the
Group may ultimately fail to obtain good title to the
land on which it has developed its new projects.
To date, the Group has obtained all the necessary
licences for these projects short of the ultimate lease,
the HGU. These include a valid right to develop the
land (izin lokasi) and operating licences (izin usaha
pertambangan). The Group has taken responsibility
for the process of compensating smallholders and
ensuring full and prompt payment of relevant
government taxes. Both are important activities that
are assessed during the final application for an HGU.
Where other companies have been granted licences
which potentially conflict with those obtained by the
Group, swift and determined legal action has been
taken to defend the Group’s assets.
SUPERVISION OF OPERATIONS
Geographical distance between the UK head office
and operations located in Indonesia, Australia and
Malaysia puts a premium on strong supervision of the
Group’s operations. Regular written reporting from all
operating companies is supplemented with routine
telephone contact and frequent visits by the executive
directors to all areas of the Group’s operations,
including the operations of associated companies.
The Group has seats on the boards of its three major
associated companies and regularly attends those
companies’ board meetings, as well as maintaining a
dialogue with those companies’ chief executives.
At the Group’s regional office in Jakarta, the local
president director has put together a team of senior
managers (agricultural, engineering and finance) with
extensive experience and expertise, well qualified to
confront the problems that arise on new and existing
plantation projects. Senior regional managers are now
resident in Sumatra, Kalimantan and Bangka.
Additionally, independent scrutiny of agricultural
operations is provided by an independent UK-based
consultant.
A training school has been erected in Kalimantan.
This is now being used to instil the Group’s systems
and high standards into new and existing staff
covering, agriculture, engineering, finance and
protection of the environment.
PROTECTION OF THE ENVIRONMENT
Concerns about global warming and particularly the
destruction of tropical rainforest have received, and
continue to receive, close scrutiny in the media.
The palm-oil industry, unfairly in many cases, is
closely associated with cutting down rainforest and
destroying the habitat of endangered species such as
the orang-utan, elephant, tiger and rhinoceros. The
Group is therefore likely to receive attention from the
many organisations connected with climate change
and South East Asian tropical rainforests.
The Group is a member of the Round Table on
Sustainable Palm Oil (“RSPO”). The RSPO has strict
guidelines by which members must abide in order to
be able to state that they are producing sustainable
palm oil, including the protection of forested areas.
The Group endorses the Principles and Criteria which
have been adopted by the membership. RSPO
accreditation has been granted to the North Sumatran
estates. A project can only be accredited if it is
producing crude palm oil. Accordingly, the RSPO
audit of the new project in Kalimantan began in 2012
following the commissioning of the new mill in
December 2011, and accreditation is expected by
early 2014.
As evidenced by its new projects in Kalimantan and
on Bangka Island, the Group has a clear policy that
only heavily-degraded land will be acquired and
developed. It is the board’s policy to have an
environmental-impact assessment undertaken by an
independent consultant for any new project. The
study undertaken for the new land in Kalimantan has
been made public on the Group’s website. Implicit in
these studies is the requirement to abide by riparian
buffer zones and nature-conservation areas and to
2012 ANNUAL REPORT
24
compensate people cultivating parts of the land to be
developed in a fair and transparent way.
With regard to both its mills, the Group has installed
composting systems which utilise both the “empty”
fruit bunches (i.e. after the fruit has been removed
from them) and the liquid effluent from the mill. The
resulting nutritious compost is applied in the field and
reduces the requirement for inorganic fertiliser. No
effluent is discharged into external water courses.
Since the middle of 2012, at the mill in Kalimantan,
methane has been captured from the mill effluent
before it is used for composting, and used in a bio-gas
engine to generate electricity for workers’ villages on
the project.
Management follows industry best-practice guidelines
and abides by Indonesian law with regard to such
matters as fertiliser application and health and safety.
RELATIONSHIP WITH LOCAL POPULATIONS
Particular attention is paid to the Group’s relationship
with the local populations where development is
taking place. On each of the projects there has been
extensive communication not only with local
government officials but also with local people
collectively and through their representatives: the
local mayor and village heads. Smallholder
cooperative schemes (KKPA) are being developed
alongside the Group’s areas and managed by the
Group. Staff members have been appointed to deal
with compensation for loss of land and crops, and to
explain the basis and workings of the KKPA schemes
and to gain the support of the villages surrounding the
Group’s project areas. This is a time-consuming
process.
RELATIONSHIP WITH LOCAL PARTNERS
The board recognises the importance of building and
maintaining a good relationship with the minority
partners and fellow shareholders in its Indonesian
plantation projects but inevitably disagreements do
sometimes arise. A breakdown in relations with a
local partner could lead to a breakdown in relations
with the local populations where the Group is
located, with a detrimental effect on operations. The
executive directors endeavour to maintain regular and
open contact, both formal and informal, with the
Group’s partners to discuss current and future issues
affecting the Group’s operations.
SECURITY OF LIQUID FUNDS
With the onset of the recent worldwide banking crisis,
the board is concerned to ensure that the Group’s
liquid funds, which are in excess of US$50 million
worldwide at the date of this report, are deposited in a
secure environment and not at risk of loss. The
Group’s policy is, and has been for many years, only
to deposit funds either with banks with an acceptable
rating from reputable rating agencies or with banks
that are majority owned by sovereign governments.
COMMODITY-PRICE FLUCTUATION
The Group relies on its ability to sell its palm oil,
palm kernels and f.f.b. through a world market over
which it has no control. Palm oil is a permanent tree
crop with f.f.b. being harvested every day of the year.
Palm oil and palm kernels are sold on a fortnightly
basis by open tender and f.f.b. are sold on a day-by-
day basis under contract at a price derived from the
quoted world price. Over a year, by selling on a
“spot” basis, an average price is therefore achieved.
The price of palm oil is determined both by
disposable income around the world generated by
economic activity and by the supply, pricing and
demand for competing vegetable oils. These factors
can result in fluctuations in the price. As with any
commodity, over-supply does occur in the vegetable-
oil market which exerts downward pressure on prices.
The competing oils, the main ones of which are
soybean, oilseed rape and sunflower, are annual
crops and producers tend to react to low prices by
switching to other crops which has, in the past,
quickly reduced oversupply and restored upward
pressure on prices.
The board is satisfied that the fundamental structure of
the vegetable-oil market, and particularly the palm-oil
market, is sound. Continuing strong demand from the
fast-developing economies, such as India, China and
Indonesia itself, as well as from more established
markets in Europe, for vegetable oil for human
consumption has supported prices, as has growing
demand for vegetable oils as a biofuel. Palm oil is the
vegetable oil with the highest production in the world
and has the lowest cost and is the most productive, by
a wide margin, in terms of yield per hectare.
The price that the Group achieves for the sale of its
fattened cattle is substantially determined by a world
market over which the Group has no control. The
price of live cattle and beef is determined by
economic activity around the world, giving the
wherewithal for demand for red meat to be created.
This activity fluctuates, as does the beef price.
Australia is a high-quality, efficient producer free of
25
2012 ANNUAL REPORT
US DOLLAR -V- INDONESIAN RUPIAH
US DOLLAR -V- AUSTRALIAN DOLLAR
US$1 = Indonesian Rupiah
US$1 = A$
CONTINUED
US DOLLAR -V- MALAYSIAN RINGGIT
STERLING -V- US DOLLAR
US$1 = RM
£1 = US$
BSE and foot-and-mouth disease, whose markets are
mainly in South East Asia and the United States, with
its principal competitors being South America and the
United States itself. The board accepts price
fluctuation as a risk of the business and has
concluded that the structure of the Australian cattle
industry is sound and that its proximity to its main
markets in South East Asia gives the business a
competitive advantage over its rivals.
EXCHANGE-RATE FLUCTUATION
The movement of the Australian Dollar and Malaysian
Ringgit against the US Dollar has an effect in US-
Dollar terms when Australian and Malaysian earnings
and assets are translated. Palm oil is a US-Dollar-
denominated commodity and a significant proportion
of revenue costs in Indonesia (such as fertiliser and
fuel) and development costs (such as heavy
machinery and fuel) are US-Dollar related. Adverse
movements in the Rupiah against the US Dollar can
have a negative effect on other revenue costs in US-
Dollar terms.
The board has taken the view that these risks are part
of the business and feels that adopting hedging
mechanisms to counter the negative effects of
exchange movements are both difficult to achieve
and would not be cost effective.
WEATHER AND NATURAL DISASTERS
Oil palms rely on regular sunshine and rainfall but
these patterns can vary and extremes such as unusual
dry periods or, conversely, heavy rainfall leading in
some locations to flooding, can occur. Dry periods, in
particular, will affect yields in the short and medium
term but any deficits so caused tend to be made up at
a later date. Where appropriate, bunding is built
around flood-prone areas and drainage constructed
and adapted either to evacuate surplus water or to
maintain water levels in areas quick to dry out.
Whilst a remarkably hardy plant, the oil palm can be
subject to attack from such pests as caterpillars and
other insects, and certain diseases. Proper
management and husbandry should identify and
prevent these attacks from becoming widespread.
Appropriate agronomic measures are taken where any
outbreaks occur.
Rainfall is of crucial importance to cattle farming in
Australia and is unpredictable. The level of rainfall
will determine the ability of existing pastures to be
maintained and of management to plant forage crops.
In turn, the quality and quantity of feed will determine
the carrying capacity of the property. The board has
taken the view that acceptance of this risk is part of
the business.
2012 ANNUAL REPORT
26
Environmental, corporate
and social responsibility
Compost production at Pangkatan
The Group aims to adopt high standards
in respect of environmental, corporate
and social responsibility in its palm-oil
and beef-cattle operations.
The Group is committed to producing
environmentally-sustainable palm oil.
NAPCo staff at a horsemanship-skills training course
In Australia, besides its commitment to
the health and safety of its employees,
the Group adopts high standards of
animal welfare in relation to its cattle.
Through NAPCo, which has won a
number of environmental awards, it is
also involved in the preservation, and
rehabilitation, of indigenous flora and
fauna.
27
2012 ANNUAL REPORT
Barn owl nesting box
Cover-crop seedlings
ROUNDTABLE FOR SUSTAINABLE
PALM OIL (“RSPO”)
The Group is a member of the RSPO. The
AGRONOMIC POLICIES
The following policies in respect of plantation
management have been adopted:-
membership covers a wide variety of interests
from plantation owners to non-governmental
organisations to supermarkets. The Group
endorses the Principles and Criteria which have
been adopted by the RSPO in relation to
environmental, social and ethical plantation
practices.
The Pangkatan mill was granted accreditation to
the RSPO in October 2012. The crude palm oil
from the mill is therefore recognised as having
been derived from a sustainable source. The
three estates that send f.f.b. to the mill, namely
Pangkatan, Bilah and Sennah Estates, are
covered by this accreditation.
The RSPO audit process has already begun at
the palm-oil mill on the Kalimantan project that
commenced its operations at the end of 2011.
It is hoped that accreditation will be achieved
before the end of 2013.
The associated companies, PT Agro Muko and
PT Kerasaan Indonesia, received RSPO
accreditation in 2011 and 2010 respectively.
NEW LAND
The Group ensures that any new plantation
development is undertaken only in heavily-
degraded areas which will not be suitable
habitats for orang-utans or other major
endangered mammals. In accordance with
RSPO rules, land will only be planted that has
been independently certified as not having high
conservation value and has been subject to an
independent social impact assessment.
Full environmental-impact assessments are
conducted on new project areas by
internationally-recognised, independent
environmental consultants. The assessment of
the Kalimantan project has been posted on the
Group’s website, www.mpevans.co.uk.
ZERO BURNING
On new plantings or replantings, no burning is
allowed. Vegetation or old palms/trees are
stacked in interrows between the new planting
lines and allowed to rot down.
CONSERVATION AREAS
On new projects, well-marked conservation
areas are set aside in areas designated as being
of high conservation value. Ongoing
programmes of planting jungle trees and other
plants are undertaken. Areas alongside river
banks (riparian reserves) are set aside as
conservation areas to prevent leaching of
fertilisers into water courses and provide
wildlife corridors.
LEGUMES
Leguminous cover crops are planted. These
serve to fix nitrogen in the soil, prevent erosion
and provide nutritious leaf litter.
Riperian reserve in oil-palm development area
2012 ANNUAL REPORT
28
Terraced oil palms
The new electricity-generating biogas plant in Kalimantan
A rare purple-necked rock wallaby in Nature Refuge on NAPCo’s
Boomarra Station
TERRACING AND SOIL EROSION
In areas with slopes above 12%, contour
terraces are dug. This prevents soil erosion and
retains water for palms on the terraces. Slopes
of more than 25% are not planted.
INTEGRATED PEST MANAGEMENT (“IPM”)
The Group adopts IPM to control pests on its
plantations.
Beneficial “host” plants are planted alongside
estate roads to attract predators (insects) of leaf
pests. The predators feed on leaf pest larva thus
reducing the need for chemical spraying. Barn
owls are, where possible, bred to control rats,
thus obviating the need for chemical baits.
MILL EFFLUENT, COMPOST AND POWER
GENERATION (ZERO-WASTE CONCEPT)
At the Group’s Pangkatan palm-oil mill, liquid
effluent is applied to empty bunches to create
nutritious compost which, in turn, is applied in
the field, reducing the requirement for inorganic
fertilisers. No effluent is discharged into rivers
or water courses.
At the new mill in Kalimantan, methane is
captured from part of the mill effluent and is
utilised to fuel a biogas engine. This engine, in
turn, generates electricity for office compounds
and housing in workers’ villages in the vicinity of
the mill. This gives rise to a significant reduction
in the use of diesel for the generators which
would otherwise have been needed to provide
this electricity. Surplus effluent (which can
occur during very rainy periods) is applied in the
field. This acts as a beneficial organic fertiliser.
The effluent, from which methane has been
captured, is then applied to the empty fruit
bunches to create compost. The balance of the
effluent which has not been utilised for methane
capture is immediately applied to the empty
fruit bunches to create compost. Because the
effluent is used quickly, the production of
methane is minimal.
29
2012 ANNUAL REPORT
Medical centre on Pangkatan Estate
Workers’ housing
HEALTH AND SAFETY
FACILITIES
The Group provides good-quality housing for its
employees, together with clean, potable water
and proper sanitation.
Kindergartens are provided for very young
children and transport for older children to
nearby government schools. In remote
locations, where schools are not available, the
Group assists by providing land and some
buildings so that government schools can
operate on the plantations.
The Group gives priority to the health and safety
of its employees and those affected by its
activities. Medical care is provided on the
plantations in polyclinics which are manned on
a daily basis by trained employees and, in
addition, doctors visit these clinics once or
twice a week. The Group pays for hospital
treatment if this is required.
Sprayers apply chemicals in the field. They are
provided with appropriate protective clothing
and masks, showering facilities are available
(and required to be used) and the sprayers are
subject to regular medical checks.
Kindergarten on Pangkatan Estate
2012 ANNUAL REPORT
30
Horseshoeing at NAPCo
Environmental signage at NAPCo
TRAINING
The Group undertakes to train and motivate its
workforce, to help employees build on skill
levels and to extend their education and
qualifications. It has built a first-class
residential training facility on its project in East
Kalimantan.
SMALLHOLDER SCHEMES
On the new projects the Group has entered into
arrangements with local people to provide land
planted with oil palms. This is done by means
of cooperatives (KKPA’s) whose members are
eligible families in the villages which are in, or
next to, the areas being developed. In the early
stages, the Group provides the finance on loan
to plant these areas and, once the land titles
have been received, facilitates the KKPA’s
obtaining bank finance, whereupon the initial
loans provided by the Group are largely repaid.
The remaining amounts due to the Group are
repaid out of KKPA profits. The land is planted
to the same high standard as the Group’s areas.
The bank loans are guaranteed by the Group
and any funding required in excess of that
provided as bank loans is also provided by the
Group.
There is a contractual arrangement for the f.f.b.
from the KKPA’s to be purchased by the Group
in accordance with a formula set by the
Indonesian Government. The KKPA’s are
maintained and managed under the supervision
of the Group. This has been a successful way of
engendering goodwill with local people, as well
as providing them with a tangible and
remunerative business which is owned by them.
COMPENSATION IN RESPECT OF LAND
ACQUIRED
When acquiring new land for development, the
Group negotiates compensation terms with
local people in a fair and transparent manner.
Transactions are meticulously recorded and
witnessed.
Training workers for crop spraying
31
2012 ANNUAL REPORT
Report of the directors
FOR THE YEAR ENDED 31 DECEMBER 2012
The directors present the audited consolidated
financial statements of M.P.Evans Group PLC for
the year ended 31 December 2012.
PRINCIPAL ACTIVITIES
At 31 December 2012, the Company, through its
subsidiary and associated undertakings, operates oil-
palm and rubber plantations in Indonesia, beef-cattle
operations in Australia, and property development
and an oil-palm plantation in West Malaysia.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
A review of the year and future prospects (including
the principal risks and uncertainties facing the
Company) is included in the chairman’s statement
(pages 6 to 8) and in the review of 2012 (pages 9 to
26) and is incorporated in this report by reference.
RESULTS AND DIVIDEND
Details of the profit for the year are given in the
consolidated income statement on page 42.
An interim dividend of 2.25p (2011 - 2.25p) per share
Board of directors
was paid on 5 November 2012. The board
recommends a final dividend of 5.75p (2011 - 5.75p)
per share. This dividend will be paid on or after 20
June 2013 to those shareholders on the register at the
close of business on 26 April 2013. This final dividend
is not provided for in the 2012 financial statements.
SCRIP-DIVIDEND SCHEME
The board has decided to make the scrip-dividend
option available for the final dividend. Shareholders
who have previously elected to receive their
dividends in this manner will automatically receive
this dividend as scrip. Forms of election will be
dispatched to remaining shareholders under separate
cover. Shareholders who now wish to make an
election to receive this and future dividends as scrip,
or who wish to revoke a previous election, should
contact the Company’s registrars (contact details on
page 80) without delay. Any such elections or
revocations will not be effective unless they have
been sent in accordance with the Company’s
instructions and received by the Company’s
registrars no later than 5:00 p.m. on 30 May 2013.
Peter E Hadsley-Chaplin, MA MBA
CHAIRMAN
Appointed a director in 1989,
chairman in 2010. Former executive
chairman of Bertam Holdings PLC
and Lendu Holdings PLC.
A director of The North Australian
Pastoral Company Pty Limited.
Former chairman of The Association
of the International Rubber Trade.
Prior to joining the Group in 1988
he was a commodity broker with
C Czarnikow Limited.
Philip A Fletcher, FCA
MANAGING DIRECTOR
Appointed a director in 1987,
managing director in 1991 and
executive chairman between 1999
and 2005. Former executive director
of Bertam Holdings PLC and Lendu
Holdings PLC. Joined the Group in
1982 after his initial career in
accountancy with KPMG in London
and Sydney and in industry with the
Rio Tinto plc group.
Tristan R J Price, MA MSC FCA
FINANCE DIRECTOR
Appointed a director in 2010.
Qualified as a Chartered Accountant
with Coopers & Lybrand. Worked in
the UK Diplomatic Service, and as
an economist at the Organisation for
Economic Co-operation and
Development (OECD). Prior to
joining the Group, he was head of
financial planning and policy at the
Foreign & Commonwealth Office.
2012 ANNUAL REPORT
32
The Company will accept partial scrip elections for this
dividend, subject to such terms and conditions as it or
its registrar may require, but will not carry forward
partial election instructions for future payments.
To calculate the basis of the allotments, the Company
will use the average of the middle-market quotations
of the Company’s shares for the five business days
commencing on the ex-dividend date for the dividend
as derived from the London Stock Exchange Daily
Official List. The scrip-dividend scheme is conditional
on the directors allotting the necessary new shares for
the purposes of section 551 of the Companies Act
2006 and the admission of the new shares allotted to
trading on the AIM market of the London Stock
Exchange. The scrip-dividend scheme is operated
with the authority of the resolution passed at the
Company’s annual general meeting in 2010 (which is
valid for five years). The scheme is subject to the
terms and conditions set out in the circular to
shareholders dated 14 May 2010 and available
on the Company’s website
(www.mpevans.co.uk/en/investors/dividends) and
may be amended, suspended or terminated at the
discretion of the board without notice.
SHARE CAPITAL
The Company has one class of share. Details of the
issued share capital of the Company are as follows:
SHARES OF 10P EACH
Issued (fully-paid and voting) capital
at 1 January 2012 54,021,901
Share options exercised
26 April 2012 10,000
6 July 2012 686,880
6 December 2012 63,496
Shares issued in lieu of a cash dividend
21 June 2012 65,980
5 November 2012 23,145
Issued (fully-paid and voting) capital
at 31 December 2012 54,871,402
Konrad P Legg
SENIOR INDEPENDENT NON-EXECUTIVE
DIRECTOR
Appointed a director in 1987.
Director of Coburg Group PLC. A
former non-executive director of
Lendu Holdings PLC. Chairman
of the audit and remuneration
committees.
Richard M Robinow
INDEPENDENT NON-EXECUTIVE
DIRECTOR
Appointed a director in 1999 and
chairman from 2005 to 2009.
Chairman of R.E.A. Holdings PLC
and a non-executive director of the
Belgian plantation group, SA SIPEF
NV. Member of the audit and
remuneration committees.
J Derek Shaw, FRAgS
INDEPENDENT NON-EXECUTIVE
DIRECTOR
Appointed a director in 2005. A
director of The North Australian
Pastoral Company Pty Limited.
Former chairman of Linden Foods
Limited and former chairman and
founder of the Australian cotton
producer, Colly Farms Cotton
Limited. Former non-executive
deputy chairman of Lendu Holdings
PLC. Member of the audit and
remuneration committees.
33
2012 ANNUAL REPORT
Report of the directors
CONTINUED
DIRECTORS AND DIRECTORS’ INTERESTS
The present membership of the board, all of whom
served throughout the year is detailed on pages 32
and 33. Messrs Price, Legg and Robinow will retire
from the board at the forthcoming annual general
meeting in accordance with the articles of association
and, being eligible, offer themselves for re-election.
The directors serving at the end of the year, together with
their interests at the beginning and end of the year, in the
shares of 10p each in the Company, were as follows:-
NON-
AT 31 DECEMBER 2012 BENEFICIAL BENEFICIAL OPTIONS
P E Hadsley-Chaplin 1,311,717 25,000 26,895
P A Fletcher 978,171 51,361 26,895
T R J Price — — 200,000
K P Legg 604,139 — —
R M Robinow 96,147 — —
J D Shaw 490,747 — —
AT 1 JANUARY 2012
P E Hadsley-Chaplin 1,185,777 25,000 370,335
P A Fletcher 845,100 51,361 370,335
T R J Price — — 150,000
K P Legg 598,228 22,412 —
R M Robinow 42,086 — —
J D Shaw 550,747 — —
Further details of the directors’ interests in share
options are disclosed in the report of the board to the
shareholders on directors’ remuneration, on page 40.
None of the directors holds any beneficial interest in, or
holds options to buy shares in, any subsidiary
undertaking of the Company as at the date of this report.
No director has had a material interest in any contract
of significance in relation to the business of the
Company, or any of its subsidiary undertakings,
during the financial year or had such an interest at the
end of the financial year.
As permitted by the Company's articles of association,
there was throughout the year to 31 December 2012
and is at the date of this report, a qualifying third-
party indemnity provision, as defined in section 236
of the Companies Act 2006 in force for the benefit of
the directors.
SUBSTANTIAL INTERESTS
The following substantial interests have been
disclosed to the Company as at the date of this report:
SHARES %
Direct interests
Alcatel Bell Pensioenfonds VZW 5,793,497 10.56
JP Morgan Fleming Mercantile
Investment Trust Plc 3,464,957 6.31
M M Hadsley-Chaplin 1,892,254 3.45
Indirect interests
Aberdeen Asset Management PLC 8,251,770 15.04
Invesco Limited 2,056,436 3.75
AUTHORITY TO ALLOT SHARES
At the annual general meeting a general authority is
being sought, under resolution 8, for the directors to
allot shares up to a maximum nominal amount of
£1,829,047, which represents 33.33% of the
Company’s issued share capital. The Company does
not currently hold any shares as treasury shares within
the meaning of section 724 of the Companies Act
2006. It is also proposed, under resolution 9, to
empower the directors to allot equity securities for
cash pursuant to this general authority (and to sell any
treasury shares which it may acquire for cash)
otherwise than in accordance with shareholders’
statutory pre-emption rights so as to deal with
practical problems arising in connection with rights
issues or otherwise up to an aggregate nominal
amount of £274,357, representing 5% of the
Company’s issued share capital. The directors do not
have any present intention of using the authorities
sought under resolutions 8 and 9. These authorities
will lapse on 30 June 2014 or, if earlier, the date of
the Company's next annual general meeting.
AUTHORITY TO MAKE MARKET PURCHASES
OF SHARES
The directors propose to seek authority under
resolution 10 for the Company to purchase its own
shares on the AIM Market of the London Stock
Exchange until 30 June 2014 or, if earlier, the date of
the Company's next annual general meeting. The
authority will give the directors flexibility to purchase
the Company’s shares as and when they consider it
appropriate. The board will only exercise the power
of purchase when satisfied that it is in the best
interests of the Company so to do and all such
2012 ANNUAL REPORT
34
purchases will be market purchases made through the
AIM Market of the London Stock Exchange.
The directors would only consider making purchases
if they believed that the earnings or net assets
per share of the Company would be improved by
such purchases. The directors would consider holding
the Company’s own shares which had been
purchased by the Company as treasury shares as this
would give the Company the flexibility of being able
to sell such shares quickly and effectively where it
considers it in the interests of shareholders so to do.
Whilst any such shares are held in treasury, no
dividends will be payable on them and they will not
carry any voting rights.
Resolution 10 set out in the notice of the annual
general meeting will accordingly be proposed to
authorise the purchase of up to a maximum of
5,487,140 shares, on the AIM Market of the London
Stock Exchange, representing 10% of the Company’s
current issued share capital. The maximum price
which may be paid for a share on any exercise of the
authority will be restricted to 5% above the average of
the middle-market quotations for such shares as
derived from the Daily Official List of the London
Stock Exchange for the five business days before the
purchase is made. The maximum number of shares
and the price range are stated for the purpose of
compliance with statutory requirements in seeking
this authority and should not be taken as an
indication of the level of purchases, or the prices
thereof, that the Company would intend to make.
The authority conferred by resolution 10 will lapse on
30 June 2014 or, if earlier, the date of the Company’s
next annual general meeting.
As at the date of this report there were options to
subscribe for 383,790 shares outstanding under the
executive share-option schemes. If all of the options
were exercised, the resulting number of shares would
represent (a) 0.69% of the enlarged issued share
capital at that date; and (b) 0.77% of the enlarged
issued equity share capital at that date if the proposed
authority to purchase shares was exercised in full
(excluding any share capital which may be purchased
and held in treasury).
PAYMENTS TO SUPPLIERS
It is the Group’s normal practice to make payments to
suppliers in line with agreed terms, provided that the
supplier has performed in accordance with the
relevant terms and conditions. The Group’s average
creditor days calculated as at 31 December 2012
amounted to 41 days (2011 - 39 days).
FINANCIAL INSTRUMENTS
Details of the Group’s financial instruments, and the
board’s policy with regard to their use, are given in
note 30 to the consolidated financial statements on
pages 68 and 69.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the annual
report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year. Under
that law the directors have prepared the Group
financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by
the European Union and the parent-Company
financial statements in accordance with United
Kingdom Generally Accepted Accounting Practices
(United Kingdom Accounting Standards and
applicable law). Under company law the directors
must not approve the financial statements unless they
are satisfied that they give a true and fair view of the
state of affairs of the Group and the Company and of
the profit or loss of the Group for that period. In
preparing these financial statements, the directors are
required to:
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that
are reasonable and prudent;
state whether applicable IFRSs as adopted by the
European Union and applicable United Kingdom
accounting standards have been followed, subject
to any material departures disclosed and explained
in the Group’s and parent-Company’s financial
statements respectively;
prepare the financial statements on the going-
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
35
2012 ANNUAL REPORT
Report of the directors
CONTINUED
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Company and the Group and hence for
taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
GOING CONCERN
so far as he is aware, there is no relevant audit
information of which the Company's auditors are
unaware; and
he has taken all the steps that he ought to have
taken as a director in order to make himself aware
of any relevant audit information and to establish
that the Company's auditors are aware of that
information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418(2) of
the Companies Act 2006.
The board’s conclusions on adopting the going-
concern basis for preparing the financial statements
are set out in the report on corporate governance on
page 38 and are incorporated in this report by
reference.
INDEPENDENT AUDITORS
The auditors, PricewaterhouseCoopers LLP, have
expressed their willingness to continue in office and a
resolution to re-appoint them will be proposed at the
forthcoming annual general meeting.
POST-BALANCE-SHEET EVENTS
There are no post-balance-sheet events.
Approved by the board of directors
and signed on its behalf
DISCLOSURE OF INFORMATION TO AUDITORS
Each person who is a director at the date of approval
of this report confirms that:
C Hayes Secretary
24 April 2013
2012 ANNUAL REPORT
36
Corporate governance
The board recognises the importance of a sound
system of internal control and of continuing to
conduct the Group’s affairs according to good
corporate-governance principles. An explanation of
how the Group has applied the principles is set out
below.
1 DIRECTORS
The details of the Company’s board, together with the
audit and remuneration committees, are set out on
pages 32 and 33. The board comprises an executive
chairman, two further executive directors and three
non-executive directors, one of whom chairs the audit
and remuneration committees. This structure is
designed to ensure that there is a clear balance of
responsibilities between the executive and the non-
executive functions. The board meets at least
quarterly and is provided with information which
includes executive operating reports, management
accounts and budgets. All of the executive directors
and non-executive directors attended each of the five
full board meetings held in 2012, with the exception
of Richard Robinow who was unable to attend the
meeting on 11 September 2012. Each executive
director, and non-executive director with less than
nine years’ tenure, retires and must seek re-election at
least every three years. Thereafter, directors will offer
themselves for re-election at each year’s annual
general meeting.
The board reserves to itself a range of key decisions to
ensure it retains proper direction and control of the
Company, whilst delegating authority to individual
directors who are responsible for the day-to-day
management of the business. All major and strategic
decisions of the Company are made in the United
Kingdom. The executive and non-executive directors
have discussions on an informal yet frequent basis to
discuss progress against budget and business issues.
2 INDEPENDENCE AND ELECTION OF A DIRECTOR
The board considers Mr Shaw to be independent and
also considers Messrs Legg and Robinow to be
independent, notwithstanding their length of service.
The board is seeking to enhance the independence of
its non-executive directors by the proposed
appointment of Mr J.M.Green-Armytage at the
forthcoming annual general meeting.
This appointment was considered by the full board.
The board determined that the individual appointed
to the position should have a good understanding of
matters affecting UK quoted companies, experience
relevant to the Group’s activities and a knowledge of
South East Asia. The board concluded that the
combination of these requirements was not suited to
the use of a recruitment consultant and so compiled
its own shortlist of candidates considered to have the
required skills and experience, from which Mr Green-
Armytage was chosen.
3 DIRECTORS’ REMUNERATION AND APPOINTMENT
As set out in the report on page 39, the remuneration of
the executive directors is determined by the
remuneration committee whilst that of the non-
executives is determined by the whole board. The
committee met three times during 2012 and each
meeting was attended by all the members.
The Company does not currently have a nominations
committee. Owing to the size of the board, it is
considered inappropriate to establish such a committee
at this time. Any new appointments to the board are
discussed at a full board meeting and each member of
the board is given the opportunity to meet the individual
concerned prior to an appointment being made.
4 RELATIONS WITH SHAREHOLDERS
The Company attaches importance to effective
communications with its institutional and private
shareholders. All shareholders have at least twenty-
one clear days’ notice of the annual general meeting
at which all of the directors, including the chairman
of the committees, are normally available for
questions. Comments and questions from
shareholders are encouraged at the meeting. The
annual report, interim report and analysts’
presentations are all available on the Group’s website
(www.mpevans.co.uk) and through an “app” that is
available for users to download for free. The
executive directors regularly make themselves
available to analysts following the Company, and
have face-to-face meetings to answer questions about
the Company’s operations and reported results. There
is a regular programme of meetings and telephone
conferences with major shareholders.
5 ACCOUNTABILITY
a) Financial reporting
A detailed review of the performance and financial
position of the Group is included in the chairman’s
statement and the review of 2012. The board uses
these and the report of the directors to present a
37
2012 ANNUAL REPORT
Corporate governance
CONTINUED
balanced and understandable assessment of the
Group’s position and prospects. The directors’
responsibility for the financial statements is described
on pages 35 and 36.
b) Risk management
The directors acknowledge their responsibilities for
the Group’s system of risk management. Such a
system can provide reasonable, but not absolute,
assurance against material misstatement or loss.
A review of the process of risk identification,
evaluation and management is carried out regularly
and presented to the board for discussion and
approval. In summary this is reported on pages 24 to
26.
The review process considers the control environment
and the major business risks faced by the Group.
Such risks include, but are not limited to:-
the risks of operating in Indonesia;
the geographical distance between the head office
and area of operation;
protection of the environment;
the relationship with local populations where the
Group has operations;
the relationship with local partners;
security of liquid funds;
commodity-price fluctuation;
exchange-rate fluctuation; and
weather and natural disasters.
Important control procedures, in addition to the day-
to-day supervision of holding-company business,
include regular executive visits to the areas of
operation of the Group and of its associates,
comparison of operating performance and monthly
management accounts with plans and budgets,
application of authorisation limits, internal audit of
subsidiary undertakings and frequent communication
with local management.
c) Going-concern basis
The Group's operations are funded through a
combination of long-term equity capital, cash
resources, long-term loans and an overdraft.
The board has undertaken a recent review of the
Group's current financial position, forecasts, associated
risks and sensitivities. This review was conducted in
the light of the board's current plans for the
development of the Group's business which
incorporates the planting expenditure in Indonesia on
the areas noted in the review of 2012 on pages 12 to
17. The forecasts indicate that the Group will have
sufficient resources to meet its obligations as they fall
due with the use of existing facilities, some of which
are renewable annually (see note 22 on page 63). The
directors know of no reason why these facilities should
not be extended on the prescribed review dates.
The board has concluded that, given the current level
of cash resources in the Group, the level of existing
borrowings and the facilities agreed in April 2010 and
March 2011, the Group is expected to be able to
continue in operational existence for the foreseeable
future, being a period of at least 12 months from the
date of the approval of the financial statements.
As a result, the board has concluded that the going-
concern basis continues to be appropriate in
preparing the financial statements.
6 AUDIT COMMITTEE
The audit committee is formally constituted with
written terms of reference and is chaired by Mr K P
Legg; the other members are Messrs R M Robinow
and J D Shaw. All served throughout the year. The
executive directors are not members of the committee
but can be invited to attend its meetings. The auditors
of the Group may also attend part or all of each
meeting and they have direct access to the committee
for independent discussions, without the presence of
the executive directors. The committee met twice
during 2012 and each meeting was attended by all of
the members.
The audit committee may examine any matters
relating to the financial affairs of the Group or the
Group’s audit; this includes reviews of the annual
accounts and announcements, accounting policies,
compliance with accounting standards, the
appointment and fees of auditors and such other
related matters as the board may require.
The Group’s auditors have provided only audit
services, other than a small amount of tax advice in the
UK and Malaysia, as well as preparing a short financial
management report to an associated company.
The audit committee meets the external auditor to
consider audit planning and the results of the external
audit. The committee specifically considered the
scope of the Group auditor’s engagement and agreed
the significant risks for the audit of the 2012 results.
The external auditor performs minimal services for the
Group other than the external audit, and so the board
does not consider there to be a risk that the provision
of non-audit services may compromise the external
auditors’ independence.
2012 ANNUAL REPORT
38
Report of the board to the shareholders
on directors’ remuneration
The remuneration committee keeps under review the
remuneration and terms of employment of the
executive directors and recommends such
remuneration and terms, and changes therein, to the
board. The committee comprises all of the non-
executive directors and is chaired by Mr K P Legg.
SERVICE CONTRACTS
All of the executive directors have service contracts
with the Company. These contracts continue until
terminated by either party giving not less than one
year’s notice in writing. The non-executive directors
do not have service contracts or provisions for pre-
determined compensation on termination of their
appointment.
REMUNERATION POLICY
EXECUTIVE DIRECTORS
The remuneration of the executive directors is
determined by the remuneration committee in
accordance with both the level of responsibility
undertaken and equivalent remuneration of
executives of a similar standing in the U.K., where
their responsibilities are primarily undertaken. The
committee has sanctioned appropriate incentives by
means of share options with a view to aligning the
interests of these three executives with those of the
shareholders. Non-pensionable bonuses may be
awarded annually in arrears at the discretion of the
committee, taking account of the performance of the
Group during the period and other targeted
objectives. Bonuses do not exceed four months’
salary.
NON-EXECUTIVE DIRECTORS
The fees of the non-executive directors are
determined by the board.
TOTAL DIRECTORS’ REMUNERATION
The total amount of directors’ remuneration for the
year ended 31 December 2012 was as follows:-
TOTAL TOTAL
SALARY BENEFITS SALARY IN LIEU PENSION REMUNERATION REMUNERATION
AND FEES IN KIND OF PENSION COSTS 2012 2011
£ £ £ £ £ £
Executive directors
P E Hadsley-Chaplin 126,000 20,141 16,147 3,675 165,963 161,430
P A Fletcher 210,000 38,972 26,911 6,125 282,008 277,889
T R J Price 148,500 17,873 — 18,563 184,936 166,513
O D Wilkinson — — — — — 110,937
484,500 76,986 43,058 28,363 632,907 716,769
Non-executive directors
K P Legg 27,650 — — — 27,650 26,300
R M Robinow 23,750 — — — 23,750 22,600
J D Shaw 33,950 — — — 33,950 37,300
85,350 — — — 85,350 86,200
Total 569,850 76,986 43,058 28,363 718,257 802,969
Gains on exercise of share options
P E Hadsley-Chaplin 1,203,616 914,991
P A Fletcher 1,193,606 798,178
Total 2,397,222 1,713,169
Grand total 3,115,479 2,516,138
NOTES
1. The pension costs for Messrs Hadsley-Chaplin, Fletcher and Price set out above are the contributions made by the
Company to Company-sponsored Self-Invested Personal Pensions (“SIPPs”) as described below. Pension contributions
for Messrs Hadsley-Chaplin and Fletcher ceased at 29 February 2012 and salaries in lieu of pension (net of employer’s
National Insurance contributions) were paid from 1 March 2012 onwards.
2. No long-term incentives, other than the share options described below, have been awarded to directors.
3.
Fees for Mr K P Legg were paid to a third party.
39
2012 ANNUAL REPORT
Report of the board to the shareholders
on directors’ remuneration
CONTINUED
EXECUTIVE SHARE-OPTION SCHEMES
The executive directors are members of executive
share-option schemes which were established in 2001
and 2012 under which options to subscribe for shares
in the Company may be granted to selected
employees. No further options can be granted under
the schemes established in 2001. As at 31 December
2012, options over 253,790 (2011 - 954,166) shares
granted to executive directors remain outstanding.
These were granted to the executive directors between
2 February 2005 and 19 June 2012. During the year,
686,880 (2011 - 561,465) options granted to directors
were exercised and none (2011 - none) lapsed.
Number of shares under option
No performance criteria are attached to the options
and no options are held by the non-executive
directors. At 31 December 2012 the middle-market
quotation for the Company’s shares, as derived from
the London Stock Exchange Daily Official List, was
487.50p, as compared with the high and low
quotations for the year of 553.75p and 431.00p
respectively.
Details of the options held over shares of the
Company by the executive directors during the year
ended 31 December 2012 are set out in the table
below:-
BALANCE AT BALANCE AT MARKET DATE FROM
1 JANUARY GRANTED EXERCISED 31 DECEMBER EXERCISE PRICE WHEN DATE OF WHICH NORMALLY EXPIRY
2012 IN THE YEAR IN THE YEAR 2012 PRICE EXERCISED OF GRANT FIRST EXERCISABLE DATE
P E Hadsley-Chaplin 200,000 — 200,000 — 126.50p 505p 2 May 2003 2 May 2006 2 May 2013
143,440 — 143,440 — 138.04p 505p 2 Feb 2005* 2 May 2006 2 May 2013
26,895 — — 26,895 158.95p — 2 Feb 2005* 4 May 2007 4 May 2014
370,335 — 343,440 26,895
P A Fletcher 200,000 — 200,000 — 126.50p 505p 2 May 2003 2 May 2006 2 May 2013
143,440 — 143,440 — 138.04p 505p 2 Feb 2005* 2 May 2006 2 May 2013
26,895 — — 26,895 158.95p — 2 Feb 2005* 4 May 2007 4 May 2014
370,335 — 343,440 26,895
T R J Price 75,000* — — 75,000 385.00p — 16 Nov 2007 16 Nov 2010 16 Nov 2017
75,000* — — 75,000 159.50p — 24 Nov 2008 24 Nov 2011 24 Nov 2018
— 50,000 — 50,000 483.21p — 19 Jun 2012 19 Jun 2015 19 Jun 2022
150,000 50,000 — 200,000
Total 890,670 50,000 686,880 253,790
* Held on appointment at 1 January 2010.
PENSIONS
The Company sponsors self-invested personal
pensions (“SIPPs”) for the UK executive directors.
Contributions made by the Company to the SIPPs and
to a life-assurance company give the executives a
pension at retirement, a pension to a spouse payable
on death and life-assurance cover based on a multiple
of salary. The members contribute a minimum of 5%
salary, is pensionable. Individuals may elect to cease
contributions to the SIPP, in which case they receive
an additional salary paid in lieu of the employer’s
pension contributions. No contributions or equivalent
salary will be paid to directors beyond the age of 65.
Approved by the board of directors
and signed on its behalf
of their pensionable salary to their SIPPs. No element
C Hayes Secretary
of a director’s-remuneration package, other than basic
24 April 2013
2012 ANNUAL REPORT
40
Independent auditors’ report
TO THE MEMBERS OF M.P.EVANS GROUP PLC
We have audited the Group financial statements of
M.P. Evans Group PLC for the year ended 31
December 2012 which comprise the consolidated
income statement, the consolidated statement of
comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in
equity, the consolidated cash-flow statement and the
related notes. The financial reporting framework that
has been applied in their preparation is applicable
law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS
AND AUDITORS
As explained more fully in the Statement of Directors’
Responsibilities set out on pages 35 and 36, the
directors are responsible for the preparation of the
financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in
accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose
hands it may come save where expressly agreed by
our prior consent in writing.
SCOPE OF THE AUDIT OF THE FINANCIAL
STATEMENTS
An audit involves obtaining evidence about the
amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the
financial statements are free from material
misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting
policies are appropriate to the Group’s circumstances
and have been consistently applied and adequately
disclosed; the reasonableness of significant
accounting estimates made by the directors; and the
overall presentation of the financial statements. In
addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements.
If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion the group financial statements:
give a true and fair view of the state of the Group’s
affairs as at 31 December 2012 and of its profit
and cash flows for the year then ended;
have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion the information given in the Report of
the Directors’ for the financial year for which the
Group financial statements are prepared is consistent
with the Group financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
OTHER MATTER
We have reported separately on the parent company
financial statements of M.P. Evans Group PLC for the
year ended 31 December 2012.
Simon O’Brien (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors,
London
24 April 2013
41
2012 ANNUAL REPORT
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER 2012
RESULT BEFORE RESULT BEFORE
BIOLOGICAL BIOLOGICAL YEAR ENDED BIOLOGICAL BIOLOGICAL YEAR ENDED
BEARER-ASSET BEARER-ASSET 31 DECEMBER BEARER-ASSET BEARER-ASSET 31 DECEMBER
ADJUSTMENT * ADJUSTMENT * 2012 ADJUSTMENT * ADJUSTMENT * 2011
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 4 83,213 — 83,213 57,756 — 57,756
Cost of sales (62,893) 2,715 (60,178) (33,636) 1,799 (31,837)
Gross profit 4 20,320 2,715 23,035 24,120 1,799 25,919
Gain on biological assets 13 — 11,907 11,907 — 17,936 17,936
Planting expenditure — (9,784) (9,784) — (15,619) (15,619)
Foreign-exchange (losses)/gains 4 (1,761) — (1,761) 528 — 528
Other administrative expenses 4 (4,292) — (4,292) (2,470) (230) (2,700)
Other income 4 17 — 17 143 — 143
Operating profit 14,284 4,838 19,122 22,321 3,886 26,207
Finance income 4,6 1,338 — 1,338 1,078 — 1,078
Finance costs 4,7 (3,437) (323) (3,760) (2,361) (574) (2,935)
Group-controlled profit
before tax 8 12,185 4,515 16,700 21,038 3,312 24,350
Tax on profit on
ordinary activities 4,9 (4,791) (1,239) (6,030) (8,450) (842) (9,292)
Group-controlled
profit after tax 7,394 3,276 10,670 12,588 2,470 15,058
Share of associated companies’
profit/(loss) after tax 4, 15 10,902 (20) 10,882 21,809 2,829 24,638
Profit for the year 18,296 3,256 21,552 34,397 5,299 39,696
Attributable to:
Owners of M. P. Evans Group PLC 15,070 2,615 17,685 30,340 5,182 35,522
Minority interests 3,226 641 3,867 4,057 117 4,174
18,296 3,256 21,552 34,397 5,299 39,696
US CENTS US CENTS US CENTS US CENTS
Basic earnings per 10p share 11 27.70 32.51 56.71 66.39
Diluted earnings per 10p share 11 27.65 32.44 56.06 65.64
* Non-statutory column (see note 13)
2012 ANNUAL REPORT
42
Consolidated statement
of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
US$’000 US$’000
Other comprehensive (expense)/income
Previously unrealised profit on sale of land to associated undertaking released
to the consolidated income statement on sale of that land by the associate (137) (54)
Exchange differences on translation of foreign operations 295 (70)
Other comprehensive expense (192) —
Other comprehensive expense (net of tax) for the year (34) (124)
Profit for the year 21,552 39,696
Total comprehensive income 21,518 39,572
Attributable to:
Owners of M. P. Evans Group PLC 17,651 35,398
Minority interests 3,867 4,174
21,518 39,572
43
2012 ANNUAL REPORT
Consolidated balance sheet
At 31 DECEMBER 2012
BEFORE BEFORE
BIOLOGICAL BIOLOGICAL BIOLOGICAL BIOLOGICAL
BEARER-ASSET BEARER-ASSET 31 DECEMBER BEARER-ASSET BEARER-ASSET 31 DECEMBER
ADJUSTMENT * ADJUSTMENT * 2012 ADJUSTMENT * ADJUSTMENT * 2011
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
12
13
14
15
16
23
19
17
18
19
20,23
4
20, 22
21
22
24
25
4
26
28
28
Non-current assets
Goodwill
Biological assets
Property, plant and equipment
Investments in associates
Investments
Deferred-tax asset
Non current receivables
Current assets
Biological assets
Inventories
Trade and other receivables
Current-tax asset
Cash and cash equivalents
Total assets
Current liabilities
Borrowings
Trade and other payables
Current-tax liability
Net current assets
Non-current liabilities
Borrowings
Deferred-tax liability
Retirement-benefit obligations
Total liabilities
Net assets
Equity
Share capital
Other reserves
Retained earnings
Equity attributable to the owners
of M.P. Evans Group PLC
Minority interests
Total equity
* Non-statutory column (see note 13)
1,157
—
— 139,335
1,157
139,335
(72,617) 107,362
130,743
25,613
109
—
6,454
—
—
—
179,979
105,130
109
6,454
—
—
— 127,428
(65,670)
25,633
—
—
1,157
161,700
106,026
145
2,808
2,189
1,157
127,428
96,030
131,659
145
2,808
2,189
292,829
92,331
385,160
274,025
87,391
361,416
4,594
9,664
14,325
1,477
54,757
84,817
—
(447)
4,594
9,217
— 14,325
—
1,477
— 54,757
(447)
84,370
9,878
8,582
14,439
6,300
52,755
91,954
9,878
—
—
8,582
— 14,439
—
6,300
— 52,755
— 91,954
377,646
91,884
469,530
365,979
87,391
453,370
25,458
14,797
1,541
41,796
43,021
31,423
2,514
4,230
38,167
— 25,458
— 14,797
1,541
—
— 41,796
(447)
42,574
— 31,423
19,193
4,230
16,679
—
16,679
54,846
25,255
14,814
4,322
44,391
47,563
31,450
3,213
2,963
37,626
— 25,255
— 14,814
4,322
—
— 44,391
— 47,563
— 31,450
18,653
2,963
15,440
—
15,440
53,066
79,963
16,679
96,642
82,017
15,440
97,457
297,683
75,205
372,888
283,962
71,951
355,913
9,227
83,133
191,734
—
25,613
41,376
9,227
108,746
233,110
9,093
84,320
180,187
—
25,633
38,742
9,093
109,953
218,929
284,094
66,989
351,083
273,600
64,375
337,975
13,589
8,216
21,805
10,362
7,576
17,938
297,683
75,205
372,888
283,962
71,951
355,913
The financial statements on pages 42 to 69 were approved by the board of directors
on 24 April 2013 and signed on its behalf
Tristan Price Philip Fletcher
Directors
2012 ANNUAL REPORT
44
Consolidated statement
of changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2012
SHARE OTHER RETAINED MINORITY TOTAL
CAPITAL RESERVES EARNINGS TOTAL INTERESTS EQUITY
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Profit for the year
— 10,882
6,803
17,685
3,867
21,552
Other comprehensive (expense)/income for the year
—
(187)
153
(34)
—
(34)
Total comprehensive income for the year
— 10,695
6,956
17,651
3,867
21,518
Issue of share capital
Dividends
Credit to equity for equity-settled
share-based payments
Transactions with owners
At 1 January 2012
At 31 December 2012
Profit for the year
134
2,162
—
2,296
— (13,755)
6,893
(6,862)
—
(309)
332
23
134
(11,902)
7,225
(4,543)
—
—
—
—
2,296
(6,862)
23
(4,543)
9,093
109,953
218,929
337,975
17,938
355,913
9,227
108,746
233,110
351,083
21,805
372,888
10
28
— 24,638
10,884
35,522
4,174
39,696
Other comprehensive income for the year
—
965
(1,089)
(124)
—
(124)
Total comprehensive income for the year
— 25,603
9,795
35,398
4,174
39,572
Issue of share capital
Dividends
Credit to equity for equity-settled
share-based payments
Transactions with owners
At 1 January 2011
At 31 December 2011
106
1,477
—
1,583
—
1,583
— (22,206)
15,594
(6,612)
(1,000)
(7,612)
—
26
2
28
—
28
106
(20,703)
15,596
(5,001)
(1,000)
(6,001)
8,987
105,053
193,538
307,578
14,764
322,342
9,093
109,953
218,929
337,975
17,938
355,913
10
28
45
2012 ANNUAL REPORT
Consolidated cash-flow statement
FOR THE YEAR ENDED 31 DECEMBER 2012
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2012 2011
NOTE US$’000 US$’000
Net cash generated by operating activities 29 33,897 48,339
Investing activities
Interest received 6 1,338 1,078
Proceeds on disposal of assets 239 598
Purchase of property, plant and equipment 14 (18,540) (31,789)
Planting expenditure (9,784) (15,619)
Net cash used by investing activities (26,747) (45,732)
Financing activities
Dividends paid to Company shareholders 10 (6,151) (6,064)
Repayment of borrowings (1,323) —
Proceeds on issue of shares 26 1,586 1,034
Dividend paid to minorities — (1,000)
Loan drawdown 22 310 20,921
Net cash (used)/generated by financing activities (5,578) 14,891
Net increase in cash and cash equivalents 1,572 17,498
Net cash and cash equivalents at 1 January 27,500 10,144
Effect of foreign-exchange rates on cash and cash equivalents 227 (142)
Net cash and cash equivalents at 31 December 20 29,299 27,500
2012 ANNUAL REPORT
46
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 1 General information
M.P. Evans Group PLC is incorporated in the United Kingdom under the Companies Act 2006 and listed on the London Stock
Exchange’s Alternative Investment Market (“AIM”). The address of its registered office is given on page 80. The nature of the
Group’s operations and its principal activities is set out in note 4 and in the review of operations on pages 12 to 26. The
Group is domiciled in the UK.
The functional currency of M.P. Evans Group PLC, determined under IAS 21, is the US Dollar. Likewise, the functional currency
of subsidiaries operating in the palm-oil sector is the US Dollar. The functional currency of Group companies operating in the
beef-cattle and property-development sectors is the local currency.
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss
account for the year. M. P. Evans Group PLC reported a profit for the financial year ended 31 December 2012 of
US$10,202,000 (2011 US$15,195,000).
By virtue of Section 479A of The Companies Act 2006, the following subsidiaries are exempt from the requirement to have an
audit and prepare individual accounts:
Lendu (UK) Limited; Sungkai Estates Limited; Supara Investments Limited; and The Singapore Para Rubber Estates, Limited.
NOTE 2 Adoption of new and revised accounting standards
(a) New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after
1 January 2012 that would be expected to have a material impact on the Group.
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning
1 January 2011 and not adopted early
IAS 1 (amendment), 'Financial statement presentation' (effective 1 July 2012). This amendment changes the disclosure of
items presented in other comprehensive income (OCI) in the statement of comprehensive income. The amendment does
not have a material impact on the consolidated financial information.
IAS 12 (amendment), ‘Income taxes’ on deferred taxes (effective 1 January 2013). This amendment introduces an exception
to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at
fair value. The amendment does not have a material impact on the combined financial information.
IAS 19, (revised 2011), 'Employee benefits' (effective 1 January 2013). This amendment makes significant changes to the
recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all
employee benefits. The amendment is not expected to have a material impact on the consolidated financial information.
IFRS 7 (amendment), 'Financial instruments – Disclosures' on asset and liability offsetting (effective 1 January 2013). This
amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements
to those that prepare financial statements in accordance with US GAAP. The amendment does not have a material impact
on the consolidated financial information.
IFRS 13 'Fair value measurement' (effective 1 January 2013). This standard aims to improve consistency and reduce
complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure
requirements for use across IFRSs. The standard did not have a material impact on the consolidated financial information.
Annual improvements 2011 (effective 1 January 2013). These annual improvements include changes to IFRS 1, IAS 1, IAS
16, IAS 32 and IAS 34. These amendments did not have material impact on the consolidated financial information.
IAS 27 (revised 2011), 'Separate financial statements' (effective 1 January 2014). This clarifies that the consequential
amendments from IAS 27 to IAS 21 ‘The effect of changes in foreign exchanges rates’, IAS 28 ‘Investments in associates’,
and IAS 31 ‘Interests in joint ventures’, apply prospectively for annual periods beginning on or after 1 July 2009. The
amendment is not expected to have a material impact on the consolidated financial information.
IAS 28 (revised 2011), 'Investments in associates and joint ventures' (effective 1 January 2014). This standard includes the
requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The
amendment is not expected to have a material impact on the consolidated financial information.
IAS 32 (amendment), 'Financial instruments – Presentation' on asset and liability offsetting (effective 1 January 2014). This
amendment clarifies some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.
The Group is yet to assess the impact of IAS 39 on its consolidated financial information.
47
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 2 Adoption of new and revised accounting standards
CONTINUED
IFRS 10 'Consolidated financial statements' (effective 1 January 2014). This standard builds on existing principles by identifying
the concept of control as the determining factor in whether an entity should be included within the consolidated financial
statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new
standard is not expected to have a material impact on the consolidation of subsidiaries.
IFRS 11 'Joint arrangements' (effective 1 January 2014). This standard provides for a more realistic reflection of joint
arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of
joint arrangements: joint operations and joint ventures. Proportional consolidation of joint ventures is no longer allowed. The
standard is not expected to have a material impact on the consolidated financial information, as the Group has historically
applied equity method to account for its joint venture interests.
IFRS 12 'Disclosure of interests in other entities' (effective 1 January 2014). This standard includes the disclosure requirements
for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off
balance sheet vehicles. The Group is yet to assess the impact of IFRS 12 on the consolidated financial information.
Amendments to IFRS 10, IFRS 11 and IFRS 12 (effective 1 January 2014). These amendments provide additional transition relief
to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding
comparative period. These amendments are not expected to have material impact on the consolidated financial information.
IFRS 9 'Financial instruments', on 'Classification and measurement' (effective 1 January 2015). This is the first part of a new
standard on classification and measurement of financial assets that will replace IAS 39. IFRS 9 has two measurement categories:
amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortised cost only if the
entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is at fair
value through profit or loss. Amortised cost accounting will also be applicable for most financial liabilities, with bifurcation of
embedded derivatives. The main change is that in cases where the fair value option is taken for financial liabilities, the part of a
fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income
statement, unless this creates an accounting mismatch. The Group is yet to assess the impact of IFRS 9 on its consolidated
financial information.
There are no other IFRSs or IFRIC interpretations which are not yet effective that would be expected to have a material impact
on the Group.
NOTE 3 Accounting policies
(a) Accounting convention and basis of presentation
These financial statements have been prepared consistently under the historical-cost convention, as modified by the valuation
of biological assets and available-for-sale investments, and comply with International Financial Reporting Standards (IFRSs)
adopted by the European Union. The Group financial statements therefore comply with the AIM rules.
(b) Going concern
The financial statements have been prepared on a going-concern basis. The directors have conducted a review of projected
cash flows from operations, investing and financing, concluding that the Group has sufficient funds projected to carry on its
business and its planned investment programme in the medium term. Furthermore, the Group has control over its main cash
expenditure, investment in its new estates and mills, which it can manage according to the resources available.
(c) Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and all of its subsidiaries, and equity
accounts for its associated undertakings. The Group treats as subsidiaries those entities in which it has the power to determine
financial and operating policies. All subsidiary and associated undertakings prepare their financial statements to 31 December.
Where necessary, the financial statements of subsidiary and associated companies are adjusted prior to consolidation or equity
accounting to bring them into line with the Group’s accounting policies. All intra-Group transactions, balances, income and
expenses are eliminated on consolidation. The results of subsidiaries acquired or disposed of during the year are included in
the consolidated income statement from or up to the effective point of acquisition or disposal.
Minority interests in the net assets of subsidiaries are separately identified. They consist of minority interests at the date of
business combination, and the minority’s share of subsequent changes in equity.
(d) Revenue
Revenue represents the value of crops, livestock and produce sold during the year, excluding sales taxes. Income is recognised
at the point of delivery. Revenue in respect of construction contracts is recognised at the point the development is sold.
Investment income is taken into account by reference to the date on which it is declared payable.
(e) Operating profit and exceptional items
The Group separately identifies gains and losses arising from significant asset disposals outside the ordinary course of business,
gains and losses arising from acquisition and disposal of shares in subsidiary and associated undertakings, and restructuring
costs. However, these are included within operating profit.
2012 ANNUAL REPORT
48
NOTE 3 Accounting policies CONTINUED
(f) Retirement benefits
The Group operates a defined-contribution pension scheme. The pension charge represents the contributions payable by the
Group under the rules of the scheme. In Indonesia, as required by law, a lump sum is paid to employees on retirement or on
leaving the Group’s employment. This terminal benefit is accrued by the Group and charged to the income statement on the
basis of individuals’ service at the balance-sheet date.
(g) Share-based payments
The Group issues equity-settled, share-based payments to certain employees. Such share-based payments are measured at fair
value (excluding the effect of any non-market-based vesting conditions) at the date of grant. The fair value determined at the
grant date of the equity-settled, share-based payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model, based on
management’s best estimates. At each balance-sheet date, the Group estimates the number of options it expects to vest. Any
changes from the previous estimate are recognised in the income statement.
(h) Goodwill
Goodwill arising on acquisition, representing any excess of the fair value of the consideration given over the fair value of the
identifiable assets and liabilities acquired, is ascribed to an operating subsidiary and capitalised, with provision being made for
any impairment. Goodwill is tested for impairment at least annually but, once made, provisions are not reversed. “Negative
goodwill”, where the fair value of the assets acquired exceeds the fair value of the consideration given, is taken to the income
statement in the period in which it arises.
Goodwill arising on acquisitions before the IFRS transition date has been retained at the amount determined under UK-GAAP
and is subjected to impairment testing at least annually. Negative goodwill on the acquisition of shares in the Group’s
Australian associated undertaking was eliminated on transition to IFRS.
(i) Biological assets
Biological gain or loss is measured in accordance with IAS 41 ‘Agriculture’ on two groups of bearer assets (oil-palm and rubber
plantations), and one consumer biological asset (beef cattle). The Group's only interest in rubber is through its associated
company, PT Agro Muko. Bearer assets (the Group’s plantations), are non-current assets. Consumer biological assets are
classified as current assets since the Group generally sells these assets within one year of the balance-sheet date.
(i)
Plantation
The Group has valued its biological assets on the basis of the discounted net present value of cash flows arising in
producing f.f.b. from oil palms, or latex from rubber trees. It values its biological assets on the basis of discounted cash
flows covering the assets’ expected 25-year economic life. Areas are included in the valuation once they are planted. The
valuation assumes that the concessions granted to exploit the land on which the biological assets are planted will be
renewed when they expire. No account is taken in the valuation of future re-planting. The Group estimates the future sales
value of its crop production using a long-term (20-year) average price. Costs associated with planting of the Group’s
estates are shown as planting expenditure on the face of the income statement.
(ii) Beef cattle
Cattle are recorded as assets at the year end at fair value less selling costs, taking into account the location of the cattle.
The herd comprises breeding and non-breeding cattle. The breeding cattle comprise cows and bulls. The non-breeding
cattle comprise steers and heifers mainly between the age of 9 and 36 months that will be grown and sold on as either
grain-fed or grass-fed cattle. Bulls are included in the balance sheet at a directors' valuation based on recent purchases and
current market data. All other cattle are valued at an estimated weight multiplied by market price per kilogram.
(iii) Crops
The cost of forage crops is released to the income statement over the period during which they are consumed.
(iv) Deferred tax
Deferred tax is recognised at the relevant local rate on the difference between the cost of biological assets and their
carrying value determined under IAS 41.
Within the consolidated income statement and balance sheet additional, non-statutory, columns have been inserted to show the
impact of recognising biological-bearer assets. The biological-bearer-asset-adjustment column shows the impact of introducing
the valuation of the Group’s biological bearer assets, as well as its share of the equivalent asset recognised by associates, and
the related deferred taxation.
(j) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes all expenditure incurred in
acquiring the asset. Leasehold land in Indonesia is held on 30-year leases and is not depreciated as the leases can be renewed
without significant cost. Perpetual-leasehold land in Malaysia and freehold land in Australia are classified as freehold land,
which is not depreciated. Buildings and plant and equipment, other than construction in progress which is not depreciated, are
written off over their estimated useful lives at rates which vary between 3% and 50% per annum. Estimated useful lives are
reviewed at each balance-sheet date.
The Group follows transitional arrangements made available under IFRS1 “First-time Adoption of International Financial
Reporting Standards”. The fair value of Indonesian leases (hak guna usaha) held by the Group on 1 January 2006 is taken to be
their deemed cost.
49
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 3 Accounting policies CONTINUED
(k) Investments in associated companies
Undertakings over which the Group exerts significant influence through shareholdings and board membership are treated as
associated undertakings. Investments in associated undertakings are held in the consolidated financial statements at fair value
under the equity method of accounting. The consolidated income statement includes the Group’s share of the profit or loss on
ordinary activities after taxation based on audited financial statements for the year ended 31 December 2012. In the
consolidated balance sheet, the investments in the associated undertakings are shown as the Group share of net assets at the
balance-sheet date, as adjusted for any associated goodwill.
(l) Non-current assets held for sale
The Group treats assets as held for sale once the sale is considered highly probable and is expected to complete within
12 months of the balance-sheet date. They are valued at the lower of fair value, and carrying value less costs to sell.
(m) Inventories
Inventories are valued at the lower of cost and net realisable value. In the case of palm oil and rubber, cost represents the weighted-
average cost of production, including appropriate overheads. Other inventories are valued on the basis of first in, first out.
(n) Taxation
The tax charge for the year comprises current and deferred tax. The Group's current-tax asset or liability is calculated using tax
rates that have been enacted or substantively enacted by the balance-sheet date.
Deferred tax is accounted for using the balance-sheet-liability method, calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised. Liabilities are generally recognised for all taxable temporary
differences; deferred-tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Deferred tax is not provided on initial recognition of goodwill.
The Group recognises deferred-tax liabilities arising from taxable temporary differences on investments in subsidiaries and
associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. The carrying amount of deferred-tax assets is reviewed at each
balance-sheet date.
Deferred-tax assets and liabilities are offset when there is a legally-enforceable right to set off current-tax assets against current-
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current-tax assets and liabilities on a net basis.
(o) Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet at fair value when the Group becomes a
party to the contractual provisions of the instrument.
AVAILABLE-FOR-SALE FINANCIAL ASSETS – the Group’s investments in unlisted shares (other than associated undertakings) are
classified as available for sale and stated at fair value, with gains and losses recognised directly in equity. Fair value is the
directors’ estimate of sales proceeds less costs to sell at the balance-sheet date.
TRADE AND OTHER RECEIVABLES – these represent amounts due from customers in the normal course of business, are not interest
bearing, and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts,
which are charged to the income statement.
CASH AND CASH EQUIVALENTS – these include cash at hand, and deposits held with banks with original maturities of three months
or less.
BANK BORROWINGS – interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs.
Finance charges are accounted for on an accruals basis in the income statement using the effective-interest-rate method.
TRADE AND OTHER PAYABLES – these are initially measured at fair value, and are subsequently measured at amortised cost, using
the effective-interest-rate method.
EQUITY INSTRUMENTS – equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
(p) Foreign currencies
As set out in note 1, the functional currency of the parent Company and of subsidiaries operating in the palm-oil sector is the
US Dollar. The functional currency of Group companies operating in the cattle and property-development sectors is the local
currency. Where relevant, results of all Group companies are translated for the purposes of consolidation into the Group's
presentation currency, the US Dollar. The monetary assets and liabilities of the Group's foreign operations are translated at
exchange rates on the balance-sheet date. Items in the income statement are translated at the average exchange rate for the period.
Exchange differences are recognised as a profit or loss of the period in which they arise except for exchange differences on
monetary items payable to foreign operations where settlement is neither planned nor likely to occur, in which case the
difference is recognised initially in other comprehensive income.
2012 ANNUAL REPORT
50
NOTE 3 Accounting policies CONTINUED
(q) Segmental reporting
Operating segments are consistent with the internal reporting provided to the chief operating-decision maker. The chief
operating-decision maker, which is responsible for allocating resources and assessing performance of the operating segments,
is the board.
(r) Critical accounting judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements under IFRS requires the Group to make estimates and assumptions that
affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on
historical experience and other factors including expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The estimates and assumptions which have the most significant
impact on the carrying amount of assets and liabilities are discussed below.
(i) Valuation of biological assets
The key assumptions underlying the valuation of the biological assets are set out in note 13. These assumptions are
reviewed at least annually. Sensitivity analysis on the impact of a variation in the palm-oil price and discount rate used in
the valuation is also shown in note 13.
(ii) Leasehold land in Indonesia
The directors have concluded that leasehold land in Indonesia should not be depreciated. Further information on this
policy is included in note 3(j).
(iii) Deferred tax on unremitted earnings
The Group's subsidiaries and associated undertakings hold a significant level of unremitted earnings. The directors have
concluded that no deferred-tax liability should be recognised in relation to these balances given the ability of the Group to
control the remittance of these earnings and the Group's operational plans for the relevant entity. Further information on
the level of these reserves is disclosed in note 23.
(iv) Assets held for sale
The directors review the fair value of the Group's available-for-sale investments to confirm that such assets are recorded at
a value that does not exceed the fair value of the asset.
(v) Goodwill arising on acquisition of subsidiaries and associates
On acquisition of shares in subsidiary companies or associated undertakings, the directors compare the fair value of the
consideration given for the shares with the fair value of the assets acquired, including an estimation of the fair value of
property, plant and equipment, intangible fixed assets and biological assets. This comparison is used to establish the value
of goodwill or the excess of fair value of the identifiable assets and liabilities acquired over their cost.
51
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 4 Segment information
The Group’s reportable segments follow the three areas of activity set out in the review of 2012. These are distinguished by location
and product: plantation crops (predominantly palm oil) in Indonesia, with a residual balance in Malaysia; cattle in Australia; and
property development in Malaysia.
2012 PLANTATION CATTLE PROPERTY OTHER TOTAL
INDONESIA MALAYSIA TOTAL AUSTRALIA MALAYSIA UK
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 76,814 292 77,106 6,061 — 46 83,213*
Gross profit/(loss) 25,155 27 25,182 (2,193) — 46 23,035
Gain on biological assets 11,907 — 11,907 — — — 11,907
Planting expenditure (9,784) — (9,784) — — — (9,784)
Foreign-exchange loss (1,555) (18) (1,573) — — (188) (1,761)
Other administrative expenses (1,185) 80 (1,105) (354) — (2,833) (4,292)
Other income — 17 17 — — — 17
Operating profit 19,122
Finance income 1,198 73 1,271 45 — 22 1,338
Finance costs (2,135) — (2,135) (1,625) — — (3,760)
Group-controlled profit before tax 16,700
Tax (4,595) 4 (4,591) — — (1,439) (6,030)
Group-controlled profit after tax 10,670
Share of associated companies’
profit after tax 13,241 — 13,241 (2,012) (347) — 10,882
Profit for the year 21,552
Consolidated total assets
Assets 271,869 9,142 281,011 41,777 — 15,999 338,787
Investments in associates 52,733 — 52,733 61,817 16,193 — 130,743
324,602 9,142 333,744 103,594 16,193 15,999 469,530
Consolidated total liabilities
Liabilities 48,949 18,551 67,500 28,117 — 1,025 96,642
Other information
Additions to non-current assets 18,417 1 18,418 120 — 2 18,540
Depreciation 4,734 14 4,748 445 — 18 5,211
Retirement-benefit obligations 1,585 — 1,585 — — — 1,585
* Revenue of US$13.62 million was from sales of crude palm oil to PT Pacific Palmindo Industries; and US$8.57 million was
from sales of crude palm oil and palm kernels to PT Salim Ivomas Pratama.
2012 ANNUAL REPORT
52
NOTE 4 Segment information CONTINUED
2011 PLANTATION CATTLE PROPERTY OTHER TOTAL
INDONESIA MALAYSIA TOTAL AUSTRALIA MALAYSIA
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 54,938 337 55,275 2,435 — 46 57,756
Gross profit/(loss) 25,825 (63) 25,762 111 — 46 25,919
Gain on biological assets 17,936 — 17,936 — — — 17,936
Planting expenditure (15,619) — ( 15,619) — — — (15,619)
Foreign-exchange gain/(loss) 631 13 644 — — (116) 528
Other administrative expenses 452 (132) 320 (128) — (2,892) (2,700)
Other income — 143 143 — — — 143
Operating profit 26,207
Finance income 971 54 1,025 43 — 10 1,078
Finance costs (999) — (999) (1,936) — — (2,935)
Group-controlled profit before tax 24,350
Tax (6,645) (9) (6,654) — — (2,638) (9,292)
Group-controlled profit after tax 15,058
Share of associated companies’
profit after tax 18,621 — 18,621 4,231 1,786 — 24,638
Profit for the year 39,696
Consolidated total assets
Assets 254,794 6,028 260,822 47,049 — 13,840 321,711
Investments in associates 50,562 — 50,562 62,604 18,493 — 131,659
305,356 6,028 311,384 109,653 18,493 13,840 453,370
Consolidated total liabilities
Liabilities 47,603 18,580 66,183 28,984 — 2,290 97,457
Other information
Additions to non-current assets 31,604 2 31,606 164 — 19 31,789
Depreciation 2,624 37 2,661 450 — 28 3,139
Retirement-benefit obligations 1,215 — 1,215 — — — 1,215
53
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 5 Employees
2012 2011
US$’000 US$’000
Employee costs during the year
Wages and salaries 11,952 9,405
Social-security costs 551 490
Current service cost of retirement benefit (see note 25) 1,183 1,036
Other pension costs 236 205
13,922 11,136
NUMBER NUMBER
Average number of persons employed (including executive directors)
Estate manual 2,337 1,838
Local management 66 79
United Kingdom head office 7 6
2,410 1,923
Details of directors’ remuneration required by the Companies Act 2006 are shown within the report of the board to the
shareholders on directors’ remuneration on pages 39 and 40 and form part of these audited financial statements.
NOTE 6 Finance income
2012 2011
US$’000 US$’000
Interest receivable on bank deposits 1,338 1,078
NOTE 7 Finance costs
Interest payable on bank loans and overdrafts 3,760 2,935
Interest capitalised into the cost of property, plant and equipment — 356
2012 ANNUAL REPORT
54
NOTE 8 Group-controlled profit before tax
2012 2011
US$’000 US$’000
Profit before tax is stated after charging
Depreciation of property, plant and equipment 5,211 3,139
Auditors’ remuneration 313 293
Employee costs (note 5) 13,922 11,136
The analysis of auditors’ remuneration is as follows:-
Fees payable to the Company’s auditor and their associates for services to the Group: *
Audit of UK parent Company 20 20
Audit of consolidated financial statements 90 74
Total audit services 110 94
Audit of overseas subsidiaries 135 125
Total fees payable 245 219
* In addition to the above, fees of US$68,000 (2011 US$74,000) were payable to other firms for the audit of subsidiary
companies. Additional fees of US$27,000 were paid to PwC in respect of tax advice.
NOTE 9 Tax on profit on ordinary activities
United Kingdom corporation tax charge for the year 370 342
Relief for overseas taxation (370) (342)
— —
Overseas taxation 8,821 10,523
Adjustments in respect of prior years (5) (5)
Total current tax 8,816 10,518
Deferred taxation – origination and reversal of temporary differences (see note 24) (2,786) (1,226)
6,030 9,292
The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, was 24.50% (2011 – 26.49%).
The standard rate of Indonesian tax was 25.00% for the current year (2011 – 25.00%). The actual tax charge is higher than the
standard rate for the reasons set out in the following reconciliation.
55
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 9 Tax on profit on ordinary activities CONTINUED
2012 2011
US$’000 US$’000
Profit on ordinary activities before tax 16,700 24,350
Tax on profit on ordinary activities at standard rate 4,092 6,450
Factors affecting the charge for the year:
Withholding tax on overseas dividends and interest 1,070 2,309
Unrelieved losses 2,593 1,539
Expenses not deductible for tax purposes 64 270
Unrealised Indonesian exchange differences not included in Group profit (1,083) 85
Utilisation of losses brought forward (23) (9)
Lower rate applicable to disposals of fixed assets (43) (14)
Biological assets 134 (35)
Other exchange differences 157 (79)
Profits subject to lower rate of tax (239) (349)
Adjustments to valuation of investments (272) –
Other differences (420) (875)
Total actual amount of current tax 6,030 9,292
NOTE 10 Dividends paid and proposed
2012 interim dividend – 2.25p per 10p share (2011 interim dividend – 2.25p) 1,985 1,887
2011 final dividend – 5.75p per 10p share (2010 final dividend – 5.50p) 4,877 4,725
6,862 6,612
Following the year end, the board has proposed a final dividend for 2012 of 5.75p per 10p share, amounting to US$4.89
million. Shareholders will again have the option to elect to receive the dividend in shares rather than in cash. Further
information is published in the report of the directors on pages 32 and 33. The dividend will be paid on or after 20 June 2013
to those shareholders on the register at the close of business on 26 April 2013.
NOTE 11 Basic and diluted earnings per share
The calculation of earnings per 10p share is based on:
2012 2012 2011 2011
NUMBER OF NUMBER OF
US$’000 SHARES US$’000 SHARES
Profit for the year attributable to the
owners of M.P. Evans Group PLC 17,685 35,522
Average number of shares in issue 54,406,455 53,502,656
Diluted average number of shares in issue* 54,509,339 54,116,145
* The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options
held by directors and key employees of the Group.
2012 ANNUAL REPORT
56
NOTE 12 Goodwill
2012 2011
US$’000 US$’000
At 1 January and 31 December 1,157 1,157
Goodwill is carried at cost. The directors have tested goodwill for impairment, concluding that the carrying amounts
are recoverable. Goodwill has arisen in respect of the Group’s new plantation projects in Indonesia in Kalimantan and on
Bangka Island. Given the size of the goodwill balance, the directors do not consider it necessary to provide detailed
disclosures regarding the impairment review.
NOTE 13 Biological assets
Non-current biological assets comprise plantation bearer assets. The Group values these plantation assets using a discounted cash
flow over the expected 25-year economic life of the asset. The discount rate used in this valuation is 14%. The price of the f.f.b.
crop is taken to be the 20-year average based on historical selling prices or, where the plantation has its own mill, an inference
based on the widely-quoted commodity price for crude palm oil delivered Rotterdam c.i.f. The directors have concluded that
using a 20-year average provides the best estimate of the prices to be achieved over the valuation period.
Assumptions
The long-term average price and exchange rate used in determining the valuations were as follows:
31 DECEMBER 31 DECEMBER
2012 2011
Price of crude palm oil (US$ per tonne, Rotterdam c.i.f.) 602 572
Exchange rate (Rupiah per US$) 9,670 9,068
Sensitivity in valuation of plantation assets
A change of US$25 in the price assumption for crude palm oil has the following effect on the valuation of plantation assets:
-US$ 25 +US$ 25
US$’000 US$’000
Subsidiaries (16,261) 16,261
Associated companies (11,734) 11,734
(27,995) 27,995
A change of 1% in the discount rate has the following effect on the valuation of plantation assets:
-1% +1%
US$’000 US$’000
Subsidiaries 10,079 (9,063)
Associated companies 5,707 (5,246)
15,786 (14,309)
57
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 13 Biological assets CONTINUED
2012 2011
Non-current biological assets US$’000 US$’000
Gain in fair value:
Initial recognition 3,289 4,224
Current period 8,618 13,712
Total gain 11,907 17,936
Decreases due to disposal and reclassification — (1,370)
Change in carrying value of biological assets 11,907 16,566
At 1 January 127,428 110,862
At 31 December 139,335 127,428
2012 2011
F.f.b. crop (Tonnes) 318,600 250,900
Fair value of crop (US$’000) 34,022 26,525
The only restrictions over biological assets are described in note 3(i). The Group’s financial risk-management strategy for
agricultural activity is described in the review of 2012 on pages 24 to 26.
Presentation
In the balance sheet, the adjustment column shows that recognition of the biological-asset valuation replaces depreciated-
historical-planting costs of US$72,617,000 (2011 US$65,670,000) which, prior to the adoption of IFRS, were included in
the carrying value of property, plant and equipment. These costs are now replaced by the biological bearer-asset adjustment
which, including the Group’s share of the asset recognised by associates together with the related deferred tax, amounts to
US$147,822,000 (2011 US$137,621,000).
2012 ANNUAL REPORT
58
NOTE 14 Property, plant and equipment
PLANT,
FREEHOLD LEASEHOLD EQUIPMENT CONSTRUCTION
LAND LAND BUILDINGS AND VEHICLES IN PROGRESS TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Cost or valuation
At 1 January 2012 29,202 18,610 31,134 29,717 2,814 111,477
Additions 53 7,212 3,208 2,116 5,951 18,540
Re-classification — — 3,479 — (3,479) —
Exchange differences 608 9 114 72 — 803
Disposals — — (56) (626) (29) (711)
At 31 December 2012 29,863 25,831 37,879 31,279 5,257 130,109
Accumulated depreciation
At 1 January 2012 — 370 4,310 10,767 — 15,447
Charge for the year — 10 1,959 3,242 — 5,211
Exchange differences — — 21 48 — 69
Disposals — — (50) (496) — (546)
Provision for impairment 2,566 — — — — 2,566
At 31 December 2012 2,566 380 6,240 13,561 — 22,747
Net book value
at 31 December 2012 27,297 25,451 31,639 17,718 5,257 107,362
Cost or valuation
At 1 January 2011 29,176 15,237 14,468 17,097 5,644 81,622
Additions 26 3,380 — 783 27,600 31,789
Re-classification — — 17,137 13,293 (30,430) —
Exchange differences — (7) (13) (7) — (27)
Disposals — — (458) (1,449) — (1,907)
At 31 December 2011 29,202 18,610 31,134 29,717 2,814 111,477
Accumulated depreciation
At 1 January 2011 — 358 3,393 9,811 — 13,562
Charge for the year — 12 963 2,164 — 3,139
Exchange differences — — (4) (10) — (14)
Disposals — — (42) (1,198) — (1,240)
At 31 December 2011 — 370 4,310 10,767 — 15,447
Net book value
at 31 December 2011 29,202 18,240 26,824 18,950 2,814 96,030
Net book value
at 1 January 2011 29,176 14,879 11,075 7,286 5,644 68,060
As at 31 December 2012, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment of US$4,787,000 (2011 US$424,000).
Depreciation, other than US$18,000 (2011 US$28,000) charged to other administrative expenses, is charged to cost of sales.
The directors consider that in the current market for rural properties in Australia it is prudent to make a modest impairment to
the carrying value of Woodlands.
59
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 15 Investments in associates
Details of the principal subsidiary and associated undertakings are given on page 75. The Group’s associated companies
are all unlisted.
SHARE OF SHARE OF
NET ASSETS NET ASSETS
2012 2011
US$’000 US$’000
Share of net assets
At 1 January 130,658 128,578
Exchange differences 1,957 (352)
Profit for the year 10,882 24,638
Net dividends received (13,755) (22,206)
At 31 December 129,742 130,658
Goodwill
At 1 January and 31 December 1,001 1,001
Carrying value
At 31 December 130,743 131,659
At valuation
Unlisted (directors’ valuation) 221,000 201,000
The Group’s aggregate share of the summarised results of its associated undertakings is shown below:-
PT AGRO PT KERASAAN BERTAM
MUKO INDONESIA NAPCo PROPERTIES
(36.84%) (38.00%) (34.37%) (40.00%) TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000
2012
Revenue 34,669 3,193 24,079 1,925 63,866
Profit after tax 11,989 1,252 (2,012) (347) 10,882
Assets 51,152 6,401 121,424 23,416 202,393
Liabilities (4,491) (328) (59,608) (7,223) (71,650)
Net assets 46,661 6,073 61,816 16,193 130,743
2011
Revenue 35,952 4,072 23,665 9,033 72,722
Profit after tax 16,269 2,352 4,231 1,786 24,638
Assets 46,428 6,097 162,484 24,211 239,220
Liabilities (2,689) (258) (98,896) (5,718) (107,561)
Net assets 43,739 5,839 63,588 18,493 131,659
2012 ANNUAL REPORT
60
NOTE 16 Investments
2012 2011
Other available-for-sale financial investments (unlisted) US$’000 US$’000
At 1 January 145 149
Exchange differences 5 (4)
Revaluation of investments (41) —
At 31 December 109 145
The directors have reviewed the fair values of the Group’s available-for-sale investments and concluded that their realisable
market value equals their carrying value.
NOTE 17 Current biological assets
2012 2011
Livestock US$’000 US$’000
Gain in fair value 146 2,279
Increase due to purchases 426 2,062
Decreases due to disposal and reclassification (6,061) (2,435)
Net exchange differences 205 (19)
Change in carrying value of biological assets (5,284) 1,887
At 1 January 9,878 7,991
At 31 December 4,594 9,878
Head sold (number) 5,278 2,177
Cattle revenue (US$’000) 6,061 2,435
NOTE 18 Inventories
2012 2011
US$’000 US$’000
Processed produce for sale 3,160 3,352
Estate stores 3,013 1,204
Nurseries 3,044 4,026
9,217 8,582
61
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 19 Trade and other receivables
2012 2011
US$’000 US$’000
Trade receivables 1,072 1,667
Other receivables 6,199 3,749
Prepayments and accrued income 7,054 9,023
14,325 14,439
Trade and other receivables analysed by currency of receivable:
Indonesian Rupiah 12,515 11,932
US Dollar 884 929
Malaysian Ringgit 582 997
Australian Dollar 192 470
Sterling 152 111
14,325 14,439
Sales of palm oil are generally made for cash payment in advance of delivery. The Group makes full provision against
invoices outstanding for more than 30 days. At 31 December 2012 there was no provision for impairment of trade receivables
(2011 US$ nil). The directors consider the carrying amount of trade and other receivables approximate their fair value.
The non-current receivable relates to tax recoverable after more than one year.
NOTE 20 Cash and cash equivalents
Cash and cash equivalents 54,757 52,755
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity
of three months or less. The carrying value of these assets approximates their fair value. Of this balance, US$19.6 million
(2011 US$19.4 million) has been pledged as security against bank loans.
Cash and cash equivalents 54,757 52,755
Bank overdrafts and loans (see note 22) (25,458) (25,255)
Net cash 29,299 27,500
NOTE 21 Trade and other payables
Trade payables 7,537 5,427
Amounts owed to associated undertakings 63 120
Other payables 7,197 9,267
14,797 14,814
The average credit period taken for trade purchases is 41 days (2011 - 39 days). The Group has processes in place to ensure
payables are settled within the agreed terms.
2012 ANNUAL REPORT
62
NOTE 22 Borrowings
2012 2011
US$’000 US$’000
Secured borrowing at amortised cost
Bank overdrafts 25,458 25,255
Bank loans 31,423 31,450
56,881 56,705
Total borrowings
Amount due for settlement within 12 months 25,458 25,255
Due for settlement in one to five years 31,423 31,450
56,881 56,705
Borrowings on bank Treasury Bill facility are treasury bills which are payable within one year but can be rolled over within the
limits of the facility. They are secured on the assets of the Woodlands cattle aggregation.
Analysis of borrowings by currency:
AUSTRALIAN MALAYSIAN
US DOLLARS DOLLARS RINGGIT TOTAL
US$’000 US$’000 US$’000 US$’000
31 December 2012
Bank Treasury Bill facility — 25,458 — 25,458
Bank loans 12,986 — 18,437 31,423
12,986 25,458 18,437 56,881
31 December 2011
Bank Treasury Bill facility — 25,255 — 25,255
Bank loans 13,018 — 18,432 31,450
13,018 25,255 18,432 56,705
Facilities drawn during the year
During the year, loans of US$0.3 million were drawn in Malaysia.
Undrawn borrowing facilities
At 31 December 2012, the Group had available US$7.97 million of a US$20.95 million loan facility with an Indonesian lender.
In addition, the Group had available MYR2.96 million (2011 MYR1.57 million) of undrawn committed borrowing facilities from
a Malaysian lender in respect of which all conditions precedent had been met, as well as an undrawn overdraft facility of
A$500,000 (2011 A$500,000) from an Australian lender.
Interest rates
The weighted-average interest rates paid during the year were as follows:-
2012 2011
% %
Bank Treasury Bill facility 4.0 4.9
Bank loans 6.0 7.0
63
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 23 Net Debt
2012 2011
US$’000 US$’000
Cash at bank 54,757 52,755
Secured borrowing
Indonesia 12,986 13,018
Australia 25,458 25,255
Malaysia 18,437 18,432
56,881 56,705
Net debt (2,124) (3,950)
NOTE 24 Deferred tax
The following are the major deferred-tax liabilities and assets recognised by the Group and movements thereon:
ACCELERATED RETIREMENT- OTHER
TAX REVALUATION BIOLOGICAL BENEFIT TIMING
DEPRECIATION OF LAND ASSETS OBLIGATIONS DIFFERENCES TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2012 3,118 3,746 15,440 (741) (5,718) 15,845
Charge/(credit) to
income statement 895 — 1,239 (375) (4,545) (2,786)
Credit to revaluation reserve — (698) — — — (698)
Exchange differences (139) 78 — 58 381 378
At 31 December 2012 3,874 3,126 16,679 (1,058) (9,882) 12,739
At 1 January 2011 2,343 3,746 14,597 (460) (3,259) 16,967
Charge/(credit) to
income statement 819 — 843 (295) (2,593) (1,226)
Exchange differences (44) — — 14 134 104
At 31 December 2011 3,118 3,746 15,440 (741) (5,718) 15,845
Certain deferred-tax assets and liabilities have been offset. The following is the analysis of deferred-tax balances (after offset) for
financial reporting purposes:
2012 2011
US$’000 US$’000
To be recovered after 12 months
Deferred-tax assets (6,454) (2,808)
Deferred-tax liabilities 19,193 18,653
12,739 15,845
At the balance-sheet date, the Group had unused tax losses of US$45,596,000 (2011 US$26,484,000) available for offset
against future profits. A deferred-tax asset has been recognised in respect of US$34,674,000 (2011 US$15,764,000) of such
losses. No deferred-tax asset has been recognised in respect of the remaining US$11,282,000 (2011 US$10,719,000) due to
the unpredictability of future profit streams. These losses may be carried forward indefinitely.
At the balance-sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries
for which deferred-tax liabilities have not been recognised was US$264,557,000 (2011 US$242,387,000). No liability has
been recognised in respect of these differences because either the Group is in a position to control the timing of the reversal of
the temporary differences, or such a reversal would not give rise to an additional tax liability.
At the balance-sheet date, the aggregate amount of temporary differences associated with undistributed earnings of associates
for which deferred-tax liabilities have not been recognised was US$82,032,000 (2011 US$86,059,000). No liability has been
2012 ANNUAL REPORT
64
NOTE 24 Deferred tax CONTINUED
recognised in respect of these differences because either the Group is in a position to control the timing of the reversal of the
temporary differences, or such a reversal would not give rise to an additional tax liability.
At the balance-sheet date, the aggregate amount of temporary differences associated with outstanding executive share options
for which deferred-tax assets have not been recognised was US$944,000 (2011 US$4,278,000). No asset has been recognised
in respect of these differences due to the unpredictability of future profit streams.
NOTE 25 Retirement-benefit obligations
The Group’s only obligation relates to an unfunded, non-contributory, post-employment statutory benefit scheme in Indonesia.
A lump sum is paid to employees on retirement or on leaving the Group’s employment. This terminal benefit is accrued
by the Group and charged in the income statement on the basis of individuals’ service at the balance-sheet date. Retirement
is assumed at the earlier of age 55 years or 30 years’ service. No allowance is made for mortality or internal promotion.
2012 2011
The main assumptions used to assess the Group’s liability are: % %
Discount rate 7.00 7.00
Salary increase per annum 8.00 8.00
Reconciliation of scheme liabilities: US$’000 US$’000
Current-service cost 1,183 1,036
Interest cost 237 182
Actuarial (losses)/gains (7) 3
Difference on settlement (40) (6)
Prior-year adjustment 212 —
1,585 1,215
Less: Benefits paid out (85) (37)
Movement in the year 1,500 1,178
At 1 January 2,963 1,840
Exchange differences (233) (55)
At 31 December 4,230 2,963
NOTE 26 Share capital
Shares of 10p each ALLOTTED, FULLY ALLOTTED, FULLY
AUTHORISED PAID AND VOTING AUTHORISED PAID AND VOTING
NUMBER NUMBER £’000 US$’000
At 1 January 2012 87,000,000 54,021,901 8,700 9,093
Issued during the year — 849,501 — 134
At 31 December 2012 87,000,000 54,871,402 8,700 9,227
At 1 January 2011 87,000,000 53,357,455 8,700 8,987
Issued during the year — 664,446 — 106
At 31 December 2011 87,000,000 54,021,901 8,700 9,093
During the year 760,376 (2011 - 566,465) 10p shares were issued as a result of the exercise of share options. In addition, a
further 89,125 shares (2011 - 97,981 shares) were issued to shareholders who elected to take scrip in lieu of cash dividends.
Total cash benefits received by the Company in respect of these allotments amounted to US$1,586,000 (2011 US$1,034,000).
65
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 27 Share-based payments
The Company has a share-option scheme for directors and selected employees of the Group. Options are exercisable at a price
equal to the quoted market price of the Company’s shares on the date of grant. The vesting period is three years. If the options
remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee
leaves the Group before the options vest. Details of the share options outstanding during the year are as follows:-
2012 2011
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE NUMBER OF EXERCISE PRICE
SHARE OPTIONS (IN BRITISH PENCE) SHARE OPTIONS (IN BRITISH PENCE)
At 1 January 1,014,166 164.3 1,580,631 141.3
Granted during the year 80,000 483.2 — —
Exercised during the year (760,376) 132.2 (566,465) 100.1
At 31 December 333,790 314.0 1,014,166 164.3
Exercisable at the end of the year 253,790 260.6 964,166 155.5
The weighted-average share price at the date of exercise for share options exercised during the period was 503p (2011 – 405p).
The options outstanding at 31 December 2012 had a weighted-average remaining contractual life of 3.1 years and exercise
prices in the range 158.95p to 385.0p. The Group recognised total expenses of US$23,000 related to equity-settled share-based
payment transactions (2011US$28,000).
Details of the directors’ share options are set out in the report of the board to the shareholders on directors’ remuneration on
pages 39 and 40.
NOTE 28 Reserves
SHARE- CAPITAL- SHARE- SHARE OF FOREIGN-
PREMIUM REVALUATION REDEMPTION MERGER OPTION ASSOCIATES’ EXCHANGE RETAINED
ACCOUNT RESERVE RESERVE RESERVE RESERVE RESERVES RESERVE TOTAL EARNINGS
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2012 22,974 12,468 3,896 1,056 624 68,871 64 109,953 218,929
Exchange differences — 29 — — — 1,685 (297) 1,417 (1,981)
Transfer from
revaluation reserve — (2,326) — — — — — (2,326) 2,326
Deferred tax on land
impairment — 721 — — — — — 721 —
Retirement benefit
obligations — — — — — — — — (192)
Issue of shares 2,163 — — — — — — 2,163 —
Share-based payments — — — — (309) — — (309) 332
Dividends from associated
undertakings — — — — — (13,755) — (13,755) 13,755
Profit for the financial year — — — — — 10,882 — 10,882 6,803
Dividends paid
(see note 10)) — — — — — — — — (6,862)
At 31 December 2012 25,137 10,892 3,896 1,056 315 67,683 (233) 108,746 233,110
2012 ANNUAL REPORT
66
NOTE 28 Reserves CONTINUED
SHARE- CAPITAL- SHARE- SHARE OF FOREIGN-
PREMIUM REVALUATION REDEMPTION MERGER OPTION ASSOCIATES’ EXCHANGE RETAINED
ACCOUNT RESERVE RESERVE RESERVE RESERVE RESERVES RESERVE TOTAL EARNINGS
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2011 21,497 12,528 3,896 1,056 598 66,571 (1,093) 105,053 193,538
Exchange differences — (60) — — — (132) 1,157 965 (1,089)
Issue of shares 1,477 — — — — — — 1,477 —
Share-based payments — — — — 26 — — 26 2
Dividends from
associated undertakings — — — — — (22,206) — (22,206) 22,206
Profit for the
financial year — — — — — 24,638 — 24,638 10,884
Dividend paid
(see note 10) — — — — — — — — (6,612)
At 31 December 2011 22,974 12,468 3,896 1,056 624 68,871 64 109,953 218,929
The revaluation reserve relates to the revaluation surplus recognised under UK GAAP. On transition to IFRS, the Group elected
to treat the revalued amount of the non-current assets as their deemed cost.
NOTE 29 Note to the consolidated cash-flow statement
2012 2011
US$’000 US$’000
Profit for the year 21,552 39,696
Share of associated companies’ profit after tax (10,882) (24,638)
Tax charge 6,030 9,292
Finance costs 3,760 2,935
Finance income (1,338) (1,078)
Operating profit 19,122 26,207
Biological gain (12,053) (20,215)
Planting expenditure 9,784 15,619
Disposal of non-current assets 207 1,441
Provision released on land to be sold to smallholders’ cooperative schemes — (961)
Release of deferred profit (137) (54)
Depreciation of property, plant and equipment 5,211 3,139
Retirement-benefit obligations 1,500 1,215
Share-based payments 23 28
Dividends from associated companies 13,755 22,206
Operating cash flows before movements in working capital 37,412 48,625
Decrease/(increase) in inventories 5,025 (270)
Decrease in receivables 164 10,846
(Decrease)/increase in payables (45) 7,073
Cash generated by operating activities 42,556 66,274
Income tax paid (4,899) (15,000)
Interest paid (3,760) (2,935)
Net cash generated by operating activities 33,897 48,339
67
2012 ANNUAL REPORT
Notes TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE 30 Financial instruments
Capital-risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising
returns to shareholders. The capital structure of the Group consists of debt, (see note 22), cash and cash equivalents and equity
attributable to the owners of the parent Company, comprising issued capital, reserves and retained earnings. The Group is not
subject to any externally-imposed capital requirements.
The Group’s board continues to monitor the capital structure based on the funding requirements of the Group. At the balance-
sheet date the Group had net cash of US$29,299,000 (2011 US$27,500,000) as shown in note 20, and equity attributable to the
owners of the parent Company of US$351,083,000 (2011 US$337,975,000). The board intends to fund its continuing
Indonesian expansion by a combination of the Group’s cash resources, disposal of its remaining Malaysian interests and by
securing additional borrowings.
Categories of financial instruments
All of the Group’s financial assets are classified as loans and receivables, with the exception of its other investments shown in
note 16 which are classified as available-for-sale financial assets. All of the Group’s financial liabilities are measured at
amortised cost.
In the opinion of the directors, there was no significant difference between the carrying values and estimated fair values of the
Group’s primary financial assets and liabilities at either the current, or preceding, financial year end.
Financial-risk-management objectives
The main risks arising from the Group’s financial instruments are foreign-currency, interest-rate, credit and liquidity. The board
reviews and agrees the policies for managing these risks. The policies and the impact of these risks on the Group’s balance
sheet at the end of the financial year are summarised below.
Foreign-currency risk
The majority of the Group’s operations are undertaken in Indonesia, Australia and Malaysia. The Group does not have transactional
currency exposures arising from sales or purchases by its operating units but the Group’s balance sheet can be significantly affected
by movements in exchange rates. Whilst the Group’s trading takes place in local currencies in South East Asia, relevant commodity
prices are determined in US Dollars in a world market which reduces the Group’s currency risk. The Group has a policy not to
hedge exchange-rate fluctuation and does not make use of forward-currency contracts.
The currency profile of the Group’s monetary assets, excluding trade and other receivables (the currency profile of which is given in
note 20), are as follows:
2012 2011
US$’000 US$’000
US Dollar 35,692 31,565
Indonesian Rupiah 11,641 13,855
Australian Dollar 4,349 1,303
Malaysian Ringgit 2,103 5,218
Sterling 972 814
54,757 52,755
The currency profile of the Group’s monetary liabilities, excluding trade and other payables, is shown in note 22.
2012 ANNUAL REPORT
68
NOTE 30 Financial instruments CONTINUED
The Group is exposed to changes in foreign-currency exchange rates. This is in relation to the impact of movements on its non-
US Dollar monetary assets, but also in relation to the consolidation of its non-US Dollar-functional-currency subsidiary and
associated undertakings. The most significant sensitivities arise in respect of movements in the Australian Dollar and Malaysian
Ringgit. Management estimates that a 10% weakening of the US Dollar against these currencies would have the following
impact on the result and net assets of its two relevant associated undertakings:
2012 2011
US$’000 US$’000
Australian Dollar
Result for the year (692) 225
Net assets 4,525 5,189
Malaysian Ringgit
Result for the year (176) 492
Net assets 2,450 2,905
Interest-rate risk
In order to optimise the income received on its cash deposits the Group continuously reviews the terms of these deposits
to take advantage of the best market rates. UK funds are passed through a broker to banks who have a credit rating of at least
AA minus.
The Group’s only financial liabilities other than short-term trade and other payables are the borrowings referred to in note 22.
The bank Treasury Bill facility is denominated in Australian Dollars and interest is charged at a variable rate linked to the
Australian base rate. The loans, denominated in Malaysian Ringgit and US Dollars, carry interest charged at a floating rate
related to US Dollar LIBOR.
The Group’s net position means it is not materially exposed to changes in interest rates on its floating-rate financial assets and
liabilities.
Credit risk
The Group’s credit risk on cash deposits is described above. Regarding trade receivables, the Group performs a credit
evaluation before extending credit to customers. The Group does not have any significant concentrations of credit risk (defined
by management as more than 10% of gross monetary assets), other than in relation to bank deposits which management seeks
to mitigate through the use of banks with high credit ratings. The Group’s maximum exposure to credit risk is represented by
the carrying amount of financial assets in the financial statements.
Liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and banking facilities, and through active monitoring
of the Group’s forecast and actual cash flows. All of the Group’s monetary financial assets and liabilities have a maturity profile
of less than eight years. The maturity profile for financial liabilities is shown in note 22.
NOTE 31 Related-party transactions
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out in the report of the board to
the shareholders on directors’ remuneration on pages 39 to 40. The directors’ participation in the executive share-option
scheme is disclosed on page 40.
The Group received dividends from its associated companies during the year. This is set out in note 15 on page 60.
69
2012 ANNUAL REPORT
Independent auditors’ report
TO THE MEMBERS OF M.P.EVANS GROUP PLC, PARENT COMPANY
We have audited the parent-Company financial
statements of M. P. Evans Group PLC for the year
ended 31 December 2012 which comprise the
Company balance sheet and the related notes. The
financial reporting framework that has been applied
in their preparation is applicable law and United
Kingdom accounting standards (United Kingdom
Generally Accepted Accounting Practice).
RESPECTIVE RESPONSIBILITIES OF DIRECTORS
AND AUDITORS
As explained more fully in the statement of directors’
responsibilities set out on pages 35 and 36, the directors
are responsible for the preparation of the parent-Company
financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and
express an opinion on the parent-Company financial
statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s “Ethical Standards for Auditors”.
This report, including the opinions, has been prepared
for, and only for, the Company’s members as a body
in accordance with chapter 3 of part 16 of the
Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose
hands it may come save where expressly agreed by
our prior consent in writing.
SCOPE OF THE AUDIT OF THE FINANCIAL
STATEMENTS
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the parent-
Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements.
If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion the parent-Company financial statements:
give a true and fair view of the state of the
Company’s affairs as at 31 December 2012;
have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
OPINION ON OTHER MATTER PRESCRIBED
BY THE COMPANIES ACT 2006
In our opinion the information given in the report of
the directors for the financial year for which the
parent-Company financial statements are prepared is
consistent with the parent-Company financial
statements.
MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept
by the parent-Company, or returns adequate for
our audit have not been received from branches
not visited by us; or
the parent-Company financial statements are not
in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
OTHER MATTER
We have reported separately on the consolidated
financial statements of M. P. Evans Group PLC for the
year ended 31 December 2012.
Simon O’Brien (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors,
London
24 April 2013
2012 ANNUAL REPORT
70
Parent-Company balance sheet
AT 31 DECEMBER 2012
2012 2011
NOTE US$’000 US$’000 US$’000 US$’000
Fixed assets
Tangible fixed assets (iv) 864 880
Investments (v) 31,494 44,210
32,358 45,090
Current assets
Debtors (vi) 56,854 49,565
Cash at bank and in hand 13,542 8,868
70,396 58,433
Creditors – amounts falling due
within one year (vii) (40,125) (46,552)
Net current assets 30,271 11,881
Total assets less current liabilities 62,629 56,971
Capital and reserves
Called-up share capital (viii) 9,227 9,093
Other reserves (ix) 30,782 28,928
Profit and loss account (ix) 22,620 18,950
(x) 62,629 56,971
The financial statements on pages 71 to 74 were approved by the board of directors
on 24 April 2013 and signed on its behalf by:
Tristan Price Philip Fletcher
Directors
71
2012 ANNUAL REPORT
Notes TO THE PARENT-COMPANY BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE i
Significant accounting policies
Unaudited subsidiaries
Under Section 479C of The Companies Act 2006, the Company has guaranteed all of the outstanding liabilities of the following
subsidiaries arising from their unaudited financial statements for the year ended 31 December 2012:
Lendu (UK) Limited; Sungkai Estates Limited; Supara Investments Limited; and The Singapore Para Rubber Estates, Limited
It is considered that there is no likelihood of these guarantees being called upon and no liability is expected to arise under these
guarantees.
Basis of accounting
The financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared
consistently on a going-concern basis under the historical-cost convention and in accordance with applicable accounting
standards in the United Kingdom.
The principal accounting policies are summarised below. The directors have concluded that the functional currency
is the US Dollar.
Cash-flow statement
The Company has not included a cash-flow statement as part of its financial statements since the consolidated financial
statements of the Group, of which the Company is a member, include a cash-flow statement and are publicly available.
Tangible fixed assets
Tangible fixed assets are stated at the historic purchase cost less accumulated depreciation. Freehold property is not
depreciated as the charge would be immaterial, but is tested for impairment. Plant, equipment and vehicles are depreciated
over their estimated useful lives at 25%.
Fixed-asset investments
Fixed-asset investments in subsidiaries are shown at cost less provision for impairment.
DEBTORS – these represent amounts due from customers in the normal course of business, are not interest bearing and are stated
at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts, which are charged to the
profit and loss account.
CASH AT BANK AND IN HAND – these include cash in hand and deposits held with banks with original maturities of three months or less.
CREDITORS – these are measured at amortised cost.
NOTE ii
Profit for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss
account for the year. M.P. Evans Group PLC reported a profit for the year ended 31 December 2012 of US$10,201,000 (2011
US$15,195,000).
The auditors’ remuneration for audit and other services was US$20,000 (2011 - US$20,000).
NOTE iii Employees
2012 2011
US$’000 US$’000
Employee costs during the year
Wages and salaries 1,189 1,077
Social security costs 163 137
Pension costs 81 157
1,433 1,371
NUMBER NUMBER
Average monthly number of persons employed
Staff 4 3
Directors 3 3
7 6
2012 ANNUAL REPORT
72
NOTE iv Tangible assets
PLANT, EQUIPMENT
BUILDINGS AND VEHICLES TOTAL
US$’000 US$’000 US$’000
Cost
At 1 January 2012 834 245 1,079
Additions — 2 2
At 31 December 2012 834 247 1,081
Accumulated depreciation
At 1 January 2012 — 199 199
Charge for the year — 18 18
At 31 December 2012 — 217 217
Net book value
At 31 December 2012 834 30 864
Net book value
At 31 December 2011 834 46 880
NOTE v
Investments
Subsidiary undertakings US$’000
At 1 January 2012 57,906
Provision for impairment b/f and c/f (13,696)
Disposals (12,716)
At 31 December 2012 31,494
At 31 December 2011 44,210
The following companies are the principal direct subsidiary companies of M. P. Evans Group PLC:
COUNTRY OF HOLDING
OPERATION %
M.P. Evans & Co. Limited UK 100
Sungkai Holdings Limited UK 100
Bertam (UK) Limited UK, Australia 100
Sungkai Estates Limited UK 100
The Singapore Para Rubber Estates Limited UK 100
Holdings are all of ordinary shares. Further information on the activity of the Group subsidiaries is given on page 75. The
directors believe the carrying value of investments is supported by their underlying net assets.
NOTE vi Debtors
2012 2011
US$’000 US$’000
Amounts owed by subsidiary undertakings 56,701 49,456
Other debtors 81 46
Prepayments and accrued income 72 63
56,854 49,565
73
2012 ANNUAL REPORT
Notes TO THE PARENT-COMPANY BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2012
NOTE vii Creditors – amounts falling due within one year
2012 2011
US$’000 US$’000
Amounts owed to subsidiary undertakings 39,171 45,034
Other creditors 954 1,518
40,125 46,552
NOTE viii Called-up share capital
See note 26 to the consolidated financial statements on page 65.
NOTE ix Reserves
SHARE- CAPITAL- PROFIT
PREMIUM REDEMPTION MERGER OTHER AND LOSS
ACCOUNT RESERVE RESERVE RESERVES TOTAL ACCOUNT
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2012 22,974 3,896 1,434 624 28,928 18,950
Issue of shares 2,163 — — — 2,163 —
Share-based payments — — — (309) (309) 331
Profit for the financial year — — — — — 10,201
Dividends* — — — — — (6,862)
At 31 December 2012 25,137 3,896 1,434 315 30,782 22,620
* See note 10 to the consolidated financial statements on page 56.
NOTE x Reconciliation of movement in shareholders’ funds
2012 2011
US$’000 US$’000
Profit/(loss) for the financial year 10,201 15,195
Dividends declared (6,862) (6,612)
3,339 8,583
Issue of shares 2,296 1,583
Share-based payments 23 28
Net increase in shareholders’ funds 5,658 10,194
At 1 January 56,971 46,777
At 31 December 62,629 56,971
2012 ANNUAL REPORT
74
Subsidiary and associated
undertakings
SUBSIDIARY UNDERTAKINGS
Details of the principal subsidiary undertakings as at 31 December 2012 are as follows:
% OF SHARES
AND VOTING COUNTRY OF COUNTRY OF
NAME OF SUBSIDIARY RIGHTS HELD INCORPORATION OPERATION FIELD OF ACTIVITY
PT Bilah Plantindo 80 Indonesia Indonesia Production of crude oil-palm f.f.b.
PT Pangkatan Indonesia 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Sembada Sennah Maju 80 Indonesia Indonesia Production of oil-palm f.f.b.
PT Simpang Kiri Plantation Indonesia 80 Indonesia Indonesia Production of oil-palm f.f.b.
PT Gunung Pelawan Lestari 90 Indonesia Indonesia Production of oil-palm f.f.b.
PT Prima Mitrajaya Mandiri 92.5 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Teguh Jayaprima Abadi 92.5 Indonesia Indonesia Production of oil-palm f.f.b.
PT Evans Lestari 100 Indonesia Indonesia Production of oil-palm f.f.b.
PT Evans Indonesia 100 Indonesia Indonesia Provision of consultancy services
Gubbagunyah Partnership 100 Australia Australia Beef-cattle farming
Bertam Consolidated Rubber 100 England Malaysia Property development and
Company Limited and Wales production of oil-palm f.f.b.
Bertam (U.K.) Limited 100 England United Kingdom Beef-cattle farming
and Wales and Australia
The shareholdings in the above companies represent ordinary shares except for Gubbagunyah Partnership, which is a partnership and
so has no class of share.
ASSOCIATED UNDERTAKINGS
Details of the associated undertakings as at 31 December 2012 are as follows:
ISSUED, FULLY-PAID % COUNTRY OF COUNTRY OF
SHARE CAPITAL HELD INCORPORATION OPERATION FIELD OF ACTIVITY
Unlisted
PT Agro Muko Rp 54.578.7m 36.84 Indonesia Indonesia Production of crude palm oil,
palm kernels and rubber
PT Kerasaan Indonesia Rp138.07m 38.00 Indonesia Indonesia Production of oil-palm f.f.b.
The North Australian Pastoral A$16.80m 34.37 Australia Australia Beef-cattle farming
Company Pty Limited
Bertam Properties Sdn. Berhad. MYR60.00m 40.00 Malaysia Malaysia Property development
75
2012 ANNUAL REPORT
Analysis of plantation land areas
FOR THE YEAR ENDED 31 DECEMBER 2012
The information in the following pages does not form part of the audited financial statements.
INFRASTRUCTURE/ COOPERATIVE
TOTAL CONSERVATION SCHEMES
OWNERSHIP MATURE IMMATURE PLANTED AREAS TOTAL PLANTED
% HA HA HA HA HA HA
Subsidiaries – oil palm
Pangkatan 80.00 2,207 220 2,427 159 2,586 —
Bilah 80.00 2,461 395 2,856 105 2,961 —
Sennah 80.00 1,681 — 1,681 132 1,813 —
Total Pangkatan group 6,349 615 6,964 396 7,360 —
Simpang Kiri 80.00 2,375 114 2,489 165 2,654 —
Total Sumatra 8,724 729 9,453 561 10,014 —
East Kalimantan 92.50 7,174 2,508 9,682 2,391 12,073* 4,002
Bangka 90.00 1,970 1,529 3,499 509 4,008* 1,580
Total new Indonesian projects* 9,144 4,037 13,181 2,900 16,081 5,582
Total Indonesia 17,868 4,766 22,634 3,461 26,095 5,582
Total Malaysia - Bertam 100.00 65 — 65 5 70 —
Total majority owned 17,933 4,766 22,699 3,466 26,165 5,582
Group share of subsidiaries’ land 15,452 4,279 19,731 3,124 22,855 —
Associates
Agro Muko - oil palm 36.84 16,694 1,196 17,890 3,685 21,575 620
- rubber 36.84 932 624 1,556 — 1,556 —
17,626 1,820 19,446 3,685 23,131 620
Kerasaan - oil palm 38.00 1,905 412 2,317 46 2,363 —
Total associates 19,531 2,232 21,763 3,731 25,494 620
Group share of associates’ land 7,217 827 8,044 1,375 9,419
Memorandum:
Subsidiaries and Group
share of associates 25,150 5,593 30,743 4,841 35,584
Group share of subsidiaries
and associates 22,670 5,106 27,776 4,499 32,275
NOTE
* The currently-estimated total plantable area for Group ownership is 10,600 hectares in East Kalimantan and 6,000
hectares on Bangka; for the cooperatives 4,400 hectares in East Kalimantan and 4,000 hectares on Bangka.
2012 ANNUAL REPORT
76
5-year summary
2012 2011 2010 2009 2008
TONNES TONNES TONNES TONNES TONNES
Production
Crude palm oil 75,400 35,600 30,000 27,000 22,300
Palm kernels 14,800 8,700 7,300 6,800 6,100
Crops
Oil-palm fresh fruit bunches (“f.f.b.”)
Majority-owned estates – Indonesia 317,000 249,300 196,400 171,300 144,700
– Malaysia 1,600 1,600 1,600 1,700 16,800
– total 318,600 250,900 198,000 173,000 161,500
Associated-company estates 410,800 403,800 369,100 384,200 355,200
US$ US$ US$ US$ US$
Average sale prices
Crude palm oil – Rotterdam c.i.f. per tonne 998 1,123 905 680 941
Exchange rates
US$1 = Indonesian Rupiah – average 9,355 8,763 9,081 10,374 9,657
– year end 9,670 9,068 8,991 9,400 10,950
US$1 = Australian Dollar – average 0.97 0.97 1.09 1.28 1.20
– year end 0.96 0.98 0.98 1.11 1.43
US$1 = Malaysian Ringgit – average 3.09 3.06 3.22 3.52 3.33
– year end 3.06 3.17 3.08 3.42 3.46
£1 = US Dollar – average 1.59 1.60 1.55 1.57 1.85
– year end 1.63 1.56 1.57 1.61 1.44
US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 83,213 57,756 42,091 28,391 30,387
Gross profit 23,035 25,919 21,887 11,705 13,834
Group-controlled profit before tax 16,700 24,350 19,359 15,338 23,447
US CENTS US CENTS US CENTS US CENTS US CENTS
Basic earnings per share – continuing 32.51 66.39 41.17 31.92 48.88
– continuing
and discontinued 32.51 66.39 41.17 34.94 96.26
PENCE PENCE PENCE PENCE PENCE
Dividend per share 8.00 8.00 7.50 7.00 7.00
US$’000 US$’000 US$’000 US$’000 US$’000
Equity attributable to the owners of
M. P. Evans Group PLC 351,083 337,975 307,578 275,498 249,178
Net cash generated by operating activities 33,897 48,339 19,417 12,311 8,825
77
2012 ANNUAL REPORT
Notice of meeting
NOTICE IS HEREBY GIVEN that the annual general
meeting of M.P. Evans Group PLC will be held at
Tallow Chandlers’ Hall, 4 Dowgate Hill, London
EC4R 2SH on 6 June 2013 at 12 noon for the
following purposes:-
AS ORDINARY BUSINESS
1 To receive and consider the report of the directors
and the audited consolidated financial statements
for the year ended 31 December 2012.
RESOLUTION ON FORM OF PROXY No 1
2 To elect Mr J Green-Armytage as a director.
RESOLUTION ON FORM OF PROXY No 2
3 To re-elect Mr T R J Price as a director.
RESOLUTION ON FORM OF PROXY No 3
4 To re-elect Mr K P Legg as a director.
RESOLUTION ON FORM OF PROXY No 4
5 To re-elect Mr R M Robinow as a director.
RESOLUTION ON FORM OF PROXY No 5
6 To declare a final dividend
RESOLUTION ON FORM OF PROXY No 6
7 To re-appoint PricewaterhouseCoopers LLP as
auditors and to authorise the directors to determine
their remuneration.
RESOLUTION ON FORM OF PROXY No 7
AS SPECIAL BUSINESS
To consider and, if thought fit, pass the following
resolutions, of which resolution 8 will be proposed as
an ordinary resolution and resolutions 9 and 10 will
be proposed as special resolutions:-
8 That, in substitution for all existing unexercised
authorities, the authority conferred on the directors
by article 7.2 of the Company’s articles of
association be renewed (unless previously
renewed, varied or revoked) for a period ending on
the earlier of the date of the Company’s next annual
general meeting and 30 June 2014 and, for that
period, the Section 551 Amount is £1,829,047.
RESOLUTION ON FORM OF PROXY No 8
9 That, in substitution for all existing unexercised
authorities, the authority conferred on the directors
by article 7.3 of the Company’s articles of
association be renewed and extended (unless
previously renewed, varied or revoked) for a
period ending on the earlier of the date of the
Company’s next annual general meeting and
30 June 2014 so that the directors are authorised
to allot shares pursuant to article 7.2 of the
Company’s articles of association and to sell
treasury shares for that period in an aggregate
amount of up to £274,357 (the section 561
amount).
RESOLUTION ON FORM OF PROXY No 9
10 That the Company is hereby generally and
unconditionally authorised to make market
purchases (within the meaning of section 693 of
the Companies Act 2006) of shares of 10p each
in the capital of the Company provided that:-
(a)
(b)
(c)
(d)
the maximum number of shares hereby
authorised to be purchased is 5,487,140;
the minimum price which may be paid for
each share is 10p (exclusive of expenses);
the maximum price (exclusive of expenses)
which may be paid for each share is an
amount equal to 105% of the average of the
middle-market quotations for such shares as
derived from the Daily Official List of the
London Stock Exchange for the five business
days immediately preceding the day of
purchase; and
the authority hereby conferred shall expire at
the conclusion of the next annual general
meeting of the Company or on 30 June 2014
whichever shall be the earlier save that the
Company may, before the expiry of this
authority, make a contract of purchase which
will or may be executed wholly or partly
after such expiry and may make a purchase
of shares pursuant to any such contract.
RESOLUTION ON FORM OF PROXY No 10
By order of the board
C Hayes
Company Secretary
24 April 2013
2012 ANNUAL REPORT
78
NOTES
1) A member of the Company entitled to attend, speak and vote
at the meeting convened by this notice may appoint a proxy
to exercise all or any of his rights to attend, speak and vote at
the meeting on his or her behalf. A proxy need not be a
member of the Company. Appointment of a proxy will not
subsequently preclude a member from attending and voting
at the meeting in person if he or she so wishes. A member
may appoint more than one proxy provided that each proxy
is appointed to exercise the rights attached to different shares
held by the member. The form of proxy contains instructions
on how to appoint more than one proxy.
2) A form of proxy for use at the meeting is enclosed. Please
return the form of proxy as soon as possible. To be valid, it
must be received by post or (during normal business hours
only) by hand at the office of the registrars, Computershare
Investor Services PLC, at The Pavilions, Bridgwater Road,
Bristol, BS99 6ZZ no later than 12 noon on 4 June 2013 (or,
if the meeting is adjourned, no later than 48 hours before the
time for holding the adjourned meeting, or, if a poll is taken
otherwise than at or on the same day as the meeting at which
it is demanded, no later than 24 hours before the time
appointed for the taking of the poll).
3) The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who
have been nominated to receive communications from the
Company in accordance with section 146 of the Companies
Act 2006 (“nominated persons”). Nominated persons may
have a right under an agreement with the registered
shareholder who holds the shares on their behalf to be
appointed (or to have someone else appointed) as a proxy.
Alternatively, if nominated persons do not have such a right,
or do not wish to exercise it, they may have a right under
such an agreement to give instructions to the person holding
the shares as to the exercise of voting rights.
4) Pursuant to regulation 41 of the Uncertificated Securities
Regulations 2001, the Company has specified that only those
shareholders registered on the register of members of the
Company at 11.00 p.m. on 4 June 2013 (or, if the meeting is
adjourned, 48 hours before the time of the adjourned
meeting) shall be entitled to attend and vote at the meeting in
respect of the number of shares registered in their name at
that time. Changes to the register of members after that time
will be disregarded in determining the rights of any person to
attend and vote at the meeting.
5) As at 24 April 2013, the Company's issued share capital
consisted of 54,871,402 shares carrying one vote each.
Therefore the total number of voting rights in the Company
as at that date was 54,871,402
6) Copies of the directors’ service contracts and terms and
conditions of appointment will be available for inspection at
the registered office of the Company during normal business
hours and at the place of the meeting from 15 minutes prior
to the meeting until its conclusion.
7) Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all
of its powers as a member, but powers purported to be
exercised by more than one authorised representative in
respect of the same shares will be treated as not exercised.
8) Members who wish to communicate with the Company in
relation to the meeting should do so using the following
means: by writing to the Registrars at The Pavilions,
Bridgwater Road, Bristol BS99 6ZZ. No other methods of
communication will be accepted. In particular, no person
may use any electronic address to communicate with the
Company for any purposes other than those expressly stated
in the relevant document.
Any addressee of this notice who has sold or transferred all
of the shares of the Company held by him or her should pass
the annual report of which this notice forms part (including
the form of proxy enclosed herewith) to the person through
whom the sale was effected for transmission to the
transferee or purchaser.
79
2012 ANNUAL REPORT
Professional advisers
and representatives
PRINCIPAL BANKERS
HSBC Bank plc
105 Mount Pleasant
Tunbridge Wells
Kent TN1 1QP
Bank International Indonesia
Graha Irama
Jalan H. R. Rasuna Said
Blok X-1, Kav. 1-2
Jakarta 12950
Indonesia
Commonwealth Bank of Australia
PO Box 2856
Toowoomba
Queensland 4350
Australia
AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Malaysia
HSBC Bank Malaysia Berhad
1 Leboh Downing
10300 Pulau Pinang
Malaysia
NOMINATED ADVISER AND BROKER
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
SOLICITORS
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London EC1A 2FG
SECRETARY AND REGISTERED OFFICE
Claire Hayes
3 Clanricarde Gardens
Tunbridge Wells
Kent TN1 1HQ
Tel: 01892 516333
Fax: 01892 518639
www.mpevans.co.uk
Company number: 1555042
INDONESIA REGIONAL OFFICE
P.T. Evans Indonesia
Gedung Graha Aktiva, Suite 1001
Jl HR Rasuna Said Blok X-1 Kav 03
Jakarta 12950
MANAGING AGENT IN MALAYSIA
Straits Estates Sdn. Berhad
Loke Mansion
147 Lorong Kelawei
10250 Penang
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
1 Embankment Place
London WC2N 6RH
REGISTRARS
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 08707 071176
Fax: 08707 036101
www.computershare.com
Email: www.investorcentre.co.uk/contactus
Designed, typeset and printed
by Michael R. Dalby Limited
28 Quebec Way, Canada Water
London SE16 7LF
020 7394 1112
email: mrd@mrdltd.plus.com
2012 ANNUAL REPORT
80
VENUE OF ANNUAL
GENERAL MEETING
on Thursday, 6 June 2013 at 12 noon
Tallow Chandlers’ Hall
4 Dowgate Hill
London EC4R 2SH
www.mpevans.co.uk