(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:21 Page 1
2016
ANNUAL REPORT
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:21 Page 2
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
2016 ANNUAL REPORT
LOCATION OF THE GROUP’S
PROPERTIES AND THOSE OF ITS
ASSOCIATED COMPANIES
BERTAM PROPERTIES
l BERTAM
l KUALA LUMPUR
SIMPANG KIRI
MEDAN l
KERASAAN
SENNAH
BILAH
PANGKATAN
l SINGAPORE
SUMATRA
l PADANG
BANGKA
ISLAND
KALIMANTAN
NEW PROJECTS
l
SAMARINDA
AGRO MUKO
MUSI RAWAS
l BENGKULU
l
JAKARTA
JAVA
INDONESIA–PLANTATIONS
M AJORITY HELD 27,400 ha
SMALLHOLDER CO-OPERATIVE 8,900 ha
JOINT VENTURE 19,100 ha
M INORITY HELD 2,300 ha
MALAYSIA–PROPERTY
MAJORITY HELD 71 ha
MINORITY HELD 314 ha
MAJORITY HELD
JOINT VENTURE*
MINORITY HELD
* Group shareholding <50%;
no controlling party
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:21 Page 1
M.P. Evans aspires to the quality of its output and
management of its plantations being regarded as a
reference point for the industry
PORTFOLIO OF ASSETS AS AT 31 DECEMBER 2016
27,400 planted hectares of majority-held oil-palm
plantations in Indonesia plus three palm-oil mills on
the Group’s majority-owned estates
8,900 hectares of valuable associated smallholder
co-operative schemes managed by the Group
Current estimate of 8,200 hectares plantable land (5,600
for the Group), majority of which in South Sumatra
38% share of a 2,300 hectare oil-palm estate in
North Sumatra
71 hectares of land in Peninsula Malaysia, with
property-development premium
40% share of a valuable property-development company,
Bertam Properties, near Penang Island, Malaysia with a
land bank of 314 hectares
Total equity value at 31 December 2016 of US$760 million
based on independent valuation of Group’s Indonesian
plantation and Malaysian property assets
Net current assets of US$132 million as at
31 December 2016
Milling operations in
Kalimantan
M.P. EVANS GROUP PLC
CONTENTS
Portfolio of assets
2 Group highlights
3
Summary of results
4 Market information
6
9
9
Chairman’s statement
Strategic report, 2016
- Strategy
10 - Results and financial position
12 - Operations: palm oil
20 - Operations: property
22 - Risk management
26 Environmental and social responsibility
32 Report of the directors
33 Board of directors
37 Corporate governance
41 Report of the board to the shareholders on
directors’ remuneration
44 Independent auditors’ report to the members
of M.P.Evans Group PLC
46 Consolidated income statement
47 Consolidated statement of comprehensive
income
48 Consolidated balance sheet
49 Consolidated statement of changes in equity
50 Consolidated cash-flow statement
51 Notes to the consolidated accounts
74 Independent auditors’ report to the members
of M.P.Evans Group PLC, parent Company
76 Parent-Company balance sheet
77 Parent-Company statement of changes in
equity
78 Notes to the parent-Company accounts
82 Subsidiary and associated undertakings
83 Analysis of Indonesian plantation land areas
84 Analysis of Group equity value
85 Five-year summary
86 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
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
Group highlights
Group profit increased in the year as a result of
strengthening palm-oil prices
INDONESIAN
PALM OIL
MALAYSIAN
PROPERTY
Plantation gross profit US$24.4 million
36% increase in Group share of Bertam
(2015 US$15.1 million)
Palm-oil prices c.i.f. Rotterdam higher
at average of US$700 per tonne
(2015 US$622)
F.f.b. crops fell 6% due to dry weather
of an exceptional ‘El Niño’, in line with
global palm-oil production
Strong average extraction rates
of 24.1%
New 60-tonne mill commissioned
in Bangka; fourth Group mill to be
completed in 2018
Total new planting of 3,600 ha in
the year (Group and smallholders)
Young planted areas, average age of
7½ years, mean Group crops projected
to rise strongly in future years
Properties’ profit as more sales
completed in year
Less development begun in 2016 than
in previous years
GROUP
VALUATION
Directors’ estimate of Group equity
value at period end, based on
independent valuation, of £11.00
per share
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M.P. EVANS GROUP PLC 2015 ANNUAL REPORT
M.P. EVANS GROUP PLC
Total dividends
of 20.00 pence per
share reflect the
positive results
FINANCIAL RESULTS
Profit for the year including discontinued
operations US$35.3 million (2015 US$25.4 million)
Profit for the year on continuing operations more than doubled to
US$16.4 million (2015 US$7.8 million)
Total dividends for the year, including special dividend of 5.00 pence per
share, of 20.00 pence per share (2015 - 8.75 pence per share)
Dividends for 2017, including special dividend of 10.00 pence per share,
to be minimum of 25.00 pence per share
Earnings per share 56.1 US cents (2015 - 43.4 US cents)
Net funds at 31 December 2016 of US$75.3 million (2015 US$11.5 million)
SUMMARY OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Gross profit
Group-controlled profit before tax
Profit for the year
Equity attributable to the owners of M.P. Evans Group PLC
Net cash inflow generated by operating activities
Basic earnings per 10p share (continuing and discontinued operations)
Dividends per 10p share in respect of the year
2016
US$ million
2015
US$ million
83.9
24.4
19.2
35.3
321.0
22.9
72.5
15.1
6.8
25.4
300.0
20.2
US cents
US cents
56.1
Pence
20.00
43.4
Pence
8.75
3
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
MARKET INFORMATION
PALM OIL
The palm-oil market in 2016 was dominated by the
effects of a severe El Niño resulting in a period of
dryness in South East Asia. Palm productivity was
adversely affected by this and exacerbated by a period
of haze in parts of Indonesia and Malaysia. According
to Oil World, these factors resulted in global palm-oil
production falling by 6% during 2016 compared to
2015, with average yield per hectare falling to its
lowest level for more than 15 years.
Stocks of crude palm oil (“CPO”) began 2016 at
record-high levels, but were drawn down during the
year in response to low production and finished the
year at a multi-year low level of less than 10 million
tonnes. In spite of lower production, this reduction in
stocks allowed consumption of palm oil to increase
during 2016, notably as a result of the sharp increase
in demand flowing from Indonesia’s adoption of a
mandatory increase in the proportion of vegetable oil
in its biodiesel standard. Shortage in supply affected
trade, where exports of CPO fell to a three-year low.
Imports by both China and India decreased
significantly.
Prices for CPO improved during 2016. After a weak
showing in January, prices strengthened during the first
quarter before receding gently in the middle part of
the year and then rose sharply in August. Following a
short setback in October, they finished the year
strongly at US$795 per tonne, more than US$200 per
tonne higher than they had been on 1 January.
The average price for CPO c.i.f. Rotterdam during
2016 was US$700 per tonne, US$78 or 13% higher
than in 2015. The increase in the price of CPO was
constrained by continuing weakness in the price of
mineral oil and that of competing vegetable oils.
Unusually, there were points during 2016 when
CPO traded at a premium to soybean oil. Production
in Indonesia began a recovery during the last
quarter of 2016, and a similar turnaround was
expected in Malaysia during the first quarter of 2017.
This recovery in supply is likely to exert downward
pressure on the market for CPO, especially during the
second half of 2017.
Palm kernel oil was affected by the same forces that
bore down on volumes of CPO, resulting in a 7% fall
in production. However, unlike CPO, lower opening
stock levels resulted in very tight supply in the latter
part of 2016, reinforced by equally reduced supplies
of competing coconut oil, with ensuing high prices.
CRUDE-PALM-OIL PRICE
1,400
1,200
1,000
800
600
400
2012
2013
2014
2015
2016
2017
US$ per tonne, Rotterdam c.i.f.
4
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M.P. EVANS GROUP PLC
AGE PROFILE OF THE GROUP’S OIL PALMS
31 DECEMBER 2016
PRODUCERS AND USERS
31 DECEMBER 2016
SUBSIDIARIES – AVERAGE AGE 7.5 YEARS
MAIN PRODUCERS OF PALM OIL – 2016
%
30
47
13
2
4
3
%
24
11
12
34
9
9
Age in years
<5
6-10
11-15
16-20
21-25
>25
0
10
20
30
40
50
60
ASSOCIATES – AVERAGE AGE 13.1 YEARS
Age in years
<5
6-10
11-15
16-20
21-25
>25
0
10
20
30
40
50
60
F.F.B CROPS - ‘000 TONNES
MAJORITY-OWNED ESTATES IN INDONESIA
2016
2015
2014
2013
2012
ASSOCIATED-COMPANY ESTATES
2016
2015
2014
2013
2012
0
5
,
5
4
9
9
6
1,1
0
1,8
0
4
3
4
9
1
7 , 3
1
32,100
MAIN USERS OF PALM OIL – 2016
21,077
9,204
9 , 1 7 9
1,2 3 8
1,937
2,352
7
9
2,5
5
,
1
2
6
6
5
6
2
,
6,9
7
5
Thousand tonnes
n INDONESIA 32,100 (55%)
n MALAYSIA 17,319 (29%)
n THAILAND 1,804 (3%)
n COLOMBIA 1,143 (2%)
n NIGERIA 960 (2%)
n OTHER COUNTRIES
5,549 (9%)
TOTAL 58,875
Thousand tonnes
n INDIA 9,204 (15%)
n INDONESIA 9,179 (15%)
n EU 6,975 (11%)
n CHINA 5,126 (8%)
n MALAYSIA 2,656 (4%)
n PAKISTAN 2,597 (4%)
n NIGERIA 2,352 (4%)
n THAILAND 1,937 (3%)
n USA 1,238 (2%)
n OTHER COUNTRIES
21,077 (34%)
TOTAL 62,341
344
317
399
424
386
384
382
387
387
409
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
420
440
5
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CHAIRMAN’S STATEMENT
Exciting prospects give grounds for confidence the Group will
be able to expand its plantation hectarage delivering strong
crop growth, and hence improving results for shareholders
STRATEGY
I should like to begin my report this year by noting
how the Group finished the year as a one-commodity
company, principally located in one country, well on
the way to controlling all of its operations. To focus on
oil palm in Indonesia, and to be in control of all the
Group’s assets, have both been long-standing strategic
objectives of the board.
The successful disposal of the Group’s investment in
The North Australian Pastoral Company Pty Limited
(“NAPCo”) marked its exit from the Australian cattle
sector. The Group sold its shares in NAPCo for A$18.50
per share that it had bought for an average of A$8.44
per share. The Group also reached an agreement in
late 2016 to sell its investment in PT Agro Muko (“Agro
Muko”), a joint venture in which it had a 37% share.
This sale was made at a level supported by an
independent valuation and was significantly higher
than that implied by the unsuccessful unsolicited offer
made in October for the Group’s shares by Kuala
Lumpur Kepong Berhad (“KLK”). More information on
valuation can be found in the table on page 84.
The sale of NAPCo and Agro Muko, in line with the
Group’s strategy, puts it in a strong position to expand
its plantation hectarage, and so strengthen the growth
in crop which it already expects from the projects
developed over the last ten years. The proceeds from
these disposals are expected to allow the Group to
increase returns to shareholders through enhanced
dividends, without compromising its ongoing
programme of expansion and hence growth in value.
As in the case of NAPCo and Agro Muko, the board
will give consideration to the payment of special
dividends as and when further non-core asset
disposals are achieved.
The board is actively reviewing a prospective
investment in a new, developed oil-palm project to
replace at least the equivalent hectarage of its share in
Agro Muko. In addition, the Group is at an advanced
stage in negotiations for further smaller areas in the
immediate vicinity of the Group’s existing East
Kalimantan project, which will bring the size of that
project from some 15,000 hectares (including
smallholder co-operatives) towards the desired target
of 20,000 hectares. These are exciting prospects and,
in view of the Group’s excellent operational
management team and proven track record of
developing new plantation projects in Indonesia, give
grounds for confidence that the Group will be able to
expand its plantation hectarage, delivering strong crop
growth and hence improving results for shareholders.
RESULTS
The Group is able to report an excellent result for
the year with profit rising by US$9.9 million to
US$35.3 million, including discontinued operations.
The year saw a steady recovery in the price of CPO,
the Group’s principal commodity, which finished the
year at US$795 per tonne c.i.f. Rotterdam, some 37%
higher than the US$580 per tonne where it started the
year. With global consumption of CPO rising, partly
due to new regulations on the admixture for biodiesel
in Indonesia, a sharp fall in global production led to a
dramatic drawdown of stocks that eventually
stimulated a rally in the price. Additionally, prices for
palm kernel oil, which translate directly into the price
for the palm kernels sold by the Group, rose even
higher than the strong levels experienced in 2015.
Despite a small reduction in crop, a recovery in prices
combined with good control of costs led to a sharp
rise in gross profit on continuing operations to
US$24.4 million (2015 US$15.1 million). Profit for the
year on continuing operations more than doubled to
US$16.4 million from US$7.8 million. The Group’s
share of Agro Muko’s results and its share of NAPCo’s
results up to the point of disposal, as well as the profit
made on selling NAPCo, comprised US$18.8 million
of profit on discontinued operations in 2016.
This compares with US$17.6 million in 2015, chiefly
reflecting NAPCo’s and Agro Muko’s trading results
and the sale of Woodlands. Overall, earnings per
share on continuing operations increased to
22.3 US cents per share (2015 - 11.7 US cents
6
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M.P. EVANS GROUP PLC
Peter Hadsley-Chaplin
Chairman
per share); earnings per share on continuing and
discontinued operations rose by 29% to 56.1 US cents
per share (2015 - 43.4 US cents per share).
Crops from the Group’s own areas fell by an average of
6% during 2016 as a result of the widely reported
El Niño weather pattern, the most severe for nearly
20 years. The effects were most keenly felt on the
Group’s estates in Kalimantan and Bangka; less so in
North Sumatra. The dry weather occasioned by the
El Niño had abated by the middle of the year and the
return to more normal rainfall resulted in crops
increasing during the last quarter. Total crop for the
year, including that from smallholder co-operatives
attached to the Group’s estates and outside crop
purchased from third parties, reached 543,700 tonnes
for the year (2015 - 562,300 tonnes).
DIVIDEND
An interim dividend of 2.25p per share in respect of
2016 was paid on 4 November. Separately,
shareholders received a special dividend of 5.00p
per share on 17 August following the disposal of the
Group’s significant investment in NAPCo. In line with
its previously announced intention, the board is
recommending a final dividend for the year of
12.75p per share. Overall, therefore, shareholders
will have received total dividends in respect of 2016
of 20.00p per share (2015 - 8.75 pence per share).
In respect of 2017, the board has already paid a special
dividend of 10.00p per share on completion of the
sale of its interest in Agro Muko. The board has also
announced its intention to maintain or increase its
dividend in future years, starting with a dividend of at
least 15.00p per share in respect of both 2016 and
2017, excluding any special dividends. Shareholders
can therefore expect total dividends of at least 25.00p
per share in respect of 2017.
OPERATIONAL DEVELOPMENTS
The Group planted 3,600 hectares in 2016 (2,100
in respect of itself and 1,500 for its associated
smallholder co-operatives) and replanted a further
800 hectares. Of the new planting, the project in Musi
Rawas continued to develop apace, accounting for
nearly half of the new planting. As previously reported,
there is an accelerated programme of replanting under
way in the mature North Sumatran estates, which was
concentrated on Simpang Kiri in 2016. The Group
expects to conclude development of the projects in
Kalimantan and Bangka during 2017, and will focus its
new planting activity in Musi Rawas. The current
enhanced replanting programme will continue for
some years in North Sumatra.
Following the successful commissioning of a new
millon Bangka, a new high for CPO production of
117,300 tonnes was achieved by the Group.
The Bangka mill began production in May 2016 and
incorporates a composting facility that creates compost
from empty fruit bunches and mill effluent as well as a
biogas plant for producing electricity from methane.
This follows the pattern established by the Group in
Kalimantan of building an efficient integrated facility
that enables the Group to effect its policy of ‘zero
waste’ whilst maximising both cost saving and the
potential for earning additional revenues from the
production of ‘green’ energy.
The Group was able to maintain high levels of
extraction from its fresh fruit bunches (“f.f.b.”) during
2016. The mill in Kalimantan achieved 25.0% of oil
extraction, whilst the mills on Pangkatan and Bangka
were slightly lower, for different reasons, at 23.1% and
23.3% respectively. These compare favourably with
mills in their vicinity. On Bangka, the Group has
decided to buy outside fruit from third parties to
maximise the use of spare capacity until its own crops
rise. Whilst profitable, this does bring down the
average rate of extraction. On Pangkatan, f.f.b. are
older varieties that are not as high yielding.
In Kalimantan, the Group has completed the first two
phases of a project to build flood-protection bunds in
the northern part of the project. The unusually dry
El Niño weather allowed this work to be completed
ahead of schedule and the bund began to prove its
7
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CHAIRMAN’S STATEMENT CONTINUED
value once heavier rains returned towards the end of
the year. The Group is now able to pump water
collecting in the fields during times of heavy rain out
to the Mahakam River.
PROSPECTS
The end of the El Niño in 2016 is likely to herald an
increasing crop in 2017, which will add further
momentum to the Group’s f.f.b. crop. This is already
rising, owing to the young average age of its palms,
only 7½ years, as a consequence of the development
of its projects in Bangka and Kalimantan over the last
ten years. The upward trend in crop is expected to last
well into the next decade. This would be augmented by
the acquisition or development of new project areas.
The expected increase in global CPO production in
2017 is likely to put some pressure on prices, particularly
in the second half of the year, notwithstanding very
low levels of CPO stocks. However, the board is of the
view that palm oil, because of its high yield and low
cost of production, is well placed to continue to
benefit from increasing demand for vegetable oil and
the outlook, therefore, remains encouraging.
BOARD AND SENIOR APPOINTMENTS
Just after the end of the year, Derek Shaw retired from
the board. The Group was introduced to Mr Shaw in
1984 when it invested in Colly Farms Cotton Limited,
in which he and his family were founding shareholders
and responsible for its substantial expansion. He was
appointed a director of the Group’s associate, Lendu
Holdings PLC, in 1990, and of M.P.Evans Group PLC
in 2005. He helped develop, expand and guide the
Group’s operations in the Australian agricultural
sector from the time of its investment in cotton, as well
as sheep and cereal farming, through to its substantial
holding of beef-cattle assets. He represented the
Group on the board of NAPCo, helping direct and
improve its operations prior to its disposal. During his
tenure he provided consistent advice on optimising
values, and returns, on the Group’s Australian
operations, including regular inspections of the
properties. The board is most grateful to him for his
substantial contribution over many years.
I should like to take this opportunity to welcome
Matthew Coulson to the board as Group finance
director from 1 February 2017. Matthew joined the
Group in 2016 from Deloitte LLP where he was an
audit director. Since then he has become an active
member of the senior management team in Tunbridge
Wells, playing a full part in its decision making. At
the same time I should also like to welcome Katya
Merrick, who joined the Group as company secretary
in October 2016. She has taken over from Claire
Hayes who left the Group after five years, and to
whom we are grateful for her excellent contribution.
ACKNOWLEDGEMENTS
I should like to express the board’s appreciation to
the Group’s managers, staff and workers worldwide
for their dedication and hard work during a year of
change and continued progress for the Group.
Peter Hadsley-Chaplin
Chairman
13 April 2017
Young palms in Kalimantan
Reviewing operations on site
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M.P. EVANS GROUP PLC
STRATEGIC REPORT 2016
Strategy
The Group’s strategy is to maintain steady expansion of its majority-
owned Indonesian palm-oil areas in a sustainable and cost-effective
manner, using the proceeds from the sale of its Australian cattle assets
and Indonesian palm-oil joint venture.
Following the disposal of its agricultural assets in
Australia, the Group’s principal activity is the ownership,
management and development of sustainable oil-palm
estates in Indonesia, together with the management and
development of smallholder areas attached to some of
those estates. The Group’s strategy is to expand its
principal activity and maintain a steady rate of growth
in planted hectarage controlled by it. Control enables
the Group to deploy its operational expertise to greatest
effect with the aim of generating better returns to
shareholders through a sustained increase in dividends.
The Group has confidence in both the palm-oil sector
and Indonesia as an area of operation to provide a
basis for successfully delivering its strategy.
During 2016, the Group reached agreement to sell its
share of the Agro Muko joint venture, a mature 19,100
hectare Indonesian plantation project. The Group is
actively reviewing the prospective acquisition of
young, planted hectarage to replace its share of this
joint venture, as well as planting its existing land bank.
Additionally, it seeks in future to acquire pieces of
land suitable for sustainable oil-palm development
located near its existing estates. The Group seeks to
bring its operating units to what the board considers an
optimal size of 10,000 hectares with a palm‐oil mill.
The funds for this are in essence a reallocation of the
Group’s resources realised by the sale of its share in
Agro Muko and NAPCo (see notes 11 and 34 to the
accounts). The Group seeks continually to maintain
and, where possible, improve agronomic standards
and productivity on its estates with a view to
increasing crops of f.f.b. and production of CPO.
As in the case of NAPCo and Agro Muko, the board
will give consideration to the payment of special
dividends as and when further non-core asset disposals
are achieved.
The total planted area of the Group’s majority-held
Indonesian operations extends to approximately
27,400 hectares. The smallholder areas adjoining the
new projects amount to 8,900 planted hectares.
The estimated unplanted land bank is some 5,600
hectares, including the new Musi Rawas project, on
the Group’s estates and some 2,600 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 as rapidly as the availability of suitable land
permits. In addition, the Group owns a 38% share of
the 2,300 hectare Kerasaan estate in North Sumatra,
which could potentially be sold to finance the
expansion of majority-held areas.
In Malaysia, the Group owns land with property
development potential, as well as a significant
minority share of a property-development company.
In retaining these assets, the Group is maximising the
opportunity for sharing in the increasing value of
property-development land in Malaysia. However,
both could potentially be sold to finance the Group’s
strategic expansion of its Indonesian oil-palm
hectarage. It is the Group’s long-term intention to
dispose of its property-development assets in order to
fund the acquisition or development of new
Indonesian palm-oil projects and, in consequence,
ultimately to exit from Malaysia.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
Results and financial position
REVENUE AND GROSS PROFIT
TAXATION
During the course of 2016, the Group experienced a
fall in f.f.b. crops, by 6% on the Group’s own areas,
and by 8% on the associated smallholder areas.
However, as a result of an increase in average palm-oil
prices to US$700 c.i.f. Rotterdam (2015 US$622),
Group revenue increased to US$83.9 million (2015
US$72.5 million). Group production costs per tonne
of palm product (CPO and palm kernels) increased by a
small amount during the year, mainly as a result of the
absorption of fixed costs over lower production
volumes, combined with the introduction of the new
Bangka mill during the year, which had higher, albeit
falling, production costs during its early production
period. The Group’s average cost of production for 2016
was US$370 per tonne of palm product (2015 US$350).
As a result of the above, the Group’s gross profit
on continuing activities increased by 62% to
US$24.4 million (2015 US$15.1 million). A more
detailed analysis by business and geographical
segment is provided in note 4 to the accounts.
BIOLOGICAL ASSETS
The Group adopted the amendments to International
Accounting Standard 41 (“IAS 41”) Biological Assets
in the 2015 annual report, treating palms as assets to
be accounted for at depreciated historic cost. F.f.b.
prior to harvest have never been included in the
Group’s internal reporting and are not incorporated
in the board’s decision making. However, based on
the advice of its auditor on the interpretation of IAS
41, the Group introduced a policy of estimating a
value for growing, but unharvested, f.f.b. for the
purposes of statutory reporting. The Group has
continued to apply the same policy for growing f.f.b.
in the 2016 statutory accounts, resulting in a gain on
biological assets of US$0.7 million.
OTHER ADMINISTRATIVE EXPENSES
The Group’s other administrative expenses increased
to US$4.9 million in the year (2015 US$2.8 million).
During the year, the Group incurred professional fees
of US$2.0 million in responding to the unsuccessful
unsolicited bid by KLK to purchase the Company.
The Group’s tax charge amounted to US$7.5 million
(2015 US$2.4 million). The Group’s effective rate in
2016 exceeded the standard rate largely due to the
higher rate of taxation borne by the Group’s subsidiary
companies in Indonesia and exchange differences not
allowable for tax (see note 9).
ASSOCIATED COMPANIES
Indonesia
The crop at Agro Muko (36.84% held) remained
consistent with that in the prior year. As a result of
maintaining production, combined with the improving
average prices referred to above, the Group’s share of
Agro Muko’s profit increased to US$7.1 million
(2015 US$5.1 million). The Group received gross
dividends of US$3.7 million (2015 US$5.5 million)
from Agro Muko during the year.
In December 2016, the Group entered into an
agreement for the sale of its shareholding in Agro
Muko. This transaction was completed in March 2017
(see note 34). Accordingly, the Group’s share of profits
from Agro Muko has been included in discontinued
operations (see note 11).
The crop at Kerasaan (38.00% held) increased a little
from the prior year, and improving prices resulted in
an increase in the Group’s share of Kerasaan’s profit to
US$1.0 million (2015 US$0.7 million). The Group
received gross dividends of US$0.8 million (2015
US$0.6 million) from Kerasaan during the year.
Malaysia
At Bertam Properties (40.00% held), revenue from
property development increased by 41% in the year.
The profit arising on these activities was US$8.4 million
(2015 US$6.2 million). Similarly to 2015, two pieces
of land were sold for separate development, generating
a profit of US$1.4 million (2015 US$1.0 million).
The golf club continued to operate at a small loss.
The Group’s share of Bertam Properties’ profit in the
year was US$3.8 million (2015 US$2.8 million) and
its share of Bertam Properties’ gross dividends was
US$1.9 million (2015 US$1.0 million).
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FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC 2015 ANNUAL REPORT
M.P. EVANS GROUP PLC
Australia
In May 2016, the Group agreed to sell its
34.37% interest in NAPCo for A$18.50 per
share. This compared with the Group’s average
cost of purchase of A$8.44 for those shares. Total
proceeds from the disposal were US$79.7
million, and the Group’s equity carrying value at
disposal (having recognised the Group’s share of
profits up to the point of disposal) was US$57.6
million. After costs and associated taxation, the
net profit on disposal recorded in the income
statement was US$7.4 million.
Prior to disposal, the Group’s share of NAPCo’s
profit in the year was US$4.3 million, the
majority of which was derived from a revaluation
of NAPCo’s herd. Combining the Group’s share
of profit prior to disposal and the profit on
disposal, the total profit to the Group in the year
was US$11.7 million, which has been included
in discontinued operations (see note 11).
PROFIT FOR THE YEAR
As a result of all of the above, the Group’s profit
for the year increased to US$35.3 million
(2015 US$25.4 million).
NET ASSETS AND BORROWING
At the end of 2016, the Group’s net assets were
US$344.2 million (2015 US$321.6 million).
Current assets exceeded current liabilities by
US$131.6 million (2015 US$43.7 million), the
increase being due to both a significant increase
in the Group’s cash balances following the
disposal of the Group’s interest in NAPCo, and
to a change in the treatment for 2016 of the
investment in Agro Muko to be an ‘asset held
for sale’, a current asset in the year-end
balance sheet.
The Group had cash and liquid resources of
US$105.7 million (of which US$14.3 million has
been pledged as security) at the end of 2016. At
this date, the Group’s gearing ratio was 8% and
it held a net funds balance of US$75.3 million
(2015 US$11.5 million).
The nursery at Musi Rawas
F.f.b. being loaded into a mill steriliser
Housing development at Bertam Properties
11
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
OPERATIONS
Palm oil
MAJORITY-OWNED ESTATES
CROPS
Crops in 2016 were adversely affected by the El Niño
which, as reported in the 2015 annual report, was
gathering strength during the last quarter of 2015.
The Group’s estates in Kalimantan and Bangka were
particularly severely affected. Overall, the Group’s
own crops fell by 6% to 399,300 tonnes and those of
its associated smallholder co-operatives by 8% to
92,400 tonnes. Purchases of third-party f.f.b. were hit
by the general reduction in available supply due to
the El Niño, falling by 25% year on year. However,
total purchases of outside crop in fact increased due
to commencing purchases in Bangka during 2016
following the commissioning of the Group’s
newest mill in May. In total, crops fell by 3% to
543,700 tonnes.
Crop on the Group’s mature operations around
Pangkatan was less affected by the adverse weather
that impacted the Group’s operations in other parts of
Indonesia. Although the younger plantings would
under other circumstances have been expected to
produce an increase in crop, the dry weather led
crops in this region to rise marginally above those
recorded in 2015. An aggressive replanting
programme at Simpang Kiri was the principal cause
of the reduction in crop from this estate: mature
hectarage was 12% lower during 2016 than in 2015.
The accelerated replanting programme in North
Sumatra is expected to continue for the next five years.
The Group is able to make a good return on
purchasing outside crop during the peak cropping
months by using spare capacity in its Pangkatan mill.
The general reduction in Indonesian crop during 2016
meant that competition from other mills in its vicinity
curtailed this opportunity in 2016.
Bangka suffered an extended period of acute dryness
that severely affected the crop on this estate, with the
Group’s crop falling by 8% and those of the associated
Details of crops for 2016, with comparative figures for
2015, are set out below:-
(DECREASE)
2016 INCREASE 2015
TONNES % TONNES
Crops
Own crop
Pangkatan group 149,100 — 148,900
Simpang Kiri 37,400 (15) 44,200
186,500 (3) 193,100
Kalimantan 151,700 (8) 164,500
Bangka 61,100 (8) 66,300
399,300 (6) 423,900
Smallholder co-operative crop
Kalimantan 67,400 (4) 70,400
Bangka 25,000 (17) 30,300
92,400 (8) 100,700
Outside crop purchased
Kalimantan 20,500 (4) 21,400
Pangkatan 7,800 (52) 16,300
Bangka 23,700 — —
52,000 38 37,700
Total crop 543,700 (3) 562,300
smallholder co-operatives by 17%. Long-term average
rainfall fell for 17 months from June 2014 until
November 2015. More normal, higher, patterns of
rainfall have since re-established themselves and in
consequence Bangka’s crop finished the year on an
upward trend.
The El Niño also affected crops in Kalimantan,
although the dry period there was shorter than that
experienced in Bangka with good rainfall occurring
from the middle of the year. This led to crop increasing
during the last quarter of 2016, leaving the combined
12
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M.P. EVANS GROUP PLC
The Group was able to
maintain excellent
rates of extraction
during 2016
Estate workers at Musi Rawas
crop for the year from the Group’s own areas as well
as associated smallholder co-operatives 7% below that
in 2015. By the end of the year, heavy rain meant that
the new system of bunds and water pumps in the
northern part of the estate was proving its worth. The
dry weather that adversely affected crops enabled
work on the bunds to progress faster than expected,
with the first two phases of this project being
completed in October. Pumping stations evacuate
water collecting inside the project to the Mahakam
River. In the southern part of the estate, however,
flooding led to some crop losses.
PRODUCTION
The Group was able to maintain excellent rates of
extraction during 2016. Whilst absolute production in
the Kalimantan and Pangkatan mills reduced in line
with crop, the Group’s total production increased as a
result of its new mill in Bangka being commissioned in
May 2016, reaching 117,300 tonnes of CPO and
24,400 tonnes of palm kernel during the year.
The new mill in Bangka has performed to a good
standard. Its extraction rate of 23.3% is below the
25.0% recorded in Kalimantan due to the decision
taken by the Group to maximise the purchase of
The details of production and extraction rates for 2016,
with comparative figures for 2015, are set out below:-
(DECREASE)
2016 INCREASE 2015
TONNES % TONNES
Production
Crude palm oil
Kalimantan 60,000 (7) 64,300
Pangkatan 36,200 (4) 37,900
Bangka 21,100 — —
117,300 15 102,200
Palm kernels
Kalimantan 11,000 — 11,000
Pangkatan 8,800 (8) 9,600
Bangka 4,600 — —
24,400 18 20,600
Extraction rates
Crude palm oil
Kalimantan 25.0 — 25.1
Pangkatan 23.1 — 23.0
Bangka 23.3 — —
Palm kernels
Kalimantan 4.6 7 4.3
Pangkatan 5.6 (3) 5.8
Bangka 5.0 — —
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
OPERATIONS Palm oil CONTINUED
outside fruit in Bangka in order to utilise, as much as
possible, spare capacity at the mill. There is a good
supply of outside fruit available for purchase. This fruit
yields significantly lower rates of extraction than fruit
from the Group’s own areas or that of its associated
smallholder co-operatives, although this is reflected in
the price the Group pays for it. Hence, purchases of
outside fruit make an acceptable profit margin
notwithstanding the consequential reduction in the
mill’s average rate of extraction.
All of the mill effluent from the Bangka mill is collected
and held in a pond to allow collection of methane
which is then burned in a gas engine to produce
electricity. The Group has signed a contract with the
local state-owned power utility to sell it any excess
power over and above the Group’s requirements for its
own use. The facility was being commissioned at the
end of 2016 and began transmission in early January
2017. Production of power will increase as the volume
of crop processed in the mill increases. Separately, all of
the empty fruit bunches are conveyed to a composting
facility where, over 50 days, the Group creates a
compost rich in potassium and nitrogen which it returns
to the field reducing the need for inorganic fertilizers.
This is in line with the Group’s facilities in Pangkatan
and Kalimantan.
The extraction rate in Pangkatan, as reported in
previous annual reports, lags behind that in
Kalimantan due to the greater average age of its
plantings, as well as the improved planting material
available to the Group when it developed its estates in
Kalimantan and Bangka. Furthermore, f.f.b. from
Sennah estate, which supplies the Pangkatan mill,
contains fruit from some low-yielding Dura palms.
These are gradually being replanted, which will in due
course lead to an increased extraction rate in the
Pangkatan mill.
Work has begun on designing a fourth mill, the second
in Kalimantan, necessitated by the sharp projected
increase in crop over the coming years. This fourth mill
is expected to be operational in 2018.
COSTS
The combined operating cost of the Group’s three mills
was US$370 per tonne of palm product during 2016,
US$20 higher than in 2015. This rise partly reflects
depreciation on increased plantings as the Group
brings more hectarage into maturity: at the end of
2016 the Group had 21,000 mature hectares
compared with 20,600 at the end of 2015. The 2016
cost also incorporates depreciation on the new Bangka
Replanting in North Sumatra
14
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M.P. EVANS GROUP PLC
mill. The underlying cash operating costs increased
modestly, mainly due to unit labour costs in the field
which have risen as a result of the crop falling. Whilst
the cost of harvesting broadly rises and falls in line
with crop, the cost of field maintenance and that of
fertilizing and manuring do not vary with crop. Lower
crop would therefore be expected to push up the cost
per tonne of palm product. Overall, despite the
pressures of lower crop and increased depreciation,
the Group was able to limit the increase in its unit
cost, underlining its ability to control costs through its
operational expertise. For example, extensive use of
river transport to bring supplies into the Kalimantan
project has allowed the Group to make and maintain
significant procurement savings.
MILL-GATE PRICE
The average mill-gate price for the CPO sold by the
Group during 2016 was US$595, a marked increase
on the US$500 per tonne in 2015. This price takes
account of the US$50 per tonne export levy due on
CPO which is in practice borne largely by CPO
producers irrespective of whether they make sales
into the domestic or export markets. The average
mill-gate price rose steadily through the year, reaching
US$621 per tonne CPO for the last quarter.
As a result of the lack of supply of coconut oil and
the market conditions affecting palm kernel oil, the
average mill-gate price for palm kernels substantially
exceeded even the levels experienced in 2015 to
reach US$514 per tonne in 2016, an increase of
US$195 per tonne.
PLANTING
New planting proceeded strongly during 2016,
totalling 3,600 hectares by the year end, of which
2,100 related to the Group and 1,500 to associated
smallholder co-operatives. Approaching half of this
took place on the Group’s Musi Rawas project in
South Sumatra, where 1,100 hectares were planted for
the Group and 600 for smallholder co-operatives.
At the year end, a further 800 hectares had been
cleared ready for planting which did not take place
owing to a planting pause initiated by the Group in
order to control pig damage to new plantings. The
Group moved quickly to address this issue as soon as
it became apparent, individually protecting palms that
had been planted with bamboo fencing. Planting
resumed in January 2017.
Development of the Group’s projects in Bangka and
Kalimantan is nearing completion. A total of 900 hectares
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
MINORITY-OWNED ESTATES
CROPS AND PRODUCTION
Whilst an agreement was reached in December 2016 to
sell the Group’s share in the Agro Muko joint venture,
the operation remained part of the Group for the entire
year under review. Agro Muko’s own f.f.b. crop of
341,900 tonnes in 2016 was very similar to the crop
achieved in 2015. In line with the Group’s own
operations in North Sumatra, Agro Muko suffered
relatively little from the El Niño that affected the more
easterly parts of Indonesia. As noted in previous annual
and interim reports, Agro Muko is undergoing an
extensive programme of replanting that is expected to
hold back crop growth until the middle of the next
decade. There was a significant increase in the quantity
of outside crop bought for processing in Agro Muko’s
mills, including from a 2,000 hectare project partly
owned and managed by the SIPEF group, one of the
Agro Muko joint-venture partners. However, outside
crop remains relatively small in absolute terms,
representing a little less than 6% of total crop
processed by Agro Muko.
STRATEGIC REPORT 2016 CONTINUED
OPERATIONS Palm oil CONTINUED
was planted during 2016 in Kalimantan, mainly behind
the new flood-protection bund, of which 700 was for
the Group and 200 for smallholder co-operatives. Some
1,000 hectares were planted in Bangka, 300 for the
Group and 700 for smallholder co-operatives.
By the end of 2017, the Group expects to have
substantively concluded planting in Kalimantan and
Bangka with, respectively, 10,600 and 6,000 hectares
for itself and 4,500 and 4,000 hectares in respect of
the smallholder co-operatives. In Kalimantan, in early
2017 the government issued the Group and the
associated smallholder co-operatives with the final
land lease, the HGU, in respect of 8,680 and 1,920
hectares respectively. A full title for the balance of the
land will follow in due course. It is too early yet to
predict with confidence how many hectares the Group
will eventually be able to plant in Musi Rawas, but the
board’s current estimate is 7,000 hectares for itself and
3,000 hectares for the smallholder co-operatives.
NEW LAND
The Group’s strategy is to replace its share in the
hectarage of the disposed Agro Muko joint venture,
7,000 hectares, with new estates under its control. To
this end, it is actively reviewing suitable newly planted
projects. In addition, it has ambitions to add to its
portfolio of estates to maintain its ability to increase
crop and future profits.
As well as acquiring suitably sized discrete new
projects, the Group is exploring the acquisition of
incremental hectarage close to its new projects to
bring them to an optimal size. The Group’s experience
is that 10,000 hectares of oil palm with a mill able to
process 60 tonnes of f.f.b. per hour provides a unit
which is both big enough to provide economies of
scale in production and administration and small
enough to allow the careful scrutiny by field
management needed to maintain high standards.
The Group’s projects in Bangka and Musi Rawas,
including smallholder areas, are of this size. In
Kalimantan, the board is actively engaged in extending
the Group’s areas from the currently projected 15,100
hectares to bring the project to the equivalent of two
10,000 hectare units. The design for a second mill has
already begun and construction is expected to begin
before the end of 2017.
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M.P. EVANS GROUP PLC
Production in Agro Muko’s two oil-palm mills
amounted to 80,700 tonnes, a small increase on the
80,300 tonnes recorded in 2015. This was less than
expected given the growth in crop processed
because the oil-extraction rate fell to 22.2%. As
noted in previous reports, local management is
engaged in a set of initiatives to improve extraction,
initially by driving up field standards.
As expected following the planting of new rubber
concentrated around its crumb-rubber factory, Agro
Muko’s rubber crop grew by 12% in 2016. Rubber
prices increased gradually during the year, notably
in the last quarter.
Crops at Kerasaan Estate were, as expected, similar
to 2015. This estate has good soils and benign
terrain. The estate has a relatively old average age of
planting, so a programme of replanting will have to
begin in the next few years. In the meantime, the
main challenge in maintaining production is to
identify palms affected by the fungal disease
ganoderma and prevent its spread. Local
management is continuing to address this.
Details of crops, production and extraction rates for 2016,
with comparative figures for 2015, are set out below:-
2016 INCREASE/ 2015
TONNES (DECREASE) TONNES
%
F.f.b. crops
PT Agro Muko
- own 341,900 — 340,500
- outgrowers 21,600 70 12,700
363,500 3 353,200
PT Kerasaan Indonesia 42,100 1 41,600
405,600 3 394,800
Production (PT Agro Muko)
Crude palm oil 80,700 — 80,300
Palm kernels 18,800 — 18,800
Extraction rates % %
Crude palm oil 22.2 (2) 22.7
Palm kernels 5.2 (2) 5.3
Rubber crops TONNES TONNES
PT Agro Muko - own 1,850 12 1,650
Framing for new buildings at Musi Rawas
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
OPERATIONS Palm oil CONTINUED
PLANTATION PERFORMANCE INDICATORS
The key 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 economic 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
palm kernels 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.
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 crop yield per hectare 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 and drains,
for example). These are monitored by management on the
ground and, in some cases, independently verified and
advised upon. Decisions, such as when and how to
replant, are taken based on local conditions.
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 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., throughput, and the percentage
of free fatty acids, 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. Throughput is monitored on a daily
basis; 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 with regard to 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 utilisation. 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.
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FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
CPO AND PK
EXTRACTION RATES
The rate at which the
Group is able to convert
its f.f.b. into CPO and
palm kernels, quantified
as oil- and kernel-
extraction rates, is
the most important
measure of its
processing efficiency.
COST PER TONNE OF
PALM PRODUCTS
The Group’s long-term
profitability depends
on its success in
minimising the unit
cost of production that
is summarised in this
measure.
CURRENT TRADING AND PROSPECTS
F.f.b. crops during the first quarter of 2017 have been
in line with expectation. At the end of March they
stood at 99,900 tonnes, 15% ahead of the same period
in 2016. Crops have benefited from the increase in
rainfall that accompanied the end of the dry weather
occasioned by the El Niño weather pattern.
The increase in crop was held back in Kalimantan
by the flooding described above, which interfered
with harvesting and collection of f.f.b.. The flooding
has now receded and crops are on a strongly
upward trend.
The details are set out in the following table:-
3 MONTHS ENDED 3 MONTHS ENDED
31 MARCH 2017 INCREASE 31 MARCH 2016
F.f.b. CROPS TONNES % TONNES
Sumatra 41,600 15 36,300
Kalimantan 40,300 5 38,200
Bangka 18,000 44 12,500
99,900 15 87,000
The end of the El Niño in 2016 is likely to herald an
increasing crop in 2017, which will add further
momentum to the Group’s f.f.b. crop. This is already
rising, owing to the young average age of its palms,
only 7½ years, as a consequence of the development
of its projects in Bangka and Kalimantan over the last
Mature estate in North Sumatra
ten years. The upward trend in crop is expected to last
well into the next decade. This would be augmented by
the acquisition or development of new project areas.
The expected increase in global CPO production
in 2017 is likely to put some pressure on prices,
particularly in the second half of the year,
notwithstanding very low levels of CPO stocks.
The average CPO price c.i.f. Rotterdam for the first
quarter of the year has been US$772 per tonne, but
weakened noticeably in the last week of March to
finish the quarter at US$700 per tonne, compared with
US$795 per tonne at the end of 2016. Low levels of
physical supply in the first part of the year could lead
to some price volatility. However, the board is of the
view that palm oil, because of its high yield and low
cost of production, is well placed to continue to
benefit from increasing demand for vegetable oil and
the outlook, therefore, remains encouraging.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
OPERATIONS
Property
MAJORITY-OWNED: BERTAM ESTATE
The value of this land, sited in a prime position not
far from the slip road onto the highway heading to
Penang Island, rises as development progresses on the
neighbouring Bertam Properties land. An estimate of its
current value is given in the table on page 84.
It remains the board’s intention to sell Bertam Estate at a
suitable time taking into account market conditions and
the Group’s need for investment capital. In the
meantime, the minor residual oil-palm operation on 65
hectares of cultivated land yielded a crop of 1,700
tonnes (2015 – 1,800 tonnes). No replanting has been
done since 1997 and the Group’s objective in managing
this land is to maximise the crop from its ageing palms
whilst minimising costs. The Group has only three junior
employees on Bertam Estate and no other employees or
office space in Malaysia. Administrative and agricultural
advice and work is carried out by Straits Estates Sdn
Berhad and other external service providers.
Bertam Properties’ developments
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M.P. EVANS GROUP PLC
The remaining development
land remains a valuable
asset whose value
has appreciated
The golf course at Bertam Properties
ASSOCIATED COMPANY:
BERTAM PROPERTIES
Mixed development of residential housing and
commercial properties continues to progress on Bertam
Properties’ land. At the end of 2016, Bertam Properties
owned 314 hectares of land, including 29 hectares
under development and 143 hectares of golf course. This
left a balance of 142 hectares for development or sale.
Given the small membership of the 36-hole golf course,
a discussion was under way at the end of 2016 as to
whether the golf course could be reduced to an 18-hole
course releasing some 40 hectares for development.
Outline planning permission was successfully sought
and, on 18 February 2017, the golf club membership
voted at an extraordinary general meeting to accept a
scheme along these lines, which compensated
individual golf club members 12,000 Malaysian Ringgit
each (some US$2,700) for their loss of amenity; a total
cost to Bertam Properties of some US$2.4 million.
During 2016, Bertam Properties completed the sale of
479 developed properties, a significant increase over the
370 units on which sales were completed in 2015.
Sales recorded in 2016 were mainly of single-storey
residential terraces, and sales during the year yielded a
very similar margin to those in the previous year. Two
pieces of land were sold for development, including one
for a Tesco supermarket. Overall, less development was
begun in 2016 than in previous years, reflecting a
slowdown in the Penang property market. The volume of
property transactions in the Penang region, and their
total value, decreased during 2016 in part reflecting
tighter lending conditions by banks. The remaining
development land at Bertam Properties remains a
valuable asset whose value has appreciated as
development in the project is completed and the new
town attracts residents and businesses to an area that is
designated by the Malaysian government as a ‘hub’ for
education. The board expects the value of this land to
continue to appreciate in future. An estimate of the
current value of the Group’s share in Bertam Properties
is given in the table on page 84.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
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 benefited from a period of political stability and
economic growth. There was an increase in nationalist
sentiment during the 2014 presidential election but,
given Indonesia’s significant need for infrastructure
development and 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.
In 2014, a draft plantation law was tabled in the
Indonesian House of Representatives which included a
provision to restrict foreign ownership of plantations in
Indonesia to 30%. This was not enacted but a modified
version was subsequently passed in September 2014
that did not include this restriction. The new law
mandated the Government to prioritise domestic
investment, protect local customary rights, empower
local farmers and set a cap on foreign investment at
some point in the future. The board continues to monitor
the situation closely and will, if necessary, liaise with
other plantation companies and industry bodies to lobby
the government not to enact such proposals. The board
continues to consider the merits of a partial listing in
Jakarta of its Indonesian business, partly to mitigate
this risk.
Security of land tenure is a matter of fundamental
concern to plantation operators. The Group holds land
in its established estates under 25 or 30-year renewable
leases (“HGU’s”) which are legally renewable, and
which have to date been renewed without difficulty
when falling due. In some of its new project areas the
Group has also already obtained the HGU. Where the
Group has not yet received the HGU, it has obtained the
necessary licences for these projects, including a valid
right to develop the land (izin lokasi) and operating
licences (izin usaha pertambangan). In all its new
project areas, the Group compensates smallholders and
ensures 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 robust 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
anti-corruption activities and policies. The Group has
employed external advisers to ensure 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
its operations located in Indonesia 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 board of its large Malaysian associated
company and regularly attends its board meetings as
well as maintaining a dialogue with its chief executive
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, finance, human resources, internal audit and
sustainability) with extensive experience and expertise,
well qualified to confront the problems that arise on
developing and mature estates. Senior agronomic
managers are resident in Sumatra (also covering Bangka
and Musi Rawas) and Kalimantan.
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M.P. EVANS GROUP PLC
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 social and environmental topics.
The Group is also complying with the requirement to
achieve certification as Indonesian Sustainable Palm Oil
(“ISPO”) and International Sustainability Carbon
Certification (“ISCC”).
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 some cases, is closely
associated with cutting down rainforest and destroying
the habitat of endangered species. The Group may
therefore receive attention from the many organisations
connected with climate change and South East Asian
tropical rainforests.
The Group is a member of the Round Table on
Sustainable Palm Oil (“RSPO”). The RSPO has strict
guidelines by which members must abide in order to be
able to state that they are producing sustainable palm oil,
including the protection of forested areas. The Group
endorses the “Principles and Criteria” which have been
adopted by the membership. 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 in 2012 and in 2014 for the
Kalimantan mill. The mill on Bangka, commissioned in
May 2016, is expected to receive certification in 2017.
As evidenced by its projects in Kalimantan and on
Bangka Island, the Group has a clear policy that only
heavily degraded land will be acquired and developed.
As required under RSPO principles, 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
land to be developed in a fair and transparent way.
With regard to 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
compost is tested for its nutrient value and applied in the
field, reducing the requirement for inorganic fertiliser. No
effluent is discharged into external water courses. At the
mills in Kalimantan and Bangka, methane is captured
from the mill effluent before it is used for composting and
then in a biogas engine to generate electricity.
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-
Bertam Properties
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
STRATEGIC REPORT 2016 CONTINUED
RISK MANAGEMENT CONTINUED
office staff. Health and safety inspections are carried out
annually. The managers of all of the Group’s estates and
mills hold a monthly meeting with key staff to review
health and safety. These meetings are minuted and
actions identified and followed up.
but any deficits so caused tend to be made up at a later
date. Where appropriate, bunding is built around flood-
prone areas and drainage constructed and adapted either
to evacuate surplus water or to maintain water levels in
areas quick to dry out.
RELATIONSHIP WITH LOCAL POPULATIONS
A breakdown in relations could significantly disrupt
the Group’s operations, for example through strikes, or
lead ultimately to a stoppage 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 population 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 losing the use 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 but effective 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
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.
The board has taken the view that acceptance of weather
risk is part of the business.
COMMODITY-PRICE FLUCTUATION
The prices of CPO and palm kernels determine 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. into 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 contract
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
24
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M.P. EVANS GROUP PLC
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, has the lowest cost and is the
most productive, by a wide margin, in terms of yield
per hectare.
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 Malaysian
Ringgit against the US Dollar has an effect in US-Dollar
terms when 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. Surplus cash balances are largely held in
US Dollars.
Approved by the board of directors and signed on its
behalf
Tristan R J Price
Chief executive
13 April 2017
US DOLLAR - V - INDONESIAN RUPIAH
US$1 = Indonesian Rupiah
16,000
14,000
12,000
10,000
8000
2012
2013
2014
2015
2016
2017
US DOLLAR - V - MALAYSIAN RINGGIT
US$1 = RM
4.8
4.4
4.0
3.6
3.2
2.8
2012
2013
2014
2015
2016
2017
STERLING - V - US DOLLAR
£1 = US$
1.8
1.7
1.6
1.5
1.4
1.3
1.2
2012
2013
2014
2015
2016
2017
25
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
Environmental
& social
responsibility
The Group produces environmentally
sustainable palm oil in all its palm-oil mills
Smallholder co-operative schemes
attached to the Group’s 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 does not allow the burning of
vegetation or old palms when planting
or replanting its estates
The Group has more than 2,000 hectares
of conservation areas
The Group adopts agronomic policies and
practices which encourage the biodiversity
of flora and fauna on its estates
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M.P. EVANS GROUP PLC
The Group is
committed to the
sustainability of its
practices and the
welfare of its employees
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
ENVIRONMENTAL & SOCIAL RESPONSIBILITY CONTINUED
SUSTAINABILITY CERTIFICATION
AGRONOMIC POLICIES
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,
many of which formalise long-standing practices which
the Group regards as hallmarks of good plantation
management.
The Pangkatan and Kalimantan mills were granted RSPO
accreditation in October 2012 and June 2014 respectively.
The new Bangka mill began the process of accreditation as
soon as it was commissioned in May 2016 and is on track
to receive certification in 2017. The three estates that send
f.f.b. to the Pangkatan mill, namely, Bilah, Pangkatan and
Sennah, are covered by RSPO accreditation, as are the
smallholder co-operative areas attached to the Group’s
projects in Kalimantan and Bangka.
PT Kerasaan Indonesia, in which the Group has a 38%
share and the PT Agro Muko joint venture received RSPO
accreditation in 2010 and 2011 respectively.
INTERNATIONAL SUSTAINABILITY & CARBON
CERTIFICATION (“ISCC”)
ISCC is a leading certification system for sustainability
and greenhouse gas emissions. It was one of the first
schemes to comply with the requirements of the EU’s
Renewable Energy Directive. It can be used to meet
legal requirements in the bioenergy markets as well as to
demonstrate sustainability and traceability in the food,
feedstock and chemical industries.
Certification under ISCC was obtained for the Pangkatan
and Kalimantan mills in September 2014 and July 2016
respectively.
INDONESIAN SUSTAINABLE PALM OIL (“ISPO”)
Mandatory ISPO certification, whose requirements are
similar in most respects to those of the RSPO, was
received in respect of Pangkatan mill in January 2014.
Compliance of the mills in Kalimantan and Bangka
awaits only the final HGU land leases to be issued by
the Indonesian government.
The Group recognises public concerns about the impact
of the palm-oil industry’s agronomic practices on the
environment and natural habitat in the regions where it
operates. The Group has the following policies, many
long-standing, in respect of plantation management.
These policies have tangible benefits to the business as a
whole whilst also responding to potential concerns:-
NEW LAND
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.
The Group ensures that any new plantation development
is undertaken only in heavily-degraded areas which will
not be suitable habitats for major endangered species.
ZERO BURNING
The Group operates a strict policy prohibiting the burning
of vegetation or old palms/trees in order to clear land and
when carrying out new planting or replanting on its
estates. Vegetation or old palms/trees are chipped and
stacked in inter-rows 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. The
planting of jungle trees and other environmentally
suitable plants is undertaken in these areas on an ongoing
basis. Areas alongside river banks (riparian reserves) are
set aside and safeguarded as conservation 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.
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M.P. EVANS GROUP PLC
All effluent from the Group’s mills, in some cases after
being used to capture methane, is applied to the empty
fruit bunches to create nutritious compost. This compost is
applied in the field, reducing the requirement for
inorganic fertilisers. No effluent is discharged into rivers
or water courses. Covered ponds are used to capture
methane from all the effluent from the mill in Bangka and
30% of it from the mill in Kalimantan. The Group has a
contract to supply power generated from its biogas to the
local electricity utility company (“PLN”) in Bangka for
one year, and management will seek to renew this
contract once its term has come to an end. The Group is
exploring the potential in Kalimantan to enter into a
similar agreement.
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 minimising 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 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.
Barn owls are introduced
and bred to control
rats, thus minimising
the need for
chemical baits.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
ENVIRONMENTAL & SOCIAL RESPONSIBILITY CONTINUED
Medical care is provided on the plantations in polyclinics which are
staffed on a daily basis by trained employees
Staff at the Kalimantan estate clinic
HEALTH AND SAFETY
FACILITIES
The Group gives priority to the health and safety of its
employees and those affected by its activities, such as
local people living on and near its estates. During 2016,
independent health and safety inspections were carried
out on the Group’s North Sumatran and Kalimantan
estates. The managers of all of the Group’s estates and
mills hold a monthly meeting with key staff to review
health and safety.
Medical care is provided to staff and workers on the
plantations in polyclinics which are manned on a daily
basis by trained employees. In addition, doctors visit
these clinics once or twice a week. The Group pays
for hospital treatment for its staff and workers if this
is required.
Trained sprayers apply chemicals in the field. They are
provided with (and are required to use) appropriate
protective clothing and masks. They are provided with
washing facilities to use after they complete their tasks
and receive regular medical checks.
The Group provides good-quality housing for its employees,
together with clean, potable water and proper sanitation.
Kindergartens are provided in the estates for very young
children, as is transport for older children to nearby
government schools. In remote locations, where schools
are not available, the Group supports education by
providing land and some buildings, as well as paying for
some teaching staff, so that government schools can
operate on its estates.
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 which conducts residential induction courses
for the Group’s agricultural staff as well as courses covering
subjects as diverse as accounting, people management,
harvesting, first aid, anti-bribery and anti-corruption
training, and environment and conservation.
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M.P. EVANS GROUP PLC
SMALLHOLDER SCHEMES
On the projects in Kalimantan, Bangka and Musi Rawas,
the Group has an obligation to promote schemes for local
smallholders. This is done by means of smallholder 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 of development, 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 by local
government officials.
The Group provides good-quality housing for its employees,
together with clean, potable water and proper sanitation.
Estate housing and children at the
on-site school
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
REPORT OF THE DIRECTORS
The directors present the audited consolidated and parent-Company
financial statements of M.P.Evans Group PLC for the year ended
31 December 2016.
PRINCIPAL ACTIVITIES
DIRECTORS AND DIRECTORS’ INTERESTS
At 31 December 2016, the Company, through its
subsidiary and associated undertakings, operates oil-palm
plantations in Indonesia and property development
in Malaysia.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
A review of the year and future prospects (including the
principal risks and uncertainties facing the Company) is
included in the chairman’s statement (pages 6 to 8) and in
the strategic report (pages 9 to 25) 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 46.
An interim dividend of 2.25p (2015 - 2.25p) per share
was paid on 4 November 2016 and a special dividend of
5.00p (2015 nil) per share was paid on 17 August 2016.
The board recommends a final dividend of 12.75p (2015
- 6.50p) per share. This dividend will be paid on or after
23 June 2017 to those shareholders on the register at the
close of business on 21 April 2017. This final dividend is
not provided for in the 2016 financial statements.
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 2016
55,700,444
The present membership of the board is detailed on
page 33. The directors shown on page 33 served
throughout the year with the exception of Bruce Tozer
who was appointed on 10 June 2016, and Matthew
Coulson who was appointed subsequent to the year end
on 1 February 2017. In addition, Derek Shaw served as a
director throughout 2016 and retired from the board on
31 January 2017. Richard Robinow, Jock Green-Armytage
and Philip Fletcher will retire from the board at the
forthcoming annual general meeting in accordance with
the articles of association and, being eligible, will offer
themselves for re-election. Matthew Coulson will retire
from the board and present himself for election at the
forthcoming annual general meeting.
The directors serving at the end of the year, together
with their interests at the beginning (or later date of
appointment) and end of the year, in the shares of
10p each in the Company, were as follows:-
AT 31 DECEMBER 2016
P E Hadsley-Chaplin
T R J Price
P A Fletcher
J M Green-Armytage
R M Robinow
J D Shaw
B C J Tozer
AT 1 JANUARY 2016
P E Hadsley-Chaplin
T R J Price
P A Fletcher
J M Green-Armytage
BENEFICIAL
OPTIONS
1,561,717
—
—
275,000
1,128,171
—
96,147
333,065
1,561,717
—
—
—
—
—
—
—
250,000
1,128,171
—
96,147
353,065
—
—
—
—
—
—
39,275
R M Robinow
J D Shaw
55,739,719
B C J Tozer (on appointment)
Shares issued in lieu of a cash dividend
18 June 2016
Issued (fully-paid and voting) capital
at 31 December 2016
32
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Board of directors
M.P. EVANS GROUP PLC 2015 ANNUAL REPORT
M.P. EVANS GROUP PLC
1
4
2
5
Peter E Hadsley-Chaplin, MA MBA EXECUTIVE CHAIRMAN
1
2
Appointed a director in 1989, chairman in 2010.
Former executive chairman of Bertam Holdings PLC and
Lendu Holdings PLC. 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.
Tristan R J Price, MA MSC FCA CHIEF EXECUTIVE
Appointed a director in 2010, chief executive in June
2016. Previously worked as a senior civil servant in the UK
Diplomatic Service, as an economist at the Organisation for
Economic Co-operation and Development (OECD) and at the
Treuhandanstalt (East German privatisation agency). Qualified
as a Chartered Accountant with Coopers & Lybrand.
3
Matthew H Coulson, BA FCA FINANCE DIRECTOR
Appointed a director in 2017. Joined the Group as Chief
1 Peter E Hadsley-Chaplin
2 Tristan R J Price
3 Matthew H Coulson
4 Jock M Green-Armytage
5 Richard M Robinow
6 Philip A Fletcher
7 Bruce C J Tozer
7
3
6
5
Richard M Robinow INDEPENDENT NON-EXECUTIVE
DIRECTOR
Appointed a director in 1999 and chairman from 2005 to
2009. A non-executive director of R.E.A. Holdings PLC
(previously chairman) and a former director of the Belgian
plantation group, SA SIPEF NV. Member of the audit and
remuneration committees.
6
Philip A Fletcher, FCA NON-EXECUTIVE DIRECTOR
Retired as managing director in June 2016, having been
appointed 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. Member of the
audit committee.
Finance Officer in 2016 with previous experience as an
audit director of Deloitte LLP, including work on companies
in the agricultural sector and in their technical policy team.
7
Bruce C J Tozer, BSC MSC MBA INDEPENDENT
NON-EXECUTIVE DIRECTOR
4
Jock M 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.
Appointed a director in 2016. Has held senior roles at
Rabobank International, JP Morgan, and Credit Agricole.
Chairman of Climate Mundial Ltd (an FCA regulated advisory
firm focused on environmental and climate finance) and on
the advisory board of Generation 10, a data analytics and
commodity logistics software company. Member of the audit
and remuneration committees.
33
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
REPORT OF THE DIRECTORS CONTINUED
Further details of the directors’ interests in share options
are disclosed in the report of the board to the shareholders
on directors’ remuneration, on pages 42 and 43.
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.
£276,985, 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 2018 or, if earlier, the date of the
Company's next annual general meeting.
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 2016
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:-
NATURE
SHARES
%
Aberdeen Asset Managers
Limited
Indirect 8,942,650 16.14
KL-Kepong International Ltd
Direct
6,231,850 11.25
Alcatel Bell Pensioenfonds VZW Direct
5,750,000 10.38
JP Morgan Asset Management
Holdings Inc
M M Hadsley-Chaplin
Direct
Direct
2,819,546
1,928,254
5.09
3.48
Montanaro Asset Management
Limited
Direct
1,705,000
3.08
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 £1,846,564 which
represents one third 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
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
2018 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 5,539,691 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 2018 or, if earlier, the date of the Company’s next
annual general meeting.
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M.P. EVANS GROUP PLC
OUTSTANDING OPTIONS TO SUBSCRIBE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
As at the date of this report there were options to
subscribe for 375,000 shares outstanding under the
executive share-option schemes. If all of the options were
exercised, the resulting number of shares would represent
(a) 0.67% of the enlarged issued share capital at that date;
and (b) 0.75% 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 2016 amounted to 45 days
(2015 - 42 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 72 and 73.
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 Company financial statement in accordance with
United Kingdom Generally-Accepted Accounting
Practices (United Kingdom Accounting Standards,
comprising Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ (“FRS101”) and applicable law).
Under company law the directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
the Company and of the profit or loss of the Group for
that period. In preparing these financial statements, the
directors are required to:-
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
Inspecting fertilizer stores
35
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
REPORT OF THE DIRECTORS CONTINUED
state whether IFRSs as adopted by the European Union
and applicable United Kingdom accounting standards,
including FRS101, have been followed, subject to any
material departures disclosed and explained in the
Group’s and 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 the Group and enable them to ensure that
the financial statements and the directors’ remuneration
report comply with the Companies Act 2006 and, as
regards the Group financial statements, article 4 of the
IAS Regulation. 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.
The directors consider that the annual report and
accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy.
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 page 39 and are
incorporated in this report by reference.
POST-BALANCE-SHEET EVENTS
Following the end of the year, on 17 March 2017, the
Group completed the sale of its 36.84% interest in PT
Agro Muko. Total sale proceeds were US$99.8 million,
and the Group recorded a profit on disposal of
US$66.4 million.
Additionally, since the end of the year, the Company
has instigated a share buyback programme. Up to the
date of this report, 362,807 of the Company’s 10p shares
have been repurchased and cancelled for a total cost of
£2.6 million.
DISCLOSURE OF INFORMATION TO AUDITORS
Each person who is a director at the date of approval of
this report confirms that:-
so far as they are aware, there is no relevant audit
information of which the Company's auditors are
unaware; and
they have taken all reasonable steps that they ought to
have taken as a director in order to make themselves
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
Katya Merrick
Company secretary
13 April 2017
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M.P. EVANS GROUP PLC
CORPORATE GOVERNANCE
The board recognises the importance of a sound system
of corporate governance and internal control, and the
board 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 page
33. The board comprises an executive chairman, two
further executive directors and four non-executive
directors, one of whom chairs the audit and remuneration
committees.
During the year and since the year end there have been a
number of changes to the composition of the board and,
whilst for some of 2016 the board comprised two
executives and five non-executives, the board is now
made up of three executive directors and four non-
executives. The maximum number of directors permitted
under the articles of association is eight.
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 13 full
board meetings held in 2016, with the exception of
Richard Robinow who was unable to attend the meetings
on 8 September 2016 and 25 October 2016. Each
executive director, and non-executive director with less
than nine years’ tenure, retires and must seek re-election
at least every three years. Non-executive directors who
have served on the board continuously for a period of
nine years or more 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
executive 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), 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 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
LLP as the Company’s nominated adviser. NM Rothschild
& Sons provided financial advice on the offer made for
the Company by Kuala Lumpur Kepong Berhad during the
autumn of 2016. The board additionally receives advice
from independent professionals on legal matters,
corporate public relations, taxation and the valuation of
the Group’s property assets.
INDEPENDENCE AND RE-ELECTION OF
LONG-SERVING DIRECTORS
During the year the board has sought to maintain a
balance of executive and non-executive directors.
A description of the roles and responsibilities of the
directors is set out on page 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). More than
half of the directors are non executive, out of whom
Richard Robinow has served for more than nine years, as
had Derek Shaw before his retirement from the board on
31 January 2017. The board considers that Richard
Robinow and Jock Green-Armytage have valuable
experience in the palm-oil industry. Bruce Tozer brings
experience in commodity finance and environmental
markets, and agri-business project finance including palm
oil to complement the existing skill set of the board.
The board is confident that each of these directors 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 Richard Robinow, Bruce Tozer and
37
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CORPORATE GOVERNANCE CONTINUED
Jock Green-Armytage are independent and that the Group
should continue to benefit from their experience and
knowledge. The board acknowledges that Philip Fletcher,
who was formerly managing director, and has also served
for more than nine years, is not independent but takes the
view that the Group is well served by Mr Fletcher in a
non-executive role, due to his in-depth knowledge of the
Group and the sector.
DIRECTORS’ REMUNERATION AND APPOINTMENT
As set out in the report on page 42 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, which during the
course of 2016 comprised Jock Green-Armytage, Richard
Robinow and Derek Shaw, met three times and all
meetings were attended by all members of the committee.
Following the resignation of Derek Shaw from the
committee on 31 January 2017, the board has appointed
Bruce Tozer to the remuneration committee.
The Company does not currently have a nominations
committee. Any new appointments to the board are
discussed at a full board meeting, taking into account the
current skills and experience of the board and that of the
candidate. 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 with board members.
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
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 22 to 25.
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; and
exchange-rate fluctuation
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.
These are also available through an “app” that is available for users to download free of charge.
38
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M.P. EVANS GROUP PLC
Going concern and viability
AUDIT COMMITTEE
The board considers both the going-concern status of the
Group and its longer-term viability on a regular basis. In
order to do this, both short-term budgets and longer-term
projections are prepared and reviewed by the board.
Due to the long-term nature of the main industry within
which the Group operates, the board has concluded that
projections should be prepared, and therefore viability
considered, over a 10-year period.
At the year end, the Group held net funds of US$75.3
million and, following the completion of the disposal of
its interest in Agro Muko in March 2017, a further
US$99.8 million was received. Budgets and forecasts
have taken this into account, whilst also incorporating the
Group’s plans for the further development of its
Indonesian operations, as discussed in the strategic report.
Principal areas of risk, and their mitigation, are included
in the section on risk management on pages 22 to 25.
As noted, whilst legislative changes in Indonesia could
adversely impact on the viability of the Group in its
current form, the board monitors the situation carefully
and considers the risk to be low. Financially, the main risk
to the Group’s results is commodity-price fluctuation, and
as was seen during 2015 and 2016, the Group is able to
continue delivering returns even during periods of lower
CPO prices.
The Group’s prospects remain sound, in particular given
the young average age of its palms, at 7½ years. An
upward trend in crop is expected to last well into the next
decade. Given these prospects and the resources
available to the Group, the board intends at least to
maintain, if not increase, normal dividends in future years
from their 2016 levels.
In light of the above, the board has concluded that the
Group is expected to be able to continue in operational
existence for the foreseeable future, and for this reason
the board has concluded that the going-concern basis is
appropriate in preparing the financial statements.
Furthermore, the board has not identified any significant
concerns regarding the Group’s longer-term viability.
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 (who resigned on 31 January
2017). All served throughout the year. The executive
directors are not members of the committee but can be
invited to attend its meetings. Following the resignation
of Derek Shaw the board has appointed Philip Fletcher
and Bruce Tozer to the audit committee. 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 2016 and
each meeting was attended by all of the members with
the exception of the meeting held on 8 September 2016
which Richard Robinow was unable to attend.
The external auditors attended two of the meetings.
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 of and fees of
auditors and such other related matters as the board
may require.
During the year the audit committee has:-
reviewed the Group’s external financial reporting,
including receiving a report from the external auditors
on the audit work they have performed;
reviewed the effectiveness of the Group’s internal
controls, including a review of the main findings of the
internal-audit team in Indonesia;
considered the ongoing appropriateness of the Group’s
accounting policies;
assessed key accounting judgements made during the
year, notably the recognition of significant disposal
transactions;
considered and approved the Group’s risk analysis; 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.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CORPORATE GOVERNANCE CONTINUED
Auditors
The auditors were first appointed, following a tender
exercise, in 2009. The audit partner changes every five
years in accordance with professional and regulatory
standards in order to protect independence and
objectivity, with Tim McAllister the audit partner for the
2016 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 2016 results.
The external auditors have provided only audit services,
other than some tax advice in the UK, Malaysia and
Australia. Accordingly, 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.
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 estimations made, and the key judgements applied
in determining a fair value for growing produce in
accordance with IAS41. The committee concluded that
depreciated historical cost should continue to be used
and that for internal reporting and decision-making
f.f.b. should be recognised at harvest. For the purposes
of statutory reporting, taking into account the advice of
its auditor regarding interpretation of IAS41, the Group
applies a policy of including an estimated valuation of
partly formed f.f.b. prior to harvest; and
the timing of recognition of disposal transactions in the
year. The committee considered the disposal of NAPCo
as part of the Group’s 2016 interim reporting, and the
disposal of Agro Muko as part of the Group’s 2016
annual reporting. For Agro Muko, the committee
concluded that due to the sale conditions remaining to
be satisfied at the end of the year, the disposal should
not be recognised in 2016.
After reviewing 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 for both the amounts reported and relevant
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.
Estate houses in Kalimantan
40
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M.P. EVANS GROUP PLC
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
to the board. The committee comprises Jock Green-
Armytage, Richard Robinow and Bruce Tozer, 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 AND PERFORMANCE 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 does not feel that a formal appraisal
process is currently appropriate but will continue to
review this position.
SUCCESSION PLANNING
The chairman maintains a strong individual relationship
with all the directors and any changes to the board are
managed collaboratively and with minimal cost and
disruption to the Group. Philip Fletcher stood down as
managing director at the annual general meeting in 2016
and was appointed as a non-executive director.
Tristan Price became chief executive on the same date.
Matthew Coulson was appointed as chief financial officer
in 2016, and has been appointed as finance director in
2017. These appointments ensure continuity of
knowledge within the Group and facilitate a
comprehensive handover process. 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.
TOTAL DIRECTORS’ REMUNERATION
The total amount of directors’ remuneration for the year ended 31 December 2016 was as follows:-
SALARY
AND FEES
£
BONUS:
PAID
£
BONUS:
DEFERRED
INTO
SHARES
£
BENEFITS
IN KIND
£
SALARY
IN LIEU OF
PENSION
£
TOTAL
PENSION REMUNERATION
2016
£
COSTS
£
TOTAL
REMUNERATION
2015
£
Executive directors
P E Hadsley-Chaplin
165,600
P A Fletcher
T R J Price
127,175
245,222
82,800
45,900
—
—
122,600
122,600
27,768
19,621
27,540
25,466
19,557
17,484
—
—
10,781
301,634
212,253
546,227
537,997
251,300
122,600
74,929
62,507
10,781
1,060,114
Non-executive directors
R M Robinow
J D Shaw
J M Green-Armytage
P A Fletcher
B C J Tozer
31,000
44,500
36,200
17,222
17,284
5,000
15,000
5,000
5,000
5,000
146,206
35,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
36,000
59,500
41,200
22,222
22,284
246,654
406,893
295,484
949,031
30,000
43,000
35,000
—
—
181,206
108,000
Total
684,203
286,300
122,600
74,929
62,507
10,781
1,241,320
1,057,031
1. The pension costs for Mr T R J Price are the contributions made by the Company to a Company-sponsored Self-Invested
Personal Pension (“SIPP”).
2. The information for Mr P A Fletcher has been split to show separately his remuneration as an executive and non-executive
director.
3. The bonuses awarded to members of the board for 2016 reflect the additional work undertaken by them as a result of the
4.
unsuccessful unsolicited offer by KLK, and in the case of Derek Shaw in recognition of his additional contribution in relation to
the sale of the Group’s interest in NAPCo.
In line with Group remuneration policy, described below, half of Mr T R J Price’s 2016 bonus is payable in cash with the
balance deferred into an award of fully-paid shares of equal value which vest after three years subject to continued employment
by the Group.
41
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
REPORT OF THE BOARD TO THE SHAREHOLDERS ON
DIRECTORS’ REMUNERATION CONTINUED
REMUNERATION POLICY
EXECUTIVE DIRECTORS
The Group’s remuneration committee recognises that the
Group’s success depends, in part, on the performance of
the directors and senior management and the importance
of ensuring that employees are incentivised. Its
philosophy is to offer a transparent and simple
remuneration package to the executive directors,
comprising a salary and a bonus related to current results
and personal performance (including significant
additional contribution in terms of time and expertise).
Half of the bonus is payable in cash and half is deferred
into an award of fully-paid shares which vest three years
after their grant subject to continued employment by the
Group. This structure for remuneration is designed to be
easily understood by both executives and shareholders. It
aims to encourage the executive directors to work
collegiately, focus their efforts on making decisions that
are in the Group’s best long-term interests, and, to some
extent, share in the benefits that accrue to shareholders
from a higher future share price. This avoids the need for
complex performance measures and the risk that targets
encourage behaviour that sacrifices long-term growth
potential in favour of short-term results.
The remuneration committee does not intend to award
any further market-price share options under the schemes
established in 2001 and 2012 (see ‘Long-term incentive
scheme’ and ‘Executive share-option schemes’ below).
LONG-TERM INCENTIVE SCHEME
As noted above, the remuneration committee does not
intend to grant any further share options under the
scheme established in 2012. It now aims to provide
senior staff, year-on-year, with a limited number of fully-
paid shares which vest after three years subject to
continued employment by the Group. These have the
advantage of being substantially less dilutive than market-
priced share options whilst continuing to provide an
adequate level of incentive to the recipient. Executive
directors will participate in the deferred-bonus policy
described above.
The new long-term incentive scheme will govern the grant
of both deferred-bonus awards to executive directors and
annual awards of fully-paid shares to senior staff other
than directors. No additional performance criteria will
attach to the deferred-bonus awards since the original
bonus will have been performance related; and no
performance criteria will attach to the senior-staff awards.
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. The
Group aims 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. Remuneration packages are designed to be
broadly comparable with those offered by similar
businesses so, in reaching its decisions, the remuneration
committee reviews remuneration data for other European
plantation and AIM-listed companies.
Non-pensionable bonuses may be awarded annually in
arrears at the discretion of the committee, taking account
of the Group’s performance during the period and other
targeted objectives. Bonuses do not exceed twelve
months’ salary, half payable in cash and half deferred into
an award of fully-paid shares which vest three years after
their grant subject to continued employment by the
Group (as described above).
NON-EXECUTIVE DIRECTORS
The fees of the non-executive directors are determined by
the board having regard to the complexity of the Group’s
operations and the need to attract, retain and motivate
high-quality non-executive directors and the level of fees
paid for similar roles in equivalent companies.
EXECUTIVE SHARE-OPTION SCHEMES
The chief executive is a member 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 scheme
established in 2001. As at 31 December 2016, options
over 275,000 (2015 – 250,000) shares granted to him
remain outstanding. These were granted between
16 November 2007 and 13 June 2016. During the year,
no options (2015 none) were exercised and none
(2015 none) lapsed.
No performance criteria are attached to the options and
no options are held by the non-executive directors.
However, options which have been granted under the
42
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M.P. EVANS GROUP PLC
2001 and 2012 schemes give the executive director the
right to purchase shares on a future date at the market
price of the shares on the date that the options are
granted. As such, the value of any option is closely tied to
the performance of the Group as reflected in its share
price. These options are of zero value if the share price on
the exercise date is lower than or equal to the share price
on the date that the options were granted.
At 31 December 2016 the middle-market quotation for
the Company’s shares, as derived from the London Stock
Exchange Daily Official List, was 635.25p, as compared
with the high and low quotations for the year of 700p and
371.75p respectively.
Details of the options held over shares of the Company
by the executive directors during the year ended
31 December 2016 are set out in the table below:-
BALANCE AT
1 JANUARY
2016
GRANTED BALANCE AT
IN THE 31 DECEMBER
2016
YEAR
EXERCISE
PRICE
DATE FROM
WHICH
DATE OF NORMALLY
OF GRANT EXERCISABLE
EXPIRY
DATE
Number of shares under option
T R J Price
*75,000
*75,000
50,000
5,750
44,250
—
—
—
—
—
—
25,000
75,000
75,000
50,000
5,750
44,250
25,000
Total
250,000
25,000
275,000
* 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. 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 at the same cost to the Company.
Approved by the board of directors and signed on its
behalf
Katya Merrick
Company secretary
13 April 2017
385.00p 16 Nov 07 16 Nov 10 16 Nov 17
159.50p 24 Nov 08 24 Nov 11 24 Nov 18
19 Jun 22
483.21p
17 Jan 23
520.00p
17 Jan 23
510.00p
19 Jun 15
17 Jan 16
17 Jan 16
19 Jun 12
17 Jan 13
17 Jan 13
410.50p
13 Jun 16
13 Jun 19
13 Jun 26
43
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
INDEPENDENT AUDITORS’ 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 2016 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
The financial statements, included within the annual
report, comprise:-
the consolidated balance sheet as at 31 December
2016;
the consolidated income statement and consolidated
statement of comprehensive income for the year then
ended;
the consolidated statement of changes in equity for the
year then ended;
the consolidated cash-flow statement 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 IFRSs
adopted by the European Union, and applicable law.
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, based on the work undertaken in the
course of the audit:
the information given in the strategic report and report
of the directors for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
the strategic report and the report of the directors have
been prepared in accordance with applicable legal
requirements.
In addition, in light of the knowledge and understanding
of the Group and its environment obtained in the course
of the audit, we are required to report if we have
identified any material misstatements in the strategic
report and the report of the directors. We have nothing
to report in this respect.
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.
44
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M.P. EVANS GROUP PLC
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 page 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 parent-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.
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. With respect to the strategic
report and report of the directors, we consider whether
those reports include the disclosures required by
applicable legal requirements.
OTHER MATTER
We have reported separately on the parent-Company
financial statements of M.P.Evans Group PLC for the year
ended 31 December 2016.
Timothy McAllister (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
13 April 2017
45
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CONSOLIDATED
INCOME STATEMENT
For the year ended 31 December 2016
Continuing operations
Revenue
Cost of sales
Gross profit
Gain/(loss) on biological assets
Foreign-exchange losses
Other administrative expenses
Other income
Operating profit
Finance income
Finance costs
Group-controlled profit before tax
Tax on profit on ordinary activities
Group-controlled profit after tax
Share of associated companies’ profit after tax
Profit for the year on continuing operations
Profit for the year from discontinued operations
Profit for the year
Attributable to:
Owners of M.P.Evans Group PLC
Non-controlling interests
Continuing operations
Basic earnings per 10p share
Diluted earnings per 10p share
Continuing and discontinued operations
Basic earnings per 10p share
Diluted earnings per 10p share
* Restated for discontinued operations - see note 11.
NOTE
2016
US$’000
2015*
US$’000
83,864
(59,480)
24,384
683
(658)
(4,931)
258
19,736
868
(1,389)
19,215
(7,547)
11,668
4,763
16,431
18,823
35,254
31,273
3,981
35,254
72,528
(57,469)
15,059
(232)
(5,320)
(2,768)
380
7,119
894
(1,244)
6,769
(2,401)
4,368
3,449
7,817
17,578
25,395
24,084
1,311
25,395
US cents
US cents
22.3
22.3
56.1
56.0
11.7
11.7
43.4
43.3
6
7
8
9
15
11
29
12
12
12
12
46
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M.P. EVANS GROUP PLC
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2016
Other comprehensive income
Items that may be reclassified to the income statement
Exchange loss on translation of foreign operations
Release of deferred profit on sale of land
Items that will not be reclassified to the income statement
Other comprehensive income
Other comprehensive expense for the year
Profit for the year
Total comprehensive income
Attributable to:
Owners of M.P.Evans Group PLC
Non-controlling interests
2016
US$’000
2015
US$’000
(221)
(291)
12
(500)
35,254
34,754
30,771
3,983
34,754
(10,402)
(263)
232
(10,433)
25,395
14,962
13,630
1,332
14,962
47
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CONSOLIDATED
BALANCE SHEET
As at 31 December 2016
Non-current assets
Goodwill
Property, plant and equipment
Investments in associates
Investments
Deferred-tax asset
Trade and other receivables
Current assets
Biological assets
Inventories
Trade and other receivables
Current-tax asset
Current-asset investments
Cash and cash equivalents
Assets classified as held for sale
Total assets
Current liabilities
Borrowings
Trade and other payables
Current-tax liability
Net current assets
Non-current liabilities
Borrowings
Deferred-tax liability
Retirement-benefit obligations
Total liabilities
Net assets
Equity
Share capital
Other reserves
Retained earnings
Equity attributable to the owners of M.P.Evans Group PLC
Non-controlling interests
Total equity
* Restated for current-asset investments - see note 20.
NOTE
2016
US$’000
2015*
US$’000
13
14
15
16
24
19
17
18
19
20
20
11
22
21
22
24
25
26
28
28
29
1,157
201,789
18,392
66
15,386
2,889
1,157
185,902
97,586
78
17,076
—
239,679
301,799
1,576
13,436
19,026
3,440
14,262
91,405
31,751
174,896
414,575
9,519
19,232
14,590
43,341
131,555
20,810
526
5,675
27,011
70,352
893
8,000
18,316
3,155
18,403
25,811
—
74,578
376,377
13,453
15,209
2,206
30,868
43,710
19,222
429
4,233
23,884
54,752
344,223
321,625
9,366
49,669
261,964
320,999
23,224
344,223
9,360
76,226
214,423
300,009
21,616
321,625
The financial statements on pages 46 to 73 were approved by the board of directors on 13 April 2017 and signed
on its behalf by
Tristan R J Price
Chief executive
Matthew H Coulson
Finance director
48
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M.P. EVANS GROUP PLC
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 31 December 2016
NON-
SHARE OTHER RETAINED CONTROLLING TOTAL
CAPITAL RESERVES EARNINGS TOTAL INTERESTS EQUITY
NOTE US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Profit for the year — 4,763 26,510 31,273 3,981 35,254
Disposal of associate — (24,506) 24,506 — — —
Other comprehensive
(expense)/income for the year — (683) 181 (502) 2 (500)
Total comprehensive (expense)/income
for the year — (20,426) 51,197 30,771 3,983 34,754
Issue of share capital 26 6 225 — 231 — 231
Dividends 10,15,29 — (6,377) (3,656) (10,033) (2,375) (12,408)
Credit to equity for equity-settled
share-based payments 27 — 21 — 21 — 21
Transactions with owners 6 (6,131) (3,656) (9,781) (2,375) (12,156)
At 1 January 2016 9,360 76,226 214,423 300,009 21,616 321,625
At 31 December 2016 9,366 49,669 261,964 320,999 23,224 344,223
Profit for the year — 19,531 4,553 24,084 1,311 25,395
Other comprehensive
(expense)/income for the year — (7,312) (3,142) (10,454) 21 (10,433)
Total comprehensive income
for the year — 12,219 1,411 13,630 1,332 14,962
Issue of share capital 26 58 2,308 — 2,366 — 2,366
Dividends 10,15 — (7,637) 63 (7,574) — (7,574)
Credit to equity for equity-settled
share-based payments 27 — 78 — 78 — 78
Transactions with owners 58 (5,251) 63 (5,130) — (5,130)
At 1 January 2015 9,302 69,258 212,949 291,509 20,284 311,793
At 31 December 2015 9,360 76,226 214,423 300,009 21,616 321,625
49
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
CONSOLIDATED
CASH-FLOW STATEMENT
For the year ended 31 December 2016
Net cash generated by operating activities
Investing activities
Purchase of property, plant and equipment
Interest received
Proceeds on disposal of property, plant and equipment
Disposal of associated undertaking
Net cash generated/(used) by investing activities
Financing activities
New borrowings
Repayment of borrowings
Decrease in bank deposits treated as current-asset investments
Dividends paid to Company shareholders
Dividends paid to non-controlling interest
Net cash used by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of foreign-exchange rates on cash and cash equivalents
Cash and cash equivalents at 31 December
* Restated for current-asset investments - see note 20.
NOTE
2016
US$’000
2015*
US$’000
30
14
6
11
20
22,888
20,231
(26,847)
868
155
79,720
53,896
11,486
(14,073)
4,141
(9,802)
(2,375)
(10,623)
66,161
25,811
(567)
91,405
(28,419)
894
21,127
—
(6,398)
18,571
(30,449)
1,666
(5,208)
—
(15,420)
(1,587)
27,973
(575)
25,811
50
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M.P. EVANS GROUP PLC
NOTES
TO THE CONSOLIDATED ACCOUNTS
For the year ended 31 December 2016
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 are set out in note 4 and in the strategic report on pages 9 to 25. 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.
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own income statement for
the year. M.P.Evans Group PLC reported a loss of US$6,979,000 for the financial year ended 31 December 2016 (2015 profit of
US$57,958,000). The Company’s separate financial statements are set out on pages 76 to 81.
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; The Singapore
Para Rubber Estates, Limited; Bertam UK Limited; Bertam Consolidated Rubber Company Limited; and Sungkai Holdings
Limited. Details of all subsidiary companies are shown on page 82.
NOTE 2
Adoption of new and revised accounting standards
(a) New and amended standards adopted by the Group
i)
There have been a number of amendments to IFRSs issued by the International Accounting Standards Board (“IASB”)
that have become effective for the first time during the year ended 31 December 2016. However, whilst the Group
has assessed each of them, none of the following standards have had a material impact on the Group’s results or
financial position.
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
Amendments to IAS 1 Disclosure Initiative
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 27 Equity Method in Separate Financial Statements
Annual Improvements to IFRSs 2012-2014 Cycle
ii)
In addition to the above, the amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants became mandatory for the
Group during the year ended 31 December 2016. However, the Group had chosen to adopt these changes early, and
incorporated their effect in the consolidated accounts for the year ended 31 December 2015.
(b) New standards, amendments and interpretations issued but not effective for the year beginning 1 January 2016 and not
adopted early
At the date of authorisation of these financial statements, a number of new and revised IFRSs have been issued by the IASB
but are not yet effective, as listed below. The directors have performed an initial review of each of the new and revised
standards, and based on the Group’s current operations and accounting policies, are of the view that their adoption will not
lead to any material change in the Group’s financial reporting.
IFRS 9 Financial instruments
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
IFRS 2 (amendments) Classification and measurement of share-based payment transactions
IAS 7 (amendments) Disclosure initiative
IAS 12 (amendments) Recognition of deferred tax assets for unrealised losses
IFRS 10 and IAS 28 (amendments) Sale or contribution of assets between an investor and its associate or joint venture
51
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
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’s 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 39.
(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 or associated companies 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.
On disposal of a subsidiary or associated company, the gain or loss on disposal is calculated as the difference between the
fair value of the proceeds received and the Group’s consolidated carrying value of the assets and liabilities of the subsidiary
or associated undertaking, including goodwill where relevant. If appropriate, results (including comparative amounts) of
the disposed of subsidiary or associated undertaking are included within discontinued operations.
(d) Revenue
Revenue represents the value of crops 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) Exceptional items
Exceptional items are those items of a significant, non-recurring nature which the directors have concluded require
separate disclosure to aid a full understanding of the Group’s financial performance.
(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.
(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.
52
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:24 Page 53
FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
NOTE 3
continued
Accounting policies CONTINUED
(h) Goodwill
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.
Goodwill arising on acquisition is ascribed to an operating subsidiary and capitalised, with provision being made for any
impairment. Goodwill is tested for impairment at least annually but provisions, once made, 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.
(i) Biological assets
For internal reporting and decision making, the Group’s policy is to recognise f.f.b. at the point of harvest. For the purposes
of statutory reporting, taking into account advice from the Group’s auditor on the interpretation of IAS 41, the Group’s
policy is to include an estimate of the value of f.f.b. prior to harvest as a biological asset in the Group’s financial statements
(see note 17). The valuation falls into the IFRS category ‘Level 3’, since sales of f.f.b. prior to harvest are never transacted.
This policy will be kept under review.
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.
(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, including directly-attributable borrowing costs. 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 is classified as freehold land, which is not depreciated. Oil-palm plantings are recognised at cost and
depreciated, once they reach maturity, over 20 years.
Land and buildings, plant, equipment and vehicles, are written off over their estimated useful lives at rates which vary
between 0% 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.
Construction 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 (HGU or 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 information for the year ended
31 December 2016. 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) Assets held for sale
The Group treats assets as held for sale once the sale is considered highly probable and is expected to complete within
12 months of the balance-sheet date. They are valued at the lower of fair value, and carrying value less costs to sell.
(m) Inventories
Inventories are valued at the lower of cost and net realisable value. In the case of palm oil and rubber, cost represents the
weighted-average cost of production, including appropriate overheads. Other inventories are valued on the basis of first in,
first out.
53
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 3
continued
Accounting policies CONTINUED
(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 if 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 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.
Current-asset investments – these include bank deposits with original maturities of between three and twelve months.
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 property-development sector is the local
currency. Where relevant, results of all Group companies are translated for the purposes of consolidation into the Group's
presentation currency, the US Dollar. The monetary assets and liabilities of the Group's foreign operations are translated
at exchange rates on the balance-sheet date. Items in the income statement are translated at the average exchange rate for
the period.
Exchange differences are recognised as a profit or loss in 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’.
54
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FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
NOTE 3
continued
Accounting policies CONTINUED
(q) Segmental reporting
Operating segments are consistent with the internal reporting provided to the chief operating-decision maker. The chief
operating-decision maker, which is responsible for allocating resources and assessing performance of the operating
segments, is the board of directors.
(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
Oil palms are harvested continuously, and so at any given time each individual palm will be at a different point in its
production cycle depending on its age, innate productivity, past production, rainfall, terrain, climate and husbandry. It
is not feasible to undertake a census of each individual palm: the Group’s own operations contain upward of three
million palms. Even if it were possible to conduct a census, there is no accepted method within the industry for
gauging the time until harvest of an observable growing bunch. Hence it is impossible to measure directly the volume
of growing f.f.b..
An alternative to direct measurement is to estimate the volume of growing f.f.b. indirectly. This can be done by
attributing an assumed percentage of full ripeness at the measurement date to crop actually harvested in future months.
This necessitates further assumptions about percentage ripeness. Female flowers that become f.f.b. appear some 22
months prior to harvest, though bunches become visible only some five to six months prior to harvesting. By
assumption, a decreasing percentage can be applied to future crop to synthesise an assumed volume of growing
bunches at the measurement date.
The Group has previously investigated a range of different assumptions for indirectly estimating a valuation for its
growing f.f.b., leading to a very wide range of estimates. Given this wide range, and the different defensible
methodologies, the Group continues to exclude f.f.b. prior to harvest from internal reporting and decision-making. For
both these purposes f.f.b are recognised at the point of harvest.
The Group’s auditors have a different interpretation to that of the board regarding f.f.b. prior to harvest, and on their
advice that reliable measurement constitutes an ability to construct an estimation methodology capable of being
applied consistently from year to year, albeit there is no one self-evidently correct methodology and that different
defensible methodologies will give widely differing answers, the Group’s policy for statutory reporting is to include an
estimate of f.f.b. prior to harvest in its financial statements. This estimate is based on the assumption that ‘measurable’
value in f.f.b. is related to oil content, which accrues exponentially in the four weeks prior to harvest (see note 17).
(ii) Disposal of Agro Muko
The Group entered into an agreement to sell its shareholding in Agro Muko in December 2016 (see note 11). The
directors have reviewed the sale contract, and concluded that, as a result of there being conditions within the sale
contract that were not satisfied at the end of the year, the transaction should not be recorded until post year end.
However, the directors also judged it highly probable that the sale would be completed within six months of the year
end date. As a result, the Group’s share of the net assets and goodwill associated with Agro Muko have been
reclassified in the year end balance sheet as an asset classified as held for sale, and the Group’s share of Agro Muko’s
results included within discontinued operations.
(iii) 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).
(iv) 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 24.
55
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 4
Segment information
The Group’s reportable segments follow the areas of activity set out in the strategic report. These are distinguished by location
and product: palm oil plantation crops in Indonesia and property development in Malaysia.
PLANTATION
INDONESIA
US$’000
PROPERTY
MALAYSIA
US$’000
OTHER
US$’000
TOTAL
US$’000
2016
Continuing operations
Revenue
Gross profit/(loss)
Gain on biological assets
Foreign-exchange gain/(loss)
Other administrative expenses
Other income
Operating profit
Finance income
Finance costs
Group-controlled profit before tax
Tax
Group-controlled profit after tax
Share of associated companies’ profit after tax
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Consolidated total assets
Assets
Investments in associates
Consolidated total liabilities
Liabilities
Other information
Additions to property, plant and equipment
Depreciation
Retirement-benefit obligations
83,742
24,415
683
744
(236)
252
699
(638)
(6,959)
—
—
—
—
—
—
—
—
—
986
3,777
122
(31)
—
(1,402)
(4,695)
6
169
(751)
(588)
—
315,665
2,292
317,957
—
16,100
16,100
80,518
—
80,518
*83,864
24,384
683
(658)
(4,931)
258
19,736
868
(1,389)
19,215
(7,547)
11,668
4,763
16,431
18,823
35,254
396,183
18,392
414,575
26,475
—
43,877
70,352
26,824
10,800
1,521
—
—
—
23
52
—
26,847
10,852
1,521
* US$12.4 million of revenue (14.8%) was from sales of CPO to one customer.
56
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:24 Page 57
FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
NOTE 4
continued
Segment information CONTINUED
2015 (restated - see note 11)
Continuing operations
Revenue
Gross profit/(loss)
Loss on biological assets
Foreign-exchange loss
Other administrative gains/(expenses)
Other income
Operating profit
Finance income
Finance costs
Group-controlled profit before tax
Tax
Group-controlled profit after tax
Share of associated companies’ profit after tax
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Consolidated total assets
Assets
Investments in associates
Consolidated total liabilities
Liabilities
Other information
Additions to property, plant and equipment
Depreciation
Retirement-benefit obligations
PLANTATION
INDONESIA
US$’000
PROPERTY
MALAYSIA
US$’000
OTHER
US$’000
TOTAL
US$’000
72,381
15,084
(232)
(5,311)
289
373
863
(788)
(1,260)
—
—
—
—
—
—
—
—
—
147
(25)
—
(9)
(3,057)
7
31
(456)
(1,141)
699
2,750
—
263,621
30,352
293,973
—
15,070
15,070
15,170
52,164
67,334
*72,528
15,059
(232)
(5,320)
(2,768)
380
7,119
894
(1,244)
6,769
(2,401)
4,368
3,449
7,817
17,578
25,395
278,791
97,586
376,377
31,917
—
22,835
54,752
28,126
9,594
1,016
—
—
—
293
275
—
28,419
9,869
1,016
*US$34.5 million of revenue (47.6%) was from sales of CPO to four customers (14.2%, 12.0%, 10.8% and 10.6% respectively).
57
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 5
Employees
Employee costs during the year
Wages and salaries
Social-security costs
Current-service cost of retirement benefit (see note 25)
Other pension costs
Share-based-payment charge
Average monthly number of persons employed (including executive directors)
Estate manual
Local management
United Kingdom head office
2016
US$’000
2015
US$’000
12,402
1,641
1,153
135
21
15,352
11,743
1,405
942
130
78
14,298
NUMBER
NUMBER
4,302
68
7
4,377
3,404
72
7
3,483
Details of directors’ remuneration required by the Companies Act 2006 are shown within the report of the board to the
shareholders on directors’ remuneration on pages 41 to 43 and form part of these audited financial statements.
NOTE 6
Finance income
Interest receivable on bank deposits
NOTE 7
Finance costs
Interest payable on bank loans and overdrafts
NOTE 8 Group-controlled profit before tax
Profit before tax is stated after charging
Depreciation of property, plant and equipment
Costs associated with response to KLK offer
Auditors’ remuneration
Employee costs (note 5)
The analysis of auditors’ remuneration is as follows:-
Fees payable to the Company’s auditor and their associates for services to the Group*
Audit of UK parent Company
Audit of consolidated financial statements
Audit of overseas subsidiaries
Total audit services
Taxation advisory services
Other services
Total non-audit services
2016
US$’000
868
2016
US$’000
1,389
2015
US$’000
894
2015
US$’000
1,244
2016
US$’000
2015
US$’000
10,852
2,000
486
15,352
9,869
—
452
14,298
20
134
191
345
110
2
112
20
94
186
300
106
3
109
* In addition to the above, fees of US$29,000 (2015 US$43,000) were payable to other firms for the audit of subsidiary companies.
58
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:24 Page 59
NOTE 9
Tax on profit on ordinary activities
United Kingdom corporation tax charge for the year
Relief for overseas taxation
Overseas taxation
Adjustments in respect of prior years
Total current tax
Deferred taxation – origination and reversal of temporary differences (see note 24)
M.P. EVANS GROUP PLC
2016
US$’000
121
(121)
—
5,159
4
5,163
2,384
7,547
2015
US$’000
480
(480)
—
7,001
26
7,027
(4,626)
2,401
The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, was 20% (2015 – 20.25%).
The standard rate of Indonesian tax was 25% for the current year (2015 – 25%). The actual tax charge is higher than the
standard rate for the reasons set out in the following reconciliation:-
Profit on ordinary activities before tax
Tax on profit on ordinary activities at the standard rate
Factors affecting the charge for the year
Profits taxed at higher standard tax rate
Unrealised Indonesian exchange differences not included in Group profit
Withholding tax on overseas dividends and interest
Adjustment relating to intercompany loan relationships
Utilisation of losses brought forward
Unrelieved losses
Other differences
Total tax charge
NOTE 10 Dividends paid and proposed
2016 interim dividend – 2.25p per 10p share (2015 interim dividend – 2.25p)
2016 special dividend – 5.00p per 10p share (2015 nil)
2015 final dividend – 6.50p per 10p share (2014 final dividend – 6.50p)
2016
US$’000
19,215
3,843
1,204
1,179
464
1,327
(814)
727
(383)
7,547
2016
US$’000
1,528
3,653
4,852
10,033
2015
US$’000
6,769
1,371
251
(1,600)
635
—
(46)
1,677
113
2,401
2015
US$’000
1,928
—
5,646
7,574
Following the year end, the board has proposed a final dividend for 2016 of 12.75p per 10p share, amounting to
US$8.8 million. The dividend will be paid on or after 23 June 2017 to those shareholders on the register at the close of
business on 21 April 2017. In addition, following the year end, the board has declared and paid a special dividend of
10.00p per 10p share upon completion of the disposal of the Group’s investment in PT Agro Muko (see notes 11 and 34).
59
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 11 Discontinued operations
i. On 6 December 2016, the Group entered into a contract for the sale of its 36.84% shareholding in PT Agro Muko.
At 31 December 2016, whilst shareholder approval for the sale had been received, the transaction remained subject to
Indonesian regulatory approval. This was received after the end of the year and the transaction completed on 17 March
2017 as disclosed in note 34, at which point the profit on disposal was recorded. At 31 December 2016, the investment in
PT Agro Muko was reclassified from investments in associates (note 15). As a result US$31,751,000 was included under
assets held for sale in the consolidated balance sheet and the profits arising shown within discontinued operations.
ii. On 6 May 2016, the Group entered into a contract for the sale of its 34.37% interest in NAPCo. The transaction formally
completed with receipt of proceeds of US$79,720,000 on 21 July 2016. Results from NAPCo, along with the profit arising
on disposal, have been included in discontinued operations.
iii.
In the prior year, the Group completed the sale of its wholly-owned cattle property in Australia, Woodlands. Results from
Woodlands were reported within discontinued operations.
The financial information relating to the discontinued operations referred to above is as follows:
2016
Share of associated companies’ profit
Profit on disposal of discontinued operations
Attributable tax expense
Net profit from discontinued operations
2015
Revenue
Expenses
Profit before income tax
Share of associated companies’ profit
Loss on disposal of discontinued operations
Net profit from discontinued operations
WOODLANDS
US$’000
NAPCO
US$’000
AGRO MUKO
US$’000
TOTAL
US$’000
—
—
—
—
11,259
(9,355)
1,904
—
(408)
1,496
4,312
21,184
(13,802)
11,694
—
—
—
10,977
—
10,977
7,129
—
—
7,129
—
—
—
5,105
—
5,105
11,441
21,184
(13,802)
18,823
11,259
(9,355)
1,904
16,082
(408)
17,578
During the year, the discontinued operations contributed US$3,684,000 (2015 US$1,904,000) to operating cash flows,
contributed US$nil (2015 US$20,862,000) to investing cash flows, and contributed US$nil (2015 paid US$16,058,000) to
financing activities.
60
(1864) MP Evans R&A 2016_Layout 1 13/04/2017 10:24 Page 61
M.P. EVANS GROUP PLC
NOTE 12 Basic and diluted earnings per share
The calculation of earnings per 10p share is based on:
Profit for the year attributable to the owners of
M.P.Evans Group PLC
Average number of shares in issue
Diluted average number of shares in issue*
2016
NUMBER
OF SHARES
2016
US$’000
31,273
2015
US$’000
24,084
2015
NUMBER
OF SHARES
55,721,155
55,799,844
55,501,745
55,557,477
* The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors
and key employees of the Group.
Basic earnings per share
From continuing operations attributable to equity holders of the company
From discontinued operations
Total basic earnings per share attributable to equity holders of the company
Diluted earnings per share
From continuing operations attributable to equity holders of the company
From discontinued operations
Total diluted earnings per share attributable to equity holders of the company
NOTE 13 Goodwill
At 1 January and 31 December
2016
US CENTS
2015
US CENTS
22.3
33.8
56.1
22.3
33.7
56.0
11.7
31.7
43.4
11.7
31.6
43.3
2016
US$’000
1,157
2015
US$’000
1,157
Goodwill is carried at cost. The directors have tested goodwill for impairment, concluding that the carrying amounts are
recoverable. Goodwill has arisen in respect of the Group’s projects in Indonesia in Kalimantan and on Bangka Island. The directors
consider the fair value of these investments to exceed their carrying value by a significant margin. Given this, and the size of the
goodwill balance, the directors do not consider it necessary to provide further detailed disclosures regarding impairment.
61
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 14 Property, plant and equipment
Cost or valuation
At 1 January 2016
Additions
Re-classification
Exchange differences
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2016
Charge for the year
Exchange differences
Disposals
At 31 December 2016
Net book value at 31 December 2016
Cost or valuation
At 1 January 2015
Additions
Re-classification
Exchange differences
Disposals
At 31 December 2015
Accumulated depreciation
At 1 January 2015
Charge for the year
Exchange differences
Disposals
At 31 December 2015
Net book value at 31 December 2015
FREEHOLD
LAND
US$’000
LEASEHOLD
LAND
US$’000
*PLANTING
US$’000
BUILDINGS
US$’000
PLANT,
EQUIPMENT
& VEHICLES
US$’000
CON-
STRUCTION
IN PROGRESS
US$’000
TOTAL
US$’000
—
—
—
—
—
—
—
—
—
—
—
—
33,753
4,820
—
(9)
—
101,376
11,522
—
—
(290)
38,564
112,608
233
17
—
—
250
17,818
4,453
—
(280)
21,991
53,115
21
9,521
(7)
(172)
62,478
12,673
3,179
(7)
(158)
15,687
32,684
1,520
9,351
(2)
(580)
42,973
18,015
3,203
(3)
(504)
20,711
13,713
8,964
(18,872)
—
—
234,641
26,847
—
(18)
(1,042)
3,805
260,428
—
—
—
—
—
48,739
10,852
(10)
(942)
58,639
38,314
90,617
46,791
22,262
3,805
201,789
24,087
151
—
(2,234)
(22,004)
30,773
3,024
—
(44)
—
93,493
8,121
—
—
(238)
—
33,753
101,376
3,682
—
—
(3,682)
—
—
215
18
—
—
233
13,892
4,122
—
(196)
17,818
52,803
451
3,911
(456)
(3,594)
53,115
10,866
2,910
(128)
(975)
12,673
34,300
1,861
—
(283)
(3,194)
32,684
18,030
2,819
(231)
(2,603)
18,015
2,813
14,811
(3,911)
—
—
238,269
28,419
—
(3,017)
(29,030)
13,713
234,641
—
—
—
—
—
46,685
9,869
(359)
(7,456)
48,739
33,520
83,558
40,442
14,669
13,713
185,902
Net book value at 1 January 2015
20,405
30,558
79,601
41,937
16,270
2,813
191,584
* Included in planting is immature planting of US$21,823,000 (2015 US$17,379,000) which is not depreciated.
As at 31 December 2016, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment of US$907,000 (2015 US$9,108,000).
Depreciation is charged to cost of sales, other than US$42,000 (2015 US$45,000) charged to other administrative expenses.
62
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M.P. EVANS GROUP PLC
NOTE 15
Investments in associates
Details of the Group’s subsidiary and associated undertakings are given on page 82. The Group’s associated companies are all
unlisted.
Share of net assets
At 1 January
Exchange differences
Profit for the year
Profit from discontinued associates (note 11)
Dividends received
Reclassified as held for sale
Disposals
At 31 December
Goodwill
At 1 January
Reclassified as held for sale
Disposals
At 31 December
Carrying value
At 31 December
SHARE OF
NET ASSETS
2016
US$’000
SHARE OF
NET ASSETS
2015
US$’000
96,585
366
4,763
11,441
(6,376)
(31,016)
(57,371)
18,392
1,001
(735)
(266)
—
93,332
(8,641)
3,449
16,082
(7,637)
—
—
96,585
1,001
—
—
1,001
18,392
97,586
The summarised results of the Group’s associated undertakings and the Group’s aggregate share of their summarised results are
shown below:-
KERASAAN
US$’000
BERTAM
PROPERTIES
US$’000
TOTAL
US$’000
2016 (Total)
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
2016 (Group share)
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Carrying value at 31 December
7,018
2,595
4,666
2,795
(966)
(463)
6,032
38,380
9,442
18,430
35,707
(9,957)
(3,930)
40,250
(38.00%)
2,667
986
(40.00%)
15,352
3,777
1,773
1,062
(367)
(176)
2,292
7,372
14,283
(3,983)
(1,572)
16,100
18,019
4,763
9,145
15,345
(4,350)
(1,748)
18,392
63
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 15
continued
INVESTMENTS IN ASSOCIATES CONTINUED
2015 (Total)
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
AGRO MUKO
US$’000
KERASAAN
US$’000
NAPCO
US$’000
BERTAM
PROPERTIES
US$’000
TOTAL
US$’000
50,597
13,857
61,778
25,046
(6,403)
(5,643)
74,778
5,868
1,839
4,368
2,245
(755)
(413)
5,445
98,138
31,938
245,755
44,094
(9,700)
(129,150)
150,999
30,522
6,875
20,595
35,105
(13,865)
(4,160)
37,675
2015 (Group share restated*)
(36.84%)
(38.00%)
(34.37%)
(40.00%)
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Goodwill
Carrying value at 31 December
—
—
22,759
9,227
(2,359)
(2,079)
27,548
735
28,283
2,230
699
1,660
853
(287)
(157)
2,069
—
2,069
—
—
84,466
15,155
(3,334)
(44,389)
51,898
266
52,164
12,209
2,750
8,238
14,042
(5,546)
(1,664)
15,070
—
15,070
14,439
3,449
117,123
39,277
(11,526)
(48,289)
96,585
1,001
97,586
* Revenue and profit has been excluded for Agro Muko and NAPCo as the Group’s share of profits arising from these
companies has been restated to discontinued operations (note 11).
NOTE 16
Investments
Other available-for-sale financial investments (unlisted)
At 1 January
Provision for diminution
Exchange differences
At 31 December
2016
US$’000
2015
US$’000
78
(9)
(3)
66
96
—
(18)
78
The directors have reviewed the fair value of the Group’s available-for-sale investments (categorised as level 3 in the fair value
hierarchy) and concluded that their realisable market value equals their carrying value.
NOTE 17 Current biological assets
F.f.b. prior to harvest
2016
US$’000
1,576
2015
US$’000
893
The estimation in respect of f.f.b. prior to harvest is based on the market price of f.f.b. in each of the Group’s locations on
31 December less the cost of harvesting and transport to mill. The market price is applied to a weight of f.f.b.. This weight
derives from the assumption that value accrues exponentially to f.f.b. from the increase in oil content in the four weeks prior to
harvest: in terms of tonnage at any given month end, equivalent to 32% of the following month’s crop.
The chosen valuation methodology determines the value presented for f.f.b. prior to harvest; different defensible valuation
methods will give widely differing answers (see note 3r(i)). Changes to the assumed tonnage will have a directly equivalent
proportional effect on the reported valuation.
64
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FOR THE PERIOD TO 31 DECEMBER 2016
M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
NOTE 18
Inventories
Processed produce for sale
Estate stores
Nurseries
NOTE 19 Trade and other receivables
Current assets
Trade receivables
Receivable from smallholder co-operatives
Other receivables
Prepayments and accrued income
Non-current assets
Receivable from smallholder co-operatives
Trade and other receivables analysed by currency of receivable:
Indonesian Rupiah
US Dollar
Sterling
Australian Dollar
Malaysian Ringgit
2016
US$’000
5,223
6,743
1,470
13,436
2015
US$’000
3,701
2,846
1,453
8,000
2016
US$’000
2015
US$’000
379
15,499
2,431
717
19,026
687
14,913
1,461
1,255
18,316
2,889
—
21,662
—
252
—
1
21,915
17,187
865
158
98
8
18,316
Sales of palm oil are made for cash payment in advance of delivery. The Group makes full provision against invoices
outstanding for more than 30 days. At 31 December 2016 there was no provision for impairment of trade receivables
(2015 US$nil). The directors consider the carrying amount of trade and other receivables approximates their fair value.
The Group makes finance available to its associated smallholder co-operatives, both during the immature stage of initial
plantings, and as working capital facilities for mature areas. All balances due from smallholders, including those for immature
areas, are repayable on demand. However, the Group may allow a longer period of finance at its discretion. At an early stage in
the development of a new project, costs are incurred but not yet allocated to a specific smallholder, awaiting the completion of
further development.
Given the above, receivables from smallholders have been classified as current assets with the exception of those balances not
yet allocated to a specific smallholder which are expected to take greater than 12 months to recover. An analysis of the balance
is as follows:
Immature areas - allocated
Mature areas
Current asset
Non-current asset – immature areas – not allocated
2016
US$’000
6,967
8,532
15,499
2,889
18,388
2015
US$’000
6,023
8,890
14,913
—
14,913
65
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 20 Cash and other liquid resources
Cash and cash equivalents
Current-asset investments
2016
US$’000
91,405
14,262
105,667
2015
US$’000
25,811
18,403
44,214
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less.
Current-asset investments are bank deposits with a maturity of twelve months or less, which have been pledged as security
against bank loans. In the 2015 annual report, these amounts were incorrectly included in cash and cash equivalents, and have
been reclassified to aid comparability with current year information.
The carrying value of these assets approximates their fair value.
NOTE 21 Trade and other payables
Trade payables
Amounts owed to associated undertakings
Other payables
2016
US$’000
9,328
16
9,888
2015
US$’000
8,963
27
6,219
19,232
15,209
The average credit period taken for trade purchases is 45 days (2015 – 42 days). The Group has processes in place to ensure
payables are settled within the agreed terms.
NOTE 22 Borrowings
Secured borrowing at amortised cost
Bank loans
Total borrowings
Amount due for settlement within 12 months
Due for settlement in one to two years
Due for settlement in two to five years
Amount due for settlement after 12 months
2016
US$’000
2015
US$’000
30,329
32,675
9,519
11,402
9,408
20,810
30,329
13,453
8,956
10,266
19,222
32,675
Bank loans from lenders in Malaysia are secured on the assets of Bertam Estate. Bank loans in Indonesia are secured against
certain assets within subsidiary companies, comprising land titles, fixed assets, inventory and cash balances.
Analysis of borrowings by currency:
31 December 2016
Bank loans
31 December 2015
Bank loans
US DOLLARS
US$’000
INDONESIAN
RUPIAH
US$’000
AUSTRALIAN
DOLLARS
US$’000
TOTAL
US$’000
26,347
3,982
—
30,329
29,104
—
3,571
32,675
66
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M.P. EVANS GROUP PLC
NOTE 22
continued
BORROWINGS CONTINUED
Facilities drawn and repaid during the year
Two revolving credit facilities, one of US$5 million, and one of A$5 million (approximately US$3.8 million) were repaid
during the year. Two new term loans were fully drawn, one of US$7.5 million, and one of IDR53.5 billion (approximately
US$4 million).
Undrawn borrowing facilities
At 31 December 2016, the Group had an available revolving credit facility of US$5 million (2015 no undrawn facilities).
Interest rates
The weighted-average interest rate paid during the year on bank loans was 4.1% (2015 – 4.1%).
NOTE 23 Maturity of financial liabilities
The table below shows the anticipated cash outflows relating to the Group’s financial liabilities based on the period remaining
between the balance-sheet and contractual-maturity dates. Where borrowings carry a floating rate of interest, an estimate of
future interest payments has been made by applying the interest rate in force at the balance- sheet date. Similarly, where
liabilities are denominated in foreign currencies, the exchange rate at the balance-sheet date has been applied to all related
future cash flows.
0-1 YEAR
US$’000
1-2 YEARS
US$’000
2-5 YEARS
US$’000
2016
Trade and other payables
Amounts owed to associated undertakings
Bank loans
2015
Trade and other payables
Amounts owed to associated undertakings
Bank loans
19,216
16
9,836
29,068
15,182
27
14,024
29,233
—
—
11,802
11,802
—
—
9,408
9,408
NOTE 24 Deferred tax
The following are the major deferred-tax liabilities and assets recognised by the Group and movements thereon:-
At 1 January 2016
Credit/(charge) to income statement
Exchange differences
At 31 December 2016
At 1 January 2015
(Charge)/credit to income statement
Exchange differences
At 31 December 2015
ACCELERATED TAX
DEPRECIATION
US$’000
RETIREMENT-
BENEFIT
OBLIGATIONS
US$’000
OTHER TIMING
DIFFERENCES
US$’000
(3,950)
825
(111)
(3,236)
(3,776)
(562)
388
(3,950)
1,058
336
24
1,418
883
269
(94)
1,058
19,539
(3,545)
684
16,678
16,830
4,919
(2,210)
19,539
—
—
9,712
9,712
—
—
10,749
10,749
TOTAL
US$’000
16,647
(2,384)
597
14,860
13,937
4,626
(1,916)
16,647
67
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 24
continued
DEFERRED TAX CONTINUED
Certain deferred-tax assets and liabilities have been offset. The following is the analysis of deferred-tax balances (after offset) for
financial reporting purposes:
To be recovered after more than 12 months:
Deferred-tax assets
Deferred-tax liabilities
2016
US$’000
2015
US$’000
15,386
(526)
14,860
17,076
(429)
16,647
At the balance-sheet date, the Group had unused tax losses of US$86,299,000 (2015 US$97,760,000) available for offset
against future profits. A deferred-tax asset has been recognised in respect of US$66,708,000 (2015 US$78,059,000) of such
losses. No deferred-tax asset has been recognised in respect of the remaining US$19,591,000 (2015 US$19,701,000) due to
the unpredictability of future profit streams and due to the time limit on utilisation of tax losses in Indonesia.
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$383,453,000 (2015 US$269,806,000). 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$40,766,000 (2015 US$79,566,000). 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$1,285,000 (2015 US$304,000). No asset has been recognised
in respect of these differences due to the unpredictability of future profit streams.
NOTE 25 Retirement-benefit obligations
The Group’s only obligation relates to an unfunded, non-contributory, post-employment statutory benefit scheme in Indonesia.
A lump sum is paid to employees on retirement or on leaving the Group’s employment. This terminal benefit is accrued by the
Group based on an annual actuarial review, and charged in the income statement on the basis of individuals’ service at the
balance-sheet date. Retirement is assumed at the earlier of age 55 years or 30 years’ service. No allowance is made for
mortality or internal promotion.
The main assumptions used to assess the Group’s liabilities are:
Discount rate
Salary increase per annum
Reconciliation of scheme liabilities:
Current-service cost
Past-service cost
Interest cost
Actuarial loss
Less: Benefits paid out
Movement in the year
At 1 January
Exchange differences
At 31 December
2016
%
8.00
8.00
2015
%
9.00
8.00
2016
US$’000
2015
US$’000
1,153
—
389
(21)
1,521
(179)
1,342
4,233
100
5,675
942
86
300
(312)
1,016
(145)
871
3,765
(403)
4,233
68
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M.P. EVANS GROUP PLC
NOTE 26 Share capital
At 1 January 2016
Issued during the year
At 31 December 2016
At 1 January 2015
Issued during the year
At 31 December 2015
AUTHORISED
NUMBER
ALLOTTED,
FULLY PAID
AND VOTING
NUMBER
AUTHORISED
£’000
ALLOTTED
FULLY PAID
AND VOTING
US$’000
87,000,000
—
55,700,444
39,275
87,000,000
55,739,719
87,000,000
—
55,327,395
373,049
87,000,000
55,700,444
8,700
—
8,700
8,700
—
8,700
9,360
6
9,366
9,302
58
9,360
During the year, 39,275 (2015 – 373,049) 10p shares were issued to shareholders who elected to take scrip in lieu of cash
dividends.
NOTE 27 Share-based payments
The company has a share-option scheme for directors and selected employees of the Group. Options are exercisable at a price
equal to the quoted market price of the Company’s shares on the date of grant. The vesting period is three years. If the options
remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee
leaves the Group before the options vest. Details of the share options outstanding during the year are as follows:-
At 1 January
Granted during the year
At 31 December
Exercisable at the end of the year
2016
WEIGHTED-
AVERAGE
EXERCISE PRICE
(IN BRITISH
PENCE)
355.1
410.5
379.5
375.4
NUMBER
OF SHARE
OPTIONS
370,000
25,000
395,000
350,000
2015
WEIGHTED-
AVERAGE
EXERCISE PRICE
(IN BRITISH
PENCE)
375.4
412.5
355.1
343.7
NUMBER
OF SHARE
OPTIONS
350,000
20,000
370,000
280,000
No options were exercised in 2016, nor in 2015. The options outstanding at 31 December 2016 had a weighted-average
remaining contractual life of 4.1 years and exercise prices in the range 159.5p to 483.2p. The Group recognised total expenses
of US$21,000 related to equity-settled share based payments (2015 US$78,000). Details of the directors’ share options are set
out in the report of the board to the shareholders on directors’ remuneration on pages 42 and 43.
69
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
NOTE 28 Reserves
SHARE-
PREMIUM
ACCOUNT
US$’000
REVALU-
CAPITAL-
ATION REDEMPTION
RESERVE
US$’000
RESERVE*
US$’000
At 1 January 2016
Exchange differences
Release of deferred profit
on sale of land
Retirement-benefit
obligations
Disposal of associate
Issue of shares
Share-based payments
Dividends from
associates
Profit for the financial
year
Dividends paid
30,503
—
2,499
(6)
4,087
—
—
(291)
—
—
225
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
MERGER
RESERVE
US$’000
766
—
SHARE-
SHARE OF
OPTION ASSOCIATES’
RESERVES
RESERVE
US$’000
US$’000
FOREIGN-
EXCHANGE
RESERVE
US$’000
TOTAL
US$’000
RETAINED
EARNINGS
US$’000
526
—
36,775
616
1,070
(1,003)
76,226 214,423
172
(393)
—
—
—
—
21
—
—
(24,506)
—
—
—
—
—
—
—
(291)
—
—
(24,506)
225
21
10
24,506
—
—
—
(6,376)
—
(6,376)
6,376
—
—
4,763
—
—
—
67
4,763
—
26,510
(10,033)
49,669 261,964
At 31 December 2016
30,728
2,202
4,087
766
547
11,272
At 1 January 2015
Exchange differences
Release of deferred
profit on sale of land
Retirement-benefit
obligations
Issue of shares
Share-based payments
Dividends from
associates
Profit for the financial
year
Dividends paid
28,195
—
2,792
(30)
4,087
—
766
—
448
—
32,259
(7,378)
711
359
69,258 212,949
(3,353)
(7,049)
—
(263)
—
2,308
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
78
—
—
—
—
—
—
—
—
(263)
—
2,308
78
—
211
—
—
—
(7,637)
—
(7,637)
7,637
—
—
19,531
—
—
—
19,531
—
4,553
(7,574)
At 31 December 2015
30,503
2,499
4,087
766
526
36,775
1,070
76,226 214,423
* 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.
NOTE 29 Non-controlling interests
At 1 January
Share of profit in the year
Dividends paid
Share of retirement-benefit credit charged to other comprehensive income
At 31 December
2016
US$’000
21,616
3,981
(2,375)
2
23,224
2015
US$’000
20,284
1,311
—
21
21,616
70
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M.P. EVANS GROUP PLC
NOTE 30 Note to the consolidated cash-flow statement
Operating profit
Biological gain
Disposal of property, plant and equipment
Release of deferred profit
Depreciation of property, plant and equipment
Impairment of investment
Retirement-benefit obligations
Share-based payments
Discontinued operations
Dividends from associated companies
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in receivables
Increase in payables
Cash generated by operating activities
Income tax paid
Interest paid
Net cash generated by operating activities
2016
US$’000
19,736
(684)
(55)
(291)
10,852
9
1,352
21
—
6,376
37,316
(5,435)
(3,599)
3,057
31,339
(7,062)
(1,389)
22,888
NOTE 31 Analysis of movements in net funds
At January 2016
Net increase in cash and cash equivalents
New borrowings
Repayment of borrowings
Change in deposits
Reclassification
Foreign-exchange movements
At 31 December 2016
At 1 January 2015
Net decrease in cash and cash equivalents
New borrowings
Repayment of borrowings
Change in deposits
Reclassification
Foreign-exchange movements
At 31 December 2015
CASH AND
CASH
EQUIVALENTS
US$’000
CURRENT
ASSET
INVESTMENTS
US$’000
BORROWINGS
DUE WITHIN
ONE YEAR
US$’000
BORROWINGS
DUE AFTER
ONE YEAR
US$’000
25,811
66,161
—
—
—
—
(567)
91,405
27,973
(1,587)
—
—
—
—
(575)
25,811
18,403
—
—
—
(4,141)
—
—
14,262
20,069
—
—
—
(1,666)
—
—
18,403
(13,453)
—
—
14,073
—
(9,893)
(246)
(9,519)
(32,424)
—
—
30,449
—
(13,451)
1,973
(13,453)
(19,222)
—
(11,486)
—
—
9,893
5
(20,810)
(14,103)
—
(18,571)
—
—
13,451
1
(19,222)
2015
US$’000
7,119
(4,346)
438
(263)
9,869
—
871
78
1,496
7,637
22,899
7,399
(5,228)
2,676
27,746
(6,271)
(1,244)
20,231
TOTAL
US$’000
11,539
66,161
(11,486)
14,073
(4,141)
—
(808)
75,338
1,515
(1,587)
(18,571)
30,449
(1,666)
—
1,399
11,539
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE CONSOLIDATED ACCOUNTS CONTINUED
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, current-
asset investments 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 funds of US$75,338,000 (2015 US$11,539,000) and equity attributable to the owners of the
parent Company of US$320,999,000 (2015 US$300,009,000). The board intends to fund its continuing Indonesian expansion
by a combination of the Group’s cash and other liquid resources, securing debt finance, and considering the sale of further
non-core assets where appropriate.
Categories of financial instruments
All of the Group’s financial assets (other than cash and other liquid resources) 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 majority of the Group's 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 and Malaysia. The Group does not have transactional
currency exposures arising from sales or purchases by its operating units, but the Group’s balance sheet can be significantly
affected by movements in exchange rates. Whilst the Group’s trading takes place in local currencies in South East Asia, relevant
commodity prices are determined in US Dollars in a world market which reduces the Group’s currency risk. The Group has a
policy not to hedge exchange-rate fluctuation and does not make use of forward-currency contracts.
The currency profile of the Group’s monetary assets, excluding trade and other receivables (the currency profile of which is
given in note 19), are as follows:-
US Dollar
Indonesian Rupiah
Australian Dollar
Sterling
Malaysian Ringgit
2016
US$’000
60,420
21,090
15,223
8,253
681
105,667
2015
US$’000
31,374
9,856
2,051
400
533
44,214
The currency profile of the Group’s monetary liabilities, excluding trade and other payables, is shown in note 22.
The Group is exposed to changes in foreign-currency exchange rates. This is in relation to the impact of movements on its
non-US Dollar monetary assets, but also in relation to the consolidation of its non-US Dollar-functional-currency subsidiary
and associated undertakings. The most significant sensitivity arises in respect of movements in the Malaysian Ringgit.
Management estimates that a 10% weakening of the US Dollar against the Malaysian Ringgit would have the following impact
on the result and net assets of its Malaysian investments:-
Result for the year
Net assets
2016
US$’000
402
1,846
2015
US$’000
287
1,941
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M.P. EVANS GROUP PLC
NOTE 32
continued
FINANCIAL INSTRUMENTS CONTINUED
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 Group’s net position means it is not materially exposed to changes in interest rates on its 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, and loans extended to the smallholder co-operative schemes
attached to the Group’s new projects. 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 ten years. The maturity profile for financial liabilities is shown in note 23.
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 page 41. The directors’ participation in the executive share-option scheme is
disclosed on page 43.
The Group received dividends from its associated companies during the year. These are set out in note 15.
NOTE 34 Post-balance-sheet events
Following the end of the year, on 17 March 2017, the Group completed the sale of its 36.84% interest in PT Agro Muko. Total
sale proceeds were US$99.8 million, and the Group recorded a profit on disposal of US$66.4 million.
Additionally, since the end of the year, the Company has instigated a share buyback programme. Up to the date of this report,
362,807 of the Company’s 10p shares have been repurchased and cancelled for a total cost of £2.6 million.
73
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT
To the members of M.P. Evans Group PLC parent-Company
REPORT ON THE PARENT-COMPANY
FINANCIAL STATEMENTS
OPINION ON OTHER MATTER PRESCRIBED BY THE
COMPANIES ACT 2006
OUR OPINION
In our opinion, M.P.Evans Group PLC’s parent-Company
financial statements (“financial statements”):
give a true and fair view of the state of the parent-
Company’s affairs as at 31 December 2016;
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
The financial statements, included within the annual
report, comprise:-
the parent-Company balance sheet as at
31 December 2016;
the parent-Company statement of changes in equity for
the year ended 31 December 2016; 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 United
Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law
(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.
In our opinion, based on the work undertaken in the
course of the audit:
the information given in the strategic report and report
of the directors for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
the strategic report and the report of the directors have
been prepared in accordance with applicable legal
requirements.
In addition, in light of the knowledge and understanding
of the parent-Company and its environment obtained in
the course of the audit, we are required to report if we
have identified any material misstatements in the strategic
report and the report of the directors. We have nothing to
report in this respect.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Adequacy of accounting records and 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; 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.
74
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M.P. EVANS GROUP PLC
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 page 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 parent-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.
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
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. With respect to the strategic
report and report of the directors, we consider whether
those reports include the disclosures required by
applicable legal requirements.
OTHER MATTER
We have reported separately on the Group financial
statements of M.P.Evans Group PLC for the year ended
31 December 2016.
Timothy McAllister (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
made by the directors; and
13 April 2017
75
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
PARENT-COMPANY
BALANCE SHEET
As at 31 December 2016
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current assets
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Other reserves
Retained earnings
Total equity
NOTE
2016
US$’000
2015
US$’000
iv
v
vi
vii
viii
ix
ix
x
907
31,494
32,401
137,722
964
138,686
171,087
41,687
96,999
7,347
49,034
934
31,494
32,428
161,772
434
162,206
194,634
46,025
116,181
9,796
55,821
122,053
138,813
9,366
36,605
76,082
9,360
36,359
93,094
122,053
138,813
The financial statements of pages 76 to 81 were approved by the board of directors on 13 April 2017 and signed
on its behalf by
Tristan R J Price
Chief executive
Matthew H Coulson
Finance director
76
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M.P. EVANS GROUP PLC
PARENT-COMPANY
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
SHARE OTHER RETAINED
CAPITAL RESERVES EARNINGS TOTAL
US$’000 US$’000 US$’000 US$’000
Loss for the year — — (6,979) (6,979)
Total comprehensive expense for the year — — (6,979) (6,979)
Issue of share capital 6 225 — 231
Dividends — — (10,033) (10,033)
Credit to equity for equity-settled share-based payments — 21 — 21
Transactions with owners 6 246 (10,033) (9,781)
At 1 January 2016 9,360 36,359 93,094 138,813
At 31 December 2016 9,366 36,605 76,082 122,053
Profit for the year — — 57,958 57,958
Total comprehensive income for the year — — 57,958 57,958
Issue of share capital 58 2,308 — 2,366
Dividends — — (7,574) (7,574)
Credit to equity for equity-settled share-based payments — 78 — 78
Transactions with owners 58 2,386 (7,574) (5,130)
At 1 January 2015 9,302 33,973 42,710 85,985
At 31 December 2015 9,360 36,359 93,094 138,813
77
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES
TO THE PARENT-COMPANY ACCOUNTS
For the year ended 31 December 2016
NOTE i
Significant accounting policies
Basis of accounting
The financial statements of the Company are presented as required by the Companies Act 2006. The financial statements
have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (“FRS 101”).
The financial statements have been prepared on a going concern basis under the historical cost convention, 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.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to share-based payment, financial instruments, capital management, presentation of comparative information in
relation to certain assets, presentation of a cash flow statement, and certain related party transactions.
Pursuant to Section 408 of the Companies Act 2006 the Company’s own income statement and statement of other
comprehensive income are not presented separately in the Company financial statements, but they have been approved
by the Board.
The Company has assessed the impact of new and revised accounting standards as described in note 2 to the consolidated
financial statements, and has concluded that none have a material impact on the Group’s results or financial position.
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.
Property, plant and equipment
Property, plant and equipment 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.
Investments in subsidiaries
Investments in subsidiaries are shown at cost less provision for impairment.
Trade and other receivables
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 and cash equivalent
These include cash in hand and deposits held with banks with original maturities of three months or less.
Trade and other payables
These are measured at amortised cost.
78
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M.P. EVANS GROUP PLC
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 loss for the year ended 31 December 2016 of US$6,979,000
(2015 profit US$57,958,000).
The auditors’ remuneration for audit services was US$20,000 (2015 US$20,000).
NOTE iii
Employees
Employee costs during the year
Wages and salaries
Social-security costs
Pension costs
Shared-based payments
2016
US$’000
1,795
267
65
21
2,148
2015
US$’000
1,678
231
76
78
2,063
As recorded in the report of the board to the shareholders on directors’ remuneration on page 41, wages and salary costs
include bonuses paid to the directors in respect of 2016 and 2015.
Average monthly number of persons employed
Staff
Directors
NOTE iv
Property, plant and equipment
Cost
At 1 January 2016
Additions
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
NUMBER
NUMBER
5
2
7
4
3
7
LAND AND
BUILDINGS
US$’000
PLANT,
EQUIPMENT
& VEHICLES
US$’000
834
—
—
834
—
—
—
—
834
834
257
23
(44)
236
157
42
(36)
163
73
100
TOTAL
US$’000
1,091
23
(44)
1,070
157
42
(36)
163
907
934
79
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTES TO THE PARENT-COMPANY ACCOUNTS CONTINUED
NOTE v
Investments in subsidiaries
Subsidiary undertakings
At 1 January and 31 December 2016
US$’000
31,494
The following companies are the principal direct subsidiary companies of M.P.Evans Group PLC:
M.P.Evans & Co. Limited
Sungkai Holdings Limited
Bertam (UK) Limited
COUNTRY OF
OPERATION
HOLDING
%
UK
UK
UK, Australia
100
100
100
Holdings are all of ordinary shares. The directors believe the carrying value of investments is supported by their underlying net
assets. Details of all subsidiary companies are shown on page 82.
NOTE vi
Trade and other receivables
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
NOTE vii Trade and other payables
Amounts owed to subsidiary undertakings
Borrowings
Other creditors
NOTE viii Called-up share capital
See note 26 to the consolidated financial statements on page 69.
2016
US$’000
137,471
121
130
137,722
2015
US$’000
161,613
31
128
161,772
2016
US$’000
36,273
2,449
2,965
41,687
2015
US$’000
36,308
8,775
942
46,025
80
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NOTE ix
Reserves
SHARE-
PREMIUM
ACCOUNT
US$’000
CAPITAL-
REDEMPTION
RESERVE
US$’000
At 1 January 2016
30,503
3,896
Issue of shares
Share-based payments
Loss for the financial year
Dividends*
225
—
—
—
—
—
—
—
MERGER
RESERVE
US$’000
1,434
—
—
—
—
At 31 December 2016
30,728
3,896
1,434
547
36,605
* See note 10 to the consolidated financial statements.
NOTE x
Reconciliation of movement in shareholders’ funds
M.P. EVANS GROUP PLC
OTHER
RESERVES
US$’000
TOTAL
US$’000
RETAINED
EARNINGS
US$’000
526
36,359
93,094
—
21
—
—
225
21
—
—
—
—
(6,979)
(10,033)
76,082
2015
US$’000
57,958
(7,574)
50,384
2,366
78
52,828
2016
US$’000
(6,979)
(10,033)
(17,012)
231
21
(16,760)
138,813
122,053
85,985
138,813
(Loss)/profit for the financial year
Dividends
Issue of shares
Share-based payments
Net increase in shareholders’ funds
At 1 January
At 31 December
NOTE xi
Post-balance-sheet events
Since the end of the year, the Company has instigated a share buyback programme. Up to the date of this report, 362,807 of the
Company’s 10p shares have been repurchased and cancelled for a total cost of £2.6 million.
81
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
SUBSIDIARY AND ASSOCIATED
UNDERTAKINGS
SUBSIDIARY UNDERTAKINGS
Details of the Group’s subsidiary undertakings as at 31 December 2016 are as follows:-
NAME OF SUBSIDIARY
% OF
SHARES HELD
COUNTRY OF
INCORPORATION
COUNTRY OF
OPERATION
FIELD OF ACTIVITY
PT Pangkatan Indonesia
PT Bilah Plantido
PT Sembada Sennah Maju
80
80
80
Indonesia
Indonesia
Indonesia
PT Simpang Kiri Plantation Indonesia 80
Indonesia
PT Prima Mitrajaya Mandiri
PT Teguh Jayaprima Abadi
PT Gunung Pelawan Lestari
PT Evans Lestari
95
95
90
80
Indonesia
Indonesia
Indonesia
Indonesia
PT Evans Indonesia
100
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Production of crude palm oil and palm kernels
Provision of agronomicand management-
consultancy services
Gubbagunyah Partnership
100 Australia
Australia
Non-trading
Bertam Consolidated Rubber
100
England & Wales Malaysia
Property development and production of
Company Limited
oil-palm f.f.b.
Bertam (U.K.) Limited
100
England & Wales United Kingdom Holding company
& Australia
M. P. Evans & Co. Limited
100
England & Wales United Kingdom Holding company
Lendu Australia Pty. Ltd
100 Australia
Australia
Holding company
Sungkai Holdings Limited
100
England & Wales United Kingdom Holding company
Lendu (U.K.) Limited
100
England & Wales United Kingdom Dormant
Sungkai Estates Limited
100
England & Wales United Kingdom Dormant
Supara Investments Limited
100
England & Wales United Kingdom Dormant
The Singapore Para Rubber
Estates, Limited
100
England & Wales United Kingdom Dormant
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 2016 are as follows:-
ISSUED, FULLY-PAID
SHARE CAPITAL
% COUNTRY OF
COUNTRY OF
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.
Bertam Properties Sdn. Berhad.
RM60.00m 40.00 Malaysia
Malaysia
Property development
82
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M.P. EVANS GROUP PLC
M.P. EVANS GROUP PLC
ANALYSIS OF
INDONESIAN PLANTATION LAND AREAS
As at 31 December 2016
The information in the following pages does not form part of the audited financial statements.
OWNERSHIP
%
MATURE
HA
IMMATURE
HA
INFRA-
STRUCTURE/
TOTAL CONSERVATION
AREAS
HA
PLANTED
HA
CO-OPERATIVE
SCHEMES
PLANTED
HA
TOTAL3
HA
Subsidiaries – oil palm
Pangkatan
Bilah
Sennah
Total Pangkatan group
Simpang Kiri
Total Sumatra
East Kalimantan
Bangka
Musi Rawas
Total new projects
Total
80.00
80.00
80.00
80.00
95.00
90.00
80.00
Group share of subsidiaries’ land
Associates
Agro Muko
– oil palm
– rubber
36.84
36.84
Kerasaan
– oil palm
38.00
Total associates
Group share of associates’ land
Memorandum:
Group share of subsidiaries’ land
2,291
2,225
1,406
5,922
1,767
7,689
9,321
3,956
—
13,277
20,966
18,567
15,851
1,127
16,978
1,648
18,626
6,881
142
630
275
1,047
611
1,658
1,131
1,779
1,873
4,783
6,441
5,500
1,526
595
2,121
659
2,780
1,031
2,433
2,855
1,681
6,969
2,378
9,347
10,452
5,735
1,873
18,060
27,407
24,067
17,377
1,722
19,099
2,307
21,406
7,912
153
101
132
386
173
559
4,775
1,453
816
7,044
7,603
2,586
2,956
1,813
7,355
2,551
9,906
15,227
7,188
2,689
25,104
35,010
6,944
31,011
3,476
378
3,854
56
3,910
1,441
20,853
2,100
22,953
2,363
25,316
9,353
4,475
3,605
785
8,865
8,865
669
—
669
—
669
and share of associates’ land
25,448
6,531
31,979
8,385
40,364
Subsidiaries’ land and Group
share of associates’ land
27,847
7,472
35,319
9,044
44,363
Notes:
1. The currently-estimated total plantable area for Group ownership is 10,600 hectares in East Kalimantan and 6,000 hectares on
Bangka; for the co-operatives 4,500 hectares in East Kalimantan and 4,000 hectares on Bangka.
2. 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 it may be possible to plant 10,000 hectares, of which 7,000
hectares would relate to the Group and 3,000 hectares to the smallholders’ co-operatives.
3. All of the Group’s areas at Pangkatan, Bilah, Sennah and Simpang Kiri, totalling 9,906 hectares have HGUs. Similarly, all of the
associates’ areas at Agro Muko and Kerasaan, totalling 25,316 hectares, and of which the Group’s share was 9,353 hectares at
31 December 2016, have HGUs. The Group’s new projects at Kalimantan, Bangka and Musi Rawas are at various stages in
process towards obtaining HGUs, and have the necessary operating and development licences. Since the year end, an HGU has
been granted at the Kalimantan project for 8,683 hectares and at Bangka for 1,366 hectares.
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
ANALYSIS OF
GROUP EQUITY VALUE
As at 31 December 2016
The information in the following table provides a directors’ estimate of the Group equity value at 31 December
2016, and is based on an independent valuation of the Group’s properties performed at the end of 2016.
OWNERSHIP
%
PLANTED TOTAL MARKET
VALUE
US$’000
AREA
HA
MARKET VALUE MARKET VALUE
ATTRIBUTABLE
TO GROUP
US$’000
PER PLANTED
HECTARE
US$
Subsidiaries – oil palm
Pangkatan
Bilah
Sennah
Total Pangkatan group
Simpang Kiri
Total Sumatra
East Kalimantan
Bangka
Musi Rawas
Total new Indonesian projects - Group
East Kalimantan smallholders
Bangka smallholders
Musi Rawas smallholders
Total new Indonesian projects - smallholders
Associates
Agro Muko1
Kerasaan
Total associates
Total Indonesia
Malaysian Property
Bertam Estate
Bertam Properties
Total Malaysian Property
Net cash2
Other assets and liabilities3
Total equity value
Equity value (per share4)
80.00
80.00
80.00
80.00
95.00
90.00
80.00
95.00
90.00
80.00
36.84
38.00
2,433
2,855
1,681
6,969
2,378
9,347
10,452
5,735
1,873
18,060
4,475
3,605
785
8,865
19,099
2,307
21,406
43,100
37,840
27,550
17,700
13,300
16,400
29,050
12,200
221,830
103,274
27,900
23,670
15,940
8,230
21,200
18,000
14,900
5,300
4,400
10,500
n/a
34,200
13,100
14,800
100.00
40.00
n/a
n/a
33,690
110,643
n/a
n/a
34,480
30,272
22,040
86,792
23,240
110,032
210,738
92,947
22,320
326,005
22,486
14,346
6,584
43,416
99,769
12,996
112,765
592,218
33,690
44,257
77,947
75,338
14,639
760,142
£11.00
Notes:
1. Agro Muko was not included in the independent valuation at 31 December 2016, and has been included at the amount received
after the year end in respect of its disposal.
2. Net cash is taken as cash and other liquid resources less borrowings from the 31 December 2016 balance sheet.
3. Other assets and liabilities taken as net assets minus plantation and property-related assets, minus net cash from the
31 December 2016 balance sheet.
4. Amount per share calculated using the year end exchange rate and year end shares in issue (see note 26).
84
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M.P. EVANS GROUP PLC
FIVE-YEAR SUMMARY
Production
Crude palm oil
Palm kernels
Crops
2016
TONNES
2015
TONNES
2014
TONNES
2013
TONNES
2012
TONNES
117,300
24,400
102,200
20,600
95,000
18,400
82,900
16,400
75,400
14,800
Oil-palm fresh fruit bunches (“f.f.b.”)
Indonesian majority-owned estates
Indonesian associated company estates
399,300
384,000
423,900
382,100
385,500
386,900
344,200
387,000
317,000
408,600
Average sale prices
Crude palm oil – Rotterdam c.i.f. per tonne
US$
700
US$
622
US$
821
US$
856
Exchange rates
US$1 = Indonesian Rupiah
– average
– year end
13,303
13,473
13,390
13,785
11,864
12,440
10,449
12,189
US$1 = Australian Dollar
– average
– year end
US$1 = Malaysian Ringgit
– average
– year end
£1 = US Dollar
– average
– year end
Revenue
Gross profit
Group-controlled profit before tax
Basic earnings per share
Dividend per share
1.35
1.38
4.14
4.49
1.35
1.24
US$’000
83,864
24,384
19,215
US cents
56.1
PENCE
20.00
1.33
1.37
3.91
4.29
1.53
1.47
US$’000
72,528
15,059
6,769
US cents
43.4
PENCE
8.75
1.11
1.22
3.27
3.50
1.65
1.56
US$’000
89,956
31,767
24,062
US cents
45.4
PENCE
8.75
1.04
1.12
3.15
3.28
1.56
1.66
US$’000
82,186
24,735
6,530
US cents
26.3
PENCE
8.25
US$
998
9,355
9,670
0.97
0.96
3.09
3.06
1.59
1.63
US$’000
83,213
23,035
12,185
US cents
27.7
PENCE
8.00
Equity attributable to the owners of
M.P.Evans Group PLC
Net cash generated by operating activities
320,999
22,888
300,009
20,231
291,509
29,156
274,091
19,494
284,094
33,897
US$’000
US$’000
US$’000
US$’000
US$’000
85
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that the annual general meeting of M.P.Evans Group PLC will be held at Tallow
Chandlers’ Hall, 4 Dowgate Hill, London EC4R 2SH on Friday 9 June 2017 at 12 noon for the following
purposes:-
AS ORDINARY BUSINESS
1
2
3
4
5
6
7
To receive and consider the report of the directors and the audited consolidated financial statements
for the year ended 31 December 2016.
To re-elect Richard Robinow as a director.
To re-elect Jock Green-Armytage as a director.
To re-elect Philip Fletcher as a director.
To elect Matthew Coulson as a director.
To declare a final dividend.
To re-appoint PricewaterhouseCoopers LLP as auditors and to authorise the directors to determine
their remuneration.
RESOLUTION ON
FORM OF PROXY
No 1
No 2
No 3
No 4
No 5
No 6
No 7
AS SPECIAL BUSINESS
To consider and, if thought fit, pass the following resolutions, of which resolution 8 will be proposed as an
ordinary resolution and resolutions 9 and 10 will be proposed as special resolutions:-
8
9
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 2018 and, for that period, the Section 551 Amount is £1,846,564.
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 2018 so that the directors are authorised to allot shares pursuant to article 7.3 of the
Company’s articles of association and to sell treasury shares for that period in an aggregate amount of up to
£276,985 (the Section 561 Amount).
RESOLUTION ON
FORM OF PROXY
No 8
No 9
10 That the Company is hereby generally and unconditionally authorised to make market purchases (within
No 10
the meaning of section 693 of the Companies Act 2006) of shares of 10p each in the capital of the Company
provided that:-
a)
b)
c)
d)
the maximum number of shares hereby authorised to be purchased is 5,539,691
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 2018 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.
By order of the board
Katya Merrick
Company Secretary
13 April 2017
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M.P. EVANS GROUP PLC
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 7 June 2017 (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
4
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.
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 7 June 2017 (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 13 April 2017, the Company's issued share capital consisted of 55,396,912 shares carrying one vote each. Therefore the
total number of voting rights in the Company as at that date was 55,396,912.
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 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.
87
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M.P. EVANS GROUP PLC
2016 ANNUAL REPORT
PROFESSIONAL ADVISERS
& REPRESENTATIVES
SECRETARY AND REGISTERED OFFICE
PRINCIPAL BANKERS
Katya Merrick
3 Clanricarde Gardens
Tunbridge Wells
Kent TN1 1HQ
Tel: 01892 516333
Email: katya.merrick@mpevans.co.uk
www.mpevans.co.uk
Company number: 1555042
INDONESIAN REGIONAL OFFICE
PT Evans Indonesia
Gedung Graha Aktiva, Suite 1001
Jl HR Rasuna Said Blok X-1 Kav 03
Jakarta 12950
Bank CIMB Niaga
Graha CIMB Niaga Lt.11
Jalan Jend. Sudirman Kav.58
Jakarta 12190
Indonesia
AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Malaysia
HSBC Bank PLC
105 Mount Pleasant Road
Tunbridge Wells
Kent TN1 1QP
MANAGING AGENT IN MALAYSIA
NOMINATED ADVISER AND BROKER
Straits Estates Sdn. Berhad
Loke Mansion
147 Lorong Kelawei
10250 Penang
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
INDEPENDENT AUDITORS
SOLICITORS
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
1 Embankment Place
London WC2N 6RH
Hogan Lovells International LLP
Atlantic House
50 Holborn Viaduct
London EC1A 2FG
REGISTRARS
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 0370 7071176
Fax: 0370 7036101
www.computershare.com
Designed and printed by
Michael R. Dalby Limited
Unit 1, Dolphin Point, Dolphin Way, West Thurrock RM19 1NR
020 7394 1112
email: mrd@mrdltd.plus.com
88
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VENUE OF ANNUAL
GENERAL MEETING
M.P. EVANS GROUP PLC
On 9 June 2017 at noon
Tallow Chandlers’ Hall
4 Dowgate Hill
London EC4R 2SH
89
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www.mpevans.co.uk