A N N U A L
R E P O R T
For the year ended 31 December 2019
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CONTENTS
1 Group financial highlights
2 Chairman’s statement
5 Operational highlights
6 Map of estates
8 The Group’s business model
10 The palm-oil market
STRATEGIC REPORT
12 Strategy
14 Results and financial position
16 Operations: Indonesian palm oil
24 Operations: Malaysian property
26 Risk management
SUSTAINABILITY
31 Approach
31 Protecting the environment
33 Sustainable palm-oil production
34 Communities
REPORT OF THE DIRECTORS
38 Board of directors
43 Corporate governance
48 Directors' remuneration report
FINANCIAL STATEMENTS
51 Independent auditors’ report
56 Consolidated income statement
58 Consolidated balance sheet
60 Consolidated cash-flow statement
62 Notes to the consolidated accounts
PARENT COMPANY
84 Parent-Company balance sheet
86 Notes to the parent-Company accounts
OTHER INFORMATION
90 Subsidiary and associated undertakings
91 Analysis of Indonesian plantation
land areas
92 Analysis of Group equity value
93 Five-year summary
94 Notice and venue of meeting
96 Officers, professional advisers &
representatives
Profit for the year US$7.5 million
(2018 US$7.2 million)
Operating profit US$16.1 million
(2018 US$19.5 million)
Continuing EPS 11.6 US cents
(2018 – 9.9 US cents)
Proposed to maintain final dividend
at 12.75p per share
“ More than one million tonnes
of crop processed, and improved
oil-extraction rates, did not
translate into record profits in
2019 only on account of this year
coinciding with a period of low
crude palm-oil prices. However,
towards the end of the year, the
price of crude palm oil rose strongly. During the year,
the Group was able effectively to acquire a further
2,200 planted hectares by purchasing additional
shareholdings in its own operating subsidiaries from
one of its minority partners. ”
Peter Hadsley-Chaplin
Read more in the Chairman’s statement on pages 2 to 5
Read more on the Group’s commitment to sustainability on
pages 31 to 37
GROUP FINANCIAL HIGHLIGHTS
GROUP FINANCIAL HIGHLIGHTS
+10%
REVENUE
-36%
GROSS
PROFIT
2019
US$ 119.3m
2018 US$ 108.6m
2019
US$ 17.0m
2018 US$ 26.5m
OPERATING
PROFIT
-17%
2019
US$ 16.1m
2018 US$ 19.5m
+4%
2019
US$ 7.5m
2018 US$ 7.2m
PROFIT FOR
THE YEAR
-8%
TOTAL EQUITY
2019
US$ 367.7m
2018 US$ 398.3m
OPERATING
CASH
GENERATED
+38%
2019
US$ 41.8m
2018 US$ 30.2m
BASIC
EARNINGS
PER SHARE
+17%
2019
11.6 US cents
2018 9.9 US cents
NORMAL
DIVIDEND PER
SHARE
–%
2019
17.75 pence
2018 17.75 pence
1
1
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
CHAIRMAN’S
STATEMENT
In 2019, for the first
time, the Group
processed more than
1 million tonnes of
fresh fruit bunches.
2
Peter Hadsley-Chaplin
Chairman
STRATEGIC DEVELOPMENTS
The Group has continued to
looks forward to a long and fruitful
relationship with a new Indonesian
implement its strategy to focus on
partner, Mr Praba Madhavan, a
developing and operating majority-
like-minded individual with wide
held plantations to produce
experience in the commodity sector.
sustainable Indonesian palm oil.
The Group’s approach to making
Wherever possible, the Group mills
decisions for the long term is suited
its own crop of fresh fruit bunches
both to a long-lived plant such as
(“ffb”). It already operates three of
the oil palm and to the thinking
its own mills, at Pangkatan, Kota
needed to make the right choices for
Bangun and Bangka. A second mill at
a sustainable future.
Kota Bangun, needed to process the
increasing crop from the maturing
In September 2019, the Group
plantings on this project, is on track
was able to take a further step in
to be commissioned in the middle of
executing its strategy by acquiring
2020. Work is also already under way
additional shares in its Indonesian
at Bumi Mas to construct a mill, which
operating subsidiaries previously
is expected to be operating in mid-
held by one of its minority partners.
2021. As it increases the amount of its
This had the effect of expanding
own crop that it mills itself, the Group
the number of high-quality and
will be able to report a higher level
environmentally-sound planted
of certified sustainable production.
hectares owned by the Group. The
Furthermore, where it buys ffb from
acquisition was fully funded by taking
on additional debt of US$25.4 million.
independent smallholders, the Group
is committed to working with them
In this way, the Group successfully
to ensure their ffb can be certified
consolidated its ownership at a
as sustainable under the new RSPO
price of US$9,500 per hectare that
Independent Smallholder Standard.
represented an attractive and
low-risk return to shareholders. As
The Group’s strategy of controlling
part of this transaction, the Group’s
all its operations means it is
long-standing Indonesian partner,
best able to draw on its excellent
PT Austindo Nusantara Jaya (“ANJ”),
operational management team, with
sold all of its holdings in Group
a proven track record of developing
companies. The board is grateful
and improving estates in the most
to ANJ for their support over many
effective, productive and sustainable
years and wishes them well in the
way. A strong balance sheet enables
future. At the same, time the Group
the Group to maintain its planned
CHAIRMAN’S STATEMENT
programme of investment in the
consumption consistently exceeding
over the coming years combined
Group’s plantations notwithstanding
production through the year. At the
with the knowledge that the sector
the cyclical rise and fall in the price
beginning of the year, high stock
has experienced an extended
of crude palm oil (“CPO”). The need to
balances and production growth
period of low CPO prices for a
build roads, permanent housing and
were able to meet this increasing
commodity whose price moves in
water-management infrastructure,
demand. However, as the year wore
cycles. The board will monitor the
quite apart from the construction
on, production growth fell and stocks
evolving situation in respect of the
of mills, represents a significant
unwound, so pressure for a price
coronavirus Covid-19 carefully in
commitment for a number of years
increase grew. By the end of 2019, the
reaching its proposals for future
after the palms on its new projects
price of CPO was US$860 per tonne.
dividends. It continues to believe the
are planted. A strong balance sheet
Demand for palm-kernel oil did not
anticipated increase in yield from its
also allows the Group to acquire
increase in the same way as that for
young plantations provides a basis
incremental hectarage for planting
CPO, so the price for palm kernels
for sustained future crop growth and,
around its existing projects.
received by the Group fell by 34%
ultimately, enhanced dividends.
RESULTS
A record year for production and
revenue resulted in only a small
increase in profit for the year. The
weak CPO price in the second half of
2018 carried through into 2019 until
near the end of the year, leading to
lower profit margins. Operating profit
was US$16.1 million compared with
US$19.5 million in 2018 reflecting low
CPO prices and a small increase in
costs, but also a positive foreign-
exchange movement compared with
a loss in the previous year. Combined
with higher interest costs, resulting
from additional debt taken to finance
the acquisition of shares from the
compared with the previous year in
the face of plentiful supplies of its
competitor coconut oil.
PROJECTED GROWTH
IN THE GROUP’S
CROP PERSISTS
The Group’s crops rose
by 16% and those of its
‘scheme’ smallholders
by 15%. The total crop
processed increased
by 21%.
DIVIDEND
An interim dividend of 5.00p per
OPERATIONAL DEVELOPMENTS
Projected growth in the Group’s crop
persists. 2019 was the first year in
which the Group processed more
than 1 million tonnes of ffb. The total
crop processed increased by 21%. The
Group’s crops rose by 16% and those
of its ‘scheme’ smallholders (those
attached to the Group’s projects) by
15%. The rise in crop was particularly
pronounced at Bumi Mas, where
the operating standards introduced
by the Group are visibly having a
positive effect. At a lower volume, the
crop at Musi Rawas is also growing at
a good rate as this project’s original
plantings increasingly come into
Group’s minority partner, and a lower
share (2018 – 5.00p per share) was
harvesting. Crop purchased from
tax charge, profit for the year rose by
paid on 1 November 2019, and the
independent smallholders increased
4% to US$7.5 million.
board is recommending a final
dividend of 12.75p per share
by 56% to 166,000 tonnes as the
Group sought to make best use of
After nearly ten months of low
(2018 – 12.75p per share). This
the spare capacity at its three mills.
CPO prices, in October 2019, prices
maintains dividends for the year
increased strongly through to the
in respect of normal operations at
The Group prides itself on the
end of the year. This welcome
17.75p per share.
movement did not prevent the
extraction it achieves from its ffb.
Overall, the Group’s extraction rate
average price of CPO for Indonesian
The Group finds itself in the unusual
rose to 23.7% in its own mills from
exporters being the lowest for 13
position of proposing a dividend not
23.5% in 2018. This was the case
years. The average price in 2019 for
covered by earnings for a second
even though the Group processed
CPO delivered in Rotterdam was
year in succession. The board’s view
significantly more crop bought from
US$566 per tonne, 5% lower than the
is that it should maintain its long-
independent smallholders, which is
US$598 per tonne seen in 2018. The
standing policy of not reducing the
not the same quality as its own crop
price increase in the last two months
dividend given the strong increase
or that of its scheme smallholders.
of the year was the result of CPO
in crop and production projected
Following last year’s dip to 23.9% in
3
3
CHAIRMAN’S STATEMENT continued
the oil-extraction rate in its Bumi
palm on behalf of itself and its
increase in supply of vegetable
Permai mill in Kota Bangun, caused
scheme smallholders, of which
oils is expected to be weaker in
by high-capacity utilisation leading
effective ownership by the Group’s
2020 and significantly below the
to longer maintenance intervals, in
shareholders, taking account of
increase in demand. Stocks of the
2019 the extraction rate at this mill
minority-shareholder interests,
four main vegetable oils relative to
climbed back to 24.6%. The Group’s
amounted to 37,100 hectares.
consumption are all expected to fall,
other mills maintained good rates of
oil- and kernel-extraction. In total,
the Group produced 230,000 tonnes
of CPO, 20% more than in 2018.
At Bumi Mas, good progress was
made in bringing the project up
to the Group’s standards. Roads
were strengthened and improved,
and housing for workers and staff
built. Work to restore plantings
which had been neglected was
carried out, which contributed
to the strong increase in crop
BUMI MAS BEING
IMPROVED TO THE
GROUP’S STANDARDS
Roads were strengthened
and improved, housing
for workers and staff built
and work was undertaken
to restore plantings.
GROUP VALUATION
Acquisition of some shareholdings
significantly so in the case of palm
oil and sunflower oil. In the longer
term, insufficient levels of replanting
in Malaysia and a reduction in new
Indonesian planting are likely to curb
growth in production. The last year
has seen a small but perceptible
shift in consumer and media
attitudes towards palm oil, with a
greater appreciation of the important
part that certified sustainable palm
oil can play in the world achieving a
sustainable future.
from this project. At Musi Rawas,
from the Group’s minority partner,
In the short term, the uncertainty
planting since development began
as well as continuing development,
surrounding the development of
reached 8,000 hectares, of which
produced an increase in the total
Covid-19 may affect both prices for
5,700 were for the Group and 2,300
US Dollar value of the Group’s
CPO and production. However, the
for its scheme smallholders. In
plantations during the year. This was
board remains of the view that palm
addition, land compensation had
counterbalanced by an increase in
oil is well placed to benefit from
been paid on 1,300 hectares and
debt used to purchase the minority
an underlying increase in global
further hectares had been surveyed,
holdings and a reduction in the value
demand for vegetable oil
which is a necessary precursor
of Malaysian property, leaving the
and, therefore, that the outlook
to the land being available for
Group’s equity valuation at the end
remains positive.
planting. However, during 2019 the
of 2019 at £11.01, slightly lower than a
Roundtable for Sustainable Palm
year earlier.
Oil (“RSPO”) adopted a change to
its standards which affects new
planting. Development at Musi Rawas
was paused to allow the Group time
PROSPECTS
The Group projects that crop from
its existing areas will rise until 2029.
BOARD RETIREMENT AND
APPOINTMENT
At the end of the year, Richard
Robinow, a non-executive director,
retired from the board. Over many
to assess the new standards and
With an average age of only 7 years,
years the board has been extremely
ensure that it complied with them.
the palms on the Group’s estates and
grateful to Richard for the invaluable
In the Group’s own areas and in
those of its scheme smallholders
contribution he has made to the
those of its scheme smallholders,
will significantly increase their yield
Group as a director and, for a period,
planting is carried out in rigorous
as they mature. Any additional areas
as chairman. His expertise and
compliance with RSPO standards
that the Group acquires in line with
knowledge about both the plantation
to ensure the fruit will be certified
its strategy would push further into
world and corporate affairs generally
as being produced sustainably. It
the future the year of its peak oil
will be greatly missed.
is anticipated that planting at Musi
production.
Rawas can resume by mid-2020.
At the same time as Richard
At the end of 2019, the Group
growth in production of CPO as
was pleased to welcome Dr Darian
managed 51,600 hectares of oil
well as that of competing oilseeds,
McBain as a non-executive director.
After successive years of strong
Robinow’s retirement, the Group
4
M.P. EVANS GROUP PLCANNUAL REPORT 2019 Darian has many years of experience
working in sustainability roles,
most recently as Global Director of
Corporate Affairs and Sustainability
at Thai Union Group PCL. At Thai
Union, Darian has been responsible
for introducing changes to embed
sustainability throughout the global
seafood industry. Prior to this, she
was Managing Director at Blue Sky
Green, a consultancy focusing on
business strategy, supply chain
analysis and sustainability. Darian
also has experience in the palm-oil
industry, working to advocate for
sustainable global palm-oil supply
chains for WWF-Australia. We look
forward to benefiting from the
skills and expertise she brings to
the board.
ACKNOWLEDGEMENTS
The Group’s managers, staff and
workers in all our operations have
been dedicated and worked hard
during a challenging year in which
they have continued to develop and
manage our operations to deliver
consistent growth. I should like to
put on record the board’s thanks for
their efforts.
Peter Hadsley-Chaplin
Chairman
31 March 2020
CHAIRMAN’S STATEMENT
OPERATIONAL HIGHLIGHTS
INDONESIAN PALM OIL
Total crop processed more than 1 million tonnes
Group crops increased 16% to 663,000 tonnes
Average extraction rate in Group mills
increased to 23.7%
Crude-palm-oil production up to
232,000 tonnes
Increase of 3,200 mature Group and
scheme smallholder hectares in year
65% of Group production certified sustainable;
target 100% once Group processes all own crop
Group increasing milling capacity as crops increase
MALAYSIAN PROPERTY
37% increase in revenue from property sales at
associated company Bertam Properties
Political uncertainty weighing down on
property valuations
M.P. EVANS GROUP PLC
Net current assets of US$35 million
at 31 December 2019
Group equity value of £11.01 per share
at 31 December 2019
5
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
M.P. Evans aspires to the quality
of its output and management of
its plantations being regarded as
a reference point for the industry.
1
1 SIMPANG KIRI
Mature oil-palm estate in the province of
Aceh, near the border with North Sumatra,
which was acquired in the early 1980s. Fresh
fruit bunches are processed in a nearby
third-party mill.
2,600 hectares
Group planted area: 2,400 hectares
Our values are an integral part of
everything we do.
2
INTEGRITY
The Group is a reliable partner and employer
with a reputation for keeping its word and not
tolerating any form of bribery or corruption.
TEAMWORK
We are open about our challenges and solve
them together.
EXCELLENCE
The Group aspires to the quality of its output and
management of its plantations being a reference
point for the industry.
6
2 KERASAAN
Mature (ex-rubber) oil-palm estate near the
town of Pematangsiantar in North Sumatra.
Fresh fruit bunches are processed in the
neighbouring Bukit Marajah mill, owned by
the SIPEF Group - also the majority
shareholder in Kerasaan.
Planted area: 2,300 hectares
Group minority share: 38%
3 PANGKATAN GROUP
Grouping of three estates (Pangkatan,
Bilah, Sennah) whose fruit is processed in
a 40-tonne mill built on Pangkatan in 2005.
Combination of a long-established, mature
(ex-rubber) oil-palm estate (Pangkatan),
and land acquired or planted over the last
30 years (Bilah and Sennah).
7,400 hectares
Group planted area: 7,000 hectares
3
4 MUSI RAWAS
Located in South Sumatra province near
the town of Lubuk Linggau, the project was
started in 2012. Much had previously been
planted with smallholders’ rubber, which had
been abandoned. The Group began planting
oil palm at the end of 2014, and harvesting
started in 2017.
10,000 hectares
Group planted area: 5,700 hectares
Scheme smallholder planted area: 2,300
hectares
4
OPERATIONAL HIGHLIGHTS
8
7
7 BUMI MAS
Located in East Kalimantan, north-east
of Sangatta next to the Manubar River.
The land was acquired in 2017. It was
largely planted in 2012-14, with the first
harvesting taking place during 2015.
10,000 hectares
Group planted area: 7,500 hectares
Scheme smallholder planted area:
1,400 hectares
8 BERTAM PROPERTIES AND BERTAM
ESTATE
This land was previously the Group’s Bertam
Estate, most of which was sold into Bertam
Properties, a joint venture with two Malaysian
partners. Starting in 1992, the area has been
developed into a new town. The remaining
developable land amounts to 179 hectares.
Both Bertam Estate and Bertam Properties have
significant value as property-development land.
Bertam Properties: 280 hectares
(Group minority share: 40%)
Bertam Estate: 70 hectares
1
2
8
3
5
4
7
6
5 BANGKA
Located on the island of Bangka, the land
was acquired in 2005. The first areas planted
started production during 2009. A 45-tonne
mill with composting facility and biogas plant
was commissioned in May 2016 and extended
to 60 tonnes in 2019.
10,000 hectares
Group planted area: 6,100 hectares
Scheme smallholder planted area: 3,900
hectares
5
6 KOTA BANGUN ESTATES
Located in East Kalimantan, close to Kota Bangun and next to
the Mahakam River, the land was acquired in 2006. The first
areas planted started production during 2010; a 60-tonne mill
was commissioned in December 2012, and a second mill will
be commissioned in 2020.
16,000 hectares
Group planted area: 10,600 hectares
Scheme smallholder planted area: 4,600 hectares
6
7
THE GROUP’S BUSINESS MODEL
OUR MAIN RESOURCES
39,400
HECTARES OF
GROUP OIL PALM
12,200
HECTARES OF
SMALLHOLDER OIL PALM
PLANTATION LAND
The Group’s plantation land is used to grow oil
RELATIONSHIPS WITH COMMUNITIES
The Group engages with the local communities
palms and harvest them to the fullest extent.
living on and near its operations and manages
superlative smallholder schemes on their behalf.
6,100
EMPLOYEES
15%
NET GEARING
PEOPLE
The Group has over 6,000 employees, including
STABLE FUNDING
The Group has a robust capital structure with
200 agronomic staff, 85 engineers and more than
market capitalisation of more than US$520 million*,
3,700 harvesters.
cash of US$26 million and prudent levels of debt.
OUTCOMES
231,900
TONNES OF
CRUDE PALM OIL
Growing production
65%
CERTIFIED
SUSTAINABLE
Sustainable
production
US$345
PER TONNE
OWN PALM PRODUCT
Low costs
17.75p
TOTAL DIVIDEND
FOR 2019
Improving returns,
rising dividends
8
* Based on a share price of 726p on 31 December 2019.
M.P. EVANS GROUP PLCANNUAL REPORT 2019
GROUP BUSINESS MODEL
HOW WE OPERATE
PROMOTE A PHILOSOPHY OF
ZERO WASTE
The Group turns its empty bunches into compost
and generates electricity from methane collected
FOCUS ON OUR STRENGTH AS A
PRODUCER OF SUSTAINABLE INDONESIAN
PALM OIL
The Group builds shareholder returns by
from mill effluent. It establishes and maintains
exploiting the Group’s strengths as an efficient
conservation areas and strictly adheres to
producer of sustainable Indonesian palm
environmental standards.
oil to generate increasing crop, production
and revenues.
MAINTAIN STRONGLY
INCREASING CROP
Having young plantations underpins
strong projected crop growth to the
end of the 2020s because of the way
oil palms increase yield as they
mature. New planting or acquisition
of young estates helps keep the
average age low.
CONTROL OUR
OPERATIONS
The Group makes the most of its
mature areas and maximises the
potential of new areas by being in
control of its operations. It makes
use of the expertise concentrated
in its Jakarta regional office.
MAKE SMALLHOLDER CO-OPERATIVES
A SUCCESS
The Group treats its smallholder co-operatives
DO A THOUSAND SMALL THINGS
WELL, REPEATEDLY
Even our most senior agronomic managers are
equally, planting, maintaining and harvesting
resident in our operations, controlling a system of
land to the same standard as its own areas. As
supervision and support that focuses on
a result, smallholders own a valuable asset and
high agronomic and engineering standards.
identify their own success with the
Staff in Jakarta and the UK are frequent visitors
Group’s success.
to the operations.
Producing sustainable Indonesian palm oil
to deliver strong results and growing returns
for shareholders.
9
THE PALM-OIL MARKET
Against a backdrop of
low prices, demand for
palm oil grew strongly
in 2019. Production too
increased, to a record
76 million tonnes.
tonnes (some 2%), a more modest
as a result of African swine fever
increase than in 2018. In both
reducing the Chinese pig herd. These
countries the average yield per
developments took place at a time
hectare fell slightly. Production
when global production of other
growth attenuated significantly in the
vegetable oils barely increased. The
second half of the year. Disease in
total increase in world production of
Latin America and volcanic eruptions
vegetable oils in 2019 was 2 million
in Papua New Guinea lay behind
tonnes, half of which was from CPO.
Rising production was not enough to
near stagnant production in the rest
satisfy burgeoning demand for palm
of the world. This was attributable
Consumption of CPO exceeded
oil as a food and as a constituent
to a respite in palm productivity
production in each quarter of 2019.
of biodiesel, notably in Indonesia
following high crop during 2018
At the beginning of the year, high
itself where crude-palm-oil (“CPO”)
and the early part of 2019, and
stock balances and production
consumption increased by 20%. As
also palms beginning to show the
growth were able to meet increased
a result, stocks of CPO fell sharply
consequence of many producers
demand. However, as the year wore
during the year from the high levels
opting to reduce costs by restricting
on, production growth fell and
they had reached at the end of 2018.
the use of fertilizers in late 2018
stocks unwound. This became clear
Increasing demand and lower stock
and 2019 in response to low CPO
at the end of October, when the
levels saw the volume of trade in CPO
prices. At the same time, there was a
price of CPO increased dramatically
rebound during 2019: 60% of trade in
significant increase in the imports of
until the end of the year. The price
vegetable oils was palm oil.
CPO by China, India and the EU during
of CPO cif Rotterdam started the
2019. This was especially marked
year at US$520 per tonne and
Indonesia and Malaysia remain the
in China. Here, imports of CPO rose
then moved in a corridor between
world’s largest palm-oil producers,
from 5.4 million tonnes in 2018 to 7.7
US$480 and US$590 per tonne until
accounting for 84% of global CPO
million tonnes in 2019 as the Chinese
the end of October. By the end of
production. In these countries
soybean crush fell by 10% and less
2019, it stood at US$860 per tonne.
production increased by 1 million
animal fat was available domestically
Notwithstanding the strong upward
CRUDE-PALM-OIL PRICE
US$ per tonne
cif Rotterdam
2015
2016
2017
2018
2019
2020
1,000
900
800
700
600
500
400
10
M.P. EVANS GROUP PLCANNUAL REPORT 2019
THE PALM-OIL MARKET
price movement in the last two
months of the year, the average price
for the year was US$566, US$32
(5%) lower than in 2018. Due to the
operation of the export levy and tax
in Indonesia, according to Oil World,
exporters there experienced an
average price of US$525 for the year,
a 13-year low.
PALM-KERNEL OIL
Unlike CPO, palm-kernel oil did not
benefit from increased demand for
the production of biodiesel. The year
also saw ample supplies of coconut
oil, the other lauric oil that is a
competitor to palm-kernel oil, and
rising stocks of palm-kernel oil. As a
result, the average price for the year
cif Rotterdam was US$668 per tonne,
some 28% below 2018. However,
trade did increase significantly
during the last quarter, leading to a
reduction in stocks, which finished
the year at 1.4 million tonnes
compared with 1.3 million tonnes a
year earlier.
MAIN PRODUCERS
OF PALM OIL
2019
MAIN CONSUMERS
OF PALM OIL
2019
58%
Indonesia
Malaysia
26%
19% Indonesia
13% India
9% China
27% Other Asia
13% Africa
11% EU
Main producers
Remaining 16% consists of Thailand
(4%), Colombia (2%), Nigeria (1%),
other countries (9%).
Main consumers
Remaining 8% consists of Americas
(7%), other countries (1%).
Source: Oil World.
11
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.
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 ‘scheme smallholder’ areas
attached to those estates. The
Group’s strategic goal is to produce
only certified sustainable palm oil,
expanding its principal activity and
to maintain a steady rate of growth
in crops and in planted hectarage
controlled by it. Majority 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. It designs its procedures
to address the risks of operating in
Indonesia. 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.
The total planted area of the
Group’s majority-held Indonesian
operations extends to 39,400
hectares. The scheme smallholder
areas adjoining the new projects
amount to 12,200 planted hectares.
The current estimated unplanted
land bank is some 1,300 hectares
on the Group’s land and some 700
hectares on the adjoining scheme
smallholder areas managed by
the Group, at Musi Rawas in South
Sumatra. The intention is to plant
these areas as rapidly as possible.
Furthermore, the Group aims to
increase the area to the extent that
the availability of environmentally-
suitable land permits, meaning it
would comply with enhanced RSPO
standards aimed at preventing any
deforestation. Hence, it is possible
the Group may be able to plant more
than the remaining 2,000 hectares
referred to above. Before taking
account of any such increase at
Musi Rawas, or future acquisitions,
the combined Group and scheme
smallholder areas are expected to
reach 53,600 hectares when fully
planted. In addition, the Group owns
a 38% share of the 2,300-hectare
Kerasaan estate in North Sumatra
which, in line with its strategy, could
potentially be sold to finance the
expansion of majority-held areas.
In addition to the expenditure on
new planting, the Group is investing
in three new mills: at Kota Bangun,
Bumi Mas and Musi Rawas, to
take maximum advantage of the
rapidly-increasing crop in the areas
planted since 2005. The mill at Kota
Bangun, the second on this project,
is expected to be in service by the
middle of 2020; work is also already
under way at Bumi Mas, where it
is planned for the mill to become
operational by the middle of 2021.
A mill site has been acquired at Musi
Rawas. In addition to building these
mills and associated composting and
biogas facilities, substantial further
investment is being made into
infrastructure in these areas, such as
housing for staff and workers, estate-
road networks, power and water
distribution as well as workshops,
stores and administrative offices. The
Group seeks continually to maintain
and improve agronomic standards
and productivity on its estates,
STRATEGIC
REPORT
2019
12
M.P. EVANS GROUP PLCANNUAL REPORT 2019
STRATEGIC REPORT
STRATEGY
including investment to manage both
development potential, as well as
of section 172 are aligned with how
excessive rainfall and dry spells, with
a significant minority share of a
the Group makes strategic decisions
the objective of increasing crops
property-development company.
concerning its operations can be
of fresh fruit bunches (“ffb”) and
These assets give the Group the
found in the “Sustainability” section
production of crude palm oil (“CPO”).
opportunity to share in any ongoing
of this report on pages 31 to 37.
In addition, it has ambitions in the
increase in the value of property-
medium term to add to its portfolio
development land in Malaysia.
The board reviews at least annually
of estates to maintain its ability to
However, either of these assets
which organisations or individuals
increase crop and future profits.
could be sold to finance the Group’s
it considers to have a reasonable
strategic expansion of its Indonesian
expectation of being significantly
The Group is actively exploring the
oil-palm hectarage. It is the Group’s
affected by the activities of the
acquisition of new land. In Kota
long-term intention to dispose of
Group. The list, together with a
Bangun, East Kalimantan, the board
its property-development assets
summary of how the Group engages
is engaged in extending the Group’s
in order to fund the acquisition or
with its stakeholders, is published on
areas from the currently-planted
development of oil-palm estates
the Group’s website (www.mpevans.
15,300 hectares to bring the project
in Indonesia, and so to exit from
co.uk). The executive directors are
towards the equivalent of two
Malaysia.
10,000-hectare units. Its experience
is that 10,000 hectares of oil palm
with a mill able to process 60 tonnes
of ffb per hour provides a unit,
‘SECTION 172’ STATEMENT:
IMPLEMENTING THE STRATEGY
In implementing its strategy, the
frequent visitors to the Group’s
operations overseas, during which
they receive regular briefings from
local management on any significant
engagement with local communities
which is both big enough to provide
board meets its obligations under
and workforce grievances. These
economies of scale in production
section 172(1) of the Companies
are relayed to the board where
and administration, and small
Act 2006 (“section 172”) to promote
appropriate.
enough to allow the careful scrutiny
the success of the company for the
by field management needed to
benefit of its members whilst having
In 2018, the board took a decision
maintain high standards. The Group’s
regard to wider stakeholders and the
to produce the Group’s first
projects in Bangka, Bumi Mas and
impact of decisions over the long
sustainability report as part of a
Musi Rawas, including smallholder
term. Each member of the board is
wider strategy on sustainability.
areas, are of this size. Following the
aware of his or her obligations under
Preparation of the report during
acquisition of a 51% share in
section 172 and due consideration is
2019 provided an excellent
600 hectares of potentially plantable
given to stakeholders’ interests when
opportunity for the Group to review
land close to one of its Kota Bangun
strategic decisions are taken.
its practices and to augment the
divisions in 2018, further areas
are being assessed for prospective
acquisition. In North Sumatra,
Pages 8 and 9 of this report set
out the Group’s business model
detailed disclosures it already
gave on the Group’s approach to
sustainability. In compiling the
the Group is promoting the formation
and how it operates. The nature of
report, the Group interviewed
of independent smallholder
oil-palm plantations is that they
representatives from all the Group’s
co-operatives that will provide ffb to
by necessity require decisions to
stakeholder groups. The outcome
its Pangkatan mill as well as ensure
be made for the long term. This
of this stakeholder engagement
the Group can demonstrate full
encompasses the health and well-
was to identify the six material
compliance with Indonesian laws
being of the environment in which
topics presented in the report. A
on smallholder development
the Group operates as well as that
copy of the Group’s sustainability
passed long after these estates were
of the people living in and around
report published in 2020 can be
first planted.
its operations. Such considerations
downloaded from the website
are intrinsic to the Group’s way
(www.mpevans.co.uk) or a printed
In Malaysia, the Group owns a small
of operating. Further details
version can be obtained by contacting
area of oil-palm land with property-
demonstrating how the principles
the Group’s company secretary.
13
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
RESULTS & FINANCIAL POSITION
REVENUE AND GROSS PROFIT
The Group’s revenue for 2019 was
in prices towards the end of 2019
dividends of US$0.4 million (2018
caused the estimated value of
US$0.4 million) in the year.
US$119.3 million, 10% higher than the
unharvested growing ffb to increase
US$108.6 million achieved in 2018.
to US$2.1 million (2018 US$1.1 million).
The Group’s Malaysian associate,
Production of CPO and palm kernels
(“PK”) increased by 20% and 22%
respectively in the year, as shown
FOREIGN EXCHANGE GAINS
During 2019, the Indonesian Rupiah
Bertam Properties Sdn Berhad (40%
owned), contributed US$1.1 million
(2018 US$0.6 million) to Group profit
on page 18. However, the increase
strengthened by approximately 3%
in the year, and the Group received
in revenue did not match the
against the US Dollar. The Group
dividends of US$0.6 million (2018
production increases due to a fall in
holds monetary assets denominated
US$1.2 million) in the year.
average sales prices for CPO and PK
in Rupiah: operating cash, other
by 5% and 34%, as discussed in the
receivables, and receivables from
section on mill-gate price on page 20.
scheme smallholders, as described in
PROFIT FOR THE YEAR
As a result of the above, the Group’s
note 19 to the financial statements.
profit for the year was US$7.5 million
The Group’s cost of production per
A foreign-exchange gain of US$1.2
(2018 US$7.2 million).
tonne of palm product (a combined
million (2018 loss of US$4.1 million)
measure for CPO and palm kernels)
arose during the year on the
for its own mills increased by
retranslation of these balances.
NET ASSETS AND BORROWING
At the end of the year, the Group’s
net assets were US$367.7 million
US$25 per tonne in the year for the
Group’s own ffb, and by US$20 per
tonne when including ffb purchased
FINANCE COSTS
During 2019, the Group drew down
(2018 US$398.3 million). The decrease
in net assets mainly arose from
from scheme and independent
US$85.4 million of its US$120 million
applying the relevant accounting
smallholders. Further details are in
credit facility. The facility was used
standards to the Group’s purchase
the costs section on page 19. As a
for a combination of refinancing
in the year of shares in its operating
result, the Group achieved a gross
existing debt, supporting Group
subsidiaries previously held by one
margin of US$127 (2018 US$164) per
capital expenditure, and financing
of its minority partners (see note
tonne on sales of CPO from its own
the acquisition from the Group’s
12). Current assets exceeded current
mills during the year. Low PK prices
minority partner. As a result,
liabilities by US$35.4 million
experienced during the year led
financing costs increased to
(2018 US$43.0 million).
to a loss on sales of PK, but taken
US$3.7 million (2018 US$1.4 million).
together, each tonne of palm product
achieved a gross margin of US$84
(2018 US$141). In addition, the Group
TAXATION
The Group tax charge for the year
At the end of the year, the Group
had cash and liquid resources of
US$27.1 million (2018 US$24.1 million).
incurred expected losses during
was US$7.2 million (2018 US$12.7
As a result of the funding draw
the early development phase of its
projects at both Musi Rawas and
million). The Group’s effective tax
rate was higher than the standard
down, referred to under finance
costs above, net debt increased
Bumi Mas.
UK tax rate mainly due to the higher
in the year to US$67.4 million
Allowing for all of the above,
the Group’s gross profit was
standard rate applied in Indonesia,
(2018 US$5.9 million) resulting in
and tax arising in Indonesia on
net gearing of 15% (2018 – 1%);
foreign exchange gains on US Dollar
gross gearing was 20% (2018 – 7%).
US$17.0 million, 36% lower than
Group borrowings.
the US$26.5 million for 2018.
BIOLOGICAL ASSETS
The Group continues to apply IAS 41
ASSOCIATED COMPANIES
The Group’s Indonesian associate,
PT Kerasaan Indonesia (38% owned),
in estimating a value for unharvested
contributed US$0.8 million (2018
growing ffb for the purposes of
US$0.9 million) to Group profit in
statutory reporting. The increase
the year, and the Group received
14
STRATEGIC REPORT
RESULTS & FINANCIAL POSITION
-36%
+10%
+20%
+22%
GROSS PROFIT
REVENUE
CRUDE PALM OIL
PRODUCTION
PALM KERNEL
PRODUCTION
Ffb arriving at Bangka mill
15
OPERATIONS: INDONESIAN PALM OIL
CROPS
The strong upward trend in crop
any spare capacity whilst its own
in slower crop growth in the final
plantings continue to mature, so
weeks of the year and is likely to
growth continued in 2019. The
currently yield less than the levels
affect crop during the first half
Group’s own crops rose by 16%,
that will be attained in time.
of 2020. Although this has borne
those of its scheme smallholders
down on crop, the dry weather
(those attached to its projects)
The Group increased its efforts to
allowed the Group to complete
by 15%. The Group’s palms have a
make profitable use of this spare
construction of bunds, drains and
young average age of only a little
capacity by purchasing crop from
pumps to manage water levels in
over seven years, meaning the
outside suppliers. In 2019, 166,000
the southern part of this project.
Group is experiencing the benefits
tonnes of ffb were purchased from
The effect of this work on crop is
of increased yields that naturally
independent smallholders. Taking
not immediate, but it is expected
occur as oil palms mature, reaching
into account purchases of outside
to have a significant effect on the
their maximum yields at about
ffb, total crop processed by the
potential of this area over time. In
the age of ten years. In addition
Group rose by 21% to 1,002,000
the short term, it has allowed the
to this upward path in yield, some
tonnes. This is the first annual
Group to replenish vacant spaces
3,200 immature hectares were
declared mature during 2019
report in which the Group can
where very young palms had died
report it processed more than
due to persistent flooding as well
for the Group and its scheme
1 million tonnes of ffb.
as plant 140 newly-protected
smallholders. Harvesting on these
areas commenced and they began
contributing to total crop. Crop
more than tripled both at Bumi
hectares.
At Kota Bangun, the unusual crop
peak during the first half of the
In Bangka, as at Kota Bangun, crop
year in 2018 was not repeated in
volumes were higher during the
Mas, acquired by the Group in 2017
2019. Instead, the more normal mild
second half of the year than the
and, at a lower total volume, on the
crop peak occurred in the second
first half. Here, as signalled in the
newest project at Musi Rawas, in
half of the year. This meant that
previous annual report, the palms
South Sumatra.
relatively poor crop performance
could not reasonably sustain the
in the first half compared with the
very high rates of crop growth
Compared with previous years,
previous year was nearly eliminated
experienced in 2017 and 2018.
there was a significant increase
in the second half of the year.
However, after a lower cropping
in the purchases of ffb from
For the year as a whole, crops in
phase during the first half of the
independent smallholders. At its
Kota Bangun fell by 3% compared
year, crop growth resumed its
three existing mills, the Group
seeks to maximise the use of
with 2018. Relatively dry weather
upward trend and total crop for the
since the middle of 2019 resulted
year finished only just behind that
16
M.P. EVANS GROUP PLCANNUAL REPORT 2019 STRATEGIC REPORT
OPERATIONS
2019
TONNES
INCREASE/
(DECREASE)
%
194,000
128,900
164,300
122,000
15,400
38,700
663,300
87,300
57,500
19,600
7,700
172,100
39,600
105,200
21,300
166,100
1,001,500
(3)
(3)
2
215
228
12
16
3
-
244
381
15
193
30
78
56
21
2018
TONNES
200,400
133,500
161,100
38,700
4,700
34,600
573,000
84,600
57,700
5,700
1,600
149,600
13,500
81,000
12,000
106,500
829,100
CROP
Own crops
Kota Bangun
Bangka
Pangkatan group
Bumi Mas
Musi Rawas
Simpang Kiri
Scheme smallholder crops
Kota Bangun
Bangka
Bumi Mas
Musi Rawas
Independent smallholder
crop purchased
Kota Bangun
Bangka
Pangkatan group
TOTAL CROP
CROP HISTORY
tonnes
Scheme smallholders
Group
1,000,000
800,000
600,000
400,000
200,000
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
17
achieved in 2018. As noted previously,
much of this estate has excellent
sources of laterite for constructing
high-quality roads, enabling the
Group to maximise the crop it can
collect and deliver to the mill.
During 2019, the Group successfully
continued to embed its ways of
working and operating standards
at Bumi Mas. Local management
focussed on improving field
conditions alongside building new
housing for the workers and staff
on this project, and improving roads
which had proved inadequate during
heavy rains early in 2019. Roads are
important for transporting workers
and fertilizers to all parts of the
area and evacuating harvested ffb.
The result on total crop, which rose
by 219%, was dramatic. During 2019,
the Group built more than 260 units
of accommodation and raised or
stoned some 225km of roads. It also
took delivery of a small boat that cut
travel time to the project by some
six hours.
More than 1,500 hectares of young
areas at Musi Rawas started to come
into harvesting, a trend which will
gather pace over the coming years.
STRATEGIC REPORT continued
PRODUCTION AND EXTRACTION RATES
GROUP AND THIRD-PARTY MILLS
2019
TONNES
79,000
67,400
42,800
189,200
29,500
4,800
8,400
42,700
231,900
17,000
16,200
10,100
43,300
6,800
1,100
1,800
9,700
53,000
2019
%
24.6
23.1
23.1
23.7
20.9
20.6
21.8
5.3
5.6
5.4
5.4
4.8
4.6
4.8
PRODUCTION
Crude palm oil
Kota Bangun
Bangka
Pangkatan group
Bumi Mas
Musi Rawas
Simpang Kiri
Palm kernels
Kota Bangun
Bangka
Pangkatan group
Bumi Mas
Musi Rawas
Simpang Kiri
EXTRACTION RATES
Crude palm oil
Kota Bangun
Bangka
Pangkatan group
Bumi Mas
Musi Rawas
Simpang Kiri
Palm kernels
Kota Bangun
Bangka
Pangkatan group
Bumi Mas
Musi Rawas
Simpang Kiri
18
Hence, crop grew strongly, albeit from
a low base. One mark of the increasing
maturity of this area is that the
2018
Group’s staff are now all resident
INCREASE/
(DECREASE)
%
11
7
7
8
224
300
9
137
20
15
7
5
10
240
267
6
143
22
INCREASE/
(DECREASE)
%
3
-
-
1
2
7
(2)
6
2
(2)
2
4
(4)
(4)
TONNES
71,400
63,200
39,900
174,500
9,100
1,200
7,700
18,000
192,500
14,800
15,100
9,600
39,500
2,000
300
1,700
4,000
43,500
2018
%
23.9
23.2
23.1
23.5
20.4
19.2
22.3
5.0
5.5
5.5
5.3
4.6
4.8
5.0
in the project. A small guest house
is available for visiting Group staff
to use, avoiding the need to stay at
the nearest town, Lubuklinggau, and
make the journey into and out of the
estates every day.
The Group’s older estates in North
Sumatra supplying the Pangkatan
mill, produced a small increase in
crop. At Simpang Kiri, the replanting
programme carried out in recent
years, started to produce results,
leading to a 12% increase in crop
from this estate.
PRODUCTION
A record year for crops, combined
with a significant increase in ffb
purchased from independent
smallholders, led to another record
year for Group production. CPO
production rose by 20% to 232,000
tonnes; that of palm kernels by 22%
to 53,000 tonnes. The Group does not
yet have its own mill at Bumi Mas or
at Musi Rawas, nor at Simpang Kiri.
Instead, it has contracts to sell ffb to
local mills based on the commodity
price for CPO and an assumed rate of
extraction. To reflect the substance
of this arrangement, oil produced
from these estates’ crops has been
included in CPO production figures
(see table).
Currently, 65% of total production
is certified sustainable palm oil (see
more in the Sustainability section on
page 31). The Group has an objective
to design and implement a scheme
that will persuade independent
smallholders who supply it with
ffb to sign up to and adhere to
M.P. EVANS GROUP PLCANNUAL REPORT 2019
STRATEGIC REPORT
OPERATIONS
the RSPO’s Independent Smallholder
Extraction rates in 2019 have increased
larger kernels and less flesh from
Standard (“RISS”). All the Group’s ffb,
from the good levels achieved in 2018.
which to squeeze CPO. This can be
and that of its scheme smallholders,
The Group compares its performance
seen in the increase in the kernel-
are grown to the same high
with other mills in the region and
extraction rate and emphasises the
standards and in a sustainable
remains confident that its mills
good performance in CPO extraction.
way. However, where the Group
continue to perform at a high level
doesn’t have its own mill, it has no
compared with its peers. The
The Group continues to buy fruit
alternative other than to sell its ffb
performance of the mill in Bangka,
from independent smallholders to
to neighbouring third-party mills
at 23.1%, continues at a creditable
utilise spare capacity at all three
that may not be RSPO certified. This
level despite the high and increasing
of its mills. Whilst, as noted above,
results in some of the Group’s CPO
volume of fruit from independent
fruit from independent smallholders
not being certified sustainable. The
smallholders being processed, which
yields significantly less CPO than
percentage of certified sustainable
is not of the same standard as that
fruit from the Group’s own areas or
production will rise as the Group
produced by the Group and its scheme
that of its scheme smallholders, this
constructs its own mills and works
smallholders. Fruit from independent
is reflected in the price the Group
with independent smallholders to
smallholders is predominantly from
pays for it. Hence, purchases of fruit
comply with RISS.
dura palms, which tend to have
from independent smallholders
COSTS
The combined cost per tonne of palm product from the Group’s mills in 2019 was US$345 (2018 US$320). The
main sources of cost pressure was from taking on additional workers into newly-mature areas, in which the
quantity and weight of ffb in the initial months of cropping are relatively low. In addition, during 2019 there
was expenditure associated with diverting harvesters at Kota Bangun to carrying out field work in the face
of lower crops, and enhanced levels of mill maintenance. The Group’s policy is to include all depreciation,
general charges, administrative costs and overheads, including those of its Jakarta office, in its calculation of
cost per tonne. Excluding depreciation and regional overheads reduces the Group’s cost to some US$260 per
tonne of palm product. As overall crop volume continues to grow, unit costs are expected to fall.
Unlike the cost of production using the Group’s own ffb, the cost per tonne of palm product for ffb purchased
from both the Group’s smallholder co-operatives and outsiders varies with the world market price for CPO.
The Group’s aggregate total cost per tonne of palm product, including ffb from all sources, was US$360, a little
higher than the US$340 achieved in 2018 on account of the increase in lower-yielding ffb purchased from
independent smallholders.
Other 11%
Head office
Other
3%
8%
Mill 12%
Labour
Depreciation
Other
4%
4%
4%
Field 77%
Labour
Fertilizer
Depreciation
Other
38%
12%
17%
10%
19
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
STRATEGIC REPORT continued
make an acceptable profit margin
Construction of a second mill, the
notwithstanding the reduction in the
Rahayu mill, at the Kota Bangun
mill’s average rate of extraction their
estates is on schedule to begin
purchase entails. The proportion
commissioning in mid-2020. Civil
PLANTING
Essentially, all of the Group’s new
planting is at Musi Rawas, where
steady progress was maintained.
of ffb bought from independent
works have already begun at the
However, during 2019 the RSPO
smallholders increased at each
site of the planned mill and bulking
adopted a change to its standards
of the Group’s mills. The highest
site at Bumi Mas. The mill here is
affecting any new planting. Currently,
proportion, 36%, is at the Group’s
expected to go into service in the
development at Musi Rawas has
Bangka mill, which currently has the
middle of 2021.
most spare capacity following its
extension to a 60-tonne-per-hour mill
during the second quarter of the year.
MILL-GATE PRICE
The dominant feature of the period
been paused to allow the Group time
to assess the new standards and
ensure that it complies with them. In
the Group’s own areas and in those
was the low CPO and palm-kernel
of its scheme smallholders, planting
The composting and biogas facilities
prices described in the section ‘The
is carried out in rigorous compliance
in Kota Bangun and Bangka are
palm-oil market’ above. The average
with RSPO standards to ensure that
processing all of the empty ffb and
cif Rotterdam price for the period
the fruit will be certified as being
most of the mill effluent at these
was US$566 per tonne, 5% lower
produced sustainably. At the end of
locations. The compost is a valuable
than the US$598 recorded in 2018.
2019, planting since development
nutrient applied in a carefully
Consequently, during 2019, the Group
began at Musi Rawas reached 8,000
controlled and supervised manner
actually received on average
hectares, of which 5,700 were for the
by the Group. The biogas plant
US$471 per tonne of CPO at mill
Group and 2,300 for the scheme
at the Bumi Permai mill at Kota
gate, US$27 less than in 2018. At the
smallholders. In addition, ten hectares
Bangun supplies all of these estates’
same time, the average sustainability
were ready for planting, and land
electricity needs. An extension to the
premium additionally received by
compensation had been paid on a
existing biogas facility at the Bumi
the Group rose slightly from US$6 to
further 1,300 hectares in anticipation
Permai mill was completed towards
US$9 per tonne.
of planting recommencing in the first
the end of 2019 and will begin
half of 2020.
supplying the state electricity
For palm kernels, the Group received
company, PLN, with surplus electricity
US$245 per tonne, very significantly
The Group newly planted
in early 2020. This extension allows
(34%) lower than the US$374 in the
930 hectares for itself and its
the Group to produce electricity
previous year, following a sharp decline
smallholders, of which 670 hectares
from 100% of the mill effluent rather
in the price of palm-kernel oil. The
were for itself. In North Sumatra,
than the 30% processed in the
Group did on average receive US$9
470 hectares were replanted.
original pilot facility, the Group’s
per tonne in the premium available
first. In Bangka, the biogas plant
was designed to process all of the
for kernels sold with sustainability
certificates, although this was
mill’s effluent and the Group has
US$1 per tonne less than in 2018.
been supplying PLN with its surplus
ASSOCIATED COMPANY:
KERASAAN
Crops at Kerasaan were 54,200
tonnes (2018 – 51,700 tonnes). Ffb
electricity since January 2017. During
In total, the Group received some
crops grew strongly in the second
2019, faults developed in the 1.2MW
US$1.9 million in sustainability
and third quarters of the year, before
Siemens-Guascor gas engine used by
premia during 2019, US$0.5 million
tailing off quite sharply in the last
the Group to supply electricity to PLN
more than in 2018. This was due to
two months of 2019. Overall, crop
that were eventually addressed by
persistent demand for oil certified by
finished the year 5% ahead of 2018.
the manufacturer. This led to less
International Sustainability & Carbon
Some 30% of its planting dates from
electricity generation than anticipated
Certification (“ISCC”), which attracts a
the second half of the 1990’s, so a
and some increase in maintenance
higher premium than oil certified by
programme of replanting will begin
costs. At both sites, production of
the RSPO, as well as sales of certified
in the coming years.
power will increase with the volume
oil and kernels from the Group’s
of crop processed by the mills.
expanded Bangka mill.
20
Caption for this picture
PERFORMANCE EVALUATION
The Group uses key performance indicators
at all levels in the Group, both in Indonesia
and in the UK, in assessing its plantation
operations and directing management effort
in supervising those operations.
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.
2018: 50,600 hectares
51,600
HECTARES ,
GROUP AND
SCHEME
SMALLHOLDERS
FFB YIELD PER HECTARE
The rate at which the Group is
able to generate ffb from its
mature planted hectarage is the
most important measure of its
agricultural efficiency.
2018: 19.3 tonnes per hectare
20.5
TONNES PER
HECTARE
FFB CROP
The volume of ffb crop is the
primary determinant of the Group’s
ability to generate CPO and PK
for sale.
2018: 722,600 tonnes
835,400
TONNES
EXTRACTION RATES
The rate at which the Group is
able to convert its ffb into CPO
and PK, quantified as oil- and
kernel-extraction rates, is the
most important measure of its
processing efficiency.
2018: 23.5% oil-extraction rate
23.7%
OIL-EXTRACTION
RATE
COST PER TONNE OF
PALM PRODUCT
The Group’s long-term profitability
depends on its success in minimising
the unit cost of production that is
summarised in this measure.
2018: US$320 per tonne palm
product
US$345
PER TONNE
PALM PRODUCT
STRATEGIC REPORT
OPERATIONS
Plantation and mill operations
Management monitors and assesses the
efficiency of operations with regard to crops
and production using key 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. The most important factor
is a palm’s age. The Group’s average yield
of 20.5 tonnes per hectare reflects the
young average age of its palms. This yield
is higher than in 2018, notwithstanding the
addition of 3,200 newly mature hectares
during the course of 2019. This figure can be
expected to rise in future years. Monitoring
of performance 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, independent verification and advice
is sought. Decisions, such as when and
how to replant, are taken based on local
conditions. Overall, the Group achieved total
crop from its own areas and those of its
scheme smallholders of 835,400 tonnes.
The development of new plantings is
monitored by management, as is the area
to be planted in a given year and the cost
per hectare of that planting. A budget for
planting programmes is set in the previous
year to allow sufficient planting material
to be purchased for the nursery. A high
proportion of planting work is undertaken
by contractors, and management monitors
the progress achieved on the contracted
areas. Planting costs are monitored by
management for each individual estate.
As with other plantation activities, costs
per hectare are influenced by factors such
as the weather pattern, the soil type and
21
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
Young palms at Bumi Mas
22
STRATEGIC REPORT continued
terrain. Ultimately, the total planted
hectarage determines future crop. At
the end of 2019, the Group had reached
51,600 hectares planted for itself and its
scheme smallholders.
With regard to mill production, the
key performance indicators are: the
extraction rate of palm oil and palm
kernels per tonne of ffb; throughput;
and the percentage of free fatty acids,
oil losses, dirt and moisture. Extraction
rates vary according to factors including
the type and quality of planting material,
the age profile of plantings and rainfall.
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 is
monitored by management. An average
oil-extraction rate of 23.7% in 2019,
compares favourably with industry norms
and with mills operating in the same
areas as the Group. Mill construction and
associated infrastructure is undertaken
by contractors. Management monitors
carefully progress achieved against
budget and agreed timetables.
Plantation and mill costs
Management monitors and assesses
the efficiency of plantation costs by
means of performance indicators which
identify field costs per hectare and per
kilogram of ffb, and mill costs per tonne
of palm product. A significant proportion
of costs both in the field and in the mill
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, so the performance indicators
are monitored by management for each
individual estate. The projected increase
in crop is expected to bring down the
US$345 it currently costs the Group to
produce one tonne of palm product.
STRATEGIC REPORT
OPERATIONS
CURRENT TRADING AND PROSPECTS
Crop in the first two months of 2020 is ahead of last year in all regions,
very notably so at Bumi Mas and Musi Rawas, the Group’s youngest areas.
Compared with last year, the Group has also purchased significantly more ffb
from independent smallholders. The Group changed its policy in the middle
of 2019 to purchase more outside fruit, so the rate of growth of outside
purchases will not be sustained for the year 2020 as a whole. At the end of
February, total crop processed was 180,000 tonnes, 47% more than the 122,000
tonnes processed during the first two months of 2019. The details are set out
in the following table:
2 MONTHS ENDED
29 FEB 2020
TONNES
INCREASE
%
2 MONTHS ENDED
28 FEB 2019
TONNES
Own crops
Smallholder crops
Outside crops purchased
107,100
27,500
45,600
180,200
23
27
240
47
87,200
21,600
13,400
122,200
in demand for CPO. In the longer
term, insufficient levels of replanting
in Malaysia and a reduction in new
Indonesian planting are likely to curb
growth in production. Average yield
per hectare for the industry in 2019
stagnated in Malaysia and declined
slightly in Indonesia.
Whilst these benign forces remain
in place, the near-term position has
been clouded by the outbreak of
Covid-19 in China that, at the date
of this report, had spread across
most of the globe. The impact of this
outbreak remains uncertain, but it
has already had a negative effect
on global economic growth and the
short-term demand for palm oil,
The Group’s crop is rising due to the
vegetable-oil supply increases during
which may persist. The CPO price
young age of its palms, an average
2020 failing to match increased
declined during February to a low
of 7 years. This is a consequence of
demand, combined with depleted
of US$640 per tonne, falling a little
the development of its projects in
stock levels compared with recent
further to US$610 at the end of
Bangka and East Kalimantan over the
years. Projections by the respected
March. It is possible that widespread
last ten years and the acquisition of
publication, Oil World, show the level
infection within Indonesia could
Bumi Mas. The upward trend in crop
of palm-oil stocks to consumption
reach the Group’s workforce and
is expected to last until the end of
reaching a multi-year low during
bring with it the possibility that it
the decade. This would be further
the second half of the year. This
could temporarily reduce the Group’s
augmented by the acquisition or
development takes place against a
capacity to harvest or mill ffb and
development of new project areas.
background of tight supply of all the
so reduce the expected growth in
major vegetable oils. To some extent
its production. Notwithstanding the
As reported in the section ‘The
trade in palm oil, and hence demand,
uncertainties surrounding Covid-19,
palm-oil market’ on pages 10 and
is likely to be affected by restrictions
the board is of the view that palm
11, the price of CPO strengthened
placed by India on imports of
oil, because of its high yield and low
considerably in the last two months
refined palm oil from Malaysia,
cost of production, is well placed
of 2019 to finish the year at US$860
although this is more likely to lead
to benefit from increasing demand
per tonne cif Rotterdam. The rise was
to a re-arrangement of trade flows
for vegetable oil and hence that the
prompted by expectations of modest
rather than a net overall reduction
outlook remains encouraging.
23
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
OPERATIONS: MALAYSIAN PROPERTY
MAJORITY-OWNED:
BERTAM ESTATE
The value of Bertam Estate, situated
ASSOCIATED COMPANY:
BERTAM PROPERTIES
The development of residential
in a prime position not far from the
housing and commercial properties
slip road onto the highway heading
was reduced in 2019 as Bertam
to Penang Island, has risen over
Properties paused commencing
many years as development has
new development and successfully
progressed on the neighbouring
undertook initiatives to reduce its
Bertam Properties land. Political
stock of finished properties. At the
uncertainty over the composition
end of 2019, Bertam Properties
of the government continues to
owned 179 hectares of development
affect prospects for the wider
land, including 51 hectares
economy, and so the property and
already under development, and a
financial markets, in Malaysia.
103-hectare golf course. During the
Nevertheless, the board sees
year, work on the new 18-hole course
advantage in selling Bertam Estate
was completed at the Penang Golf
notwithstanding prevailing property
Resort. This was a combination of
market conditions in which current
creating new holes and renovating
values have fallen significantly, in
order to invest the proceeds into its
existing holes from the 36 holes
previously in play before 39 hectares
Indonesian plantations.
of land was transferred to Bertam
Properties for development.
In the meantime, the residual oil-
palm operation on 65 hectares of
During 2019, as a result of its
cultivated land yielded a crop of
initiative to clear its stock, Bertam
1,100 tonnes (2018 – 1,200 tonnes).
Properties sold 461 properties, 70%
The Group has three junior employees
more than in 2018. This led to a
on Bertam Estate and no other
significant increase of MYR28 million,
employees or office space in Malaysia.
or 37%, in property revenue, but this
Administrative and agricultural
was achieved at the cost of a lower
advice and work are carried out by
gross-sales margin. The sales margin
its agent, Straits Estates Sdn Berhad,
on property fell to 21% in 2019 from
and other external service providers.
28% in 2018. No land was sold for
24
STRATEGIC REPORT
OPERATIONS
Bertam Properties show home
25
development during 2019. There
was little sign of recovery in the
Malaysian property market, although
mid-cost residential property, a
strength of Bertam Properties, has
held up better than commercial
property and high-end residential
property. The Penang region too has
proved more resilient than other
regions of Malaysia, but the housing
market remains sensitive to lending
conditions by banks.
The remaining development land
at Bertam Properties continues to
be 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.
Whilst there may be some short-term
downward pressure on the property
market as a result of the political
uncertainty referred to above, the
board expects the value of this land
to continue to appreciate in the
longer term.
RISK MANAGEMENT
The Group regularly considers its principal risks. They are reviewed and assessed by the
audit committee at least annually and reported to the board for approval.
The 2019 review concluded that the principal risks reported in the 2018 annual report remain risks to the Group, and that
no new principal risks have been identified other than in relation to the recent Covid-19 outbreak described below. Set
out below is the board’s evaluation of the principal areas of potential risk. Risks have been classified as being either
specific to the Group or of a general nature. The risk to the Group is described, along with the steps taken to mitigate
that risk. The board regards the principal risk to the Group to be a reduction in the commodity price for CPO.
SPECIFIC RISKS
CORONAVIRUS COVID-19
Demand for the Group’s products
varies to some extent with the
health of the global economy, and
its ability to harvest and process
its ffb fully and efficiently relies
on having a healthy workforce.
The Group assesses that Covid-19
can affect it principally in two ways:
indirectly through the demand
for CPO and PK, and directly
through affecting the health, and
as far as possible, access blocked
the attendant risk that the Group
to external visitors. The Group
will be unable to extract profits
has prepared plans to isolate
from its subsidiaries and associated
individual divisions or estates,
companies in Indonesia.
including stopping all harvesting
and production where this becomes
warranted. Remote working
arrangements are in place in both
the Jakarta and UK offices.
In 2014, a draft law including a
restriction of 30% on foreign
ownership of plantations in Indonesia
was tabled but not enacted. Rather,
a new law mandated the government
Read more in the strategic report
to prioritise domestic investment,
on page 23
INDONESIA COUNTRY RISK
hence capacity, of its workforce.
The Group’s strategy is based
As set out in the general risk on
on maintaining control over its
commodity-price fluctuation below,
plantation assets and identifying
notwithstanding shorter-term
opportunities to expand by
disruption arising from the spread of
acquisition of additional
Covid-19, the Group believes there will
plantation areas.
be continuing strong demand from
the fast-developing economies, such
The Group relies on the continuing
as India, China and Indonesia itself,
ability to acquire and enforce property
as well as from more established
rights in Indonesia. The country has
markets in Europe, for vegetable oil
benefited from a period of political
for human consumption and demand
stability and economic growth.
for vegetable oils as a biofuel.
There is a tendency for nationalist
sentiment to increase during
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 and will,
if necessary, liaise with other
plantation companies and industry
bodies to lobby the government not
to enact such proposals.
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.
Whilst the future impact on
human health of Covid-19 remains
uncertain, the Group has put in
place precautionary measures to
prevent the spread of any infection.
Monitoring of the workforce for
symptoms of the virus has been
established. Travel by the Group’s
staff has been reduced to essential
travel only. Movement on the Group’s
estates has been restricted and,
26
presidential elections, although there
The Group has already obtained
was no sign of this in the lead-up to
the HGU for most of the land it
the 2019 Presidential election that
has developed since it began its
took place in April 2019. In any case,
expansion in 2005. Where the Group
given Indonesia’s significant need for
has not yet received the HGU, it has
infrastructure development and to
obtained the necessary licences
attract inward investment, the board
for these projects, including a valid
continues to perceive a low risk of,
for example, nationalisation or the
right to develop the land (izin lokasi)
and operating licences (izin usaha
imposition of exchange controls, and
perusahan). The Group’s experience
M.P. EVANS GROUP PLCANNUAL REPORT 2019 to strengthen its controls, the Group
of the equity.
has been that renewal of HGUs has
puts a premium on strong supervision
been straightforward, even where
of the Group’s operations. Regular
changes in applicable regulations
written reporting from all its operating
have occurred since the HGUs were
companies is supplemented with
originally issued.
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.
routine telephone contact and
frequent visits by the executive
directors to all areas of the Group’s
operations, including the operations
of associated companies. In order
is putting in place an integrated
operations and accounting software
system which staff will be able
to access from the UK as well as
Indonesia and Malaysia. The Group
has seats on the board of its large
Malaysian associated company and
regularly attends its board meetings,
Operations in Indonesia are
as well as maintaining a dialogue
deemed to be at high risk from the
with its chief executive and senior
threat of bribery and corruption.
management.
The Group has a robust policy on
bribery and corruption, completes
risk assessments and conducts
training of senior management in
Indonesia and Malaysia. It requires
all its business partners to complete
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.
At the Group’s regional office in
Jakarta, the local president director
has 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)
Read more in the strategic report
and Kalimantan.
on pages 12 to 23
SUPERVISION OF OPERATIONS
The business model explains
how the Group controls and
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,
supervises its operations using
health and safety, modern slavery,
expert staff. The Group also uses
anti bribery and social and
key performance indicators (KPIs)
environmental topics.
to monitor plantation operations.
Geographical distance between the
UK head office and its operations
located in Indonesia and Malaysia
See the business model on pages
8 to 9
Read more in the KPIs on pages
21 to 22
STRATEGIC REPORT
RISK MANAGEMENT
RELATIONSHIP WITH LOCAL
PARTNERS
As set out in the business
model, the Group’s strength is
as a producer of sustainable
Indonesian palm oil. The Group
seeks to have a local partner in
each subsidiary with at least 5%
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.
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 any
differences do arise, the Group seeks
to negotiate a mutually acceptable
settlement.
The Group’s business model is on
pages 8 to 9
PROTECTION OF THE
ENVIRONMENT
Sustainable production is a
priority for the Group. Further
information is included in the
section on sustainability and in
the business model
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
27
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
STRATEGIC REPORT continued
RELATIONSHIP WITH LOCAL POPULATIONS
The Group’s business model includes making smallholder
co-operatives a success. Smallholder areas are planted,
maintained and harvested to the same standard as the
Group’s own areas.
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 cause disruption by
blocking roads in order to prevent ffb, 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 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 schemes and to gain the
support of the villages surrounding the Group’s project areas.
This is a time-consuming but effective process.
See the business model on pages 8 to 9
SCHEME SMALLHOLDERS BANGKA
In 2019, each scheme smallholder received a monthly
dividend of IDR 8.2 million, 3 times the average wage.
On average the Group paid scheme smallholders IDR 14.7
million per hectare of land compensation before planting
began.
90 scheme smallholders worked for the Group in 2019 at an
average wage of IDR 3.0 million per month plus benefits such
as housing and healthcare.
28
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 and were revised in 2019
to tighten the definition of ‘forested
areas’. The Group has specialist
RSPO officers, supported by external
consultants, working to ensure the
Group complies with RSPO best
practice. All of its mills have been
accredited by the RSPO. Additionally,
the Group’s Pangkatan mill in North
Sumatra and Bumi Permai mill in East
Kalimantan are certified under the
strict requirements of ISCC.
The Group has a clear policy that only
heavily degraded land will be acquired
and developed. As required under
RSPO principles, high conservation
value and high carbon stock
assessments are undertaken by an
independent consultant for any new
project. Implicit in these studies is
the requirement to maintain riparian-
buffer zones and nature-conservation
areas and to compensate people
cultivating land to be developed in a
fair and transparent way.
The Group has a policy of ‘zero waste’.
It has installed composting systems
at its mills 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 the
effluent is used for composting; the
methane is used 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-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.
The Group began preparing its first
self-standing Sustainability Report
during 2019, which was published
in January 2020 (available on the
Group’s website at www.mpevans.
co.uk). The report set out the Group’s
actions to protect the environment,
demonstrates the benefits of
sustainable palm-oil production
and how it seeks to achieve a
positive economic and social impact
on communities in and around
its areas of operation. The report
also contained detailed annexes
of numerical information on the
Group’s activities that are relevant to
sustainability.
Read more about sustainability:
pages 31 to 37
See the business model on pages
8 to 9
STRATEGIC REPORT
RISK MANAGEMENT
PESTS AND DISEASE
The Group projects a sustained
increase in crop. Productivity
would be affected if palms were
impacted by pests or disease.
GENERAL RISKS
COMMODITY-PRICE
FLUCTUATION
Sales of CPO and PK take place
based on a world market over
which the Group has no control.
This has been considered as part
of the Group’s assessment of
viability.
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
The prices of CPO and PK determine
and husbandry instilled by the
the Group’s revenue and earnings.
Group in its field staff is designed
Fluctuations in the price directly
to identify and prevent these
affect the Group’s reported earnings
attacks from becoming widespread.
and its ability to generate cash
Appropriate agronomic measures are
inflows from its operations.
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 Group relies on its ability to sell
its palm oil, palm kernels and ffb into
a world market over which it has no
control. Palm oil is a permanent tree
crop with ffb being harvested every
More detail about our strategy is
day of the year. Palm oil and palm
on page 12
kernels are sold on an approximately
fortnightly basis by open tender and
ffb 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 a progressive Indonesian export
tax increases the risk in such
contracts given 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
29
and demand for competing vegetable
dry periods or, conversely, heavy
Malaysian Ringgit against the US
oils. These factors can result in
rainfall leading in some locations
Dollar has an effect in US-Dollar
fluctuations in the price. The Group’s
to flooding, can occur. Dry periods,
terms when Malaysian assets are
ability to collect sustainability
in particular, will affect yields in the
translated into US Dollars.
premiums helps to mitigate the
short- and medium-term but any
effect of falling prices. As with any
deficits so caused tend to be made
commodity, over supply does occur
up at a later date. Where appropriate,
in the vegetable-oil market which
bunding is built around flood-prone
exerts downward pressure on prices.
areas and drainage constructed and
The competing oils, the main ones
adapted either to evacuate surplus
of which are soybean, oilseed rape
water or to maintain water levels in
and sunflower, are annual crops and
areas quick to dry out. The Group
producers tend to react to low prices
acknowledges that climate change
by switching to other crops which
could lead to increasing disruption
has, in the past, quickly reduced over
of existing patterns of rainfall and
supply and restored upward pressure
sunshine.
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 is
both difficult to achieve and would
not be cost effective. Surplus
cash balances are largely held in
US Dollars.
Note 31, containing further
details, is on pages 82 to 83
Approved by the board of directors
and signed on its behalf
Tristan Price
Chief executive
31 March 2020
on prices.
The board has taken the view that
The board is satisfied that the
acceptance of weather risk, including
fundamental structure of the
that caused by climate change, is
vegetable-oil market, and particularly
part of the business. It is mitigated
the palm-oil market, is sound.
by the geographical diversity of its
Continuing strong demand from the
operations.
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.
Assessment of viability report
is on pages 46
WEATHER AND NATURAL
DISASTERS
The Group projects a sustained
More details about our strategy
is on page 12
EXCHANGE-RATE FLUCTUATION
The Group’s functional currency
is the US Dollar. Risks associated
with changes in exchange rates
have been assessed by the
board, as set out in note 31 to the
financial statements.
Palm oil is a US-Dollar-denominated
commodity and a significant
proportion of direct costs in
Indonesia (such as fertiliser and
fuel) and development costs (such
as heavy machinery and fuel) are
US-Dollar related. Hence, adverse
increase in crop. Adverse weather
movements in the Indonesian
events may temporarily slow the
Rupiah against the US Dollar can
rate of increase in crop.
have a negative effect both on other
revenue costs in US-Dollar terms
Oil palms rely on regular sunshine
and when Rupiah-denominated
and rainfall but these patterns can
assets are translated into US Dollars.
vary and extremes such as unusual
Similarly, the movement of the
3030
M.P. EVANS GROUP PLCANNUAL REPORT 2019
SUSTAINABILITY
SUSTAINABILITY
APPROACH
APPROACH
The Group’s operational
and financial success in
producing crude palm oil
comes from taking the
right decisions for the
long term.
The Group makes long-term
decisions investing in land, the
environment, its workforce and
the communities in and around
its operations. This approach is
well suited to a robust long-term
asset such as oil palm and aligns
• protecting the environment;
establish a benchmark for future
• demonstrating the benefits of
sustainable palm-oil production;
• having a positive economic
and social impact on local
communities.
reporting and to set expectations
with regard to the future. The Group
will work to provide disclosures to
GRI Standards in the future.
The cornerstone of the Group’s
commitment to sustainability is
Whilst the Group has for many
its membership of the Roundtable
years published a wide range of
on Sustainable Palm Oil (“RSPO”).
information showing its approach
Palm oil is a global commodity
to sustainability, in January 2020
and the Group believes the way to
the Group published its first
make meaningful progress is for
sustainability report. This annual
the industry to commit to a system
report should be read in conjunction
of transparent global rules against
with the sustainability report,
both of which are available to
which performance is rigorously and
independently verified. All three
download from www.mpevans.co.uk.
of the Group’s existing mills have
completely with the thinking required
Information for the sustainability
to make decisions that will lead to a
report was prepared based on
been certified and Group policy is
for any new mills to achieve RSPO
sustainable future for the economy,
society and the environment.
standards published by the Global
certification as soon as practically
Reporting Initiative (“GRI”) that are
possible after commencing
widely used in this sphere. The
operation. In the meantime, all the
The Group has three priority themes
report sets out the Group’s strategy,
estates that will in due course supply
in guiding its operational approach
policies and practices, as well as
Group mills once they are built
to sustainability:
its performance over 24 months to
already comply with RSPO standards.
PROTECTING THE ENVIRONMENT
Concerns about global warming and particularly the destruction of the tropical rainforest have rightly received,
and continue to receive, close scrutiny. The palm-oil industry is one of those associated with cutting down
tropical rainforest and destroying the habitat of endangered species. Oil-palm plantations do not require land
that was previously forest. The Group believes there is plentiful land available to grow sustainable palm oil
that does not require rainforest destruction and that sustainable palm oil can be an important contributor to
building global sustainable agriculture.
In order to protect the environment, the Group minimises the emission of greenhouse gases and has strict
policies to prevent it from being responsible for any deforestation. The sustainability report sets out the
Group’s activity in capturing methane and generating biogas, preventing any burning of land for subsequent
cultivation, the identification and protection of conservation and high-carbon-stock areas, and promoting
biodiversity. The Group has a ‘zero waste’ approach in which all of the waste from our mills is converted into
either biogas or compost which we use to reduce application of inorganic fertilizers. Not only is this good for
the environment; it also reduces the Group’s costs.
31
APPROACH continued
HOW TO PRODUCE CERTIFIED SUSTAINABLE PALM OIL
Start nursery
Negotiate with
local community
over land
compensation
Submit planting
plan to RSPO for
approval
Submit studies to
RSPO for independent
approval
Receive
operating
license
Obtain permission
from government
for agricultural
development
Conduct high-
conservation-value
and carbon stock
studies
32
M.P. EVANS GROUP PLCANNUAL REPORT 2019
Planting declared
mature
Begin
planting
Build mill
Apply to RSPO for
certification
Full RSPO
audit
The Group produces
certified sustainable
palm oil in all its
palm-oil mills.
SUSTAINABILITY
APPROACH
SUSTAINABLE
PALM-OIL
PRODUCTION
Just 19% of all palm oil is currently
RSPO certified. The Group believes
this should increase across the
industry until most, if not all,
palm oil produced is certified as
sustainable. For this to happen
the industry needs to ensure that
ffb are traceable. The biggest
challenge is persuading independent
smallholders, who account for 40% of
all ffb supply, to adopt sustainability
standards. If this can be done, the
amount of certified sustainable
palm oil produced will increase
significantly. The Group is
working to persuade independent
smallholders from which it
buys ffb to commit to producing
their crop in line with the RSPO
Independent Smallholders Standard,
which includes mapping where the
fruit is harvested. Already all the
ffb produced in our own estates
and those of the Group’s scheme
smallholders are fully traceable.
Work is already under way to
establish a system for knowing where
all the ffb the Group processes
originate. It has long-standing
policies and operating procedures to
manage water carefully and prevent
pollution of air, land or water. The
sustainability report sets out how
the Group certifies its production
and how it plans to achieve full
traceability of all the ffb it processes,
as well as how it manages water and
agricultural chemicals.
33
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
APPROACH continued
SUSTAINABLY CERTIFIED CPO OUTPUT
FROM GROUP MILLS
2019
79%
2018
86%
TOTAL ELECTRICITY GENERATED
(MWH)
2019
2018
12,200
9,200
WOMEN IN THE PERMANENT WORKFORCE
2019
27%
2018
25%
INJURIES PER YEAR
PER 100 WORKERS
2019
2018
4.0
2.7
34
COMMUNITIES
Doing the right thing for
the long term naturally
includes doing the
right thing both for the
environment and for the
communities that live on
and around the Group’s
operations.
Yields from independent
smallholder areas are commonly
very significantly less than those
achieved by commercial operators.
If those commercial operations can
share information and techniques
with smallholders in co-operative
schemes and those in the wider
community, they can help them to
improve their yields. Improving the
productivity of their land can help
improve living standards and relieve
Palm-oil estates are often in remote
pressure for further deforestation.
rural locations and are likely to be
the largest source of income in the
area, supporting both families and
the entire community. The estate
and the local communities are to
an extent mutually dependent.
The Group believes it is in its
interests to act both responsibly
and ethically. It works hard to
The sustainability report sets out
how the Group runs award-winning
smallholder co-operative schemes
alongside its estates, promotes
gender equality, works to improve the
education and health of its workforce
and the communities where it
operates and how it is vigilant for
engender goodwill with communities
any sign of modern slavery amongst
to secure a committed and skilled
the firms from which it buys goods
workforce and to maintain efficient
and services.
operations. Palm-oil estates can
act as beacons demonstrating the
value of good governance and
responsible development by setting
high standards in how they treat staff
and workers and in how they work in
partnership with local communities.
SUSTAINABILITY
COMMUNITIES
CASE STUDY
CHILD CARE
Children do not belong in the workplace and should have free access to education.
The Group has provided nursery schooling in our estates for many years, allowing parents to go to work.
At the next stage of children’s education, where there are government schools the Group provides transport to
get students to and from school each day. In places where there are no government schools, the Group builds
primary schools. In 2019, it began construction of its first secondary school, at Kota Bangun.
The Group currently has 13 crèches in which children of any age up to 6 years are properly looked after. The
crèches are equipped with play areas, kitchens, toys, baby cradles and beds. Older children can take part in
supervised games or activities such as reading, singing, and
learning about common animals and plants. The carers are
often women from the local community. These crèches are
free to use for the Group’s workforce.
2020 SUSTAINABILTY REPORT
Setting out the Group’s strategy, policies and practices
In January 2020, the Group published its first sustainability report
covering our activities for the two years up to June 2019.
To read online please visit www.mpevans.co.uk
Or ring 01892 516 333 to obtain a copy
35
COMMUNITIES continued
VEGETABLE
GARDENS
The Group has always
been conscious that
its responsibility
to workers extends
beyond paying them
properly.
The Group supports workers and
their families by providing a good
standard of housing.
In its estates the Group
establishes good co-operative
shops where workers and their
families can buy basic foodstuffs
and the necessities of everyday
life at a reasonable price. In many
places the Group also provides
a weekly bus service to a nearby
market, so that families have the
chance to buy a wider variety of
goods and foodstuffs.
Since 2018, all of the Group’s
housing has a small allotment
attached to them so that every
household can grow fresh
vegetables. Free of any charge to
the workers, the Group provides
seeds, advice and encouragement
as one way to improve their
food security.
36
M.P. EVANS GROUP PLCANNUAL REPORT 2019 SUSTAINABILITY
COMMUNITIES
SUPPORTING OUR COMMUNITIES
SHOP
+
21 co-operative stores
SCHOOL
5 nursery schools
2 primary schools
550 pupils
35 teachers
22 football pitches
22 volleyball courts
10 tennis courts
1 swimming pool
45 mosques
40 imams
4 churches
3 preachers
+
8 doctors
20 nurses and midwives
11 clinics
41,000 patient treatments
13 community halls
COMMUNITY HALL
37
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
REPORT
OF THE
DIRECTORS
38
BOARD OF DIRECTORS
Peter Hadsley-Chaplin
Tristan Price
Matthew Coulson
EXECUTIVE CHAIRMAN
CHIEF EXECUTIVE
FINANCE DIRECTOR
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.
Appointed a director in
2010, chief executive in
June 2016. Previously
worked as a senior UK
diplomat, as an economist
at the Organisation for
Economic Co-operation
and Development (OECD)
and at the Treuhandanstalt
(East German privatisation
agency).
Appointed a director in
2017. Joined the Group as
chief finance officer in 2016
with previous experience
as an audit director of
Deloitte LLP, including
work on companies in the
agricultural sector and in
the technical policy team.
REPORT OF THE DIRECTORS
Jock Green-Armytage
Philip Fletcher
Bruce Tozer
Dr Darian McBain
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE
DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
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.
Retired as managing
director in June 2016,
having been appointed
director in 1987 and
managing director in 1991.
He was executive chairman
between 1999 and 2005.
Former executive director
of Bertam Holdings PLC
and Lendu Holdings PLC.
Joined the Group in 1982
after an initial career in
accountancy with KPMG in
London and Sydney and in
industry with the Rio Tinto
plc group. Member of the
audit committee.
Appointed a director in
2016. Has held senior roles
at Rabobank International,
JP Morgan, and Credit
Agricole. Chairman of
Climate Mundial Ltd (an
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.
Appointed a director in
2020. Global Director
of Corporate Affairs and
Sustainability at Thai
Union. A leading academic
in the field of integrated
sustainability analysis.
She has won awards for
furthering sustainability and
ethics in business. Board
member of not-for-profit
organisation Be Slavery
Free. She has previously
worked with WWF, focusing
on the palm-oil industry.
Member of the audit and
remuneration committees.
39
REPORT OF THE DIRECTORS continued
The directors present the audited consolidated and
Richard Robinow served on the board throughout the
parent-Company financial statements of M.P. Evans
year, retiring on 31 December 2019. Dr Darian McBain
Group PLC for the year ended 31 December 2019.
joined the board on 1 January 2020 and will present
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
A review of the year and future prospects (including the
herself for election as a non-executive director at the
forthcoming annual general meeting. Philip Fletcher,
Bruce Tozer, Matthew Coulson and Jock Green-Armytage
principal risks and uncertainties facing the Company)
will retire from the board at the forthcoming annual
is included in the chairman’s statement (pages 2 to
general meeting in accordance with the articles of
5) and in the strategic report (pages 12 to 30) and is
association and, being eligible, will offer themselves
incorporated in this report by reference.
for re-election.
RESULTS AND DIVIDEND
Details of the profit for the year are given in the
The directors serving at the end of the year, together with
their interests at the beginning and end of the year in the
consolidated income statement on page 56.
shares of 10p each in the Company were as follows:
An interim dividend of 5.00p (2018 – 5.00p) per share in
respect of 2019 was paid on 1 November 2019. The board
At 31 December 2019
BENEFICIAL
OPTIONS
recommends a final dividend of 12.75p (2018 - 12.75p)
P E Hadsley-Chaplin
1,561,717
per share. This dividend will be paid on or after 19 June
2020 to those shareholders on the register at the close
of business on 24 April 2020. This final dividend is not
provided for in the 2019 financial statements.
SHARE CAPITAL
The Company has one class of share. Details of the
issued share capital of the Company are as follows:
T R J Price
M H Coulson
J M Green-Armytage
R M Robinow
P A Fletcher
B C J Tozer
At 1 January 2019
50,000
1,500
—
96,147
1,048,171
—
Issued (fully-paid and voting)
at 1 January 2019
Issued in respect of options exercised
Bought back and cancelled
Issued (fully-paid and voting)
at 31 December 2019
SHARES OF
10P EACH
54,677,872
50,000
266,652
54,461,220
P E Hadsley-Chaplin
1,561,717
T R J Price
M H Coulson
J M Green-Armytage
R M Robinow
P A Fletcher
B C J Tozer
50,000
1,500
—
96,147
1,048,171
—
—
161,678
22,490
—
—
—
—
—
153,406
16,664
—
—
—
—
During the year, the Company bought back and cancelled
are disclosed in the directors’ remuneration report, on
266,652 (2018 – 280,579) 10p shares for a total cost of
pages 48 to 50.
Further details of the directors’ interests in share options
US$2,286,000 (2018-US$2,733,000), representing 0.5%
(2018 - 0.5%) of the Company’s issued share capital, as
the board considered that the share price undervalued
the Group’s assets and that purchases would enhance
earnings.
DIRECTORS AND DIRECTORS’ INTERESTS
The present membership of the board is detailed on
pages 38 and 39. All of these directors, other than Dr
None of the directors holds any beneficial interest
in, or holds options to buy shares in, any subsidiary
undertaking of the Company as at the date of this report.
No director has had a material interest in any contract
of significance in relation to the business of the
Company, or any of its subsidiary undertakings, during
the financial year or had such an interest at the end of
Darian McBain, served throughout the year and up to the
the financial year.
date of signing of these financial statements. In addition,
40
M.P. EVANS GROUP PLCANNUAL REPORT 2019
REPORT OF THE DIRECTORS
As permitted by the Company’s articles of association,
there was throughout the year to 31 December 2019,
SUBSIDIARY COMPANIES
Details of the Group’s subsidiary companies, including
and is at the date of this report, a qualifying third-
their country of operation, are given on page 90.
party indemnity provision, as defined in section 234 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:
KL-Kepong
International Ltd
Standard Life
Aberdeen plc
Nokia Bell
Pensioenfonds ofp
MM Hadsley-Chaplin
NATURE
SHARES
%
Direct
11,127,286
20.45
Indirect
6,443,787
11.84
Direct
Direct
5,862,422
10.78
1,928,254
3.54
OUTSTANDING OPTIONS TO SUBSCRIBE
As at the date of this report, there were options to
subscribe for 175,000 shares outstanding under the
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN
RESPECT OF THE FINANCIAL STATEMENTS
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 statements 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
executive share-option schemes, and options to subscribe
and fair view of the state of affairs of the Group and
for 241,915 shares outstanding under the 2017 long-term
the Company and of the profit or loss of the Group and
incentive scheme. If all of the options were exercised, the
Company for that period. In preparing these financial
resulting number of shares would represent (a) 0.76%
statements, the directors are required to:
of the enlarged issued share capital at that date; and (b)
0.84% 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
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
be purchased and held in treasury).
reasonable and prudent;
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 2019 amounted to 50 days
• 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; and
(2018 - 39 days). The increase was due to the timing of
• prepare the financial statements on the going-concern
payments to suppliers around the year end. However,
basis unless it is inappropriate to presume that the
the Group continues to ensure that payables are settled
Company will continue in business.
within agreed terms.
FINANCIAL INSTRUMENTS
Details of the Group’s financial instruments, and the
accounting records that are sufficient to show and explain
the Group and Company’s transactions and disclose with
board’s policy with regard to their use, are given in note
reasonable accuracy at any time the financial position
31 to the consolidated accounts on pages 82 and 83.
of the Company and the Group and enable them to
The directors are responsible for keeping adequate
41
REPORT OF THE DIRECTORS continued
ensure that the financial statements and the directors’
remuneration report comply with the Companies Act
GOING CONCERN
The Group’s operations are funded through a
2006. They are also responsible for safeguarding the
combination of cash resources, loan finance, and long-
assets of the Company and the Group, and hence for
term equity. The board has undertaken a recent review of
taking reasonable steps for the prevention and detection
the Group’s financial position, including forecasts, risks
of fraud and other irregularities.
and sensitivities (including an assessment of the impact
of Covid-19). The review has considered the Group’s
The directors are responsible for the maintenance
plans for further development in Indonesia, along with
and integrity of the Company’s website. Legislation in
the required funding for that development. Based on
the United Kingdom governing the preparation and
that review, the board has concluded that the Group is
dissemination of financial statements may differ from
expected to be able to continue in operational existence
legislation in other jurisdictions.
for the foreseeable future, being at least the next 12
months from the date of approval of these financial
In the case of each director in office at the date the
statements. As a result, the board has concluded that
report of the directors is approved:
the going-concern basis continues to be appropriate in
• so far as the director is aware, there is no relevant
audit information of which the Group and parent
Company’s auditors are unaware; and
preparing the financial statements.
INDEPENDENT AUDITORS
BDO LLP were appointed as the Group’s auditors in
• they have taken all the steps that they ought to have
2019 following a formal tendering process at the end of
taken as a director in order to make themselves aware
PricewaterhouseCoopers LLP’s term in office. A resolution
of any relevant audit information and to establish that
to appoint them will be proposed at the forthcoming
the Group and parent Company’s auditors are aware of
annual general meeting.
that information.
Approved by the board of directors and signed
by its order
Katya Merrick
Company secretary
31 March 2020
42
M.P. EVANS GROUP PLCANNUAL REPORT 2019 REPORT OF THE DIRECTORS
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
The board has formally adopted the Quoted Companies Alliance Corporate Governance Code (“QCA Code”) published in
2018 as its recognised corporate governance code. The board is committed to following the principles set out in the
QCA Code, to disclose and report on the corporate-governance structures and processes operated by the Group and to
develop these further to continue to meet the appropriate standards. An explanation of how the Group has applied
the principles, including an index of corporate governance disclosures, is included on the Group’s website
(www.mpevans.co.uk).
The chairman’s statement on corporate governance is set out below.
The board recognises the importance of a sound
Each board member invested a significant amount of
system of corporate governance and internal control.
time in answering a series of structured questions.
In some respects, the Group’s corporate governance is
A consolidated report of these assessments was
more developed than required under the QCA Code, the
considered by the board and actions in response to
Group’s recognised corporate governance code.
it were agreed. The retirement of Richard Robinow
The board is made up of three executive directors and
four non-executives. This structure is designed to ensure
that there is a clear balance of responsibilities between
the executive and the non-executive functions. As
chairman I am primarily responsible for setting the
Group’s strategy in conjunction with the board, and for
ensuring the effective operation of the board. This
includes making sure the board continues to develop its
corporate governance in response to changes in official
standards and public expectations through full and
timely discussion at board meetings. Board evaluation
and a review of corporate governance will take place at
from the board at the end of 2019 after many years
of valuable service, meant that further consideration
was given to what skills and attributes would enhance
the composition of the board. Given the Group’s focus
on producing sustainable palm-oil the directors were
delighted that Dr Darian McBain, both an experienced
independent corporate director and senior academic
specialising in sustainability and ESG, accepted an
appointment to the board as a non-executive director.
She will be able to provide valuable perspective in these
increasingly significant areas. The next board evaluation
is scheduled to take place in the first quarter of 2021.
least every two years, although the corporate governance
Effective risk management, and acknowledging the role
information on our website is reviewed annually.
that stakeholders play in our Group’s operations, are
A good system of corporate governance is of no use
without a board whose members continue to develop
their skills and capabilities. Our board members
have extensive experience and remain professionally
active and motivated to broaden their knowledge. All
directors have the opportunity to attend seminars
and formal training courses; they keep in touch with
relevant developments through discussion amongst
their business and professional contacts; and they read
relevant trade and other professional publications. This
activity is recorded by the Group’s company secretary,
central to our success. We believe compliance with the
QCA Code provides a valuable support in strengthening
our ability to grow and so deliver returns to our
shareholders that also benefits our wider stakeholders.
The Group sees ethical behaviour as a competitive
advantage to building trust with suppliers and attracting
and retaining high-performing staff. This too is
emphasised in the QCA Code. Finally, the Group operates
in a sector where timelines are long and hence where
there is a premium on boards in which shareholders can
place their long-term trust.
who recommends appropriate seminars and training
There have been no significant changes to the Group’s
opportunities to directors.
The board conducted the first formal evaluation of itself
during the first quarter of 2019. This was conducted
internally, led by me and supported by the company
corporate governance framework during the year other
than widening the scope of the remuneration committee
to include the remuneration of senior management as
well as that of executive directors.
secretary. Its design drew on an independent framework
Peter Hadsley-Chaplin, Chairman
and recommended questions assessing the nature
31 March 2020
and performance of the board and its committees.
43
CORPORATE GOVERNANCE continued
OPERATION OF THE BOARD
Directors
decisions of the Company are made in the United
Kingdom. The executive and non-executive directors
Details of the Company’s board, together with those of
discuss progress against budgets and other business
the audit and remuneration committees, are set out on
issues, both during board meetings and at other times.
pages 38 and 39. The board comprises an executive
chairman, working on a part-time basis, two further
The board has access to independent professional
full-time executive directors and four non-executive
advice at the Group’s expense when the board deems
directors, one of whom chairs the audit and remuneration
it necessary in order for them to carry out their
committees. The maximum number of directors permitted
responsibilities. Currently, the board retains Peel
under the articles of association is eight.
Hunt LLP as the Company’s nominated adviser. The
board additionally receives advice from independent
This structure is designed to ensure that there is a clear
professionals on legal matters, corporate public relations,
balance of responsibilities between the executive and
taxation, and valuation of the Group’s property assets.
the non-executive functions. Non-executive directors
The company secretary provides support on matters of
are expected to contribute two to three days’ service
corporate governance.
per month to the Company, including attendance at
board meetings and the AGM. The board meets at least
Independence and re-election of long-serving directors
quarterly and is provided with information at least
During the year, the board has sought to maintain a
monthly. It receives operating summaries, executive
balance of executive and non-executive directors. A
operating reports, management accounts and budgets.
description of the roles and responsibilities of the
All of the executive directors and non-executive directors
directors is set out on pages 38 and 39. More than half
attended each of the nine full board meetings held in
of the directors are non-executive and, in accordance
2019, with the exception of Matthew Coulson who was
with the QCA Code, two of the non-executives serving
excused from the meeting held on 26 June 2019 and Jock
during 2019, Jock Green-Armytage and Bruce Tozer, were
Green-Armytage who was unable to attend the meeting
independent. The appointment of Darian McBain at the
held on 10 December 2019.
beginning of 2020 increases the number of independent
non-executive directors to three.
The board as a whole is collectively responsible for the
success of the Company. The personal attributes of each
The board considers that Richard Robinow, who served
of the directors facilitates rigorous but constructive
throughout 2019, contributed valuable technical and
debate, informed and considered decision making and
operational experience in the palm-oil industry, having
effective monitoring of progress in achieving the Group’s
been in senior roles in a number of related businesses.
strategic objectives. It promotes a culture founded on its
Jock Green-Armytage also brings significant industry
values of integrity, teamwork and excellence. Members
knowledge as well as experience in both corporate
of the board lead by example during their frequent visits
to operations and interactions with staff. Remuneration
finance and corporate governance, as well as chairing
FTSE-listed companies. Bruce Tozer’s background is in
of all staff rewards those who display these behaviours;
commodity finance, environmental markets, and agri-
access to the Group’s long-term incentive scheme is
business project finance, including palm oil, contributing
likewise offered to senior staff who qualify on grounds
insight from the finance sector. Philip Fletcher, as
of length of service and promote the Group’s values. The
former managing director and finance director of the
Group dismisses staff found to have breached the value
Group, has extensive specific knowledge of both the
of integrity.
sector, operations in Indonesia and the finances of the
Group. As well as general corporate experience through
The board reserves to itself a range of key decisions
her directorships in a South-East-Asian-based global
(which can be found at www.mpevans.co.uk) to ensure
seafood producer, Darian McBain has a special interest
it retains proper direction and control of the Company,
in sustainable food production and ESG issues and the
whilst delegating authority to individual executive
board will benefit from her recognised knowledge and
directors who are responsible for the day-to-day
experience in these fields.
management of the business. All major and strategic
44
M.P. EVANS GROUP PLCANNUAL REPORT 2019 REPORT OF THE DIRECTORS
CORPORATE GOVERNANCE
The board has an executive chairman, Peter Hadsley-
questionnaires for the Group bodies of which they were
Chaplin. Given the time that he has served the Company
a member. Separate questionnaires were distributed and
both as a director and chairman, as well as the size of
completed by the:
his shareholding in the Company, he is not considered
independent.
• whole board;
• audit committee;
Each executive director, and non-executive director
with less than nine years’ tenure, retires and must seek
• remuneration committee;
re-election at least every three years. Non-executive
• non-executive directors.
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.
Directors’ remuneration and appointment
As set out in the report on pages 48 to 50, 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 2019 comprised
Jock Green-Armitage, Richard Robinow and Bruce Tozer,
met twice and all meetings were attended by all members
of the committee.
The Company does not currently have a nominations
committee. Any new appointments to the board are
The results of these questionnaires were analysed by
the company secretary. Whilst no category covered in the
questionnaires returned a low score, the board assessed
its best performing area to be its work on strategy. The
full board discussed the outcome of the evaluation and
agreed some actions in response to it. During the year
the board has reviewed how items qualify for inclusion
on the board agenda; reviewed and changed delegation
from the board to its committees; reviewed stakeholder
identification; and disclosed more about the board’s mix
of skills and experience. It continues to work on formal
recording of risk appetite; how to intensify monitoring
anti-bribery and corruption efforts; and will set the
frequency of external reviews of internal audit.
discussed at a full board meeting, taking into account
Relations with shareholders
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 before an
appointment is made.
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. It is considered that the board
would be robust to any unplanned retirements and be
able to recruit suitable, well-qualified, candidates within a
The board attaches great importance to communications
with both institutional and private shareholders. The
executive directors regularly meet shareholders to
update them on the progress of the Group and discuss
any areas of concern that they may have. At other
times the executive directors respond to questions
they receive from shareholders. Any issues raised by
major shareholders are discussed by the board as a
whole. Whilst this is not always possible with smaller
shareholders, the chairman personally responds to
communications received from individuals, and the
annual general meeting provides an opportunity for
reasonable time period. Any recruitment of new members
smaller shareholders to meet executive and non-
to the board takes into account the board’s assessment
of its composition and the skills and experience required
in the board successfully to formulate and execute Group
strategy.
executive members of the board, to raise any issues and
discuss the development of the business with them.
Many of the Group’s smaller shareholders have become
personally known to the directors through their many
years of regular attendance at the Company’s AGMs.
Board performance evaluation
The board undertook a performance evaluation during
the first quarter of 2019. This was an internal evaluation
drawing on material purchased from a professional
adviser. Each director was asked to complete the
The board uses the Group’s website (www.mpevans.
co.uk) to make available details of the AGMs, the results
of the votes cast at those meetings, and reports and
presentations given at meetings with investors.
45
CORPORATE GOVERNANCE continued
ACCOUNTABILITY
Financial reporting
A detailed review of the performance and financial
has concluded that projections should be prepared, and
therefore viability considered, over a 10-year period.
position of the Group is included in the chairman’s
At the year end, the Group held cash and other liquid
statement and the strategic report. The board uses these
funds of US$27.1 million. Furthermore, as disclosed
and the report of the directors to present a balanced and
in note 22, at the year end the Group had available
understandable assessment of the Group’s position and
undrawn finance facilities of up to US$34.6 million. The
prospects. The directors’ responsibility for the financial
Group’s plans for further development of its Indonesian
statements is described on pages 41 and 42 of the report
operations have been taken into consideration, as set out
of the directors.
Risk management
in the strategic report, including development of existing
projects, investment in new hectarage, and appropriate
financing where necessary.
The directors acknowledge their responsibilities for the
Group’s system of risk management. Such a system can
Principal areas of risk, and their mitigation, are included
provide reasonable, but not absolute, assurance against
in the section on risk management on pages 26 to 30.
material misstatement or loss. A review of the process of
As noted, whilst legislative changes in Indonesia could
risk identification, evaluation and management is carried
adversely impact on the viability of the Group in its
out and reviewed by the audit committee. The committee
current form, the board monitors the situation carefully
considers the Group’s principal risks, and a summary is
and considers the risk to be low. Financially, the main risk
presented to the board for discussion and approval. The
to the Group’s results is commodity-price fluctuation, and
review process considers the control environment and
as has been demonstrated, the Group is able to continue
the major business risks faced by the Group. In summary,
delivering returns even during periods of lower crude-
this is reported on pages 26 to 30.
palm-oil prices.
Important control procedures, in addition to the day-to-
The Group’s prospects remain sound, in particular
day supervision of parent-Company business, include
given the young average age of its palms, at a little over
regular executive visits to the areas of operation of the
seven years. An upward trend in crop is expected to last
Group and of its associates, comparison of operating
until towards the end of the next decade. Given these
performance and monthly management accounts with
prospects and the resources available to the Group, the
plans and budgets, application of authorisation limits,
board intends, where possible, to maintain or increase,
internal audit of subsidiary undertakings and frequent
normal dividends in future years from their current levels.
communication with local management. Internal audit
is subject to periodic external review. A board visit,
In light of the above, the board has not identified any
including both executives and non executives, to the
significant concerns regarding the Group’s longer-term
Jakarta office and the Bangka estates took place in
October 2019.
viability.
Going concern
AUDIT COMMITTEE REPORT
The audit committee is formally constituted with written
The board has assessed and concluded on the going-
terms of reference (which are available on the Company’s
concern status of the Group, and further information is
website www.mpevans.co.uk) and is chaired by Jock
included in the directors’ report on page 42.
Green-Armytage. The other members are Bruce Tozer
Viability
and Philip Fletcher, who served throughout the year, and
Darian McBain who was appointed to the committee on
The board considers the Group’s longer-term viability
9 January 2020. Richard Robinow served on the audit
on a regular basis. In order to do this, both short-term
committee throughout 2019 until his retirement from
budgets and longer-term projections are prepared and
the board on 31 December 2019. The executive directors
reviewed by the board. Due to the long-term nature of
are not members of the committee but can be invited to
the industry within which the Group operates, the board
attend its meetings. The auditors of the Group may also
46
M.P. EVANS GROUP PLCANNUAL REPORT 2019 REPORT OF THE DIRECTORS
CORPORATE GOVERNANCE
attend part or all of each meeting and they have direct
of the Group auditors’ engagement and agreed the
access to the committee for independent discussions,
significant risks for the audit of the 2019 results. The
without the presence of the executive directors. The
external auditors have provided only audit services during
committee met six times during 2019 and each meeting
the current year. Accordingly, the board does not consider
was attended by all of the members. The external
there to be a risk that the provision of non-audit services
auditors attended two of the meetings.
may compromise the external auditors’ independence.
The audit committee may examine any matters relating
To assess the effectiveness of the auditors, the committee
to the financial affairs of the Group or the Group’s
will review their fulfilment of the agreed audit plan and
audit; this includes reviews of the annual accounts and
variations from it, and the auditors’ report on issues
announcements, accounting policies, compliance with
arising during the course of the audit.
accounting standards, reviewing the Group’s principal
risks, the appointment of and fees of auditors and such
Financial reporting and review of financial statements
other related matters as the board may require.
The committee is able to ensure it has a full
During the year the audit committee has:
receipt of regular financial and operational reporting,
understanding of business performance through its
• 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;
• assessed critical accounting judgements and key
estimates made during the year;
• considered and approved the Group’s risk analysis;
• reviewed the quality and effectiveness of the external
audit; and
• conducted and concluded a formal tender process for
the Group external audit appointment.
Auditors
Current policy is to tender the external audit at least
every ten years. Accordingly, during 2019 the board
its review of the budget and long-term plan and its
discussion of key accounting policies and judgements. It
has specifically addressed the:
• accounting treatment for the acquisition of shares in
the Group’s Indonesian subsidiaries;
• ongoing validity of deferred-tax assets held by the
Group in relation to losses, particularly in light of
Indonesian tax rules;
•
impact of new and revised accounting standards on
the Group’s financial reporting;
• Group’s equity valuation, as disclosed in the annual
report; and
• ongoing validity of key judgements in the financial
statements. The committee considered the judgements
that deferred tax should not be provided on
unremitted earnings of subsidiaries and associates,
and the judgement that depreciation should not be
provided on leasehold land, and concluded that both
appointed BDO LLP as the Group’s external auditors.
remained appropriate.
It adopted the recommendations of the audit committee
following a formal tender process which considered the
After reviewing presentations and reports from
2017 FRC recommendation on audit tenders. The audit
management and consulting with the auditors, the audit
partner changes at least every five years in accordance
committee is satisfied that the financial statements
with professional and regulatory standards in order to
properly present the critical judgements and key
protect independence and objectivity, with Anna Draper
estimates for both the amounts reported and relevant
the audit partner for the 2019 audit.
disclosures. The committee is also satisfied that the
significant assumptions used for determining the value of
The audit committee meets the external auditors to
assets and liabilities have been appropriately scrutinised,
consider audit planning and the results of the external
challenged and are sufficiently robust.
audit. The committee specifically considered the scope
47
DIRECTORS’ REMUNERATION REPORT
REMUNERATION COMMITTEE
The remuneration committee, which is formally
executive directors and annual awards of fully-paid
shares to senior staff other than directors. The award of
constituted with written terms of reference (available on
fully-paid shares has the advantage of being substantially
the Company’s website at www.mpevans.co.uk), keeps
less dilutive than market-priced share options, whilst
under review the remuneration and terms of employment
continuing to provide an adequate level of incentive to
of the executive directors and recommends such
the recipient.
remuneration and terms to the board. The committee
comprised Jock Green-Armytage, Richard Robinow and
The long-term incentive for executive directors is through
Bruce Tozer throughout 2019, and is chaired by Jock
the award of fully-paid share options under the deferred-
Green-Armytage. Darian McBain was appointed to the
bonus policy described above. No additional performance
remuneration committee on 9 January 2020.
criteria attach to the deferred-bonus awards since the
original bonus will have been performance-related.
SERVICE CONTRACTS
All of the executive directors have service contracts with
In respect of senior staff who are not directors, the Group
the Company. These contracts continue until terminated
aims annually to give a limited number of fully-paid
by either party giving not less than one year’s notice in
shares which vest after three years subject to continued
writing. The non-executive directors do not have service
employment by the Group. This is designed to retain
contracts or provisions for pre-determined compensation
valued individuals in a growing and competitive sector.
on termination of their appointment.
No performance criteria attach to these awards.
REMUNERATION POLICY
The Group’s remuneration committee recognises
EXECUTIVE DIRECTORS
When determining the remuneration of the executive
that the Group’s success depends, in part, on the
directors, the remuneration committee considers the pay
performance of the directors and senior management
and conditions across the Group, particularly those of
and the importance of ensuring that employees are
the senior management of the operations in Indonesia.
incentivised. Its philosophy is to offer a transparent and
The Group aims to provide remuneration packages for the
simple remuneration package to the executive directors,
directors and senior management which are a fair reward
comprising a salary and a bonus related to current
for their contribution to the business, having regard
results and personal performance (including significant
to the complexity of the Group’s operations and the
additional contribution in terms of time and expertise).
need to attract, retain and motivate high-quality senior
Half of the bonus is payable in cash and half is deferred
management. Remuneration packages are designed to
into an award of fully-paid shares which vest three years
be broadly comparable with those offered by similar
after their grant, subject to continued employment by the
businesses, such as European plantation and AIM-listed
Group. This structure for remuneration is designed to be
companies.
easily understood by both executives and shareholders.
It aims to encourage the executive directors to work
Non-pensionable bonuses may be awarded annually in
collegiately, focus their efforts on making decisions that
arrears at the discretion of the committee, taking account
are in the Group’s best long-term interests, and, to some
of the Group’s performance during the period and other
extent, share in the benefits that accrue to shareholders
targeted objectives. Bonuses do not exceed twelve
from a higher future share price. This avoids the need
months’ salary, half payable in cash and half deferred
for complex performance measures and the risk that
into an award of fully-paid shares which vest three years
numerical targets encourage behaviour that sacrifices
after their grant, subject to continued employment by the
long-term growth potential in favour of short-term
Group (as described above). The bonus in respect of 2019
results.
took into account the processing, for the first time of
over 1 million tonnes of ffb. The remuneration committee
LONG-TERM INCENTIVE SCHEME
The long-term incentive scheme established in 2017
noted achievements by the executive directors such as
the purchase of shares from a minority partner in the
governs the grant of both deferred-bonus awards to
Group’s operating subsidiaries at an attractive price, the
48
M.P. EVANS GROUP PLCANNUAL REPORT 2019 REPORT OF THE DIRECTORS
DIRECTORS’ REMUNERATION REPORT
TOTAL DIRECTORS’ REMUNERATION FOR THE YEAR ENDED 31 DECEMBER 2019
SALARY
AND FEES
£
BONUS
PAID
£
1BONUS
DEFERRED
£
OTHER
BENEFITS
£
SALARY
IN LIEU OF
PENSION
£
2PENSION
COSTS
£
TOTAL
REMUNERATION
2019
£
TOTAL
REMUNERATION
2018
£
Executive directors
P E Hadsley-Chaplin
180,900
T R J Price
M H Coulson
301,300
212,200
33,919
56,494
39,788
—
56,494
39,788
29,527
42,333
29,414
694,400
130,201
96,282
101,274
27,819
24,308
14,521
66,648
—
10,000
10,000
20,000
272,165
490,929
345,711
263,193
919,116
336,004
1,108,805
1,518,313
Non-executive directors
J M Green-Armytage
R M Robinow
P A Fletcher
B C J Tozer
39,700
34,000
34,000
34,000
141,700
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
39,700
34,000
34,000
34,000
38,500
33,000
33,000
33,000
141,700
137,500
Total
836,100
130,201
96,282
101,274
66,648
20,000
1,250,505
1,655,813
1. In line with Group remuneration policy, half of the bonuses for the year to Mr T R J Price and Mr M H Coulson (being 4.5 months’
salary) have been deferred into an award of options over fully-paid shares of equal value which vest after three years subject to
continued employment by the Group.
2. The pension costs for Mr T R J Price and Mr M H Coulson are the contributions made by the Company to Company-sponsored self-
invested personal pensions.
The annual ratio for total compensation of the chief executive in relation to the median of Group’s UK payroll excluding
this individual was 3.9 in 2019. The equivalent ratio for the percentage increase in annual total compensation was 0.2.
introduction of a new Indonesian partner, completion of
Options which were previously granted under the 2012
the first four phases of the Kota Bangun bunding project,
scheme give the chief executive the right to purchase
and management of a thorough tender for the Group’s
shares on a future date at the market price of the shares
external audit. The absolute value of these measures
on the date that the options are granted. As such, the
was assessed, as was their outturn against expected
value of any option is closely tied to the performance of
performance.
NON-EXECUTIVE DIRECTORS
The fees of the non-executive directors are determined by
the Group as reflected in its share price. There will be no
gain on exercise unless the share price on the exercise
date exceeds the share price on the date the options
were granted. On 31 December 2019, options over 125,000
the board having regard to the complexity of the Group’s
(2018 – 125,000) shares granted to him under this scheme
operations and the need to attract, retain and motivate
remained outstanding. During the year, no options were
high-quality non-executive directors and the level of fees
exercised (2018 - 75,000) and none (2018 – none) lapsed.
paid for similar roles in equivalent companies.
EXECUTIVE SHARE-OPTION SCHEMES
During 2019, the chief executive was a member of the
executive share-option scheme which was established
The chief executive and finance director are members
of the long-term incentive scheme established in 2017
described above, under which half of any discretionary
bonus is deferred into options over fully-paid shares.
in 2012. The remuneration committee does not intend to
Under this arrangement options on 14,098 fully-paid
grant any further share options under that scheme.
shares were awarded in 2019 (2018 – 20,390), representing
49
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
DIRECTORS’ REMUNERATION REPORT continued
half of the bonus awarded to these individuals in
assurance company give the executives a pension at
respect of 2018.
retirement, a pension to a spouse payable on death
whilst in the employment of the Company, and life-
No options are held by either the chairman or non-
assurance cover based on a multiple of salary. No
executive directors.
element of a director’s remuneration package, other than
basic salary, is pensionable. Individuals may elect to forgo
At 31 December 2019 the middle-market quotation for
contributions to the SIPP, in which case they receive an
the Company’s shares, as derived from the London Stock
additional salary paid in lieu of the employer’s pension
Exchange Daily Official List, was 726p, as compared with
contributions at the same cost to the Company.
the high and low quotations for the year of 750p and 612p
respectively.
Approved by the board of directors and
signed by its order
PENSIONS
The Company sponsors self-invested personal pensions
Katya Merrick
(“SIPPs”) for the UK executive directors. Contributions
Company Secretary
made by the Company to the SIPPs and to a life-
31 March 2020
OPTIONS HELD OVER SHARES OF THE COMPANY BY THE EXECUTIVE DIRECTORS
DURING THE YEAR ENDED 31 DECEMBER 2019
BALANCE
AT 1 JAN
2019
GRANTED
IN THE
YEAR
EXERCISED
IN THE
YEAR
BALANCE
AT 31 DEC
2019
EXERCISE
PRICE
PENCE
DATE FROM
WHICH
NORMALLY
EXERCISABLE
DATE OF
GRANT
EXPIRY
DATE
Executive share-option scheme
T R J Price
Total
50,000
5,750
44,250
25,000
125,000
Long-term incentive scheme
T R J Price
M H Coulson
Total
16,347
12,059
—
28,406
8,333
8,331
—
16,664
45,070
—
—
—
—
—
—
—
8,272
8,272
—
—
5,826
5,826
14,098
483.21
520.00
510.00
410.50
19 Jun 12
19 Jun 15
19 Jun 22
17 Jan 13
17 Jan 16
17 Jan 23
17 Jan 13
17 Jan 16
17 Jan 23
13 Jun 16
13 Jun 19
13 Jun 26
0.00
0.00
0.00
0.00
0.00
0.00
8 Jun 17
3 Apr 20
2 Apr 27
12 Jan 18
12 Jan 21
11 Jan 28
11 Jan 19
11 Jan 22
10 Jan 29
8 Jun 17
3 Apr 20
2 Apr 27
12 Jan 18
12 Jan 21
11 Jan 28
11 Jan 19
11 Jan 22
10 Jan 29
—
—
—
—
—
—
—
—
—
—
—
—
—
—
50,000
5,750
44,250
25,000
125,000
16,347
12,059
8,272
36,678
8,333
8,331
5,826
22,490
59,168
50
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT
To the members of M.P. Evans Group PLC
Report on the audit of the financial statements
OPINION
We have audited the financial statements of M.P. Evans
BASIS FOR OPINION
We conducted our audit in accordance with International
Group PLC (the ‘Parent Company’) and its subsidiaries
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
(the ‘Group’) for the year ended 31 December 2019
Our responsibilities under those standards are further
which comprise the Consolidated Income Statement,
described in the Auditor’s responsibilities for the audit
Consolidated Statement of Comprehensive Income,
of the financial statements section of our report. We
Consolidated and Parent-Company Balance Sheets,
are independent of the Group and the Parent Company
Consolidated and Parent-Company Statements of
in accordance with the ethical requirements that are
Changes in Equity, Consolidated Cash Flow Statement and
relevant to our audit of the financial statements in the
notes to the financial statements, including a summary of
UK, including the FRC’s Ethical Standard as applied to
significant accounting policies.
listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The financial reporting framework that has been applied
We believe that the audit evidence we have obtained is
in the preparation of the Group financial statements is
sufficient and appropriate to provide a basis for
applicable law and International Financial Reporting
our opinion.
Standards (IFRSs) as adopted by the European Union.
The financial reporting framework that has been applied
in the preparation of the Parent-Company financial
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following
statements is applicable law and United Kingdom
matters in relation to which the ISAs (UK) require us to
Accounting Standards, including Financial Reporting
report to you where:
• the directors’ use of the going-concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
• the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s or the
Parent Company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 31 December 2019 and of the Group’s profit
for the year then ended;
• the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
51
INDEPENDENT AUDITORS’ REPORT continued
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE
AUDIT
Valuation of biological assets (note 3 and 17)
Our audit work included, but was not restricted to, the
The Group’s accounting policy in relation to
biological assets is included within note 3 and
further explained in note 17.
The unharvested fresh fruit bunches (‘FFB’) on the
bearer plants at the year end fall within the scope
of IAS 41 Biological Assets and are therefore held at
fair value less costs to sell determined on the basis
following:
We assessed the key inputs and assumptions in the calculation
being:
• production data – agreed to internal production reports for
January 2020 over which we performed analytical review
procedures, considering the reasonableness of current year
production against prior year production for the same period
of the net present value of expected future cash
• average growth rate – agreed to externally published
flows arising in the production of FFB. Management
research papers
exercise significant judgement in determining the
method to be applied in determining fair value
as well as in the underlying assumptions used in
• selling price – agreed to sales price achieved in December
2019, independently verified by the component audit team.
the calculation. These assumptions include the
• costs to sell – agreed to internal cost data for December 2019
estimation of the weight of unharvested FFB at the
independently verified by the component audit team.
balance sheet date (being the actual production
We considered the valuation model applied and determined
for the first month subsequent to the balance
it to be appropriate for the purpose of this valuation in
sheet date multiplied by 32%, based on the average
accordance with IAS 41.
growth rate of FFB), selling price and costs to sell.
We identified this as a significant risk due to the
Key observations: Based on the procedures we performed, we
inherent uncertainty around the future estimates.
identified no changes to key assumptions that would result in
material changes to the valuation.
Identification of prior period errors
For each of the errors identified we performed the following:
Our audit identified four material accounting and
• We considered the correct accounting treatment with
disclosure errors in the prior period financial
reference to the relevant accounting standards, supporting
information, requiring correction via prior period
documentation where relevant and, through discussion with
adjustment and therefore restatement of the
management.
comparative information. Of these, one required a
significant proportion of the engagement team’s
resources and efforts in the auditing of the
correction of this error. This was therefore treated
as a Key Audit Matter.
• We checked that the appropriate disclosures were made in
accordance with relevant accounting standards.
Key observations: Based on the procedures performed we
are satisfied that the identified errors were appropriately
There was a reclassification from revaluation
corrected and disclosed.
reserve to investments in associates resulting
from a historic deferral of profit from a land sale
between the Group and its associate (note 15).
52
M.P. EVANS GROUP PLCANNUAL REPORT 2019 INDEPENDENT AUDITORS’ REPORT
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning
being US$575,000. Performance materiality was set at
75% of materiality (taking into account various factors
and performing our audit, and in evaluating the
including the expected total value of known and likely
effect of misstatements. For planning, we consider
misstatements, brought forward misstatements and the
materiality to be the magnitude by which misstatements,
number of material estimates).
including omissions, could influence the economic
decisions of reasonable users that are taken on the
basis of the financial statements. In order to reduce
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Group financial statements are a consolidation of
to an appropriately low level the probability that any
twenty one companies consisting of the parent company
misstatements exceed materiality, we use a lower
(audited by BDO UK), three management companies
materiality level, performance materiality, to determine
(audited by Creaseys UK), thirteen palm-oil plantation
the extent of testing needed. Importantly, misstatements
trading companies (audited by BDO Indonesia), one other
below these levels will not necessarily be evaluated
trading company (audited by RSM Singapore) and three
as immaterial as we also take account of the nature
associate entities (one audited by Deloitte Indonesia and
of identified misstatements, and the particular
two audited by BDO Penang). The majority of the Group’s
circumstances of their occurrence, when evaluating their
operations are located in Indonesia with the head office
effect on the financial statements as a whole.
and main group accounting function being located in the
United Kingdom.
The materiality for the Group financial statements as a
whole was set at US$639,000. This was determined on
Our audit of the Group and Parent Company financial
the basis of 5% of profit before tax. In 2018, materiality
statements was scoped by obtaining an understanding
was set by the previous auditors at US$1,000,000 based
of the Group and its environment, including the Group’s
on 5.5% of profit before tax (excluding profit from
system of internal control, the performance and
discontinued operations).
financial position of each component as a proportion
of the total for the Group and assessing the risks of
Performance materiality was set at US$447,000 being 70%
material misstatement at the Group level. Based on our
of the above materiality level taking into account various
assessment, we identified nine operating plantation
factors including the expected total value of known and
companies which, in our view, required an audit of their
likely misstatements, brought forward misstatements, the
complete financial information due to their financial
number of material estimates and the expected use of
significance to the Group (“significant components”).
sample testing.
The audit procedures for these components were
performed by the component auditors. It was considered
Where financial information from components was
appropriate to perform audit procedures on specific audit
audited separately, component materiality levels,
areas where their balance was material to the Group
excluding the parent company, were set for this
purpose at lower levels up to a maximum of 83% of
for a further five companies and one associate entity
(“material but not significant components”). Where these
Group materiality and ranged between US$28,000 and
components were located overseas, the audit procedures
US$531,000, being 4% and 83% of Group materiality
were performed by the component auditors whilst the
respectively.
audit procedures for components located in the UK
were performed by the Group audit team. For the other
We agreed with the audit committee that we would
components that were not identified as being significant
report to them all individual audit differences in excess
to the Group, we performed analytical review procedures
of US$13,000 being 2% of materiality. We also agreed to
at a Group level.
report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Components that were subject to full scope audit
procedures accounted for 100% of the Group’s revenue,
The materiality for the Parent Company financial
79% of the Group’s profit before tax and 94% of the
statements, as a holding company, was based on 2% of
Group’s total assets.
total assets but restricted to 90% of Group materiality,
53
INDEPENDENT AUDITORS’ REPORT continued
5%
16%
PBT
REVENUE
6%
TOTAL
ASSETS
79%
100%
94%
Significant (full scope procedures)
Material but not significant (specific scope procedures)
Non significant (analytical procedures)
As part of our audit planning, the Senior Statutory Auditor
and other senior members of the Group audit team
OTHER INFORMATION
The Directors are responsible for the other information.
visited the Indonesian component audit team to review
The other information comprises the information
the planning documentation on the audit file and met
included in the annual report, other than the financial
with local management, as these are the most significant
statements and our auditor’s report thereon. Our opinion
components to the Group. We discussed the group and
on the financial statements does not cover the other
local risks identified and agreed the testing approach and
information and, except to the extent otherwise explicitly
audit timelines.
stated in our report, we do not express any form of
assurance conclusion thereon.
As part of the audit strategy for this year’s audit, the
Senior Statutory Auditor and other senior members
In connection with our audit of the financial statements,
of the Group audit team also visited three of the
our responsibility is to read the other information and,
Group’s Indonesian plantations, accompanied by Group
in doing so, consider whether the other information is
management. The three estates visited were Pangkatan,
materially inconsistent with the financial statements
Bilah and Sennah.
Senior members of the Group audit team visited
or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify
such material inconsistencies or apparent material
Indonesia again to meet with the component auditors
misstatements, we are required to determine whether
and perform a review of the complete audit files for the
there is a material misstatement in the financial
Indonesian operating units and requested the component
statements or a material misstatement of the other
auditors to perform any further procedures required.
information. If, based on the work we have performed,
we conclude that there is a material misstatement of this
At the completion stage senior members of the Group
other information, we are required to report that fact. We
audit team attended meetings with local audit and local
have nothing to report in this regard.
management teams and reviewed component audit
teams’ reporting, addressing risks and specific procedures
raised. We held discussions with component and group
management to discuss the findings from our audit,
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the
including local adjustments raised.
course of the audit:
54
M.P. EVANS GROUP PLCANNUAL REPORT 2019 INDEPENDENT AUDITORS’ REPORT
•
the information given in the strategic report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
•
the strategic report and the Directors’ report have
been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
In the light of the knowledge and understanding of the
Group and the Parent Company and its environment
obtained in the course of the audit, we have not
identified material misstatements in the strategic report
or the Directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the
audit of the financial statements is located on the
• adequate accounting records have not been kept, or
Financial Reporting Council’s website : www.frc.org.uk/
returns adequate for our audit have not been received
auditorsresponsibilities. This description forms part of
from branches not visited by us; or
our auditor’s report.
•
the Parent Company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’
Responsibilities within the Report of the Directors, set
out on pages 41 and 42 the Directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary
to enable the preparation of financial statements that
are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or
the Parent Company or to cease operations, or have no
realistic alternative but to do so.
USE OF OUR REPORT
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Parent
Company’s members those matters we are required to
state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than
the Parent Company and the Parent Company’s members
as a body, for our audit work, for this report, or for the
opinions we have formed.
Anna Draper (Senior Statutory Auditor)
for and on behalf of BDO LLP, Statutory Auditor
Gatwick
United Kingdom
31 March 2020
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127)
55
CONS0LIDATED INCOME STATEMENT
For the year ended 31 December 2019
Note
2019
US$’000
2018
US$’000
Continuing operations
Revenue
Cost of sales
Gross profit
Gain/(loss) on biological assets
Foreign-exchange gains/(losses)
Other administrative expenses
Other income
Operating profit
Finance income
Finance costs
Profit before tax
Tax on profit on ordinary activities
Profit after tax
Share of associated companies’ profit after tax
Profit for the year
Attributable to:
Owners of M.P. Evans Group PLC
Non-controlling interests
Continuing operations
Basic earnings per 10p share
Diluted earnings per 10p share
Basic earnings per 10p share
Continuing operations
119,341
(102,297)
17,044
927
1,161
(3,466)
458
16,124
403
(3,747)
12,780
(7,183)
5,597
1,873
7,470
6,333
1,137
7,470
108,553
(82,028)
26,525
(703)
(4,056)
(2,940)
652
19,478
300
(1,430)
18,348
(12,657)
5,691
1,470
7,161
5,405
1,756
7,161
US cents
US cents
11.6
11.5
9.9
9.8
Pence
Pence
9.0
7.4
6
7
8
9
28
11
11
56
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
CONS0LIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Other comprehensive income (net of tax)
Items that may be reclassified to the income statement
Exchange gain/(loss) on translation of foreign operations
390
(393)
2019
US$’000
2018*
US$’000
Items that will not be reclassified to the income statement
Remeasurement of retirement-benefit obligations
Other comprehensive income for the year
Profit for the year
Total comprehensive income
Attributable to:
Owners of M.P. Evans Group PLC
Non-controlling interests
* Restated, see note 27
696
1,086
7,470
8,556
7,370
1,186
8,556
711
318
7,161
7,479
5,633
1,846
7,479
57
CONS0LIDATED BALANCE SHEET
As at 31 December 2019
COMPANY NUMBER: 1555042
Note
2019
US$’000
2018*
US$’000
2017*
US$’000
Non-current assets
Goodwill
Other intangible assets
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
Total assets
Current liabilities
Borrowings
Trade and other payables
Current-tax liability
Net current assets
Non-current liabilities
Borrowings
Trade and other payables
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, see notes 15 and 27
13
13
14
15
16
19
17
18
19
20
20
22
21
22
21
23
24
25
27
27
28
11,767
1,433
368,744
21,553
66
5,284
11,555
420,402
2,067
11,072
45,117
4,245
1,160
25,947
89,608
11,767
—
338,225
20,312
62
5,192
8,740
384,298
1,140
12,883
39,681
3,470
2,502
21,626
81,302
510,010
465,600
28,337
22,215
3,657
54,209
35,399
66,137
265
12,312
9,401
88,115
142,324
367,686
9,200
55,385
294,139
358,724
8,962
367,686
20,883
15,029
2,423
38,335
42,967
9,173
—
11,505
8,251
28,929
67,264
398,336
9,228
53,582
314,223
377,033
21,303
398,336
12,228
—
321,558
20,631
53
12,280
5,465
372,215
1,843
10,462
34,368
4,614
6,913
113,910
172,110
544,325
9,159
65,194
5,317
79,670
92,440
30,285
—
11,813
8,434
50,532
130,202
414,123
9,255
52,852
322,055
384,162
29,961
414,123
The financial statements on pages 56 to 83 were approved by the board of directors on 31 March 2020 and signed on its
behalf by
Tristan Price
Chief executive
58
Matthew Coulson
Finance director
M.P. EVANS GROUP PLCANNUAL REPORT 2019
FINANCIAL STATEMENTS
CONS0LIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
SHARE
CAPITAL
US$’000
OTHER
RESERVES
US$’000
RETAINED
EARNINGS
US$’000
Note
NON-
CONTROLLING
INTERESTS
US$’000
TOTAL
US$’000
TOTAL
EQUITY
US$’000
Profit for the year
Other comprehensive
income for the year
Total comprehensive income
for the year
Issue of share capital
Share buy-backs
Dividends paid
Dividends from associates
Credit to equity for equity-
settled share-based
payments
Reclassification
Acquisition
Transactions with owners
At 1 January 2019
At 31 December 2019
Profit for the year
Other comprehensive
income for the year*
Total comprehensive income
for the year*
Issue of share capital
Share buy-backs
Dividends paid
Dividends from associates
Credit to equity for equity-
settled share-based
payments
Group reconstruction
Reclassification
Acquisition
25
10
15
26
28
12
25
10
15
26
28
28
—
—
—
6
(34)
—
—
—
—
—
(28)
9,228
9,200
—
—
—
10
(37)
—
—
—
—
—
—
1,873
4,460
6,333
1,137
7,470
128
909
1,037
49
1,086
2,001
5,369
7,370
1,186
8,556
212
34
—
(1,036)
592
—
—
(198)
53,582
55,385
—
(2,286)
(12,364)
1,036
51
(2,056)
(9,834)
(25,453)
314,223
294,139
218
(2,286)
(12,364)
—
643
(2,056)
(9,834)
(25,679)
377,033
358,724
—
—
—
—
—
2,056
(15,583)
(13,527)
21,303
8,962
218
(2,286)
(12,364)
—
643
—
(25,417)
(39,206)
398,336
367,686
1,470
3,935
5,405
1,756
7,161
176
52
228
90
318
1,646
3,987
5,633
1,846
7,479
149
37
—
(1,568)
466
—
—
—
—
(2,733)
(12,725)
1,568
24
(9)
2,056
—
159
(2,733)
(12,725)
—
490
(9)
2,056
—
—
—
(8,105)
—
—
—
(2,056)
(343)
159
(2,733)
(20,830)
—
490
(9)
—
(343)
Transactions with owners
(27)
(916)
(11,819)
(12,762)
(10,504)
(23,266)
At 1 January 2018 – as
previously stated
Restatement*
At 1 January 2018 – as
restated
At 31 December 2018
* Restated, see notes 15 and 27
9,255
—
9,255
9,228
54,382
(1,530)
52,852
53,582
323,397
387,034
29,961
416,995
(1,342)
(2,872)
—
(2,872)
322,055
384,162
314,223
377,033
29,961
21,303
414,123
398,336
59
CONS0LIDATED CASH-FLOW STATEMENT
For the year ended 31 December 2019
Net cash generated by operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Decrease in bank deposits treated as current-asset investments*
Decrease/(increase) in receivables from smallholder co-operatives*
Proceeds on disposal of property, plant and equipment
Purchase of subsidiary undertaking
Loan to related party
Net cash used by investing activities
Financing activities
New borrowings
Repayment of borrowings
Lease liability payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interest
Purchase of non-controlling interests
Exercise of Company share options
Buy-back of Company shares
Note
29
14
13
6
30
30
30
Net cash generated/(used) by financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at 1 January
Effect of foreign-exchange rates on cash and cash equivalents
Cash and cash equivalents at 31 December
20
2019
US$’000
2018
US$’000
32,002
21,297
(46,531)
(31,879)
(721)
210
1,342
4,690
489
—
(11,747)
(52,268)
110,419
(46,134)
(167)
(12,364)
—
(25,417)
218
(2,286)
24,269
4,003
21,626
318
25,947
—
300
4,411
(4,668)
727
(49,167)
—
(80,276)
—
(9,159)
—
(12,725)
(8,105)
—
159
(2,733)
(32,563)
(91,542)
113,910
(742)
21,626
* Following a review of cash flows in the current year, both movements in receivables from smallholder co-operatives and changes in
bank deposits treated as current asset-investments have been included in investing activities. Comparative amounts have been shown
consistently, having previously been included in operating and financing activities respectively.
60
M.P. EVANS GROUP PLCANNUAL REPORT 2019 On site review at Bumi Mas
61
61
NOTES TO THE CONSOLIDATED ACCOUNTS
For the year ended 31 December 2019
1 General information
M.P. Evans Group PLC is a public limited company incorporated in the United Kingdom under the Companies Act 2006 and listed
on the London Stock Exchange’s Alternative Investment Market (“AIM”). The Company is registered in England and Wales, and the
address of its registered office is given on page 96. The nature of the Group’s operations and its principal activities are set out in
note 4 and in the strategic report on pages 12 to 30. 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, reflecting the primary economic environment in which the Group
operates. The presentational currency for the Group accounts is also 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$3,485,000 for the financial year ended 31 December 2019 (2018 profit of
US$115,929,000). The Company’s separate financial statements are set out on pages 84 to 89.
By virtue of Section 479A of the Companies Act 2006, the Company’s subsidiary Bertam Consolidated Rubber Company Limited is
exempt from the requirement to have an audit and prepare individual accounts. Details of all subsidiary companies are shown on
page 90.
2 Adoption of new and revised accounting standards
(a) New and amended standards adopted by the Group
There have been a number of new and amended standards issued by the International Accounting Standards Board (“IASB”)
that became effective for the first time during the year ended 31 December 2019. The Group has assessed each of them, and
concluded that the following standards and amendments have not had a material impact on the Group’s results or financial
position.
IFRS 16 Leases
IFRIC 23 Uncertainty over income tax treatments
IAS 28 (amendments) Long-term interests in associates and joint ventures
IAS 19 (amendments) Plan amendment, curtailment or settlement
Annual Improvements to IFRS Standards 2015-2017 Cycle
(b) New standards, amendments and interpretations issued but not effective for the year beginning 1 January 2019 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 17 Insurance contracts
Amendments to references in the conceptual framework in IFRS Standards
IFRS 3 (amendments) Definition of a business
IAS 1 and IAS 8 (amendments) Definition of material
IFRS 9, IAS 39 and IFRS 7 (amendments) Interest rate benchmark reform
IAS 1 (amendments) Classification of liabilities as current or non-current
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 (including an assessment of the impact of Covid-19), 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 report of the directors on page 42.
62
M.P. EVANS GROUP PLCANNUAL REPORT 2019
3 Accounting policies continued
(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 power over the
investee, has the rights or exposure to variable returns, and has the ability to affect those returns. 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 gaining or losing either
control or significant influence as appropriate.
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 required by IFRS 5, results (including comparative amounts) of
the disposed of subsidiary or associated undertaking are included within discontinued operations.
(d) Revenue
Revenue represents the fair value of crops and produce sold during the year, excluding sales taxes. Income is recognised at
the point of delivery, which is deemed to be the point at which the performance obligation is satisfied.
(e) 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 based
on an annual actuarial review using the projected unit credit method, and charged to the income statement on the basis
of individuals’ service at the balance-sheet date. Remeasurement by the actuary is included in equity, whilst all other
movements in the liability, other than benefits paid, are recognised in profit or loss.
(f ) 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 exercise period for market-
priced options and at the start of the exercise period for options issued under the long-term incentive scheme; 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.
(g) 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 identifiable net 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 net 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. Inputs to the
fair value measurement of goodwill fall into ‘Levels 2 and 3’ in the IFRS categories.
(h) Biological assets
For internal reporting and decision-making, the Group’s policy is to recognise fresh fruit bunches (“ffb”) at the point of harvest.
For the purposes of statutory reporting, the Group’s policy is to include an estimate of the fair value of ffb prior to harvest as a
biological asset in the Group’s financial statements (see note 17). The impact of initial valuations and subsequent changes in
value are included in the Group’s income statement. The valuation falls into the IFRS category ‘Level 3’, since sales of ffb prior
to harvest are never transacted.
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.
63
NOTES TO THE CONSOLIDATED ACCOUNTS continued
3 Accounting policies continued
i)
Intangible assets
Intangible assets (other than goodwill) are stated at historical cost less amortisation. Software is written off over its estimated
useful life on a straight line basis at 10% per annum. Estimated useful lives are reviewed at each balance-sheet date.
(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 initial costs are 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 on a straight line basis 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, as in the case of the UK office, no provision is made
for depreciation.
Construction in progress is measured at cost and is not depreciated. Depreciation commences once assets are complete and
available for use.
(k) Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and
leases with a duration of 12 months or less. Lease liabilities are measured at the present value of lease payments over the
term of the lease, and the right-of-use asset is measured at a corresponding amount. The asset is depreciated on a straight
line basis over the lease term, and the lease payments are allocated to the lease liability and the interest implicit in the lease.
(l) Investments in associated companies
Undertakings over which the Group has the ability to exert significant influence, but not control, 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 2019. 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.
(m) Inventories
Inventories are valued at the lower of cost and net realisable value. In the case of palm oil, cost represents the weighted-
average cost of production, including appropriate overheads. Other inventories are valued on the basis of first in, first out.
Young seedlings are included within nurseries as part of inventory, and their cost is transferred to immature planting within
property, plant and equipment when they are planted out in the field.
(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 it is probable that the
temporary difference will not reverse in the foreseeable future. The carrying amount of deferred-tax assets is reviewed at each
balance-sheet date.
Deferred-tax assets and liabilities are offset when there is a legally-enforceable right to set off current-tax assets against
current-tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to
settle its current-tax assets and liabilities on a net basis.
64
M.P. EVANS GROUP PLCANNUAL REPORT 2019
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
3 Accounting policies continued
(o) Financial instruments
Financial assets and financial liabilities are initially recognised on the Group’s balance sheet at fair value when the Group
becomes a party to the contractual provisions of the instrument, and other than the Group’s investments in unlisted shares
are carried at amortised cost.
Financial assets at fair value through profit or loss – the Group’s investments in unlisted shares (other than associated
undertakings) are classified as fair value through profit or loss and stated at fair value, with gains and losses recognised
directly in the income statement. Fair value is the directors’ estimate of sales proceeds at the balance-sheet date.
Trade and other receivables – these represent both amounts due from customers in the normal course of business and
financing made available to related parties and smallholder co-operatives. Balances are initially stated at their fair value, and
subsequently measured at amortised cost, using the effective-interest-rate method, as reduced by appropriate allowances for
estimated expected credit losses, 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,
the Malaysian Ringgit. 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. In addition, exchange differences arising from translating
the results of Group companies that do not have the US Dollar as their functional currency are also recognised in other
comprehensive income.
(q) Segmental reporting
Operating segments are consistent with the internal reporting provided to the chief operating-decision maker. The chief
operating-decision maker, which is responsible for allocating resources and assessing performance of the operating segments,
is the board of directors. The Group’s reportable operating segments are included in note 4.
(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 how its policies are applied and hence amounts are reported in the financial statements. Estimates and judgements are
periodically evaluated. They 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 estimates.
The critical judgements and key estimates which have the most significant impact on the carrying amount of assets and
liabilities are identified below and discussed further in the relevant notes to the accounts.
Critical judgements
• Deferred tax on unremitted earnings (note 23); and
• Depreciation of leasehold land (note 14).
Key estimates
•
•
•
• Determination of retirement benefit obligations (note 24).
Carrying value of deferred-tax assets relating to losses (note 23);
Valuation of biological assets – growing produce (note 17);
Carrying value of goodwill (note 13); and
65
NOTES TO THE CONSOLIDATED ACCOUNTS continued
4 Segment information
The Group’s reportable segments are distinguished by location and activity: palm-oil plantations in Indonesia and property
development in Malaysia.
PLANTATION
INDONESIA
US$’000
PROPERTY
MALAYSIA
US$’000
OTHER
US$’000
TOTAL
US$’000
2019
Continuing operations
Revenue
Gross profit/(loss)
Gain on biological assets
Foreign-exchange gain
Other administrative expenses
Other income
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit after tax
119,250
17,100
927
1,121
(44)
458
201
(589)
(6,471)
—
—
—
—
—
—
—
—
—
Share of associated companies’ profit after tax
799
1,074
91
(56)
—
40
(3,422)
—
202
(3,158)
(712)
—
*119,341
17,044
927
1,161
(3,466)
458
16,124
403
(3,747)
12,780
(7,183)
5,597
1,873
7,470
Profit for the year
Consolidated total assets
Assets
Investments in associates
Consolidated total liabilities
Liabilities
Other information
Additions to property, plant and equipment
Additions to intangible assets
Depreciation
Amortisation
461,851
3,933
465,784
53,334
47,155
721
15,318
112
—
17,620
17,620
26,606
—
26,606
488,457
21,553
510,010
—
—
—
—
—
88,990
142,324
8
—
22
—
47,163
721
15,340
112
* US$85.5 million of revenue (71.7%) was from sales to 4 customers (27.0%,17.8%,14.0% and 12.9% respectively).
66
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
PLANTATION
INDONESIA
US$’000
PROPERTY
MALAYSIA
US$’000
OTHER
US$’000
TOTAL
US$’000
108,445
26,583
(703)
(3,448)
(181)
646
291
(1,026)
(12,167)
—
—
—
—
—
—
—
—
—
4 Segment information continued
2018
Continuing operations
Revenue
Gross profit/(loss)
Loss on biological assets
Foreign-exchange loss
Other administrative expenses
Other income
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit after tax
Share of associated companies’ profit after tax
864
606
Profit for the year
Consolidated total assets
Assets
Investments in associates**
Consolidated total liabilities
Liabilities
Other information
Additions to property, plant and equipment
Depreciation
402,855
3,587
406,442
61,489
31,875
14,441
—
16,725
16,725
—
—
—
* US$69.5 million of revenue (64.0%) was from sales to four customers (18.0%, 16.8%, 14.9% and 14.3% respectively).
** Restated, see notes 15 and 27.
5 Employees
Employee costs during the year
Wages and salaries
Social security costs
Current service cost of retirement benefit (see note 24)
Other pension costs
Share-based payment charge
108
(58)
—
(608)
(2,759)
6
9
(404)
(490)
—
42,433
—
42,433
*108,553
26,525
(703)
(4,056)
(2,940)
652
19,478
300
(1,430)
18,348
(12,657)
5,691
1,470
7,161
445,288
20,312
465,600
5,775
67,264
4
33
31,879
14,474
2019
US$’000
19,133
1,801
1,457
114
643
2018
US$’000
16,204
1,630
1,576
105
490
23,148
20,005
67
NOTES TO THE CONSOLIDATED ACCOUNTS continued
5 Employees continued
Average monthly number of persons employed (including executive directors)
Estate manual
Local management
United Kingdom head office
2019
Number
2018
Number
6,010
91
7
6,108
5,211
99
7
5,317
Details of directors’ remuneration required by the Companies Act 2006 are shown within the directors’ remuneration
report on page 49 and form part of these audited financial statements.
6 Finance income
Interest receivable on bank deposits
Interest receivable on related party loans
7 Finance costs
Interest payable on bank loans and overdrafts
8 Profit before tax
Profit before tax is stated after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Auditors’ remuneration
Employee costs (note 5)
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s auditor and their associates for services to the Group*
Audit of UK parent Company
Audit of consolidated financial statements
Audit of overseas subsidiaries
Total audit services
Taxation advisory services
Total non-audit services
2019
US$’000
2018
US$’000
210
193
403
300
—
300
2019
US$’000
3,747
2018
US$’000
1,430
2019
US$’000
2018
US$’000
15,340
14,474
112
341
—
416
23,148
20,005
25
132
158
315
—
—
23
119
229
371
7
7
* In addition to the above, US$26,000 (2018 US$38,000) were payable to other firms for the audit of subsidiary companies.
68
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
9 Tax on profit on ordinary activities
United Kingdom corporation tax charge for the year
Relief for overseas taxation
Overseas taxation
Adjustments in respect of prior years
Total current tax
Deferred taxation – origination and reversal of temporary differences (see note 23)
2019
US$’000
637
(637)
—
6,548
—
6,548
635
7,183
2018
US$’000
448
(448)
—
5,799
3
5,802
6,855
12,657
The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, was 19% (2018 – 19%). The
standard rate of Indonesian tax was 25% (2018 – 25%). The actual tax charge is higher than the standard rate for the reasons set
out in the reconciliation below.
Profit on ordinary activities before tax
Tax on profit on ordinary activities at the standard rate
Factors affecting the charge for the year
Profits taxed at higher standard tax rate
Losses no longer available
Unrealised Indonesian exchange differences not included in Group profit
Withholding tax on overseas dividends and interest
Adjustment relating to intercompany loan relationships
Utilisation of losses brought forward
Unrelieved losses
Other differences
Total tax charge
2019
US$’000
12,780
2,428
1,553
—
2,467
74
223
(27)
296
169
2018
US$’000
18,348
3,486
3,038
5,331
(341)
38
—
(663)
1,367
401
7,183
12,657
In addition to the above, the Group recognised tax of US$0.2 million (2018 US$0.1 million) on retirement benefit obligation
remeasurement gains recorded in other comprehensive income.
10 Dividends paid and proposed
2019 interim dividend – 5.00p per 10p share (2018 interim dividend 5.00p)
2018 final dividend – 12.75p per 10p share (2017 final dividend 12.75p)
2019
US$’000
3,519
8,845
12,364
2018
US$’000
3,504
9,221
12,725
Following the year end, the board has proposed a final dividend for 2019 of 12.75p per 10p share, amounting to US$9.0 million.
The dividend will be paid on or after 19 June 2020 to shareholders on the register at the close of business on 24 April 2020.
69
NOTES TO THE CONSOLIDATED ACCOUNTS continued
11 Basic and diluted earnings per share
The calculation of earnings per 10p share is based on:
Profit for the year attributable to the owners of
M.P. Evans Group PLC
Average number of shares in issue
Diluted average number of shares in issue*
2019
US$’000
6,333
2019
NUMBER OF
SHARES
54,599,417
54,875,441
2018
US$’000
5,405
2018
NUMBER OF
SHARES
54,787,105
55,058,331
* 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.
12 Acquisition
On 4 September 2019, the Group effectively acquired a further 2,200 planted hectares by purchasing additional shareholdings in
its own operating subsidiaries from one of its minority partners. The acquisition cost was US$25.4 million, funded by taking on
additional debt.
The Group acquired an additional 15% interest in both PT Pangkatan Indonesia and PT Evans Lestari, and acquired an additional
20% interest in both PT Surya Makmur and PT Aceh Timor Indonesia.
As the Group had already been consolidating the results of the companies in which further interests were acquired, a reduction to
non-controlling interests has been recognised, with the excess of consideration allocated to reserves.
Acquisition cost
Reduction in non-controlling interests (note 28)
Reserves
13 Intangible assets
Cost
At 1 January 2019
Transfer from property, plant and equipment
Additions
At 31 December 2019
Accumulated amortisation
At 1 January 2019
Transfer from property, plant and equipment
Charge for the year
At 31 December 2019
2019
US$’000
25,417
(15,583)
9,834
GOODWILL
US$’000
SOFTWARE
US$’000
TOTAL
US$’000
11,767
—
—
11,767
—
—
—
—
—
831
721
1,552
—
7
112
119
11,767
831
721
13,319
—
7
112
119
Net book value at 31 December 2019
11,767
1,433
13,200
Cost and net book value
At 31 December 2018
11,767
—
11,767
During the year, software with a net book value of US$0.8 million, which had previously been recorded within property, plant and
equipment, was transferred to intangible assets.
Goodwill is carried at cost. Of the balance above, a significant amount (US$10.6 million) relates to the Group’s project at Bumi Mas,
with the remainder relating to the Group’s projects at Kota Bangun, Bangka, and at Sennah Estate (part of the Pangkatan group).
70
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
13 Intangible assets continued
Key estimate
A review for goodwill impairment has been undertaken by comparing the carrying value of the relevant cash generating
units with fair value less cost of disposal. Fair value less cost of disposal has been obtained by reference to independent
valuations of the Group’s property assets conducted at the end of 2019 (see page 92). It used a 30-year forecast period,
to reflect the long-term nature of the asset, pre-tax discount rates of 16-19%, and a mill-gate price for CPO rising over
three years from US$560 to a long-term average of US$610 per tonne. A decrease in the CPO price assumption of 5-10%
would result in a range between no and full impairment of the goodwill relating to Bumi Mas.
14 Property, plant and equipment
Cost or valuation
At 1 January 2019
Transfer to intangible assets
Additions
Re-classification
Exchange differences
Disposals
Accumulated depreciation
At 1 January 2019
Transfer to intangible assets
Charge for the year
Exchange differences
Disposals
At 31 December 2019
LEASEHOLD
LAND
US$’000
PLANTING
US$’000
BUILDINGS
US$’000
PLANT
EQUIPMENT
& VEHICLES
US$’000
CON-
STRUCTION
IN PROGRESS
US$’000
TOTAL
US$’000
101,339
189,227
73,068
48,621
7,495
419,750
—
4,742
—
2
—
—
15,246
—
—
(261)
—
632
10,262
2
(869)
(831)
3,920
1,056
—
(1,564)
51,202
—
22,623
(11,318)
—
—
(831)
47,163
—
4
(2,694)
18,800
463,392
112
32,231
23,452
25,730
At 31 December 2019
106,083
204,212
83,095
—
17
—
—
129
—
7,234
—
(259)
39,206
165,006
Net book value at 31 December 2019
105,954
Cost or valuation
At 1 January 2018
Additions
Acquisition
Re-classification
Exchange differences
Disposals
99,837
1,724
171,635
18,319
5
—
(3)
—
—
—
(224)
(727)
At 31 December 2018
101,339
189,227
73,068
Accumulated depreciation
At 1 January 2018
Charge for the year
Exchange differences
Disposals
At 31 December 2018
267
32
—
(187)
112
Net book value at 31 December 2018
101,227
26,328
6,334
—
(431)
32,231
156,996
19,133
4,555
(4)
(232)
23,452
49,616
—
4,601
2
(703)
27,352
55,743
70,118
387
—
2,673
(4)
(106)
(7)
3,488
—
(1,250)
27,961
23,241
46,875
3,277
—
194
(1)
(1,724)
48,621
23,526
3,553
(1)
(1,348)
25,730
22,891
—
—
—
—
—
81,525
(7)
15,340
2
(2,212)
94,648
18,800
368,744
2,347
8,172
—
(2,867)
—
(157)
7,495
—
—
—
—
—
390,812
31,879
5
—
(8)
(2,938)
419,750
69,254
14,474
(5)
(2,198)
81,525
7,495
338,225
Included in planting is immature planting of US$36,349,000 (2018 US$45,860,000) which is not depreciated
71
NOTES TO THE CONSOLIDATED ACCOUNTS continued
14 Property, plant and equipment cotinued
Critical judgement
Included in leasehold land is land in Indonesia which is not being depreciated. Land is held on 25- or 30-year leases,
and as those leases can be renewed without significant cost and the Group has previous experience of successful lease
renewals, the directors have concluded that the land should not be depreciated. The carrying value of the land at the end
of the year is US$105,428,000 (2018 US$100,716,000).
As at 31 December 2019, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment of US$8,135,000 (2018 US$7,552,000).
Depreciation is charged to cost of sales, other than US$20,000 (2018 US$29,000) charged to other administrative expenses.
At 31 December 2019, the Group accounted for one right-of-use asset (2018 – no assets) as a lease under IFRS 16. The net book
value of the asset was US$0.5 million. The lease has a three-year term with fixed payments, and the lease liability is included in
note 21.
15 Investments in associates
Details of the Group’s subsidiary and associated undertakings are given on page 90. The Group’s associated companies are both
unlisted.
Share of net assets
At 1 January
Exchange differences
Profit for the year
Dividends received
At 31 December
Unrealised profit - deferral on land sales to associate
2019
US$’000
23,020
200
1,873
(1,036)
24,057
(2,504)
21,553
2018*
US$’000
23,503
(385)
1,470
(1,568)
23,020
(2,708)
20,312
* During the year US$0.2 million (2018 US$0.2 million) was released relating to profit on land previously sold to one of the Group’s associated
undertakings. Previously, the deferred amount was recorded within the Group’s revaluation reserve, and a prior year adjustment has been recorded
to reclassify it as a reduction from investment in associates. The impact of the adjustment is to reduce net assets and total equity at 31 December
2018 by the US$2.7 million shown above, and there is no impact on the consolidated income statement or cash flows. At the beginning of 2018,
the impact of the adjustment on the balance sheet is to reduce the Group’s investment in associated undertakings by US$2.9 million, with a
corresponding change in reserves, as disclosed in the consolidated balance sheet on page 58.
72
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
15 Investments in associates continued
The summarised results of the Group’s associated undertakings and the Group’s aggregate share of their summarised results are
shown below:
2019
KERASAAN
US$’000
BERTAM
PROPERTIES
US$’000
TOTAL
US$’000
KERASAAN
US$’000
BERTAM
PROPERTIES
US$’000
2018
TOTAL
US$’000
5,659
2,102
4,371
8,071
(1,503)
(589)
10,350
(38%)
2,150
799
1,661
3,067
(571)
(224)
3,933
26,201
2,687
28,422
30,073
(3,946)
(4,240)
50,309
(40%)
10,480
1,074
11,369
12,029
(1,578)
(1,696)
20,124
12,630
1,873
13,030
15,096
(2,149)
(1,920)
24,057
6,129
2,275
4,534
6,078
(656)
(516)
9,440
(38%)
2,329
864
1,723
2,309
(249)
(196)
3,587
19,929
1,514
26,293
35,802
(9,314)
(4,199)
48,582
(40%)
7,972
606
10,518
14,321
(3,726)
(1,680)
19,433
10,301
1,470
12,241
16,630
(3,975)
(1,876)
23,020
Total
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Group share
Revenue
Profit after tax
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Carrying value at 31 December
16 Investments
Financial assets at fair value through profit or loss (unlisted)
At 1 January
Revaluation gain
Exchange differences
At 31 December
17 Current biological assets
Ffb prior to harvest
2019
US$’000
2018
US$’000
62
1
3
66
53
10
(1)
62
2019
US$’000
2018
US$’000
2,067
1,140
Oil palms are harvested continuously, many times throughout the year, and at any given time each palm will be at a different point
in its production cycle. It is not possible to undertake a full census of all palms, and so it is necessary to measure the volume of
growing ffb indirectly. The gain or loss shown in the consolidated income statement represents the net movement in the fair value
of ffb prior to harvest during the year.
73
NOTES TO THE CONSOLIDATED ACCOUNTS continued
17 Current biological assets continued
Key estimate
The estimation in respect of ffb prior to harvest is based on the market price of ffb 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 ffb. This weight
derives from the assumption that value accrues exponentially to ffb 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 ffb prior to harvest. Changes to the assumed
tonnage will have a directly equivalent proportional effect on the reported valuation. Different defensible valuation
methods will give widely differing answers. Changes to both tonnage and methodology lead to a range of valuations
between US$1.8 million and US$17.6 million. The Group has never included ffb prior to harvest in its internal reporting
and decision-making.
18 Inventories
Processed produce for sale
Estate stores
Nurseries
19 Trade and other receivables
Current assets
Trade receivables
Receivable from smallholder co-operatives
Loans to related parties
Other receivables
Prepayments and accrued income
Non-current assets
Costs to be allocated to smallholder co-operatives
Loans to related parties
Trade and other receivables analysed by currency of receivable:
Indonesian Rupiah
US Dollar
Sterling
Malaysian Ringgit
2019
US$’000
6,760
2,925
1,387
11,072
2019
US$’000
3,032
29,250
385
10,117
2,333
45,117
—
11,555
11,555
44,061
12,207
400
4
2018
US$’000
5,048
6,497
1,338
12,883
2018
US$’000
893
25,200
—
12,205
1,383
39,681
8,740
—
8,740
44,933
3,299
181
8
Sales of palm oil are made for cash payment in advance of delivery. The Group makes full provision against invoices outstanding
for more than 30 days. At 31 December 2019 there was no provision for impairment of trade receivables (2018 US$nil). The
directors consider the carrying amount of trade and other receivables approximates their fair value.
56,672
48,421
74
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
19 Trade and other receivables continued
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. It also provides financial guarantees for some bank loans provided to
its associated smallholders. 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.
The Group’s expected credit loss on its trade and other receivables and financial guarantees is not material. The Group applies
the simplified approach in IFRS 9 to determining expected credit losses on trade receivables, taking account of their similar risk
characteristics and the Group’s experience. In assessing expected credit losses on non-trade receivables and financial guarantees
under IFRS 9, the Group considers the long-standing relationship with its stakeholders, the ongoing trading of its associated
smallholders, and its ability to continue to recover balances in a planned and controlled manner.
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
2019
US$’000
9,679
19,571
29,250
—
29,250
2018
US$’000
7,304
17,896
25,200
8,740
33,940
During the year, the Group made finance available to enable its new minority partner to acquire a 5% interest in a number of the
Group’s Indonesian subsidiary companies. The balance is repayable on demand. However, the Group, at its discretion, anticipates
recovering the balance over a longer period based on profit distribution from the subsidiary companies, and has classified the
majority of the balance as non-current accordingly. At the end of the year, the balance outstanding on the related party loans was
US$11,940,000 (2018 US$nil).
20 Cash and other liquid resources
Cash and cash equivalents
Current-asset investments
2019
US$’000
25,947
1,160
27,107
2018
US$’000
21,626
2,502
24,128
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. The carrying value of these assets approximates their fair value.
75
NOTES TO THE CONSOLIDATED ACCOUNTS continued
21 Trade and other payables
Current liabilities
Trade payables
Amounts owed to associated undertakings
Lease liabilities
Other payables
Non-current liabilities
Lease liabilities (due in 1-2 years)
2019
US$’000
14,024
18
200
7,973
22,215
265
265
2018
US$’000
7,243
20
—
7,766
15,029
—
—
The average credit period taken for trade purchases is 50 days (2018 – 39 days). The Group has processes in place to ensure
payables are settled within the agreed terms. The amounts above also reflect the Group’s anticipated cash outflows for these
financial liabilities.
22 Borrowings
Secured borrowing at amortised cost
Bank loans
Total borrowings
Amount due for settlement within one year
Due for settlement in one to two years
Due for settlement in two to five years
Due for settlement after five years
Amount due for settlement after one year
Analysis of borrowings by currency:
US Dollar
Indonesian Rupiah
Analysis of anticipated cash outflows:
Within one year
Due within one to two years
Due within two to five years
Due after five years
2019
US$’000
2018
US$’000
94,474
30,056
28,337
11,006
49,159
5,972
66,137
94,474
91,005
3,469
94,474
32,083
13,985
53,765
6,007
105,840
20,883
5,327
3,009
837
9,173
30,056
26,336
3,720
30,056
21,863
5,844
3,631
898
32,236
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 share certificates, land titles and fixed assets. The net book value of
property, plant and equipment used as security for bank loans is US$145.2 million (2018 US$107.1 million). At the year end the
Group had undrawn available credit facilities of US$34.6 million (2018 US$125.0 million).
The weighted-average interest rate paid on bank loans in the year was 5.0% (2018 – 6.5%).
The analysis of anticipated cash outflows above is based on interest and exchange rates in force at the balance-sheet date.
76
M.P. EVANS GROUP PLCANNUAL REPORT 2019
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
23 Deferred tax
The following are the major deferred-tax liabilities and assets recognised by the Group and movements thereon:
At 1 January 2019
(Charge)/credit to income statement
Exchange differences
At 31 December 2019
At 1 January 2018
(Charge)/credit to income statement
Acquisition of subsidiary
Exchange differences
At 31 December 2018
ACCELERATED TAX
DEPRECIATION
US$’000
RETIREMENT-
BENEFIT
OBLIGATIONS
US$’000
OTHER TIMING
DIFFERENCES
US$’000
(5,786)
(796)
(222)
(6,804)
(4,678)
(1,386)
—
278
(5,786)
2,061
(32)
73
2,102
1,944
229
—
(112)
2,061
(2,588)
193
69
(2,326)
3,201
(5,698)
113
(204)
(2,588)
TOTAL
US$’000
(6,313)
(635)
(80)
(7,028)
467
(6,855)
113
(38)
(6,313)
Other timing differences relate to losses, with the exception of the deferred tax liability of US$10.6 million that arose in 2017 on
the acquisition of PT Bumi Mas Agro. Certain deferred-tax assets and liabilities have been offset. The following is the analysis of
deferred-tax balances (after offset) for financial reporting purposes:
Deferred-tax assets
Deferred-tax liabilities
2019
US$’000
5,284
(12,312)
(7,028)
2018
US$’000
5,192
(11,505)
(6,313)
Critical judgement
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$494,289,000 (2018 US$461,369,000). 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$18,009,000 (2018 US$17,029,000). No
liability has been recognised in respect of these differences because the reversal would not give rise to an additional tax
liability as the dividends would not be taxed on receipt.
Key estimate
At the balance-sheet date, the Group had unused tax losses of US$57,939,000 (2018 US$61,168,000) available for
offset against future profits. The directors have reviewed estimates of future profits and a deferred-tax asset has been
recognised in respect of US$31,590,000 (2018 US$33,795,000) of such losses. No deferred-tax asset has been recognised
in respect of the remaining US$26,349,000 (2018 US$27,372,000) due to the unpredictability of future profit streams and
due to the 5-year time limit on utilisation of tax losses in Indonesia. In the normal course of business, both in the UK and
Indonesia, the Group has a number of matters under discussion with local tax authorities. The Group is satisfied, based
on external tax advice, that appropriate tax treatments have been applied. The likely impact of any change in treatment
would be to restrict the availability of the Group’s unused tax losses.
The directors have considered the sensitivity of the deferred-tax asset recognised in respect of losses to changes in
estimated future profits, particularly with regard to changes in the price of CPO. If CPO prices were to fall by 10% from
those initially estimated, then the deferred-tax asset would be reduced by approximately US$0.2 million.
77
NOTES TO THE CONSOLIDATED ACCOUNTS continued
23 Deferred tax continued
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$2,730,000 (2018 US$2,249,000). No asset has been
recognised in respect of these differences due to the unpredictability of future profit streams.
24 Retirement-benefit obligations
The Group’s only obligation relates to an unfunded, non-contributory, post-employment statutory benefit scheme in Indonesia.
A lump sum is paid to employees on retirement or on leaving the Group’s employment. This terminal benefit is accrued by the
Group based on an annual actuarial review and charged in the income statement on the basis of individuals’ service at the
balance-sheet date. Retirement is assumed at the earlier of age 55 years or 30 years’ service. Standard Indonesian mortality
assumptions are used, and no allowance is made for internal promotion.
The main assumptions used to assess the Group’s liabilities are:
Discount rate
Salary increase per annum
Reconciliation of scheme liabilities:
Current-service cost
Interest cost
Past service cost
Effect of settlement
Actuarial gain
Less: Benefits paid out
Movement in the year
At 1 January
Exchange differences
At 31 December
2019
%
7.55
8.00
2018
%
8.25
8.00
2019
US$’000
2018
US$’000
1,457
676
—
—
(928)
1,205
(384)
821
8,251
329
9,401
1,576
568
103
(750)
(836)
661
(344)
317
8,434
(500)
8,251
Key estimate
The main assumptions used to assess the Group’s liabilities are shown in the table above. Changing one of them by 1%
in either direction would have the effect of increasing or decreasing the Group’s liabilities by between US$0.9 million and
US$1.1 million.
78
M.P. EVANS GROUP PLCANNUAL REPORT 2019
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
AUTHORISED
NUMBER
ALLOTTED,
FULLY PAID
AND VOTING
NUMBER
AUTHORISED
£’000
ALLOTTED
FULLY PAID
AND VOTING
US$’000
87,000,000
54,677,872
8,700
—
—
50,000
(266,652)
—
—
87,000,000
54,461,220
8,700
87,000,000
54,883,451
8,700
—
—
75,000
(280,579)
—
—
87,000,000
54,677,872
8,700
9,228
6
(34)
9,200
9,255
10
(37)
9,228
25 Share capital
At 1 January 2019
Issued during the year
Redeemed during the year
At 31 December 2019
At 1 January 2018
Issued during the year
Redeemed during the year
At 31 December 2018
During the year, as the result of the exercise of share options, the Company issued 50,000 10p shares for US$218,000 cash
consideration. In addition, the Company bought back and cancelled 266,652 10p shares for a total cost of US$2,286,000 (an
average of 670 pence per share).
26 Share-based payments
The Group has equity-settled share-option schemes in place for directors and selected employees of the Group. Under the
schemes established in 2001 and 2012, options are exercisable at a price equal to the quoted market price of the Company’s
shares on the date of grant. Under the Group’s long-term incentive scheme established in 2017, options are exercisable at nil
cost. For all schemes, the vesting period is three years and if the options remain unexercised after a period of ten years from the
date of grant, the options lapse. Options may be 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
Exercised during the year
At 31 December
Exercisable at the end of the year
2019
WEIGHTED-
AVERAGE
EXERCISE PRICE
(PENCE)
244.2
0.0
335.0
207.4
472.7
NUMBER
OF SHARE
OPTIONS
407,320
41,548
(50,000)
398,868
175,000
2018
WEIGHTED-
AVERAGE
EXERCISE PRICE
(PENCE)
253.5
0.0
159.5
244.2
446.0
NUMBER
OF SHARE
OPTIONS
439,680
42,640
(75,000)
407,320
200,000
The weighted-average share price at the date of exercise for share options exercised during the year was 335p. The options
outstanding at 31 December 2019 had a weighted-average remaining contractual life of 5.1 years and exercise prices in the
range of nil to 520p. The Group recognised total expenses of US$643,000 related to equity-settled share based payments
(2018 US$490,000). Details of the directors’ share options are set out in the directors’ remuneration report on pages 48 to 50.
79
NOTES TO THE CONSOLIDATED ACCOUNTS continued
27 Reserves
SHARE-
PREMIUM
ACCOUNT
US$’000
REVALU-
ATION
RESERVE
US$’000
CAPITAL-
REDEMPTION
RESERVE
US$’000
MERGER
RESERVE
US$’000
SHARE-
OPTION
RESERVE
US$’000
SHARE OF
ASSOCIATES’
RESERVES
US$’000
FOREIGN-
EXCHANGE
RESERVE
US$’000
At 1 January 2019
31,370
549
4,248
766
1,188
15,434
Profit for the financial year
Exchange differences
Retirement-benefit
obligations
Issue of shares
Share buy-back
Dividends paid
Dividends from associates
Share-based payments
Acquired from minority
Reclassification (note 28)
—
—
—
212
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
34
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
592
—
—
1,873
143
—
—
—
—
(1,036)
—
—
—
27
—
(16)
—
—
—
—
—
—
—
—
TOTAL
US$’000
RETAINED
EARNINGS
US$’000
53,582
314,223
1,873
128
—
212
34
—
4,460
262
647
—
(2,286)
(12,364)
(1,036)
1,036
592
—
—
51
(9,834)
(2,056)
At 31 December 2019
31,582
550
4,282
766
1,780
16,414
11
55,385
294,139
At 1 January 2018*
31,221
Exchange differences
Retirement-benefit
obligations
Issue of shares
Share-based payments
Share buy-back
Group reconstruction
Reclassification (note 28)
Dividends from associates
Profit for the financial year
Dividends paid
—
—
149
—
—
—
—
—
—
—
551
(2)
—
—
—
—
—
—
—
—
—
4,211
766
722
15,802
(421)
52,852
322,055
—
—
—
—
37
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
466
—
—
—
—
—
—
(270)
448
176
(569)
—
—
—
—
—
—
(1,568)
1,470
—
—
—
—
—
—
—
—
—
—
—
149
466
37
—
—
(1,568)
1,470
621
—
24
(2,733)
(9)
2,056
1,568
3,935
—
(12,725)
At 31 December 2018*
31,370
549
4,248
766
1,188
15,434
27
53,582
314,223
* The revaluation reserve has been restated for the treatment of deferred profit on land sales (see note 15). The previous treatment resulted in a
reserve release (and a corresponding debit to other comprehensive income) each year, but these amounts are no longer required under the revised
treatment. In addition, a historic deficit on the revaluation reserve of US$1.3 million has been transferred to retained earnings. The nature and
purpose of each reserve is indicated by its name.
28 Non-controlling interests
At 1 January
Share of profit in the year
Dividends paid
Reclassification*
Share of retirement benefit credited to other comprehensive income
Minority acquisition (note 12)
Acquisition
At 31 December
2019
US$’000
21,303
1,137
—
2,056
49
(15,583)
—
8,962
2018
US$’000
29,961
1,756
(8,105)
(2,056)
90
—
(343)
21,303
* At 31 December 2018 US$2,056,000 was reclassified from non-controlling interests to retained earnings to reflect the Group’s effective interest
in its operating subsidiaries at that point. It was subsequently reclassified back to non-controlling interests during 2019 when ownership was
transferred to the Group’s new minority partner (see note 12).
80
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
28 Non-controlling interests continued
In accordance with Indonesian law, the Group is required to have a minority partner in each of its plantation operations. The minority share of profit
for the year and Group equity, allocated by operation, is shown in the following table:
Kota Bangun
Bangka
Pangkatan Group
Bumi Mas
Musi Rawas
Simpang Kiri
29 Note to the consolidated cash-flow statement
Operating profit
Biological (gain)/loss
Disposal of property, plant and equipment
Release of deferred profit
Depreciation of property, plant and equipment
Amortisation of intangible assets
Remeasurement of investment
Retirement-benefit obligations
Share-based payments
Dividends from associated companies
Operating cash flows before movements in working capital
(Decrease)/increase in inventories
Increase in receivables
Increase/(decrease) in payables
Cash generated by operating activities
Income tax paid
Interest paid
Net cash generated by operating activities
PROFIT
US$’000
78
512
885
(128)
(288)
78
1,137
2019
EQUITY
US$’000
1,747
2,473
2,777
1,935
(24)
54
8,962
PROFIT
US$’000
(108)
935
1,198
(356)
(75)
162
1,756
2018
EQUITY
US$’000
1,674
1,931
14,148
—
319
3,231
21,303
2019
US$’000
2018
US$’000
16,124
19,478
(927)
(7)
(204)
703
13
(164)
15,340
14,474
112
(1)
1,846
643
580
33,506
1,811
(545)
6,986
41,758
(6,009)
(3,747)
32,002
—
(10)
2,122
490
1,568
38,674
(2,421)
(3,920)
(2,092)
30,241
(7,514)
(1,430)
21,297
81
NOTES TO THE CONSOLIDATED ACCOUNTS continued
30 Analysis of movements in net (debt)/funds
CASH AND
CASH
EQUIVALENTS
US$’000
CURRENT
ASSET
INVESTMENTS
US$’000
BORROWINGS
DUE WITHIN
ONE YEAR
US$’000
BORROWINGS
DUE AFTER
ONE YEAR
US$’000
TOTAL
US$’000
At 1 January 2019
21,626
2,502
(20,883)
(9,173)
(5,928)
Net increase in cash and cash
equivalents
New borrowings
Repayment of borrowings
Change in deposits
Reclassification
Foreign-exchange movements
At 31 December 2019
4,003
—
—
—
—
318
25,947
—
—
—
(1,342)
—
—
1,160
—
(35,000)
46,134
—
(18,455)
(133)
(28,337)
—
4,003
(75,419)
(110,419)
—
—
18,455
—
(66,137)
46,134
(1,342)
—
185
(67,367)
At 1 January 2018
113,910
6,913
(9,159)
(30,285)
81,379
Net decrease in cash and cash
equivalents
Repayment of borrowings
Change in deposits
Reclassification
Foreign-exchange movements
At 31 December 2018
31 Financial instruments
(91,542)
—
—
—
(742)
21,626
—
—
(4,411)
—
—
2,502
—
9,159
—
(21,112)
229
(20,883)
—
—
—
21,112
—
(9,173)
(91,542)
9,159
(4,411)
—
(513)
(5,928)
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 debt of US$67,367,000 (2018 US$5,928,000) and equity attributable to the owners of the parent
Company of US$358,724,000 (2018 US$377,033,000). The board intends to fund its continuing Indonesian expansion by a
combination of the Group’s cash and other liquid resources, 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 held at amortised cost, with the
exception of its other investments shown in note 16, which are classified as financial assets at fair value through profit or loss.
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 significant
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.
82
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
31 Financial instruments continued
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
Sterling
Malaysian Ringgit
Australian Dollar
2019
US$’00
13,304
13,493
152
158
—
2018
US$’000
10,606
10,913
1,933
496
180
27,107
24,128
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 and 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 Indonesian Rupiah. Management estimates
that a 10% weakening of the US Dollar against the Indonesian Rupiah would result in a fall in profit for the year and net assets of
US$5.4 million (2018 US$5.2 million).
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 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. Group borrowings
are at variable rates of interest linked to LIBOR, and so is exposed to changes in underlying interest rates. Based on current
borrowing, management estimates that for every 1% increase or decrease in interest rates, Group profit for the year and net
assets would decrease or increase by US$0.8 million (2018 US$0.3 million).
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 22.
32 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 directors’ remuneration
report on page 49. The directors’ participation in the executive share-option schemes and long-term incentive scheme is disclosed
on page 50.
The Group received dividends from its associated companies during the year. These are set out in note 15.
The Group made finance available to its new minority partner during the year. This is set out in note 19.
83
PARENT-COMPANY BALANCE SHEET
As at 31 December 2019
COMPANY NUMBER: 1555042
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
iv
v
vi
vii
viii
ix
ix
2019
US$’000
858
15,799
16,657
162,225
5,375
167,600
184,257
8,232
159,368
—
8,232
2018
US$’000
871
15,799
16,670
180,202
2,091
182,293
198,963
3,215
179,078
2,449
5,664
176,025
193,299
9,200
38,887
127,938
176,025
9,228
38,049
146,022
193,299
The Company recorded a loss for the year of US$3,485,000 (2018 profit US$115,929,000).
The financial statements on pages 84 to 89 were approved by the board of directors on 31 March 2020 and signed on its
behalf by
Tristan Price
Chief executive
Company number: 1555042
Matthew Coulson
Finance director
84
M.P. EVANS GROUP PLCANNUAL REPORT 2019
PARENT-COMPANY
FINANCIAL STATEMENTS
PARENT-COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Loss for the year
Total comprehensive expense for the year
Issue of share capital
Dividends
Share buy-back
Credit to equity for equity-settled
share-based payments
Transactions with owners
At 1 January 2019
At 31 December 2019
Profit for the year
Total comprehensive expense for the year
Issue of share capital
Dividends
Share buy-back
Credit to equity for equity-settled
share-based payments
Transactions with owners
At 1 January 2018
At 31 December 2018
SHARE
CAPITAL
US$’000
OTHER
RESERVES
US$’000
—
—
6
—
(34)
—
(28)
9,228
9,200
—
—
10
—
(37)
—
(27)
9,255
9,228
—
—
212
—
34
592
838
38,049
38,887
—
—
149
—
37
466
652
37,397
38,049
RETAINED
EARNINGS
US$’000
(3,485)
(3,485)
—
(12,364)
(2,286)
51
(14,599)
146,022
127,938
115,929
115,929
—
(12,725)
(2,733)
24
(15,434)
45,527
146,022
TOTAL
US$’000
(3,485)
(3,485)
218
(12,364)
(2,286)
643
(13,789)
193,299
176,025
115,929
115,929
159
(12,725)
(2,733)
490
(14,809)
92,179
193,299
85
NOTES TO THE PARENT-COMPANY ACCOUNTS
For the year ended 31 December 2019
i Significant accounting policies
Basis of accounting
M.P. Evans Group PLC is a public limited company incorporated in the United Kingdom and registered in England and Wales, and
the address of its registered office is given on page 96. The Group’s principal activities are shown in the strategic report on
page 12. 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 Company is domiciled in the UK.
The principal accounting policies have been consistently applied and are summarised below. The directors have concluded
that the functional currency is the US Dollar, reflecting the primary economic environment in which the Company operates. The
presentational currency for the Company accounts is also 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, 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 Company’s results or financial position.
Going concern
The financial statements have been prepared on a going-concern basis. The directors have conducted a review of projected cash
flows, concluding that the Company has sufficient projected funds to continue its business in the medium term. Further details
are given in the report of the directors on page 42.
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, reduced by appropriate allowances for expected credit losses.
Cash and cash-equivalents
These include cash in hand and deposits held with banks with original maturities of three months or less.
Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost. Borrowings are
recorded at the proceeds received, net of direct issue costs.
Critical accounting judgements and key sources of estimation uncertainty
The critical judgements and accounting estimates relevant to the consolidated financial statements are shown in note 3 to the
consolidated financial statements on page 65. The directors have concluded that there are no critical judgements and accounting
estimates in the preparation of the parent-Company accounts.
86
M.P. EVANS GROUP PLCANNUAL REPORT 2019 PARENT-COMPANY
NOTES TO THE PARENT-COMPANY ACCOUNTS
ii Result 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 2019 of US$3,485,000 (2018 profit
US$115,929,000). The Company’s main source of income is dividends from subsidiary companies.
The auditors’ remuneration for audit services was US$25,000 (2018 US$23,000).
iii Employees
Employee costs during the year
Wages and salaries
Social security costs
Pension costs
Shared-based payments
2019
US$’000
2018
US$’000
1,608
208
55
219
2,090
1,562
344
58
152
2,116
As recorded in the directors’ remuneration report on page 49, wages and salary costs include bonuses paid to the directors in
respect of 2019 and 2018.
Average monthly number of persons employed
Staff
Directors
iv Property, plant and equipment
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge for the year
Disposals
At 31 December 2019
Net book value at 31 December 2019
Net book value at 31 December 2018
NUMBER
NUMBER
4
3
7
4
3
7
LAND AND
BUILDINGS
US$’000
PLANT,
EQUIPMENT
& VEHICLES
US$’000
834
—
—
834
—
—
—
—
834
834
226
9
(59)
176
189
20
(57)
152
24
37
TOTAL
US$’000
1,060
9
(59)
1,010
189
20
(57)
152
858
871
87
NOTES TO THE PARENT-COMPANY ACCOUNTS continued
v
Investments in subsidiaries
Subsidiary undertakings
At 1 January and 31 December 2019
The following companies are the principal direct subsidiary companies of M.P. Evans Group PLC:
M.P. Evans & Co. Limited
Sungkai Holdings Limited
US$’000
15,799
HOLDING
%
100
100
COUNTRY OF
OPERATION
UK
UK
Holdings are all of ordinary shares. The directors believe the carrying value of investments is supported by their underlying net
assets. Details of all subsidiary companies are shown on page 90.
vi Trade and other receivables
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
vii Trade and other payables
Borrowings
Other creditors
viii Called-up share capital
See note 25 to the consolidated financial statements.
2019
US$’000
2018
US$’000
161,681
179,519
445
99
588
95
162,225
180,202
2019
US$’000
7,449
783
8,232
2018
US$’000
2,449
766
3,215
88
M.P. EVANS GROUP PLCANNUAL REPORT 2019 PARENT-COMPANY
NOTES TO THE PARENT-COMPANY ACCOUNTS
ix Reserves
SHARE-
PREMIUM
ACCOUNT
US$’000
CAPITAL-
REDEMPTION
RESERVE
US$’000
MERGER
RESERVE
US$’000
OTHER
RESERVES
US$’000
TOTAL
US$’000
RETAINED
EARNINGS
US$’000
At 1 January 2019
31,370
4,057
1,434
1,188
38,049
146,022
Issue of shares
Share buy-back
Share-based payments
Profit for the year
Dividends*
212
—
—
—
—
—
34
—
—
—
—
—
—
—
—
—
—
592
—
—
212
34
592
—
—
At 31 December 2019
31,582
4,091
1,434
1,780
38,887
—
(2,286)
51
(3,485)
(12,364)
127,938
At 1 January 2018
31,221
4,020
1,434
Issue of shares
Share buy-back
Share-based payments
Loss for the year
Dividends*
149
—
—
—
—
—
37
—
—
—
—
—
—
—
—
722
—
—
466
—
—
149
37
466
—
—
At 31 December 2018
31,370
4,057
1,434
1,188
38,049
* See note 10 to the consolidated financial statements.
37,397
45,527
—
(2,733)
24
115,929
(12,725)
146,022
89
SUBSIDIARY AND ASSOCIATED UNDERTAKINGS
As at 31 December 2019
SUBSIDIARY UNDERTAKINGS
Details of the subsidiary undertakings as at 31 December 2019 are as follows:
NAME OF SUBSIDIARY
PT Prima Mitrajaya Mandiri
PT Teguh Jayaprima Abadi
PT Perkebunan Tenera Muarawis
PT Bumi Mas Agro
PT Gunung Pelawan Lestari
PT Evans Lestari
PT Pangkatan Indonesia
PT Bilah Plantindo
PT Sembada Sennah Maju
PT Simpang Kiri Plantation Indonesia
% OF
SHARES
HELD
2019
% OF
SHARES
HELD
2018
COUNTRY OF
INCORPORATION
COUNTRY OF
OPERATION
FIELD OF ACTIVITY
95
95
51
95
90
95
95
95
95
95
95
95
51
95
90
80
80
80
80
80
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
Indonesia
Production of CPO and PK
PT Evans Indonesia
100
100
Indonesia
Indonesia
Provision of agronomic and
management-consultancy
services
Production of oil-palm ffb and
property development
Bertam Consolidated Rubber
Company Limited
M.P. Evans & Co. Limited*
Sungkai Holdings Limited*
Sunrich Plantations Pte Ltd
PT Surya Makmur
PT Aceh Timor Indonesia
100
100
England and Wales
Malaysia
100
100
100
95
95
100
100
100
75
75
England and Wales
United Kingdom Holding company
England and Wales
United Kingdom Holding company
Singapore
Indonesia
Indonesia
Singapore
Holding company
Indonesia
Holding company
Indonesia
Holding company
The shareholdings in the above companies represent ordinary shares. Other than the companies marked *, all shareholdings are held
indirectly.
The registered offices for all Indonesian companies is Graha Aktiva, Suite 1001, Jl HR Rasuna Said Blok X-1 Kav 03, Jakarta 12950
Indonesia, for Sunrich Plantations Pte Ltd is 50 Raffles Place #06-00, Singapore Land Tower, Singapore 048623, and for all UK
companies is the Group’s registered office as shown on page 96.
KEY: CPO = crude palm oil, PK = palm kernels, ffb = fresh fruit bunches
ASSOCIATED UNDERTAKINGS
Details of the associated undertakings as at 31 December 2019 are as follows:
UNLISTED
ISSUED, FULLY-
PAID SHARE
CAPITAL
%
HELD
COUNTRY OF
INCORPORATION
COUNTRY OF
OPERATION
FIELD OF ACTIVITY
PT Kerasaan Indonesia
Rp 138.07m
Bertam Properties Sdn. Berhad.
RM 60.00m
38
40
Indonesia
Malaysia
Indonesia
Production of oil-palm ffb
Malaysia
Property development
The registered office of PT Kerasaan Indonesia is Forum Nine Building, 10th Floor, Suite 1-11 Jl.Imam Bonjol No.9, Medan-20112, North
Sumatra, Indonesia and the registered office of Bertam Properties Sdn. Berhad is 1st Floor, Standard Chartered Bank Chambers, Lebuh
Pantai, 10300 Pulau Pinang, Malaysia.
90
M.P. EVANS GROUP PLCANNUAL REPORT 2019
OTHER INFORMATION
ANALYSIS OF INDONESIAN PLANTATION LAND AREAS
As at 31 December 2019
The information on pages 91 to 96 does not form part of the audited financial statements.
PLANTED HECTARAGE1
Subsidiaries – oil palm
Kota Bangun
Bumi Mas
Bangka
Musi Rawas2
Pangkatan group
Simpang Kiri
Total
Group share of subsidiaries’ land
Associates – oil palm
Kerasaan
Group share of associates’ land
Memorandum:
Group share of subsidiaries’ land and
share of associates’ land
Subsidiaries’ land and Group share of
associates’ land
Notes
GROUP
SCHEME SMALLHOLDERS
OWNERSHIP
%
MATURE
HA
IMMATURE
HA
TOTAL
HA
MATURE
HA
IMMATURE
HA
TOTAL
HA
4,299
1,175
2,849
886
335
191
1,032
1,460
4,634
1,366
3,881
2,346
9,209
3,018
12,227
95
95
90
95
95
95
9,546
6,443
5,604
1,763
6,404
1,703
31,463
29,610
2,317
880
1,092
1,049
531
3,966
565
746
7,949
7,526
10,638
7,492
6,135
5,729
6,969
2,449
39,412
37,136
-
-
2,317
880
30,490
7,526
38,016
32,343
7,949
40,292
1. All of the Group’s areas in Bangka, the Pangkatan group, Simpang Kiri and Bumi Mas have a final land license (“HGU”), as does all
of the associate’s area at Kerasaan. At Kota Bangun the Group has HGUs covering 10,800 hectares; the remaining areas here and at
Musi Rawas are in the process of obtaining HGUs, and have the necessary operating and development licences.
2. The board’s current estimate is 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 smallholder co-operatives.
91
ANALYSIS OF GROUP EQUITY VALUE
As at 31 December 2019
The information in the following table provides a directors’ estimate of the Group equity value at 31 December 2019
utilising, except where indicated, an independent valuation of the Group’s properties performed at the end of 2019.
OWNERSHIP
%
PLANTED
AREA
HA
TOTAL MARKET
VALUE
US$’000
MARKET VALUE
PER PLANTED
HECTARE
US$
MARKET VALUE
ATTRIBUTABLE
TO GROUP
US$’000
INDONESIAN OIL PALM
PLANTATIONS
Group
Kota Bangun1
Bumi Mas
Bangka1
Musi Rawas
Pangkatan group1
Simpang Kiri
Smallholders
Kota Bangun
Bumi Mas
Bangka
Musi Rawas
Associates
Kerasaan
Total Indonesia
MALAYSIAN PROPERTY
Bertam Estate3
Bertam Properties
Total Malaysia
Net debt2
Other assets and liabilities4
Total equity value
Equity value (£ per share5)
Notes:
95
95
90
95
95
95
95
95
90
95
38
10,638
7,492
6,135
5,729
6,969
2,449
39,412
4,634
1,366
3,881
2,346
12,227
220,500
128,000
121,800
109,800
112,600
27,900
720,600
26,100
5,900
14,100
15,500
61,600
20,700
17,100
19,900
19,200
16,200
11,400
18,300
5,600
4,300
3,600
6,600
5,000
2,317
33,100
14,300
100
40
n/a
n/a
209,475
121,600
109,620
104,310
106,970
26,505
678,480
24,795
5,605
12,690
14,725
57,815
12,578
748,873
21,990
50,000
71,990
(67,686)
38,498
791,675
11.01
1. Market value per planted hectare includes value of mills on the related estates.
2. Net debt is taken as cash and other liquid resources less borrowings from the 31 December 2019 balance sheet, attributable to the
owners of M.P. Evans Group PLC.
3. Bertam Estate has been included at a directors’ estimate of its value taking into account prevailing property market conditions.
4. Other assets and liabilities are taken as net assets minus plantation and property-related assets, minus net cash from the 31
December 2019 balance sheet, attributable to the owners of M.P. Evans Group PLC.
5. Amount per share is calculated using the year-end exchange rate and year-end shares in issue (see note 25).
92
M.P. EVANS GROUP PLCANNUAL REPORT 2019 FIVE-YEAR SUMMARY
Production
Crude palm oil
Palm kernels
Crops
Oil-palm fresh fruit bunches
Own crops
Scheme smallholder crops
Independent smallholder crop purchased
Indonesian associated-company estates
Average sale prices
Crude palm oil – Rotterdam cif per tonne
Exchange rates
US$1 = Indonesian Rupiah – average
– year end
US$1 = Malaysian Ringgit – average
– year end
£1 = US Dollar – average
– year end
OTHER INFORMATION
2019
Tonnes
2018
Tonnes
2017
Tonnes
2016
Tonnes
2015
Tonnes
231,900
53,000
192,500
43,500
154,000
33,500
125,600
26,200
112,000
22,700
663,300
172,100
166,100
1,001,500
54,200
US$
566
14,142
13,883
4.14
4.09
1.28
1.32
573,000
149,600
106,500
829,100
51,700
US$
598
14,234
14,380
4.04
4.13
1.34
1.27
434,500
101,300
118,300
654,100
50,000
US$
714
13,382
13,568
4.30
4.05
1.29
1.35
399,300
92,400
52,000
543,700
384,000
US$
700
13,303
13,473
4.14
4.49
1.35
1.24
US$’000
83,864
24,384
19,215
423,900
100,700
37,700
562,300
382,100
US$
622
13,390
13,785
3.91
4.29
1.53
1.47
US$’000
72,528
15,059
6,769
Revenue
Gross profit
Profit before tax
US$’000
US$’000
US$’000
119,341
17,044
12,780
108,553
26,525
18,348
116,536
36,246
35,070
Basic earnings per share
11.6
9.9
164.9
56.1
43.4
US cents
US cents
US cents
US cents
US cents
Dividends per share:
Normal
Special
Total
PENCE
PENCE
PENCE
PENCE
PENCE
17.75
—
17.75
17.75
—
17.75
17.75
10.00
27.75
15.00
5.00
20.00
8.75
—
8.75
US$’000
US$’000
US$’000
US$’000
US$’000
Equity attributable to the owners of
M.P. Evans Group PLC
Net cash generated by operating activities
358,724
32,002
377,033
21,297
387,034
20,723
323,400
22,888
300,009
20,231
93
NOTICE OF MEETING
The board is monitoring closely the evolving Covid-19 situation and the related guidelines from governmental authorities,
including with regard to the potential impact on attendance at the AGM. In the light of the recent government prohibition of
gatherings of more than two persons we are proposing that two directors should be the sole persons attending the meeting
and that no admission of any other person will be permitted. The government has stated that it will review the prohibition in
mid-April and we shall notify shareholders of any resulting change to these plans on our website www.mpevans.co.uk. Given
the current prohibition on attendance at the AGM, we would strongly urge shareholders to submit proxy votes as described
below. Delivery of a proxy vote will not preclude shareholders from attending and voting in person at the AGM should the
government withdraw the prohibition so that we are able to allow admission by the time of the meeting.
NOTICE IS HEREBY GIVEN that the annual general meeting of M.P. Evans Group PLC will be held at 3 Clanricarde Gardens,
Tunbridge Wells, TN1 1HQ on Friday 5 June 2020 at 10am for the following purposes:
AS ORDINARY BUSINESS
RESOLUTION ON
FORM OF PROXY
1
2
3
4
5
6
7
8
9
To receive and consider the report of the directors and the audited consolidated financial statements
for the year ended 31 December 2019.
To receive and consider the directors’ remuneration report as set out in the annual report and accounts
for the financial year ended 31 December 2019.
To elect Darian McBain as a director.
To re-elect Philip Fletcher as a director.
To re-elect Jock Green-Armytage as a director.
To re-elect Bruce Tozer as a director.
To re-elect Matthew Coulson as a director.
To declare a final dividend.
To appoint BDO LLP as auditors and to authorise the directors to determine their remuneration.
No 1
No 2
No 3
No 4
No 5
No 6
No 7
No 8
No 9
AS SPECIAL BUSINESS
To consider and, if thought fit, pass the following resolution as a special resolution:
RESOLUTION ON
FORM OF PROXY
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) the maximum number of shares hereby authorised to be purchased is 5,440,381;
b) the minimum price which may be paid for each share is 10p (exclusive of expenses);
c) 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
d) the authority hereby conferred shall expire at the conclusion of the next annual general meeting of
the Company or on 30 June 2021 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
31 March 2020
94
M.P. EVANS GROUP PLCANNUAL REPORT 2019
OTHER INFORMATION
NOTES
Please note that, as stated above, pursuant to the current government ban of public gatherings two directors will attend the meeting
to form a quorum thereat and that no admission of any other person will be permitted. The government has stated that it will review
the prohibition in mid-April and we shall notify shareholders of any resulting change to these plans on our website www.mpevans.co.uk.
The notes below are to be construed as subject to this restriction.
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 (but subject to the restrictions
stated above). A proxy need not be a member of the Company. Appointment of a proxy will not subsequently preclude a member
from attending and voting at the meeting in person if he or she so wishes. A member may appoint more than one proxy provided
that each proxy is appointed to exercise the rights attached to different shares held by the member. The form of proxy contains
instructions on how to appoint more than one proxy.
2) A form of proxy for use at the meeting is enclosed. Please return the form of proxy as soon as possible. To be valid, it must be
received by post or (during normal business hours only) by hand at the office of the registrars, Computershare Investor Services
PLC, at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ no later than 12 noon on 3 June 2020 (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). Alternatively,
you may appoint a proxy electronically.
If you wish to submit your form of proxy via the internet, you will need your Control Number, Shareholder Reference Number
(‘SRN’) and Personal Identification Number (‘PIN’) which are printed on the Form of Proxy. To appoint a proxy via the internet,
you should log on to the Computershare website at www.investorcentre.co.uk/eproxy. You will be asked to agree to the terms
and conditions for electronic proxy appointment. It is important that you read these terms and conditions as they set out the
basis on which proxy appointment via the internet shall take place. This electronic address is provided only for the purpose of
communications relating to electronic appointment of proxies.
3) The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another person and who have
been nominated to receive communications from the Company in accordance with section 146 of the Companies Act 2006
(“nominated persons”). Nominated persons may have a right under an agreement with the registered shareholder who holds the
shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not
have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person
holding the shares as to the exercise of voting rights.
4) Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those
shareholders registered on the register of members of the Company at 11.00 p.m. on 3 June 2020 (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 31 March 2020, the Company’s issued share capital consisted of 54,403,818 shares carrying one vote each. Therefore the
total number of voting rights in the Company as at that date was 54,403,818.
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 (but please note that this will not apply whilst the prohibition on persons travelling to the Company’s
registered office remain in force).
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.
9) Members have the right to require notice of a resolution to be moved or a matter to be included in the business of the meeting.
10) Given the restrictions on attendance at the meeting as stated above, members are invited to send any questions which they may
have on matters concerning the business of the meeting by post to the Company’s registered office (marked for the attention of
the Company Secretary) or by email to katya.merrick@mpevans.co.uk. The Company will endeavour to respond to such requests
but no answer need be given if: (i) to do so would involve the disclosure of confidential information; (ii) the answer has already
been given on a website in the form of an answer to a question; or (iii) it is undesirable in the interests of the Company that the
question be answered.
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.
95
M.P. EVANS GROUP PLC
ANNUAL REPORT 2019
OFFICERS, PROFESSIONAL ADVISERS & REPRESENTATIVES
EXECUTIVE DIRECTORS
Peter E Hadsley-Chaplin,
MA MBA
Chairman
SECRETARY AND REGISTERED OFFICE
Katya Merrick
3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ
Company number: 1555042
t +44 (0)1892 516 333
e katya.merrick@mpevans.co.uk
Tristan R J Price, MA MSc FCA
w www.mpevans.co.uk
Chief executive
Matthew H Coulson, BA FCA
Finance director
INDONESIAN REGIONAL OFFICE
PT Evans Indonesia
Gedung Graha Aktiva, Suite 1001, Jl HR Rasuna Said Blok X-1 Kav 03,
NON-EXECUTIVE DIRECTORS
Jakarta 12950
Jock M Green-Armytage,
BA MBA *†
Senior independent, chair
of audit and remuneration
committee
Philip A Fletcher, FCA *
MANAGING AGENT IN MALAYSIA
Straits Estates Sdn. Berhad
Loke Mansion, 147 Lorong Kelawei, 10250 Penang
INDEPENDENT AUDITORS
BDO LLP
2 City Place, Beehive Ring Road, Gatwick, West Sussex RH6 0PA
Bruce C J Tozer, BSc MSc MBA *†
Independent
REGISTRARS
Computershare Investor Services PLC
Darian McBain, BE MSc PhD *†
Independent
* Member of the audit committee
† Member of the remuneration
committee
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
t +44 (0)3707 071 176
w www.computershare.com
PRINCIPAL BANKERS
OCBC Bank
18 Jalan Tun Perak, 50050 Kuala Lumpur, Malaysia
AmBank Group
55 Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia
NatWest
89 Mount Pleasant Road, Tunbridge Wells, Kent TN1 1QJ
NOMINATED ADVISER AND JOINT BROKER
Peel Hunt LLP
Moor House, 120 London Wall, London EC2Y 5ET
JOINT BROKER
finnCap
60 New Broad Street, London EC2M 1JJ
SOLICITORS
Hogan Lovells International LLP
Atlantic House, 50 Holborn Viaduct, London EC1A 2FG
PUBLIC RELATIONS ADVISERS
Hudson Sandler LLP
25 Charterhouse Square, London EC1M 6AE
96
3 Clanricarde Gardens
Tunbridge Wells
Kent TN1 1HQ
United Kingdom
t +44 (0)1892 516 333
e enquiries@mpevans.co.uk
w mpevans.co.uk