M.P. Evans Group plc
Annual Report 2022

Plain-text annual report

s t n e m e t a t S l a i c n a n i F & t r o p e R l a u n n A 2 2 2 2 0 0 2 2 A N N U A L R E P O R T For the year ended 31 December 2022 L E BRATIN G E C 150 VANS G R O U P P LC years M . P . E FROM THE CHAIRMAN “As we celebrate our 150-year history, the Group has produced another set of excellent operational and financial results. Crop and production have increased once again, and we have reached the milestone of processing 1.5 million tonnes of fresh fruit bunches. The Group remains focused on long-term and sustainable growth, and has both acquired further planted hectarage and started production at another Group palm-oil mill since the end of the year. Profit and cash generation have remained strong, the Group has eliminated net debt, and now has net funds in place to support continued investment and shareholder returns. The board is recommending a final dividend of 30p per share, bringing total dividends for the year to 42.5p per share, up more than 20% from the 35p normal dividends paid in respect of the previous year, and a further step forward in the Group’s long-standing progressive dividend policy.” Peter Hadsley-Chaplin L E BRATIN G E C 150 VANS G R O U P P LC years M . P . E CONTENTS 1 Group financial highlights 2 Celebrating 150 years of M.P. Evans 4 Chairman’s statement 7 Operational highlights 8 Map of estates 10 Market information 12 The Group’s business model STRATEGIC REPORT 14 Strategy 18 Results and financial position 20 Operations: Indonesian palm oil 28 Operations: Malaysian property 30 Risk management SUSTAINABILITY 34 TCFD disclosure summary 38 Communities REPORT OF THE DIRECTORS 42 Board of directors 48 Corporate governance 55 Directors’ remuneration report FINANCIAL STATEMENTS 60 Independent auditors’ report 66 Consolidated income statement 67 Consolidated statement of comprehensive income 68 Consolidated balance sheet 69 Consolidated statement of changes in equity 70 Consolidated cash-flow statement 71 Notes to the consolidated accounts PARENT COMPANY 92 Parent-Company balance sheet 94 Notes to the parent-Company accounts OTHER INFORMATION 98 Subsidiary and associated undertakings 99 Analysis of Indonesian plantation land areas 100 Analysis of Group equity value 101 Five-year summary 102 Notice of meeting 104 Officers, professional advisers and representatives 104 Glossary Front cover image: Mature palms on Bangka estate GROUP FINANCIAL HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS 18% INCREASE IN REVENUE 2022 US$ 326.9m 2021 US$ 276.6m 21% INCREASE IN OPERATING CASH GENERATED 2022 US$ 132.2m 2021 US$ 109.2m 7%* DECREASE IN BASIC EARNINGS PER SHARE 2022 108.0 pence 2021 115.6 pence 5% INCREASE IN GROSS PROFIT 2022 US$ 109.2m 2021 US$ 103.6m 11%* DECREASE IN OPERATING PROFIT 2022 US$ 101.6m 2021 US$ 114.6m 10% INCREASE IN TOTAL EQUITY 2022 US$ 488.8m 2021 US$ 445.0m 15%* DECREASE IN PROFIT FOR THE YEAR 2022 US$ 78.4m 2021 US$ 91.8m 21% INCREASE IN NORMAL DIVIDEND PER SHARE 2022 42.5 pence 2021 35.0 pence NET CASH SURPLUS 2022 NET CASH US$ 33.5 million 2021 NET DEBT US$ 5.4 million *Note on prior-year figures Included in the 2021 results was a one-off gain arising on land disposal, increasing operating profit by US$13.9 million, profit for the year by US$12.6 million, and earnings per share by 9.2p. 11 CELEBRATING 150 YEARS OF M.P. EVANS KEY MILESTONES AND DEVELOPMENTS IN THE HISTORY OF OUR GROUP EARLY 1870’s Commencement of business, in tea Matthew Pennefather Evans, founding partner, starts business as UK merchant, importing tea from Ceylon LATE 1880’s – 1900 Expansion of business Partnership helps pioneers raise capital on London market for new tea plantations and acts as company secretary and UK selling agent for their produce Matthew Pennefather Evans divides time between UK and Asia EARLY 1900’s Introduction of rubber 1902: Matthew Pennefather Evans dies 1905: New partnership formed, bearing M.P. Evans name New rubber companies operating in Malaya and The Dutch East Indies added to client portfolio 2 1970’s A shift to oil palm Exit from Sri Lankan tea following change in Sri Lankan government policy: Start of shift from rubber to oil palm in SE Asia as the superior financial rewards from oil palm become increasingly clear 1960’s Indonesian developments 1963: Indonesian government nationalises all foreign owned plantation land 1968: Indonesian government grants ownership back – no longer on a freehold, but on a (30-year) leasehold basis Appointment of SIPEF as managing agents for grouping’s Indonesian plantations 1950’s Share acquisitions M.P. Evans & Co Limited begins acquiring shares in its client companies which in turn own shares in M.P. Evans & Co Limited; early beginnings of ‘crossholding’ structure, which later becomes known as the ‘M.P. Evans grouping’ 1940’s From Partnership to Company 1941–1943: Partnership dissolved. M.P. Evans & Co Limited formed Initial shareholders are twelve of its client companies and its first five directors 1947: Edwin Hadsley-Chaplin joins company, retiring over 50 years later. He plays a seminal role in developing the Group and protecting it from takeover Edwin Hadsley-Chaplin The Hadsley-Chaplin/Fletcher family remains actively involved today M.P. EVANS GROUP PLCANNUAL REPORT 2022CELEBRATING 150 YEARS OF M.P. EVANS KEY MILESTONES AND DEVELOPMENTS IN THE HISTORY OF OUR GROUP 1980’s UK, Malaysian and Australian developments 1981: Rowe Evans Investments PLC (“REI”) formed following merger with companies under the Rowe White tea agency, which had previously merged with M.P. Evans & Co Limited. REI is listed on the London Stock Exchange Our Group today Our Group today now owns 42,000 hectares of sustainable oil palm in Indonesia and manages 14,000 hectares on behalf of its scheme smallholders. It owns six palm-oil mills and employs over 11,500 staff We aim to continue to grow, responsibly, sustainably and profitably L E BRATIN G E C M.P. Evans (Malaysia) Sdn. Berhad formed to manage grouping’s Malaysian estates Expansion into Australian agriculture to create geographical and commodity diversity within the Group; first sheep, wool and arable, then irrigated cotton and finally beef cattle 1990’s Malaysian property development Start of Malaysian property development after 2,000 hectares of the grouping’s Bertam Estate is sold into a joint venture with two Malaysian partners A new town is developed over the ensuing 30 years, with approximately 200 hectares still to be developed today 2005 – 2016 Strategic initiative launched 2005: Grouping structure rationalised into single company: M.P. Evans Group PLC Strategic initiative to exit Malaysia by selling its small valuable estates for property development, using the proceeds to fund a major expansion of its sustainable plantation areas in Indonesia. Group joins Roundtable on Sustainable Palm Oil (“RSPO”) shortly after its formation P.T. Evans (Indonesia) formed K Chandra Sekaran joins Group P.T. Evans (Indonesia) takes over management of all its Indonesian estates 150 years VANS G R O U P P LC M . P . E 2016 – 2023 One country; one commodity Disposal of investments in Australian beef cattle and share of oil-palm joint venture in Indonesia to move the Group towards its strategic objective of having operations in one country, in one commodity, in operations it controls; sustainable Indonesian palm oil 3 CHAIRMAN’S STATEMENT As we celebrate our 150-year anniversary, we also celebrate the milestone of processing over 1.5 million tonnes of fresh fruit bunches (“ffb”). This is a significant achievement and demonstrates the benefits of the long-term investment made by the Group in its Indonesian operations, both in the development of high-quality planted areas and, more recently, in our own milling capacity. Peter Hadsley-Chaplin, Chairman RESULTS The Group achieved a gross profit on its environmental obligations. For average mill-gate price of US$854 per the first time in 2022, and in advance tonne, US$44 higher than in 2021. of US$109.2 million, higher than of a requirement to do so, the Group the US$103.6 million recorded is providing summarised disclosures in 2021, representing an all-time based on the Taskforce for Climate- record. Average palm-oil prices were related Financial Disclosures (“TCFD”) particularly strong once again in 2022 in this annual report, as shown on and these, combined with an increase pages 34 to 37. in production, offset some inflationary cost pressures, most notable in the fertiliser inputs required to maintain healthy and productive palms across our estates. With five palm-oil mills operational throughout the year, the Group was able to increase its own production and reduce its reliance on outside mills to process its crop. Since the year end, this reliance has reduced even further THE GROUP HAS ACHIEVED A GROSS PROFIT OF US$109.2 MILLION, HIGHER THAN THE US$103.6 MILLION RECORDED IN 2021, REPRESENTING AN ALL-TIME RECORD. Earnings per share were 108.0p, only a little lower than the 115.6p recorded in 2021. The previous year’s earnings were enhanced by the one-off profit recorded on the disposal of land in Malaysia to the Group’s joint-venture company, Bertam Properties Sdn Bhd, which accounted for 9.2p of earnings. In 2022, earnings expressed in sterling benefited from a comparatively weak pound during the year, offsetting, at least in part, the non-recurring land sale. The Group has continued to be significantly cash generative, with net operating cash generated of US$102.3 million in the year. This has enabled the Group to maintain with the opening, in February 2023, of Palm-oil prices were strong throughout capital investment, eliminate net debt, the Group’s sixth mill, located at the 2022, albeit with the cif Rotterdam price and continue to prioritise progressive Musi Rawas estate. The Group also in a wide band between US$895 and shareholder returns. increased the volume of its output sold US$1,990 per tonne. Prices spiked in the as sustainable palm oil or sustainable early part of the year at the outbreak palm kernels during the course of of war between Russia and Ukraine, DIVIDEND An interim dividend of 12.5p per share 2022, and sustainability premia for and softened somewhat in the second (2021 – 10p per share) was paid on the Group’s palm kernels increased half of the year, particularly following 4 November 2022, and the board is markedly during the year as demand a short-term export ban imposed recommending a final dividend of for related products increased. Overall, by the Indonesian government. The 30p per share (2021 – 25p per share). the Group received US$7.5 million in average cif Rotterdam price during This represents another year of sustainability income during the year, 2022 was US$1,345, and despite several increasing normal dividends, up by a 74% increase on the US$4.3 million changes to the Indonesian export taxes 7.5p from 2021, and a substantial in 2021. The Group remains committed and levies that were applied during increase of 93% from the amount paid to acting responsibly and focusing the year, the Group still achieved an two years ago. 4 M.P. EVANS GROUP PLCANNUAL REPORT 2022CHAIRMAN’S STATEMENT Dividends have accelerated in recent term scaling back of crop purchases The Group continues to develop its years as the Group’s operational from outside suppliers in the first project at Musi Rawas, including cash flows have strengthened due half of the year caused by the palm- building new housing, roads and other to the increasing maturity of the oil export ban, the overall level of infrastructure, as well as continuing to Group’s operations. The Group has purchases in the year increased by 4% plant further hectares of oil palm, all an unbroken track record, spanning to 340,600 tonnes, as the Group was of which are developed in accordance more than thirty years, of maintaining able to purchase outside crop for the with RSPO guidelines and with the or increasing dividends, and the Bumi Mas mill that was in operation agreement of the local community. As anticipated trend of increasing crop for its first whole year in 2022. the Group’s planted area increases and and production forms a sound basis for further dividend increases. 150-YEAR ANNIVERSARY During 2023 the Group is proud to be marking its 150-year anniversary, having traced its origins back to the early 1870s. An overview of the Group’s history, development and growth is included in this report on pages 2 and 3. The Group is holding several celebratory events, both in Indonesia and in the UK during the year, including an AGM at Mansion House in London followed by a celebratory lunch, to which shareholders are invited. Places for the lunch are limited and registration is required. Further information is included in the notice of meeting on page 102. OPERATIONAL DEVELOPMENTS The total crop processed by the Group increased by 11% in the year to just over 1.5 million tonnes. All of the Group’s own estates continued to be 87% OF THE GROUP’S 341,700 TONNES OF CRUDE-PALM-OIL (“CPO”) PRODUCTION CAME FROM THE GROUP’S OWN MILLS. With the Bumi Mas mill running throughout the year, the Group enjoyed the benefit of having five of its own mills in operation in 2022, and as a result 87% of the Group’s 341,700 tonnes of crude-palm- oil (“CPO”) production came from the Group’s own mills, the highest proportion that the Group has achieved to date. Work continued throughout the year on the construction of the mill at Musi Rawas, and this was commissioned in February 2023, meaning that the proportion of production in Group mills will increase once again in 2023. more productive, with crop increasing The average oil-extraction rate in operations become more established, securing further hectares for planting can become more expensive and more time consuming. However, during 2022, the Group was able to plant a further 585 hectares at Musi Rawas and remains on target to achieve a minimum total planted hectarage of 10,000 hectares. At the end of 2022, the Group managed 54,100 hectares of planted oil palm from its own and associated scheme- smallholder areas, 93% of which were mature and in harvest, and the average yield per mature planted hectare had increased to 23 tonnes. STRATEGIC DEVELOPMENTS The Group’s four strategic pillars of responsibility, excellence, growth and yield remain central to its day-to-day operations and its ongoing development. Further details are set out on page 17 of this report. The Group is committed to its sustainable oil-palm estates in Indonesia and to their maintenance and expansion. to 905,400 tonnes in the year Group mills decreased a small amount By investing for the long term, the (2021 – 809,700 tonnes). Once again, in 2022, from 23.3% to 22.9%. There in proportionate terms, the largest were several reasons for this, but Group has demonstrated that it is possible to develop projects in rural increase was achieved at Musi Rawas most notable were some particularly Indonesia which are run sustainably, in South Sumatra, where the Group’s wet conditions experienced during provide well-paid employment for a own crop exceeded 100,000 tonnes the course of 2022. These can large workforce, and offer high-quality in 2022 for the first time. This was an naturally result in slight reductions estate facilities including housing, encouraging result in anticipation of in extraction rates, but can also medical, educational and other the start of processing at the Group’s give rise to some harvesting and services. Those estates are designed own mill in early 2023. Crop from the transportation challenges, and to be part of their local communities, Group’s associated scheme small- oil-extraction rates are sensitive to particularly through the development holders went up to 265,700 tonnes, both optimum ripeness standards and and planting of valuable scheme- an increase of 16%. Despite a short- to processing delay. smallholder areas. Both these and 5 M.P. EVANS GROUP PLC ANNUAL REPORT 2022 CHAIRMAN’S STATEMENT continued Group areas are managed to high did benefit, in sterling terms, from a hectares. Although the existing area standards, delivering increasing yields weaker year-end exchange rate when at Simpang Kiri has been both highly and therefore attractive returns for all compared to the position at the productive and profitable for many stakeholders. end of 2021, accounting for £1.58 of years, it has not been worthwhile All the Group’s estates are developed and managed sustainably, but independent certification enabling the sale of the Group’s production as sustainable palm oil is awarded to the Group’s mills. Certified sustainable sales rose significantly in 2022 to almost two thirds of the total, an increase of approximately 50,000 tonnes from the previous year. As the Group continues to grow, by adding milling capacity, maximising the yield from its existing areas and seeking additional sustainably managed areas to provide further Group crop for those mills, its ambition is to continue elevating its sustainable output towards 100%. THE GROUP INCREASED THE VOLUME OF ITS OUTPUT SOLD AS SUSTAINABLE PALM OIL IN THE YEAR. GROUP VALUATION An independent valuation of the Group’s plantations and other property assets is performed at the end of each year, the details of which are included on page 100 of this report. The independent valuation acknowledges that the Group’s estates are highly productive and maintained to a high standard, ascribing an average valuation to majority-owned areas of the increase. PROSPECTS The Group has made a positive start to construct our own mill there, and Group crop has been sent for outside processing. Whilst some of the newly acquired hectarage will to 2023, and total crop processed in require a certain amount of replanting the first two months of the year was and rehabilitation, as crop from the 213,000 tonnes, 8% higher than in the combined area increases, this is likely, first two months of 2022. The benefits in time, to warrant the construction of of the significant investment made by an additional Group mill. At that point the Group in its Indonesian estates all of the Group’s estates would have continue to be felt, and, barring their own mills. any unforeseen circumstances, the long-term trend of increasing crop is expected to continue as the Group moves further into 2023. The new mill at Musi Rawas began processing Group crop in February 2023, and after a short period of stabilisation, will soon start to take in crop from outside suppliers, only adding further to the Group’s ability to process crop and increase production. Palm oil continues to be, by volume of supply and consumption, the largest of the vegetable oils produced globally and of the major vegetable oils is the most efficient to produce when measured by tonnes of oil per hectare of land. The board is of the belief that sustainably produced palm oil will continue to be in demand for the foreseeable future, and that Group prospects therefore remain positive. CPO pricing remained stable in the early part of 2023, and the Group enjoyed mill-gate prices in a relatively narrow band around US$750 per tonne, similar to those achieved in the latter part of 2022, although sales prices have increased above US$800 BOARD AND SENIOR MANAGEMENT CHANGES There were several changes to the board and senior management roles in 2022, all of which were announced and referred to in previous reports. At the start of the year, Matthew Coulson per tonne for recent contracts. Whilst was appointed as chief executive, these are lower than the unusually having previously served as the high prices seen in the early part of Group’s finance director, and on 2022, the Group remains confident 1 July 2022 Luke Shaw joined the that, at these price levels, it will be Group as chief financial officer, having able to deliver further significant previously held a senior finance profits and cash generation. position with Spectris plc. US$20,700 per planted hectare. After Since the year end, the Group has On 31 March 2022, Dr Darian McBain allowing for the Group’s other assets announced the acquisition of 2,100 stepped down from the board, having and liabilities, notably including the planted hectares close to its Simpang taken up a new full-time role in Group’s share of year-end net funds, Kiri project in Aceh Province, northern Singapore, and on 1 August 2022 being US$31.7 million, this equity value Sumatra, bringing the total planted Tanya Ashton joined as an per share had increased during the area, including that of associated independent non-executive director. year to £14.98 per share. The Group scheme smallholders, to 4,800 Tanya is the head of sustainability 6 CHAIRMAN’S STATEMENT at Walgreens Boots Alliance, Europe, Finally, as recently announced, and brings significant sustainability Philip Fletcher will be retiring from ACKNOWLEDGEMENTS As well as being highly profitable, this experience to the board. On 30 the board on 31 July 2023. Philip has been another year of development September, Jock Green-Armytage has worked for the Group for over and growth for our Group, and it could retired from the board after a long 40 years, giving loyal and invaluable not have been achieved without the and highly valued association with service to several Group companies, constant effort of our management the Group, in recent years chairing the including this company, both as and staff, both in Indonesia and the audit and remuneration committees, M.P. Evans Group PLC and in its former UK, along with the workforce based and on 1 July 2022 Michael Sherwin, guise as Rowe Evans Investments PLC, at our estates and mills. On behalf former CFO of both Games Workshop as well as to others such as Bertam of the board, I would like to thank plc and Vertu Motors plc, joined as an Holdings PLC and Lendu Holdings each and every one of them, and we independent non-executive director. PLC. He has variously been finance look forward to another exciting, and director, managing director, chairman successful, year together in 2023. Since the year end, Lee Yuan Zhang and, more recently, a non-executive joined the board as a non-excecutive director. He was central to the Group’s As a closing comment, I cannot director on 1 February 2023. Yuan Zhang operations and growth, and he played but reflect that my late father, is the regional director (plantations) a pivotal role in devising the strategy, Edwin Hadsley-Chaplin, without of Kuala Lumpur Kepong Berhad formed in 2005, to sell the Group’s whom our Group would not still (“KLK”), the Group’s largest shareholder, Malaysian estates and focus on the exist today, would have been proud and has served as president director expansion of its sustainable palm- of its recent achievements. I hope that of PT KLK Agriservindo in Indonesia, oil interests in Indonesia. This has Matthew Pennefather Evans would where he was responsible for the resulted in the hugely enlarged Group have been proud too. management of 140,000 hectares of we are today. His wisdom, expertise oil palm. The board is delighted to and unfailing attention to detail will Peter Hadsley-Chaplin welcome Yuan Zhang, particularly in be greatly missed and everyone at light of his extensive plantation and M.P. Evans sends their best wishes to Chairman 21 March 2023 corporate experience. Philip in his retirement. OPERATIONAL HIGHLIGHTS INDONESIAN PALM OIL M.P. EVANS GROUP PLC • Total crop processed up 11% to • Net current assets up to 1.5 million tonnes • Group crops up to 905,000 tonnes, a 12% increase • Increasing demand for sustainable production resulted in increased sustainability income to US$7.5 million • 100% of Group and scheme-smallholder crop grown to sustainability standards • CPO production up 9% to 342,000 tonnes US$97.4 million at 31 December 2022 • Group equity value based on independent valuation increased to £14.98 per share at 31 December 2022 POST YEAR END • Group’s sixth palm-oil mill opened, at Musi Rawas • Continuing increase in certified sustainable output, now 64% of Group CPO production • A further 2,100 planted hectares acquired close to Simpang Kiri 7 M.P. Evans is a responsible producer of sustainable Indonesian palm oil, striving for excellence in its operations, with a focus on continuing growth and offering an increasing yield. 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. Ffb are processed in a nearby third-party mill. A further 2,100 hectares were acquired in early 2023. 2,600 hectares Group planted area: 2,400 hectares Scheme-smallholder planted area: 300 hectares 1 2 KERASAAN Mature (ex-rubber) oil-palm estate near the town of Pematangsiantar in North Sumatra. Ffb are processed in the neighbouring Bukit Marajah mill, owned by the SIPEF Group - also the majority shareholder in Kerasaan. Planted area: 2,200 hectares Group minority share: 38% Medan 2 8 3 Sumatra Malaysia Kuala Lumpur Singapore 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). 4 7,500 hectares Group planted area: 7,000 hectares Scheme-smallholder planted area: 900 hectares Kalimantan Samarinda Bangka Island 5 Jakarta Indonesia 4 MUSI RAWAS Located in South Sumatra province near the town of Lubuk Linggau, the project was started in 2012 and is now approaching the target of at least 10,000 planted hectares. A 60-tonne mill was commissioned in February 2023. 12,000 hectares Group planted area: 6,800 hectares 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. 12,000 hectares Group planted area: 6,100 hectares Scheme-smallholder planted area: 2,800 hectares Scheme-smallholder planted area: 3,900 hectares 8 M.P. EVANS GROUP PLCANNUAL REPORT 2022 8 BERTAM PROPERTIES This land was previously the Group’s Bertam Estate, all of which has now been sold to Bertam Properties, a joint venture with two Malaysian partners. Starting in 1992, the area has been developed into a new town. Following the sale of the last 70 hectares of Bertam Estate into Bertam Properties in 2021, the remaining developable area is 210 hectares. Bertam Properties: 313 hectares Group minority share: 40% Malaysia Medan Kuala Lumpur Singapore Sumatra 7 6 Kalimantan Samarinda Bangka Island Jakarta Indonesia OPERATIONAL HIGHLIGHTS 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. A 60-tonne mill was commissioned in August 2021. 9,000 hectares Group planted area: 7,500 hectares Scheme-smallholder planted area: 1,400 hectares 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 40-tonne mill was commissioned in September 2020. 16,000 hectares Group planted area: 10,400 hectares Scheme-smallholder planted area: 4,600 hectares 9 MARKET INFORMATION PALM OIL The vegetable-oil market moved into the growth in mature areas planted more significantly, Indonesian export to oil palm in Indonesia is slowing, taxes and levies. During 2022, as a 2022 in a position of relatively tight indicative of the government’s result of the high CPO prices, the supplies and high prices. Throughout more restrictive policies on land Indonesian government made a January and into the first part of use. In Malaysia, labour shortages number of changes to the taxes and February, cif Rotterdam prices for remain an issue and, despite some levies applied to CPO. These included CPO were already at historically high levels, between US$1,300 and US$1,500 per tonne. At the improvements, the shortfall is changes to the amounts of taxes expected to be a continuing drag and levies charged at certain CPO on production. Whilst not at the price bands, a temporary export levy outbreak of war between Russia and historically high levels seen in the ‘holiday’ and the introduction of a Ukraine, prices increased sharply, first half, pricing stabilised in the temporary additional export tariff. reaching almost US$2,000 per tonne, second half of the year with CPO cif By the end of the year, the export particularly due to concerns about Rotterdam a little above US$1,000 tax and levy arrangements had reductions in sunflower-oil supplies for much of the period. Demand for reverted to a similar position to that from Ukraine, and remained at palm oil strengthened in the second in place at the start of the year, and elevated levels for several months. half of the year due to its price there have been no changes for Indonesia accounts for more than competitiveness when compared several months. half of world palm-oil supplies, and to other major vegetable oils. At the Indonesian government took points during the period, Indonesian The average mill-gate price received the unexpected step of introducing palm oil was trading at a more than for the Group’s CPO in 2022 was a temporary ban on exports in April US$400 per tonne discount to South US$854 per tonne, up by 5% on the 2022, causing a build-up of stocks, American soya oil, compared to US$810 per tonne received in 2021. an increase in demand for other average discounts of approximately In 2022, world production of palm oil vegetable oils, and a rapid decline US$100 over the last ten years. was 78.9 million tonnes, up by 4% on in prices once the ban was lifted in late May. The Group does not receive the full largest part of the increase was in benefit of the cif Rotterdam prices Indonesia where production is now the 76.0 million produced in 2021. The The second half of the year was referred to above. It receives a 46.5 million tonnes. There was a slight characterised by improving supply ‘mill-gate’ price for its CPO which is fall in global consumption during in Indonesia compared to the earlier based on local tenders, and which the year, partly as a result of the part of the year. Looking to the longer is net of adjustments to allow for temporary market disruption caused term, there is some evidence that transport and insurance costs, but by the export ban in Indonesia, 10 Harvesting ffb at Kota Bangun M.P. EVANS GROUP PLCANNUAL REPORT 2022 THE PALM-OIL MARKET MAIN PRODUCERS OF PALM OIL 2022 59% 23% Indonesia Malaysia Main producing countries Remaining 18% consists of Thailand (4%), Colombia (2%), Nigeria (2%), other countries (10%) Indonesia MAIN CONSUMERS OF PALM OIL 2022 25% 11% 7% 24% 13% 8% Other Asia Africa China India EU Main consuming countries Remaining 12% consists of Americas (8%), other countries (4%) although this was offset by an increasing consumption in Indonesia’s domestic market. There was a fall in consumption in China in 2022, but imports are expected to increase as changes to lockdown policies take effect. PALM-KERNEL OIL The Group’s mills produce both CPO and palm kernels (“PK”). The Group sells its PK to independent kernel-crushing facilities, in which palm-kernel oil (“PKO”) is produced. The price that the Group is able to secure for its PK is therefore connected to the market for PKO. That market can also be connected to the one for coconut oil, because of its use in similar end products such as personal care and cosmetic items. In the early part of 2022, a combination of high demand for hygiene products and a reduced level of coconut-oil production pushed up the prices available for the Group’s PK, peaking briefly at almost US$1,000 per tonne in March. Since then, the disruption caused by the palm-oil export ban, along with recovering coconut-oil production causing a change in demand patterns, did lead to a reduction in prices but, as with CPO, prices stabilised over the second half of the year. Over the whole of 2022, the Group’s average selling price for its palm kernels was US$611 per tonne, 15% higher than the US$533 per tonne for 2021. Source: Oil World 2022 data CRUDE-PALM-OIL PRICE 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 US$ per tonne cif Rotterdam 2018 2019 2020 2021 2022 2023 11 THE GROUP’S BUSINESS MODEL OUR MAIN RESOURCES 40,200 HECTARES OF GROUP OIL PALM 13,900 HECTARES OF SMALLHOLDER OIL PALM PLANTATION LAND The Group’s plantation land is used to grow oil palms RELATIONSHIPS WITH COMMUNITIES The Group engages with the local communities living and harvest their fresh fruit bunches. on and near its operations and manages smallholder schemes to the same standard as Group areas. 11,700 EMPLOYEES US$33.5 MILLION NET CASH PEOPLE The Group’s employees include 210 agronomic staff, STABLE FUNDING The Group has a robust capital structure with a market 105 engineers and more than 4,700 harvesters. capitalisation of more than US$527 million*, cash of US$82 million and low levels of debt. OUTCOMES 341,700 TONNES OF CRUDE PALM OIL Growing production 64% CERTIFIED SUSTAINABLE Sustainable production US$402 PER TONNE OWN PALM PRODUCT Cost efficient 42.5p NORMAL DIVIDEND FOR 2022 Improving returns, rising dividends 12 * Based on a share price of 810p on 31 December 2022 M.P. EVANS GROUP PLCANNUAL REPORT 2022 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 Group producer of sustainable Indonesian palm environmental policies. 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. We regard sustainable production as integral to our operations. MAKE SMALLHOLDER CO-OPERATIVES A SUCCESS The Group treats associated smallholder ENSURE BEST PRACTICE IN EVERYTHING WE DO Even our most senior agronomic managers are co-operatives equally, planting, maintaining and resident in our operations, controlling a system of harvesting land to the same standard as its own supervision and support that focuses on areas. As a result, smallholders own a valuable high agronomic and engineering standards. asset and identify their own success with the Staff in Jakarta and the UK are frequent visitors Group’s success. to the operations. A growing and responsible Company producing sustainable Indonesian palm oil for the benefit of all its stakeholders. 13 STRATEGIC REPORT 2022 The Group’s strategy is to maintain steady expansion of its majority-owned Indonesian palm-oil areas in a sustainable and cost-effective manner. STRATEGY During 2022, the Group continued ensuring no deforestation and that scheme smallholders, a total planted to execute its principal activity, only land suitable for cultivation is hectarage of 56,200 hectares. being the responsible ownership, developed. The total planted area at management and development Musi Rawas, including that planted of sustainable oil-palm estates on behalf of the Group’s associated in Indonesia. Alongside its own scheme smallholders, was 9,600 projects, the Group also manages hectares, and management are and develops scheme-smallholder confident that the initial target of a areas attached to those estates. total of 10,000 planted hectares The Group’s objective is to continue will be exceeded during the course increasing both its own crop and of 2023. that from its scheme smallholders, whilst also increasing its own milling capacity, thereby increasing its output of certified sustainable palm oil. As Group areas mature, its strategy is to increase the planted hectarage controlled by it. Milling its own crop and that of its scheme smallholders in its own mills enables the Group to deploy its operational expertise to greatest effect with the aim of generating stronger returns, allowing shareholders to receive sustained increases in dividends. Scheme-smallholder areas associated with Group estates expanded in the year to 13,900 hectares. This followed a significant project promoted by the Group in northern Sumatra to attract independent smallholders to join new co-operative schemes. Under these schemes, the Group is providing initial funding for replanting, and crop from the newly planted areas close to Pangkatan will become a valuable new source of input to the Group’s mill there. By the end of 2022, 1,100 planted hectares had been added The Group designs its procedures as part of the new co-operative to address the risks of operating in arrangements. After the acquisition at Simpang Kiri, the Group remains committed to its growth strategy, and a number of further projects remain under review. The Group had five palm-oil mills operating throughout the year and was able to raise the proportion of crop processed in its own efficiently and sustainably run facilities. This will increase further in 2023 as the Group’s sixth mill opened just after the year end at Musi Rawas. In addition, following the acquisition of further hectarage close to Simpang Kiri referred to above, the Group will review plans to build a mill there. If constructed, the Group would then achieve 100% ‘in-house’ processing of its own crop, and the output from that crop would all qualify as certified sustainable CPO. As part of its commitment to responsible operation and development, the Group has continued to support the well-being of its workforce across Indonesia. Further investment has been made 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. Following the year end, the Group has been successful in acquiring an additional 2,100 planted hectares during the year in estate development close to its estate at Simpang Kiri in including new and upgraded housing, Aceh Province in northern Sumatra. more school places and more The planted area of the Group’s This is in line with the Group’s stated teachers, and additional recreational majority-held Indonesian estates strategy of continuing to increase its and community facilities on site. increased during 2022 to 40,200 planted area through the acquisition The Group is also seeking to increase hectares, as planting continued at of further hectarage, initially within the hectarage within its estates Musi Rawas in South Sumatra. All the vicinity of its existing projects. that is specifically designated for planting is supervised by the Group’s After taking these additional hectares conservation, and is expanding its sustainability team, and takes place in into consideration, the Group now sustainability team to support full compliance with RSPO standards, has, in conjunction with its associated this effort. 14 M.P. EVANS GROUP PLCANNUAL REPORT 2022STRATEGIC REPORT STRATEGY CPO storage tanks at the Bangka mill 1515 STRATEGIC REPORT continued ‘‘SECTION 172’ STATEMENT: IMPLEMENTING THE STRATEGY way of operating. Further details business. The recommendations of demonstrating how the principles the audit committee, in turn, fed into The board acknowledges that working productively with all stakeholders is a key factor in ensuring the Group’s long-term success. In formulating and implementing its strategy, the board meets its obligations under section 172 (1) of the Companies Act 2006 (“section 172”) to promote the success of the Company for the benefit of its members, whilst of section 172 are aligned with how the board’s decisions around risk the Group makes strategic decisions disclosure in the annual report. concerning its operations can be found in the “Sustainability” section of this report on pages 34 to 41. The board, through media articles and discussions with its professional communications advisers, regularly The Group has analysed carbon data informs itself on public sentiment on its operations, in order to provide in relation to the palm-oil industry a baseline against which targets can be set. It acknowledges the importance of net-zero targets as and its products, taking note of concerns around industry practices and environmental impacts linked having regard to wider stakeholders part of the changes that stakeholders to deforestation. The board has and the impact of decisions over the long term. Each member of the board is aware of their obligations, and due consideration is given to stakeholders’ interests, as well as the other matters listed in section 172, when strategic decisions are taken. The board reviews at least annually which organisations or individuals it considers to have a reasonable expectation of being significantly affected by, or of affecting, the activities of the Group including assessing the best means of engaging with those stakeholders. The current list, together with a summary of how it engages with its stakeholders, is published on the Group’s website (www.mpevans.co.uk). expect, amid concerns about the effects of climate change. The Group will use this data to make public disclosures in accordance with new non-financial reporting standards which are being introduced. It welcomes the prospect of increasingly widespread standardised information, providing context for the Group’s own disclosures which will not only benefit the Group in its own decision- making, but will give stakeholders greater insights into these increasingly important areas and how they might impact on the business. The board values stakeholder engagement as an essential tool in its risk-management strategy. In response to feedback from its employees, the board refined its Pages 12 and 13 of this report set out the Group’s business model and how existing risk-identification process and tasked the chief executive to again this year responded to these concerns by reaffirming the Group’s commitment to operating to the highest of standards and in accordance with the requirements of the RSPO, designed to provide assurance of industry good practice that protects environments and communities. This imperative to act responsibly is integral to the Group’s strategy and includes taking into account the interests of the Group’s employees when contemplating future growth. The board receives input from its executive members who are in frequent contact with senior management in Indonesia, both via video link and in person, now that travel restrictions have been lifted. Recognising the value of its existing management expertise and skilled workforce as one of the bases it operates. In addition, the Group’s carry out the first of a programme of on which to continue to focus on the core strategic pillars are shown on stakeholder engagement exercises production of sustainable Indonesian page 17. The nature of oil-palm in which he, together with the head palm oil, the board remains of the plantations is that they, by necessity, of risk in Indonesia, met with small view that new project acquisitions require decisions to be made for groups of senior staff across all should, where possible, be additive to the long term. This encompasses operational divisions to discuss existing projects, take account of staff the health and well-being of the their insights on the potential risks resource, and ensure maintenance environment in which the Group that the Group faces. The audit of the Group’s high operational operates, as well as that of the people committee used the data gathered standards. The Group has for some living in and around its operations. to update the Group’s risk register, time been investing in workforce Such considerations are intrinsic which it then reviewed to identify and recruitment and developing its to the Group’s long-established classify the principal risks facing the management resources. 16 M.P. EVANS GROUP PLCANNUAL REPORT 2022STRATEGIC REPORT STRATEGY STRATEGY PILLARS M.P. Evans is a responsible producer of sustainable Indonesian palm oil, striving for excellence in all its operations, with a focus on continuing growth and offering an increasing yield. The Group maintains conservation areas and does not plant near water courses Morning briefing to promote safe and efficient working practices Acting responsibly is at the heart of what we do and who we are. We are active members of the RSPO, we do not deforest, and are good stewards of the land we cultivate. We provide housing along with medical, educational, religious and leisure facilities for our workers and their families. Excellence comes from investing for the long term. Our investment is not only in plantation assets but also in our employees, their diversity and inclusion, and in their training and development. In this way, we are consistently able to deliver both high yields and high oil-extraction rates from our estates and mills. Responsibility Growth Strategy pillars Excellence Yield GROWTH IN CROPS PROCESSED (‘000 TONNES) GROWTH IN DIVIDENDS (PENCE) Group Scheme smallholders Independent 1,600 1,400 1,200 1,000 800 600 400 200 0 Normal dividends 45 40 35 30 25 20 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 We seek to grow and develop the business. Growth continues to come from the increasing maturity of the Group’s young estates, from the ongoing focus on improving yields, and from the planned acquisition and sustainable development of new areas of land. The Group’s investment strategy has already led to a significant improvement in shareholder returns. In line with its growth programme, the Group plans to deliver increasing returns to shareholders. 17 RESULTS & FINANCIAL POSITION 5% INCREASE IN CRUDE-PALM-OIL EMG SALE PRICE 15% INCREASE IN PALM-KERNEL EMG SALE PRICE 18% INCREASE IN REVENUE 2022 US$854 per tonne 2021 US$810 per tonne 2022 US$611 per tonne 2021 US$533 per tonne 2022 US$326.9m 2021 US$276.6m REVENUE AND GROSS PROFIT Group revenue increased to US$326.9 from US$350 per tonne to US$402 Limited. There is no corresponding per tonne, caused predominantly amount in 2022. At the time of million in 2022, up by 18% from the by inflationary pressure on fertiliser the disposal, US$9.3 million of US$276.6 million recorded in 2021. inputs in the year. Cost per tonne, the proceeds were deferred, and Group crops continued to rise, and production of both CPO and PK reached new highs as a result, as explained in more detail in the later crop and production sections of this report. Sales prices were up for both CPO and PK, and average ex-mill- gate (“EMG”) prices were US$854 and US$611 per tonne in the year, increases of 5% and 15% respectively on the previous year. The Group also benefited from directly selling an increasing proportion of its output as CPO and PK rather than selling ffb for processing in outside mills. This was particularly significant at Bumi Mas, where the Group mill was operational throughout 2022. The Group’s cost of production is reported as a combined cost per tonne, measuring the costs associated with each tonne of ‘palm product’, being both CPO and PK. It after taking into consideration crops purchased from scheme smallholders and independent suppliers, increased in the year to US$527 per tonne (2021 US$465 per tonne) as ffb purchase prices increased along with the higher CPO price during 2022. Further analysis of Group costs is included on page 24. since then, US$2.5 million has been received during 2022. The final instalment of US$6.8 million is due to be received by the Group in July 2023. ADMINISTRATIVE EXPENSES AND OTHER INCOME Group administrative expenditure in 2022 was US$4.6 million The Group does not measure cost (2021 US$5.4 million), a little lower per tonne in the same way for its than the amount incurred in the estates supplying outside mills, but previous year. Group other income continues to maintain careful estate increased to US$1.9 million (2021 cost control in those locations. At the US$1.4 million) on sales of electricity end of 2022, the only Group locations from the Group’s biogas facilities supplying outside mills were Musi Rawas and Simpang Kiri, and this reduced to only Simpang Kiri in early 2023 once the mill at Musi Rawas had opened. As there were fewer of them, the gross profit achieved by locations without mills reduced in 2022 to US$9.6 million (2021 US$12.6 million). and sale of surplus kernel shells. The Group continues to work on identifying new opportunities for electricity generation and supply agreements to maximise the use of available capacity at its milling locations. is designed to be a fully absorbed Allowing for the above, the cost, which includes all estate Group’s gross profit in 2022 was overheads along with the significant US$109.2 million, 5% higher than the majority of central costs recharged US$103.6 million achieved in 2021. from the Group’s Jakarta head office plus an appropriate element of costs recharged from the UK head PROFIT ON SALE OF LAND In 2021, the Group recorded a one-off NET FINANCE COSTS The Group’s finance costs were similar to the prior year at US$2.7 million, reflecting the impact of increasing interest rates over the course of the year, offset by reduced borrowings as the Group continues office. The Group’s cost per tonne profit on the disposal of 70 hectares to pay down outstanding term loans. in relation to crop harvested and of land in Malaysia owned by Finance income increased to processed from the Group’s majority- its subsidiary company, Bertam US$1.4 million (2021 US$0.6 million) owned areas increased in the year, Consolidated Rubber Company as cash balances rose in the year. 18 M.P. EVANS GROUP PLCANNUAL REPORT 2022 5% INCREASE IN GROSS PROFIT 2022 US$109.2m 2021 US$103.6m TAXATION The Group tax charge for the year was US$24.1 million (2021 US$23.2 million). The Group pays a significant amount of corporate tax in Indonesia, its principal operating location, and remains committed to operating transparently and paying appropriate taxation on the profits generated. ASSOCIATED COMPANIES The Group’s Indonesian associate, PT Kerasaan Indonesia (38% owned) contributed US$1.7 million (2021 US$1.5 million) to Group profit in the year, and the Group received dividends of US$1.5 million (2021 US$1.2 million). The Group’s Malaysian associate, Bertam Properties Sdn Bhd (40% owned), contributed US$0.5 million (2021 US$1.0 million) to Group profit in the year, and the Group received dividends of US$1.2 million (2021 US$1.2 million). PROFIT FOR THE YEAR As a result of the above, the Group’s profit for the year was US$78.4 million (2021 US$91.8 million), lower than the previous year mainly due to the one-off profit on land sale in 2021 referred to above. NET ASSETS AND BORROWING At the end of the year, the Group’s net assets had increased to US$488.8 million (2021 US$445.0 million). Current assets exceeded current liabilities by US$97.4 million (2021 US$72.3 million). The Group had cash and liquid resources of US$82.5 million (2021 US$65.6 million). As a result of the further cash generation in the year, net debt had been eliminated, and year-end net funds were US$33.5 million (2021 net debt US$5.4 million). As a result, the Group had no net gearing (2021 – 1%), whilst gross gearing was 9% (2021 – 14%). STRATEGIC REPORT RESULTS & FINANCIAL POSITION Harvester with ripe ffb at Kota Bangun estate 19 19 OPERATIONS: INDONESIAN PALM OIL CROPS The crop processed by the Group is Crop from the Group’s majority- up 23% (2021 – 24%) of total crop owned areas was up by 12%, from processed by the Group. This made up of three component parts: 809,700 tonnes in 2021 to 905,400 proportion may increase in the short Group crops harvested from its majority-owned areas, scheme- tonnes in 2022. Plantings have term as the Group’s Musi Rawas mill continued to mature during the is commissioned, but is ultimately smallholder crops harvested from course of the year, and the average planned to decrease as Group and community-owned smallholder co-operatives areas attached to age of majority-owned areas is now scheme-smallholder crops utilise a ten years, approximately the point larger amount of milling capacity. some of the Group’s estates, but at which palms reach a lengthy The increase in independent crop managed by the Group on behalf of period (up to a decade) of maximum processed was restricted to 4% in the smallholder co-operatives, and productivity. However, that average 2022 as purchases were temporarily independent crops purchased from age is made up of estates at different scaled back during the palm-oil third-party suppliers to utilise spare points in their planting lifecycle, and export ban in April and May to capacity in Group mills. The majority some are notably younger, particularly mitigate against the risk of Group of crop is processed in Group mills, Musi Rawas in South Sumatra, where storage facilities becoming full. This with a small part currently being the Group is continuing to plant secured the continued operation of processed by third-party mills where new palms and crop is increasing Group mills and processing of Group Group milling facilities have not yet more rapidly. The crop from scheme and scheme-smallholder crops. been built. smallholders increased by 16% in The total crop processed by the Group increased in the year to the year, from 229,300 tonnes to As reported in last year’s annual 265,700 tonnes, following a similar report, there was a period of pattern to crop from the Group’s own particularly wet weather towards 1,511,700 tonnes (2021 – 1,366,200 areas, but with a slightly younger the end of 2021 at Kota Bangun, tonnes), an overall increase of 11%. planting profile leading to a larger creating some challenging conditions This was in line with the Group’s proportionate increase in the year. on the estate. The wet weather growth plans, and a result of both persisted into the early part of the long-term investment made by Purchasing crop from independent 2022, making harvesting conditions the Group in Indonesian oil palm suppliers continues to be important difficult in some areas, as well as and the commitment to operational to the Group to ensure that mill adding operational challenges in excellence by the Group’s agronomic capacity is utilised as much as transporting the harvested ffb for management teams. possible. Independent input made mill processing on a timely basis. Nursery at Simpang Kiri estate 20 M.P. EVANS GROUP PLCANNUAL REPORT 20222021 TONNES 194,300 152,300 179,000 165,700 69,400 49,000 809,700 86,300 80,800 — 29,900 32,300 229,300 13 10 8 1 55 6 12 5 13 — 2 61 16 (9) (20) 9 1,780 4 11 210,600 78,200 35,900 2,500 327,200 1,366,200 STRATEGIC REPORT OPERATIONS Despite the relatively slow start to the year, CROP 2022 TONNES INCREASE/ (DECREASE) % conditions improved as it progressed, and the pattern of long-term crop growth at Kota Bangun reasserted itself, such that by the end of the year total crop from the estate was over 300,000 tonnes, with growth of 13% and 5% from Group and scheme- smallholder areas respectively. The estate sits close to the Mahakam river in East Kalimantan, and due to the topographical conditions on site, some of the planted areas are relatively low-lying, increasing flood risk in times of high rainfall. The Group has, for several years, invested in innovative water-management and water-defence projects, mitigating this risk, and in 2022 a water-catchment area was constructed, with a capacity of 1 million cubic metres which will enable estate management to moderate the flow of water through some of the affected area. A further water-catchment area, with a 1.5 million cubic-metre capacity, is planned for construction in 2023. As part of its ongoing review process, the Group identified a small planted area of 152 hectares which had been badly flood damaged and for which there was no cost- effective water-defence plan, and these hectares were written off during the year. In a similar way to Kota Bangun, crop at the Group’s Bangka estate got off to a relatively slow start in 2022. This was partly weather related, but also a reflection of natural seasonality of oil-palm cropping, which does not necessarily follow a 12-month cycle. Unlike 2021, when crop was very heavily weighted towards the first half of the year in Bangka, a more even split was established during 2022, with the crop peak occurring around the middle of the year. Crop for the full year was up by 10% for the Group’s own areas and 13% for scheme smallholders, whilst there was a 20% (15,400 tonne) reduction in outside crop purchases, a combination of managing mill capacity as Group and scheme-smallholder crops continued to increase, and the cautious approach adopted during the palm-oil export ban. 219,400 167,200 192,500 166,700 107,600 52,000 905,400 91,000 91,200 900 30,600 52,000 265,700 191,700 62,800 39,100 47,000 340,600 1,511,700 Own crops Kota Bangun Bangka Pangkatan group Bumi Mas Musi Rawas Simpang Kiri Scheme-smallholder crops Kota Bangun Bangka Pangkatan group Bumi Mas Musi Rawas Independent crops purchased Kota Bangun Bangka Pangkatan group Bumi Mas TOTAL CROP CROP HISTORY tonnes Scheme smallholders Group 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 21 STRATEGIC REPORT continued The Pangkatan estates in North independent suppliers, with 47,000 PK. As before, during 2022, the Sumatra continued to deliver high tonnes of outside crop sourced for Group sold its crop at Musi Rawas crop levels in 2022, with an average processing in the Group mill. As local and Simpang Kiri to outside mills yield of 29 tonnes in Group-owned supplier relationships develop and for processing, with a selling price areas. There was a small amount of strengthen, the Group’s objective is based on the CPO market and an replanting during the year amounting to increase independent purchases assumed rate of extraction. However, to 64 hectares, as part of the Group’s in the coming year. commitment to maintaining the to be consistent with other locations, CPO and PK produced from these long-term productivity of these The Group’s largest crop increase estates’ crops are reported as part well-established estates. During was at Musi Rawas, its youngest of the Group total but subtotalled the year, the Group continued to estate, with an average planting age separately in the production table. work with local communities to of less than five years at the end of develop independent smallholder 2022. Crop from Group-owned areas The Group is committed to increasing co-operatives and to replant those increased by 55%, whilst that from its CPO and PK production capacity areas to a high standard. By the end scheme smallholders was up by 61% as much as possible. The Group’s of 2022, 894 smallholder hectares in the year, putting the Group in a crops and those of its scheme had been developed. The majority of strong position as it starts to supply smallholders are of a high standard, these remained immature at the end its newly constructed mill on site, and the Group seeks to maximise of the year, but a small crop of 900 operational from February 2023. the margins available to it by milling tonnes has been recorded. At Bumi Mas, the Group has seen At Simpang Kiri, crop increased by 6% to 52,000 tonnes, as the that crop and selling the oil and kernels for itself. With the benefit of having five Group mills operational significant crop increases in recent Group continues to benefit from years following the acquisition of the the replanting that has taken place throughout the year, total CPO production increased by 9% to estate and subsequent improvement there and the higher quality planting 341,700 tonnes, and PK production to agronomic standards. By 2021, material that has been used during was up by 10% to 73,800 tonnes. the estate was achieving a yield of that programme. 23 tonnes per mature hectare. After several years of larger steps forward, the estate delivered a smaller PRODUCTION The Group continues to prioritise All the Group’s palm-oil mills are accredited as certified sustainable producers as soon as possible after increase in 2022, 1% and 2% up on processing crop through its own commissioning, although it can take crops from Group and scheme- smallholder areas respectively. milling facilities, given both the strategic and financial benefits time to complete the necessary independent audit and approval Also, being in East Kalimantan, the involved. Throughout the course of checks. All of the Group’s ffb, and estate experienced similar weather- 2022, the Group had five operational that of its scheme smallholders, are related harvesting and operational palm-oil mills, with a sixth under grown to the same high standards challenges to Kota Bangun in the construction at Musi Rawas. The mill and in a sustainable way. The early part of the year. The harvesting at Musi Rawas opened in February Group’s certified sustainable output challenge was compounded by the 2023 and will now process all of increased to 64% in the year departure of some inexperienced the crop from that estate and start (2021 – 55%) as the Group benefited harvesting workers during these to take in additional crop from from the increase in milling capacity. difficult working conditions, but the independent suppliers to maximise This figure will rise further as the management team have worked its utilisation. diligently to address this issue and mill-building and certification programme continues, but will also ensure that the estate workforce As crops available for processing benefit from mill capacity being is robust to future challenges. continued to increase in 2022, so the taken up increasingly by the Group’s Crop at Bumi Mas was enhanced Group was able to record another own crop and that of its scheme by a full year of purchasing from rise in production of both CPO and smallholders. 22 M.P. EVANS GROUP PLCANNUAL REPORT 2022 STRATEGIC REPORT OPERATIONS PRODUCTION AND EXTRACTION RATES GROUP AND THIRD-PARTY MILLS CRUDE PALM OIL PALM KERNELS PRODUCTION Group mills Kota Bangun Bangka Pangkatan group Bumi Mas Third-party mills Bumi Mas Musi Rawas Simpang Kiri EXTRACTION RATES Group mills Kota Bangun – Bumi Permai Kota Bangun – Rahayu Bangka Pangkatan group Bumi Mas Third-party mills Bumi Mas Musi Rawas Simpang Kiri 2022 TONNES 112,800 75,100 53,300 56,200 297,400 — 32,600 11,700 44,300 341,700 % 23.3 21.2 23.4 22.9 23.0 22.9 — 20.4 22.5 INCREASE/ (DECREASE) 2021 2022 INCREASE/ (DECREASE) % TONNES TONNES (1) 1 10 170 15 — 57 6 (19) 9 % (2) (6) (2) 1 1 (2) — — — 114,400 74,200 48,600 20,800 258,000 23,100 20,800 11,000 54,900 23,800 18,400 12,200 9,600 64,000 — 7,500 2,300 9,800 312,900 73,800 % 23.8 22.5 23.8 22.6 22.8 23.3 21.6 20.4 22.5 % 5.1 4.2 5.7 5.2 3.9 4.9 — 4.7 4.5 % 5 3 8 182 16 — 60 5 (18) 10 % 4 — — (2) 5 (2) — 2 — 2021 TONNES 22,700 17,800 11,300 3,400 55,200 5,000 4,700 2,200 11,900 67,100 % 4.9 4.2 5.7 5.3 3.7 5.0 4.7 4.6 4.5 The Group sells some crop to outside mills for processing, with a selling price based on the CPO market and an assumed rate of extraction. However, to be consistent with other locations, CPO and PK produced from these estates’ crops are reported as part of the Group total but subtotalled separately above. The Group continues to purchase ffb from independent suppliers and in Bangka and this is an area of continuing focus for mill management. At all other locations, compost is produced and applied to the Group’s in order to maximise the capacity Mill staff go through a detailed planted areas as a nutritious organic utilisation of its milling facilities. grading process to review incoming fertiliser, and biogas facilities are Supplies purchased from independent supplies with the objective of sorting used both to treat mill effluent in sources tend to be of noticeably and rejecting poor-quality bunches. covered ponds, significantly reducing lower quality than ffb grown and greenhouse gas emissions, and to harvested either from the Group’s Group mills are developed on a fully generate green electricity. Electricity own areas or from those belonging integrated basis and on a zero- generated is used either for the to scheme smallholders, which are waste principal. All mills have both Group’s own power needs (reducing planted and managed by the Group composting and biogas facilities the requirement for diesel generators to the same high standards as on site, with the exception of the on site or for power drawn from majority-owned hectarage. Over the Group’s oldest mill at Pangkatan, the domestic grid, much of which course of 2022, maintaining quality where it has not been possible to is dependent on coal-fired power standards for independent crop was a particular challenge in Kota Bangun reach a power supply agreement with the state electricity company. stations) or to sell as excess power to the state electricity company. 23 STRATEGIC REPORT continued 74% Field 30% Labour Fertiliser 17% Depreciation 15% 12% Other 15% Other Head office Other 7% 8% 11% Mill Labour 3% Depreciation 4% 4% Other 24 COSTS Cost per tonne of palm product is in maintaining and enhancing crop yields. Unit costs do also vary by usually at its lowest when the Group location, depending on a number processes crop from its majority- of factors including maturity, yield owned areas in its own mills. patterns, upkeep requirements, and Production costs increase when the experience of the local workforce. Group purchases crop for processing, The Group’s location with the lowest whether from its associated scheme production cost continues to be smallholders, or from independent Pangkatan in North Sumatra, which suppliers. This is partly due to benefits from being a mature, replacing its own estate costs with well-established estate with a an ffb purchase cost, but also in low-cost mill. the case of ffb from independent suppliers, due to the lower extraction The total cost of production, allowing rates achieved. The variance for all sources of crop, increased increases at times of higher prices, from US$465 in 2021 to US$527 as purchase costs are linked by in 2022, an increase of 13%, the formula to the prevailing CPO price. rise being a combination of cost increases and the higher CPO price The Group’s long-standing policy prevailing during the year. Purchasing has been to include all depreciation, crop to maximise capacity utilisation general charges and estate in Group mills remains worthwhile administrative and overhead costs even with the higher cost involved in its analysis of cost per tonne. In not least as the Group benefits from addition, all central costs incurred at the higher CPO selling price after its Jakarta head office are allocated processing, and the Group continues to its operating units and included to make profitable use of the as part of cost per tonne, as are an additional capacity available to it. appropriate proportion of UK costs. During 2022, cost per tonne for The Group continually monitors production sourced from the Group’s costs on its estates, at its mills, and own areas increased to US$402 in relation to its management and (2021 US$350), an increase of 15%. administrative activities. Inflationary The main upward pressure during the pressures remain, particularly in year was a sharp increase in fertiliser costs, which in some cases more relation to fertiliser, but to a lesser extent for other inputs such as wage than doubled. Russia is a significant costs and fuel, caused by world producer of fertiliser, and the Group events over which the Group has no took the decision to avoid purchases control, most notably the ongoing originating from that country, adding conflict in Ukraine. A continuing to some cost increases in the year. period of relatively high commodity Nonetheless, management took the prices, along with rising production, strategic decision that maintaining act as mitigating factors, but at the fertiliser application based on same time the Group continues to recommendations from our expert work on operational innovation, agronomic consultants remained in seeking wherever possible to reduce the Group’s best long-term interests unit costs. M.P. EVANS GROUP PLCANNUAL REPORT 2022STRATEGIC REPORT OPERATIONS MILL-GATE PRICE The Group benefited from a high CPO reflecting both the demand for certified sustainable production and price environment during the course the Group’s ability to deliver more ASSOCIATED COMPANY: KERASAAN The Group’s 38%-owned oil-palm of 2022. As explained in more detail in of its own certified output. CPO and associate in North Sumatra, the ‘palm-oil market’ section on pages PK are sold with both RSPO and ISCC PT Kerasaan Indonesia (“Kerasaan”), 10 and 11, the price per tonne for certifications depending on demand achieved a crop of 51,900 tonnes CPO, when expressed in cif Rotterdam and where the best premia can be in 2022, 6% lower than the 55,200 terms, ranged between US$895 and achieved. The average premia for tonnes in 2021. Replanting continued US$1,990 and averaged US$1,345, 13% CPO when sold as certified oil was at the estate in 2022, with a total higher than the US$1,195 in 2021. In US$16.90 per tonne (2021 US$17.40), of 145 hectares planted in the year, Indonesia, the government charges whilst demand for sustainable PK bringing up the total planted area taxes and levies on the export of was particularly strong in 2022 to 2,242 hectares. The average age of palm oil and related products. Whilst with average premia for PK sold as planting at Kerasaan is now 13 years. these are not borne directly by the certified up to US$91.80 per tonne Group, as sales are made at mill-gate (2021 US$55.20). for onward shipment and processing, they influence the amount buyers are willing to pay. As also discussed PLANTING At Musi Rawas, planting continued PERFORMANCE EVALUATION The Group uses key performance indicators at all levels, both in Indonesia and in the UK, in assessing in the ‘palm-oil market’ section of throughout 2022. As part of any new its plantation operations and this report, there were some changes development, the Group works with directing management effort in to taxes and levies in 2022, but as local communities and any local supervising those operations. In this a general rule, the gap between land-rights holders on the basis of year’s annual report, the Group is quoted cif Rotterdam prices and free, prior informed consent. Fully continuing to provide, in this section, available mill-gate prices widens as agreed, documented, and witnessed the key operational metrics as prices increase due to the graduated land compensation is paid prior to previously reported. taxation system in place. Despite this, any planting taking place. All planting the Group achieved an average mill- is performed in compliance with the The planted hectarage managed by gate price for CPO sales from its own environmental standards published the Group continued to increase mills of US$854 per tonne in the year, by the RSPO. The Group planted in the year, with ongoing planting 5% higher than the US$810 per tonne 585 hectares at Musi Rawas in 2022, at Musi Rawas, as well as the in 2021. bringing the total planted area there development of new co-operative to 9,600 hectares, and the Group schemes in northern Sumatra. All Pricing for palm kernels was expects to achieve its initial target activity takes place in line with the particularly strong in the early of achieving a total planted area of RSPO planting requirements, and the part of 2022, with prices peaking in March at US$980 per tonne, based 10,000 hectares during 2023. Group is committed to the highest sustainability standards. At the end on a combination of high demand In North Sumatra and Aceh, the of the year, the total planted area of for certain products and a deficit Group has made significant progress the Group and its associated scheme of coconut-oil supplies. Since then, during the year on the formation smallholders was 54,100 hectares. pricing has abated, returning to more of new co-operative schemes and Planted hectarage increased further familiar levels. The average selling financing replanting of areas of oil after the year end following the price for the year was US$611 per palm for members of those schemes. acquisition of 2,100 planted hectares tonne, 15% higher than the US$533 By the end of 2022, a total of 1,147 close to the Simpang Kiri estate. per tonne achieved in 2021. hectares had been replanted as part The Group anticipates introducing an of these schemes, both at Pangkatan accelerated replanting programme in Included in the above sales figures, and Simpang Kiri. In addition, 64 some of the acquired area to the Group received sustainability hectares of the Group’s own oil palm work towards bringing them up premia of US$7.5 million (2021 were replanted at Pangkatan during to the expected excellent Group US$4.3 million), another increase the year. standards. 25 M.P. EVANS GROUP PLC ANNUAL REPORT 2022 STRATEGIC REPORT continued PERFORMANCE EVALUATION The Group uses key performance indicators at all levels, both in Indonesia and in the UK, in assessing its plantation operations and directing management effort in supervising those operations. 2626 54,100 HECTARES, GROUP AND SCHEME SMALLHOLDERS 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 2021: 52,600 hectares growth in the future. 23.2 TONNES PER HECTARE 2021: 21.1 tonnes per hectare 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. 1,171,100 TONNES FFB CROP The volume of ffb crop is the primary determinant of the 2021: 1,039,000 tonnes Group’s ability to generate CPO and PK for sale. 22.9% OIL-EXTRACTION RATE 2021: 23.3% EXTRACTION RATES The rate at which the Group is able to convert its ffb into CPO, quantified as the oil-extraction rate, is the most important measure of its processing efficiency. US$402 PER TONNE PALM PRODUCT 2021: US$350 per tonne palm product 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. STRATEGIC REPORT OPERATIONS The crop yield per hectare is Mill management monitor the Cost control is central to the monitored carefully by management. performance of each of the Group’s success of the Group’s operations, For each year of planting on each oil-palm mills, and as part of their and management monitors the estate it is budgeted, reported and monitoring will regularly record and efficiency of both its plantation and reviewed. The yield per hectare can review the percentages of free fatty its milling operations by reviewing be significantly different as a result acids, dirt and moisture in mill output, their unit costs in comparison of a number of agronomic factors as well as oil losses at various stages to agreed budgets, and as well including soil, weather, and the of the production process. Extraction as benchmarking against other natural yield cycle. However, the most rates can vary depending on both the operating units. A significant important determining factor in yield performance of the mill itself and proportion of costs in both the field is the age of the palm. In 2022, the the type and quality of the ffb that is and the mill are fixed and so vary average yield per mature hectare supplied to the mill for processing. little with levels of utilisation. Field across all of the Group’s plantings, Mill throughput is also measured costs in particular can vary from including scheme smallholders, daily as an efficiency indicator. An location to location depending on increased to 23.2 tonnes, an average oil-extraction rate of 22.9% local conditions, including terrain, encouraging increase on the was achieved across all the Group’s weather conditions, infrastructure 21.1 tonnes recorded in 2021. mills in 2022. This is slightly lower and age of plantings. As a result, Local estate management work than the rate achieved in the previous costs are monitored on an individual diligently to control field standards, year but compares well with industry estate basis. During 2022, the Group fertiliser application, harvester standards. The main reason for achieved a cost of US$402 per numbers and productivity as well as the reduction was identified to be tonne for production from its own the quality of estate infrastructure, some challenges associated with the areas. The Group experienced some including estate roads and drains. quality of independent crop supplied significant inflationary pressure Senior management monitor estate to Group mills, and this has been on certain input costs in 2022, activities and obtain independent prioritised for follow up and review most notably in fertiliser prices. advice if required. Overall, the by mill management. The Group’s Maintaining recommended fertiliser combined crop from the Group’s engineering team supervises all mill inputs is key to achieving ongoing own areas and from the associated construction. This work is undertaken high yields, and the Group has, to scheme smallholders was by independent contractors, but is date, accepted this cost increase, but 1,171,100 tonnes. based on agreed tenders, budgets continues to keep this, and all other and timetables. costs, under continual review. The chief executive in discussion with the senior Kalimantan mill manager during a visit to the Rahayu mill at Kota Bangun 27 STRATEGIC REPORT continued CURRENT TRADING AND PROSPECTS The total crop processed by the Group for the first two months of 2023 is 8% higher than for the same period in 2022. The Group’s own crops and those of its associated scheme smallholders have been a little subdued during the early part of the year, mainly due to normal seasonal variances, as was the case in early 2022. As a result, the Group’s own crop and that of its associated scheme smallholders has been very similar to that achieved in the first two months of 2022, being 1% down and the same respectively. A review of bunch formation and bunch counts on Group and smallholder palms indicates that crop is expected to increase as the Group moves further into 2023. Purchases of outside crop increased more significantly, with a 38% year-on-year rise, helping to keep Group mills occupied during the period. The details are set out in the following table: Own crops Scheme-smallholder crops Independent crops purchased 2 MONTHS ENDED 28 FEB 2023 TONNES 116,300 35,100 61,300 212,700 INCREASE/ (DECREASE) % (1) — 38 8 2 MONTHS ENDED 28 FEB 2022 TONNES 116,900 35,000 44,300 196,200 As reported above, CPO prices were high during 2022, and cif Rotterdam prices averaged US$1,345 per tonne for the year, whilst the Group’s average mill-gate prices for its sales were US$854 per tonne. Prices stabilised at a somewhat lower level in the latter part of the year and into early 2023, with the Group able to achieve mill-gate prices of approximately US$750 per tonne, although there have been some recent positive signs with sales prices moving above US$800 per tonne in recent sales contracts. Encouragingly, there have been no significant changes to the regulatory environment for the sale of palm oil and related products within Indonesia over several months, providing some welcome stability within the market. The Group made another step forward in delivering its strategy in February 2023 by opening its sixth palm-oil mill, located at the Musi Rawas estate in South Sumatra. The 60-tonne-per- hour capacity mill is now processing all of the crop from the Group’s own planted areas at Musi Rawas as well as those of its associated scheme smallholders, offering an immediate uplift to the extraction rates available to the Group from that crop. In addition, after a short proving period, the mill will soon start to take in crop from outside suppliers, to increase its capacity utilisation and to add further to the total crop processed by the Group. Now that the Musi Rawas mill has been commissioned, the Group is milling for itself approximately 96% of the crop that it processes, with only the crop at Simpang Kiri being sent to an outside facility. As announced in early March 2023, the Group has just acquired a further 2,100 planted hectares close to the Simpang Kiri estate, in line with its growth strategy. Management will now review plans to develop a further mill there which, if constructed, would enable the Group to mill 100% of the crop that it processes. The board remains firmly of the view that sustainable palm oil, as a high yielding and low-cost product, will continue to offer attractive returns, and that the prospects for the Group remain bright. 28 M.P. EVANS GROUP PLCANNUAL REPORT 2022 STRATEGIC REPORT OPERATIONS OPERATIONS: MALAYSIAN PROPERTY ASSOCIATED COMPANY: BERTAM PROPERTIES Properties developed by the Group’s 40%-owned associate, Bertam Properties Sdn Bhd (“Bertam Properties”) continued to be of a high quality, and appealing to buyers, during 2022. Total consolidated revenue at Bertam Properties, including from its own subsidiary, Penang Golf Resort Berhad, was 77 million Malaysian Ringgit (US$17 million) in 2022, a little lower than the 84 million Malaysian Ringgit (US$20 million) in 2021. Bertam Properties sold 176 properties from its developments during the year (2021 – 146 properties), with some of the housing launches in the second half of 2022 being in particularly high demand. Because of the related accounting rules, some of the benefit of those agreed sales will not be recorded until 2023. Bertam Properties continues to hold a land bank available for future development, and its total development area, including that currently under construction, but not including the 103-hectare golf course, amounts to 210 hectares. The Bertam Properties land continues to be a valuable asset whose value has increased as development of the projects has progressed towards completion and the new town attracts more residents and businesses. Artist’s impression of new housing at Bertam Properties, with already developed houses in background 29 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. During 2022, an updated and refreshed approach to the identification and management of risks was introduced. A new ‘head of risk management’ was appointed, based in the Group’s Jakarta office, responsible for maintaining the Group risk register and for working closely with operational management across Indonesia as well as with the UK head office team. Risks are classified within one of seven areas, being: operational, production and sales, financial, people, ESG (Environmental, Social and Governance), political and regulatory, and information systems. Regular risk review meetings take place to discuss the development of existing risks, their mitigation, as well as to identify new and emerging risks to the Group. Risk summaries are presented to, and reviewed by, the audit committee. As a result of this updated approach, a number of new principal risks have been identified, as disclosed in this section. However, the board remains of the view that the most significant risk to the Group is a reduction in the commodity prices for CPO and PKO. KEY Likelihood of occurrence LOW MED HIGH Impact on the business LOW MED HIGH Risk change from prior year INCREASE  DECREASE NO CHANGE   NEW N e c n e r r u c c o f o d o o h i l e k i L HIGH 5 MED 6 18 1 3 10 14 2 7 9 LOW 4 19 8 13 15 16 17 11 12 LOW MED HIGH Impact on the business RISK IMPACT MITIGATION OPERATIONAL 1 Adverse weather One or more of the Group’s operational locations suffers from adverse weather conditions. MED MED  2 Climate change Group estates start to feel the impact of long- term changes in climate patterns. MED HIGH  Yields may be lower than anticipated if weather conditions are too wet or too dry, causing lower crops or difficulties in harvesting. The Group accepts that weather patterns can vary over the short term, but its experience of developing and managing oil-palm estates in Indonesia over several decades shows that any crop deficits tend to be made up over the longer term. In addition, the Group benefits from the geographical diversity of its operations within Indonesia. Changing weather patterns may result in changing yield profiles on the Group’s oil- palm estates. There has been no evidence of significant changes to weather patterns on the Group’s estates to date. However, the Group is not complacent and continues to monitor the situation. A more detailed assessment of climate risk has been performed and is included in the TCFD section of this report on pages 34 to 37. 3 Flood and water incursion One or more of the Group’s planted areas suffer a significant flood. Depending on the severity, flooded areas are difficult or impossible to harvest, reducing yield from those areas. Some of the Group’s estates are more prone to flood risk than others, due to their location and topographical conditions. The Group has invested in water management systems, including bunding and drainage systems, as well as water pumps to evacuate excess water. Whilst a remarkably hardy plant, the oil palm can still be subject to attack from pest and disease, reducing yield from affected areas. The Group employs experienced agronomic managers in all its estates and takes advice from external consultants when appropriate. Effective management is designed to identify issues when they occur, and to ensure that they do not become widespread. Senior staff remain up to date in latest agronomic practices. MED MED  4 Pests and disease Group planted areas are attacked by pests or infected by disease. LOW LOW  30 M.P. EVANS GROUP PLCANNUAL REPORT 2022 STRATEGIC REPORT RISK MANAGEMENT RISK IMPACT MITIGATION PRODUCTION AND SALES 5 Change in prices There is a significant fall in commodity pricing for CPO and PKO. HIGH HIGH  A fall in commodity prices would result in a reduction in mill-gate prices received by the Group for its output. FINANCIAL The Group accepts that it is dependent on its ability to sell its output into a world market over which it has no control. However, oil palm is a permanent tree crop and is the cheapest major vegetable oil to produce, with Indonesia being the lowest cost producing country. The Group employs a dedicated marketing team to monitor developments in the market and to ensure that it receives the best available prices for its sales tenders and other supply agreements. 6 Exchange-rate fluctuation There is an adverse impact in the Indonesian Rupiah exchange rate. Adverse exchange rate movements can impact upon Group costs and the value of locally held assets. Exchange rate risk is mitigated at least in part as the Group’s functional currency is USD and both its revenue and significant proportion of its costs are USD related. Local costs denominated in Indonesian Rupiah (“IDR”) are lower in USD terms when the IDR weakens, but at the same time assets held in IDR devalue, whilst the opposite holds when the IDR strengthens against USD. Management have concluded that, other than seeking to hold surplus cash balances in USD as far as possible, any other formal hedging mechanisms would be difficult to achieve and unlikely to be cost effective. Increasing input costs adversely affect cost per tonne and, by extension, operating margins. The Group operates a centralised purchasing team, based in Jakarta, that is responsible for all major procurement, supported by regional offices dealing with local suppliers. Tenders are well-controlled and subject to multiple reviews. Unit costs have benefited from increasing yields, but recent inflation, particularly on fertiliser caused by the Russia Ukraine conflict, has inevitably fed through to cost per tonne. The Group is subject to an additional tax liability. In all cases, the Group is committed to complying with relevant tax legislation and to paying taxes that are due. The Group employs a dedicated tax specialist team and works with external tax consultants where necessary to advise on complex areas. 9 Sufficiency of workforce The Group is unable to attract, train, or retain a sufficient workforce at its oil-palm estates. A lack of workers may lead to key operational tasks not being performed to a Group standard or not performed at all, resulting in lost crop, production and revenue. The Group has a clearly defined management structure across all its operating locations in Indonesia from senior management through to managers and assistants responsible for individual estates and divisions. Regular reviews are conducted including a discussion of current and anticipated workforce requirements. Steps are taken where necessary to recruit additional workers, and the pay rates, working and living conditions are monitored to ensure that they are in accordance with Group standards. MED LOW  7 Inflation There is a significant increase in Group costs due to inflationary pressures. MED HIGH N 8 Taxation The Group is unable to agree its tax accounting with local tax authorities. LOW MED N PEOPLE MED HIGH N 10 Succession planning The Group fails to focus on development of its management team and planning for succession in key roles. MED MED N The Group relies on the experience and expertise of its senior management Group, without whom the Group risks a reduction in its high operating standards. Succession planning for senior staff has been identified as a priority area and is discussed on a regular basis by the Group board. Wherever possible, early discussions are held with staff members to discuss their plans along with opportunities for future development. The continuing growth of the Group has allowed for scope to provide new learning and development for staff. 31 STRATEGIC REPORT continued RISK IMPACT MITIGATION ENVIRONMENTAL, SOCIAL AND GOVERNANCE 11 Environmental obligations The Group fails to comply with its own policies, or with legal or regulatory obligations, on environmental protection. A failure to comply with environmental obligations may lead to environmental loss, reputational damage, remediation costs and potential fines. LOW HIGH  12 Relationship with local populations Operations are disrupted by a breakdown in relations with local populations around Group estates. Disruption around Group estates, including workforce problems or transport difficulties, could lead to a slowdown or even stoppage in Group production. LOW HIGH  13 Reporting obligations The Group fails to comply with obligations to provide external reporting on ESG data and analysis. LOW MED N The Group may be subject to regulatory challenge, or have concerns raised by investors if necessary ESG data is missing from reporting. POLITICAL AND REGULATORY 14 Indonesian regulatory environment The Indonesian government introduces new laws or regulations which adversely affect Group operations. A change in the legal or regulatory environment could result in a reduction in Group profitability due to lower pricing, higher taxes, or some other impact. MED MED  15 Bribery and corruption Operations in Indonesia are deemed to be at risk of bribery and corruption. Inappropriate activities could lead to both legal sanction and a loss of reputation. LOW MED  16 Security of land rights The Group fails to secure or renew the land rights over its operating locations. Without valid title to the land on which it operates, estate operations may be significantly disrupted or, at worst, result in loss of the land. LOW MED  32 The Group applies its well-established policies on the development and operation of sustainable oil-palm estates. It has a separate sustainability team, including staff members resident at all its operating sites. The Group is a long-standing member of the RSPO and is subject to their independent audit and scrutiny. Careful attention is paid to the Group’s relationship with local populations around Group estates, including communication with local government, mayors and village representatives. The smallholder co-operative schemes attached to the majority of the Group’s planted areas play an important part in aligning the interests of the Group and the local community, and the Group works hard to ensure that the mutual benefits of co-operative participation are well understood. There have been, and continue to be, significant changes in the regulatory environment around ESG in recent years, and the obligations to capture and report data are only expected to increase. The Group works with advisors, monitors guidance, and plans disclosure in annual reports, standalone documents and through the website with the objectives of meeting its obligations and to providing useful information to its shareholders. The Group has a very long history of operating in Indonesia, and during that time the country has benefited from a period of political stability and economic growth. Inevitably some changes occur which influence the Group’s operations, for example the CPO export tax changes during 2022, but the Group monitors these and reports them to shareholders as required. The Group has a robust policy on bribery and corruption, completes risk assessments and conducts training of senior management and staff in all locations. It requires all its business partners to complete questionnaires on their respective anti-bribery and anti-corruption activities and policies. The Group has experienced staff at its Jakarta head office and has employed independent consultants to maintain a whistleblowing reporting channel to monitor any issues that arise. The Group’s legal department in Jakarta maintain close control over all of the Group’s land titles across Indonesia. Land is held under 25- or 30-year leases (HGUs) which are legally renewable at the end of their term. The Group’s experience has been that renewal of HGUs has been a straightforward process. For newer projects and estates under development, a process of initial application takes place, which again is controlled by the legal department. Prior to obtaining the HGU, all necessary development and operating licences are obtained. M.P. EVANS GROUP PLCANNUAL REPORT 2022STRATEGIC REPORT RISK MANAGEMENT RISK IMPACT MITIGATION POLITICAL AND REGULATORY (continued) 17 Land rights dispute There is a dispute over land rights between the Group and another interested party. LOW MED N If the Group is unable to defend its land rights, a loss of planted hectarage would have a knock-on effect to crop and production. At times, the Group is subject to claims from others who seek to demonstrate an interest in the Group’s planted areas. This can be more prevalent when commodity prices are high, not just for CPO, but other competing commodities when claimants see other potential uses for Group land. The Group legal team, supported by advisors as necessary, robustly defend the Group’s land rights, and in all cases the Group is satisfied that it holds the proper title to its planted areas. INFORMATION SYSTEMS 18 Information security Group IT systems are not sufficiently secure. MED LOW N Proprietary or sensitive information is shared outside the Group, either as a result of accidental loss or malicious cyber attack. A Group-wide information management and reporting system has been deployed, and an in-house IT team works closely with retained IT consultants to ensure that Group data remains secure. Access controls have been established, and core data is stored in a secure ‘cloud’ environment. 19 System robustness IT systems critical to the Group are found to be unreliable or inconsistent. LOW LOW N Group decision-making and reporting is based on system output, and unreliable data could lead to poor decisions or incorrect analysis. The Group’s management system is made up of several modules covering different aspects of operations and reporting. It is well- established and outputs are reviewed by management across the Group. Reports are discussed and challenged appropriately. A change management protocol has been developed to ensure that system updates are tested rigorously before being deployed into the ‘live’ environment. Approved by the board of directors and signed on its behalf. Matthew Coulson Chief executive 21 March 2023 33 SUSTAINABILITY The Group is committed to the production of certified sustainable palm oil, and has sustainability at the core of its strategic and operational decision making SUMMARY OF TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES The Group recognises that developing active members of the RSPO, we focused specifically on environmental, do not deforest, and we are good social and governance (“ESG”) matters. stewards of the land we cultivate. We provide housing, along with medical, The management of climate risks a sustainable business means making educational and leisure facilities and opportunities takes place long-term decisions, including protecting the environment for the benefit of all. Concerns about along with places of worship for our throughout the business. The board workers and their families. has delegated executive responsibility for the Group’s climate action to the global warming, and in particular The board proactively takes into chief executive. In his role, the chief the destruction of tropical rainforest, consideration stakeholder feedback in executive takes the lead in setting have rightly received, and continue to the development of its sustainability policy on sustainability and managing receive, close scrutiny. As a producer strategy, including the Group’s the Group’s climate risk register. The of sustainable palm oil, the Group response to climate change. Through Group has a dedicated sustainability supports the UK’s commitment to previous stakeholder engagement, we department, which, along with the limiting global warming to well below identified six material topics which dedicated head of risk management, 2°C, as set out by the Paris Agreement. helped us to define strategic focus support the chief executive in areas. Those topics are greenhouse identifying, assessing and addressing For the first time, in this annual report, on a voluntary basis, the gas emissions, forest protection, climate risks and opportunities traceability, water, fair labour and impacting Group operations. Group has followed the guidance communities. of the Taskforce on Climate-related Financial Disclosures (“TCFD”), covering The board has overall responsibility STRATEGY Our strategy is to maintain expansion the four key areas of governance, for monitoring climate-related risks of palm-oil production, and hectarage, strategy, risk management and and opportunities. We understand in a sustainable and cost-effective metrics and targets, and is reporting that climate change may present manner. Whilst this is our first its progress on integrating the 11 challenges which could impact our TCFD disclosure, we have, for many TCFD recommendations into Group ability to deliver the Group’s strategy, years, published a wide range of processes. Summary information is and climate-related risks and information, in our annual report, provided in this section of the annual opportunities are considered during standalone reporting and on our report, whilst more detailed analysis strategic decision making by the website, showing how we approach will be provided in a standalone report board where appropriate. To support sustainability in practice. We have due for publication later in 2023. them in fulfilling their responsibilities, a training session was held for the utilised the recommendations of TCFD as a tool to strengthen our developing CLIMATE GOVERNANCE The board continues to promote the board, facilitated by the Group’s third- sustainability programme and party sustainability advisors, providing ensure awareness of climate change success of the Group, considering them with an overview on climate influences strategic and financial the interests of all its stakeholders, change and how both governments decisions made by the board. By and focuses on acting responsibly and individual organisations are identifying and assessing the climate- when considering the Group’s setting ‘net zero’ emissions targets. related risks which may impact our strategic priorities. Climate change This session also included a business directly over time, we can evaluation has been integrated into facilitated discussion around how to actively work to mitigate potential existing sustainability governance, account for the Group’s greenhouse damage. This also enables us to which has been developing alongside gas emissions, or ‘carbon balance identify and capitalise on climate- our sustainability strategy. Acting sheet’. As part of its governance related opportunities which may responsibly is at the heart of what development, the board is reviewing support the Group when delivering on we do and who we are. We are the need for a separate committee its business strategy. 34 M.P. EVANS GROUP PLCANNUAL REPORT 2022 SUSTAINABILITY Conservation area at Bumi Mas RISK MANAGEMENT The board acknowledge their Evaluation Management Using climate-scenario analysis, After assessing each risk, potential responsibility for the Group’s system we assessed each risk, considering management strategies have of risk management. A review of the process of risk identification, evaluation and management is different timescales and global been discussed, with an objective warming forecasts, leading to risk to implement the most effective classifications of low, medium or framework and actions for each carried out regularly and presented high for likelihood and impact. The relevant risk. Throughout the process to the board for discussion and results of this analysis were presented we engaged with internal stakeholders approval. We have worked to integrate at a climate-risk workshop, which across the business to identify an awareness of climate change into was attended by representatives information about existing mitigation this existing process to form a from operations, sustainability, risk processes. We applied a ‘climate climate-risk-management framework, management, finance and the board. lens’ where possible to existing as detailed below. Risks can also be categorised as mitigation strategies across all parts Identification ‘transition’ or ‘physical’ in nature. Physical risks arise from climate events, of the business. We will introduce new management processes where We launched a data collection process whilst transition risks from action appropriate. We have developed a in 2022 to identify the climate-related taken to transition away from fossil- climate-risk register which will be risks which are applicable for our fuel reliance. The analysis identified maintained internally by our business. Through this process we the Group’s most significant physical chief executive and reviewed at engaged with internal stakeholders risk to be in relation to rising mean least annually. to perform a review of current temperatures, and the most significant processes and operations. Education transition risk to be the costs sessions on TCFD and climate change associated with transitioning to lower were facilitated by our specialist emissions technologies. Further details sustainability consultant and current of these and the other risks identified guidance was considered throughout will be included in the Group’s this process. standalone sustainability report. 35 SUSTAINABILITY continued METRICS AND TARGETS The Group is committed to operating 100 palm oil companies. In 2022, the all Group operations. Emissions from Group increased its score by 3.9% to scope 1 and 2 account for 5% of the sustainably and doing what it can 80.2% and its ranking to 15th. Group total in 2021, and relate to to protect the environment. A range of metrics is used to measure our impact and we aim to establish reduction targets to manage our climate-related risks and Reducing our greenhouse gas emissions In 2022, the Group conducted a energy consumption (electricity, gas and biomass) as well as transport fuels used in Group operations. thorough data collection process, The Group’s scope 1 and 2 emissions opportunities. We are working to working with its specialist for 2022, and total emissions for its minimise our emission of greenhouse sustainability consultants, to baseline year in 2021 are as reported gases and are diligent in ensuring calculate its full carbon footprint in the following table. Given the the Group is not responsible for any comprising of scope 1, 2 and 3 complexity of collecting all scope deforestation. We will report on our greenhouse gas emissions. In 3 data, we anticipate reporting the environmental performance annually accordance with TCFD guidance, 2022 information in our forthcoming in the future. scope 1 relates to the Group’s direct standalone sustainability report. operations and scope 2 relates to In order to reduce our impact on emissions from fuel used to power the environment, we first must those operations. Scope 3 emissions understand and measure it. Reducing are indirect, occurring outside of the our greenhouse gas emissions is a Group, for example in the products material topic for our stakeholders purchased for use by the Group, or in and therefore, in 2022, we initiated the onward processing of the Group’s a robust data collection process to output. It is common for scope 3 to calculate our full carbon footprint for account for the significant majority the first time. of total emissions. Not all emissions are from CO2, for example some may Additional environmental indicators arise from methane, but for simplicity are used to reflect our commitment all are converted to CO2 equivalent to acting responsibly. We believe that amounts, and reported as tonnes of producing palm oil does not have CO2 equivalent, or ‘tCO2e’. As this is a to come at the expense of tropical complex process, we used 2021 data rainforests, reduced biodiversity to calculate a ‘baseline’ year. The or threatened endangered species. creation of our carbon balance sheet Adhering to RSPO standards means allows us to understand the impact we assess the suitability of land for planting using the High Carbon Stock associated with our operations, both direct and indirect, while identifying Scope 1 (direct) Scope 2 (indirect) Scope 3 (indirect) 2022 TONNES 2021 TONNES 116,800 124,500 500 400 117,300 124,900 tbc tbc 2,594,400 2,719,300 The Group’s scope 1 and 2 emissions reduced by 6% in 2022 and the Group is committed to making further reductions. The biogas facilities installed at our operating locations are already helping to make a positive difference. Further detailed SECR information will be included in the Group’s standalone sustainability Approach (HCSA), have a policy of opportunities for future reduction. report. zero-burning and a commitment not The Group’s total greenhouse gas to develop high conservation value emissions (scopes 1, 2 and 3) were (HCV) land. We prevent any burning 2.7 million tCO2e for 2021, with scopes of land for subsequent cultivation, 1 and 2 being 5% and scope 3 being we seek to identify and conserve 95% of the total. high-carbon-stock areas, and we promote biodiversity. The Group The Group started to report scope also participates each year in the 1 and 2 data for the UK business in SPOTT assessment undertaken by the 2019 for compliance with streamlined Zoological Society of London, which energy and carbon reporting (“SECR”) provides an indicator of the ESG requirements. We have widened our disclosures provided by a sample of data collection, and now report on Calculating the Group’s indirect scope 3 emissions enables it to identify the main sources of greenhouse gases outside its own operations. This process also provides a baseline for making decisions about carbon neutrality and net zero. Within scope 3, the largest component comes from the further processing of the products that the Group sells, accounting for 36 M.P. EVANS GROUP PLCANNUAL REPORT 202285% of the Group total. A large part of this is from processing of crop in outside mills, and the Group should benefit from a reduction as its own milling capacity increases from its baseline year. Intensity measures The Group uses intensity measures as a way of monitoring emissions whilst also taking account of the growth in activities and supporting the measurement of year-on-year progress. The main intensity measure used is tCO2e per tonne of CPO produced. For the Group’s baseline year, the total intensity measure for scopes 1, 2 and 3 was 9.3, whilst in 2022 the intensity measure for scopes 1 and 2 was 0.4. NEXT STEPS The Group is committed to working on climate risk and carbon reduction. The Group has continued to invest in its own efficient milling capacity, and while this will increase scope 1 emissions, they will be more than offset by a fall in scope 3 emissions as the Group will not rely in the same way on outside mills. Data gathering is taking place for 2022 scope 3 analysis, and the plan is to publish this as part of the detailed sustainability report due for publication later this year. The Group is also working with its external consultants on carbon analysis, including carbon sequestration, associated with the Group’s planted hectarage and its conservation areas, as these are not included in the scope 1, 2 and 3 categories. Having completed baseline analysis, plans for carbon reduction are being assessed. The Group is holding a net- zero strategy workshop in the first half of 2023 to review its carbon footprint, decarbonisation opportunities, and potential targets. SUSTAINABILITY INSPECTION OF OWL-NESTING BOX AT KOTA BANGUN As part of its work to maintain healthy and productive palms on its estates, and to mitigate against the risk of significant damage to fresh fruit bunches prior to harvest, the Group seeks to keep rat populations under control within its planted areas. As part of its strategy to control rats, the Group builds barn-owl boxes amongst its oil palms, and encourages barn owls, which are natural rat predators, to nest within them. 37 CASE STUDY ESTATE SCHOOLS The Group works to ensure education is accessible for children of workers living on its oil-palm estates, providing both schooling and transportation. A number of the Group’s estates are in relatively remote areas, particularly those located in East Kalimantan on the island of Borneo. Attracting and retaining a high-quality workforce is important to the Group, and encouraging workers to join our more remote estates is difficult when they bring their families, if there is no easy access to local schools. As part of the Group’s commitment as a responsible operator, a significant and ongoing investment is being made in school building in East Kalimantan, and at the end of 2022, across the Group’s estates in that region, 640 school places had been taken up by pupils across three schools staffed by over 40 teachers. A further school is currently under construction at Kota Bangun estate, due to be opened in 2023. COMMUNITIES The Group takes an active interest in the welfare of the communities living on and around its operations promoting trust and mutual support. Over the last twenty years, the Group has expanded substantially in Indonesia, investing over half a billion US dollars in its oil-palm projects. In each of its key development areas, whether in East Kalimantan, in Sumatra or on Bangka Island, the Group has always worked carefully and sensitively with local communities. The Group’s strategy anticipates further growth, and as part of that strategy recognises that local communities are important stakeholders in Group operations. Following the formation of smallholder co-operative schemes connected to the Group’s estates at Pangkatan and Simpang Kiri, the Group now has smallholder schemes connected to all its estates. By the end of 2022, these schemes had over 10,000 individual members. Those smallholder schemes owned 13,900 hectares of oil palm, a very valuable asset. Given the remote nature of some of the Group’s estates, it is often one of the largest, if not the largest, employer in the area, providing a valuable source of income helping to raise living standards. During the course of 2022, the Group increased its permanent workforce to over 11,500, with its economic impact felt far more widely. The Group is committed to providing high-quality facilities for the communities living on its estates (see page 41 for details). 38 M.P. EVANS GROUP PLCANNUAL REPORT 2022Transportation to and from estate schools is provided by the Group in dedicated school buses. In other regions where government schools are more easily accessible, Group school buses take children to and from their classes. SUSTAINABILITY COMMUNITIES Primary school at Kota Bangun For younger children, estate crèches are available, providing a safe and supportive pre-school learning and development environment. 39 COMMUNITIES continued CASE STUDY FIRE SAFETY MONITORING Group estates have dedicated and trained fire marshals. High-risk areas are monitored, and fire-fighting equipment can be deployed quickly The Group recognises the risk of fire on its oil-palm estates and surrounding areas and its environmental obligation to remain vigilant in monitoring that risk, both in its own estates and in those adjoining its areas of operation. Fire risk includes danger to life, environmental damage associated with uncontrolled release of stored greenhouse gases, and loss of physical assets including planted areas. Training is conducted regularly by the Group’s health and safety team, and risk assessments are reviewed and updated. Mobile water tank and pump unit at Kota Bangun 40 Fire watch-towers have been built on Group estates and patrols take place. The Group has a zero-tolerance approach to burning as a method for clearance, and makes a report of any observed instances in surrounding areas. Where any instances occur on Group land, they can be dealt with swiftly using fire-fighting equipment available to trained personnel on site. M.P. EVANS GROUP PLCANNUAL REPORT 2022 COMMITMENT TO THE GROUP’S ESTATE COMMUNITIES SUSTAINABILITY COMMUNITIES HOUSING Developing high-quality housing is a core part of the commitment to our workforce and their families. During 2022, the Group built 350 new housing units, and approximately 16,000 people live on the Group’s oil-palm estates. EDUCATION The Group offers crèche facilities for young children and has developed both primary and secondary schools on its estates, and now has over 1,000 school places available. School buses are provided by the Group. RECREATION The Group supports and encourages a wide range of sporting activities at its estates. Infrastructure is in place to enable participation by both our workforce and the wider community, with sports programmes in place for young people through to more senior age groups. HEALTH There are 12 medical facilities at Group estates, and the doctors and medical staff employed by the Group are able to offer support and care on a wide range of issues, with 41,000 consultations completed in 2022. RELIGION Religion plays an important part in community life on Group estates, and this is supported by the Group through the provision of places of worship. COMMUNITY Finally, gathering as estate communities is important, and the Group has provided both community halls and estate clubhouses to make this possible. The Group started construction during the year on a new clubhouse at Bumi Mas, due for completion in 2023. 41 M.P. EVANS GROUP PLC ANNUAL REPORT 2022 REPORT OF THE DIRECTORS 6. Michael Sherwin INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed a director and member of the audit and remuneration committees in July 2022. Has over 40 years’ experience in finance and leadership roles, having originally trained and qualified as a chartered accountant with Price Waterhouse. Was CFO of Games Workshop plc for ten years, followed by nine years as CFO at Vertu Motors plc. Has also worked as a non- executive director at both Plusnet plc and at Sumo Group plc where he chaired their audit committees. 7. Tanya Ashton INDEPENDENT NON-EXECUTIVE DIRECTOR Joined the board on 1 August 2022. Member of audit and remuneration committee. Has over 18 years’ experience working in ESG roles. Currently head of sustainability at Walgreens Boots Alliance, Global Sourcing, Europe and a board member of global not-for profit organisation The Sustainability Consortium. Previously held senior positions at Silver Spoon British Sugar plc, part of Associated British Foods. Recognised for her commitment to increasing sustainability in consumer products. 8. Lee Yuan Zhang NON-EXECUTIVE DIRECTOR Joined the board on 1 February 2023. Regional Director (Plantations) of Kuala Lumpur Kepong Berhad (“KLK”), Malaysia. Former President Director of PT KLK Agriservindo, Indonesia, responsible for the management of 140,000 hectares of oil-palm plantations across five Indonesian provinces. Has also held a number of senior head office roles, including senior marketing and sales roles, within the KLK Group. 8 1. Peter Hadsley-Chaplin EXECUTIVE CHAIRMAN 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. 2. Matthew Coulson CHIEF EXECUTIVE Appointed chief executive in 2022 having been finance director since 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. 3. K Chandra Sekaran EXECUTIVE DIRECTOR, ASIA PRESIDENT DIRECTOR, PT EVANS INDONESIA Appointed a director in 2021. Took up position of PT Evans Indonesia’s president director in 2008. Began working in Indonesia in 1995, with experience in Sumatra and Kalimantan where he was chief operating officer for Sinarmas Plantations. Began career with Harrisons and Crosfield (later known as Golden Hope Plantations and today part of the Sime Darby group). Has a profound understanding of the Indonesian plantation industry and the social issues related to it. 4. Bruce Tozer INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed a director and member of the audit and remuneration committees in 2016, and chairman of those committees since 2022. Has held senior roles at JP Morgan, Rabobank International, and Credit Agricole. Non-executive director of the Real Wild Estates Limited, and Canadian-listed Base Carbon Corp. He consults in environmental markets, commodities, agribusiness investment and ESG. Advisory roles include lead adviser on carbon at Singapore-regulated Abaxx Exchange. 5. Philip Fletcher NON-EXECUTIVE DIRECTOR 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. 42 REPORT OF THE DIRECTORS 6 5 2 4 1 3 7 Board of directors at UK head office for December 2022 board meeting 43 REPORT OF THE DIRECTORS continued The directors present the audited consolidated and parent-Company financial statements of M.P. Evans Group PLC for the year ended 31 December 2022. REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS A review of the year and future prospects (including the principal risks and uncertainties facing the Company) is included in the chairman’s statement (pages 4 to 7) and in the strategic report (pages 14 to 33) and is incorporated in this report by reference. RESULTS AND DIVIDEND Details of the profit for the year are given in the consolidated income statement on page 66. An interim dividend of 12.5p (2021 – 10p) per share in respect of 2022 was paid on 4 November 2022. The board recommends a final dividend of 30p (2021 – 25p) per share. This dividend will be paid on or after 16 June 2023 to those shareholders on the register at the close of business on 28 April 2023. This final dividend is not provided for in these financial statements. SHARE CAPITAL The Company has one class of share. Details of the issued share capital of the Company are as follows: from the start of the year until their resignations on 31 March 2022 and 30 September 2022 respectively. Michael Sherwin, Tanya Ashton and Lee Yuan Zhang will offer themselves for election at the forthcoming annual general meeting. In addition, in accordance with the articles of association, Philip Fletcher, Bruce Tozer and Matthew Coulson will retire from the board at the forthcoming annual general meeting and, being eligible, will offer themselves for re-election. The directors serving at the end of the year, together with their interests at the beginning, or later date of appointment, and end of the year in the 10p shares in the Company were as follows: BENEFICIAL OPTIONS At 31 December 2022 P E Hadsley-Chaplin M H Coulson K Chandra Sekaran P A Fletcher B C J Tozer M Sherwin T Ashton 1,561,717 17,000 142,181 1,048,171 - 2,250 - 1,561,717 13,900 123,181 1,048,171 – – – - 49,234 32,000 - - - - – 35,180 59,000 – – – – Issued (fully-paid and voting) at 1 January 2022 Issued in respect of options Bought back and cancelled Issued (fully-paid and voting) at 31 December 2022 SHARES OF 10P EACH 54,696,253 30,000 (495,365) 54,230,888 At 1 January 2022 (or later date of appointment) P E Hadsley-Chaplin M H Coulson K Chandra Sekaran P A Fletcher B C J Tozer M Sherwin T Ashton The Company introduced a share-buyback programme during the year. Under that programme the Company bought back and cancelled 495,365 shares, representing 0.9% of the issued share capital, for a total cost of Further details of the directors’ interests in share options are disclosed in the directors’ remuneration report, on page 58. US$4.9 million. There was no share-buyback programme None of the directors holds any beneficial interest in operation in the prior year. DIRECTORS AND DIRECTORS’ INTERESTS The present membership of the board is detailed on pages 42 and 43. All of those directors served throughout the year apart from Michael Sherwin, who joined the board on 1 July 2022, Tanya Ashton, who joined on 1 August 2022, and Lee Yuan Zhang, who was appointed in, or holds options to buy shares in, any subsidiary undertaking of the Company as at the date of this report. No director has had a material interest in any contract of significance in relation to the business of the Company, or any of its subsidiary undertakings, during the financial year or had such an interest at the end of the financial year. after the year end on 1 February 2023. In addition, Darian As permitted by the Company’s articles of association, McBain and Jock Green-Armytage both served as directors there was throughout the year to 31 December 2022, 44 M.P. EVANS GROUP PLCANNUAL REPORT 2022 REPORT OF THE DIRECTORS and is at the date of this report, a qualifying third- party indemnity provision, as defined in section 234 of the Companies Act 2006 in force for the benefit of the directors. SIGNIFICANT INTERESTS As far as the Company is aware, the significant interests in the Company as at the date of this report are: been purchased by the Company as treasury shares as this would give the Company the flexibility of being able to sell such shares quickly and effectively where it considers it in the interests of shareholders so to do. Whilst any such shares are held in treasury, no dividends will be payable on them and they will not carry any voting rights. Resolution 11 set out in the notice of the annual general meeting will accordingly be proposed to authorise the NATURE SHARES % purchase of up to a maximum of 5,401,372 shares, on the Kuala Lumpur Kepong Berhad Nokia Bell Pensioenfonds ofp Direct 12,685,357 23.49 AIM market of the London Stock Exchange, representing 10% of the Company’s current issued share capital. The maximum price which may be paid for a share on Direct 5,683,225 10.52 any exercise of the authority will be restricted to 5% Abrdn plc Indirect 2,983,902 5.52 Schroder Investment Management Canaccord Genuity Wealth Management MM Hadsley-Chaplin Direct 1,928,254 Indirect 1,960,000 Indirect 2,102,120 3.89 the London Stock Exchange for the five business days above the average of the middle-market quotations for such shares as derived from the Daily Official List of before the purchase is made. The maximum number of 3.63 3.57 shares and the price range are stated for the purpose of compliance with statutory requirements in seeking OUTSTANDING OPTIONS TO SUBSCRIBE As at the date of this report, there were options to subscribe for 20,000 shares outstanding under the executive share-option scheme, and options to subscribe for 182,577 shares outstanding under the 2017 long-term incentive scheme. If all of the options were exercised, the resulting number of shares would represent 0.37% of the enlarged issued share capital at that date and 0.41% of the enlarged issued equity share capital at that date if the proposed authority to purchase shares was exercised in full (excluding any share capital which may be purchased and held in treasury). AUTHORITY TO MAKE MARKET PURCHASES OF SHARES The directors propose to seek authority under resolution 11 for the Company to purchase its own shares on the AIM market of the London Stock Exchange until 30 June 2024 or, if earlier, the date of the Company’s 2024 annual general meeting. The authority will give the directors flexibility to purchase the Company’s shares as and when they consider it appropriate. The board will only exercise the power of purchase when satisfied that it is in the best interests of the Company so to do and all such purchases will be market purchases made through the AIM market of the London Stock Exchange. The directors would only consider making purchases if they believed that the earnings or net assets per share of the Company would be improved by such purchases. The directors would consider holding the Company’s own shares which had this authority and should not be taken as an indication of the level of purchases, or the prices thereof, that the Company would intend to make. The authority conferred by resolution 11 will lapse on 30 June 2024 or, if earlier, the date of the Company’s 2024 annual general meeting. 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 2022 amounted to 37 days (2021 – 50 days). FINANCIAL INSTRUMENTS Details of the Group’s financial instruments, and the board’s policy with regard to their use, are given in note 31 to the consolidated accounts on pages 90 and 91. SUBSIDIARY COMPANIES Details of the Group’s subsidiary companies, including their country of operation, are given on page 98. ENERGY USE The Group has provided disclosures in accordance with the requirements of the Taskforce on Climate-related Financial Disclosures in the sustainability section of this annual report on pages 34 to 37. Energy use is included as part of the ‘scope 1 and 2’ disclosures in that analysis. 45 REPORT OF THE DIRECTORS continued STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The directors are responsible for preparing the annual and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from report and the financial statements in accordance with legislation in other jurisdictions. applicable law and regulations. In the case of each director in office at the date the Company law requires the directors to prepare financial report of the directors is approved: statements for each financial year. Under that law the directors have prepared the Group financial statements in accordance with UK-adopted International Accounting Standards and the Company financial statements 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 accordance with United Kingdom Generally Accepted • they have each taken all the steps that they ought to Accounting Practices (United Kingdom Accounting have taken as a director in order to make themselves Standards, comprising Financial Reporting Standard 101 aware of any relevant audit information and to ‘Reduced Disclosure Framework’ (“FRS101”) and applicable establish that the Group and parent-Company’s law). Under company law the directors must not approve auditors are aware of that information. the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the GOING CONCERN The Group’s operations are funded through a Group and Company for that period. In preparing these combination of cash resources, loan finance, and long- financial statements, the directors are required to: term equity. The board has undertaken a recent review of • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether UK-adopted International Accounting Standards 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 the Group’s financial position, including forecasts, risks and sensitivities. The review has considered the Group’s plans for further development in Indonesia, along with the required funding for that development. Based on that review, the board has concluded that the Group is expected to be able to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of these financial statements. As a result, the board has concluded that the going-concern basis continues to be appropriate in preparing the financial statements. • prepare the financial statements on the going-concern basis unless it is inappropriate to presume that the Company will continue in business. POST BALANCE-SHEET EVENT As described in note 33, the Group acquired a further 2,100 planted hectares close to its Simpang Kiri estate in The directors are responsible for keeping adequate March 2023. Total costs associated with the acquisition accounting records that are sufficient to show and explain are estimated to be US$14.3 million. the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them INDEPENDENT AUDITORS The auditors, BDO LLP, have expressed their willingness to to ensure that the financial statements and the directors’ continue in office and a resolution to re-appoint them will remuneration report comply with the Companies Act be proposed at the forthcoming annual general meeting. 2006. They are also responsible for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Approved by the board of directors and signed by its order. Katya Merrick Company secretary The directors are responsible for the maintenance 21 March 2023 46 M.P. EVANS GROUP PLCANNUAL REPORT 2022REPORT OF THE DIRECTORS Peter Hadsley-Chaplin officiating at the opening of the new Kota Bangun clubhouse 47 CORPORATE GOVERNANCE The Group’s recognised corporate governance code is the Quoted Companies Alliance’s 2018 Corporate Governance Code (“QCA Code”). The board is committed to following the principles set out in the QCA Code, to review, 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 here. The first of the Group’s four strategic pillars is objectives and the Group’s strategy. Secondly, a robust “Responsibility”. At M.P. Evans, acting responsibly is at and transparent recruitment process was carried the heart of what we do and, as a board, we believe out with the assistance of specialist recruitment that a strong governance framework plays a vital role consultants. As a result, we have been very pleased in ensuring that business is conducted responsibly during the year, to welcome firstly Michael Sherwin, a at every level. This, in turn, benefits the Group’s very experienced non-executive director and former shareholders. The board embraced the QCA’s Corporate listed company executive, coming from an accountancy Governance Code (the “Code”) in 2018, recognising this and finance background, and then Tanya Ashton, who as a valuable tool to help the Group achieve its goals. is a leader in sustainability and ESG. At the beginning As a board, we dedicate significant time to developing of February 2023, we also welcomed Lee Yuan Zhang and reviewing codes and policies which support our to the board who, due to his roles within the Kuala values of acting responsibly, and have promoted these Lumpur Kepong Berhad Group, has valuable experience throughout the organisation. Our compliance with the in the Indonesian oil-palm plantation sector, as well as Code is monitored annually by the board, which also wider corporate experience. We are delighted already serves as an opportunity to remind ourselves of the to be benefiting from the various perspectives brought corporate governance standards we aspire to and to by our new directors, and are confident that we are in keep up to date with any developments. The corporate strong shape, with a dynamic board equipped to face governance information and QCA compliance index on challenges and to identify opportunities, particularly our website is updated annually following the board’s those presented by climate change, and to continue to review, and was last updated in September 2022. deliver returns to shareholders. As chairman, in addition to setting the Group’s strategy With the appointment of Michael and Tanya at in conjunction with the board, one of my primary the beginning of July and August respectively, responsibilities is to ensure that an effective corporate we rebalanced the ratio of independent to non- governance framework exists, and that clear policies, independent non-executive directors where, for a very which have been approved and endorsed by the board, short period in June, the remuneration committee are embedded within all levels of the organisation. I am had comprised two non-executive directors, one of also responsible for ensuring the effective operation of the board. The composition of the board, the breadth whom, Jock Green-Armytage, was deemed not to be independent, having at that point reached nine years and depth of its skill set, the diversity of its members of continuous service as a director for the Group. We to facilitate insight and perspective on matters being were grateful to Jock for remaining in post until his considered, and the inclusive environment within which retirement at the end of September, as this greatly constructive debate is enabled, are hugely important to supported the transitions on the board. With the most the effectiveness of the board in its strategy setting and recent appointment of Yuan Zhang to the board, we decision making. Board composition was a particular now have three independent non-executive directors focus during 2022 due to a number of changes arising and two non-executive directors who are not considered during the course of the year. My colleagues and I to be independent. The board acknowledges that dedicated significant time, firstly in evaluating the Yuan Zhang is associated with the Group’s significant current performance, skills and attributes of the board shareholder, KLK. However, after taking external advice, and identifying areas which could be enhanced to it has concluded that existing safeguards are sufficient ensure that the board is equipped to deliver on its and it would be alert to any conflicts of interest should 48 M.P. EVANS GROUP PLCANNUAL REPORT 2022REPORT OF THE DIRECTORS CORPORATE GOVERNANCE these occur. I am confident that those deemed not to At least annually, the board considers who the Group’s be independent understand their responsibilities to stakeholders are, and how the board engages with shareholders and that they will conduct their duties them. This helps to embed into the board’s decision- with an independent mindset. making process the practice of considering wider From the beginning of 2022, when Matthew Coulson took up the role of chief executive, I was pleased to relinquish my temporary responsibilities as chief executive. Whilst my role as executive chairman is not strictly in line with the Code, feedback received via the formal board evaluation process and, from time to time, directly from shareholders leads me to feel stakeholder issues. The whistleblower hotline continues to be effective as a channel for stakeholders to report potential wrongdoing, and whilst we are pleased that no serious whistleblower issues have been identified to date, grievances reported are treated as an opportunity to see whether improvements need to be made in the way we do things. comfortable that I have the support of my colleagues The board, supported by the audit committee, has and shareholders alike, in continuing in this role. continued to make progress on the areas of risk The board continues to evaluate itself. Lines of communication are always open between board members and me, the senior independent non- executive director and chair of the remuneration and audit committees, Bruce Tozer, and the company secretary, and a formal board evaluation is normally conducted towards the end of each year. It has been especially helpful, at the most recent formal evaluation, to receive reassuring feedback from the newest board members on such matters as the induction process, initial impressions on how board discussions are identification, management and mitigation, and disclosure. Stakeholder engagement has proved to be a valuable tool in the risk identification strategy. Matthew Coulson, as tasked by the board, held a series of risk review meetings during the year both in the UK and Indonesia, assisted in Indonesia by the Indonesian head of risk. In these meetings Matthew gathered insights from head office staff, estate management, engineering management and the legal department, with the information feeding into an updated risk register which was reviewed by the board. conducted and decisions made, including the quality of As I have stated previously, we believe compliance board information and the functioning of committees. with the QCA Code provides a valuable support in We note all feedback and agree on actions, in an strengthening our ability to grow and so deliver endeavour continually to improve the way we work returns to our shareholders that also benefit our wider together and achieve the best results for the business. stakeholders. The Group sees ethical behaviour as a The focus of training for the board during the year, and which is ongoing, has been on ESG, both in understanding the requirements of the emerging regulatory and disclosure environment, and evaluating the associated risks to the business of climate change. Because we are committed to acting responsibly, we competitive advantage to building trust with suppliers and attracting and retaining high-performing staff. This too is emphasised in the QCA Code. 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. have engaged specialist ESG consultants to assist My colleagues on the board and I are committed us with collating and evaluating the data needed to to ensuring that the Group’s corporate-governance fulfil our disclosure obligations and support good structures are robust and are keeping these under decision making across the organisation. In this frequent review. There have been no significant changes ongoing process it has been gratifying to note that the to the Group’s corporate governance framework during requirements of our RSPO membership, which we have the year. adhered to and been audited on for many years, has expedited the data-gathering process. Board members Peter Hadsley-Chaplin are encouraged to develop and keep all their skills up Chairman to date, and training is available as needed. 21 March 2023 49 CORPORATE GOVERNANCE continued OPERATION OF THE BOARD Directors Remuneration of all staff rewards those who display these behaviours; access to the Group’s long-term incentive Details of the Company’s board, together with those of scheme is likewise offered to senior staff who qualify on the audit and remuneration committees, are set out on grounds of length of service and who promote the Group’s pages 42 and 43. For the first three months of the year, values. The Group dismisses staff found to have breached the board comprised an executive chairman, two executive the value of integrity. directors and four non-executive directors. The number of non-executive directors reduced to three at the end of March, but on appointment of two non-executives in July and August respectively there were five non-executive directors on the board until the end of September, when the number reduced again to four. Since February 2023 the number of non-executive directors has increased to five. The audit and remuneration committees are chaired by the senior independent non-executive director. The maximum number of directors permitted under the articles of association is eight. Executive directors work on a full-time basis apart from the chairman who, for the The board reserves to itself a range of key decisions (which can be found at www.mpevans.co.uk) to ensure it retains proper direction and control of the Company, whilst delegating authority to individual executive directors who are responsible for its day-to-day management. The board’s objectives are subject to periodic review, most recently in December 2022. All major and strategic decisions of the Company are made in the United Kingdom. The executive and non-executive directors discuss progress against budgets and other business issues, both during board meetings and at other times. second half of the year, worked on a part-time basis. The board has access to independent professional This structure is designed to ensure that there is a clear balance of responsibilities between the executive and the non-executive functions. Non-executive directors are expected to contribute two to three days’ service per month to the Company, including attendance at board meetings and the AGM. The board meets at least quarterly and is provided with information at least monthly. It receives operating summaries, executive operating reports, management accounts and budgets. Of the executive directors and non-executive directors serving throughout the whole year, all attended each of the six full board meetings held in 2022. Of the other directors, each of whom only served for part of the year, only one director was not able to attend one of the meetings during the period in which they served on the board. advice at the Group’s expense when the board deems it necessary in order for them to carry out their responsibilities. Currently, the board retains Peel Hunt LLP as the Company’s nominated adviser. The board additionally receives advice from independent professionals on legal matters, corporate public relations, taxation, and valuation of the Group’s property assets. The company secretary provides support on matters of corporate governance. During 2022 the Group also engaged the services of executive remuneration consultants to assist with developing a long-term incentive plan for UK-based executives, within the context of the Group as a whole, as well as comparable companies. In addition, the Group has engaged a specialist ESG consultancy firm to assist with the disclosure obligations to which it will become subject The board is collectively responsible for the success under the non-financial and sustainability reporting of the Company. The personal attributes of each of the regime for its 2023 accounts. This will provide a solid directors facilitates rigorous but constructive debate, benchmark against which the Group’s subsequent informed and considered decision-making and effective progress can be assessed. monitoring of progress in achieving the Group’s strategic objectives. The board as a whole actively engages in Independence and re-election of long-serving directors reviewing and developing Group policies. It promotes During the year, the board has sought to maintain a a culture founded on its values of integrity, teamwork balance of executive and non-executive directors. and excellence. Members of the board lead by example A description of the roles and responsibilities of the during their frequent interactions with staff and the clear directors is set out on page 42. For most of the year, policies which are discussed, set by the board with input other than for a period between 1 April and 1 July, more from stakeholders where appropriate, and promulgated than half of the directors were non-executive and, in throughout the workforce, including training and refresher accordance with the QCA Code, at least two of the non- training on key areas such as anti-bribery and corruption. executives serving during 2022 were independent, other 50 M.P. EVANS GROUP PLCANNUAL REPORT 2022REPORT OF THE DIRECTORS CORPORATE GOVERNANCE than for a very short period during June when Jock Green- Armytage was no longer deemed independent due to his length of service on the board. The board acknowledges that Philip Fletcher is not independent. However, the depth of his understanding of the Group, coupled with his commitment and track record of conducting his role with an independent mindset enables him to bring significant value to the board and its audit committee. The board is satisfied that its composition covers a broad range of relevant skills and experience to enable effective formulation and execution of the Group’s strategy. Jock Green-Armytage, who served on the board until 30 September 2022 has chaired FTSE-listed companies and brought significant industry knowledge as well as experience in both corporate finance and corporate governance. Bruce Tozer’s background is in commodity finance, environmental markets, and agri-business project finance, including palm oil, and he is able to contribute valuable insight from the finance sector. Philip Fletcher, as former managing director and finance director of the Group with a background in accountancy, has extensive specific knowledge of both the sector, operations in Indonesia and the evolution of the Group. The extensive corporate experience of Michael Sherwin, gained over many years in both executive and non-executive roles, and across a range of areas from M&A to corporate governance, is especially welcome following Jock’s retirement. Tanya Ashton’s nearly 20 years of experience in ESG roles is proving invaluable as the board intensifies its understanding of ESG issues including climate-change impacts and net-zero targets, having sadly lost the ESG expertise of Dr Darian McBain, who stood down from the board at the end of March 2022 due to conflicts of interest with her new role. Since their appointments, Michael and Tanya have demonstrated their willingness to contribute to board discussions with independent mindsets, participating fully and presenting constructive challenges to the executive team. At the beginning of 2023, Lee Yuan Zhang also joined the board. His perspective, derived from the roles he has held and continues to hold in KLK and its associated companies, where he has experience in the agronomic as well as corporate aspects of the business, promises to enhance the board’s expertise in these areas. effective in this role and building strong relationships with shareholders, as well as presiding over a well-functioning board. The perceived governance concern around having an executive chairman is mitigated by having, in Bruce Tozer, a robust senior independent non-executive director. Each director retires and must seek re-election at least every three years. Non-executive directors who have served on the board continuously for a period of nine years or more will offer themselves for re-election at each year’s annual general meeting. Directors’ remuneration As set out in the report on pages 55 to 58, 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 2022 comprised Bruce Tozer throughout the year, Jock Green-Armytage (until September 2022), Darian McBain (until March 2022), Michael Sherwin (from July 2022) and Tanya Ashton (from August 2022) met three times and all meetings were attended by all members appointed to the committee at the date of each meeting. Succession planning The Company does not currently have a nominations committee. The chairman maintains a strong individual relationship with all the directors and any changes to the board are managed collaboratively. The board reviewed succession planning during the year, including the merits of establishing a nominations committee, and remained of the view that it, led by the chairman, is competent to deal with any new appointments to the board. Any new appointments are discussed at a full board meeting, taking into account an assessment of the skills and experience required for the board successfully to formulate and execute the Group’s strategy, the current skills and experience of board members and those of the candidate, an assessment of board diversity, as well as feedback from the board evaluation process. Professional consultants may be engaged to assist in identifying appropriate candidates. Each member of the board is given the opportunity to meet the individual concerned before an appointment is made. The board has an executive chairman, Peter Hadsley- Chaplin. Given the time that he has served the Company both as a director and chairman, as well as the size of his shareholding in the Company, he is not considered independent. However, he has a long track record of being It is considered that the board would be resilient to any unplanned changes and be able to recruit or promote suitable, well-qualified, candidates within a reasonable time period. The board has committed to regular reviews of succession planning. 51 CORPORATE GOVERNANCE continued Board performance evaluation The board undertook a performance evaluation of itself and its committees during the year. Following the format used in the previous year, board members were invited to provide anonymous feedback to the company secretary within topic areas including board composition and structure, skills, induction, areas of responsibility, conduct of meetings, decision-making, committees, culture, risk management, stakeholder engagement, board evaluation and effectiveness of the chair. These comments were then analysed and compiled into a report by the company secretary, forming the basis of a board discussion. Once again, there was significant consensus among board members, with encouraging and constructive feedback given. Progress had been made during the year in addressing areas identified during the last evaluation process, with additional focus having been given to succession planning, executive pay and risk management. The 2022 evaluation process highlighted a need for the board to increase its understanding of ESG issues. This might include setting up a separate ESG committee and reviewing those areas of most importance to the Group’s stakeholders. Relations with shareholders and AGM The board attaches great importance to communications with both institutional and private shareholders. The executive directors regularly engage with shareholders to update them on the progress of the Group and discuss any areas of interest that they may have. Any significant issues raised by major shareholders are discussed by the board as a whole. Whilst this is not always possible with smaller shareholders, the chairman aims personally to respond to communications received from individuals. Following a two-year period in which the Covid-19 pandemic necessitated restricted in-person attendance at the Company’s AGM, the board was very pleased to resume business as usual in 2022, with an AGM at Tallow Chandlers Hall, which was also available to watch via a live weblink. The AGM was attended by all but one director, with Jock Green-Armytage, who had already declared his intention to step down from the board, sadly unable to be there. Bruce Tozer attended in his capacity as remuneration and audit committee chair, having newly taken over these roles on the board. The board was delighted to see so many shareholders, comprising many familiar and some new faces, at the 2022 AGM, and the directors were pleased to answer questions both during the meeting and, more informally, afterwards. During 2022, the executive directors took part in a number of online presentations, including two events hosted through the Investor Meet Company platform. These were live webinars following, respectively, the announcement of the 2021 results and interim results for 2022, available to existing and prospective shareholders, and providing an opportunity for questions to be posed to the directors after the presentation. The board acknowledges the important role that technology can play in facilitating shareholder engagement and will host further online events, including those specifically providing a forum for engaging with greater numbers of smaller shareholders. 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. ACCOUNTABILITY Financial reporting A detailed review of the performance and financial position of the Group is included in the chairman’s statement and the strategic report. The board uses these and the report of the directors to present a balanced and understandable assessment of the Group’s position and prospects. The directors’ responsibility for the financial statements is described on page 46 of the report of the directors. Risk management The directors acknowledge their responsibilities for the Group’s system of risk management. Such a system can provide reasonable, but not absolute, assurance against material misstatement or loss. A review of the process of risk identification, evaluation and management is carried out by the audit committee. The committee considers the Group’s principal risks, and a summary is presented to the board for discussion and approval. The review process considers the control environment and the major business risks faced by the Group. In summary, this is reported on pages 30 to 33. Important control procedures, in addition to the day-to- day supervision of parent-Company business, include regular executive visits to the areas of operation of the Group and of its associates, comparison of operating performance and monthly management accounts with plans and budgets, application of authorisation limits, internal audit of subsidiary undertakings and frequent communication with local management. The Group 52 M.P. EVANS GROUP PLCANNUAL REPORT 2022REPORT OF THE DIRECTORS CORPORATE GOVERNANCE also has an independently administered whistleblower hotline service. During the first half of 2022, supervision of operations continued to be maintained through a series of ‘virtual visits’ using digital technology, enabling executive directors, and from time-to-time non-executive directors, to engage in discussions with field managers to review detailed operational reports, photographs and video and drone footage of operations, and other head office departments, including the sustainability department. However, following easing of Covid-19 travel restrictions, physical visits to operations by the UK executives resumed. It is planned for the full board to visit the Group’s operations during the first half of 2023. Going concern The board has assessed and concluded on the going- concern status of the Group, and further information is included in the directors’ report on page 46. Viability The board considers the Group’s longer-term viability on a regular basis. In order to do this, both short-term budgets and longer-term projections are prepared and reviewed by the board. Due to the long-term nature of the industry within which the Group operates, the board has concluded that projections should be prepared, and therefore viability considered, over a 10-year period. At the year end, the Group held a cash balance of over US$80 million. Furthermore, as disclosed in note 22, at the year end the Group had available undrawn finance facilities of up to US$30 million. The Group’s plans for further development of its Indonesian operations have been taken into consideration, as set out in the strategic report, including development of existing projects, investment in new hectarage, and appropriate financing where necessary. Principal areas of risk, and their mitigation, are included in the section on risk management on pages 30 to 33. As noted, whilst legislative changes in Indonesia could adversely impact on the viability of the Group in its current form, the board monitors the situation carefully and considers the risk to be low. Financially, the main risk to the Group’s results is commodity-price fluctuation, and as has been demonstrated previously, the Group is able to continue delivering returns even during periods of lower crude-palm-oil prices. The Group’s prospects remain sound, in particular given the relatively young average age of its palms, at approximately 10 years. In light of this, and the resources available to the Group, the board intends, where possible, to maintain or increase, normal dividends in future years from their current levels. The board has not identified any significant concerns regarding the Group’s longer-term viability. AUDIT COMMITTEE REPORT The audit committee is formally constituted with written terms of reference (which are available on the Company’s website www.mpevans.co.uk) and is chaired by Bruce Tozer. During the year the committee comprised Bruce Tozer, Philip Fletcher, Darian McBain (until 31 March 2022), Jock Green-Armytage (until 30 September 2022), Michael Sherwin (from 1 July 2022) and Tanya Ashton (from 1 August 2022). The directors who are not members of the committee can be invited to attend its meetings. The auditors of the Group may also attend part or all of each meeting and they have direct access to the committee for independent discussions, without the presence of the executive directors. The committee met six times during 2022 and each meeting was attended by all the members appointed at the time of the meeting, other than the meeting on 9 June 2022 which Jock Green-Armytage was unable to attend. The external auditors attended two of the meetings. The audit committee may examine any matters relating to the financial affairs of the Group or the Group’s audit; this includes reviews of the annual accounts and announcements, accounting policies, compliance with accounting standards, reviewing the Group’s principal risks, the appointment of and fees of auditors and such other related matters as the board may require. During the year the audit committee has: • Reviewed the Group’s external financial reporting, including receiving a report from the external auditors on the audit work they have performed; • Assessed critical accounting judgements and key estimates made during the year; • Reviewed findings of the internal audit team and the work they have performed; • Reviewed the quality and effectiveness of the external audit and considered points arising from it; • Reviewed the Group’s whistleblower policy and implementation, including assessment of briefings of reports made to the independent hotline; • Reviewed and strengthened the Group’s process for risk identification, management and disclosure. 53 CORPORATE GOVERNANCE continued Auditors The auditors were appointed, following a tender exercise, in 2019. The audit partner changes at least every five years in accordance with professional and regulatory standards in order to protect independence and objectivity. Nigel Harker was the audit partner for the 2022 audit. The audit committee meets the external auditors to consider audit planning and the results of the external audit. The committee specifically considered the scope of the Group auditors’ engagement and agreed the significant risks for the audit of the 2022 results. The external auditors have provided only audit services during the current year. Accordingly, the board does not consider there to be a risk that the provision of non- audit services may compromise the external auditors’ independence. To assess the effectiveness of the auditors, the committee reviews their fulfilment of the agreed audit plan and variations from it, and the auditors’ report on issues arising during the course of the audit. Financial reporting and review of financial statements The committee is able to ensure it has a full understanding of business performance through its receipt of regular financial and operational reporting, its review of the budget and long-term plan and its discussion of key accounting policies and judgements. It has specifically addressed the: • Existing control environment over internal controls in financial reporting; • Group’s equity valuation, as disclosed in the annual report; and • Ongoing validity of key judgements in the financial statements. After reviewing presentations and reports from management and consulting with the auditors, the audit committee is satisfied that the financial statements properly present the critical judgements and key estimates for both the amounts reported and relevant disclosures. The committee is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust. 54 Palms and surrounding flora in Pangkatan M.P. EVANS GROUP PLCANNUAL REPORT 2022REPORT OF THE DIRECTORS REMUNERATION REPORT REMUNERATION REPORT REMUNERATION COMMITTEE The remuneration committee, which is formally constituted with written terms of reference (available on the Company’s website at www.mpevans.co.uk), keeps under review the remuneration and terms of employment of the executive directors and senior managment and recommends such remuneration and terms to the board. The committee comprised Bruce Tozer, Jock Green-Armytage (until 30 September 2022), Darian McBain (until 31 March 2022), Michael Sherwin (from 1 July 2022), and Tanya Ashton (from 1 August 2022). It was chaired by Jock Green-Armytage until 9 June 2022 and thereafter by Bruce Tozer. The committee met three times during 2022 and each meeting was attended by all the members appointed at the time of the meeting. an award of options on fully-paid shares which vest three years after their grant, subject to continued employment by the Group. In January 2023, a new element of remuneration was introduced for the Group’s UK-based chief executive. This was a share award made under the long-term incentive scheme (see below) which is designed further to align the chief executive’s remuneration package with the long-term interests of shareholders. This share award, which is intended to be repeated each year, maintains the Group’s outlook of offering remuneration packages which are designed to be broadly comparable with those offered by similar businesses, such as European plantation and AIM-listed companies. SERVICE CONTRACTS All of the UK executive directors have service contracts with the Company. These contracts continue until terminated by either party giving not less than one year’s notice in writing. The executive director based overseas has a service contract with a subsidiary company with a notice period of less than one year. The non-executive directors do not have service contracts or provisions for pre-determined compensation on termination of their appointment. REMUNERATION POLICY The Group’s remuneration committee recognises that the Group’s success depends, in part, on the performance of the directors and senior management, and the importance of ensuring that employees are incentivised. Its philosophy is to offer a transparent and simple remuneration package to the executive directors. To deliver this, the structure for remuneration: • is designed to be easily understood by both executives and shareholders. • aims to encourage the executive directors to work collegiately, focus their efforts on making decisions that are in the Group’s best long-term interests, and, to some extent, share in the benefits that accrue to shareholders from a higher future share price. Key aspects of the January 2023 share awards to the chief executive, and the rationale for those awards are summarised below: • The type of award made could be classified as a ‘restricted-stock’ award, where vesting is dependent on continued employment at the end of a three-year vesting period from the date of award. • Importantly for M.P. Evans, this form of award is already used for the Group’s Indonesia-based executive and senior management and there is a strong benefit in consistency of approach across our executive team (see the section “Long-term incentive scheme” below). • The award is straightforward and aligns to the Group’s business outlook. The remuneration committee considered and discounted introducing a Performance Share Plan, where the vesting of awards would be dependent on attaining three-year Group performance conditions. In a very long-term business like that of M.P. Evans, three-year cycles would not necessarily reflect the Group’s investment and development profile, and vesting could be heavily influenced by macro-factors such as commodity prices. For several years, this has been delivered by remuneration packages comprising a salary and a bonus related to current results and personal performance (including significant additional contribution in terms of time and expertise). For the UK executive directors, half of the bonus is payable in cash and half is deferred into • The vesting of the share awards made to the chief executive is, however, subject to the remuneration committee being satisfied regarding the attainment of ‘underpin’ performance conditions in the period to vesting which will consider the general financial performance of the Group and adherence to the 55 DIRECTORS’ REMUNERATION REPORT continued Group’s core strategic pillars of Responsibility, shares, although this will be reviewed for continuing Excellence, Growth, and Yield. appropriateness before each award is made. • The quantum of awards for the chief executive was set at a level which the remuneration committee regards as meaningful and appropriate but still relatively modest, aligning to the Company’s overall outlook on pay levels which remains mindful of costs. At the date of award on 16 January 2023, the 18,000 shares subject to the awards made were equal in value to approximately 45% of the chief executive’s 2022 base salary. In future years, for simplicity and for consistency with how award levels are set for colleagues in Indonesia, it is intended to maintain the chief executive’s annual award level at 18,000 • The awards to the chief executive also contain features which we believe will make the awards genuinely long-term: – After the three-year vesting period, vested shares (after any sales for UK income taxes and National Insurance) must be retained by the chief executive for a further two years. – Beyond that period, the chief executive is encouraged to hold shares and build his personal shareholding. TOTAL DIRECTORS’ REMUNERATION FOR THE YEAR ENDED 31 DECEMBER 2022 SALARY AND FEES £ BONUS PAID £ 1BONUS DEFERRED £ OTHER BENEFITS £ SALARY IN LIEU OF PENSION £ 2 PENSION COSTS £ 3 GAIN ON EXERCISE OF SHARE OPTIONS £ TOTAL REMUNERATION 2022 £ TOTAL REMUNERATION 2021 £ Executive directors P E Hadsley-Chaplin 264,640 132,320 T R J Price M H Coulson — — — — 40,641 40,447 — — — — — — 330,800 165,400 165,400 39,117 32,613 4,000 48,006 K Chandra Sekaran4 534,613 350,481 — — — — 201,777 1,130,053 648,201 165,400 79,758 73,060 4,000 249,783 Non-executive directors J M Green-Armytage P A Fletcher B C Tozer D M McBain M Sherwin T Ashton 30,813 37,350 40,850 9,338 18,675 15,563 152,589 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 478,048 — 785,336 1,086,871 2,350,255 435,270 637,003 576,615 198,062 1,846,950 30,813 37,350 40,850 9,338 18,675 15,563 42,350 36,250 36,250 36,250 — — 152,589 151,100 Total 1,282,642 648,201 165,400 79,758 73,060 4,000 249,783 2,502,844 1,998,050 1. In line with the Group remuneration policy, half of the bonus for the year to Mr M H Coulson (being 12 months’ salary) has 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 M H Coulson are the contributions made by the Company to a Company-sponsored self-invested personal pension. 3. The gain on share options for Mr M H Coulson includes amounts already reported in previous years as remuneration under “Bonus deferred”. 4. The remuneration for K Chandra Sekaran in 2021 relates to the period from his appointment on 1 August 2021, and does not include the bonus paid to him earlier in that year. The annual ratio for total remuneration of the chief executive in relation to the median of the Group’s UK payroll excluding this individual was 6.0 in 2022 (2021 – 5.3). The equivalent ratio for the percentage increase in annual total remuneration was 3.9 (2021 – 1.4). 56 M.P. EVANS GROUP PLCANNUAL REPORT 2022 REPORT OF THE DIRECTORS REMUNERATION REPORT LONG-TERM INCENTIVE SCHEME The long-term incentive scheme established in 2017 governs the grant of deferred-bonus awards to UK-based executive directors and annual awards of fully-paid shares to senior staff, including, as described above, the awards made to our UK-based chief executive in January 2023 and which are intended to be an annual element of UK executive remuneration in the future. The award of fully-paid shares has the advantage of being substantially less dilutive than market-priced share options, whilst continuing to provide an adequate level of incentive to the recipient. No additional performance criteria attach to the deferred- bonus awards since the original bonus will have been performance related. In respect of senior staff who are not UK-based executive directors, the Group aims annually to grant options in a limited number of fully-paid shares which vest after three years subject to continued employment by the Group. This is designed to retain valued individuals in a growing and competitive sector. No performance criteria attach to these awards. EXECUTIVE DIRECTORS When determining the remuneration of the executive directors, the remuneration committee considers the pay and conditions across the Group, particularly those of the senior management of the operations in Indonesia. The Group aims to provide remuneration packages for the directors and senior management which are a fair reward for their contribution to the business, having regard to the complexity of the Group’s operations and the need to attract, retain and motivate high-quality senior management. Non-pensionable bonuses may be awarded annually in arrears at the discretion of the committee, taking account of the Group’s performance during the period and other targeted objectives. Bonuses do not exceed twelve months’ salary, half payable in cash and half deferred into an award of fully-paid shares which vest three years after their grant, subject to continued employment by the Group (as described above). The bonuses for 2022 took into account, inter alia, another record year of crop and production supporting strong profitability and shareholder returns; significant work on recruitment to senior positions in the Company and management of smooth transitions of both executive roles and changes within the wider board; significant initiatives undertaken in relation to ESG awareness and development of reporting strategy including work with ESG consultants on carbon accounting and TCFD reporting; also good progress on risk management and disclosure. The absolute value of these measures was assessed, as was their outturn against budget. Also, for our UK-based chief executive, from January 2023 we have introduced the annual share award described above. NON-EXECUTIVE DIRECTORS The fees of the non-executive directors are determined by the board having regard to the complexity of the Group’s operations and the need to attract, retain and motivate high-quality non-executive directors and the level of fees paid for similar roles in equivalent companies. EXECUTIVE SHARE-OPTION SCHEME During 2022, K Chandra Sekaran was a member of the executive share-option scheme which was established in 2012. Options granted under this scheme gave K Chandra Sekaran the right to purchase shares on a future date at the market price of the shares on the date that the options were granted. As such, the value of any option is closely tied to the performance of 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 2022, options over 20,000 shares (2021 – 50,000) granted to K Chandra Sekaran under this scheme remained outstanding. During the year, 30,000 options were exercised by him (2021 - none) and none (2021 - none) lapsed. During the year, Matthew Coulson was a member 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. Under this arrangement options on 19,880 fully- paid shares were awarded in 2022 (2021 – 13,748), representing half of the bonus awarded to Matthew Coulson. No options are held by either the chairman or non- executive directors. At 31 December 2022, the middle-market quotation for the Company’s shares, as derived from the London Stock Exchange Daily Official List, was 810p, as compared with the high and low quotations for the year of 1,085p and 784p respectively. 57 M.P. EVANS GROUP PLC ANNUAL REPORT 2022 OPTIONS HELD OVER SHARES OF THE COMPANY BY THE EXECUTIVE DIRECTORS DURING THE YEAR ENDED 31 DECEMBER 2022 BALANCE AT 1 JAN 2022 GRANTED IN THE YEAR EXERCISED IN THE YEAR BALANCE AT 31 DEC 2022 EXERCISE PRICE PENCE DATE FROM WHICH NORMALLY EXERCISABLE DATE OF GRANT EXPIRY DATE Executive share-option scheme K Chandra Sekaran 30,000 Total 20,000 50,000 Long-term incentive scheme M H Coulson K Chandra Sekaran Total 5,826 5,557 10,049 13,748 — 35,180 3,000 3,000 3,000 — — 9,000 44,180 — — — — — — — 19,880 19,880 — — — 3,000 3,000 6,000 25,880 30,000 — 30,000 5,826 — — — — 5,826 3,000 — — — — 3,000 8,826 — 20,000 20,000 — 5,557 10,049 13,748 19,880 49,234 — 3,000 3,000 3,000 3,000 12,000 61,234 483.21 412.50 19 Jun 12 19 Jun 15 19 Jun 22 27 Apr 15 27 Apr 18 27 Apr 25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 11 Jan 19 11 Jan 22 10 Jan 29 9 Jan 20 9 Jan 23 8 Jan 30 22 Dec 20 22 Dec 23 21 Dec 30 14 Dec 21 14 Dec 24 13 Dec 31 13 Dec 22 13 Dec 25 12 Dec 32 1 Jul 19 1 Jul 20 1 Jul 21 23 Mar 22 1 Jul 22 1 Jul 22 1 Jul 23 1 Jul 24 7 Jan 25 1 Jul 25 30 Jun 29 30 Jun 30 30 Jun 31 6 Jan 32 30 Jun 32 PENSIONS The Company sponsors self-invested personal pensions (“SIPPs”) for the UK executive directors. Contributions made by the Company to the SIPPs and to a life-assurance company give the executives a pension at retirement, a pension to a spouse payable on death whilst in the employment of the Company, and life-assurance cover based on a multiple of salary. No element of a director’s remuneration package, other than basic salary, is pensionable. Individuals may elect to forgo contributions to the SIPP, in which case they receive an additional salary paid in lieu of the employer’s pension contributions at the same cost to the Company. Approved by the board of directors and signed by its order. Katya Merrick Company secretary 21 March 2023 58 Bangka estate community vegetable garden 59 INDEPENDENT AUDITORS’ REPORT To the members of M.P. Evans Group PLC OPINION ON THE FINANCIAL STATEMENTS 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 2022 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards; • 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. We have audited the financial statements of M.P. Evans Group PLC (the ‘parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2022 which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated and parent-Company balance sheets, consolidated and parent- Company statements of changes in equity, consolidated cash-flow statement and notes to the consolidated and parent- Company financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK-adopted International Accounting Standards. The financial reporting framework that has been applied in the preparation of the parent-Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remain independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the directors’ use of the going-concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and the parent Company’s ability to continue to adopt the going concern basis of accounting included: • A review of the directors’ assessment of going concern and consideration of the key assumptions used in the forecasts, including: – Comparing the CPO price used to historical data and price forecasts. – Corroborating the historically achieved oil-extraction rate (“OER”) to supporting documentation and considering the reasonableness of forecast extraction rates for each estate. – Considering forecast production by comparing to historical results along with taking into account the age of planted areas in each estate. 60 M.P. EVANS GROUP PLCANNUAL REPORT 2022INDEPENDENT AUDITORS’ REPORT • Consideration of the directors’ sensitivity analysis along with performing further sensitivities on the revenue and gross profit margin assumptions. • An assessment of the appropriateness and accuracy of cash-flow forecasts by comparing prior year forecasts to current year results. • A review of whether the disclosures are appropriate for the circumstances of the entity and provide sufficient information about the Group and its subsidiaries and the directors’ consideration of their ability to continue as a going concern. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OVERVIEW COVERAGE KEY AUDIT MATTERS MATERIALITY 77% (2021 – 78%) of Group profit before tax 85% (2021 – 84%) of Group revenue 70% (2021 – 77%) of Group total assets 2022 2021 Impairment of goodwill  Valuation of biological assets  Valuation of biological assets is no longer considered to be a key audit matter because the valuation is below our materiality threshold. Group financial statements as a whole US$5.0 million (2021 US$4.9 million) based on 5% of profit before tax (2021 5% of adjusted profit before tax). AN OVERVIEW OF THE SCOPE OF OUR AUDIT The Group financial statements are a consolidation of twenty one companies consisting of the parent Company, three UK-incorporated subsidiary companies, thirteen Indonesian subsidiary companies, one Singapore-incorporated subsidiary company and three associate entities. The majority of the Group’s operations are located in Indonesia with the head office and main Group accounting function located in the United Kingdom. Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the directors that may have represented a risk of material misstatement. Based on our assessment, we identified five (2021 five) operating plantation companies which, in our view, required an audit of their complete financial information due to their financial significance to the Group (“significant components”). The audit procedures for these components were performed by component auditors who were members of the BDO International network. It was considered appropriate to perform audit procedures on specific audit areas where their balance was material to the Group for a further seven (2021 seven) companies (“material but not significant components”). Where these components were located overseas, the audit procedures were performed by component auditors who were also members of the BDO Global network whilst the audit procedures for components located in the UK were performed by the Group audit team. For the other components that were not identified as being significant to the Group, we performed analytical review procedures at the Group level. As part of the audit strategy, senior members of the Group audit team attended a number of the board’s remote quarterly review meeting with estate management. 61 INDEPENDENT AUDITORS’ REPORT continued Our involvement with component auditors For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our involvement with component auditors included the following: • As part of our audit planning, the senior statutory auditor and other senior members of the Group audit team visited Indonesia to attend the engagement team discussion where we discussed the Group and local risks identified and agreed the testing approach. Those team members then visited the Musi Rawas estate with management. • Senior members of the Group audit team visited Indonesia to perform a review of the component team audit files for the Indonesian operating units and requested the component auditors to perform any further procedures required. • At the completion stage senior members of the Group audit team attended the clearance meeting with local audit and local 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, including local adjustments raised. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, 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) that 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 THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER Impairment of goodwill Our procedures have focused on the goodwill impairment test Refer to the accounting policies of the Group (note 3) for further detail on the policies impacting goodwill valuation together with note 13 detailing the key estimates over goodwill impairment and the financial disclosure of goodwill. Goodwill is a significant balance in the consolidated balance sheet and is subject to an annual impairment review. The goodwill balance at 31 December 2022 was US$11.8 million, of which US$10.6 million related to the Bumi Mas estate. for the Bumi Mas estate. We have: • Assessed management’s impairment model for compliance with applicable accounting standards and tested its computational accuracy; • Assessed management’s identification and allocation of cash generating units with reference to the estates; • With the assistance of our internal valuation experts we tested the discount rate assumptions to assess their reasonableness through corroboration to external sources; The recoverability of goodwill is dependent on • Performed sensitivity analysis over the key assumptions management’s identification and allocation of cash (discount rate, CPO price, production, forecast length generating units, estimating both cash flows and appropriate and extraction rates) and agreed their reasonableness discount rates to apply in the value in use calculation. through corroboration to external sources and historical Given the size of the goodwill balance, and the complexity of performance. estimating both cash flows and discount rates we consider goodwill impairment to be an area of material estimation. Hence there is a risk that the valuation of goodwill is Key observations: We did not identify any indicators to suggest that the estimates made by the directors in the calculation of the goodwill impairment assessment were inappropriate. Due to the judgements involved we consider inappropriate. this to be a key audit matter. 62 M.P. EVANS GROUP PLCANNUAL REPORT 2022INDEPENDENT AUDITORS’ REPORT OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Group financial statements Parent-Company financial statements 2022 US$ 2021 US$ 2022 US$ 2021 US$ Materiality 5.0 million 4.9 million 2.0 million 2.8 million Basis for determining materiality 5% of profit before tax 5% of adjusted profit before tax 2% of total assets 2% of total assets Rationale for benchmark applied We consider profit to be a key performance measure to a user for the purpose of evaluating financial performance. Materiality for 2022 was based on 5% of profit before tax (2021 - 5% of adjusted profit before tax to exclude the profit on sale of Malaysian land which was non-recurring in nature). Calculated as 2% of total assets restricted to 95% percent of Group materiality (if lower) for Group reporting purposes given the assessment of aggregation risk. Performance materiality Basis for determining performance materiality 3.5 million 3.4 million 1.4 million 2.0 million 70% of materiality 70% of materiality 70% of materiality 70% of materiality 70% of materiality based on our experience and knowledge of the Group and parent Company, Group structure, planned testing approach, and history of errors. Component materiality We set materiality for each component of the Group based on a percentage of between 70% and 19% (2021 between 82% and 20%) of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from US$3.7 million to US$1.0 million (2021 US$4.0 million to US$1.0 million). In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. Reporting threshold We agreed with the audit committee that we would report to them all individual audit differences in excess of US$106,000 (2021 US$98,000), being 2% of materiality. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditors’ report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, 63 INDEPENDENT AUDITORS’ REPORT continued we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report In our opinion, based on the work undertaken in the course of the audit: and directors’ 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. In the light of the knowledge and understanding of the Group and 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. Matters on which we are required to report by exception 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: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the statement of directors’ responsibilities, 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. 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 auditors’ 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. 64 M.P. EVANS GROUP PLCANNUAL REPORT 2022 INDEPENDENT AUDITORS’ REPORT Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered the risk of acts by the Group that were contrary to applicable laws and regulations, including fraud. • We considered the Group’s compliance with laws and regulations that have a direct impact on the financial statements including, but not limited to, UK company law, UK tax legislation, AIM Rules and the component auditors considered compliance with Indonesian tax law, Indonesian Sustainable Palm Oil (“ISPO”) standard and Indonesian land laws, and we considered the extent to which non-compliance might have a material effect on the Group financial statements. • We designed audit procedures at both the Group and significant component levels to identify instances of non- compliance with such laws and regulations. Our procedures included reviewing the financial statement disclosures and agreeing to underlying supporting documentation where necessary. We reviewed internal audit reports throughout the year and subsequent to the year-end and we reviewed minutes of all board and committee meetings held during and subsequent to the year for any indicators of non-compliance and made enquiries of management and of the directors as to the risks of non-compliance and any instances thereof. • We addressed the risk of management override of internal controls, including testing journal entries processed during and subsequent to the year end where the audit believe the accounts could be misstated due to fraud. We assessed journals posted by super users, journals with no description and revenue journals. We then evaluated whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. • We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. We also instructed all component auditors and reviewed the work performed by the component audit team in this regard. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non- compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditors’ report. 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 auditors’ 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. Nigel Harker (Senior Statutory Auditor) for and on behalf of BDO LLP, Statutory Auditor Gatwick, United Kingdom 21 March 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127) 65 CONS0LIDATED INCOME STATEMENT For the year ended 31 December 2022 Note 2022 US$’000 2021 US$’000 Continuing operations Revenue Cost of sales Gross profit (Loss)/gain on biological assets Profit on sale of land Foreign-exchange loss Other administrative expenses Other income Operating profit Finance income Finance costs Profit before tax Tax on profit on ordinary activities Profit after tax Share of associated companies’ profit after tax Profit for the year Attributable to: Owners of M.P. Evans Group PLC Non-controlling interests Continuing operations Basic earnings per 10p share Diluted earnings per 10p share Basic earnings per 10p share Continuing operations 326,917 (217,707) 109,210 (1,431) — (3,444) (4,614) 1,865 101,586 1,395 (2,731) 100,250 (24,073) 76,177 2,184 78,361 73,060 5,301 78,361 276,592 (172,979) 103,613 1,771 13,946 (820) (5,380) 1,426 114,556 645 (2,699) 112,502 (23,228) 89,274 2,508 91,782 86,406 5,376 91,782 US cents US cents 133.9 133.4 158.4 157.9 Pence Pence 108.0 115.6 6 7 8 9 28 11 11 66 M.P. EVANS GROUP PLCANNUAL REPORT 2022CONS0LIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2022 FINANCIAL STATEMENTS Other comprehensive (expense)/income (net of tax) Items that may be reclassified to the income statement Exchange loss on translation of foreign operations Items that will not be reclassified to the income statement Remeasurement of retirement-benefit obligations Other comprehensive (expense)/income for the year Profit for the year Total comprehensive income Attributable to: Owners of M.P. Evans Group PLC Non-controlling interests 2022 US$’000 2021 US$’000 (1,528) (780) 986 (542) 78,361 77,819 72,449 5,370 77,819 814 34 91,782 91,816 86,380 5,436 91,816 67 CONS0LIDATED BALANCE SHEET As at 31 December 2022 COMPANY NUMBER: 1555042 Note 2022 US$’000 2021 US$’000 Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates Investments Deferred-tax asset Trade and other receivables Current assets Biological assets Inventories Trade and other receivables Current-tax asset Cash and cash equivalents Total assets Current liabilities Borrowings Trade and other payables Current-tax liability Net current assets Non-current liabilities Borrowings Deferred-tax liability Retirement-benefit obligations Total liabilities Net assets Equity Share capital Other reserves Retained earnings Equity attributable to the owners of M.P. Evans Group PLC Non-controlling interests Total equity 13 13 14 15 16 23 19 17 18 19 20 22 21 22 23 24 25 27 27 28 11,767 1,167 411,658 11,795 61 989 9,146 446,583 3,089 23,112 32,681 2,290 82,503 143,675 590,258 17,364 24,410 4,455 46,229 97,446 31,675 13,538 9,972 55,185 101,414 488,844 9,179 54,543 407,460 471,182 17,662 488,844 11,767 1,222 401,005 13,242 65 3,602 16,618 447,521 4,520 21,754 41,892 2,522 65,609 136,297 583,818 20,531 31,200 12,219 63,950 72,347 50,517 11,417 12,886 74,820 138,770 445,048 9,232 55,467 366,825 431,524 13,524 445,048 The financial statements on pages 66 to 91 were approved by the board of directors on 21 March 2023 and signed on its behalf by Peter Hadsley-Chaplin Executive chairman Matthew Coulson Chief executive 68 M.P. EVANS GROUP PLCANNUAL REPORT 2022 FINANCIAL STATEMENTS CONS0LIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2022 SHARE CAPITAL US$’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 (expense)/income for the year Total comprehensive income for the year Issue of share capital Dividends paid Dividends from associates Share buyback Credit to equity for equity-settled share-based payments Transactions with owners At 1 January 2022 At 31 December 2022 Profit for the year Other comprehensive (expense)/income for the year Total comprehensive income for the year Issue of share capital Dividends paid Dividends from associates Credit to equity for equity-settled share-based payments Transactions with owners At 1 January 2021 At 31 December 2021 25 10 15 26 25 10 15 26 — — — 4 — — (57) — (53) 9,232 9,179 2,184 70,876 73,060 5,301 78,361 (677) 66 (611) 69 (542) 1,507 70,942 72,449 5,370 77,819 — 191 — 191 (28,500) (28,500) (1,232) (29,732) 187 — (2,656) 57 2,656 (4,902) — (4,902) — — — — (4,902) 420 (19) 439 420 (2,431) (30,307) (32,791) (1,232) (34,023) 55,467 54,543 366,825 407,460 431,524 471,182 13,524 17,662 445,048 488,844 — 2,508 83,898 86,406 5,376 91,782 — — 28 — — — 28 9,204 9,232 (404) 378 (26) 60 34 2,104 84,276 86,380 5,436 91,816 799 — — 827 — 827 (20,527) (20,527) (1,641) (22,168) (2,424) 2,424 — (102) (1,727) 55,090 55,467 535 (17,568) 300,117 366,825 433 (19,267) 364,411 431,524 — — (1,641) 9,729 13,524 — 433 (20,908) 374,140 445,048 69 CONS0LIDATED CASH-FLOW STATEMENT For the year ended 31 December 2022 Note 29 14 13 6 30 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 in receivables from smallholder co-operatives Proceeds on disposal of property, plant and equipment Net cash (used by)/from investing activities Financing activities Repayment of borrowings Lease liability payments Dividends paid to Company shareholders Dividends paid to non-controlling interest Issue of Company shares Buyback of Company shares Net cash used by financing activities Net increase 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 2022 US$’000 102,288 2021 US$’000 92,272 (33,714) (32,510) (116) 622 — 1,714 3,055 (28,439) (22,009) (38) (28,500) (124) 191 (4,902) (55,382) 18,467 65,609 (1,573) 82,503 (8) 316 334 17,630 15,125 887 (34,636) (218) (20,527) (164) 827 — (54,718) 38,441 27,222 (54) 65,609 70 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS NOTES TO THE CONSOLIDATED ACCOUNTS For the year ended 31 December 2022 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”), Company number 1555042. The Company is registered in England and Wales, and the address of its registered office is given on page 104. The nature of the Group’s operations and its principal activities are set out in note 4 and in the strategic report on pages 14 to 33. 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 for the year of US$3,657,000 (2021 US$3,492,000). The Company’s separate financial statements are set out on pages 92 to 97. 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 98. 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 2022. 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 3 (amendments) Reference to the conceptual framework IAS 16 (amendments) Proceeds before intended use IAS 37 (amendments) Cost of fulfilling a contract Annual improvements to IFRS Standards 2018-2020 (b) New standards, amendments and interpretations issued but not effective for the year beginning 1 January 2022 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 (amendments) Insurance contracts IAS 1 (amendments) Classification of liabilities as current or non-current IAS 1 (amendments) Disclosure of accounting policies IAS 8 (amendments) Definition of accounting estimates IAS 12 (amendments) Deferred tax arising from a single transaction IFRS 16 (amendments) Leases: lease liability in a sale and leaseback 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 UK-adopted International Accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under International Financial Reporting Standards (IFRS). They have been prepared under the historical cost convention, except for items that are required by IFRS to be measured at fair value, principally biological 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 considering in detail the period up to the end of 2024, including risks and sensitivities, 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. 71 NOTES TO THE CONSOLIDATED ACCOUNTS continued 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. Payment terms are cash on delivery. However, in some circumstances credit is offered to selected customers, on up to 10-day terms. (e) Retirement benefits In the UK, 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. 72 M.P. EVANS GROUP PLCANNUAL REPORT 2022 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 3 Accounting policies continued Biological assets continued Deferred tax is recognised at the relevant local rate on the difference between the estimated cost of biological assets and their carrying value determined under IAS 41. (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 2022. 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 less any profits deferred on sales made to associated companies. (m) Inventories Inventories are valued at the lower end 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 for 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. 73 NOTES TO THE CONSOLIDATED ACCOUNTS continued 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, recoverable VAT, 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. 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 the amounts 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). Carrying value of deferred-tax assets relating to losses (note 23); Key estimates • • Determination of retirement-benefit obligations (note 24); • • Carrying value of goodwill (note 13); and Valuation of biological assets – growing produce (note 17). 74 M.P. EVANS GROUP PLCANNUAL REPORT 2022 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 4 Segment information The Group’s reportable segments are distinguished by location and activity: palm-oil plantations in Indonesia and property development in Malaysia. The ‘other’ segment relates in the main to the Group’s UK head office. PLANTATION INDONESIA US$’000 PROPERTY MALAYSIA US$’000 OTHER US$’000 TOTAL US$’000 2022 Continuing operations Revenue Gross profit 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 326,872 109,165 (1,431) (2,402) (402) 1,845 — — — — — — 617 (64) — — 45 45 — (1,042) (4,212) 20 778 (2,667) (23,386) — (687) Share of associated companies’ profit after tax 1,677 507 — Profit for the year Consolidated total assets Non-current assets Current assets Investments in associates Consolidated total liabilities Liabilities Other information Additions to property, plant and equipment Additions to intangible assets Depreciation Amortisation 424,736 85,878 7,183 517,797 — — 4,612 4,612 10,052 57,797 — 67,849 51,186 — 50,228 101,414 33,708 116 21,924 171 — — — — 6 — 7 — 33,714 116 21,931 171 326,917* 109,210 (1,431) (3,444) (4,614) 1,865 101,586 1,395 (2,731) 100,250 (24,073) 76,177 2,184 78,361 434,788 143,675 11,795 590,258 * US$194.9 million of revenue (59.6%) was from sales to 2 customers (34.3% and 25.3% respectively). 75 276,592* 103,613 1,771 13,946 (820) (5,380) 1,426 114,556 645 (2,699) 112,502 (23,228) 89,274 2,508 91,782 434,279 136,297 13,242 583,818 NOTES TO THE CONSOLIDATED ACCOUNTS continued 4 Segment information continued PLANTATION INDONESIA US$’000 PROPERTY MALAYSIA US$’000 OTHER US$’000 TOTAL US$’000 2021 Continuing operations Revenue Gross profit Gain on biological assets Profit on sale of land Foreign-exchange (loss)/gain Other administrative expenses Other income Operating profit Finance income Finance costs Profit before tax Tax Profit after tax 276,485 103,605 1,771 — (966) (325) 1,405 292 (280) (21,161) — — — — — — — — — — 107 8 — 13,946 146 (5,055) 21 353 (2,419) (2,067) Share of associated companies’ profit after tax 1,460 1,048 — Profit for the year Consolidated total assets Non-current assets Current assets Investments in associates Consolidated total liabilities Liabilities Other information Additions to property, plant and equipment Additions to intangible assets Depreciation Amortisation 416,748 107,438 5,247 58,202 32,510 8 20,627 167 — — 7,995 17,531 28,859 — — — — — — 80,568 138,770 — — 14 — 32,510 8 20,641 167 * US$94.1 million of revenue (34.0%) was from sales to 3 customers (12.4%, 11.2% and 10.4% respectively). 5 Employees Employee costs during the year Wages and salaries Social security costs Current service cost of retirement benefit (see note 24) Other pension costs Share-based payment charge 76 2022 US$’000 44,553 3,319 1,879 207 420 2021 US$’000 35,092 2,857 2,347 491 433 50,378 41,220 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 5 Employees continued Average monthly number of people employed (including executive directors) Estate manual Local management United Kingdom head office 2022 Number 11,560 107 7 11,674 2021 Number 8,115 105 8 8,228 Included in the table above are costs relating to key management personnel, those persons having authority and responsibility for planning, directing and controlling the activities of the Group. Total directors’ emoluments for the year were £2.5 million (2021 £2.0 million). Emoluments for the highest paid director were £1.1 million (2021 £0.6 million). The total gain on exercise of share options by the directors was £0.2 million (2021 £0.1 million). The total gain on exercise of share options by the highest paid director was £0.2 million (2021 £0.1 million). The total number of directors for whom contributions were made to defined contribution pension arrangements was 1 (2021 - 2), in the current year the highest paid director did not (2021 did) receive any contributions to defined contribution pension arrangements. In addition to amounts paid to directors, other key management personnel received a further £0.1 million (2021 £nil) in short-term employee benefits during the year. 6 Finance income Unwinding of discounting of receivables Interest receivable on bank deposits Interest receivable on related party loans 7 Finance costs Interest payable on bank loans and overdrafts 8 Profit before tax Profit before tax is stated after charging: Depreciation of property, plant and equipment Amortisation of intangible assets Auditors’ remuneration Employee costs (note 5) The analysis of auditors’ remuneration is as follows: Audit of UK parent Company Audit of consolidated financial statements Audit of overseas subsidiaries Total audit services* Taxation advisory services Total non-audit services 2022 US$’000 282 622 491 1,395 2022 US$’000 2,731 2021 US$’000 — 316 329 645 2021 US$’000 2,699 2022 US$’000 2021 US$’000 21,931 20,641 171 411 167 363 50,378 41,220 33 176 177 386 — — 27 150 160 337 — — * In addition to the above, US$25,400 (2021 US$26,000) were payable to other firms for the audit for the subsidiary companies. 77 NOTES TO THE CONSOLIDATED ACCOUNTS continued 9 Tax on profit on ordinary activities United Kingdom corporation tax charge for the year Relief for overseas taxation Overseas taxation Adjustments in respect of prior years Total current tax Deferred taxation – origination and reversal of temporary differences (see note 23) 2022 US$’000 549 (549) — 19,617 — 19,617 4,456 24,073 2021 US$’000 508 (508) — 21,124 — 21,124 2,104 23,228 The standard rate of tax for the year, based on the United Kingdom standard rate of corporation tax, was 19% (2021 – 19%). The standard rate of Indonesian tax was 22% (2021 – 22%). The actual tax charge is higher than the standard rate for the reasons set out in the reconciliation below. Profit on ordinary activities before tax Tax on profit on ordinary activities at the standard rate Factors affecting the charge for the year Profits taxed at higher standard tax rate Expenses not deductible Reinstatement of losses Lower rate on fixed asset disposals Withholding tax on overseas dividends and interest Adjustment relating to intercompany loan relationships Utilisation of losses brought forward Unrelieved losses Other differences Total tax charge 2022 US$’000 100,250 19,048 3,189 1,075 — (8) 152 335 — 293 (11) 2021 US$’000 112,502 21,375 2,886 918 (1,003) (1,352) 122 335 (254) 533 (332) 24,073 23,228 In addition to the above, the Group recognised a tax charge of US$0.3 million (2021 US$0.2 million) on retirement benefit obligation remeasurement gains, recorded in other comprehensive income. 10 Dividends paid and proposed 2022 interim dividend – 12.5p per 10p share (2021 interim dividend 10p) 2021 special dividend – 5p per 10p share 2021 final dividend – 25p per 10p share (2020 final dividend 17p) 2022 US$’000 7,611 3,662 17,227 28,500 2021 US$’000 7,377 — 13,150 20,527 Following the year end, the board has proposed a final dividend for 2022 of 30p per 10p share, amounting to US$19.8 million. The dividend will be paid on or after 16 June 2023 to shareholders on the register at the close of business on 28 April 2023. 78 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 11 Basic and diluted earnings per share The calculation of earnings per 10p share is based on: Profit for the year attributable to the owners of M.P. Evans Group PLC Average number of shares in issue Diluted average number of shares in issue* 2022 US$’000 73,060 2022 NUMBER OF SHARES 54,579,591 54,754,110 2021 US$’000 86,406 2021 NUMBER OF SHARES 54,564,864 54,710,139 * 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 Disposal As announced on 15 October 2021, the Group completed the disposal of 70 hectares of land owned by its wholly-owned subsidiary Bertam Consolidated Rubber Company Limited to Bertam Properties Sdn Berhad, its 40%-owned associated company. The total sale consideration is 99.9 million Malaysian Ringgit, or US$24.0 million based on the 2021 year-end exchange rate. In accordance with the agreement, 60% of the consideration had been received before the end of the 2021, 10% had been received in January 2022 and the remainder is due in July 2023. This outstanding amount is included in current receivables in note 19. An initial profit on disposal of US$13.9 million was recognised in 2021. However, accounting standards require that 40% of the profit on disposal be deferred and recognised at the point when Bertam Properties has developed and sold the land. The deferred profit has been deducted from the carrying value of the associated company, as shown in note 15. 13 Intangible assets Cost At 1 January 2022 Additions At 31 December 2022 Accumulated amortisation At 1 January 2022 Charge for the year At 31 December 2022 GOODWILL US$’000 SOFTWARE US$’000 11,767 — 11,767 — — — 1,673 116 1,789 451 171 622 TOTAL US$’000 13,440 116 13,556 451 171 622 Net book value at 31 December 2022 11,767 1,167 12,934 Cost At 1 January 2021 Additions At 31 December 2021 Accumulated amortisation At 1 January 2021 Charge for the year At 31 December 2021 11,767 — 11,767 — — — 1,665 8 1,673 284 167 451 13,432 8 13,440 284 167 451 Net book value at 31 December 2021 11,767 1,222 12,989 Goodwill is carried at cost. Of the balance above, 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). 79 NOTES TO THE CONSOLIDATED ACCOUNTS continued 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, being the six estates as described on pages 8 and 9, with their recoverable amount. Recoverable amount has been obtained by reference to independent valuations of the Group’s property assets conducted at the end of 2022 (see page 100). These cash-flow valuations used a 30-year forecast period, to reflect the nature and growth profile of the asset and its long-term resilience to variations in climate and weather patterns, pre-tax inflation-adjusted discount rates of 16-19% (2021 – 16-19%), and a mill-gate price for CPO of US$666 for two years before reverting to US$642 as a long- term average (2021 two years at US$666 followed by US$642 for the long term). A decrease in any of the CPO price, yield or extraction assumptions of up to 10% would not result in any impairment (2021 nil impairment) of the goodwill relating to Bumi Mas. 14 Property, plant and equipment Cost or valuation At 1 January 2022 Additions Re-classification Disposals LEASEHOLD LAND US$’000 111,907 2,552 — (21) PLANTING US$’000 BUILDINGS US$’000 212,880 114,777 3,431 — (1,525) — 10,715 (602) At 31 December 2022 114,438 214,786 124,890 Accumulated depreciation At 1 January 2022 Charge for the year Disposals At 31 December 2022 155 32 — 187 Net book value at 31 December 2022 114,251 Cost or valuation At 1 January 2021 Additions Re-classification Exchange differences Disposals 110,133 1,724 504 (7) (447) 56,145 9,618 (870) 64,893 149,893 209,769 4,017 — — (906) 37,974 6,694 (302) 44,366 80,524 99,136 — 16,560 (17) (902) At 31 December 2021 111,907 212,880 114,777 Accumulated depreciation At 1 January 2021 Charge for the year Exchange differences Disposals At 31 December 2021 146 19 — (10) 155 Net book value at 31 December 2021 111,752 47,507 9,270 — (632) 56,145 156,735 32,335 6,353 (6) (708) 37,974 76,803 PLANT, EQUIPMENT & VEHICLES US$’000 CON- STRUCTION IN PROGRESS US$’000 TOTAL US$’000 529,928 33,714 — (3,333) 12,742 24,217 (12,843) — 24,116 560,309 — — — — 24,116 19,687 22,255 (28,938) — (262) 128,923 21,931 (2,203) 148,651 411,658 501,422 32,510 — (26) (3,978) 12,742 529,928 — — — — — 12,742 110,780 20,641 (8) (2,490) 128,923 401,005 77,622 3,514 2,128 (1,185) 82,079 34,649 5,587 (1,031) 39,205 42,874 62,697 4,514 11,874 (2) (1,461) 77,622 30,792 4,999 (2) (1,140) 34,649 42,973 Included in planting is immature planting with a cost of US$7,337,000 (2021 US$9,381,000). 80 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 14 Property, plant and equipment continued 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$113,308,000 (2021 US$110,983,000). As at 31 December 2022, the Group had entered into contractual commitments for the acquisition of property, plant and equipment of US$8,162,000 (2021 US$16,847,000). Depreciation and amortisation is charged to cost of sales, other than US$7,000 (2021 US$11,000) charged to other administrative expenses. At 31 December 2022, the Group accounted for no right-of-use assets with no net book value (2021 – one asset with net book value of US$nil) as a lease under IFRS 16. 15 Investments in associates Details of the Group’s subsidiary and associated undertakings are given on page 98. 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 2022 US$’000 2021 US$’000 23,981 (1,015) 2,184 (2,656) 22,494 (10,699) 11,795 24,600 (703) 2,508 (2,424) 23,981 (10,739) 13,242 A separate reserve is maintained for the share of profit or loss in the associates. As a result, dividends received are reclassified from the share of associates reserves to retained earnings. The summarised results of the Group’s associated undertakings and the Group’s aggregate share of their summarised results are shown below: 2022 KERASAAN US$’000 BERTAM PROPERTIES US$’000 TOTAL US$’000 KERASAAN US$’000 BERTAM PROPERTIES US$’000 2021 TOTAL US$’000 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 9,582 4,414 4,486 11,645 (1,131) (769) 14,231 (38%) 3,641 1,677 1,705 4,425 (430) (292) 5,408 17,429 1,266 47,529 28,996 (9,012) (24,797) 42,716 (40%) 6,972 507 19,012 11,598 (3,605) (9,919) 17,086 10,613 2,184 20,717 16,023 (4,035) (10,211) 22,494 8,676 3,843 4,291 11,846 (1,585) (743) 13,809 (38%) 3,297 1,460 1,631 4,501 (603) (282) 5,247 20,256 2,620 50,053 27,702 (9,027) (21,894) 46,834 (40%) 8,102 1,048 20,021 11,081 (3,612) (8,756) 18,734 11,399 2,508 21,652 15,582 (4,215) (9,038) 23,981 81 NOTES TO THE CONSOLIDATED ACCOUNTS continued 16 Investments Financial assets at fair value through profit or loss (unlisted) At 1 January Exchange differences At 31 December 17 Current biological assets Ffb prior to harvest 2022 US$’000 2021 US$’000 65 (4) 61 67 (2) 65 2022 US$’000 3,089 2021 US$’000 4,520 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. During the year, all of the opening balance of ffb prior to harvest was harvested whilst all of the closing balance arose in the year due to gains in fair value less costs to sell. 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$3.1 million and US$34.6 million. The Group has never included ffb prior to harvest in its internal reporting and decision-making. 18 Inventories Processed produce for sale Estate stores Nurseries 2022 US$’000 13,155 8,789 1,168 23,112 2021 US$’000 11,319 9,238 1,197 21,754 82 M.P. EVANS GROUP PLCANNUAL REPORT 202219 Trade and other receivables Current assets Trade receivables Receivable from smallholder co-operatives Due from associate company Loans to related parties Other receivables Prepayments and accrued income Non-current assets Due from associate company Loans to related parties Trade and other receivables analysed by currency of receivable: Indonesian Rupiah US Dollar Sterling Malaysian Ringgit FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 2022 US$’000 5,537 6,020 6,798 662 9,643 4,021 32,681 — 9,146 9,146 23,984 10,633 410 6,800 41,827 2021 US$’000 6,492 7,734 2,396 697 22,398 2,175 41,892 6,890 9,728 16,618 38,566 10,523 84 9,337 58,510 The majority of palm-oil sales are made for cash payment in advance of delivery. The Group makes full provision against invoices outstanding for more than 30 days. At 31 December 2022 there was no provision for impairment of trade receivables (2021 US$nil). The directors consider that the carrying amount of trade and other receivables approximates their fair value. The Group makes finance available to its associated smallholder co-operatives, both during the immature stage of initial plantings, and as working capital facilities for mature areas. It also provides financial guarantees for some bank loans of US$55.4 million (2021 US$60.0 million) provided to its associated smallholders. All balances due from smallholders, including those for immature areas, are repayable on demand. However, the Group may allow a longer period of finance at its discretion. At an early stage in the development of a new project, costs are incurred but not yet allocated to a specific smallholder, awaiting the completion of further development. The Group’s expected credit loss on its trade and other receivables and financial guarantees is not material. The Group applies the simplified approach in IFRS 9 in determining expected credit losses on trade receivables, taking account of their similar risk characteristics and the Group’s experience. In assessing expected credit losses on non-trade receivables and financial guarantees under IFRS 9, the Group considers the long-standing relationship with its stakeholders, the ongoing trading of its associated smallholders, and its ability to continue to recover balances in a planned and controlled manner. Given the above, receivables from smallholders have been classified as current assets with the exception of those balances not yet allocated to a specific smallholder co-operative which are expected to take greater than 12 months to recover. An analysis of the balance is as follows: Immature areas - allocated Mature areas Current asset Non-current asset – immature areas – not allocated 2022 US$’000 3,084 2,936 6,020 — 6,020 2021 US$’000 4,317 3,417 7,734 — 7,734 The Group previously 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$9,808,000 (2021 US$10,425,000). 83 NOTES TO THE CONSOLIDATED ACCOUNTS continued 20 Cash and other liquid resources Cash and cash equivalents 2022 US$’000 82,503 2021 US$’000 65,609 Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. 21 Trade and other payables Current liabilities Trade payables Payable to smallholder co-operatives Lease liabilities Other payables 2022 US$’000 8,598 2,488 — 13,324 24,410 2021 US$’000 15,857 5,428 38 9,877 31,200 The average credit period taken for trade purchases is 37 days (2021 – 50 days). The Group has processes in place to ensure payables are settled within the agreed terms. The amounts above also reflect the Group’s anticipated cash outflows for these financial liabilities. 22 Borrowings Secured borrowing at amortised cost Bank loans Total borrowings Amount due for settlement within one year Due for settlement in one to two years Due for settlement in two to five years Amount due for settlement after one year Analysis of borrowings by currency: US Dollar Indonesian Rupiah Analysis of anticipated cash outflows: Within one year Due within one to two years Due within two to five years 2022 US$’000 2021 US$’000 49,039 71,048 17,364 20,640 11,035 31,675 49,039 49,039 — 49,039 20,268 22,158 11,155 53,581 20,531 17,998 32,519 50,517 71,048 68,936 2,112 71,048 22,384 19,290 33,236 74,910 Bank loans have been provided from lenders in Malaysia to support the Group’s Indonesian operations. They 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$114.9 million (2021 US$121.3 million). At the year end, the Group had undrawn available credit facilities of US$30 million (2021 US$20 million). The weighted-average interest rate paid on bank loans in the year was 4.4% (2021 – 3.3%). The analysis of anticipated cash outflows above is based on interest and exchange rates in force at the balance-sheet date. 84 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 23 Deferred tax The following are the major deferred-tax liabilities and assets recognised by the Group and movements thereon: ACCELERATED TAX DEPRECIATION US$’000 RETIREMENT- BENEFIT OBLIGATIONS US$’000 OTHER TIMING DIFFERENCES US$’000 At 1 January 2022 Charge to income statement Credit to other comprehensive income At 31 December 2022 At 1 January 2021 Charge to income statement Credit to other comprehensive income At 31 December 2021 (8,779) (744) — (9,523) (8,093) (686) — (8,779) 2,835 (363) (278) 2,194 3,090 (27) (228) 2,835 TOTAL US$’000 (7,815) (4,456) (278) (1,871) (3,349) — (5,220) (12,549) (480) (1,391) — (1,871) (5,483) (2,104) (228) (7,815) Other timing differences relate to losses, with the exception of the deferred tax liability of US$8.5million (2021 US$8.5 million) that arose in 2017 on the acquisition of PT Bumi Mas Agro. Certain deferred-tax assets and liabilities have been offset. The following is the analysis of deferred-tax balances (after offset) for financial reporting purposes: Deferred-tax assets Deferred-tax liabilities 2022 US$’000 989 (13,538) (12,549) 2021 US$’000 3,602 (11,417) (7,815) 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$511,464,000 (2021 US$426,090,000). 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$23,238,000 (2021 US$24,777,000). No liability has been recognised in respect of these differences because the reversal would not give rise to an additional tax liability. Key estimate At the balance-sheet date, the Group had unused tax losses of US$49,458,000 (2021 US$62,089,000) 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$14,848,000 (2021 US$30,070,000) of such losses. No deferred-tax asset has been recognised in respect of the remaining US$34,610,000 (2021 US32,018,000) due to the unpredictability of future profit streams. 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, there would be no impact on the deferred-tax asset. At the balance-sheet date, the aggregate amount of temporary differences associated with outstanding executive share options for which deferred-tax assets have not been recognised was US$1,689,000 (2021 US$1,675,000). No asset has been recognised in respect of these differences due to the unpredictability of parent-Company future profit streams. 85 NOTES TO THE CONSOLIDATED ACCOUNTS continued 24 Retirement-benefit obligations The Group’s only obligation relates to an unfunded, non-contributory, post-employment statutory benefit scheme in Indonesia. A lump sum is paid to employees on retirement or on leaving the Group’s employment. This terminal benefit is accrued by the Group based on an annual actuarial review and charged in the income statement on the basis of individuals’ service at the balance- sheet date. Retirement is assumed at the age of 55 years. Standard Indonesian mortality assumptions are used, and no allowance is made for internal promotion. A range of different discount rates are used for each of the Indonesian subsidiary companies, based on actuarial advice. The main assumptions used to assess the Group’s liabilities are: Discount rate Salary increase per annum Reconciliation of scheme liabilities: Current-service cost Past-service cost* Interest cost Actuarial gain Less: Benefits paid out Movement in the year At 1 January Exchange differences At 31 December 2022 % 2021 % 6.75-7.25 5.25-7.50 7.00 2022 US$’000 1,879 (2,242) 842 (1,264) (785) (1,065) (1,850) 12,886 (1,064) 9,972 7.00 2021 US$’000 2,347 (2,117) 902 (1,043) 89 (1,055) (966) 14,051 (199) 12,886 * At its meeting in April 2021, the IFRS Interpretations committee (“IFRIC”) decided to finalise an agenda decision that would include material explaining how the applicable principles and requirements in IFRS standards apply to attributing benefit to periods of service. The result of the decision capped the number of years that benefits start to accrue to 24 years. In April 2022, the Indonesian Financial Accounting Standards Board implemented the agenda decision. With Indonesian company regulations mandating a retirement age of 55, benefits therefore only start to accrue from the age of 31. Previously benefits were calculated regardless of age and as such there is a credit of US$2.2 million arising in the year following the adjustment to future benefits following the IFRIC decision. 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 US$0.8-1.1 million. 86 M.P. EVANS GROUP PLCANNUAL REPORT 2022 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS AUTHORISED NUMBER ALLOTTED, FULLY PAID AND VOTING NUMBER AUTHORISED £’000 ALLOTTED, FULLY PAID AND VOTING US$’000 87,000,000 54,696,253 8,700 — — 30,000 (495,365) — — 87,000,000 54,230,888 8,700 87,000,000 54,490,253 — 206,000 87,000,000 54,696,253 8,700 — 8,700 9,232 4 (57) 9,179 9,204 28 9,232 25 Share capital At 1 January 2022 Issued Redeemed At 31 December 2022 At 1 January 2021 Issued At 31 December 2021 During the year, in anticipation of the exercise of share options, the Company issued 30,000 10p shares for US$4,000 cash consideration. Furthermore, certain share options were exercised in the year giving rise to the share premium shown in note 27. The Company introduced a share-buyback programme during the year. Under that programme the Company bought back and cancelled 495,365 10p shares, representing 0.9% of the issued share capital, for a total cost of US$4.9 million. There was no share-buyback programme in operation in the prior year. 26 Share-based payments The Group has equity-settled share-option schemes in place for directors and selected employees of the Group. Under the scheme established in 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 both 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 2022 NUMBER OF SHARE OPTIONS 176,080 64,380 (56,526) 183,934 25,250 2022 WEIGHTED- AVERAGE EXERCISE PRICE (PENCE) 129.2 0.0 256.5 44.9 326.7 2021 NUMBER OF SHARE OPTIONS 326,402 46,248 (196,570) 176,080 50,750 2021 WEIGHTED- AVERAGE EXERCISE PRICE (PENCE) 253.5 0.0 305.1 129.2 448.2 The weighted-average share price at the date of exercise for share options exercised during the year was 950p. The options outstanding at 31 December 2022 had a weighted-average remaining contractual life of 7.9 years and exercise prices in the range of 0 to 412p. The Group recognised total expenses of US$420,000 related to equity-settled share-based payments (2021 US$433,000), with options granted in the year valued using a Black-Scholes pricing model based on exercise after three years, share volatility over the last year of 24%, assumed dividends of 3-5%, and a risk-free rate of approximately 1%. The fair value of options granted in the year was between 725p and 882p. Details of the directors’ share options are set out in the directors’ remuneration report on pages 55 to 58. 87 NOTES TO THE CONSOLIDATED ACCOUNTS continued 27 Reserves SHARE- PREMIUM ACCOUNT US$’000 REVALU- ATION RESERVE US$’000 CAPITAL- REDEMPTION RESERVE US$’000 MERGER RESERVE US$’000 TREASURY SHARES US$’000 SHARE- OPTION RESERVE US$’000 SHARE OF ASSOCIATES’ RESERVES US$’000 FOREIGN- EXCHANGE RESERVE US$’000 TOTAL US$’000 RETAINED EARNINGS US$’000 32,392 548 4,301 766 (6) 960 16,451 55 55,467 366,825 — — — 187 — — — — — (8) — — — — — — — — — — — — — 57 — — — — — — — — — — — 4 — — — — — — — — — — — — — (2,656) (19) — — — 2,184 — 2,184 70,876 (702) 29 (681) (851) — — — — — — — 917 191 — — (28,500) (2,656) 2,656 (19) 57 439 (4,902) 32,579 540 4,358 766 (2) 941 15,277 84 54,543 407,460 31,582 553 4,301 766 (5) 1,072 16,856 (35) 55,090 300,117 — — — 810 — — — — (5) — — — — — — — — — — — — — — — — — — — — — — (11) — — — — — — — — 2,508 (489) — — — (2,424) 10 (112) — — 90 — — — — — 2,508 83,898 (404) (376) — 754 799 — — (20,527) (2,424) 2,424 (102) 535 32,392 548 4,301 766 (6) 960 16,451 55 55,467 366,825 At 1 January 2022 Profit for the financial year Exchange differences Retirement- benefit obligations Issue of shares Dividends paid Dividends from associates Share-based payments Share buybacks At 31 December 2022 At 1 January 2021 Profit for the financial year Exchange differences Retirement- benefit obligations Issue of shares Dividends paid Dividends from associates Share-based payments At 31 December 2021 The nature and purpose of each reserve is described by its title shown in the table above. 88 M.P. EVANS GROUP PLCANNUAL REPORT 2022FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED ACCOUNTS 28 Non-controlling interests At 1 January Share of profit in the year Dividends paid Share of retirement benefit credited to other comprehensive income At 31 December 2022 US$’000 13,524 5,301 (1,232) 69 17,662 2021 US$’000 9,729 5,376 (1,641) 60 13,524 The Group has a minority partner in each of its plantation operations. The minority share of profit for the year and Group equity, allocated by operation, is shown in the following table: Kota Bangun Bangka Pangkatan group Bumi Mas Musi Rawas Simpang Kiri 29 Note to the consolidated cash-flow statement Operating profit Biological loss/(gain) Loss/(gain) on disposal of property, plant and equipment Release of deferred profit Depreciation of property, plant and equipment Amortisation of intangible assets Retirement-benefit obligations Share-based payments Dividends from associated companies PROFIT US$’000 949 2,205 928 848 222 149 2022 EQUITY US$’000 3,360 7,858 3,771 3,088 (167) (248) PROFIT US$’000 1,121 2,292 975 663 132 193 2021 EQUITY US$’000 2,598 5,825 3,244 2,337 (285) (195) 5,301 17,662 5,376 13,524 2022 US$’000 2021 US$’000 101,586 114,556 1,431 845 (40) 21,931 171 (586) 420 2,656 (1,771) (13,538) (64) 20,641 167 (351) 433 2,424 Operating cash flows before movements in working capital 128,414 122,497 Increase in inventories Decrease/(increase) in receivables (Decrease)/increase in payables Cash generated by operating activities Income tax paid Interest paid Net cash generated by operating activities (1,358) 11,864 (6,752) (10,137) (8,461) 5,341 132,168 109,240 (27,149) (2,731) 102,288 (14,269) (2,699) 92,272 89 NOTES TO THE CONSOLIDATED ACCOUNTS continued 30 Analysis of movements in net funds/debt At 1 January 2022 Net increase in cash and cash equivalents Repayment of borrowings Reclassification Foreign-exchange movements At 31 December 2022 CASH AND CASH EQUIVALENTS US$’000 CURRENT-ASSET INVESTMENTS US$’000 BORROWINGS DUE WITHIN ONE YEAR US$’000 BORROWINGS DUE AFTER ONE YEAR US$’000 TOTAL US$’000 65,609 18,469 — — (1,575) 82,503 — — — — — — (20,531) (50,517) (5,439) — 22,009 (18,842) — (17,364) — — 18,842 — (31,675) 18,469 22,009 — (1,575) 33,464 At 1 January 2021 27,222 334 (39,605) (66,079) (78,128) Net increase in cash and cash equivalents Repayment of borrowings Change in deposits Reclassification Foreign-exchange movements At 31 December 2021 31 Financial instruments 38,441 — — — (54) 65,609 — — (334) — — — — 34,636 — (15,562) — — — — 15,562 — 38,441 34,636 (334) — (54) (20,531) (50,517) (5,439) 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 cash surplus, see note 30, of US$33,464,000 (2021 net debt US$5,439,000) and equity attributable to the owners of the parent Company of US$471,182,000 (2021 US$431,524,000). The board intends to fund its continuing Indonesian expansion and maximise returns to shareholders 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 makes limited use of forward-currency contracts; there were no contracts open at 31 December 2022. 90 M.P. EVANS GROUP PLCANNUAL REPORT 2022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 2022 US$’000 51,433 30,015 886 169 82,503 2021 US$’000 18,439 39,349 7,562 259 65,609 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 (2021 US$7.6 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 (subsequently changed to SOFR in early 2023), and so is exposed to changes in underlying interest rates. Based on current borrowing, management estimates that for every 1% decrease or increase in interest rates, Group profit for the year and net assets would increase or decrease by US$0.4 million (2021 US$0.6 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 56. The directors’ participation in the executive share-option schemes and long-term incentive scheme is disclosed on page 58. On 15 October 2021, the Group completed the disposal of 70 hectares of land owned by its wholly-owned subsidiary Bertam Consolidated Rubber Company Limited to Bertam Properties Sdn Berhad, its 40%-owned associated company. Further details are in note 12. The Group received dividends from its associated companies during the year. These are set out in note 15. The Group continued to make finance available to one of its minority partners during the year. This is set out in note 19. 33 Post balance-sheet events On 2 March 2023, the Group acquired 100% of the shares in two Indonesian companies, PT Teunggulon Raya and PT Dharma Agung, which between them own 2,100 hectares planted with oil palm. The planted land is close to the Group’s Simpang Kiri estate in Aceh Province, northern Sumatra. Total costs associated with the acquisition, including the assumption of liabilities within the companies acquired, are estimated to be US$14.3 million. 91 PARENT-COMPANY BALANCE SHEET As at 31 December 2022 COMPANY NUMBER: 1555042 Non-current assets Property, plant and equipment Investments in subsidiaries Trade and other receivables Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Net current assets Total liabilities Net assets Equity Share capital Other reserves Retained earnings Total equity Note iv v vi vi vii viii ix ix 2022 US$’000 845 15,799 79,982 96,626 1,231 2,616 3,847 2021 US$’000 846 15,799 115,588 132,233 746 8,926 9,672 100,473 141,905 820 3,027 820 99,653 9,179 39,119 51,355 99,653 5,808 3,864 5,808 136,097 9,232 38,890 87,975 136,097 The Company recorded a loss for the year of US$3,657,000 (2021 US$3,492,000). The financial statements on pages 92 to 97 were approved by the board of directors on 21 March 2023 and signed on its behalf by Peter Hadsley-Chaplin Executive chairman Matthew Coulson Chief executive 92 M.P. EVANS GROUP PLCANNUAL REPORT 2022 PARENT-COMPANY FINANCIAL STATEMENTS PARENT-COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2022 Loss for the year Total comprehensive expense for the year Issue of share capital Dividends Share buyback Credit to equity for equity-settled share-based payments Transactions with owners At 1 January 2022 At 31 December 2022 Loss for the year Total comprehensive expense for the year Issue of share capital Dividends Credit to equity for equity-settled share-based payments Transactions with owners At 1 January 2021 At 31 December 2021 SHARE CAPITAL US$’000 — — 4 — (57) — (53) 9,232 9,179 — — 28 — — 28 9,204 9,232 OTHER RESERVES US$’000 — — 191 — 57 (19) 229 38,890 39,119 — — 799 — (102) 697 38,193 38,890 RETAINED EARNINGS US$’000 (3,657) (3,657) — (28,500) (4,902) 439 (32,963) 87,975 51,355 (3,492) (3,492) — (20,527) 535 (19,992) 111,459 87,975 TOTAL US$’000 (3,657) (3,657) 195 (28,500) (4,902) 420 (32,787) 136,097 99,653 (3,492) (3,492) 827 (20,527) 433 (19,267) 158,856 136,097 93 NOTES TO THE PARENT-COMPANY ACCOUNTS For the year ended 31 December 2022 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 104. The Group’s principal activities are shown in the strategic report on page 14. 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 46. 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. Balances are classified as non-current if they are not expected to be recovered in less than one year. 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 74. The directors have concluded that there are no critical judgements and accounting estimates in the preparation of the parent-Company accounts. 94 M.P. EVANS GROUP PLCANNUAL REPORT 2022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 2022 of US$3,657,000 (2021 US$3,492,000). The Company’s main source of income is dividends from subsidiary companies. The auditors’ remuneration for audit services was US$33,000 (2021 US$27,000). iii Employees Employee costs during the year Wages and salaries Social security costs Pension costs Share-based payments 2022 US$’000 2021 US$’000 1,881 266 53 169 2,369 2,349 502 52 195 3,098 As recorded in the directors’ remuneration report on page 55, wages and salary costs include bonuses paid to the directors in respect of 2022 and 2021. Average monthly number of people employed Staff Directors iv Property, plant and equipment Cost At 1 January 2022 Additions At 31 December 2022 Accumulated depreciation At 1 January 2022 Charge for the year At 31 December 2022 Net book value at 31 December 2022 Net book value at 31 December 2021 2022 NUMBER 2021 NUMBER 5 2 7 5 3 8 LAND AND BUILDINGS US$’000 PLANT, EQUIPMENT & VEHICLES US$’000 TOTAL US$’000 834 — 834 — — — 834 834 124 6 130 112 7 119 11 12 958 6 964 112 7 119 845 846 95 NOTES TO THE PARENT-COMPANY ACCOUNTS continued v Investments in subsidiaries Subsidiary undertakings At 1 January and 31 December 2022 The following companies are the principal direct subsidiary companies of M.P. Evans Group PLC: M.P. Evans & Co. Limited Sungkai Holdings Limited US$’000 15,799 HOLDING % 100 100 COUNTRY OF OPERATION UK UK Holdings are all of ordinary shares. The directors believe the carrying value of investments is supported by their underlying net assets. Details of all subsidiary companies are shown on page 98. 2022 US$’000 2021 US$’000 1,208 23 1,231 691 55 746 79,982 115,588 2022 US$’000 — 820 820 2021 US$’000 5,000 808 5,808 vi Trade and other receivables Current assets Other debtors Prepayments and accrued income Non-current assets Amounts owed by subsidiary undertakings vii Trade and other payables Borrowings Other creditors viii Share capital See note 25 to the consolidated financial statements. 96 M.P. EVANS GROUP PLCANNUAL REPORT 2022NOTES TO THE PARENT-COMPANY ACCOUNTS continued PARENT-COMPANY NOTES TO THE PARENT-COMPANY ACCOUNTS CAPITAL- REDEMPTION RESERVE US$’000 MERGER RESERVE US$’000 TREASURY SHARES US$’000 OTHER RESERVES US$’000 TOTAL US$’000 RETAINED EARNINGS US$’000 ix Reserves At 1 January 2022 Issue of shares Share-based payments Share buyback Loss for the year Dividends* SHARE- PREMIUM ACCOUNT US$’000 32,392 187 — — — — 4,110 1,434 — — 57 — — — — — — — At 31 December 2022 32,579 4,167 1,434 At 1 January 2021 Issue of shares Share-based payments Loss for the year Dividends* 31,582 810 — — — 4,110 1,434 — — — — — — — — At 31 December 2021 32,392 4,110 1,434 * See note 10 to the consolidated financial statements. (6) — 4 — — — (2) (5) (11) 10 — — (6) 960 — (19) — — — 1,072 — (112) — — 38,890 87,975 — 439 (4,902) (3,657) (28,500) 51,355 941 39,119 38,193 111,459 187 (15) 57 — — 799 (102) — — 960 38,890 — 535 (3,492) (20,527) 87,975 97 SUBSIDIARY AND ASSOCIATED UNDERTAKINGS As at 31 December 2022 SUBSIDIARY UNDERTAKINGS Details of the Group’s subsidiary undertakings as at 31 December 2022 are as follows: % OF SHARES HELD COUNTRY OF INCORPORATION COUNTRY OF OPERATION FIELD OF ACTIVITY NAME OF SUBSIDIARY PT Prima Mitrajaya Mandiri PT Teguh Jayaprima Abadi 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 95 95 95 90 95 95 95 95 95 Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia PT Evans Indonesia 100 Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Production at Kota Bangun Production at Kota Bangun Production at Bumi Mas Production at Bangka Production at Musi Rawas Production at Pangkatan Production at Pangkatan Production at Pangkatan Production at Simpang Kiri Provision of agronomic and management-consultancy services Bertam Consolidated Rubber Company Limited M.P. Evans & Co. Limited* Sungkai Holdings Limited* Sunrich Plantations Pte Ltd PT Perusahaan Pertanian Perkebunan Perindustrian dan Perdagangan Surya Makmur 100 England and Wales Malaysia Holding company 100 100 100 95 England and Wales United Kingdom Holding company England and Wales United Kingdom Holding company Singapore Indonesia Singapore Indonesia Holding company Holding company PT Aceh Timur Indonesia 95 Indonesia 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 25 North Bridge Road, Level 7 Singapore 179104, and for all UK companies is the Group’s registered office as shown on page 104. ASSOCIATED UNDERTAKINGS Details of the associated undertakings as at 31 December 2022 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 CPO and PK 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. 98 M.P. EVANS GROUP PLCANNUAL REPORT 2022OTHER INFORMATION ANALYSIS OF INDONESIAN PLANTATION LAND AREAS As at 31 December 2022 The information on pages 99 to 104 does not form part of the audited financial statements. PLANTED HECTARAGE Subsidiaries – oil palm Kota Bangun Bumi Mas Bangka Musi Rawas3 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 TOTAL1 HA MATURE HA IMMATURE HA TOTAL2 HA 4,596 1,351 3,881 2,537 80 - 52 87 - 269 814 253 4,648 1,438 3,881 2,806 894 253 12,445 1,475 13,920 95 95 90 95 95 95 38 10,210 7,278 6,135 5,538 6,600 2,241 38,002 35,797 1,994 758 140 215 16 1,297 366 179 2,213 2,101 247 94 10,350 7,493 6,151 6,835 6,966 2,420 40,215 37,898 2,241 852 36,555 2,195 38,750 38,760 2,307 41,067 1. All of the Group’s areas, other than at Kota Bangun, have a final land license, as does all of the associate’s area at Kerasaan. At Kota Bangun, the Group has all HGUs except for approximately 500 hectares for which the HGU is currently being obtained. 2. All the scheme-smallholder areas at Bangka and Musi Rawas have an HGU. At Kota Bangun, HGUs have been granted over 3,300 of the planted hectares. The Group is assisting the smallholders in obtaining the HGUs for the remaining areas at Kota Bangun and at Bumi Mas. At the newer smallholder areas in near Pangkatan and Simpang Kiri, approximately 700 planted hectares are fully titled. 3. The board’s current estimate is that, between Group and scheme-smallholder areas it will be possible to plant a minimum of 10,000 hectares at Musi Rawas, and that this may be extendable to between 11,000 – 12,000 hectares as a final total. 99 ANALYSIS OF GROUP EQUITY VALUE As at 31 December 2022 The information in the following table provides a directors’ estimate of the Group equity value at 31 December 2022 utilising, except where indicated, an independent valuation of the Group’s properties performed at the end of 2022. 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 Mas1 Bangka1 Musi Rawas Pangkatan group1 Simpang Kiri Smallholders Kota Bangun Bumi Mas Bangka Musi Rawas Pangkatan group Simpang Kiri Associates Kerasaan2 Total Indonesia MALAYSIAN PROPERTY Bertam Properties3 Total Malaysia Net funds3 Other assets and liabilities4 Total equity value Equity value (£ per share5) Notes 95 95 90 95 95 95 95 95 90 95 95 95 38 40 10,350 7,493 6,151 6,835 6,966 2,420 40,215 4,648 1,438 3,881 2,806 894 253 13,920 225,400 168,800 128,000 153,700 122,900 33,000 831,800 29,700 7,500 18,200 20,700 3,700 500 80,300 21,800 22,500 20,800 22,500 17,600 13,600 20,700 6,400 5,200 4,700 7,400 4,100 2,000 5,800 2,241 33,100 14,800 n/a 214,130 160,360 115,200 146,015 116,755 31,350 783,810 28,215 7,125 16,380 19,665 3,515 475 75,375 12,578 871,763 49,312 49,312 31,743 22,147 974,965 14.98 1. Market value per planted hectare includes value of mills on the related estates. 2. The Group’s only oil-palm associate, Kerasaan, was not included in the independent valuation at 31 December 2022. The value in the table above has been carried forward from the independent valuation performed at 31 December 2019. 3. Net funds is taken as cash and other liquid resources less borrowings from the 31 December 2022 balance sheet, attributable to the owners of M.P. Evans Group PLC. 4. Other assets and liabilities are taken as net assets minus plantation and property-related assets, minus net cash from the 31 December 2022 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). 100 M.P. EVANS GROUP PLCANNUAL REPORT 2022Indonesian associated-company estates 51,900 55,200 54,800 54,200 FIVE-YEAR SUMMARY Production Crude palm oil Palm kernels Crops Oil-palm fresh fruit bunches Own crops Scheme-smallholder crops Independent-smallholder crop purchased Average sale prices Crude palm oil – cif Rotterdam per tonne Crude palm oil – ex-mill-gate per tonne Exchange rates US$1 = Indonesian Rupiah – average – year end US$1 = Malaysian Ringgit – average – year end £1 = US Dollar – average – year end Revenue Gross profit Profit before tax Basic continuing earnings per share Basic continuing earnings per share Dividends per share: Normal Special Total OTHER INFORMATION 2022 Tonnes 2021 Tonnes 2020 Tonnes 2019 Tonnes 2018 Tonnes 341,700 73,800 312,900 67,100 271,700 60,400 231,900 53,000 192,500 43,500 905,400 265,700 340,600 809,700 229,300 327,200 724,300 193,000 289,700 663,300 172,100 166,100 1,511,700 1,366,200 1,207,000 1,001,500 US$ US$ 1,345 854 14,853 15,568 4.40 4.41 1.24 1.20 1,195 810 14,295 14,253 4.14 4.17 1.37 1.35 US$ 716 591 14,541 14,050 4.20 4.02 1.28 1.37 US$ 566 480 14,142 13,883 4.14 4.09 1.28 1.32 573,000 149,600 106,500 829,100 51,700 US$ 598 504 14,234 14,380 4.04 4.13 1.34 1.27 US$’000 US$’000 US$’000 US$’000 US$’000 326,917 109,210 100,250 276,592 103,613 112,502 174,510 34,755 28,440 119,341 17,044 12,780 108,553 26,525 18,348 US cents US cents US cents US cents US cents 133.9 Pence 108.0 42.50 — 42.50 158.4 Pence 115.6 35.00 5.00 40.00 37.4 Pence 29.2 22.00 — 22.00 11.6 Pence 9.0 17.75 — 17.75 9.9 Pence 7.4 17.75 — 17.75 US$’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 488,844 102,288 431,524 92,272 364,111 39,598 358,724 32,002 377,033 21,297 101 NOTICE OF MEETING AND INVITATION TO POST-AGM 150 YEAR CELEBRATION LUNCH MESSAGE FROM THE CHAIRMAN The chairman, Peter Hadsley-Chaplin, is delighted to invite all shareholders, as usual, to the Group’s annual general meeting, which this year is taking place at 11am on Friday 9 June, at Mansion House in London. In addition, to mark the Group’s 150-year history, the AGM will be followed by a celebratory lunch, held at the same venue. To register for attendance at the lunch, shareholders should log on to the investor section of the Group’s website (www.mpevans.co.uk) where registration information will be made available. Registration is required by 21 April 2023 at the latest. Shareholders may also contact Harriette Pike with any questions at harriette.pike@mpevans.co.uk. Places at the lunch must inevitably be limited, but we hope to see as many shareholders in attendance as possible. NOTICE IS HEREBY GIVEN that the annual general meeting of M.P. Evans Group PLC will be held at Mansion House, London EC4N 8BH on 9 June 2023 at 11am BST. The Company also aims to make the meeting available to view online. Further details will be provided in advance of the meeting on the Company’s AGM website page. The meeting will be for the following purposes, and unless a poll is validly demanded, voting will be decided on a show of hands: AS ORDINARY BUSINESS RESOLUTION ON FORM OF PROXY 1 To receive and consider the report of the directors and the audited consolidated financial statements No 1 for the year ended 31 December 2022. 2 To receive and consider the directors’ remuneration report as set out in the annual report and accounts No 2 for the financial year ended 31 December 2022. 3 To elect Michael Sherwin as a director. 4 To elect Tanya Ashton as a director. 5 To elect Lee Yuan Zhang as a director. 6 To re-elect Philip Fletcher as a director. 7 To re-elect Bruce Tozer as a director. 8 To re-elect Matthew Coulson as a director. 9 To declare a final dividend. No 3 No 4 No 5 No 6 No 7 No 8 No 9 10 To appoint BDO LLP as auditors and to authorise the directors to determine their remuneration. No 10 AS SPECIAL BUSINESS To consider and, if thought fit, pass the following resolution, as a special resolution: RESOLUTION ON FORM OF PROXY 11 That the Company is hereby generally and unconditionally authorised to make market purchases (within No 11 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 5,401,372; 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 2024 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 102 21 March 2023 M.P. EVANS GROUP PLCANNUAL REPORT 2022 OTHER INFORMATION NOTES 1) A member of the Company entitled to attend, speak and vote at the meeting convened by this notice may appoint a proxy to exercise all or any of his or her rights to attend, speak and vote at the meeting on his or her behalf. A proxy need not be a member of the Company. Appointment of a proxy will not subsequently preclude a member from attending and voting at the meeting in person if he or she so wishes. A member may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to different shares held by the member. The form of proxy contains instructions on how to appoint more than one proxy. 2) A form of proxy for use at the meeting is enclosed. Please return the form of proxy as soon as possible. To be valid, it must be received by post or (during normal business hours only) by hand at the office of the registrars, Computershare Investor Services PLC, at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ no later than 11am on 7 June 2023 (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. CREST members wishing to appoint a proxy or proxies through the CREST electronic proxy appointment service should refer to the more detailed instructions posted on the AGM page of the Group’s website (www.mpevans.co.uk). 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 7 June 2023 (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 21 March 2023, the Company’s issued share capital consisted of 54,013,727 shares carrying one vote each. Therefore the total number of voting rights in the Company as at that date was 54,013,727. 6) Copies of the directors’ service contracts and terms and conditions of appointment will be available for inspection at the registered office of the Company during normal business hours and at the place of the meeting from 15 minutes prior to the meeting until its conclusion. 7) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member, but powers purported to be exercised by more than one authorised representative in respect of the same shares will be treated as not exercised. 8) Save as provided below, 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. 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. THE ANNUAL GENERAL MEETING WILL BE HELD ON FRIDAY 9 JUNE 2023 AT 11AM VENUE Mansion House, London EC4N 8BH Mansion House CLOSEST TRANSPORT LINKS Mansion House (District and Circle Lines) Cannon Street (District and Circle Lines, National Rail Services) Bank (Central, Northern and Waterloo & City Lines) ORDER OF EVENTS 10am 11am 12pm 1pm Registration/coffee AGM Drinks reception Lunch (by prior registration) 103 M.P. EVANS GROUP PLC ANNUAL REPORT 2022 PROFESSIONAL ADVISERS & REPRESENTATIVES SECRETARY AND REGISTERED OFFICE Katya Merrick M.P. Evans Group PLC 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ Company number: 1555042 t +44 (0)1892 516 333 e katya.merrick@mpevans.co.uk w www.mpevans.co.uk INDONESIAN REGIONAL OFFICE PT Evans Indonesia Gedung Graha Aktiva, Suite 1001, Jl HR Rasuna Said Blok X-1 Kav 03, Jakarta 12950 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 7th Floor, 100 Liverpool Street, London EC2M 2AT MANAGING AGENT IN MALAYSIA Straits Estates Sdn. Berhad JOINT BROKER finnCap Loke Mansion, 147 Lorong Kelawei, 10250 Penang One Bartholomew Close, London EC1A 7BL INDEPENDENT AUDITORS BDO LLP SOLICITORS Hogan Lovells International LLP 2 City Place, Beehive Ring Road, Gatwick, Atlantic House, 50 Holborn Viaduct, London EC1A 2FG West Sussex RH6 0PA REGISTRARS Computershare Investor Services PLC PUBLIC RELATIONS ADVISERS Hudson Sandler LLP The Pavilions, Bridgwater Road, Bristol BS99 6ZZ 25 Charterhouse Square, London EC1M 6AE t +44 (0)3707 071 176 w www.computershare.com GLOSSARY Crude palm oil Palm-kernel oil Ex mill gate Round Table on Sustainable Palm Oil Fresh fruit bunches Palm kernels RSPO’s Independent Smallholder Standard International Sustainability & Carbon Certification Hak guna usaha: land lease granted by Indonesian government CPO PKO EMG RSPO Ffb PK RISS ISCC HGU 104 The Group’s palm-oil mill at Bumi Mas M.P. Evans is a responsible producer of sustainable Indonesian palm oil, striving for excellence in all the Group’s operations, with a focus on continuing growth and offering an increasing yield. 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 CBP017914 This report is printed on paper certified in accordance with the FSC® (Forest Stewardship Council®). Woodrow Press Ltd aims to reduce at source the effect its operations have on the environment and is committed to continual improvement, prevention of pollution and compliance with any legislation or industry standards. 

Continue reading text version or see original annual report in PDF format above