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4
ANNUAL REPORT 2014
BERTAM
(cid:1) SIMPANG KIRI
(cid:1) MEDAN
KERASAAN
(cid:1) KUALA LUMPUR
SENNAH (cid:1) (cid:1) BILAH
(cid:1) PANGKATAN
(cid:1) SINGAPORE
SUMATRA
(cid:1) PADANG
BANGKA
ISLAND
(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 371 ha
(cid:1)
JAKARTA
JAVA
INDONESIA
PLANTATIONS
MAJORITY HELD 24,100 ha OIL PALM
MINORITY HELD 19,900 ha OIL PALM
AND 1,700 ha RUBBER
(cid:1) DARWIN
AREA OF NAPCo
BREEDING AND
GROWING-OUT
PROPERTIES
(cid:1) MOUNT ISA
AREAS OF NAPCo
BACKGROUNDING
PROPERTIES
WOODLANDS AGGREGATION (cid:1)
NAPCo
FEEDLOT
BRISBANE (cid:1)
SYDNEY (cid:1)
MELBOURNE
(cid:1)
AUSTRALIA
BEEF-CATTLE FARMING
M AJORITY HELD 31,000 ha
M INORITY HELD 5,800,000 ha
Location of the Group’s properties
and those of its associated companies
as at 31 December 2014
(cid:1) MAJORITY HELD
HELD BY ASSOCIATED
COMPANIES
M P EVANS GROUP PLC 2014 ANNUAL REPORT
The M. P. Evans Group is committed to
producing environmentally-sustainable
palm oil and adopting the highest standards
of animal welfare for its beef cattle
PORTFOLIO OF ASSETS AS AT 31 DECEMBER 2014
24,100 planted hectares of majority-held oil-palm
plantations in Indonesia plus a 60-tonne-per-hour mill
in Kalimantan and a 40-tonne-per-hour mill in Sumatra
6,300 hectares of associated smallholder co-
operative schemes
20,000-hectare oil-palm concession newly acquired
in South Sumatra – initial estimate 10,000 hectares
plantable (7,000 for the Group)
21,600 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 371 hectares
Net current assets of US$27.8 million as at
31 December 2014
LAND ASSETS BY VALUE 31 DECEMBER 2014
10%
15%
(cid:0) INDONESIA
75%
(cid:0) AUSTRALIA (cid:0) MALAYSIA
CONTENTS
1
Portfolio of assets
2 Group highlights
3
Summary of results
4 Market information
6
8
8
9
Chairman’s statement
Strategic report, 2014
- Strategy
- Results and financial position
12 - Operations: palm oil
20 - Operations: beef cattle
23 - Operations: property
24 - Risk management
28 Environmental and social responsibility
32 Board of directors
32 Report of the directors
37 Corporate governance
41 Report of the board to the shareholders
on directors’ remuneration
43 Independent auditor’s report to the
members of M. P. Evans Group PLC
45 Consolidated income statement
46 Consolidated statement of
comprehensive income
47 Consolidated balance sheet
48 Consolidated statement of changes in equity
49 Consolidated cash-flow statement
50 Notes to the consolidated accounts
75 Independent auditor’s report to the members
of M. P. Evans Group PLC, parent Company
77 Parent-Company balance sheet
78 Notes to the parent-Company balance sheet
81 Subsidiary and associated undertakings
82 Analysis of plantation land areas
83 5-year summary
84 Notice of meeting
88 Professional advisers and representatives
The map of the venue of the annual general
meeting is shown on the inside back cover
1
Group Highlights
The Group increased plantation profits markedly in a year when the
average palm-oil price fell by 4% through higher crops and lower costs
Financial
Profit for the year US$37.1 million (2013 US$22.9 million)
Earnings per share US cents 61.0 (2013 US cents 36.0)
Total dividend for the year increased by 0.50 pence to 8.75 pence
(2.25 pence interim already paid)
Indonesian palm oil
Plantation profits higher at US$35.8 million (2013 US$24.8 million)
F.f.b. crops 12% higher than 2013 - 40% on Kalimantan and
24% on Bangka projects, 7% lower on established estates
Palm-oil price averaged US$821 per tonne (2013 US$856 per tonne);
currently around US$670 per tonne
2,200 hectares compensated at year end on the new Musi Rawas
project in South Sumatra; planting commenced in late 2014
Group’s crops projected to continue rising strongly in future years
Australian beef cattle
NAPCo made profit after 2013 loss as cattle prices strengthened markedly
Woodlands made small farm profit as cattle price strengthened though
weight gain fell
Good rainfall received in early 2015 – cattle prices have remained firm
Malaysian property
Reduced profits by Bertam Properties as completed sales
comprised lower-value properties
2
M P EVANS GROUP PLC 2014 ANNUAL REPORT
2014
US$ million
2013
US$ million
SUMMARY OF RESULTS
For the year ended 31 December 2014
Revenue
Gross profit
Group-controlled profit before tax
Profit for the year
90.9
35.9
34.9
37.1
Equity attributable to the owners of M. P. Evans Group PLC
371.9
Net cash inflow generated by operating activities
Basic earnings per 10p share
Dividend per 10p share in respect of the year
28.4
US cents
61.05
Pence
8.75
82.2
24.7
12.2
22.9
347.2
19.5
US cents
35.96
Pence
8.25
MANAGING DIRECTOR’S STATEMENT
It is pleasing to report that the Group’s overall profit for the year, US$37.1 million, was 62% higher than 2013’s
US$22.9 million. The gross profit from the Indonesian operations was 44% higher compared with 2013. This was as a
result of higher f.f.b. crops, particularly on the Kalimantan and Bangka projects, slightly lower average palm-oil prices
and costs beneficially affected by the strengthening of the US Dollar and higher production of palm oil. Woodlands and
NAPCo benefited from higher cattle prices. Woodlands recorded a slightly-improved result, approximately breaking
even as in the previous year, whilst NAPCo turned 2013’s loss round to a profit in 2014 despite experiencing another
difficult season. The property activities in Malaysia resulted in lower profits in 2014, as development profits, despite
higher numbers of units sold and completed, fell due to lower-margin sales being made in 2014.
The upward trend of the Group’s f.f.b. crops continued in 2014 with 385,400 tonnes harvested, 12% more than
2013’s 344,200 tonnes. The crop from the Kalimantan project was 40% higher and from
the Bangka project, despite two acute dry periods in the year, was 24% higher.
The associated-company crops were similar to 2013 and profits were slightly higher.
The unusually-dry conditions experienced in early 2014 and some flooding in early 2015 have
affected f.f.b. crops in the early part of 2015 although recently the crop has started to recover.
Palm-oil prices have been at lower levels so far in 2015. Australian cattle prices remain firm.
Progress on the new Musi Rawas project was slower than originally expected but by the
end of 2014 some 2,200 hectares had been compensated. Planting commenced, as
expected, at the end of 2014.
Philip Fletcher
3
Palm oil is the world’s largest vegetable oil,
with production in 2014 of 59.3 million
tonnes and 36% of the global production of
the major vegetable oils. Soybean oil is the
second largest with 45.1 million tonnes and
27%. Palm-kernel oil accounts for a further
6.5 million tonnes (4%).
PALM-OIL PRICE
US$ per tonne, Rotterdam c.i.f.
MARKET INFORMATION
Palm oil
The average palm-oil price (Rotterdam c.i.f.) was
lower, at US$821 per tonne, than the level of
US$856 seen in 2013. Relative strength during
the first half of the year, notably a peak of nearly
US$1,000 per tonne at the beginning of March as
the market responded to fears of an El Niño, gave
way to much weaker prices in the second half.
The price oscillated around US$700 per tonne
after falling sharply during August as competing
oil seeds posted good harvests, especially
soybeans in both North and South America.
This was in spite of the impact of lower palm
crops resulting from dryness early in the year and
relatively low stock levels of palm oil. In 2015
the price has generally moved between US$650
and US$700 per tonne.
Palm oil is used mainly as a cooking oil but
also in margarine, shortenings (cakes,
biscuits), soap, cosmetics, lubricants and
more recently in bio-diesel.
Palm oil has the lowest cost of production
and is the most productive of all the major
vegetable oils. More than 7.0 tonnes per
hectare per annum can be produced in
good–quality plantings compared with around
1.0 tonne for its main rival, soybean oil.
CROPS OF OIL-PALM FRESH FRUIT BUNCHES ‘000 TONNES
MAJORITY-OWNED ESTATES IN INDONESIA
ASSOCIATED-COMPANY ESTATES
249
196
D
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S
386
344
317
387
387
409
401
366
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
420
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
4
M P EVANS GROUP PLC 2014 ANNUAL REPORT
Beef cattle
Australian beef-cattle prices rose in 2014, both for
backgrounded cattle destined for feedlot “finishing”
(Woodlands) and heavier, grain-finished, cattle
(NAPCo). The weakening Australian Dollar and
stronger Asian demand improved prices in the
second half, especially for NAPCo cattle. Prices
remain firm in 2015.
Australia is one of the world’s largest beef
exporters with some 17% of global trade.
Australia is well placed geographically to serve
Asia – the world’s fastest-growing beef consumer.
NAPCo (34.4% held) is one of Australia’s leading
beef-cattle companies with thirteen properties
covering an area of 5.8 million hectares.
EASTERN YOUNG CATTLE
INDICATOR (EYCI) – WOODLANDS
A$ per kg carcass weight
100-DAY SHORTFED CATTLE
– NAPCo
A$ per kg carcass weight
5
AGE PROFILE OF THE GROUP’S OIL PALMS
31 DECEMBER 2014
SUBSIDIARIES – AVERAGE AGE 8.0 YEARS
Age in years
<5
6-10
11-15
16-20
21-25
>25
<5
6-10
11-15
16-20
21-25
>25
0
10
20
30
40
50
60
70
ASSOCIATES – AVERAGE AGE 13.4 YEARS
Age in years
0
10
20
30
40
50
60
70
MAIN PRODUCERS OF PALM OIL – 2014
4
4
4
4
4
,
,
,
,
,
3
3
3
3
7
1
9
9
9
9
6
6
6
6
8
0
0
0
0
6
0
3
3
3
3
1
,
7
7
7
7
1
9
9
9
9
2
1
,
4
4
4
4
01,6
01,6
01,6
01,6
1,9
0
0
0
0
0
0
0
0
0
0
0
0
(cid:127)26,500
(cid:127)26,500
(cid:127)26,500
26,500
30,800
1 9 , 6 6 7
5
5
5
5
8
8
8
8
8 , 7
8 , 7
8 , 7
8 , 7
1
1
1
1
Thousand tonnes
(cid:0) INDONESIA 30,800 (52%)
(cid:0) MALAYSIA 19,667 (33%)
(cid:0) THAILAND 1,900 (3%)
(cid:0) COLOMBIA 1,120 (2%)
(cid:0) NIGERIA 1,010 (2%)
(cid:0) OTHER COUNTRIES
4,786 (8%)
TOTAL 59,283
MAIN USERS OF PALM OIL – 2014
1
9,6
7
1
0
4
8,8
7 , 8 1 1
4
4
1,6 7 0
7
1 ,1
2,012
(cid:127)
(cid:127)
6
2,2
(cid:127)
8
4
8
,
2
6,9
9
1
6
,
0
6
9
Thousand tonnes
(cid:0) INDONESIA 8,840 (15%)
(cid:0) INDIA 7,811 (13%)
(cid:0) EU 6,991 (12%)
(cid:0) CHINA 6,069 (10%)
(cid:0) MALAYSIA 2,848 (5%)
(cid:0) PAKISTAN 2,267 (4%)
(cid:0) NIGERIA 2,012 (3%)
(cid:0) THAILAND 1,670 (3%)
(cid:0) USA 1,144 (2%)
(cid:0) OTHER COUNTRIES
19,671 (33%)
TOTAL 59,323
%
28
49
6
5
6
5
%
18
13
13
32
18
5
D
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D
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:
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S
CHAIRMAN’S STATEMENT
RESULTS
I am pleased to report that the profit for the year
increased by 62% to US$37.1 million, compared with
US$22.9 million in 2013. Earnings per share rose
accordingly by 70% to US cents 61.0 (2013 US cents
36.0).
The markedly-improved profit was achieved largely as
a result of a 12% increase in the Group’s Indonesian
crops of oil palm fresh fruit bunches (“f.f.b.”), to
385,400 tonnes, despite a 4% decline in the average
palm-oil price to US$821 per tonne in 2014 compared
with 2013. The higher crop level was mainly
attributable to a significant increase from the Group’s
two new projects in East Kalimantan and on Bangka
Island. The profits of the Group’s two associated oil-
palm companies were similar to last year. In Australia,
a small profit was recorded at Woodlands, compared
with a small loss last year, while similarly, at
The North Australian Pastoral Company Pty Limited
(“NAPCo”), last year’s loss was turned round to a
profit. This resulted from a sharp increase in cattle
prices, especially for the heavier, export-orientated
cattle produced by NAPCo. With regard to the Group’s
Malaysian property-development activities, the
Group’s share of the profit achieved by Bertam
Properties Sdn. Berhad (“Bertam Properties”) declined
following a lower average value of completed property
sales. Overall, chiefly because of the substantially-
improved result at NAPCo, the Group’s share of its
associated companies’ profits increased by 23%.
DIVIDEND
Taking account of the increased profit, the board is
recommending a final dividend for the year of 6.50p
per share, a 0.50p per share increase compared with
the 6.00p per share in respect of 2013. Together with
the interim dividend of 2.25p per share paid in
November 2014 (the same as the interim dividend
paid in November 2013), the total dividend for the
year is therefore 8.75p per share. A scrip-dividend
alternative is again being offered (provided resolution
11 is passed at the annual general meeting).
STRATEGY
The Group’s strategy is to continue to expand its oil-
palm areas in Indonesia, in a sustainable and cost-
effective manner, and to capitalise on the value of its
Australian and Malaysian operations, using any sale
proceeds to fund the continuing Indonesian
development. The strategy is set out in more detail in
the strategic report on page 8.
KEY OPERATIONAL DEVELOPMENTS
In Indonesia, in addition to the increased crop levels
of f.f.b. referred to above, there was a commendable
improvement, once again, in the palm-oil extraction
rate achieved from the Group’s Kalimantan project,
which rose to 25.6% from 24.8%. On Pangkatan
Estate, the extraction rate was maintained at 23.9%
which the board considers acceptable in view of the
low quality of the (inherited) planting material on part
of Sennah Estate, one of the Group’s three estates
which provides Pangkatan Mill with f.f.b. On Bangka,
good progress has been made with the new mill and
commissioning is still expected to take place in
mid-2016.
Modest progress was made on Musi Rawas, the
Group’s new project in South Sumatra, with
compensation terms agreed with the users of the land
over some 2,200 hectares at the year end. Planting
commenced at the end of 2014 with some 90 hectares
in the ground at 31 December. At this early stage, the
board continues to estimate that of the 20,000-hectare
concession some 10,000 hectares may be plantable, of
which 7,000 hectares would accrue to the Group and
3,000 hectares to a smallholders’ cooperative which
will be managed by the Group.
During the year, the Group’s new plantings amounted
to 910 hectares (in addition to 320 hectares for the
smallholder areas). It is anticipated that this level will
be improved upon in future years, not least as a result
of the areas being opened up on Musi Rawas.
A welcome development during the year was the
receipt by Pangkatan Mill of International Sustainability
and Carbon Certification (‘’ISCC’’). The mill is already
accredited by the Roundtable for Sustainable Palm Oil
(“RSPO”) and as Indonesian Sustainable Palm Oil
(“ISPO”). In addition, during the year the Kalimantan
mill was accredited by RSPO, whilst the ISPO and
ISCC audits are under way.
In Australia, at Woodlands, in view of rising beef-cattle
prices, the board decided to replace the cattle owned
by third parties with its own cattle. As referred to in the
2014 interim report, negotiations are still in progress
regarding the sale of Woodlands but the property
continues to be operated on a ‘business-as-usual’ basis
until a sale is concluded. At NAPCo, despite another
challenging season, the herd number only declined by
6
M P EVANS GROUP PLC 2014 ANNUAL REPORT
Work on the construction of flood protection in Indonesia is
proceeding well and should improve yields considerably
5% thanks to the efforts of management and staff across
the company in minimising the impact of dry weather.
The drought-resistance measures were, as in 2013,
assisted by the recently-expanded feedlot, facilitating
the retention of more young cattle than would have
been possible in the past. As reported on page 11 of
the strategic report, the prospective sale process of a
majority holding in NAPCo, including the Group’s
34.4% share, drew to a close in 2013 without a sale
but the board will continue to consider any
opportunities that may arise in relation to its holding.
INDONESIAN INVESTMENT CLIMATE
The 2014 interim report referred to the fact that a draft
plantation law had been tabled, although not at that time
enacted, in the Indonesian House of Representatives.
This draft law included provisions which, if passed,
would have restricted foreign ownership of plantations in
Indonesia to 30%. A modified version of the draft law
was subsequently passed on 29 September 2014 that did
not include the 30% cap on foreign investment. The new
law mandates the Government to prioritise domestic
investment, protect local customary rights, empower
local farmers and to set a cap on foreign investment at
some point in the future. The current cap is 95%.
PROSPECTS
The Group’s f.f.b. crops are expected to continue to
rise substantially both in 2015 and in subsequent
years. Notwithstanding the decline in the palm-oil
price in the last two years, healthy profit margins are
still achievable and the board believes growth in
Indonesian domestic and global demand makes the
long-term outlook for palm oil positive.
The established Sumatran estates and the Banka
project have been particularly affected in 2015 by the
dry weather in 2014 and the Kalimantan project has
also recorded crops sharply below expectations
(although 8% higher than for the same period last
year) related to flooding in February 2015. Crops
have recently started to pick up. Palm-oil prices have
hovered between US$650 and US$700 per tonne
(Rotterdam c.i.f.) so far in 2015 reflecting, on the
upside, a slowdown in palm-oil production (relating to
last year’s dry weather) and, on the downside,
continuing weakness in mineral-oil prices.
with high temperatures, has affected pasture quality.
Very recently, substantial further rainfall has been
received on Woodlands, which will enable
considerably more young cattle to be acquired.
Despite the lack of further rain on most of the NAPCo
properties, there is sufficient feed to sustain the herd
until the year end. Although cattle prices have eased a
little, they remain strong and longer-term prospects, as
for palm oil, appear favourable.
CORPORATE-GOVERNANCE FRAMEWORK
The board recognises the importance of a sound
system of corporate governance and internal control,
so seeks to follow the principles set out in the
Corporate Governance Code for Small and Mid-Size
Quoted Companies 2013 published by the Quoted
Companies Alliance (“QCA”) as far as they are
relevant to the Group and its context. It should be
noted that the Group is not required to comply with
this code but it is nonetheless the board's intention to
disclose and report on the corporate-governance
structures and processes operated by the Group and to
develop these further to meet the standards
appropriate to the Company.
ACKNOWLEDGEMENTS
Mike Redshaw, an independent consultant, has
provided agronomic advice in respect of the
Indonesian plantation operations for many years. The
Group has benefited from his helpful advice both on
the established estates and on the new projects that
have been undertaken in Kalimantan and Bangka. He
has decided to retire and the board would like to place
on record its appreciation for the work that he has
done for the Group and to wish him well in his
retirement. The Group will continue to obtain
independent agronomic advice.
I should like, as ever, to express the board’s
appreciation to the Group’s managers, staff and workers
worldwide for their dedication and hard work and for
contributing to another improved
result for the year.
Peter Hadsley-Chaplin
After welcome rainfall was received early in 2015
both on Woodlands and across the majority of the
NAPCo properties, a lack of follow-up rain, combined
Chairman
24 April 2015
7
STRATEGIC REPORT 2014
STRATEGY
The Group’s strategy is to continue
to expand its oil-palm areas in
Indonesia in a sustainable and cost-
effective manner, and to capitalise
on the value of its Australian and
Malaysian operations using any sale
proceeds to fund the continuing
Indonesian development.
The Group’s two principal, majority-held, activities are
the ownership, management and development of
sustainable oil-palm estates in Indonesia (together with
the management and development of smallholder areas
adjoining the new projects), and the ownership and
management of beef-cattle operations in Australia.
The Group also has a joint venture in the oil-palm sector
and a substantial minority holding in a company
operating in the beef-cattle sector. In addition to these,
the Group owns a small oil-palm estate with property-
development potential and a significant minority share of
a property-development company operating on one of
the Group’s former estates. Both of these are located on
the mainland of Peninsular Malaysia, near Penang Island.
The total planted area of the Group’s majority-held
Indonesian operations extends to approximately
24,100 hectares, 910 of which were planted on its new
projects during 2014. The planted smallholder areas
adjoining the new projects amount to 6,300 hectares,
320 of which were planted in 2014. The estimated
unplanted land bank is some 9,000 hectares, including
the new Musi Rawas project, on the Group’s estates
and some 5,100 hectares on the adjoining smallholder
areas managed by the Group. It is the board’s aim for
the Group’s own areas to be planted at as rapid a rate
as the availability of suitable land permits. In addition
to the Group’s existing unplanted landbank, the board
seeks, in the future, to acquire further pieces of land
suitable for sustainable oil-palm development located,
if possible, near the Group’s existing estates. The
Group will also seek continually to maintain and,
where possible, improve agronomic standards and
productivity on its estates leading, ideally, to increased
crops of f.f.b. and, where relevant, production of crude
palm oil (“CPO”). Furthermore, the Group will
continue to work closely with its joint-venture partner,
SA SIPEF NV, (“SIPEF”) with regard to the two
associated estates which SIPEF manages, to ensure that
the highest standards are maintained.
In Australia, on the Group’s beef-cattle property,
Woodlands, it is aimed to maximise the kilograms of
beef produced. Productivity has been, and, where
appropriate, will continue to be, improved through the
enhancement of waters and fencing and the upgrading
of paddocks. Notwithstanding the continued
improvement measures in place at Woodlands, it
remains the board’s intention to dispose of this property
as and when suitable terms are agreed. With regard to
NAPCo, the aim is to maximise productivity in breeding
and fattening cattle. Productivity has in recent years
been enhanced both on the principal breeding stations
by the sinking of a significant number of new bore holes
(thereby providing drinking water for the cattle) and in
the grain-finishing feedlot by expansion of the facilities.
These measures have helped to render the operations
not only more productive but also more resistant to the
effects of drought. The strategy is for more bore holes to
be sunk in the future. In addition, over the past quarter
century substantial improvements have been made to
the genetic characteristics of the herd, and the strategy
is for this programme to continue.
In 2013, the majority shareholders in NAPCo
undertook a strategic review. Following this, they
indicated their willingness to sell part or all of their
holding, and M.P.Evans also indicated its willingness to
sell its holding in conjunction with them. The review,
and prospective sale process, drew to a close in late
2013 without a sale. The Group’s board will continue
to consider any opportunities that arise in relation
to its holding.
In Malaysia, the aim is for Bertam Properties to
continue to capitalise on the value of its land, either
by the development and sale of housing, retail and
other units or through the outright sale of raw land.
The Group will continue to reap the benefit of this
development and sale activity until eventually, in some
five to ten years’ time, the project is fully developed, or
until an acceptable offer is received to acquire the
Group’s 40% share. It is also the Group’s long-term
intention to dispose of its adjacent estate and
therefore, as a consequence, ultimately to exit from
Malaysia entirely.
8
M P EVANS GROUP PLC 2014 ANNUAL REPORT
RESULTS AND FINANCIAL POSITION
GROSS PROFIT FROM AGRICULTURAL ACTIVITIES
Revenue during 2014 was US$8.7 million higher than in
2013 as f.f.b crops grew strongly in the Group’s own
areas and those of its smallholder co-operative schemes.
This increase in crop volume combined with excellent
extraction rates more than outweighed a reduction in
the average price for CPO obtained during the year,
amounting to some US$35 per tonne. Increased
throughput at the Group’s Kalimantan Mill has, as
expected, reduced the unit costs of producing palm
products (CPO and palm kernels). This benign volume
effect was strengthened by the weakness of the
Indonesian Rupiah against the US Dollar which had the
effect of reducing, in US Dollar terms, operating costs
incurred in local currency. The Group’s two mills and
supplying estates now have a combined operating cost
of US$370 per tonne of palm products. Overall, this has
had a positive effect on the Indonesian gross-profit
margin which stands at 39.8% (2013 - 32.5%). The
planned construction of a mill on the Group’s Bangka
project is expected to give further impetus to this
improvement in the Group’s margins.
As anticipated in the 2013 annual report, the Group’s
project in Kalimantan has increased its gross profit to
US$10.9 million (2013 US$1.6 million) before the
bearer-biological-asset adjustment. Subject to changes
in the selling price, this trend is set to continue with
production of CPO and palm kernels rising as the palms
mature and approach peak productivity.
Results at Woodlands have improved, continuing the
trend emerging in 2013. The operation reported another
rise in cattle-trading profit resulting in a farm profit of
US$0.2 million (2013 loss of US$0.1 million). Given the
drought conditions in existence for much of the year,
cattle weight gains were lower than in 2013 but much-
improved cattle prices, notably towards the end of the
year, placed a high value on the weight gain that had
been achieved. This effect was emphasised by an
increase in the Group’s own herd in the second half of
the year by some 5,500 head as Woodlands was stocked
with its own cattle rather than replacing outgoing cattle
on ‘agistment’ (managed for a fee) with more third-party
animals.
As a result of the above, the Group’s gross profit
amounted to US$35.9 million (2013 US$24.7 million).
A detailed analysis is given in note 4 to the accounts on
pages 55 and 56. The Group’s palm-oil and beef-cattle
operations are reviewed in more detail in the section on
operations below, commencing on pages 12 and 20
respectively.
BEARER-BIOLOGICAL-ASSET ADJUSTMENT
Whilst, as widely documented in this report, the price of
CPO fell during 2014, the 20-year average price of CPO
used to value the Group’s biological assets nevertheless
rose to US$641 (2013 US$626). This was the principal
factor leading to a biological gain of US$15.1 million
(2013 US$9.1 million), supported by a reduction in unit
costs partly arising from a weaker Indonesian Rupiah.
The value of new plantings contributed US$2.9 million
towards the reported biological gain (2013 US$2.9
million). Overall, the net effect on profit of all the
components of the bearer-biological-asset adjustment
amounted to US$8.4 million (2013 US$6.0 million).
Following an amendment to International Accounting
Standard 41: Biological Assets issued by the
International Accounting Standards Board in June 2014,
the Group intends to account for its plantings under
International Accounting Standard 16: Property, Plant
and Equipment. Hence, as from 1 January 2015 the
Group will measure its planting at depreciated cost
rather than as a ‘biological asset’ determined using a
valuation model based on discounted cash flow. This
future measure is shown in the columns of the income
statement and balance sheet in this annual report
described as ‘(Result) before biological-bearer-asset
adjustment’.
OTHER ADMINISTRATIVE EXPENSES
Other administrative expenses of US$5.9 million were
US$1.5 million higher than the US$4.4 million
reported for 2013. This is almost entirely due to an
impairment of US$1.1 million made to the value of
land and buildings at Woodlands, the Group’s
wholly-owned cattle-backgrounding operation. This
impairment was based on external valuation advice.
Other administrative expenses also includes the cost of
introducing a bonus scheme for the Group’s four head
office staff, which was largely offset by reductions in
other head-office expenses.
9
Strategic report 2014 CONTINUED
ASSOCIATED COMPANIES
The Group’s share of its associated companies’ profits or losses , including the share of the Indonesian
companies’ biological-bearer-asset adjustments, compared with last year, was as follows:
2014 2013
POST-TAX POST-TAX POST-TAX POST-TAX)
PROFIT PROFIT PROFIT/(LOSS) PROFIT/(LOSS)
BEFORE BIOLOGICAL- BIOLOGICAL- AFTER BIOLOGICAL- BEFORE BIOLOGICAL- BIOLOGICAL- AFTER BIOLOGICAL-
BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET BEARER-ASSET
% ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT
HELD US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Agro Muko 36.84 9,856 (1,013) 8,843 6,949 1,661 8,610
Kerasaan 38.00 1,093 (39) 1,054 955 62 1,017
Total Indonesia 10,949 (1,052) 9,897 7,904 1,723 9,627
NAPCo 34.37 1,454 — 1,454 (2,429) — (2,429)
Bertam Properties 40.00 2,905 — 2,905 4,396 — 4,396
Total 15,308 (1,052) 14,256 9,871 1,723 11,594
The results of the Indonesian, Australian and
Malaysian associated companies are described
below and reviewed in more detail commencing on
pages 17, 21 and 23 respectively.
Indonesia
As foreshadowed in the 2013 annual report, PT Agro
Muko (“Agro Muko”) has entered a period of
replanting during which it is projected that its crop
will fall slightly, though there was only a marginal
drop in 2014’s crop compared with 2013 as the
average yield rose slightly across a smaller mature
hectarage. The modest oil-extraction rate of 22.5%
seen in 2013 was repeated in 2014 and so
production of CPO in 2014 was only fractionally
below that in 2013 (see page 17 below). Against this
background, Agro Muko was able to achieve
significantly higher prices in 2014 than in 2013,
partly as a result of achieving a good premium for its
RSPO-certified oil and partly from its export sales
which are sold for physical delivery up to three
months forward. This, together with stronger prices
for palm kernels, produced a 17% increase in
revenue. By contrast, rubber production increased as
the areas that have been replanted over recent years
mature, though a 26% fall in prices led to a fall in
rubber profits. The Group’s share of results before the
biological-bearer-asset adjustment amounted to
US$9.9 million (2013 US$6.9 million). The crop,
and results, of PT Kerasaan Indonesia (“Kerasaan”)
were very similar to those in 2013. As a result of the
above, the Group’s combined share of the post-tax,
pre-biological-bearer-asset adjustment profit of these
two associated companies in 2014 was US$10.9
million, an improvement of US$3.0 million (39%) on
the US$7.9 million recorded in 2013.
As with the Group’s own areas, the valuation of
biological assets in the associated plantation
companies benefited from the increase in the long-
term CPO price used in the valuation. In Agro Muko,
the costs of significant replanting and increases in
general expenses and overheads outweighed the
benefit of the rise in the long-term price of CPO
across its much larger hectarage. In Kerasaan, this
gain from the increase in the CPO price was
counterbalanced by the costs of replanting.
The Group’s share of the post-biological-bearer-
asset-adjustment, post-tax profit of the Indonesian
associates amounted to US$9.9 million (2013
US$9.6 million). The Group received gross dividends
10
M P EVANS GROUP PLC 2014 ANNUAL REPORT
of US$9.2 million from Agro Muko in 2014 (2013
US$5.2 million). Gross dividends from Kerasaan
were US$0.9 million (2013 US$0.6 million).
Australia
Following a severe drought in 2013, difficult
conditions persisted across much of eastern Australia
during 2014 despite which NAPCo was able to report
sales revenue slightly higher than for 2013. Prices for
all NAPCo’s cattle increased steadily throughout the
year and NAPCo worked hard to maintain its herd
though, at the year end, numbers had nonetheless
fallen by 5%, or 10,000 head (2013 – 9,500 head).
This was largely due to lower brandings resulting
from the poor seasonal conditions. Adverse weather
conditions also affected revenue since cattle were
slower to achieve required sales weights. Slower
weight gain led to a 9% fall in the number of animals
sold, offsetting to some degree the general rise in
cattle prices that produced a significant increase in
the year-end valuation of the herd, itself central to the
much-improved result reported by NAPCo. NAPCo’s
expanded feedlot at Wainui was beneficially put to
full use in mitigating the effects of the indifferent
conditions though leading to higher costs as feedlot
rations were increased at a time of high grain prices.
As a result of all these factors, the Group’s share of
NAPCo’s profit amounted to US$1.5 million (2013
loss of US$2.4 million). The Group’s share of
NAPCo’s gross dividends was US$0.4 million (2013
US$0.6 million ).
Malaysia
Property-development revenue fell during 2014 to
US$36.5 million compared with the US$46.0 million
reported in 2013, generating a profit after tax of
US$7.7 million (2013 US$11.2 million). As noted in
previous annual reports, property-development
revenue is brought to book under the international
accounting standard IFRIC 15 only when a sale is
fully completed. Exceptional income of US$1.5
million in 2013, relating mainly to forfeiture fees
paid by purchasers defaulting on contracts to buy
land and contractor penalties, was not repeated in
2014. There were no sales of land during 2014 and
the golf operation continued to make a small loss.
Overall, the Group’s share of Bertam Properties’
profit for the year amounted to US$2.9 million
(2013 US$4.4 million). The Group’s share of Bertam
Properties’ gross dividends amounted to US$1.2
million (2013 US$3.5 million).
PROFIT FOR THE YEAR
As a result of all the above, the Group profit for the
year amounted to US$37.1 million, an increase of
US$14.2 million (62%) compared with the US$22.9
million reported for 2013. This rise in reported profit
led to an increase of 70% in basic earnings per share
to US cents 61.0 (2013 US cents 36.0).
NET ASSETS AND BORROWING
At the end of 2014, the net assets shown in the
Group’s balance sheet amounted to US$400.3
million (2013 US$371.3 million). Current assets
exceeded current liabilities by US$27.8 million
(2013 US$33.1 million) and the Group had cash
balances of US$48.0 million (US$20.1 million of
which had been pledged as security). At the end of
2014, the Group’s gearing ratio was 6% (2013 -
15%) and it held a net cash balance of US$ 1.5
million (2013 net debt of US$10.1 million).
11
OPERATIONS
PALM OIL
The planned increase in f.f.b. crops on the Group’s new projects in
Kalimantan and Bangka continues, with new areas coming into maturity
PALM-OIL MARKET
Average palm-oil prices (Rotterdam c.i.f.) were
4% lower in 2014 at US$821 per tonne, compared
with US$856 in 2013. Downward pressure on the
price primarily related to the significant increase
in the production of oilseeds, particularly
soybeans, in the year. Of the major oils, the price
of palm oil remained the firmest with the normal
discount to soybean oil narrowing to below
US$100 per tonne, compared with the average in
recent years of over US$150.
Palm-oil prices remained relatively strong in the
first quarter of 2014 as dry weather in the main
producing countries, Indonesia and Malaysia, and
the prospect of El-Niño conditions later in the year
(which did not materialise) reduced crop
expectations. The early dry period did indeed
affect crops later in the year and world supply
(opening stocks plus production) increased
considerably more slowly than in 2013.
Early price firmness was also helped by the
Indonesian Government’s plans to boost bio-diesel
admixture to 10%. However, the dramatic fall in
the mineral-oil price in the second half of the year
resulted in palm oil becoming uneconomic for this
purpose and so blending and exports reduced
significantly. Palm-oil prices fell accordingly.
Palm-oil use by the major buyers, India, China and
the EU, stagnated or fell in 2014 and world
consumption increased (1.5 million tonnes) less
than in previous years (2013 - 5.2 million tonnes).
Indonesia became the world’s biggest palm-oil
user. Further information is shown in the charts
on pages 4 and 5.
Palm-kernel-oil prices followed palm-oil prices
and weakened in the latter part of the year,
although not to the same extent. The fall in
coconut-oil production (a lauric oil like palm-
kernel oil) in the Philippines following Typhoon
Haiyan in 2013 was still having some effect in
supporting lauric-oil prices in 2014.
MAJORITY-OWNED ESTATES
CROPS AND PRODUCTION
The overall Group f.f.b. crop of 385,400 tonnes
was 12% higher than the 344,200 tonnes recorded
for 2013. As referred to in the 2014 interim report,
the original crop estimate for the year of 425,000
tonnes had to be revised downwards mid-year to
385,000 tonnes (which was indeed achieved) as a
result of an acute dry period experienced in the
early part of the year. The dry period particularly
affected the estates in North Sumatra and Bangka.
However, notwithstanding this temporary set back,
the Group’s overall upward trend of crops
continued and, in the circumstances, it is still
pleasing to report a 12% increase, primarily
derived from the Kalimantan project. Oil-
extraction rates continued at most satisfactory
levels in 2014 with the Kalimantan mill achieving
an increase to the commendable level of 25.6%.
Details of crops, production and extraction rates
12
New planting, Sumatra
for 2014, with comparative figures for 2013, are set
out below:-
2014 INCREASE/ 2013
TONNES (DECREASE) TONNES
%
Crops
Own crops
Pangkatan group 140,400 148,800
Simpang Kiri 42,100 46,600
182,500 (7) 195,400
Kalimantan 160,200 40 114,500
Bangka 42,700 24 34,300
385,400 12 344,200
Smallholder co-operative crops
Kalimantan 64,500 52 42,400
Bangka 22,200 21 18,300
86,700 43 60,700
Outside crop purchased
Kalimantan 15,600 (55) 34,400
Production
Crude palm oil
Kalimantan 61,500 47,400
Pangkatan 33,500 35,500
95,000 15 82,900
Palm kernels
Kalimantan 10,100 7,800
Pangkatan 8,300 8,600
18,400 12 16,400
Extraction rates % %
Crude palm oil
Kalimantan 25.6 24.8
Pangkatan 23.9 23.9
Palm kernels
Kalimantan 4.2 4.1
Pangkatan 5.9 5.8
REVIEW OF OPERATIONS
Sumatra – established estates
The four established estates in Sumatra (see their
location on the map on the inside front cover)
continue to operate well. As anticipated in the 2014
interim report, the unusually dry months in the early
part of 2014 impacted negatively on the f.f.b. crop in
the second half of the year. The crop for the second
half was similar to that in the first, whereas in more
normal years it would be markedly higher than in the
first half.
As has been referred to in previous annual reports,
two of the estates, Bilah and Simpang Kiri, were
established as new projects in the early 1980’s. The
programme for replanting their earlier plantings, in
which the yields are falling, is under way. This
programme will continue for the next seven or eight
years and crops are expected to remain, in total, at
around current levels until the new replantings
mature and yields start to accelerate. During 2014,
136 hectares were replanted on Bilah Estate,
60 hectares on Sennah Estate and 109 hectares on
Simpang Kiri Estate, totalling 305 hectares. Over the
next few years, the programme is to replant between
350 and 600 hectares each year.
The oil-extraction rate achieved by Pangkatan Mill
(which processes the f.f.b. from Pangkatan, Bilah and
Sennah Estates) continued during 2014 at the very
acceptable average rate of 23.9%. The essential
close coordination between mill and field
management ensured that fruit of the optimum
13
Operations Palm oil CONTINUED
quality and ripeness is delivered to the mill for
processing. High engineering standards required in
the mill were sustained, achieving good extraction
rates and oil quality and minimum oil losses. The
low-quality planting material on Sennah Estate,
which was acquired, and known about, when the
estate was purchased in 2002, has held back (to a
minor extent) the overall extraction rate in Pangkatan
Mill. These areas are in the process of being
replanted with modern, high-yielding seeds and, as
these mature over the next few years, extraction rates
are expected to increase.
Pangkatan Mill has spare capacity. In order to spread
the fixed mill costs more thinly over higher
throughput, and therefore reduce unit costs, local
management is in the process of investigating whether
it is worthwhile, in an area where competition is
fierce, purchasing f.f.b. from local plantation owners
at certain times of the year when crops are high. In the
event that this does go ahead, it is likely that the mill’s
extraction rate will go down but this will be reflected
in the price that would be paid to the providers of
f.f.b. As it is likely that at least some purchases of f.f.b.
would be from non-accredited sources, the mill would
not sell its CPO as 100% “segregated” as it does at the
moment and therefore would restrict the amount it
could sell as RSPO/ISCC accredited to the proportion
that is derived from accredited sources. This is known
as the “mass-balance” system. The board believes that
selective purchasing of third-party f.f.b. should
profitably make use of spare capacity in the Pangkatan
mill.
Bilah and Sennah Estates are low lying and each has
flood-protective bunding. Extensive improvements
to drains on the estates have been made over the last
few years. This means that, in periods of heavy
rainfall, more surplus water can be held in the drains
when the water level is higher outside the bunds
than on the estates. There are water gates in the
bunds on each estate and new, extra ones were
installed during 2014. The estates are in a tidal area
so the level of water rises and falls outside the bunds.
By adroit use of the gates, water inside the estate can
often be evacuated when the tide is low.
Consideration is still being given by management to
capturing methane from Pangkatan Mill’s effluent
pond, “scrubbing” it, burning it in a gas engine and
selling the resultant electricity to the government
electricity board (“PLN”). This project will only
progress if acceptable terms can be negotiated with
PLN.
During 2014, Pangkatan Mill received International
Sustainability and Carbon Certification (“ISCC”). The
mill is already accredited by the international Round
Table on Sustainable Palm Oil (“RSPO”) and as
Indonesian Sustainable Palm Oil (“ISPO”). The
annual RSPO “surveillance” audit was successfully
completed in 2014.
During the year, credits for both CPO and palm
kernels were sold through a marketing platform with
those for palm-kernel oil (and therefore palm kernels)
being particularly robust following the devastating
effects on Philippine coconut plantations of Typhoon
Haiyan. Premia were also received from buyers for
accredited CPO and also for good-quality CPO with
low percentages of free fatty acid (“f.f.a.”)
Sumatra – Musi Rawas project
Modest progress was made during 2014 on the Musi
Rawas project in South Sumatra. Local elections
were held in the area of the project and it was felt
prudent to suspend land-compensation negotiations
until the elections were over. Towards the end of
2014, these negotiations re-started and, as at the end
of the year, some 2,200 hectares had been
compensated. Planting commenced at the end of
the year with just under 100 hectares in the ground
at the year end.
An experienced management team is in place and
the nursery is now well established, ready for the
planting programme which is under way.
The board currently estimates that some 10,000
hectares might ultimately be plantable although it is
very difficult at this early stage to be certain what
will transpire. As has been said before, much will
depend upon the Group’s ability to agree acceptable
terms with the users of the land. The Group has
undertaken to develop 30% of the planted land for
the smallholders’ cooperatives. The members of the
cooperatives will be those who have agreed to sell
their rights to the land to the Group.
14
The annual RSPO surveillance audit in Kalimantan
was successfully completed in 2014
Kalimantan
The 40% increase in the f.f.b. crop to 160,200
tonnes in 2014, compared with the 114,500 tonnes
recorded in 2013, continues the expected upward
trend from this young project. The f.f.b. purchased
from the associated co-operative schemes increased
similarly whilst purchases from nearby, third-party
estates continued, as anticipated, to decline as
competition increases in the locality as a
consequence of new mills being constructed.
Planting progressed at modest levels during 2014 as
the project nears completion. At the end of 2014,
some 13,940 hectares had been planted of which
9,780 hectares relate to the Group and 4,160
hectares to the smallholders’ co-operatives. The
board’s estimation remains that, ultimately, some
15,000 hectares will be planted of which 10,600
hectares will relate to the Group. The unplanted
balance is largely low-lying, flood-prone land which,
it is intended, will be protected from flooding by the
construction of bunds and the installation of
powerful pumps. Preliminary work has already
commenced and official clearances and permissions
are currently being sought from the authorities for the
project. It is hoped that, once these have been
received, work proper will commence during 2015
and is expected to extend into 2016. It is anticipated
that approximately 950 hectares will be able to be
flood-protected and yields from these areas are
expected to be high. In addition, there are 900
hectares that have already been planted but which
are susceptible to regular flooding. These areas will
be protected by the new bunds and yields are
expected to improve markedly as a result.
Management has been concentrating on maximising
yields and field standards on the Kalimantan project
now that the majority of the planting programme has
been completed. To this end, an experienced
general manager was appointed in 2014 to
undertake an agricultural audit of the operations to
assist the senior management.
The bulking station on the side of the Mahakam
River continues to work successfully. Bulk purchases
of such items as fertiliser and road-stoning materials
are delivered by barge and unloaded at the jetty.
By transporting these items in bulk, competitive cost
New planting, Sumatra
15
Operations Palm oil CONTINUED
prices are achieved. The CPO stored in the bulking
tanks is pumped into customers’ barges. Of the three
tanks, one is now rented to a third party, whilst the
other two are utilised for the Group’s increasing
production. A second tank had been rented to a
third party but this arrangement ceased in 2014 as
more storage space is required for the Group’s own
purposes.
The CPO mill continued to improve its oil-extraction
rate and it is pleasing to report that an outstanding
average rate of 25.6% was achieved in 2014. Close
coordination between mill and field management
was maintained during the year and high
engineering standards were achieved.
During 2014, the Kalimantan mill was accredited by
RSPO. The ISPO and ISCC audit process got under
way in 2014 and accreditation is expected to be
completed in 2015.
Bangka
The 24% increase in the f.f.b. crop to 42,700 tonnes
in 2014, compared with the 34,300 tonnes recorded
in 2013, continues the upward trend from this young
project after the set back experienced in 2013. The
unexpected downturn in that year was caused by
adverse weather but a further two dry spells in 2014
also negatively impacted on the 2014 crop in the
latter part of the year, although not to the extent
experienced in 2013. Bangka Island normally has a
dry period in the middle of the year but a virtual
absence of rainfall in February and March 2014
resulted in the crop in the last quarter falling off
markedly. Rat damage to the fruit on the palms,
which occurs in dry periods as the rats seek
moisture, also negatively impacted the f.f.b. crop.
The planted area at the end of 2014 amounted to
6,880 hectares in total of which 4,730 related to the
Group and 2,150 to the smallholders’ cooperatives.
Planting progress was relatively modest during the
year, amounting to 820 hectares in total, of which
640 related to the Group and 180 to the
cooperatives. Dealings with competing tin-mining
interests continued to be very time consuming but it
is encouraging that progress, albeit slow, continues
to be made and it remains the board’s view that
ultimately 10,000 hectares will be planted, of which
6,000 will relate to the Group and 4,000 to the co-
operatives.
16
Pangkatan mill team
Good progress has been made with the mill. A
tender process has been completed and contracts
awarded. Work on the ground will start shortly and
commissioning of the mill is expected to take place
in mid-2016 at an estimated cost of approximately
US$13 million. The mill will initially be rated at 45-
tonne per hour expandable by another 15 tonnes at a
later date. Methane will be captured from the liquid
effluent, “scrubbed” and then burnt in a gas engine,
producing power for the project. Surplus electricity
will be generated and it is hoped that acceptable
terms can be agreed with the government electricity
board, PLN, to sell it into the grid.
The f.f.b. harvested on the Bangka project is
currently sold under contract to nearby mills. When
the Group’s own mill is in operation the sale of CPO
and palm kernels, less the manufacturing costs, will
be more profitable than selling f.f.b. to third-party
mills.
ENVIRONMENTAL AND SOCIAL FACTORS
Reference has been made earlier in the report to the
Group’s commitment to producing environmentally-
sustainable palm oil. The Kalimantan and Pangkatan
mills are already RSPO-accredited. Pangkatan mill is
also ISPO and ISCC accredited whilst the Kalimantan
mill is in the process of applying for accreditation.
The Bangka project, although not yet in a position to
become RSPO accredited until its mill is in operation
and it is selling CPO, already adheres to the RSPO
“Principles and Criteria”. The Group’s
environmental and social activities and policies are
set out in more detail in the section entitled
“Corporate environmental and social responsibility”
on pages 28 to 31.
The 40% increase in the Kalimantan f.f.b. crop
continues the upward trend from this young project
ASSOCIATED COMPANY ESTATES
CROPS AND PRODUCTION
PT Agro Muko’s f.f.b. crop, at 344,900 tonnes, was
slightly ahead of expectations and virtually identical
to the 345,800 tonnes recorded in 2013. With a
smaller area under cultivation due to the replanting
programme, the overall yield per hectare improved
but a dry third quarter followed by a wet fourth
quarter hampered harvesting and crops fell towards
the end of the year. The dry third quarter also held
back replanting. As has been referred to in previous
years, the project is now undertaking an enhanced
replanting programme as the large, first plantings of
the 1980’s become due for replanting. During the
five or so year period that this programme is
expected to be under way, overall crops are likely to
remain at around the level of the 2014 crop, or
slightly below, before accelerating as yields from the
new young plantings increase.
The rubber crop, at 1,520 tonnes, was 6% higher
than 2013’s 1,440 tonnes. The young areas that
have been replanted in recent years are now
beginning to increase their yields and this upward
trend is expected to continue.
Kerasaan Estate’s f.f.b. crop, at 42,000 tonnes, was
similar to the 41,200 recorded in 2013.
Details of crops, production and extraction rates for
2014, with comparative figures for 2013, are set out
below:-
INCREASE/
2014 (DECREASE) 2013
TONNES % TONNES
F.f.b. crops
PT Agro Muko
- own 344,900 — 345,800
- outgrowers 8,500 (1) 8,600
353,400 — 354,400
PT Kerasaan Indonesia 42,000 2 41,200
395,400 — 395,600
Production (PT Agro Muko)
Crude palm oil 79,400 — 79,700
Palm kernels 18,500 1 18,400
Extraction rates % %
Crude palm oil 22.5 22.5
Palm kernels 5.2 5.2
Rubber crops TONNES TONNES
PT Agro Muko - own 1,520 6 1,440
Oil palm nursery
17
Operations Palm oil CONTINUED
PLANTATION PERFORMANCE INDICATORS
The principal performance indicators considered by the board in assessing the
Group’s plantation operations are as follows:
PLANTED HECTARAGE
Planting new hectarage
and replanting
hectarage that has
reached the end of its
life determines the
Group’s capacity to
produce crop growth in
the future.
F.F.B. CROP
The volume of f.f.b. crop
is the primary
determinant of the
Group’s ability to
generate CPO and
PK for sale.
F.F.B. YIELD PER HECTARE
The rate at which the
Group is able to
generate f.f.b. from its
planted hectarage is the
most important
measure of its
agricultural efficiency.
CPO AND PK
EXTRACTION RATES
COST PER TONNE OF
PALM PRODUCTS
The rate at which the
Group is able to convert
its f.f.b. into CPO and PK,
quantified as oil and
kernel extraction rates,
is the most important
measure of its
processing efficiency.
The Group’s long
term profitability
depends on its
success in
minimising costs
of production that
are summarised
in this measure.
REVIEW OF OPERATIONS
Over recent years, the management of Agro Muko
has put in place a programme of improvement of
agricultural practices in the field. In the past, it has
proved difficult to recruit a sufficient number of
workers, particularly harvesters, but a programme of
house building for workers’ accommodation has
improved this situation and the number of harvesters
has increased. The existing areas have benefited in
terms of yields and of fruit quality. The standard of
recent replantings of both oil palms and rubber trees
has been high. Management is actively engaged on
improving extraction rates from their current levels.
The methane-capture plant attached to one of the
mills has been working since the end of 2013 but
management has recently been considering a change
of approach. Whereas, at the outset, the idea was to
burn the scrubbed methane both in the boilers of
one of the mills and in the dryers in the rubber
factory, neither of these has proved entirely
satisfactory. Management is considering the
installation of a gas engine and is reviewing a
number of options with regard to the use or sale of
the electricity that would be generated.
The road-stoning programme continues and is
expected to be largely completed within the next ten
or so years. The benefit of improved access to the
remoter areas during wet weather is already being
felt as is reduced costs, with trucks able to collect
f.f.b. and deliver straight to the mill, rather than
double handling with tractors and trailers.
The leaf-pest problems encountered on Kerasaan
Estate three or so years ago have largely been
resolved. Management remains vigilant to prevent
further outbreaks. Concerns remain about the fungal
disease, ganoderma. It is hoped, however, that the
strict enforcement of the standard operating
procedures covering what action to take in the event
of palms suffering infestation and the rules for land
preparation before replantings are undertaken will go
some way to preventing the spread of the fungus.
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 budgeted, 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 year’s planting 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, 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.
Management monitors and assesses the performance
of the development of the new plantings by means of
performance indicators which identify the area to be
planted in a given year and also the cost per hectare
of that planting. A budget for planting programmes is
set, with sufficient planting material already in place,
in the previous year. This type of activity is normally
undertaken by contractors and management
monitors the progress achieved on the contracted
18
:-
Bilah water gate and, right, Kalimantan mill
areas. As with other plantation activities, costs
per hectare are determined by such factors as the
weather pattern, the soil type and the terrain.
These 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., and the percentage
of f.f.a., oil losses, dirt and moisture. Extraction rates
vary according to factors such as the type and quality
of planting material, the age profile of plantings,
rainfall, etc. Oil losses, dirt and moisture content
are expressed in terms of percentages and actual
achievement against maximum permitted levels
are monitored by management.
PLANTATION AND MILL COSTS
Management monitors and assesses the efficiency of
plantation operations in terms of cost by means of
performance indicators which identify field costs per
hectare and per kilogram of f.f.b. and factory costs
per tonne of palm products. 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 performance indicators are monitored
by management for each individual estate.
CURRENT TRADING AND PROSPECTS
The unusually dry period at the beginning of 2014
had a negative impact on f.f.b. crops in the latter part
of that year and this impact has continued to be felt
into the first quarter of 2015. The crops from the
majority-owned estates for the three months ended
31 March 2015, with comparative figures for the
same period in 2014, were as follows:
3 MONTHS ENDED INCREASE/ 3 MONTHS ENDED
31 MARCH 2015 (DECREASE) 31 MARCH 2014
TONNES % TONNES
Sumatra 36,200 (16) 43,000
Kalimantan 35,100 8 32,600
Bangka 13,500 5 12,800
84,800 (4) 88,400
The established Sumatran estates and the Bangka
project have been particularly affected in 2015 by
the dry weather in 2014 and the Kalimantan project
has also recorded crops sharply below expectations
(although 8% higher than for the same period last
year) related to flooding in February 2015. Crops
have recently started to pick up. The associated
companies’ f.f.b. crops have, as on the Group’s
majority-owned estates, been lower so far in 2015
than expectations and lower than for the first quarter
of 2014.
Palm-oil prices have hovered between US$650 and
US$700 per tonne so far in 2015 reflecting, on the
upside, a slowdown in palm-oil production (relating
to last year’s dry weather) and, on the downside,
continuing weakness in mineral-oil prices. As
reported by Oil World, the weakness
of mineral-oil prices has made palm oil less
competitive in the energy sector despite increased
subsidies being made available by the Indonesian
Government in respect of bio-diesel. However, the
Indonesian Government has introduced a US$50
levy per tonne of CPO when the existing export tax
falls to zero.
The Indonesian Rupiah has weakened in the first part
of 2015 to the current level of around US$1 =
Rp 13,000 compared with Rp 12,440 at the end of
2014. This has a beneficial effect on the Group’s
Rupiah-based costs (both revenue and capital) when
translated into the functional currency, US Dollars.
19
OPERATIONS
BEEF CATTLE
The year-end value of the herd reflected the significant increase
in the price for beef cattle
AUSTRALIAN BEEF-CATTLE MARKET
Prices for both the lighter-weight cattle produced by
Woodlands and the heavier, grain-finished cattle
produced by NAPCo broadly rose during the course
of 2014. The continuing decline in the value of the
Australian Dollar boosted export demand, especially
from Asia, which impacted positively on prices,
particularly towards the year end. Higher-than-usual
slaughter rates in Australia, owing to the continuing
drought, led to record volumes, at record prices, of
both beef and live-cattle exports from Australia
during the year.
MAJORITY-OWNED OPERATIONS
WOODLANDS
Income from cattle trading, at US$2.0 million, was
markedly higher than the US$1.4 million reported
for 2013, though income from fattening third parties’
cattle for a fee per kilogram of weight gained
(agistment) fell slightly from US$0.5 million to
US$0.3 million. Given the improving prospects for
the beef market, the board took the view that it
should stock Woodlands with its own herd, and so
cattle on agistment were replaced with cattle
NAPCo cattle
20
Woodlands cattle
purchased on Woodlands’ own account. By the end
of the year, the 5,600 cattle on the property at the
beginning of the year had either been sold or
returned to their third-party owners. In their place,
5,500 young cattle were purchased and grazed on
Woodlands’ pastures.
At the year end, the value of the herd reflected the
significant increase in the price for beef cattle
reported above, contributing to the much-improved
cattle-trading result. Good rains were received early
in the year but were not followed up by meaningful
volumes of moisture, leading to another difficult
season after the drought experienced in 2013. In
addition, for much of the year, Woodlands’ own herd
was comprised of older animals that gain weight
more slowly than young animals. As a result, it was
not possible to sustain the only modestly-reduced
pace of weight gain achieved in the early months of
the year and, overall, weight gain for the year fell to
the low level of 0.22 kg per cattle day (2013 – 0.55
kg per cattle day). Hence, poor weight gain went
some way to erasing the benefit of higher prices so,
in total, Woodlands made a profit in the year under
review of US$0.2 million (2013 loss of US$0.1
million).
ASSOCIATED COMPANY - NAPCo
RESULTS FOR THE YEAR
A profit was achieved at NAPCo, of which the
Group’s share amounted to US$1.5 million,
compared with a loss in 2013, of which the Group’s
share amounted to US$2.4 million. Despite a 5%
decline in the herd number, cattle weights were up
and prices were stronger. These factors are all
reflected in the improved year-end-herd valuation
figure which forms part of the profit.
SEASONAL CONDITIONS
Following very poor seasonal conditions in 2013,
2014 proved another challenging year for the
northern Australian cattle industry, with drought
conditions prevailing across much of Queensland.
While NAPCo’s properties enjoyed a better season
than in 2013, conditions on most were still
significantly dryer than on average.
COMPANY OPERATIONS
In 2014, the herd number declined by some 5%
from 187,800 to 177,800 head. In the light of the
difficult season, this decline was relatively modest
and the part that management and staff played in
minimising the impact of the drought was
commendable. Furthermore, the expansion of the
Wainui feedlot in 2013 facilitated the retention of
significantly more cattle than would have been
possible in prior years. The branding of 50,700
calves (2013 - 58,600) was the lowest since 2009,
following the 2008 drought. Lower conception rates
resulting from 2013’s poor season were the principal
reason for this. A total of 58,000 cattle were sold
during 2014, down from the previous year (64,000),
as a result of many cattle not achieving the required
sale weights.
21
Operations Beef cattle CONTINUED
BEEF CATTLE PERFORMANCE INDICATORS
The principal performance indicators considered by the board in assessing the
Group’s beef-cattle operation are as follows:
TOTAL HERD WEIGHT GAIN
HERD SIZE
The aggregate increase in cattle
weight during their time on the
property is the primary indicator of
the property’s output.
Herd size constrains the maximum
total weight gain it is possible for
the operation to accumulate during
a given period, though herd size
must be matched to the property’s
capacity (itself a function of
rainfall).
WEIGHT GAIN PER CATTLE DAY
The speed with which cattle, on
average, put on weight during their
time on the property is an
important factor in determining
total weight gains.
NAPCo PROPERTIES
CATTLE SALES AND BRANDINGS
(cid:0) SALES (cid:0) BRANDINGS (cid:0) CLOSING STOCK
2014
2013
2012
2011
57,998
50,721
64,017
58,638
59,489
62,506
57,155
54,695
2010
36,844
61,456
40,337
44,090
2009
2008
96,552
67,599
177,775
187,795
197,309
197,590
195,342
160,622
162,336
‘000 HEAD
20
40
60
80
100
120
140
160
180
200
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,
which depends on the weather and pasture/forage-
crop conditions.
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.
CURRENT TRADING AND PROSPECTS
Welcome rainfall both on Woodlands and across most
of the NAPCo properties was received in early 2015,
and substantial further rainfall has recently been
received on Woodlands. Cattle prices moved sharply
higher, to record levels, in response both to the rainfall
and to the weakening Australian Dollar and consequent
increase in export demand. Prices have eased a little but
are still above where they were at the end of 2014. The
longer-term outlook for the Australian cattle industry
appears favourable, as demand for high-quality red
meat, especially in Asia, continues to rise and as herd
numbers both in Australia and in the US continue to fall.
22
OPERATIONS
PROPERTY
Bertam Properties increased its completed sales of developed
properties to over 1,000 units during the year
MALAYSIAN PROPERTY
MAJORITY-OWNED OPERATIONS
BERTAM ESTATE
It is the board’s intention to sell Bertam Estate (70
hectares) when market conditions are deemed
suitable. The land is estimated, based on
independent advice, to have a value in excess of
US$19 million. In the meantime, the minor oil-palm
operations on the remaining 65 hectares of
cultivated land continue with 1,400 tonnes (2013 –
1,400 tonnes) of f.f.b. harvested. No replanting has
been undertaken since 1997.
ASSOCIATED COMPANY – BERTAM
PROPERTIES
The Penang property market, although not quite as
robust as in 2013, was, nevertheless, reasonably
buoyant in 2014. Bertam Properties increased its
completed sales of developed properties to over
1,000 units during the year compared with some 500
in 2013. The sales in the current year were, however,
mostly at the lower end of the market on which the
profit margin is smaller. As a result, the profit after tax
from these sales amounted to US$7.7 million (Group
share US$3.1 million), compared with a profit of
US$11.2 million (Group share US$4.5 million) in
2013. No sales of raw land were completed in 2014
although there are some in the pipeline which, it is
hoped, will be completed in 2015.
Oil-palm plantation activities continued on the small
remaining area of agricultural land (115 hectares
(2013 – 139 hectares)). 1,400 tonnes of f.f.b. were
harvested compared with 1,700 tonnes in 2013 and,
as a result of the lower crop, the modest profit fell
compared with 2013.
As at the end of 2014, Bertam Properties held 371
hectares of land. This includes 143 hectares of the golf
course and 53 hectares currently under development,
leaving 176 hectares undeveloped. This remaining
area continues to be a very valuable asset. The
Group’s investment in Bertam Properties is currently
estimated to be worth in excess of US$35 million.
23
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 relative exchange-rate stability.
There was an increase in nationalist sentiment during
the 2014 presidential election but, given Indonesia’s
significant needs for infrastructure development and the
need to attract inward investment, the board continues
to perceive a low risk of, for example, nationalisation or
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 held by the Group, swift and determined legal
action has been taken to defend the Group’s position.
Operations in Indonesia are deemed to be at high risk
from the threat of bribery and corruption. The Group has
a policy on bribery and corruption, completed a risk
assessment and conducted training of senior
management in Indonesia and Malaysia. It has
approached all of its business partners and submitted
questionnaires on their respective anti-bribery and
corruption activities and policies. The Group has
employed external advisers to ensure that its actions
carry the maximum prospect of preventing bribery and
corruption in its operations.
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 and
senior management.
At the Group’s regional office in Jakarta, the local
president director has put together a team of senior
managers (agricultural, engineering, legal,
procurement, marketing 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,
scrutiny of agricultural operations is provided by an
independent consultant.
The Group uses its Kalimantan training school 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 orangutan,
24
M P EVANS GROUP PLC 2014 ANNUAL REPORT
Work on the construction of flood protection in Indonesia is
proceeding well and should improve yields considerably
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 which members must abide by 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. The Group has specialist
RSPO officers, supported by external consultants,
working to ensure the Group complies with RSPO best
practice. RSPO accreditation was granted to its North
Sumatran mill on Pangkatan Estate and in July 2014 for
the new Kalimantan Mill. The Group is also complying
with the requirement to achieve certification as
Indonesian Sustainable Palm Oil (“ISPO”).
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.
An environmental assessment is undertaken by an
independent consultant for any new project. Implicit in
these studies is the requirement to abide by riparian-
buffer zones and nature-conservation areas and to
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. A similar
system is planned for the Group’s new mill in Bangka
expected to open in early 2016.
Management follows industry best-practice guidelines
and abides by Indonesian law with regard to such
matters as fertiliser application and health and safety.
Any accidents are thoroughly investigated by senior
head office staff. It is planned to establish a new Health
& Safety Committee in 2015, reporting to the Indonesian
President Director, in order to increase the Group’s
emphasis on this aspect of its operations.
RELATIONSHIP WITH LOCAL POPULATIONS
A breakdown in relations could significantly disrupt the
Group’s operations, for example through strikes, or lead
ultimately to a stop in production should villagers pursue
their case by blocking roads in order to prevent f.f.b., a
perishable crop, from reaching the mill to be processed.
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 co-operative 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
A breakdown in relations with a local partner could
affect relations with the local populations where the
Group is operating, with a detrimental effect on
operations. 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. 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. Where disputes do arise, the Group
seeks to negotiate a mutually-acceptable settlement.
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
25
Risk management CONTINUED
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. The practice of
proper management and husbandry instilled by the
Group in its field staff is designed to identify and
prevent these attacks from becoming widespread.
Appropriate agronomic measures are taken where any
outbreaks occur. Senior agricultural staff are kept up to
date with current research in this area, for example by
attending relevant conferences.
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. Investment is
made in pumps, pipes, dams and water tanks to ensure
drinking water is available in all areas.
The board has taken the view that acceptance of
weather risk is part of the business.
COMMODITY-PRICE FLUCTUATION
The price of CPO, palm kernels and beef determines the
Group’s revenue and earnings. Fluctuations in the price
directly affect the Group’s reported earnings and its
ability to generate cash inflows from its operations.
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. Given this, the directors
have taken the view that in the long run it is not
generally cost effective to sell forward contracts for the
delivery of CPO, particularly since the presence of
Indonesian export tax increases the risk in such contracts
since it is determined and levied at the time of delivery,
not at the time at which the contracted is agreed.
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 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 BSE and foot-and-mouth disease, whose
markets are mainly in 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 it a competitive advantage over its rivals.
EXCHANGE-RATE FLUCTUATION
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 Indonesian Rupiah against
the US Dollar can have a negative effect on other
revenue costs in US-Dollar terms. The movement of the
26
M P EVANS GROUP PLC 2014 ANNUAL REPORT
US DOLLAR -V- INDONESIAN RUPIAH
US DOLLAR -V- AUSTRALIAN DOLLAR
US$1 = Indonesian Rupiah
US$1 = A$
US DOLLAR -V- MALAYSIAN RINGGIT
STERLING -V- US DOLLAR
US$1 = RM
£1 = US$
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.
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.
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 credit rating
from reputable rating agencies or with banks that are
majority owned by sovereign governments.
Approved by the board of directors and signed on its behalf
SECURITY OF LIQUID FUNDS
The board is concerned to ensure that the Group’s
liquid funds, which are in the order of US$50 million
Philip Fletcher
Managing director
24 April 2015
27
ENVIRONMENTAL AND
SOCIAL RESPONSIBILITY
The Group produces environmentally-sustainable palm oil in all its palm-oil
mills and at its joint venture in Bengkulu province
Smallholder co-operative schemes attached to the Group’s new projects have
been developed and are operated to the same high standards applied to the
Group’s own areas
To ensure its high environmental standards are maintained, the Group
regularly monitors air and water quality on all its estates
The Group has 2,200 hectares of conservation areas, with another 2,500
hectares at its joint venture in Bengkulu province
In Australia, NAPCo has won a number of environmental awards and is
involved in the preservation, and rehabilitation, of indigenous flora and fauna
commissioned, expected to be in mid-2016.
The associated companies, PT Kerasaan Indonesia and
PT Agro Muko, received RSPO accreditation in 2010
and 2011 respectively.
INDONESIAN SUSTAINABLE PALM OIL (“ISPO”)
The mandatorily-required ISPO certification, the
requirements of which are similar in most respects to
those of the RSPO, was received in respect of Pangkatan
Mill in early 2014. The ISPO audit of the Kalimantan
project is under way at the date of this report.
SUSTAINABILITY CERTIFICATION
ROUNDTABLE ON SUSTAINABLE PALM OIL (“RSPO”)
The Group is a member of the RSPO. The
membership covers a wide variety of interests from
plantation owners to non-governmental organisations
and supermarkets. The Group endorses the
“Principles and Criteria” which have been adopted by
the RSPO in relation to environmental, social and
ethical plantation practices.
Pangkatan Mill was granted accreditation to the RSPO
in October 2012. CPO 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 annual surveillance
audit was successfully completed in 2014. The RSPO
audit took place on the Kalimantan project at the end
of 2013 and certification was received in 2014.
Preliminary work is being done on the Bangka project
to facilitate speedy certification of the mill once it is
28
M P EVANS GROUP PLC 2014 ANNUAL REPORT
areas both to prevent leaching of fertilisers into water
courses and to provide wildlife corridors.
LEGUMES
Leguminous cover crops are planted. These serve to
fix nitrogen in the soil, prevent erosion and provide
nutritious leaf litter.
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.
AGRONOMIC POLICIES
The following policies in respect of plantation
management have been adopted:-
NEW LAND
The Group ensures that any new plantation
development is undertaken only in heavily-degraded
areas which will not be suitable habitats for
orangutans or other major endangered species. In
accordance with RSPO rules, land will only be planted
that has been independently certified as not having
high conservation value (“HCV”) and has been subject
to an independent social-impact assessment.
ZERO BURNING
On new plantings or replantings, no burning is
allowed. Vegetation or old palms/trees are chipped
and 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 having HCV status.
Ongoing programmes of planting jungle trees and
other plants are undertaken. Areas alongside river
banks (riparian reserves) are set aside as conservation
29
Environmental, corporate and social responsibility CONTINUED
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 larvae thus reducing the
need for chemical spraying. Barn owls are, where
possible, introduced and bred to control rats, thus
obviating the need for chemical baits.
MILL EFFLUENT, COMPOST AND POWER
GENERATION (ZERO-WASTE CONCEPT)
At the palm-oil 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
nutritious 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. The compost, in turn, is applied in
the field, reducing the requirement for inorganic
fertilisers. Because the effluent is used quickly the
production of methane is minimal. No effluent is
discharged into rivers or water courses. Similarly,
Pangkatan Mill’s liquid effluent is applied to empty
bunches to create compost. Management is
considering the commercial feasibility of capturing
methane from the effluent pond to burn and then
generate and sell electricity in a similar way to that
described above at the Kalimantan mill. Methane
capture and generation of electricity is planned for the
Group’s mill on Bangka.
HEALTH AND SAFETY
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. From 2015 it is
planned routinely to subject the Indonesian operations
to an independent health and safety inspection.
Sprayers apply chemicals in the field. They are
provided with appropriate protective clothing and
30
masks, showering facilities are available (and required
to be used) and the sprayers are subject to regular
medical checks.
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, as
is 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.
M P EVANS GROUP PLC 2014 ANNUAL REPORT
TRAINING
The Group undertakes to train and motivate its staff
and workforce, to help employees build on their 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
co-operatives (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.
31
BOARD OF DIRECTORS
Peter E Hadsley-Chaplin, MA MBA
EXECUTIVE 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.
REPORT OF THE DIRECTORS
The directors present the audited consolidated financial statements of
M.P. Evans Group PLC for the year ended 31 December 2014
PRINCIPAL ACTIVITIES
At 31 December 2014, the Company, through its
subsidiary and associated undertakings, operates oil-
palm and rubber plantations in Indonesia, beef-cattle
operations in Australia, and property development in
West Malaysia.
recommends a final dividend of 6.50p (2013 - 6.00p)
per share. This dividend will be paid on or after 18
June 2015 to those shareholders on the register at the
close of business on 24 April 2015. This final
dividend is not provided for in the 2014 financial
statements.
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 and 7) and in the strategic report (pages 8 to
27) 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 45.
An interim dividend of 2.25p (2013 - 2.25p) per share
was paid on 4 November 2014. The board
SCRIP-DIVIDEND SCHEME
The Company currently operates a scrip-dividend
scheme with the authority of a resolution passed at the
Company’s annual general meeting in 2010. This
resolution was valid for five years and so expires this
year. The board has decided to seek renewed authority,
under resolution 11, for the directors to offer a scrip-
dividend option for a further period expiring at the end
of the third general meeting of the Company after the
date of the resolution. If that resolution is passed, the
scheme will continue to be operated in accordance
with the terms and conditions set out in the circular to
shareholders dated 14 May 2010 and available on the
32
M P EVANS GROUP PLC 2014 ANNUAL REPORT
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.
Jock Green-Armytage
SENIOR INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed a director and
chairman of the audit and
remuneration committees in
2013. Formerly a director of
Rowe Evans Investments PLC from
1989 to 1994. Currently
chairman of JZ International
Limited and chairman or director
of many of its investee companies.
Previously chief executive of The
Guthrie Corporation PLC and
chairman of AMEC PLC.
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.
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.
The board has decided to make the scrip-dividend
option available for the final dividend on the above
terms, provided that resolution 11 is passed. If that
resolution is passed, 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 88) 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 28 May 2015.
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.
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 2014 55,034,876
Shares issued in lieu of a cash dividend
19 June 2014 217,060
4 November 2014 75,459
Issued (fully-paid and voting) capital
at 31 December 2014 55,327,395
33
Report of the directors CONTINUED
DIRECTORS AND DIRECTORS’ INTERESTS
The present membership of the board is detailed on
pages 32 and 33. Konrad Legg served on the board
until his retirement on 5 June 2014 at the AGM and
all other directors served throughout the year.
Richard Robinow, Derek Shaw, Peter Hadsley-Chaplin
and Philip Fletcher will retire from the board at the
forthcoming annual general meeting in accordance
with the articles of association and, being eligible all
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 2014 BENEFICIAL BENEFICIAL OPTIONS
P E Hadsley-Chaplin 1,561,717 25,000 —
P A Fletcher 1,128,171 — —
T R J Price — — 250,000
R M Robinow 96,147 — —
J D Shaw 394,065 — —
J M Green-Armytage — — —
AT 1 JANUARY 2014
P E Hadsley-Chaplin 1,561,717 25,000 —
P A Fletcher 1,128,171 — —
T R J Price — — 250,000
R M Robinow 96,147 — —
J D Shaw 435,065 — —
J M Green-Armytage — — —
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 41.
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 2014
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 10.47
JP Morgan Fleming Mercantile
Investment Trust Plc 3,464,957 6.26
Montanaro Asset Management 1,982,894 3.58
M M Hadsley-Chaplin 1,892,254 3.42
Indirect interests
Aberdeen Asset Management Plc 8,837,770 15.97
Fidelity Investments Limited 2,904,489 5.25
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
£1,844,246, which represents 33.33% of the
Company’s issued share capital as at the date of this
report. 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 £276,637, representing 5% of the
Company’s issued share capital as at the date of this
report. 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 2016
or, if earlier, the date of the Company's next annual
general meeting.
34
M P EVANS GROUP PLC 2014 ANNUAL REPORT
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 2016 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 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
5,532,739 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 2016 or, if earlier, the date of the Company’s
next annual general meeting.
executive share-option schemes. If all of the options
were exercised, the resulting number of shares would
represent (a) 0.63% of the enlarged issued share
capital at that date; and (b) 0.70% 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 2014
amounted to 36 days (2013 - 31 days).
FINANCIAL INSTRUMENTS
Details of the Group’s financial instruments, and the
board’s policy with regard to their use, are given in
note 32 to the consolidated financial statements on
pages 73 and 74.
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
statement 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;
As at the date of this report there were options to
subscribe for 350,000 shares outstanding under the
make judgements and accounting estimates that are
reasonable and prudent;
35
Report of the directors CONTINUED
state whether applicable IFRSs as adopted by the
European Union and applicable United Kingdom
POST-BALANCE-SHEET EVENTS
There have been no post-balance-sheet events.
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
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
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
pages 38 and 39 and are incorporated in this report
by reference.
DISCLOSURE OF INFORMATION TO AUDITORS
Each person who is a director at the date of approval
of this report confirms that:
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 reasonable 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.
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.
Approved by the board of directors
and signed on its behalf
Claire Hayes
Secretary
24 April 2015
36
M P EVANS GROUP PLC 2014 ANNUAL REPORT
CORPORATE GOVERNANCE
The board recognises the importance of a sound
system of corporate governance and internal control
and so seeks to follow the principles set out in the
Corporate Governance Code for Small and Mid-Size
Quoted Companies 2013 published by the Quoted
Companies Alliance (“QCA”) as far as they are
relevant to the Group and its context. It should be
noted that the Group is not required to comply with
this code but it is nonetheless the board's intention to
disclose and report on the corporate-governance
structures and processes operated by the Group and
to develop these further to meet the appropriate
standards. An explanation of how the Group has
applied the principles is set out below.
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 2014, with the exception of Richard
Robinow who was unable to attend the meeting on
6 November 2014 and Konrad P Legg who attended
all meetings until his retirement on 5 June 2014. 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, non-
executive 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 other business issues.
The board has an executive chairman, Peter Hadsley-
Chaplin. Given the current structure and composition
of the board, the role that Peter Hadsley-Chaplin
performs (which is not that of chief executive officer),
the size of the Group, the size of the shareholdings
which the directors hold in the Company and the
active dialogue with institutional shareholders that
takes place throughout the year, the board considers
that a non-executive chairman would not provide any
further benefit to the Company.
The chairman maintains a strong individual relationship
with all the directors and on this basis is confident that
there are currently no planned retirements. It is
considered that the board would be robust to any
unplanned retirements and be able to recruit suitable,
well-qualified, candidates within a reasonable time
period. As such, the board does not feel that there is
a need for a formal succession plan at this time.
The board has access to independent professional
advice at the Group’s expense when the board deems
it necessary in order for them to carry out their
responsibilities. Currently, the board retains Peel Hunt
as the Company’s nominated adviser and Hudson
Sandler for advice regarding corporate public
relations. It additionally receives advice from
independent professionals on the valuation of its
property assets in Australia and Malaysia.
INDEPENDENCE AND RE-ELECTION OF
LONG-SERVING DIRECTORS
During the year the board has had a balance of
executive and non-executive directors. A description of
the roles and responsibilities of the directors is set out
on pages 32 and 33 and the terms and conditions of the
non-executive directors are available on the website
(www.mpevans.co.uk/mpevans/en/aboutus/board/non-
executive-directors). Half of the directors are non-
executive, two of whom (Richard Robinow and Derek
Shaw) have served for more than nine years. The
board considers that Richard Robinow and Derek
Shaw have valuable experience in the palm-oil and
cattle industries respectively and that both act in the
best interests of the Company and the Group, free
from any conflicts or undue influence. As such, the
board is satisfied that both Richard Robinow and
Derek Shaw are independent and that the Group
should continue to benefit from their experience and
knowledge.
37
Corporate governance CONTINUED
DIRECTORS’ REMUNERATION AND APPOINTMENT
As set out in the report on page 41, 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 twice during 2014 and both meetings
were 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.
RELATIONS WITH SHAREHOLDERS
The board attaches great importance to
communications with both institutional and private
shareholders. The board actively meets with major
shareholders to update them on the progress of the
Group and discuss any areas of concern that they may
have. Any issues raised by major shareholders are
discussed by the board as a whole. This is not always
possible with private shareholders but the annual
general meeting provides an opportunity for private
shareholders to raise any issues and discuss the
development of the business. The board uses the
Group’s website to set out details of the annual
general meeting and the results of the votes cast at
those meetings and contains the reports and
presentations given at meetings with investors
www.mpevans.co.uk/mpevans/en/investors/reports and
www.mpevans.co.uk/mpevans/en/investors/governance
/agm). These are also available through an “app” that is
available for users to download free of charge.
ACCOUNTABILITY
Financial reporting
A detailed review of the performance and financial
position of the Group is included in the chairman’s
statement and the strategic report. The board uses
these and the report of the directors to present a
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 of the report of the directors.
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 and presented to the board
for discussion and approval. In summary this is
reported on pages 24 to 27.
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 areas of operation;
protection of the environment;
the relationship with local populations where the
Group has operations;
the relationship with local partners;
weather and natural disasters;
commodity-price fluctuation;
exchange-rate fluctuation; and
security of liquid funds.
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.
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 strategic report on pages 8 to 22.
38
M P EVANS GROUP PLC 2014 ANNUAL REPORT
The forecasts indicate that the Group will have
sufficient resources to meet its obligations as they fall
due on the basis that facilities expiring during the
course of 2015 will be renewed (see note 24 on
page 68). Discussions with the one lender to convert
a revolving credit facility into a term loan are well
advanced, and the directors have taken the view
that it is reasonable to expect these discussions will
successfully conclude with agreement for a new facility
on terms acceptable to the Group.
The board has concluded that, given the current level
of cash resources in the Group, the level of existing
borrowings and the facilities agreed March 2011,
March 2013 and June 2014, and the likelihood that
these will be renewed when they reach the end of
their term, as well as its ability to manage capital
expenditure, 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.
AUDIT COMMITTEE
The audit committee is formally constituted with
written terms of reference (which are available on the
Company’s website www.mpevans.co.uk and is
chaired by Jock Green-Armytage; the other members
are Richard Robinow and Derek 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 three times during 2014 and each
meeting was attended by all of the members with the
exception that Richard Robinow was unable to attend
the meeting on 6 November 2014. The external
auditors attended the meetings on 10 April and 6
November 2014.
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.
During the year the audit committee has:
Reviewed the financial statements, having received
a report from the external auditors on their review
and audit;
Reviewed the effectiveness of the Group’s internal
controls, including a review of main findings by the
internal-audit team in Indonesia;
Considered the Group’s accounting policies,
notably its response to an amendment by the IASB
to IAS 41;
Considered and approved the Group’s risk analysis;
Considered the management letter from the external
auditors on their review of the effectiveness of
internal controls; and
Agreed the fees and terms of appointment of the
external auditors, reviewed their quality and
effectiveness and discussed the key risks to be
addressed during their audit.
Auditors
The auditors were first appointed, following a tender
exercise, in 2009. The audit partner changes
periodically in accordance with professional and
regulatory standards in order to protect independence
and objectivity. The last rotation took place in 2010
and another is expected for the 2015 audit. Current
policy is to tender the external audit at least every ten
years.
The audit committee meets the external auditors to
consider audit planning and the results of the external
audit. The committee specifically considered the
scope of the Group auditors’ engagement and agreed
the significant risks for the audit of the 2014 results.
The external auditors have provided only audit
services, other than a small amount of tax advice in
Malaysia and Australia. Hence the board does not
consider there to be a risk that the provision of non-
audit services may compromise the external auditors’
independence.
To assess the effectiveness of the auditors, the
committee reviewed their fulfilment of the agreed
audit plan and variations from it, and the auditor’s
report on issues arising during the course of the audit.
39
Corporate governance CONTINUED
Financial reporting and review of financial statements
The committee is able to ensure it has a full
understanding of business performance through its
receipt of regular financial and operational reporting;
its review of the budget and long-term plan and its
discussion of key accounting policies and judgements.
It has specifically addressed:
The Group’s response to the IASB’s amendment of
IAS 41: Biological assets, which permits entities to
account for plantation assets at depreciated cost
rather than at ‘biological valuation’. The committee
concluded that depreciated historical cost should
be used as soon as the amendment comes into
force, expected to be in the third quarter of 2015;
and
The carrying value of Woodlands. The committee
took independent external professional advice on
the market value of the property in concluding
that its carrying value should be reduced to
A$28.5 million.
After reviewing the presentations and reports from
management and consulting with the auditors, the
audit committee is satisfied that the financial
statements appropriately address the critical
judgements and key estimates, both for the amounts
reported and disclosures. The committee is also
satisfied that the significant assumptions used for
determining the value of assets and liabilities have
been appropriately scrutinised, challenged and are
sufficiently robust.
NOTES TO TABLE OPPOSITE
1. The pension costs for Mr TRJ Price set out above are
the contributions made by the Company to a
Company-sponsored Self-Invested Personal Pension
(“SIPP”) as described below. Pension contributions
for Mr PE Hadsley-Chaplin and Mr PA Fletcher
ceased on 29 February 2012 and salaries in lieu of
pension (net of employer’s National Insurance
contributions) have been paid from 1 March 2012
onwards.
2. No long-term incentives, other than the share
options described below, have been awarded to
directors.
40
M P EVANS GROUP PLC 2014 ANNUAL REPORT
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 Jock Green-Armytage.
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.
BOARD EVALUATION
Whilst the board does not undertake any formal
appraisal process for the directors, there is a close
working relationship between the board as a whole
and the executive and non-executive directors and
with the Company’s external advisers. Given the
nature of the business of the Group and the open
dialogue with investors, the board do not feel that a
formal appraisal process is currently appropriate but
will continue to review this position.
REMUNERATION POLICY
Executive directors
and recognises the importance of ensuring that
employees are incentivised. When determining the
remuneration of the executive directors, the
remuneration committee considers the pay and
conditions across the Group, particularly those of the
senior management of the operations in Indonesia. It is
the Group’s policy to provide remuneration packages
for the directors and senior management which are a
fair reward for their contribution to the business,
having regard to the complexity of the Group’s
operations and the need to attract, retain and motivate
high-quality senior management. In addition,
remuneration packages are designed to ensure
retention in the long term and to be broadly
comparable with those offered by similar businesses.
The committee has sanctioned appropriate incentives
by means of share options with a view to aligning the
interests of the executive directors 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 six months’ salary.
Non-executive directors
The fees of the non-executive directors are determined
by the board.
The Group’s policy on remuneration recognises that
the success of the Group depends, in part, on the
performance of the directors and senior management
TOTAL DIRECTORS’ REMUNERATION
The total amount of directors’ remuneration for the
year ended 31 December 2014 was as follows:-
Executive directors
P E Hadsley-Chaplin
P A Fletcher
T R J Price
Non-executive directors
R M Robinow
J D Shaw
J M Green-Armytage
K P Legg
TOTAL
SALARY BENEFITS SALARY IN LIEU PENSION REMUNERATION
AND FEES BONUS IN KIND OF PENSION COSTS 2014
£ £ £ £ £ £
TOTAL
REMUNERATION
2013
£
146,400 30,000 25,128 22,512 — 224,040 202,579
244,000 50,000 53,719 37,521 — 385,240 349,704
182,500 40,000 22,410 — 22,812 267,722 245,783
572,900 120,000 101,257 60,033 22,812 877,002 798,066
27,500 — — — — 27,500 24,500
39,250 — — — — 39,250 35,000
32,000 — — — — 32,000 15,952
11,881 — — — — 11,881 26,500
110,631 — — — — 110,631 101,952
Total
683,531 120,000 101,257 60,033 22,812 987,633 900,018
Gains on exercise of share options
P E Hadsley-Chaplin
P A Fletcher
Total
Grand total
SEE NOTES ON PAGE OPPOSITE
— 98,449
— 98,449
— 196,898
987,633 1,096,916
41
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
2014, options over 250,000 (2013 -250,000) shares
granted to executive directors remain outstanding.
These were granted to the executive directors between
16 November 2007 and 17 January 2013. During the
year, no options (2013 - 53,790) granted to directors
were exercised and none (2013 - none) lapsed.
No performance criteria are attached to the options
and no options are held by the non-executive
directors. At 31 December 2014 the middle-market
quotation for the Company’s shares, as derived from
the London Stock Exchange Daily Official List, was
391.37p, as compared with the high and low
quotations for the year of 492.25p and 364.25p
respectively.
Details of the options held over shares of the Company
by the executive directors during the year ended
31 December 2014 are set out in the table below:-
Number of shares under option
BALANCE AT BALANCE AT MARKET DATE FROM
1 JANUARY GRANTED EXERCISED 31 DECEMBER EXERCISE PRICE WHEN DATE OF WHICH NORMALLY EXPIRY
2014 IN THE YEAR IN THE YEAR 2014 PRICE EXERCISED OF GRANT FIRST EXERCISABLE DATE
P E Hadsley-Chaplin — — — — — — — — —
P A Fletcher — — — — — — — — —
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
5,750 — — 5,750 520.00p — 17 Jan 2013 17 Jan 2016 17 Jan 2023
44,250 — — 44,250 510.00p — 17 Jan 2013 17 Jan 2016 17 Jan 2023
250,000 — — 250,000
Total 250,000 — — 250,000
* Held at appointment on 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 whilst in the employment of the Company
and life-assurance cover based on a multiple of salary.
The members contribute a minimum of 5% of their
pensionable salary to their SIPP. No element of a
director’s remuneration package, other than basic
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
Claire Hayes
Secretary
24 April 2015
42
M P EVANS GROUP PLC 2014 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF M.P. EVANS GROUP PLC
REPORT ON THE GROUP FINANCIAL STATEMENTS
OUR OPINION
In our opinion, M.P. Evans Group PLC’s group
financial statements (the “financial statements”):
give a true and fair view of the state of the Group’s
affairs as at 31 December 2014 and of its profit and
cash flows for the year then ended;
have been properly prepared in accordance with
International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
WHAT WE HAVE AUDITED
M.P. Evans Group PLC’s financial statements comprise:
the consolidated balance sheet as at 31 December
2014;
the consolidated income statement and
consolidated statement of comprehensive income
for the year then ended;
the consolidated cash-flow statement for the year
then ended;
the consolidated statement of changes in equity for
the year then ended; and
the notes to the financial statements, which include
a summary of significant accounting policies and
other explanatory information.
Certain required disclosures have been presented
elsewhere in the annual report, rather than in the notes
to the financial statements. These are cross-referenced
from the financial statements and are identified as
audited.
The financial reporting framework that has been
applied in the preparation of the financial statements is
applicable law and IFRSs as adopted by the European
Union.
In applying the financial reporting framework, the
directors have made a number of subjective
judgements, for example in respect of significant
accounting estimates. In making such estimates, they
have made assumptions and considered future events.
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, the information given in the strategic
report and the report of the directors for the financial
year for which the financial statements are prepared is
consistent with the financial statements.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to
report to you if, in our opinion, we have not received
all the information and explanations we require for our
audit. We have no exceptions to report arising from
this responsibility.
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have
no exceptions to report arising from this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Our responsibilities and those of the directors
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) (“ISAs (UK & 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.
43
Independent auditor’s report CONTINUED
What an audit of financial statements involves
We conducted our audit in accordance with ISAs
(UK & Ireland). 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.
We primarily focus our work in these areas by
assessing the directors’ judgements against available
evidence, forming our own judgements, and
evaluating the disclosures in the financial statements.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or
a combination of both.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies
we consider the implications for our report.
OTHER MATTER
We have reported separately on the parent-company
financial statements of M.P. Evans Group PLC for the
year ended 31 December 2014.
Simon O'Brien
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 April 2015
44
M P EVANS GROUP PLC 2014 ANNUAL REPORT
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
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 * 2014 ADJUSTMENT * ADJUSTMENT * 2013
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 4 90,922 — 90,922 82,186 — 82,186
Cost of sales (58,987) 3,959 (55,028) (60,749) 3,298 (57,451)
Gross profit 4 31,935 3,959 35,894 21,437 3,298 24,735
Gain on biological assets 13 — 15,144 15,144 — 9,059 9,059
Planting expenditure — (6,314) (6,314) — (6,265) (6,265)
Foreign-exchange losses 4 (2,379) — (2,379) (8,322) — (8,322)
Other administrative expenses 4 (5,870) — (5,870) (4,444) — (4,444)
Other income 4 448 — 448 8 — 8
Operating profit 24,134 12,789 36,923 8,679 6,092 14,771
Finance income 4,6 1,650 — 1,650 972 — 972
Finance costs 4,7 (3,310) (403) (3,713) (3,121) (399) (3,520)
Group-controlled profit before tax 8 22,474 12,386 34,860 6,530 5,693 12,223
Tax on profit on ordinary activities 4,9 (9,095) (2,923) (12,018) 435 (1,381) (946)
Group-controlled profit after tax 13,379 9,463 22,842 6,965 4,312 11,277
Share of associated companies’
profit/(loss) after tax 4, 15 15,308 (1,052) 14,256 9,871 1,723 11,594
Profit for the year 28,687 8,411 37,098 16,836 6,035 22,871
Attributable to:
Owners of M. P. Evans Group PLC 25,395 8,281 33,676 14,438 5,315 19,753
Non-controlling interests 30 3,292 130 3,422 2,398 720 3,118
28,687 8,411 37,098 16,836 6,035 22,871
US CENTS US CENTS US CENTS US CENTS
Basic earnings per 10p share 11 46.04 61.05 26.28 35.96
Diluted earnings per 10p share 11 45.98 60.97 26.24 35.90
* Non-statutory column (see note 13)
45
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
2014 2013
US$’000 US$’000
Other comprehensive (expense)/income
Exchange loss on translation of foreign operations (4,060) (11,785)
Previously unrealised profit on sale of land to associated undertaking
released to the consolidated income statement on sale of that land
by the associate to a third party (458) (323)
Release of deferred tax 2,460 –
Other comprehensive (expense)/income (633) 806
Other comprehensive expense for the year (2,691) (11,302)
Profit for the year 37,098 22,871
Total comprehensive income 34,407 11,569
Attributable to:
Owners of M. P. Evans Group PLC 30,095 8,327
Non-controlling interests 4,312 3,242
34,407 11,569
46
CONSOLIDATED BALANCE SHEET
At 31 DECEMBER 2014
BEFORE BEFORE
BIOLOGICAL- BIOLOGICAL- BIOLOGICAL- BIOLOGICAL-
BEARER-ASSET BEARER-ASSET 31 DECEMBER BEARER-ASSET BEARER-ASSET 31 DECEMBER
ADJUSTMENT * ADJUSTMENT * 2014 ADJUSTMENT * ADJUSTMENT * 2013
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Non-current assets
Goodwill
Biological assets
Property, plant and equipment
Investments in associates
Investments
Deferred-tax asset
Current assets
Biological assets
Inventories
Trade and other receivables
Current-tax asset
Cash and cash equivalents
12
13
14
15
16
25
17
18
19
20,23
1,157
1,157
—
163,538
— 163,538
111,983
(79,601)
120,617
26,284
—
96
— 14,137
191,584
94,333
96
14,137
1,157
1,157
—
148,394
— 148,394
109,319
(76,152)
122,856
27,335
—
102
— 14,996
185,471
95,521
102
14,996
301,307
110,221
411,528
297,247
99,577
396,824
4,440
6,879
13,220
2,029
48,042
74,610
—
415
4,440
7,294
— 13,220
2,029
—
— 48,042
415
75,025
594
8,267
12,345
2,201
56,348
79,755
—
(277)
594
7,990
— 12,345
2,201
—
— 56,348
(277)
79,478
Total assets
4
375,917
110,636
486,553
377,002
99,300
476,302
Current liabilities
Borrowings
Trade and other payables
Current-tax liability
20, 22
21
Net current assets
Non-current liabilities
Borrowings
Deferred-tax liability
Retirement-benefit obligations
22
25
26
32,424
12,555
2,202
47,181
27,429
14,103
199
3,765
— 32,424
— 12,555
2,202
—
— 47,181
415
27,844
— 14,103
21,183
3,765
20,984
—
31,710
10,311
4,313
46,334
33,421
34,780
2,903
2,933
— 31,710
10,311
—
4,313
—
— 46,334
(277)
33,144
— 34,780
20,963
2,933
18,060
—
Total liabilities
Net assets
Equity
Share capital
Other reserves
Retained earnings
18,067
20,984
39,051
40,616
18,060
58,676
4
65,248
20,984
86,232
86,950
18,060
105,010
310,669
89,652
400,321
290,052
81,240
371,292
27
29
29
9,302
69,258
211,966
—
26,284
55,098
9,302
95,542
267,064
9,253
75,212
189,626
—
27,336
45,764
9,253
102,548
235,390
Equity attributable to the owners
of M.P. Evans Group PLC
290,526
81,382
371,908
274,091
73,100
347,191
Non-controlling interests
30
20,143
8,270
28,413
15,961
8,140
24,101
Total equity
310,669
89,652
400,321
290,052
81,240
371,292
* Non-statutory column (see note 13)
The financial statements on pages 45 to 74 were approved by the board of directors
on 24 April 2015 and signed on its behalf by
Tristan Price Philip Fletcher
Directors
47
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
NON-
SHARE OTHER RETAINED CONTROLLING TOTAL
CAPITAL RESERVES EARNINGS TOTAL INTERESTS EQUITY
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Profit for the year
— 14,256
19,420
33,676
3,422
37,098
Other comprehensive (expense)/income
for the year
Total comprehensive income for the year
Issue of share capital
27,29
—
49
— (11,734)
8,153
(3,581)
890
(2,691)
2,522
27,573
30,095
4,312
34,407
2,130
—
2,179
Dividends
10, 15, 30
— (11,742)
4,101
(7,641)
Credit to equity for equity-settled
share-based payments
28
Movement in non-controlling interests
Transactions with owners
At 1 January 2014
—
—
49
84
—
—
—
84
—
(9,528)
4,101
(5,378)
9,253
102,548
235,390
347,191
24,101
371,292
—
—
—
—
—
2,179
(7,641)
84
—
(5,378)
At 31 December 2014
27, 29, 30
9,302
95,542
267,064
371,908
28,413
400,321
Profit for the year
—
11,594
8,159
19,753
3,118
22,871
Other comprehensive (expense)/income
for the year
Total comprehensive income for the year
Issue of share capital
Dividends
Credit to equity for equity-settled
share-based payments
27, 29
10, 15, 30
28
Movement in non-controlling interests
Transactions with owners
At 1 January 2013
—
—
26
—
—
—
26
(9,005)
(2,421)
(11,426)
124
(11,302)
2,589
5,738
8,327
3,242
11,569
928
—
954
—
954
(9,764)
2,977
(6,787)
(896)
(7,683)
49
—
33
82
—
82
(6,468)
(6,468)
(50)
(6,518)
(8,787)
(3,458)
(12,219)
(946)
(13,165)
9,227
108,746
233,110
351,083
21,805
372,888
At 31 December 2013
27, 29, 30
9,253
102,548
235,390
347,191
24,101
371,292
48
M P EVANS GROUP PLC 2014 ANNUAL REPORT
CONSOLIDATED
CASH-FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2014 2013
NOTE US$’000 US$’000
Net cash generated by operating activities 31 28,351 19,494
Investing activities
Interest received 6 1,650 972
Sale of shares to non-controlling interest 30 926 498
Proceeds on disposal of assets 415 358
Purchase of property, plant and equipment 14 (11,917) (12,261)
Purchase of shares from non-controlling interest — (7,100)
Planting expenditure (6,314) (6,265)
Net cash used by investing activities (15,240) (23,798)
Financing activities
Loan drawdown — 6,800
Proceeds on issue of shares 27 — 131
Dividends paid to Company shareholders 10 (5,462) (5,964)
Repayment of borrowings 23 (17,262) (2,318)
Dividend paid to non-controlling interest 30 — (896)
Net cash used by financing activities (22,724) (2,247)
Net decrease in cash and cash equivalents (9,613) (6,551)
Net cash and cash equivalents at 1 January 24,638 29,299
Effect of foreign-exchange rates on cash and cash equivalents 593 1,890
Net cash and cash equivalents at 31 December 20 15,618 24,638
49
NOTES TO THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 88. The nature of the
Group’s operations and its principal activities is set out in note 4 and in the strategic report on pages 8 to 27. 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 not elected not to present its own profit and loss
account for the year. M.P.Evans Group PLC reported a profit of US$36,754,000 for the financial year ended 31 December 2014
(2013 loss of US$2,269,000).
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
The following standards, which had no material impact on the Group, have been adopted by the Group for the first time
for the financial year beginning on 1 January 2014:
IFRS 10 'Consolidated financial statements'. 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.
IFRS 11 'Joint arrangements'. 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.
IFRS 12 'Disclosure of interests in other entities'. 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.
IFRS 9 ‘Financial Instruments’. The standard addresses the classification, measurement and recognition of financial
instruments. 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 separate accounting for 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.
(b) New standards, amendments and interpretations issued but not effective for the year beginning 1 January 2014 and not
adopted early
The following accounting standards are effective for accounting periods beginning on or after 1 January 2014 and have not
yet been adopted by the Group:
Amendments to IAS 16 ‘Property, plant and equipment’ and IAS 41 ‘Agriculture’ (effective 1 January 2016; not endorsed by
the EU at the date of this report). These amendments change the reporting for bearer plants, such as oil palms and rubber
trees. These should be accounted for in the same way as property, plant and equipment under IAS 16 rather than IAS 41,
though the produce of bearer plants remains in the scope of IAS 41. The amendments to IAS 16 and IAS 41 are expected to
have a material effect on the consolidated financial statements of the Group, as explained in the section Results and
financial position on page 9.
IFRIC 21 ‘Levies’ (effective 1 January 2014; endorsed by the EU 17 June 2014). IAS 37 sets out criteria for the recognition of
a liability, one of which is the presence of an obligation resulting from a past event. The interpretation addresses what is the
obligating event that gives rise to the payment of a levy, and when a liability should be recognised. The Group has not yet
assessed the impact of IFRIC 21 on the consolidated financial information.
Amendment to IFRS 11 ‘Joint arrangements’ (effective 1 January 2016; not endorsed by the EU at the date of this report).
This amendment provides guidance on how to account for the acquisition of an interest in a joint venture operation that
constitutes a business. The amendments are applicable both to the initial acquisition of an interest in a joint operation and
50
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 2
Adoption of new and revised accounting standards CONTINUED
the acquisition of any subsequent additional interest. A previously-held interest is not re-measured when the acquisition of an
additional interest in the same joint operation results in retaining joint control. The Group has not yet assessed the impact of the
amendment to IFRS 11 on the consolidated financial information.
IFRS 9, ‘Financial instruments’ (effective 1 January 2018; not endorsed by the EU at the date of this report). The complete
version of IFRS 9 replaces most of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial assets. The basis of classification depends on the entity’s
business model and the contractual cash flow characteristics of the financial asset. For financial liabilities there were no
changes to classification and measurement except for some liabilities designated at fair value through profit or loss. IFRS 9
relaxes the requirements for hedge effectiveness by now requiring an economic relationship between the hedged item and
hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management
purposes. The Group has not yet assessed the impact of IFRS 9 on the consolidated financial information.
There are no other IFRS’s 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
The consolidated financial statements of M.P.Evans Group PLC have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRS IC”) interpretations as adopted by the European Union,
and the Companies Act 2006 as applicable to companies reporting under IFRS. They have been prepared under the historical
cost convention, as modified by the valuation of biological assets and available-for-sale financial assets. 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 projected funds 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. Further details
are given in the corporate governance section on page 37.
(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.
Non-controlling interests in the net assets of subsidiaries are separately identified. They consist of non-controlling interests at
the date of business combination, and the non-controlling interest’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 sale of the developed
property is fully completed. 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.
(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 unfunded but the expense is accrued by the Group and charged to the
income statement on the basis of individuals’ service at the balance-sheet date.
51
Notes to the consolidated accounts CONTINUED
NOTE 3
Accounting policies CONTINUED
(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 application of the Black-Scholes model, using
management’s best estimates assuming that: options are exercised in the middle of the vesting period; dividend yield is the
latest annual dividend divided by the share price on the date the options are granted; share-price volatility is assessed as the
average standard deviation over one year using share prices since 1 January 1993. 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 oil palms), 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. In applying the
‘fair value hierarchy’ in IFRS 13 the Group has concluded that the valuation of its beef cattle falls into Level 1 since there is an
active local market for beef cattle of varying ages and weights. The valuation of its bearer biological assets falls into Level 3
since there is no active market in plantation assets and where sales do take place these are typically private transactions where
information about the sale is not made publicly available.
(i)
Plantation
The Group has valued its biological assets at the discounted net present value of cash flows arising in producing crops over
the assets’ expected 25-year economic life using actual and budgeted management information about the expected crop
and the fieldwork, harvesting, general and overhead costs on each of its estates. 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 CPO production using a long-term (20-year) average price. The cost of planting the Group’s
estates is 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 charged 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 associated
companies, 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 25 or 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. Where the board judges the residual value of an asset to exceed its
carrying value, no provision is made for depreciation.
52
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 3
Accounting policies CONTINUED
Work-in-progress is measured at cost and is not depreciated.
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 at transition
to IFRS is taken to be their deemed cost.
(k) Investments in associated companies
Undertakings over which the Group has the ability to exert significant influence through shareholdings and board membership
are treated as associated undertakings. Investments in associated undertakings are held in the consolidated financial statements
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 2014. 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 and investments held for sale
The Group treats assets, including investments, 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 bank deposits 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.
53
Notes to the consolidated accounts CONTINUED
NOTE 3
Accounting policies CONTINUED
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.
(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 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 25.
(iv) Investments
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.
54
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 4
Segment information
The Group’s reportable segments follow the three areas of activity set out in the strategic report 2014. 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.
2014 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 89,786 124 89,910 966 — 46 90,922*
Gross profit/(loss) 35,772 (92) 35,680 168 — 46 35,894
Gain on biological assets 15,144 — 15,144 — — — 15,144
Planting expenditure (6,314) — (6,314) — — — (6,314)
Foreign-exchange (loss)/gain (2,074) (354) (2,428) — — 49 (2,379)
Other administrative expenses (1,356) 396 (960) (178) — (3,616) (4,754)
Impairment of Woodlands — — — (1,116) — — (1,116)
Other income 448 — 448 — — — 448
Operating profit 36,923
Finance income 1,259 322 1,581 59 — 10 1,650
Finance costs (2,161) (266) (2,427) (956) — (330) (3,713)
Group-controlled profit before tax 34,860
Tax (9,989) (557) (10,546) (25) — (1,447) (12,018)
Group-controlled profit after tax 22,842
Share of associated companies’
profit after tax 9,897 — 9,897 1,454 2,905 — 14,256
Profit for the year 37,098
Consolidated total assets
Assets 321,395 1,052 322,447 29,003 — 14,486 365,936
Investments in associates 56,927 — 56,927 47,147 16,543 — 120,617
378,322 1,052 379,374 76,150 16,543 14,486 486,553
Consolidated total liabilities
Liabilities 56,874 68 56,942 18,236 — 11,054 86,232
Other information
Additions to non-current assets 11,857 — 11,857 57 — 3 11,917
Depreciation 5,364 12 5,376 355 — 37 5,768
Retirement-benefit obligations 1,178 — 1,178 — — — 1,178
* US$42.3 million of revenue (46.6%) was from sales of CPO to three customers (18.9%, 17.0% and 10.7% respectively).
55
Notes to the consolidated accounts CONTINUED
NOTE 4
Segment information CONTINUED
2013 PLANTATION CATTLE PROPERTY OTHER TOTAL
INDONESIA MALAYSIA TOTAL AUSTRALIA MALAYSIA
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 76,479 203 76,682 5,458 — 46 82,186*
Gross profit/(loss) 24,820 (41) 24,779 (90) — 46 24,735
Gain on biological assets 9,059 — 9,059 — — — 9,059
Planting expenditure (6,265) — (6,265) — — — (6,265)
Foreign-exchange (loss)/gain (8,349) 46 (8,303) — — (19) (8,322)
Other administrative expenses (1,361) 232 (1,129) (66) — (3,249) (4,444)
Other income — 8 8 — — — 8
Operating profit 14,771
Finance income 824 56 880 84 — 8 972
Finance costs (2,181) (79) (2,260) (1,155) — (105) (3,520)
Group-controlled profit before tax 12,223
Tax 417 (21) 396 — — (1,342) (946)
Group-controlled profit after tax 11,277
Share of associated companies’
profit/(loss) after tax 9,627 — 9,627 (2,429) 4,396 — 11,594
Profit for the year 22,871
Consolidated total assets
Assets 299,886 6,091 305,977 33,325 — 14,144 353,446
Investments in associates 56,627 — 56,627 50,254 15,975 — 122,856
356,513 6,091 362,604 83,579 15,975 14,144 476,302
Consolidated total liabilities
Liabilities 54,120 16,364 70,484 23,351 — 11,175 105,010
Other information
Additions to non-current assets 11,912 — 11,912 232 — 117 12,261
Depreciation 4,876 15 4,891 387 — 34 5,312
Retirement-benefit obligations (64) — (64) — — — (64)
* Revenue of US$16.2 million (19.7%) was from sales of crude palm oil one customer.
56
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 5
Employees
2014 2013
US$’000 US$’000
Employee costs during the year
Wages and salaries 12,583 10,807
Social-security costs 894 873
Current-service cost of retirement benefit (see note 26) 620 922
Other pension costs 169 109
14,266 12,711
NUMBER NUMBER
Average number of persons employed (including executive directors)
Estate manual 2,141 1,735
Local management 71 60
United Kingdom head office 7 7
2,219 1,802
Details of directors’ remuneration required by the Companies Act 2006 are shown within the report of the board to the
shareholders on directors’ remuneration on pages 41and 42 and form part of these audited financial statements.
NOTE 6
Finance income
2014 2013
US$’000 US$’000
Interest receivable on bank deposits 1,650 972
NOTE 7
Finance costs
Interest payable on bank loans and overdrafts 3,713 3,520
57
Notes to the consolidated accounts CONTINUED
NOTE 8
Group-controlled profit before tax
2014 2013
US$’000 US$’000
Profit before tax is stated after charging
Depreciation of property, plant and equipment 5,768 5,312
Auditors’ remuneration 356 338
Employee costs (note 5) 14,266 12,711
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 96 95
Total audit services 116 115
Audit of overseas subsidiaries 172 153
Total fees payable 288 268
* In addition to the above, fees of US$68,000 (2013 US$70,000) were payable to other firms for the audit of subsidiary
companies.
NOTE 9
Tax on profit on ordinary activities
United Kingdom corporation tax charge for the year 413 384
Relief for overseas taxation (413) (384)
— —
Overseas taxation 8,152 10,881
Adjustments in respect of prior years — 18
Total current tax 8,152 10,899
Deferred taxation – origination and reversal of temporary differences (see note 25) 3,866 (9,953)
12,018 946
The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, was 21.49 % (2013 –
23.25%). The standard rate of Indonesian tax was 25.00% for the current year (2013 – 25.00%). The actual tax charge is higher
(lower in 2013) than the standard rate for the reasons set out in the following reconciliation:-
58
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 9
Tax on profit on ordinary activities CONTINUED
2014 2013
US$’000 US$’000
Profit on ordinary activities before tax 34,860 12,223
Tax on profit on ordinary activities at the standard rate 7,491 2,842
Factors affecting the charge for the year
Withholding tax on overseas dividends and interest 1,059 960
Unrelieved losses 1,906 1,512
Expenses not deductible for tax purposes 21 78
Unrealised Indonesian exchange differences not included in Group profit 47 ( 4,412)
Utilisation of losses brought forward (56) ( 184)
Lower rate applicable to disposals of fixed assets (99) ( 75)
Biological assets 262 57
Other exchange differences 115 (701)
Adjustments to valuation of investments 51 160
Other differences 1,221 709
Total actual amount of tax 12,018 946
NOTE 10
Dividends paid and proposed
2014 interim dividend – 2.25p per 10p share (2013 interim dividend – 2.25p) 1,994 1,991
2013 final dividend – 6.00p per 10p share (2012 final dividend – 5.75p) 5,647 4,796
7,641 6,787
Following the year end, the board has proposed a final dividend for 2014 of 6.50p per 10p share, amounting to US$5.4
million. Shareholders will again have the option to elect to receive the dividend in shares rather than in cash (provided
resolution 11 is passed at the annual general meeting). Further information is published in the report of the directors on
page 33. The dividend will be paid on or after 18 June 2015 to those shareholders on the register at the close of business on
24 April 2015.
NOTE 11
Basic and diluted earnings per share
The calculation of earnings per 10p share is based on:
2014 2014 2013 2013
NUMBER OF NUMBER OF
US$’000 SHARES US$’000 SHARES
Profit for the year attributable to the
owners of M.P. Evans Group PLC 33,676 19,753
Average number of shares in issue 55,163,657 54,936,947
Diluted average number of shares in issue* 55,235,438 55,025,655
* The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options
held by directors and key employees of the Group.
59
Notes to the consolidated accounts CONTINUED
NOTE 12
Goodwill
2014 2013
US$’000 US$’000
At 1 January and 31 December 1,157 1,157
Goodwill is carried at cost. The directors have tested goodwill for impairment, concluding that the carrying amounts are
recoverable. Goodwill has arisen in respect of the Group’s projects in Indonesia in Kalimantan and on Bangka Island. The directors
consider the fair value of these investments to exceed their carrying value by a significant margin. Given this, and the size of the
goodwill balance, the directors do not consider it necessary to provide further detailed disclosures regarding impairment.
NOTE 13
Biological assets
Non-current biological assets comprise plantation bearer assets. The Group values these plantation assets using a discounted cash
flow over the expected 25-year economic life of the asset. The discount rate used in this valuation is 14%. The price of the f.f.b.
crop is taken to be the 20-year average based on historical selling prices or, where the plantation has its own mill, an inference
based on the widely-quoted commodity price for CPO delivered c.i.f. Rotterdam. The directors have concluded that using a 20-
year average provides the best estimate of the prices to be achieved over the valuation period.
Assumptions
The long-term average price and exchange rate used in determining the valuations were as follows:
31 DECEMBER 31 DECEMBER
2014 2013
Price of CPO (US$/tonne, c.i.f. Rotterdam) 641 626
Exchange rate (Rupiah per US$) 12,440 12,189
Sensitivity in valuation of plantation assets
A change of US$25 in the price assumption for CPO has the following effect on the valuation of plantation assets:
-US$ 25 +US$ 25
US$’000 US$’000
Subsidiaries (18,677) 18,677
Associated companies (12,638) 12,638
(31,315) 31,315
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 11,260 (10,148)
Associated companies 6,568 (6,017)
17,828 (16,165)
60
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 13
Biological assets CONTINUED
2014 2013
Non-current biological assets US$’000 US$’000
Gain in fair value:
Initial recognition 2,932 2,882
Current period 12,212 6,177
Total gain 15,144 9,059
At 1 January 148,394 139,335
At 31 December 163,538 148,394
2014 2013
F.f.b. crop (Tonnes) 385,400 345,600
Fair value of crop (US$’000) 48,104 41,365
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 strategic report 2014 on pages 24 to 27.
Presentation
In the balance sheet, the adjustment column shows that recognition of the biological-asset valuation replaces depreciated-
historical-planting costs of US$79,601,000 (2013 US$76,152,000) 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$169,253,000 (2013 US$157,392,000).
61
Notes to the consolidated accounts CONTINUED
NOTE 14
Property, plant and equipment
PLANT,
FREEHOLD LEASEHOLD EQUIPMENT CONSTRUCTION
LAND LAND BUILDINGS AND VEHICLES IN PROGRESS TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Cost or valuation
At 1 January 2014 26,008 28,185 44,030 32,642 5,270 136,135
Additions — 2,604 — 2,367 6,946 11,917
Re-classification — — 9,403 — (9,403) —
Exchange differences (1,921) (16) (355) (364) — (2,656)
Disposals — — (275) (345) — (620)
At 31 December 2014 24,087 30,773 52,803 34,300 2,813 144,776
Accumulated depreciation
At 1 January 2014 2,566 201 8,382 15,667 — 26,816
Charge for the year — 14 2,678 3,076 — 5,768
Exchange differences — — (88) (330) — (418)
Disposals — — (106) (383) — (489)
Impairment 1,116 — — — — 1,116
At 31 December 2014 3,682 215 10,866 18,030 — 32,793
Net book value
at 31 December 2014 20,405 30,558 41,937 16,270 2,813 111,983
Cost or valuation
At 1 January 2013 29,863 25,831 37,879 31,279 5,257 130,109
Additions 45 2,560 28 2,504 7,124 12,261
Re-classification — — 7,111 — (7,111) —
Exchange differences (3,900) (18) (720) (455) — (5,093)
Disposals — (188) (268) (686) — (1,142)
At 31 December 2013 26,008 28,185 44,030 32,642 5,270 136,135
Accumulated depreciation
At 1 January 2013 2,566 380 6,240 13,561 — 22,747
Charge for the year — 9 2,336 2,967 — 5,312
Exchange differences — — (142) (318) — (460)
Disposals — (188) (52) (543) — (783)
At 31 December 2013 2,566 201 8,382 15,667 — 26,816
Net book value
at 31 December 2013 23,442 27,984 35,648 16,975 5,270 109,319
Net book value
at 1 January 2013 27,297 25,451 31,639 17,718 5,257 107,362
As at 31 December 2014, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment of US$2,267,000 (2013 US$6,891,000).
Depreciation is charged to cost of sales, other than US$37,000 (2013 US$34,000) charged to other administrative expenses.
62
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 15
Investments in associates
Details of the principal subsidiary and associated undertakings are given on page 81.
The Group’s associated companies are all unlisted.
SHARE OF SHARE OF
NET ASSETS NET ASSETS
2014 2013
US$’000 US$’000
Share of net assets
At 1 January 121,855 129,742
Exchange differences (4,753) (9,717)
Profit for the year 14,256 11,594
Dividends received (11,742) (9,764)
At 31 December 119,616 121,855
Goodwill
At 1 January and 31 December 1,001 1,001
Carrying value
At 31 December 120,617 122,856
At valuation
Unlisted (directors’ valuation) 202,000 205,000
The Group’s aggregate share of the summarised results of its associated undertakings is shown below:-
AGRO BERTAM
MUKO KERASAAN NAPCo PROPERTIES
(36.84%) (38.00%) (34.37%) (40.00%) TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000
2014
Revenue 25,596 2,943 24,835 15,084 68,458
Profit after tax 8,843 1,054 1,454 2,905 14,256
Non-current assets 43,528 6,115 86,719 11,197 147,559
Current assets 12,067 1,077 11,619 13,238 38,001
Total assets 55,595 7,192 98,338 24,435 185,560
Current liabilities (3,339) (380) (5,405) (5,734) (14,858)
Non-current liabilities (1,985) (156) (45,786) (2,158) (50,085)
Total liabilities (5,324) (536) (51,191) (7,892) (64,943)
Net assets 50,271 6,656 47,147 16,543 120,617
63
Notes to the consolidated accounts CONTINUED
NOTE 15
Investments in associates CONTINUED
AGRO BERTAM
MUKO KERASAAN NAPCo PROPERTIES
(36.84%) (38.00%) (34.37%) (40.00%) TOTAL
US$’000 US$’000 US$’000 US$’000 US$’000
2013
Revenue 21,946 2,293 22,713 18,927 65,879
Profit/loss after tax 8,610 1,017 (2,429) 4,396 11,594
Non-current assets 43,682 5,509 91,578 12,096 152,865
Current assets 8,100 1,232 10,923 12,234 32,489
Total assets 51,782 6,741 102,501 24,330 185,354
Current liabilities (564) (60) (4,214) (5,945) (10,783)
Non-current liabilities (1,131) (140) (48,034) (2,410) (51,715)
Total liabilities (1,695) (200) (52,248) (8,355) (62,498)
Net assets 50,087 6,541 50,253 15,975 122,856
NOTE 16
Investments
2014 2013
Other available-for-sale financial investments (unlisted) US$’000 US$’000
At 1 January 102 109
Exchange differences (6) (7)
At 31 December 96 102
The directors have reviewed the fair values of the Group’s available-for-sale investments and concluded that their realisable
market value equals their carrying value.
NOTE 17
Current biological assets
2014 2013
Livestock US$’000 US$’000
Gain in fair value 1,545 1,005
Increase due to purchases 3,044 —
Decrease due to disposal and reclassification (694) (4,349)
Foreign exchange loss (49) (656)
Change in carrying value of biological assets 3,846 (4,000)
At 1 January 594 4,594
At 31 December 4,440 594
Head sold (number) 671 4,872
Cattle revenue 694 4,349
64
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 18
Inventories
2014 2013
US$’000 US$’000
Processed produce for sale 3,175 2,327
Estate stores 2,422 2,538
Nurseries 1,697 3,125
7,294 7,990
NOTE 19
Trade and other receivables
2014 2013
US$’000 US$’000
Trade receivables 1,116 905
Receivable from smallholder co-operatives 10,258 6,483
Other receivables 508 1,094
Prepayments and accrued income 1,338 3,863
13,220 12,345
Trade and other receivables analysed by currency of receivable:
Indonesian Rupiah 12,144 10,915
US Dollar 865 1,049
Sterling 132 55
Australian Dollar 71 252
Malaysian Ringgit 8 74
13,220 12,345
Sales of palm oil are generally made for cash payment in advance of delivery. The Group makes full provision against invoices
outstanding for more than 30 days. At 31 December 2014 there was no provision for impairment of trade receivables (2013
US$ nil). The directors consider the carrying amount of trade and other receivables approximate their fair value.
NOTE 20
Cash and cash equivalents
Cash and cash equivalents 48,042 56,348
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$20.1 million (2013
US$19.7 million) has been pledged as security against bank loans.
Cash and cash equivalents 48,042 56,348
Bank overdrafts and loans (see note 22) (32,424) (31,710)
Net cash 15,618 24,638
65
Notes to the consolidated accounts CONTINUED
NOTE 21
Trade and other payables
Trade payables 4,286 3,368
Amounts owed to associated undertakings 44 50
Other payables 8,225 6,893
12,555 10,311
The average credit period taken for trade purchases is 36 days (2013 - 30 days). The Group has processes in place to ensure
payables are settled within the agreed terms.
NOTE 22
Borrowings
2014 2013
US$’000 US$’000
Secured borrowing at amortised cost
Bank Treasury Bill facility — 20,453
Bank loans 46,527 46,037
46,527 66,490
Total borrowings
Amount due for settlement within 12 months 32,424 31,710
Due for settlement in one to five years 14,103 34,780
46,527 66,490
Bank loans from lenders in Indonesia, Australia and Malaysia are secured, respectively, the assets of the Woodlands cattle
aggregation, on Bertam Estate and the Kalimantan palm-oil mill.
Analysis of borrowings by currency:
AUSTRALIAN MALAYSIAN
US DOLLARS DOLLARS RINGGIT TOTAL
US$’000 US$’000 US$’000 US$’000
31 December 2014
Bank loans 28,494 18,033 — 46,527
31 December 2013
Bank Treasury Bill facility — 20,453 — 20,453
Bank loans 29,751 — 16,286 46,037
29,751 20,453 16,286 66,490
Facilities drawn during the year
In the UK, continuing use was made of a US$10 million revolving-credit facility which is treated as an overdraft.
Undrawn borrowing facilities
At 31 December 2014, the Group had no undrawn loan facilities in either Indonesia or Malaysia. There is no longer an
overdraft facility from an Australian lender (2013 A$500,000).
Interest rates
The weighted-average interest rates paid during the year were as follows:-
66
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 22
Borrowings CONTINUED
2014 2013
% %
Bank Treasury Bill facility 4.8 5.0
Bank loans 6.3 5.9
NOTE 23
Net debt
2014 2013
US$’000 US$’000
Cash at bank 48,042 56,348
Secured borrowing
Indonesia 18,494 19,751
Australia 18,033 20,453
Malaysia — 16,286
UK 10,000 10,000
46,527 66,490
Net cash/(debt) 1,515 ( 10,142)
Net debt reconciliation
At 1 January (10,142) (2,124)
Repayment of borrowings 17,262 2,318
Loans drawn down — (6,800)
Net change in cash and cash equivalents (7,155) (6,551)
Difference on foreign exchange 1,550 3,015
At 31 December 1,515 (10,142)
67
Notes to the consolidated accounts CONTINUED
NOTE 24
Maturity of financial liabilities
The table below shows anticipated cash outflows relating to the Group’s financial liabilities based on the period remaining
between the balance-sheet and contractual-maturity dates. Where borrowings carry a floating rate of interest, an estimate of future
interest payments has been made by applying the interest rate in force at the balance-sheet date. Similarly, where liabilities are
denominated in foreign currencies, the exchange rate at the balance-sheet date has been applied to all related future cash flows.
0-1 YEAR 1-2 YEARS 2-5 YEARS
US$’000 US$’000 US$’000
2014
Trade and other payables 12,511 — —
Amounts owed to associated undertakings 44 — —
Short-term borrowings* 29,233 — —
Term loans 4,622 5,168 10,911
46,410 5,168 10,911
2013
Trade and other payables 10,261 — —
Amounts owed to associated undertakings 50 — —
Short-term borrowings* 31,165 — —
Term loans 18,802 4,852 16,324
60,278 4,852 16,324
* Short-term borrowings are shown as being fully repaid at their contractual expiry date. The Group expects these facilities to
be renewed if needed
NOTE 25
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 2014 3,411 2,679 18,060 (734) (17,449) 5,967
Charge/(credit) to
income statement 477 — 2,923 (172) 638 3,866
Transfer from revaluation
reserve — (2,460) — — — (2,460)
Exchange differences (112) (219) — 23 (19) (327)
At 31 December 2014 3,776 — 20,983 (883) (16,830) 7,046
At 1 January 2013 3,874 3,126 16,679 (1,058) (9,882) 12,739
Charge/(credit) to
income statement 361 — 1,381 123 (11,818) (9,953)
Exchange differences (824) (447) — 201 4,251 3,181
At 31 December 2013 3,411 2,679 18,060 (734) (17,449) 5,967
Certain deferred-tax assets and liabilities have been offset. The following is the analysis of deferred-tax balances (after offset) for
financial reporting purposes:
68
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 25
Deferred tax CONTINUED
2014 2013
US$’000 US$’000
To be recovered after more than 12 months
Deferred-tax assets (14,137) (14,996)
Deferred-tax liabilities 21,183 20,963
7,046 5,967
At the balance-sheet date, the Group had unused tax losses of US$84,129,000 (2013 US$81,858,000) available for offset
against future profits. A deferred-tax asset has been recognised in respect of US$65,529,000 (2013 US$66,273,000) of such
losses. No deferred-tax asset has been recognised in respect of the remaining US$18,600,000 (2013 US$15,585,000) 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$303,618,000 (2013 US$295,438,000). 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$75,049,000 (2013 US$75,129,000). 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 outstanding executive share options
for which deferred-tax assets have not been recognised was US$323,000 (2013 US$604,000). No asset has been recognised in
respect of these differences due to the unpredictability of future profit streams.
NOTE 26
Retirement-benefit obligations
The Group’s only obligation relates to an unfunded, non-contributory, post-employment statutory benefit scheme in Indonesia.
A lump sum is paid to employees on retirement or on leaving the Group’s employment. This terminal benefit is accrued by the
Group and charged in the income statement on the basis of individuals’ service at the balance-sheet date. Retirement is
assumed at the earlier of age 55 years or 30 years’ service. No allowance is made for mortality or internal promotion.
2014 2013
The main assumptions used to assess the Group’s liability are: % %
Discount rate 8.50 9.00
Salary increase per annum 8.00 8.00
Reconciliation of scheme liabilities: US$’000 US$’000
Current-service cost 620 922
Past-service cost 48 29
Interest cost 259 223
Actuarial gains/(loss) 251 (1,238)
1,178 (64)
Less: Benefits paid out (255) (232)
Movement in the year 923 (296)
At 1 January 2,933 4,230
Exchange differences (91) (1,001)
At 31 December 3,765 2,933
69
Notes to the consolidated accounts CONTINUED
NOTE 27
Share capital
Shares of 10p each ALLOTTED, FULLY ALLOTTED, FULLY
AUTHORISED PAID AND VOTING AUTHORISED PAID AND VOTING
NUMBER NUMBER £’000 US$’000
At 1 January 2014 87,000,000 55,034,876 8,700 9,253
Issued during the year — 292,519 — 49
At 31 December 2014 87,000,000 55,327,395 8,700 9,302
At 1 January 2013 87,000,000 54,871,402 8,700 9,227
Issued during the year — 163,474 — 26
At 31 December 2013 87,000,000 55,034,876 8,700 9,253
During the year, no 10p shares were issued as the result of the exercise of share options (2013 - 53,790). In addition, a further
292,519 shares (2013 - 109,684 shares) were issued to shareholders who elected to take scrip in lieu of cash dividends. There
were no cash receipts by the Company in respect of allotments in 2014 (2013 US$131,000).
NOTE 28
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:-
2014 2013
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 350,000 375.4 333,790 314.0
Granted during the year — — 70,000 502.3
Exercised during the year — — (53,790) 159.0
At 31 December 350,000 375.4 350,000 375.4
Exercisable at the end of the year 200,000 287.9 200,000 287.9
No options were exercised in 2014. The weighted-average share price at the date of exercise for share options exercised during
2013 was 527p. The options outstanding at 31 December 2014 had a weighted-average remaining contractual life of 5.4 years
and exercise prices in the range 159.5p to 520.0p.
The Group recognised total expenses of US$84,000 related to equity-settled share-based payment transactions (2013
US$82,000).
Details of the directors’ share options are set out in the report of the board to the shareholders on directors’ remuneration on
pages 41 and 42.
70
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 29
Reserves
SHARE- CAPITAL- SHARE- SHARE OF FOREIGN-
PREMIUM REVALUATION REDEMPTION MERGER OPTION ASSOCIATES’ EXCHANGE RETAINED
ACCOUNT RESERVE1 RESERVE RESERVE RESERVE RESERVES RESERVE TOTAL EARNINGS
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2014 26,065 9,513 3,896 1,056 364 60,322 1,332 102,548 235,390
Exchange differences — (524) — — — (4,293) (621) (5,438) 1,302
Release of deferred profit
on sale of land — (506) — — — — — (506) —
Retirement-benefit
obligations — — — — — — — — (183)
Issue of shares 2,130 — — — — 2,130 —
Share-based payments — — — — 84 — — 84 —
Statutory Indonesian
reserve — — 191 — — — — 191 (191)
Liquidation of dormant
subsidiary — — — (290) — — — (290) —
Transfer to retained
earnings2 — (8,151) — — — — — (8,151) 8,151
Release of deferred tax — 2,460 — — — — — 2,460 —
Dividends from associated
undertakings — — — — — (11,742) — (11,742) 11,742
Sale of shares to minority — — — — — — — — (926)
Profit for the financial year — — — — — 14,256 — 14,256 19,420
Dividends paid
(see note 10) — — — — — — — — (7,641)
At 31 December 2014 28,195 2,792 4,087 766 448 58,543 711 95,542 267,064
SHARE- CAPITAL- SHARE- SHARE OF FOREIGN-
PREMIUM REVALUATION REDEMPTION MERGER OPTION ASSOCIATES’ EXCHANGE RETAINED
ACCOUNT RESERVE1 RESERVE RESERVE RESERVE RESERVES RESERVE TOTAL EARNINGS
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2013 25,137 10,892 3,896 1,056 315 67,683 (233) 108,746 233,110
Exchange differences — (1,056) — — — (9,191) 1,565 (8,682) (3,104)
Transfer from non-
controlling interests — — — — — — — — (84)
Release of deferred profit
profit on sale of land — (323) — — — — — (323) —
Retirement-benefit
obligations — — — — — — — — 767
Issue of shares 928 — — — — — — 928 —
Share-based payments — — — — 49 — — 49 33
Dividends from
associated undertakings — — — — — (9,764) — (9,764) 9,764
Purchase of non-
controlling interests — — — — — — — — (6,468)
Profit for the
financial year — — — — — 11,594 — 11,594 8,159
Dividends paid
(see note 10) — — — — — — — — (6,787)
At 31 December 2013 26,065 9,513 3,896 1,056 364 60,322 1,332 102,548 235,390
1. The revaluation reserve relates to the revaluation surplus recognised under UK GAAP. On transition to IFRS, the Group
elected to treat the revalued amount of non-current assets as their deemed cost.
2. This amount has been treated as non-distributable since it arose on the disposal of some properties in Australia more than a
decade ago. On further investigation it has been established that under IFRS this amount is distributable and has therefore
been transferred to retained earnings.
71
Notes to the consolidated accounts CONTINUED
NOTE 30
Non-controlling interests
2014 2013
US$’000 US$’000
At 1 January 24,101 21,805
Share of profit in the year 3,422 3,118
Dividends paid — (896)
Share of retirement-benefit (credit)/debit
charged to other comprehensive income (36) 124
Transfer on sale of non-controlling interest by the Group 926 498
Transfer on sale of non-controlling interest to the Group — (548)
At 31 December 28,413 24,101
During the year the Group disposed of a non-controlling interest to a new partner in its Kalimantan project.
NOTE 31
Note to the consolidated cash-flow statement
2014 2013
US$’000 US$’000
Profit for the year 37,098 22,871
Share of associated companies’ profit after tax (14,256) (11,594)
Tax charge 12,018 946
Finance costs 3,713 3,520
Finance income (1,650) (972)
Operating profit 36,923 14,771
Biological gain (16,689) (10,064)
Planting expenditure 6,314 6,265
Disposal of non-current assets 833 1
Release of deferred profit (506) (323)
Depreciation of property, plant and equipment 5,768 5,312
Retirement-benefit obligations 923 892
Share-based payments 84 82
Dividends from associated companies 11,742 9,764
Operating cash flows before movements in working capital 45,392 26,700
(Increase)/decrease in inventories (1,710) 5,444
(Increase)/decrease in receivables (974) 1,917
(Increase)/decrease in payables 2,265 (4,458)
Cash generated by operating activities 44,973 29,603
Income tax paid (12,909) (6,589)
Interest paid (3,713) (3,520)
Net cash generated by operating activities 28,351 19,494
72
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE 32
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$15,618,000 (2013 US$24,638,000) as shown in note 20, and equity attributable to
the owners of the parent Company of US$371,908,000 (2013 US$347,191,000). The board intends to fund its continuing
Indonesian expansion by a combination of the Group’s cash resources, disposal of its remaining Malaysian interests and by
securing additional borrowing as needed.
Categories of financial instruments
All of the Group’s financial assets are classified as loans and receivables, with the exception of its other investments shown in
note 16 which are classified as available-for-sale financial assets. All of the Group’s financial liabilities are measured at
amortised cost.
In the opinion of the directors, there was no significant difference between the carrying values and estimated fair values of the
Group’s primary financial assets and liabilities at either the current, or preceding, financial year end.
Financial-risk-management objectives
The main risks arising from the Group’s financial instruments are foreign-currency, interest-rate, credit and liquidity. The board
reviews and agrees the policies for managing these risks. The policies and the impact of these risks on the Group’s balance
sheet at the end of the financial year are summarised below.
Foreign-currency risk
The majority of the Group’s operations are undertaken in Indonesia, Australia and Malaysia. The Group does not have material
transactional currency exposures arising from sales or purchases by its operating units but the Group’s balance sheet can be
significantly affected by movements in exchange rates. Whilst the Group’s trading takes place in local currencies in South East Asia,
relevant commodity prices are determined in US Dollars in a world market which reduces the Group’s currency risk. The Group has
a policy not to hedge exchange-rate fluctuation and does not make use of forward-currency contracts.
The currency profile of the Group’s monetary assets, excluding trade and other receivables (the currency profile of which is given in
note 19), are as follows:
2014 2013
US$’000 US$’000
US Dollar 30,790 31,243
Indonesian Rupiah 15,597 15,620
Malaysian Ringgit 832 4,085
Australian Dollar 465 5,143
Sterling 358 257
48,042 56,348
The currency profile of the Group’s monetary liabilities, excluding trade and other payables, is shown in note 22.
73
Notes to the consolidated accounts CONTINUED
NOTE 32
Financial instruments CONTINUED
The Group is exposed to changes in foreign-currency exchange rates. This is in relation to the impact of movements on its non-
US Dollar monetary assets, but also in relation to the consolidation of its non-US Dollar-functional-currency subsidiary and
associated undertakings. The most significant sensitivities arise in respect of movements in the Australian Dollar and Malaysian
Ringgit. Management estimates that a 10% weakening of the US Dollar against these currencies would have the following
impact on the result and net assets of its two relevant associated undertakings:
2014 2013
US$’000 US$’000
Australian Dollar
Result for the year (51) (331)
Net assets 3,078 3,443
Malaysian Ringgit
Result for the year 413 852
Net assets 2,266 2,743
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 A minus.
The Group’s only financial liabilities other than short-term trade and other payables are the borrowings referred to in note 22.
The loan denominated in Australian Dollars is charged at a three-month variable market 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 actively
monitoring 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 five years. The maturity profile for financial liabilities is shown in note 24.
NOTE 33
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 41 and 42. The directors’ participation in the executive share-option
scheme is disclosed on page 42.
The Group received dividends from its associated companies during the year. These are set out in note 15 on page 63.
74
M P EVANS GROUP PLC 2014 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF M.P. EVANS GROUP PLC
PARENT-COMPANY
REPORT ON THE PARENT-COMPANY FINANCIAL STATEMENTS
OUR OPINION
In our opinion, M.P. Evans Group PLC’s parent-
Company financial statements (the “financial
statements”):
OTHER MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Adequacy of accounting records and information
and explanations received
give a true and fair view of the state of the parent-
Company’s affairs as at 31 December 2014;
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.
WHAT WE HAVE AUDITED
M.P. Evans Group PLC’s financial statements
comprise:
the parent-Company balance sheet as at
31 December 2014; and
the notes to the financial statements, which
include a summary of significant accounting
policies and other explanatory information.
Certain required disclosures have been presented
elsewhere in the annual report, rather than in the
notes to the financial statements. These are cross-
referenced from the financial statements and are
identified as audited.
The financial reporting framework that has been
applied in the preparation of the financial statements
is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally-Accepted
Accounting Practice).
In applying the financial reporting framework, the
directors have made a number of subjective
judgements, for example in respect of significant
accounting estimates. In making such estimates, they
have made assumptions and considered future events.
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, the information given in the strategic
report and the report of the directors on the financial
year for which the financial statements are prepared is
consistent with the financial statements.
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
we have not received all the information and
explanations we require for our audit; or
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 financial statements are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have
no exceptions to report arising from this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Our responsibilities and those of the directors
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) (“ISAs (UK & 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, part 16 of the Companies
Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility
75
Independent Auditors Report CONTINUED
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.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs
(UK & Ireland). 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.
We primarily focus our work in these areas by
assessing the directors’ judgements against available
evidence, forming our own judgements, and
evaluating the disclosures in the financial statements.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through
testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-
financial information in the annual report to identify
material inconsistencies with the audited financial
statements and to identify any information that is
apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we
become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
OTHER MATTER
We have reported separately on the Group financial
statements of M.P. Evans Group PLC for the year
ended 31 December 2014.
Simon O’Brien (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors,
London
24 April 2015
76
M P EVANS GROUP PLC 2014 ANNUAL REPORT
PARENT-COMPANY BALANCE SHEET
AT 31 DECEMBER 2014
2014 2013
NOTE US$’000 US$’000 US$’000 US$’000
Fixed assets
Tangible fixed assets (iv) 913 947
Investments (v) 31,494 31,494
32,407 32,441
Current assets
Debtors (vi) 94,716 60,322
Cash at bank and in hand 7,545 11,135
102,261 71,457
Creditors – amounts falling due
within one year (vii) (48,683) (49,289)
Net current assets 53,578 22,168
Total assets less current liabilities 85,985 54,609
Capital and reserves
Called-up share capital (viii) 9,302 9,253
Other reserves (ix) 33,973 31,759
Profit and loss account (ix) 42,710 13,597
Total shareholders’ funds (x) 85,985 54,609
The financial statements on pages 77 to 80 were approved by the board of directors
on 24 April 2015 and signed on its behalf by
Tristan Price Philip Fletcher
Directors
77
NOTES
TO THE PARENT-COMPANY BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2014
NOTE i
Significant accounting policies
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. Plant, equipment and vehicles are
depreciated over their estimated useful lives at 25%. Estimated useful lives are reviewed at each balance-sheet date. Where the
board judges the residual value of an asset to exceed its carrying value, no provision is made for depreciation.
Fixed-asset investments
Fixed-asset investments in subsidiaries are shown at cost less provision for impairment.
Debtors
These represent amounts due from Group companies in the normal course of business, are repayable on demand, unsecured
and are not interest bearing. These are measured at amortised cost.
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 2014 of US$36,754,000
(2013 loss of US$2,269,000).
The auditors’ remuneration for audit and other services was US$20,000 (2013 - US$20,000).
NOTE iii
Employees
2014 2013
US$’000 US$’000
Employee costs during the year
Wages and salaries 1,946 1,607
Social security costs 221 231
Pension costs 80 73
2,247 1,911
As recorded in the report of the board to the shareholders on directors’ remuneration on page 41, wages and salary costs
include bonuses paid to the directors in respect of 2013 and 2014.
NUMBER NUMBER
Average monthly number of persons employed
Staff 4 4
Directors 3 3
7 7
78
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTE iv
Tangible fixed assets
PLANT, EQUIPMENT
BUILDINGS AND VEHICLES TOTAL
US$’000 US$’000 US$’000
Cost
At 1 January 2014 834 226 1,060
Additions — 3 3
Disposals — — —
At 31 December 2014 834 229 1063
Accumulated depreciation
At 1 January 2014 — 113 113
Charge for the year — 37 37
Disposals — — —
At 31 December 2014 — 150 150
Net book value
At 31 December 2014 834 79 913
Net book value
At 31 December 2013 834 113 947
NOTE v
Investments
Subsidiary undertakings US$’000
At 1 January and 31 December 2014 31,494
At 31 December 2013 31,494
The following companies are the principal direct subsidiary companies of M. P. Evans Group PLC:
COUNTRY OF HOLDING
OPERATION %
M.P. Evans & Co. Limited UK 100
Sungkai Holdings Limited UK 100
Bertam (UK) Limited UK, Australia 100
Sungkai Estates Limited UK 100
The Singapore Para Rubber Estates, Limited UK 100
Holdings are all of ordinary shares. Further information on the activity of the Group subsidiaries is given on page 81.
The directors believe the carrying value of investments is supported by their underlying net assets.
NOTE vi
Debtors
2014 2013
US$’000 US$’000
Amounts owed by subsidiary undertakings 94,585 60,268
Other debtors 76 27
Prepayments and accrued income 55 27
94,716 60,322
79
Notes to the parent company balance sheet CONTINUED
NOTE vii
Creditors-amounts falling due within one year
2014 2013
US$’000 US$’000
Amounts owed to subsidiary undertakings 37,692 38,179
Bank loan 10,000 10,000
Other creditors 991 1,110
48,683 49,289
NOTE viii
Called-up share capital
See note 27 to the consolidated financial statements on page 70.
NOTE ix
Reserves
SHARE- CAPITAL- PROFIT
PREMIUM REDEMPTION MERGER OTHER AND LOSS
ACCOUNT RESERVE RESERVE RESERVES TOTAL ACCOUNT
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At 1 January 2014 26,065 3,896 1,434 364 31,759 13,597
Issue of shares 2,130 — — — 2,130 —
Share-based payments — — — 84 84 —
Profit for the financial year — — — — — 36,754
Dividends* — — — — — (7,641)
At 31 December 2014 28,195 3,896 1,434 448 33,973 42,710
* See note 10 to the consolidated financial statements on page 59.
NOTE x
Reconciliation of movement in shareholders’ funds
2014 2013
US$’000 US$’000
Profit/(loss) for the financial year 36,754 (2,269)
Dividends declared (7,641) (6,787)
29,113 (9,056)
Issue of shares 2,179 954
Share-based payments 84 82
Net increase/(decrease) in shareholders’ funds 31,376 (8,020)
At 1 January 54,609 62,629
At 31 December 85,985 54,609
80
M P EVANS GROUP PLC 2014 ANNUAL REPORT
SUBSIDIARY AND ASSOCIATED
UNDERTAKINGS
SUBSIDIARY UNDERTAKINGS
The Group has taken the exemption under section 410 of Companies Act 2006 to disclose only the details of its principal subsidiaries.
A full list of its subsidiaries will be annexed to its next annual return, which is publicly available at Companies House
(www.companieshouse.gov.uk). Details of the principal subsidiary undertakings as at 31 December 2014 are as follows:-
% OF SHARES COUNTRY OF COUNTRY OF
NAME OF SUBSIDIARY HELD INCORPORATION OPERATION FIELD OF ACTIVITY
PT Pangkatan Indonesia 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Bilah Plantindo 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Sembada Sennah Maju 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Simpang Kiri Plantation Indonesia 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Prima Mitrajaya Mandiri 95 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Teguh Jayaprima Abadi 95 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Gunung Pelawan Lestari 90 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Evans Lestari 80 Indonesia Indonesia Production of crude palm oil
and palm kernels
PT Evans Indonesia 100 Indonesia Indonesia Provision of management and
agronomic 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 2014 are as follows:-
ISSUED, FULLY-PAID % COUNTRY OF COUNTRY OF
SHARE CAPITAL HELD INCORPORATION OPERATION FIELD OF ACTIVITY
Unlisted
PT Agro Muko Rp54.578.70m 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. RM60.00m 40.00 Malaysia Malaysia Property development
81
ANALYSIS OF PLANTATION
LAND AREAS
AS AT 31 DECEMBER 2014
The information in the following pages does not form part of the audited financial statements.
INFRASTRUCTURE/ CO-OPERATIVE
TOTAL CONSERVATION SCHEMES
OWNERSHIP MATURE IMMATURE PLANTED AREAS TOTAL PLANTED
% HA HA HA HA HA HA
Subsidiaries – oil palm
Pangkatan 80.00 1,959 468 2,427 159 2,586 —
Bilah 80.00 2,633 223 2,856 105 2,961 —
Sennah 80.00 1,621 60 1,681 132 1,813 —
Total Pangkatan group 6,213 751 6,964 396 7,360 —
Simpang Kiri 80.00 2,133 356 2,489 165 2,654 —
Total Sumatra 8,346 1,107 9,453 561 10,014 —
East Kalimantan 95.00 8,557 1,221 9,778 3,287 13,065* 4,160*
Bangka 90.00 2,571 2,163 4,734 961 5,695* 2,141*
Musi Rawas 80.00 — 92 92 — 92** —
Total new Indonesian projects** 11,128 3,476 14,604 4,248 18,852 6,301
Total Indonesia 19,474 4,583 24,057 4,809 28,866 6,301
Total Malaysia - Bertam Estate 65 — 65 5 70 —
Total subsidiaries 19,539 4,583 24,122 4,814 28,936 6,301
Group share of subsidiaries’ land 17,184 4,079 21,263 4,442 25,705
Associates
Agro Muko - oil palm 36.84 15,290 2,515 17,805 3,457 21,262 651
- rubber 36.84 1,006 684 1,690 — 1,690 —
16,296 3,199 19,495 3,457 22,952 651
Kerasaan - oil palm 38.00 1,539 559 2,098 264 2,362 —
Total associates 17,835 3,758 21,593 3,721 25,314 651
Group share of associates’ land 6,589 1,391 7,980 1,374 9,354
Memorandum:
Subsidiaries’ land and Group
share of associates’ land 26,128 5,974 32,102 6,188 38,290
Group share of subsidiaries’ land and
share of associates’ land 23,773 5,470 29,243 5,816 35,059
NOTES
* 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.
** In 2012, the Group acquired a concession in South Sumatra over a gross area of 20,000 hectares. It is not yet clear
how much will be plantable but the board has made an initial estimate that 10,000 hectares may be able to be
planted of which 7,000 hectares would relate to the Group and 3,000 hectares to the smallholders’ cooperative.
82
M P EVANS GROUP PLC 2014 ANNUAL REPORT
5-YEAR SUMMARY
2014 2013 2012 2011 2010
TONNES TONNES TONNES TONNES TONNES
Production
Crude palm oil 95,000 82,900 75,400 35,600 30,000
Palm kernels 18,400 16,400 14,800 8,700 7,300
Crops
Oil-palm fresh fruit bunches (“f.f.b.”)
Indonesian majority-owned estates
344,200 317,000 249,300 196,400
Indonesian associated-company estates 386,900 387,000 408,600 401,200 366,100
385,500
US$ US$ US$ US$ US$
Average sale prices
Crude palm oil – Rotterdam c.i.f. per tonne 821 856 998 1,123 905
Exchange rates
US$1 = Indonesian Rupiah – average 11,864 10,449 9,355 8,763 9,081
– year end 12,440 12,189 9,670 9,068 8,991
US$1 = Australian Dollar – average 1.11 1.04 0.97 0.97 1.09
– year end 1.22 1.12 0.96 0.98 0.98
US$1 = Malaysian Ringgit – average 3.27 3.15 3.09 3.06 3.22
– year end 3.50 3.28 3.06 3.17 3.08
£1 = US Dollar – average 1.65 1.56 1.59 1.60 1.55
– year end 1.56 1.66 1.63 1.56 1.57
US$’000 US$’000 US$’000 US$’000 US$’000
Revenue 90,922 82,186 83,213 57,756 42,091
Gross profit 35,894 24,735 23,035 25,919 21,887
Group-controlled profit before tax 34,860 12,223 16,700 24,350 19,359
US CENTS US CENTS US CENTS US CENTS US CENTS
Basic earnings per share 61.05 35.96 32.51 66.39 41.17
PENCE PENCE PENCE PENCE PENCE
Dividend per share 8.75 8.25 8.00 8.00 7.50
US$’000 US$’000 US$’000 US$’000 US$’000
Equity attributable to the owners of
M. P. Evans Group PLC 371,908 347,191 351,083 337,975 307,578
Net cash generated by operating activities 28,351 19,494 33,897 48,339 19,417
83
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
5 June 2015 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 2014.
RESOLUTION ON FORM OF PROXY No 1
To re-elect Mr P E Hadsley-Chaplin as a director.
RESOLUTION ON FORM OF PROXY No 2
To re-elect Mr P A Fletcher as a director.
RESOLUTION ON FORM OF PROXY No 3
To re-elect Mr R M Robinow as a director.
RESOLUTION ON FORM OF PROXY No 4
To re-elect Mr J D Shaw as a director.
RESOLUTION ON FORM OF PROXY No 5
To declare a final dividend.
2
3
4
5
6
7
RESOLUTION ON FORM OF PROXY No 6
(d)
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 and 11 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 2016 and, for
that period, the Section 551 Amount is
£1,844,246.
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 2016 so that the directors are authorised to
allot shares pursuant to article 7.2 of the
Company’s articles of association and to sell
84
treasury shares for that period in an aggregate
amount of up to £276,637 (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)
the maximum number of shares hereby
authorised to be purchased is 5,532,739;
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 2016
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
11. That the directors be generally and
unconditionally authorised to exercise the power
contained in the articles of association of the
Company as from time to time varied so that, to
the extent and in the manner announced and
determined by the directors, shareholders will be
entitled to elect to receive an allotment of
additional shares credited as fully paid in lieu of
any cash dividend (or part thereof) paid by the
directors or declared by the Company provided
that this resolution shall expire at the end of the
third general meeting of the Company after the
date on which this resolution is passed.
RESOLUTION ON FORM OF PROXY No 11
By order of the board
Claire Hayes
Company Secretary
24 April 2015
M P EVANS GROUP PLC 2014 ANNUAL REPORT
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 or her 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 3 June 2015 (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 3 June 2015 (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 2015, the Company's issued share capital
consisted of 55,327,395 shares carrying one vote each.
Therefore the total number of voting rights in the Company
as at that date was 55,327,395.
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.
85
NOTES
86
M P EVANS GROUP PLC 2014 ANNUAL REPORT
NOTES
87
PROFESSIONAL ADVISERS
AND REPRESENTATIVES
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
INDONESIAN 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
PRINCIPAL BANKERS
AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Malaysia
Bank CIMB Niaga
Graha CIMB Niaga Lt.11
Jalan Jend. Sudirman Kav.58
Jakarta 12190
Indonesia
Commonwealth Bank of Australia
PO Box 2856,Toowoomba
Queensland 4350
Australia
HSBC Bank Malaysia Berhad
1 Leboh Downing
10300 Pulau Pinang
Malaysia
HSBC Bank PLC
105 Mount Pleasant
Tunbridge Wells
Kent TN1 1QP
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
Designed and printed
by Michael R. Dalby Limited
28 Quebec Way, Canada Water
London SE16 7LF
020 7394 1112
email: mrd@mrdltd.plus.com
88
VENUE OF ANNUAL
GENERAL MEETING
on Friday 5 June 2015 at 12 noon
Tallow Chandlers’ Hall
4 Dowgate Hill
London EC4R 2SH
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ANNUAL REPORT 2014
www.mpevans.co.uk