TIDMPALM
RNS Number : 8488E
Asian Plantations Limited
14 April 2011
14 April 2011
Asian Plantations Limited
("Asian Plantations" or the "Company")
Final Results for the year ended 31 December 2010
Asian Plantations Limited (LSE: PALM), a palm oil plantation
company with operations in Malaysia, is pleased to announce its
audited results for the year ended 31 December 2010.
Highlights
-- Initiation of first-ever fresh fruit bunch ("FFB") sale of
USD314,000.
-- Completion of the acquisition of Fortune Plantation Sdn Bhd,
significantly enlarging the Company's land bank to 15,645 hectares
and an important step towards achieving the Company's stated
objective of owning in excess of 20,000 hectares of Malaysian
titled land within two years of listing.
-- Planting programme on track, with over 4,051 hectares planted
at as year-end 2010 and three nurseries in operation.
-- Successful completion of two Company sponsored direct
placings:
- on 13 August 2010, the issue of GBP4.26 million in new equity
capital at 110 pence per share, a 46.7% premium to the Company's 30
November 2009 AIM Admission price of 75 pence per share.
- on 19 November 2010, the issue of USD1,000,000 unsecured four
year convertible debt to Asian Agri Capital ("AAC"), an existing
shareholder in the Company, via Asian Agriculture Fund III, at a
conversion price of 201 pence per share. The conversion price
represented a 21.8% premium to the closing price on 18 November
2010.
Post Balance Sheet Events
-- The raising of approximately GBP16.0 million, before
expenses, through the issue of 7,272,728 new shares at a price of
220 pence per share to new and existing investors
Dennis Melka, Asian Plantations' Joint Chief Executive Officer,
commented:
"2010 has been a transformational year for the Company.
Following on from the successful completion of the Company's first
acquisition in 2009, doubling our land bank in Sarawak, Asian
Plantations has now significantly enlarged that land bank by
acquiring Fortune Plantation Sdn Bhd. We are confident of achieving
our strategic objectives stated at the Company's admission to
trading on AIM.
"The Company has continued to grow and develop in a sustainable
and responsible manner throughout 2010, and considerable resources
have been devoted to our community outreach initiative to those
communities surrounding our land.
"Excellent progress has been made in the first three months of
2011 and we currently have over 845,000 seedlings in our three
nurseries. We expect to complete the planting fully at our BJ
estate this year and complete plantings at Fortune and Incosetia by
2012.
"The next 18 months promise to be exciting and challenging phase
for the Group, as we continue to consolidate neighbouring land
parcels selectively, complete the planting works on our existing
parcels and open our milling complex. We look forward to providing
further updates on our progress in the months ahead."
For Further information contact:
Asian Plantations Limited
Dennis Melka, Joint Chief Executive Officer Tel: +65 6325
0970
Graeme Browne, Joint Chief Executive Officer
Strand Hanson Limited
James Harris Tel: +44 (0) 20 7409 3494
Paul Cocker
Liam Buswell
Panmure Gordon (UK) Limited
Tom Nicholson Tel: +44 (0) 20 7459 3600
Edward Farmer
Bankside Consultants
Simon Rothschild Tel: +44 (0) 20 7367 8871
Louise Mason Tel: +44 (0) 20 7367 8872
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors, I am pleased to present the
2nd Annual Report and Financial Statements of Asian Plantations
Limited, for the financial year ended 31st December 2010.
Palm Oil
Palm oil is the most efficient agricultural crop that humans can
grow to meet our population's ever-growing edible oil requirement
with the least environmental impact. Edible oils are an integral
part of the human food supply chain and utilized in cooking and
baking across all socioeconomic levels. Humans need edible oils
just as we need water, starch and sugars to survive. Global edible
oil demand is currently in excess of 170 m tonnes per annum and has
grown at a CAGR of 4.3 per cent. for over three decades (this
demand is highly correlated to population growth and rising incomes
in the emerging markets). Palm oil is the leading edible oil
consumed globally, with a 37 per cent. market share; however, more
importantly, palm oil represents over 55 per cent. of the global
trade in exported edible oils. One hectare of mature palm yields
over six tonnes of oil per annum, compared with less than half a
tonne of oil from traditional row crops such as soya, rapeseed or
sunflower. As such, it takes over ten hectares of an oilseed row
crop to replace one hectare of naturally irrigated palm. Whilst
certain environmental critics may target the palm oil industry,
they provide no solutions to addressing the world's ever growing
edible oil requirements, particularly in developing countries. Palm
oil is a naturally irrigated crop which grows exclusively in a
narrow band around the Equator. The palm oil industry provides
direct employment for several million people in rural and remote
areas, as it is manually harvested (compared to mechanised row crop
agriculture). In addition, approximately half of the palm oil
estates under cultivation are in fact owned by small holders who
are able to join the emerging middle class because of their farming
activities. The palm oil tree's immense productivity gives it the
lowest cost of production for all edible oil crops. The cash cost
of production is approximately USD350 per tonne of crude palm oil,
compared with a current market selling price in excess of USD1,000
per tonne. It is for this reason that palm oil plantations in
Southeast Asia have a global competitive and comparative advantage
in the production of edible oils.
One hectare of mature palm yields over six tonnes of oil per
annum, compared with less than half a tonne of oil from traditional
row crops such as soya, rapeseed or sunflower. As such, it takes
over ten hectares of an oilseed row crop to replace one hectare of
naturally irrigated palm. Whilst certain environmental critics may
target the palm oil industry, they provide no solutions to
addressing the world's ever growing edible oil requirements,
particularly in developing countries. Palm oil is a naturally
irrigated crop which grows exclusively in a narrow band around the
Equator. The palm oil industry provides direct employment for
several million people in rural and remote areas, as it is manually
harvested (compared to mechanised row crop agriculture). In
addition, approximately half of the palm oil estates under
cultivation are in fact owned by small holders who are able to join
the emerging middle class because of their farming activities.
The palm oil tree's immense productivity gives it the lowest
cost of production for all edible oil crops. The cash cost of
production is approximately USD350 per tonne of crude palm oil,
compared with a current market selling price in excess of USD1,000
per tonne. It is for this reason that palm oil plantations in
Southeast Asia have a global competitive and comparative advantage
in the production of edible oils.
Investment Thesis & Strategic Objectives
Due to Malaysia's strict land titling and zoning regulations,
which protect over 60% of the country's land mass as a Forest or
Forest Reserve, the supply of agriculturally titled land for the
development of palm oil is nearly exhausted in Malaysia. There is
some land available for purchase in the State of Sarawak; yet, we
estimate this supply will also be depleted in a few years, similar
to the situation of peninsular Malaysia and the State of Sabah.
Due to our on-the-ground presence in Kuching (the capital of the
State of Sarawak), we have a unique opportunity to acquire,
consolidate and develop this remaining land supply in Sarawak. All
land parcels that we purchase are mineral soil and have full
agriculture title. We will not consider peat soil opportunities due
to the higher development costs and negative environmental impact.
Since our Admission on the London Stock Exchange's AIM Market
("AIM") on 30th November 2009, we have completed two acquisitions
thereby taking our total land resource to 15,645 hectares (38,658
acres). We continue to review select acquisition opportunities to
achieve our stated objective of owning over 20,000 hectares (49,400
acres) of Malaysian titled land within two years of admission to
AIM.
We are of the opinion that the development of properly titled
green-field palm oil estates provides a highly attractive return on
equity over the medium term. Our all-in-cost of acquisition,
ownership and development in Sarawak, over a three year period, is
approximately USD7,500 - USD8,000 per hectare. Of this gross
investment per hectare, we are able to leverage approximately
two-thirds from the local banks in local currency under long term
(+10 years) financing arrangements.
Research shows that well-run, mature Malaysian palm oil
plantations are valued at up to USD30,000 per hectare in the public
equity markets, a meaningful premium when compared to valuations in
other palm oil producing countries. As such, the Directors believe
that green-field land acquisition in Malaysia, at valuations of
approximately USD2,500 per hectare, are highly accretive in value
to all shareholders of the Company.
We intend to be a global leader in fresh fruit bunch ("FFB")
processing technology via the construction of our vertical
sterilizer crushing mill with clean energy components. We have
already initiated the planning and approval process for a 120 tonne
vertical sterilizer mill at our estates. At completion, this mill
will be among the largest in Malaysia. The mill will incorporate a
proprietary sterilization process and carbon credit eligible
methane recapture facility. We expect the mill to be operational in
2012 and we intend to also process third party crop from the
smaller, independent operators in the area.
Malaysia
We are of the opinion that Malaysia represents a superior
location for the development of palm oil estates due to a variety
of legal, operational, financial and valuation considerations.
Malaysia is an "A" rated country that has welcomed foreign
investment since the 1960s. It benefits from a stable, multi-
racial democratic system and an advanced land titling system for
agriculture that protects the nation's forest reserves and
indigenous land rights. Malaysia's banking system is generally
regarded as stable and liquid; for example, no Malaysian bank was
bailed-out by the government in the last global financial crisis.
Borrowing costs are approximately 5% - 6% for our loan facilities
compared with corporate borrowing costs of mid-teens in Indonesia
and the non-availability of leverage in other countries on the
Equator. The Group enjoys strong relations with its funding banks,
with certain of the Company's borrowings personally guaranteed by
the Executive Directors and Chairman. The availability of low cost
bank finance for plantation development in Malaysia dramatically
enhances the Group's long-term equity returns, when compared with
alternative destinations in the emerging markets.
Financial Position
The Group is pleased to report its first revenue of USD314,000
in 2010. This is an important milestone given the intensive capital
investment in our estates since 2008. The Group's balance sheet as
at 31(st) December 2010 shows a net assets position of
USD18,002,000 compared to USD13,408,000 on 31(st) December 2009.
The Group has gross loans and borrowings with local Malaysian banks
of USD38,571,000 compared to USD22,479,000 in 31(st) December 2009.
As at 31(st) March 2011, the Group has an additional RM81,000,000
(approximately USD26,750,000) in undrawn bank lines for its
plantation development activities.
Financial Performance
Consolidated income statements for the financial years
ended:
31.12.10 31.12.09
(USD) (USD)
------------------- ---------- ----------
Revenue 314,000 -
------------------- ---------- ----------
Other Income 71,000 48,000
------------------- ---------- ----------
Administrative
Expenses 2,207,000 1,306,000
------------------- ---------- ----------
Other Expenses 811,000 107,000
------------------- ---------- ----------
Finance Expenses 893,000 22,000
------------------- ---------- ----------
Loss before
Taxation 3,796,000 1,387,000
------------------- ---------- ----------
Income Tax
Benefit 185,000 145,000
------------------- ---------- ----------
Loss for the
Year 3,611,000 1,242,000
------------------- ---------- ----------
Loss Attributable to:
-------------------------------------------
Owners of the
parent 3,611,000 1,226,000
------------------- ---------- ----------
Non-controlling
Interests - 16,000
------------------- ---------- ----------
Loss per share (cents per share)
-------------------------------------------
Basic and diluted 11.6 6.1
------------------- ---------- ----------
Financing Activities
On 13(th) August 2010, we completed a Company sponsored placing
(without the use of placement agents and brokers) of 3,868,083
shares at a price of 110 pence per share, resulting in GBP4,265,891
in new equity capital; a portion of this was utilized for the
Fortune acquisition. This placing was carried out at a 46.7%
premium to the Company's AIM Admission on 30(th) November 2009,
also a Company sponsored placing at a price per share of 75
pence.
On 19(th) November 2010, we executed a Company sponsored placing
of a USD1,000,000 four year, 1.75% coupon, unsecured convertible
bond. This bond has a conversion price of 201 pence per share. The
conversion price represented a 21.8% premium to the closing price
on 18(th) November 2010.
Subsequent to a Company EGM, on 28(th) February 2011, we
completed a placing of 7,272,728 shares at a price of 220 pence per
share, resulting in net proceeds after fees and commissions of
approximately GBP15,400,000 (USD24,800,000) in new equity capital.
This capital will allow the Group to complete its land acquisition
programme stated earlier at admission to AIM, which targets a land
resource in excess of 20,000 hectares (49,420 acres) by year-end
2011.
Operations & Planting Strategy to 2012
We have three wholly-owned estates:
BJ Corporation 4,795 hectares
Incosetia 5,850 hectares (acquired 30th December 2009)
Fortune 5,000 hectares (acquired 30th December 2010)
Total 15,645 hectares (approximately 38,658 acres)
As at year-end 2010, the Group had 4,051 hectares planted and
two nurseries in operation with over 629,000 seedlings being grown
for field planting. (Seedlings are grown in a nursery for
approximately 9 months prior to field planting.) Post-acquisition
of the Fortune estate, we initiated a third nursery. As at 31(st)
March 2011, the three nurseries had over 845,000 seedlings.
"In-the-ground" plantings at BJ Corporation have been ongoing
since early 2009 and we are targeting completion of planting works
in 2011, with a total expected planted area of approximately 4,300
hectares at this estate. In addition, the first FFB harvest from
the BJ estate is scheduled for the late 2011.
Our acquisition of Incosetia (on 30(th) December 2009) provided
the Group with a large unplanted land resource of 4,650 hectares
and planted land of another 1,200 hectares, some of which is fruit
bearing. As such, we recorded our first revenue from FFB sales in
January 2010, post-closing of the acquisition. Additional planting
works are now well underway. Our acquisition of Fortune (on 30(th)
December 2010) provided the Group with an additional 5,000 hectares
of land for development, with planting works now also having
commenced on this estate. Incosetia and Fortune are expected to
have, combined, over 4,000 hectares planted by the end of 2011;
thereby achieving a gross planted area for the Group in excess of
8,000 hectares by year-end 2011.
All remaining "in-the-ground" plantings at Incosetia and Fortune
are expected to be concluded by year-end 2012; this would coincide
with a significant ramp-up in FFB production from the BJ estate. In
2012, our processing mill is scheduled to open, thereby enabling
the Group to maximise operating margins. The mill complex is now in
design and development and will have a total capacity of 120 tonnes
per hour, via two lines of 60 tonnes per hour. The first line will
open in the second half of 2012 and the second line will be turned
on, with minimal additional capital expenditures, once fruit
volumes are sufficient which is most likely in 2014. We are using
vertical sterilizer technology, with certain proprietary elements,
coupled with carbon credit eligible methane recapture for
processing of the effluent water. Through the combination of these
two technologies, we are of the opinion that the Group will have
the most advanced processing mill complex in the palm oil
plantation industry globally. Compared to the industry standard
"horizontal sterilizer" mill (which is effectively pre-WWII British
era technology), the Group's mill is expected to have a lower
all-in construction cost and have a higher oil extraction ratio
("OER").
It is important to note that the Group's estates are in close
proximity to each other, thereby simplifying operations and
management. Further, the estates are only 2.5 hours away, on a
combination of paved and unpaved roads, from the deep-water port of
Bintulu. This port is the only deep-water port in Sarawak and the
transit point for virtually all of Sarawak's CPO exports and
refining.
Closing Comments
We wish to thank all our staff, who have worked to make the
Group the success that it is today. We wish to thank our
shareholders, who share our vision of creating a best-of-breed,
sustainable palm oil company in Malaysia. We also take this
opportunity to thank our bankers at Malayan Banking Berhad for
their continued support of our operations.
The next 18 months are an exciting phase for the Group as we
continue to consolidate neighboring land parcels selectively,
complete the planting works on our existing parcels and open our
milling complex. We look forward to updating you on our process in
the months ahead.
Datuk Linggi
Non-Executive Chairman
14th April 2011
COMMUNITY OUTREACH PROGRAMME 2011
Corporate Philosophy
We are committed to improving the lives of the rural communities
that are in the general vicinity of our estates. Approximately five
to twenty kilometers from the Group's plantations, there are three
villages totalling approximately 200 people. It is important to
note that no native communities live or previously lived on the
Group's land.
Malaysia has an advanced titling regime, established by the
British prior to Malaysia's independence, which protects local and
indigenous peoples' land rights under Native Customary Rights
("NCR") zoning. Agriculturally titled land for palm oil development
cannot and does not overlap with NCR Land.
In addition, Malaysia has protected, via federal zoning, over
60% of its entire land mass as a "Forest" or "Forest Reserve"; in
Western European countries, such as the United Kingdom or France,
less than 30% of these countries' land is protected under a similar
designation. Forest and Forest Reserve Land does not overlap with
agricultural land and it is illegal to plant an agricultural crop,
such as palm oil, on Forest Land. As such, we feel it is important
to re-iterate that there is no "clearing the virgin rainforest for
palm oil" in Malaysia - this practice stopped well over 15 years
ago.
We have undertaken a variety of initiatives in our Community
Outreach Programme:
Medical services
The Group's medical specialist visits each community on a
monthly basis. Services provided include general medical treatment,
vaccinations for newborns, provision of antibiotics and emergency
medical evacuation when required. Prior to the Group's involvement,
there was no regular medical service in these communities.
Clean Water Supply
We are pleased to report that in 2010, each of the three
communities now has consistent, year-round clean water supply for
the first time in their existence. We developed a gravity-fed water
system utilizing mini-reservoirs and a piping system over 2
kilometres in length. The Group provided all equipment and
materials and our staff worked hand-in-hand with the residents to
build the water delivery system.
Employment Opportunities & Other
We employ all village residents who seek to work with the Group.
Approximately 35 residents are currently employed in a variety of
field and office roles.
In 2010, we also provided donations for the repair for a
community chapel and initiated a daily transport service so that
children have a shorter transit time to school.
Sustainable Community Development Through Agriculture
The village residents seek to plant palm oil on their own land,
as they know the Group is planning construction of its mill. This
mill will provide a ready off-take for the villagers' own FFB
production, thereby allowing them to enjoy regular cash-crop
incomes like thousands of other palm oil growing communities across
Malaysia. As such, we have provided the villages with training and
subsidized palm oil seedlings so they can begin planting their own
fields. We are preparing for a further expansion of this programme
in 2011 through a pioneering joint venture initiative.
Our staff are regularly invited to all local celebrations and
community events; some of the residents have also participated in a
video documentary which is available on
www.asianplantations.com.
We strongly believe the foundation has been laid for closer
cooperation in the years ahead. All aspects of our community
outreach have been and will be guided by our desire to improve
local lives in a sustainable and respectful manner.
Our Community Outreach Programme is also important for the Group
as it prepares for the Roundtable on Sustainable Palm Oil ("RSPO")
certification process. RSPO certification is a multi-year process
which includes many audits, including on the Group's community and
village relations.
ANNUAL FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31
DECEMBER 2010
The Directors present the report to the members together with
the audited consolidated financial statements of Asian Plantations
and its subsidiaries (collectively the "Group") for the financial
year ended 31 December 2010.
Consolidated Income Statement
For the financial year ended 31 December 2010
Note 2010 2009
USD'000 USD'000
Restated
Revenue 5 314 -
Cost of sales (270) -
Gross profit 44 -
Other income 6 71 48
Other items of expenses
Administrative expenses 7 (2,207) (1,306)
Other expenses 8 (811) (107)
Finance expenses 9 (893) (22)
Loss before taxation (3,796) (1,387)
Income tax benefit 10 185 145
Loss for the year (3,611) (1,242)
Loss attributable to :
Owners of the parent (3,611) (1,226)
Non-controlling interests - (16)
(3,611) (1,242)
Loss per share attributable to owners
of the parent (cents per share)
Basic and diluted 11 (11.6) (6.1)
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2010
2010 2009
USD'000 USD'000
Restated
Loss for the year (3,611) (1,242)
Other comprehensive income:
Foreign currency translation adjustments 1,453 (199)
Total comprehensive income for the
year (2,158) (1,441)
Total comprehensive income attributable
to:
Owners of the parent (2,158) (1,431)
Non-controlling interests - (10)
(2,158) (1,441)
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Financial Position
As at 31 December 2010
Note 2010 2009
USD'000 USD'000
Restated
Non-current assets
Property, plant and equipment 12 9,576 5,063
Biological assets 13 11,022 6,093
Land use rights 14 33,546 20,950
Goodwill on consolidation 15 7,560 4,365
Total non-current assets 61,704 36,471
Current assets
------- --------
Inventories 16 122 45
Trade and other receivables 17 193 180
Prepaid operating expenses 165 82
Cash and bank balances 18 1,247 4,174
Total current assets 1,727 4,481
Total assets 63,431 40,952
Current liabilities
------- --------
Trade and other payables 19 795 585
Other liabilities 20 253 798
Loans and borrowings 21 2,267 2,544
Total current liabilities 3,315 3,927
Non-current liabilities
Loans and borrowings 21 36,304 19,935
Deferred tax liabilities 22 5,810 3,682
Total non-current liabilities 42,114 23,617
Total liabilities 45,429 27,544
Net assets 18,002 13,408
Consolidated Statement of Financial Position
As at 31 December 2010 (cont'd)
Note 2010 2009
USD'000 USD'000
Restated
Equity attributable to owners of the
parent
Share capital 23 42,211 35,459
Other reserves 24 (18,995) (20,448)
Accumulated losses (5,214) (1,603)
Total equity 18,002 13,408
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2010
Attributable to the equity holders
of the parent
----------------------------------------------------
Share Accumulated
2010 capital Other reserves losses Total equity
USD'000 USD'000 USD'000 USD'000
(Note 23) (Note 24)
At 1 January 2010
As previously reported 35,459 (20,452) (1,748) 13,259
Prior year adjustments
(Note 32) - 4 145 149
At 1 January 2010
(restated) 35,459 (20,448) (1,603) 13,408
Loss for the year - - (3,611) (3,611)
Other comprehensive
income
Foreign currency
translation
adjustments - 1,453 - 1,453
Total comprehensive
income for the year - 1,453 (3,611) (2,158)
Issuance of ordinary
shares for cash 6,752 - - 6,752
At 31 December 2010 42,211 (18,995) (5,214) 18,002
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2010
Attributable to equity holders
of the parent
------------------------------------------
Total
share
capital
Share Other Accumu-lated and Non-controlling Total
2009 capital reserves losses reserves interests equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
(Note (Note
23) 24)
At 1 January 2009 5,849 13 (377) 5,485 497 5,982
Loss for the year
(restated) (Note
32) - - (1,226) (1,226) (16) (1,242)
Other
comprehensive
income
Foreign currency
translation
adjustments
(restated) - (205) - (205) 6 (199)
Total
comprehensive
income for the
year - (205) (1,226) (1,431) (10) (1,441)
Share issuance
expenses (160) - - (160) - (160)
Issuance of
ordinary shares
for cash 8,714 - - 8,714 - 8,714
Issuance of new
shares as
consideration
for acquisition
of a subsidiary 26,905 - - 26,905 - 26,905
Adjustment due to
pooling of
interest method (5,849) (20,256) - (26,105) - (26,105)
Acquisition of
non-controlling
interest in a
subsidiary - - - - (487) (487)
At 31 December
2009 35,459 (20,448) (1,603) 13,408 - 13,408
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Cash Flow Statement
For the financial year ended 31 December 2010
2010 2009
USD'000 USD'000
Cash flows from operating activities
Loss before taxation (3,796) (1,387)
Adjustments for:
Amortisation of land use rights 406 105
Depreciation of property, plant and equipment 43 2
Interest income (42) -
Interest expense 893 22
Operating cash flows before changes in working
capital (2,496) (1,258)
Increase in inventories (77) (13)
Decrease/(increase) in trade and other receivables 31 (69)
Decrease/(increase) in prepaid operating
expenses 148 (24)
Decrease in trade and other payables (5,302) (6,884)
Cash flows used in operations (7,696) (8,248)
Interest received 42 -
Interest paid (893) (22)
Net cash used in operating activities (8,547) (8,270)
Cash flows from investing activities
Net cash outflow arising from acquisition
of a subsidiary (Note 1) (8,084) (12,021)
Purchase of property, plant and equipment (2,630) (2,474)
Additions to biological assets (3,809) (2,009)
Acquisition of non-controlling interest
in a subsidiary - (487)
Net cash used in investing activities (14,523) (16,991)
Consolidated Cash Flow Statement
For the financial year ended 31 December 2010 (cont'd)
2010 2009
USD'000 USD'000
Cash flows from financing activities
Proceeds from issuance of ordinary shares 6,752 8,714
Share issuance expenses - (160)
Drawdown of term loans 12,569 20,581
Repayment of finance lease (103) (9)
Net cash generated from financing activities 19,218 29,126
Net (decrease)/increase in cash and cash
equivalents (3,852) 3,865
Effect of exchange rates on cash and cash
equivalents 697 235
Cash and cash equivalents, beginning balance 4,174 74
Cash and cash equivalents, ending balance
(Note 18) 1,019 4,174
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Notes to the Consolidated Financial Statements - 31 December
2010
1. General
(a) Corporate information
Asian Plantations Limited (the "Company") is a limited liability
company incorporated and domiciled in the Republic of Singapore and
listed on the Alternative Investment Market ("AIM") of the London
Stock Exchange.
The registered office of the Company is located at No. 14 Ann
Siang Road, #02-01, Singapore 069694.
The principal activity of the Company is that of investment
holding. The principal activities of the subsidiaries are as
disclosed in Note 1(b).
(b) Subsidiaries
As of 31 December 2010, the details of subsidiaries are as
follows:
Proportion of
ownership interest
---------------------
Country
Subsidiaries of incorporation Activities 2010 2009
----------------- ----------------- ----------------- ---------- ---------
% %
Asian
Plantations
(Sarawak)
Sdn. Bhd.
(formerly
known as Arus
Plantation
Sdn. Bhd.) Investment
("APS") (1) Malaysia holding 100 100
Held through
APS:
BJ Corporation
Sdn. Bhd. Oil-palm
("BJ") (1) Malaysia plantation 100 100
Jubilant
Paradise Sdn.
Bhd. ("JP") Investment
(1) Malaysia holding 100 100
Incosetia Sdn.
Bhd.
("Incosetia") Oil-palm
(1) Malaysia plantation 100 -
Fortune
Plantation
Sdn. Bhd. Oil-palm
(1) Malaysia plantation 100 -
Asian
Plantation
Milling Sdn.
Bhd. (1) Malaysia Dormant 100 -
Held through
JP:
Incosetia Sdn.
Bhd.
("Incosetia") Oil-palm
(1) Malaysia plantation - 100
(1) Audited by member firm of Ernst & Young Global in Malaysia.
1. General (cont'd)
On 31 December 2010, the Group acquired 100% equity interest in
Fortune Plantation Sdn. Bhd. ("FPSB"), a company incorporated in
Malaysia.
The fair values of the identifiable assets and liabilities of
FPSB on the date that the Group acquired 100% of FPSB were:
Recognised Carrying
on date amount before
of acquisition acquisition
USD'000 USD'000
Assets
Property, plant and equipment 1,286 1,286
Land use rights 10,702 1,584
Receivables 44 44
Cash and bank balances 116 116
12,148 3,030
Liabilities
Payables (4,736) (4,736)
Deferred tax liabilities (1,924) -
(6,660) (4,736)
Net identifiable assets/(liabilities) 5,488 (1,706)
1. General (cont'd)
The total cost of the business combination is as follows:
USD'000
Consideration paid for the 100% interest
acquired 8,200
Goodwill is computed as follows:
Consideration paid 8,200
Share of net identifiable assets acquired (5,488)
Goodwill on acquisition (Note 15) 2,712
The cash outflow on acquisition is as follows:
Purchase consideration 8,200
Cash and cash equivalents of the subsidiary
acquired (116)
Net cash outflow on acquisition 8,084
Goodwill on acquisition of USD 2,712,000 has been determined on
a provisional basis as the purchase price allocation has not been
completed by the date the financial statements was authorised for
issue. Goodwill on acquisition, the carrying amount of the
property, plant and equipment, land use rights, receivables,
payables and deferred tax liabilities will be adjusted accordingly
on a retrospective basis when the purchase price allocation is
finalised.
Transaction costs relating to the acquisition of USD 234,000
have been recognised in the "other expenses" line item in profit or
loss for the current year.
If the acquisition had occurred on 1 January 2010, the Group's
revenue and loss for the year would have been USD 314,000 and USD
4,909,000, respectively.
2. Fundamental accounting concept
As at 31 December 2010, the Group's current liabilities exceeded
its current assets by USD 1,588,000. The consolidated financial
statements have been prepared under the going concern basis as the
Directors are in the opinion that the Group and the Company is able
to raise additional equity as and when required. The Company has
issued new shares via a share placement and raised GBP 15,426,796
(equivalent to USD 24,892,000), net of commissions, on 28 February
2011 (Note 33).
3. Summary of significant accounting policies
3.1 Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") are issued by the International Accounting Standards Board
("IASB").
The consolidated financial statements have been prepared on the
historical cost basis, except as disclosed in the accounting
policies below.
The consolidated financial statements are presented in United
States Dollars ("USD") to facilitate the comparison of financial
results with companies in the Oil-palm industry and all values are
rounded to the nearest thousand ("USD'000") except when otherwise
indicated.
3.2 Changes in accounting policies and disclosures
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the
previous financial year, except for the following new and amended
IFRS and IFRIC interpretations effective as of 1 January 2010:
IFRS 2 Share-based Payment: Group Cash-settled Share-based
Payment Transactions effective 1 January 2010
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated
and Separate Financial Statements (Amended) effective 1 July 2009,
including consequential amendments to IFRS 2, IFRS 5, IFRS 7, IAS
7, IAS 21, IAS 28, IAS 31 and IAS 39
IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items effective 1 July 2009
IFRIC 17 Distributions of Non-cash Assets to Owners effective 1
July 2009
Improvements to IFRSs (May 2008)
Improvements to IFRSs (April 2009)
3. Summary of significant accounting policies (cont'd)
3.2 Changes in accounting policies and disclosures (cont'd)
New and amended standards and interpretations (cont'd)
The adoption of the standards or interpretations is described
below:
IFRS 2 Share-based Payment (Revised)
The IASB issued an amendment to IFRS 2 that clarified the scope
and the accounting for group cash-settled share-based payment
transactions. The Group adopted this amendment as of 1 January
2010. It did not have an impact on the financial position or
performance of the Group.
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated
and Separate Financial Statements (Amended)
IFRS 3 (Revised) introduces significant changes in the
accounting for business combinations occurring after becoming
effective. Changes affect the valuation of non-controlling
interest, the accounting for transaction costs, the initial
recognition and subsequent measurement of a contingent
consideration and business combinations achieved in stages. These
changes will impact the amount of goodwill recognised, the reported
results in the period that an acquisition occurs and future
reported results.
IAS 27 (Amended) requires that a change in the ownership
interest of a subsidiary (without loss of control) is accounted for
as a transaction with owners in their capacity as owners.
Therefore, such transactions will no longer give rise to goodwill,
nor will it give rise to a gain or loss. Furthermore, the amended
standard changes the accounting for losses incurred by the
subsidiary as well as the loss of control of a subsidiary. The
changes by IFRS 3 (Revised) and IAS 27 (Amended) affect
acquisitions or loss of control of subsidiaries and transactions
with non-controlling interests after 1 January 2010.
The change in accounting policy was applied prospectively and
had no material impact on earnings per share.
IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items
The amendment clarifies that an entity is permitted to designate
a portion of the fair value changes or cash flow variability of a
financial instrument as a hedged item. This also covers the
designation of inflation as a hedged risk or portion in particular
situations. The Group has concluded that the amendment will have no
impact on the financial position or performance of the Group, as
the Group has not entered into any such hedges.
IFRIC 17 Distribution of Non-cash Assets to Owners
This interpretation provides guidance on accounting for
arrangements whereby an entity distributes non-cash assets to
shareholders either as a distribution of reserves or as dividends.
The interpretation has no effect on either, the financial position
nor performance of the Group.
3. Summary of significant accounting policies (cont'd)
3.2 Changes in accounting policies and disclosures (cont'd)
New and amended standards and interpretations (cont'd)
Improvements to IFRSs
In May 2008 and April 2009, the IASB issued omnibus of
amendments to its standards, primarily with a view to removing
inconsistencies and clarifying wording. There are separate
transitional provisions for each standard.
The adoption of the following amendments resulted in changes to
accounting policies but did not have any impact on the financial
position or performance of the Group.
Issued in May 2008
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations: clarifies that when a subsidiary is classified as held
for sale, all its assets and liabilities are classified as held for
sale, even when the entity remains a non-controlling interest after
the sale transaction. The amendment is applied prospectively and
has no impact on the financial position nor financial performance
of the Group.
Issued in April 2009
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations: clarifies that the disclosures required in respect of
non-current assets and disposal groups classified as held for sale
or discontinued operations are only those set out in IFRS 5. The
disclosure requirements of other IFRSs only apply if specifically
required for such non-current assets or discontinued operations. As
a result of this amendment, the Group amended its disclosures in
Note 8 Segment information.
IFRS 8 Operating Segments: clarifies that segment assets and
liabilities need only be reported when those assets and liabilities
are included in measures that are used by the chief operating
decision maker. As the Group's chief operating decision maker does
review segment assets and liabilities, the Group has continued to
disclose this information in Note 30.
IAS 7 Statement of Cash Flows: States that only expenditure that
results in recognising an asset can be classified as a cash flow
from investing activities. This amendment will impact amongst
others, the presentation in the statement of cash flows of the
contingent consideration on the business combination completed in
2010 upon cash settlement.
IAS 36 Impairment of Assets: The amendment clarifies that the
largest unit permitted for allocating goodwill, acquired in a
business combination, is the operating segment as defined in IFRS 8
before aggregation for reporting purposes. The amendment has no
impact on the Group as the annual impairment test is performed
before aggregation.
3. Summary of significant accounting policies (cont'd)
3.2 Changes in accounting policies and disclosures (cont'd)
New and amended standards and interpretations (cont'd)
Other amendments resulting from Improvements to IFRSs to the
following standards did not have any impact on the accounting
policies, financial position or performance of the Group:
Issued in April 2009
IFRS 2 Share-based Payment
IAS 1 Presentation of Financial Statements
IAS 17 Leases
IAS 34 Interim Financial Reporting
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement
IFRIC 9 Reassessment of Embedded Derivatives
IFRIC 16 Hedge of a Net Investment in a Foreign Operation
3.3 Standards issued but not yet effective
Standards issued but not yet effective up to the date of
issuance of the Group's financial statements are listed below. This
listing is of standards and interpretations issued, which the Group
reasonably expects to be applicable at a future date. The Group
intends to adopt those standards when they become effective.
IAS 24 Related Party Disclosures (Amendment)
The amended standard is effective for annual periods beginning
on or after 1 January 2011. It clarified the definition of a
related party to simplify the identification of such relationships
and to eliminate inconsistencies in its application. The revised
standard introduces a partial exemption of disclosure requirements
for government related entities. The Group does not expect any
impact on its financial position or performance. Early adoption is
permitted for either the partial exemption for government-related
entities or for the entire standard.
IAS 32 Financial Instruments: Presentation - Classification of
Rights Issues (Amendment)
The amendment to IAS 32 is effective for annual periods
beginning on or after 1 February 2010 and amended the definition of
a financial liability in order to classify rights issues (and
certain options or warrants) as equity instruments in cases where
such rights are given pro rata to all of the existing owners of the
same class of an entity's non-derivative equity instruments, or to
acquire a fixed number of the entity's own equity instruments for a
fixed amount in any currency. This amendment will have no impact on
the Group after initial application.
3. Summary of significant accounting policies (cont'd)
3.3 Standards issued but not yet effective (cont'd)
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASBs work on
the replacement of IAS 39 and applies to classification and
measurement of financial assets as defined in IAS 39. The standard
is effective for annual periods beginning on or after 1 January
2013. In subsequent phases, the IASB will address classification
and measurement of financial liabilities, hedge accounting and
derecognition. The completion of this project is expected in early
2011. The adoption of the first phase of IFRS 9 will have an effect
on the classification and measurement of the Group's financial
assets. The Group will quantify the effect in conjunction with the
other phases, when issued, to present a comprehensive picture.
IFRIC 14 Prepayments of a minimum funding requirement
(Amendment)
The amendment to IFRIC 14 is effective for annual periods
beginning on or after 1 January 2011 with retrospective
application. The amendment provides guidance on assessing the
recoverable amount of a net pension asset. The amendment permits an
entity to treat the prepayment of a minimum funding requirement as
an asset. The amendment is deemed to have no impact on the
financial statements of the Group.
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
IFRIC 19 is effective for annual periods beginning on or after 1
July 2010. The interpretation clarifies that equity instruments
issued to a creditor to extinguish a financial liability qualify as
consideration paid. The equity instruments issued are measured at
their fair value. In case that this cannot be reliably measured,
the instruments are measured at the fair value of the liability
extinguished. Any gain or loss is recognised immediately in profit
or loss. The adoption of this interpretation will have no effect on
the financial statements of the Group.
Improvements to IFRSs (issued in May 2010)
The IASB issued Improvements to IFRSs, an omnibus of amendments
to its IFRS standards. The amendments have not been adopted as they
become effective for annual periods on or after either 1 July 2010
or 1 January 2011. The amendments listed below, are considered to
have a reasonable possible impact on the Group:
IFRS 3 Business Combinations
IFRS 7 Financial Instruments: Disclosures
IAS 1 Presentation of Financial Statements
IAS 27 Consolidated and Separate Financial Statements
IFRIC 13 Customer Loyalty Programmes
The Group, however, expects no impact from the adoption of the
amendments on its financial position or performance.
3. Summary of significant accounting policies (cont'd)
3.3 Standards issued but not yet effective (cont'd)
IFRS 7 Financial Instruments: Disclosures - Transfers of
Financial Assets (Amendments)
The amendments to IFRS 7 are effective for annual periods
beginning on or after 1 July 2011. The amendments introduce
disclosure requirements for all transferred assets, existing at the
reporting date, irrespective of when the related transfer
transaction occurred. These additional disclosure requirements are
to enable users of financial statements to evaluate the risk
exposures relating to transfers transactions of financial assets
(for example, securitisations), including understanding the
possible effects of any risks that may remain with the entity that
transferred the assets. The amendments also require additional
disclosures if a disproportionate amount of transfer transactions
are undertaken around the end of a reporting period. The amendments
are deemed to have no impact on the financial statements of the
Group.
IAS 12 Income Taxes: Deferred Tax - Recovery of Underlying
Assets (Amendments)
The amendments to IAS 12 are effective for annual periods
beginning on or after 1 January 2012. The amendments introduce a
limited exception to the principle in IAS 12 Income Taxes that the
measurement of deferred tax reflects the expected manner in which
the entity intends to recover or settle the carrying amount of the
underlying asset or liability. The amendments applies to deferred
tax liabilities and assets arising from investment property
measured using the fair value model in IAS 40, including investment
property measured at fair value in a business combination and
subsequently measured using the fair value model. For the purposes
of measuring deferred tax, the amendments introduce a rebuttable
presumption that the carrying amount of such an asset will be
recovered entirely through sale. The presumption can be rebutted if
the investment property is depreciable and is held within a
business model whose objective is to consume substantially all of
the economic benefits over time, rather than through sale. The
amendments are deemed to have no impact on the financial statements
of the Group.
3. Summary of significant accounting policies (cont'd)
3.4 Basis of consolidation
Basis of consolidation from 1 January 2010
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2010.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date when such control
ceases. The financial statements of the subsidiaries are prepared
for the same reporting period as the Company, using consistent
accounting policies. All intra-group balances, transactions,
unrealised gains and losses resulting from intra-group transactions
and dividends are eliminated in full.
Losses within a subsidiary are attributed to the non-controlling
interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it:
-- Derecognises the assets (including goodwill) and liabilities
of the subsidiary
-- Derecognises the carrying amount of any non-controlling
interest
-- Derecognises the cumulative translation differences, recorded
in equity
-- Recognises the fair value of the consideration received
-- Recognises the fair value of any investment retained
-- Recognises any surplus or deficit in profit or loss
-- Reclassifies the parent's share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate.
Basis of consolidation prior to 1 January 2010
Certain of the above-mentioned requirements were applied on a
prospective basis. The following differences, however, are carried
forward in certain instances from the previous basis of
consolidation:
-- Acquisitions of non-controlling interests, prior to 1 January
2010, were accounted for using the parent entity extension method,
whereby, the difference between the consideration and the book
value of the share of the net assets acquired were recognised in
goodwill.
-- Losses incurred by the Group were attributed to the
non-controlling interest ("NCI") until the balance was reduced to
nil. Any further excess losses were attributed to the parent,
unless the non-controlling interest had a binding obligation to
cover these. Losses prior to 1 January 2010 were not reallocated
between NCI and the parent shareholders.
-- Upon loss of control, the Group accounted for the investment
retained at its proportionate share of net asset value at the date
control was lost. The carrying value of such investments at 1
January 2010 will not be restated.
3. Summary of significant accounting policies (cont'd)
3.4 Basis of consolidation (cont'd)
Business combinations and goodwill
Business combinations from 1 January 2010
Other than business combinations involving entities under common
control, business combinations are accounted for using the
acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition
date fair value and the amount of any non-controlling interest in
the acquiree. For each business combination, the acquirer measures
the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree's identifiable net
assets. Acquisition costs incurred are expensed and included in
other expenses.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host
contracts by the acquiree.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability, will be
recognised in accordance with IAS 39 either in profit or loss or as
a change to other comprehensive income. If the contingent
consideration is classified as equity, it should not be remeasured
until it is finally settled within equity.
The Group elects for each individual business combination,
whether non-controlling interest in the acquiree (if any) is
recognised on the acquisition date at fair value, or at the
non-controlling interest's proportionate share of the acquiree
identifiable net assets.
Any excess of the sum of the fair value of the consideration
transferred in the business combination, the amount of
non-controlling interest in the acquiree (if any), and the fair
value of the Group's previously held equity interest in the
acquiree (if any), over the net fair value of the acquiree's
identifiable assets and liabilities is recorded as goodwill. The
accounting policy for goodwill is set out in Note 3.10. In
instances where the latter amount exceeds the former, the excess is
recognised as gain on bargain purchase in profit or loss on the
acquisition date.
3. Summary of significant accounting policies (cont'd)
3.4 Basis of consolidation (cont'd)
Business combinations prior to 1 January 2010
In comparison to the above-mentioned requirements, the following
differences applied:
Business combinations were accounted for using the purchase
method. Transaction costs directly attributable to the acquisition
formed part of the acquisition costs. The non-controlling interest
(formerly known as minority interest) was measured at the
proportionate share of the acquiree's identifiable net assets.
Business combinations achieved in stages were accounted for as
separate steps. Any additional acquired share of interest did not
affect previously recognised goodwill.
When the Group acquired a business, embedded derivatives
separated from the host contract by the acquiree were not
reassessed on acquisition unless the business combination resulted
in a change in the terms of the contract that significantly
modified the cash flows that otherwise would have been required
under the contract.
Contingent consideration was recognised if, and only if, the
Group had a present obligation, the economic outflow was more
likely than not and a reliable estimate was determinable.
Subsequent adjustments to the contingent consideration were
recognised as part of goodwill.
Business combinations involving entities under common control:
Pooling of interest method
Business combinations involving entities under common control
are accounted for by applying the pooling of interest method. The
assets and liabilities of the combining entities are reflected at
their carrying amounts reported in the consolidated financial
statements of the controlling holding company. No adjustments are
made to reflect the fair values or recognise any new assets or
liabilities. No goodwill is recognised as a result of the
combination. Any difference between the consideration paid and the
equity of the "acquired" entity is reflected within equity as
"merger reserve". The statement of comprehensive income reflects
the results of the combining entities for the full year,
irrespective of when the combination took place. Comparatives are
presented as if the entities had always been combined since the
date the entities had come under common control.
Transactions with non-controlling interests
Non-controlling interest represents the equity in subsidiaries
not attributable, directly or indirectly, to owners of the Company,
and are presented separately in the consolidated statement of
comprehensive income and within equity in the consolidated
statement of financial position, separately from equity
attributable to owners of the Company.
Changes in the Company owners' ownership interest in a
subsidiary that do not result in a loss of control are accounted
for as equity transactions. In such circumstances, the carrying
amounts of the controlling and non-controlling interests are
adjusted to reflect the changes in their relative interests in the
subsidiary. Any difference between the amount by which the
non-controlling interest is adjusted and the fair value of the
consideration paid or received is recognised directly in equity and
attributed to owners of the parent.
3. Summary of significant accounting policies (cont'd)
3.5 Foreign currency
Management has determined the currency of the primary economic
environment in which the Company operates i.e. functional currency,
to be in Ringgit Malaysia ("RM"). Revenues and major costs of
providing services including major operating expenses are primarily
influenced by fluctuations in RM. Each entity in the Group
determines its own functional currency and items included in the
financial statements of each entity are measured using that
functional currency.
a) Transactions and balances
Transactions in foreign currencies are measured in the
respective functional currencies of the Company and its
subsidiaries and are recorded on initial recognition in the
functional currencies at exchange rates approximating those ruling
at the transaction dates. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of
exchange ruling at the end of reporting period. Non-monetary items
that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in
a foreign currency are translated using the exchange rates at the
date when the fair value was determined.
Exchange differences arising on the settlement of monetary items
or on translating monetary items at the end of reporting period are
recognised in profit or loss except for exchange differences
arising on monetary items that form part of the Group's net
investment in foreign operations, which are recognised initially in
other comprehensive income and accumulated under foreign currency
translation reserve in equity. The foreign currency translation
reserve is reclassified from equity to profit or loss of the Group
on disposal of the foreign operation.
b) Group companies
The assets and liabilities of foreign operations are translated
into USD at the rate of exchange ruling at the end of reporting
period and their profit or loss are translated at the weighted
average exchange rates for the year. The exchange differences
arising on the translation are recognised in other comprehensive
income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
Rates used in the translation of results and financial position
of the Company and its subsidiaries from its functional currency to
its presentation currency at the end of the reporting period are as
follows:
2010 2009
RM/USD
Assets and liabilities 3.0835 3.4245
Income and expenses 3.2133 3.5233
3. Summary of significant accounting policies (cont'd)
3.5 Foreign currency (cont'd)
b) Group companies (cont'd)
In the case of a partial disposal without loss of control of a
subsidiary that includes a foreign operation, the proportionate
share of the cumulative amount of the exchange differences are
re-attributed to non-controlling interest and are not recognised in
profit or loss.
The Group has elected to recycle the accumulated exchange
differences in the separate component of other comprehensive income
that arises from the direct method of consolidation, which is the
method the Group uses to complete its consolidation.
3.6 Subsidiaries
A subsidiary is an entity over which the Group has the power to
govern the financial and operating policies so as to obtain
benefits from its activities.
3.7 Biological assets
Biological assets, which include mature and immature oil palm
plantations, are stated at fair value less estimated costs to sell.
Gains or losses arising on initial recognition of plantations at
fair value less estimated costs to sell and from the changes in
fair value less estimated costs to sell of plantations at each
reporting date are included in profit or loss for the period in
which they arise.
Oil palm trees have an average life of 28 years; with the first
three as immature and the remaining as mature. Oil palm plantation
is classified as mature when 60% of oil palm per block is bearing
fruits with an average weight of 3 kilograms or more per bunch.
Biological assets also include land preparation costs which is the
cost incurred to clear the land and to ensure that the plantations
are in a state ready for the planting of seedlings.
The fair value of the oil palm plantation is estimated by using
the discounted cash flows of the underlying biological assets. The
expected cash flows from the whole life cycle of the oil palm
plantations is determined using the market price and the estimated
yield of the agricultural produce, being fresh fruit bunches
("FFB"), net of maintenance and harvesting costs and any costs
required to bring the oil palm plantations to maturity. The
estimated yield of the oil palm plantations is affected by the age
of the oil palm trees, the location, soil type and infrastructure.
The market price of the fresh fruit bunches is largely dependent on
the prevailing market price of the processed products after
harvest, being crude palm oil and palm kernel.
Cost is taken to approximate fair value when little biological
transformation has taken place since initial cost incurrence and
the impact of the biological transformation on price is not
expected to be material. Cost includes employee benefits expenses
and depreciation of certain property, plant and equipment.
3. Summary of significant accounting policies (cont'd)
3.8 Property, plant and equipment
All items of property, plant and equipment are initially
recorded at cost. Such cost includes the cost of replacing part of
the property, plant and equipment and borrowing costs that are
directly attributable to the acquisition, construction or
production of a qualifying property, plant and equipment. The
accounting policy for borrowing costs is set out in Note 3.18. The
cost of an item of property, plant and equipment is recognised as
an asset if, and only if, it is probable that future economic
benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably.
Subsequent to initial recognition, property, plant and equipment
are measured at cost less accumulated depreciation and any
accumulated impairment losses. When significant parts of property,
plant and equipment are required to be replaced in intervals, the
Group recognises such parts as individual assets with specific
useful lives and depreciation, respectively. Likewise, when a major
inspection is performed, its cost is recognised in the carrying
amount of the property, plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair and
maintenance costs are recognised in profit or loss as incurred.
Depreciation of an asset begins when it is available for use and
is computed on a straight-line basis over the estimated useful life
of the asset at the following annual rates:
Building - 6.67% - 20%
Renovation - 20%
Infrastructure - 4%
Office equipment - 20%
Furniture and fittings - 10-20%
Plant and machinery - 20%
Motor vehicles - 20%
Computers - 20%
Depreciation of property, plant and equipment related to the
plantations are allocated proportionately based on the area of
mature and immature plantations.
Assets under construction included in property, plant and
equipment is stated at cost and not depreciated as these assets are
not yet available for use.
The carrying values of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are
reviewed at each financial year-end and adjusted prospectively, if
appropriate.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition of the
asset is included in profit or loss in the year the asset is
derecognised.
3. Summary of significant accounting policies (cont'd)
3.9 Land use rights
Land use rights are initially measured at cost. Following
initial recognition, land use rights are measured at cost less
accumulated amortisation. The land use rights are amortised on a
straight line basis over the period of 60 years.
3.10 Intangible assets - Goodwill
Goodwill is initially measured at cost. Following initial
recognition, goodwill is measured at cost less accumulated
impairment losses.
For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to
each of the Group's cash-generating units that are expected to
benefit from the synergies of the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to
those units.
The cash-generating unit to which goodwill has been allocated is
tested for impairment annually and whenever there is an indication
that the cash-generating unit may be impaired. Impairment is
determined for goodwill by assessing the recoverable amount of each
cash-generating unit (or group of cash-generating units) to which
the goodwill relates. Where the recoverable amount of the
cash-generating unit is less than the carrying amount, an
impairment loss is recognised in profit or loss. Impairment losses
recognised for goodwill are not reversed in subsequent periods.
Where goodwill forms part of a cash-generating unit and part of
the operation within that cash-generating unit is disposed of, the
goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative fair values of the
operations disposed of and the portion of the cash-generating unit
retained.
Goodwill and fair value adjustments arising on the acquisition
of foreign operations are treated as assets and liabilities of the
foreign operations and are recorded in the functional currency of
the foreign operations and translated in accordance with the
accounting policy set out in Note 3.5.
3. Summary of significant accounting policies (cont'd)
3.11 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the
Group makes an estimate of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of
those from other assets or group of assets. Where the carrying
amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows expected to be generated by the asset are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to
sell, an appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share prices for
publicly traded subsidiaries or other available fair value
indicators.
Impairment losses are recognised in profit or loss in those
expense categories consistent with the function of the impaired
asset.
For assets excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may
have decreased. If such indication exists, the Group estimates the
asset's or cash-generating unit's recoverable amount. A previously
recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is
the case, the carrying amount of the asset is increased to its
recoverable amount. That increase cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised previously. Such reversal is
recognised in profit or loss.
3.12 Financial assets
Initial recognition and measurement
Financial assets are recognised on the statement of financial
position when, and only when, the Group becomes a party to the
contractual provisions of the financial instrument. The Group
determines the classification of its financial assets at initial
recognition.
When financial assets are recognised initially, they are
measured at fair value, plus, in the case of financial assets not
at fair value through profit or loss, directly attributable
transaction costs.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the marketplace (regular way trades) are recognised on the trade
date, i.e., the date that the Group commits to purchase or sell the
asset.
3. Summary of significant accounting policies (cont'd)
3.12 Financial assets (cont'd)
Subsequent measurement
The Group has only one class of financial assets, namely loans
and receivables. The subsequent measurement of loans and
receivables is as follows:
Loans and receivables
Financial assets with fixed or determinable payments that are
not quoted in an active market are classified as loans and
receivables. Subsequent to initial recognition, loans and
receivables are measured at amortised cost using the effective
interest method ("EIR"), less impairment. Amortised cost is
calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR.
Gains and losses are recognised in profit or loss when the loans
and receivables are derecognised or impaired, and through the
amortisation process.
Derecognition
A financial asset (or, where applicable a part of a financial
asset or part of a group of similar financial assets) is
derecognised when:
-- The rights to receive cash flows from the asset have
expired
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a pass-through arrangement, and
has neither transferred nor retained substantially all of the risks
and rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group's continuing
involvement in the asset.
In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
3. Summary of significant accounting policies (cont'd)
3.13 Impairment of financial assets
The Group assesses at the end of each of reporting period
whether there is any objective evidence that a financial asset is
impaired.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first
assesses individually whether objective evidence of impairment
exists individually for financial assets that are individually
significant, or collectively for financial assets that are not
individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the asset
in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which
an impairment loss is, or continues to be recognised are not
included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on
financial assets carried at amortised cost has incurred, the amount
of the loss is measured as the difference between the asset's
carrying amount and the present value of estimated future cash
flows discounted at the financial asset's original effective
interest rate. If a loan has a variable interest rate, the discount
rate for measuring any impairment loss is the current effective
interest rate. The carrying amount of the asset is reduced through
the use of an allowance account. The impairment loss is recognised
in profit or loss.
When the asset becomes uncollectible, the carrying amount of
impaired financial assets is reduced directly or if an amount was
charged to the allowance account, the amounts charged to the
allowance account are written off against the carrying value of the
financial asset.
To determine whether there is objective evidence that an
impairment loss on financial assets has been incurred, the Group
considers factors such as the probability of insolvency or
significant financial difficulties of the debtor and default or
significant delay in payments.
If in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed to the extent that the
carrying amount of the asset does not exceed its amortised cost at
the reversal date. The amount of reversal is recognised in profit
or loss.
3. Summary of significant accounting policies (cont'd)
3.14 Inventories
Inventories are stated at the lower of cost and net realisable
value.
Inventories comprise consumable supplies, chemicals and
fertilisers. Cost is determined using the weighted average method.
The cost of the consumable supplies, chemicals and fertilisers
includes expenses incurred in bringing them into store.
Where necessary, allowance is provided for damaged, obsolete and
slow moving items to adjust the carrying value of inventories to
the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
3.15 Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand,
and short-term, highly liquid investments that are readily
convertible to known amount of cash and which are subject to an
insignificant risk of changes in value. These also include bank
overdrafts that form an integral part of the cash management.
3.16 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised on the statement of
financial position when, and only when, the Group becomes a party
to the contractual provisions of the financial instrument. The
Group determines the classification of its financial liabilities at
initial recognition.
All financial liabilities are recognised initially at fair value
and in the case of other financial liabilities, plus directly
attributable transaction costs.
Subsequent measurement
After initial recognition, financial liabilities are
subsequently measured at amortised cost using the effective
interest rate method ("EIR"). Gains and losses are recognised in
profit or loss when the liabilities are derecognised, and through
the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expired. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in
profit or loss.
3. Summary of significant accounting policies (cont'd)
3.16 Financial liabilities (cont'd)
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the assets and settle the
liabilities simultaneously.
3.17 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive), as a result of a past event, it
is probable that an outflow of economic resources will be required
to settle the obligation and the amount of the obligation can be
estimated reliably.
Provisions are reviewed at the end of each reporting period and
adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, the provision is
reversed. If the effect of time value of money is material,
provisions are discounted using a current pre tax rate that,
reflects where appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
3.18 Borrowing costs
Borrowing costs are capitalised as part of the cost of a
qualifying asset if they are directly attributable to the
acquisition, construction or production of that asset.
Capitalisation of borrowing costs commences when the activities to
prepare the asset for its intended use or sale are in progress and
the expenditures and borrowing costs are incurred. Borrowing costs
are capitalised until the assets are substantially completed for
their intended use or sale. All other borrowing costs are expensed
in the period they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing
of funds.
The Group capitalises borrowing costs for all eligible assets
where construction was commenced on or after 1 January 2009.
3.19 Share capital and share issue expenses
Proceeds from issuance of ordinary shares are recognised as
share capital in equity. Incremental costs directly attributable to
the issuance of ordinary shares are deducted against share
capital.
3. Summary of significant accounting policies (cont'd)
3.20 Employee benefits
(a) Defined contribution plans
The Group participates in the national pension schemes as
defined by the laws of the countries in which it has operations.
Such contributions to defined contribution pension schemes are
recognised as an expense in the period in which the related service
is performed.
In particular, the Singapore company in the Group makes
contribution to the Central Provident Fund scheme in Singapore, a
defined contribution scheme. Subsidiary companies in Malaysia make
contribution to the Employees Provident Fund.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised as a
liability when they accrue to the employees. The estimated
liability for leave is recognised for services rendered by
employees up to the end of the reporting period.
(c) Bonus plans
The expected cost of bonus plans is recognised as a liability
when the Group has a present legal or constructive obligation as a
result of services rendered by the employees and a reliable
estimate of the obligation can be made. Liabilities for bonus plans
are expected to be settled within 12 months of the end of the
reporting period and are measured at the amounts expected to be
paid when they are settled.
3.21 Leases
The determination of whether an arrangement is, or contains a
lease is based on the substance of the arrangement at inception
date: whether fulfillment of the arrangement is dependent on the
use of a specific asset or assets or the arrangement conveys a
right to use the asset.
For arrangements entered into prior to 1 January 2005, the date
of inception is deemed to be 1 January 2005 in accordance with the
transitional requirements of IFRIC 4.
As lessee
Finance leases, which transfer to the Group substantially all
the risks and rewards incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of
the leased asset or, if lower, at the present value of the minimum
lease payments. Any initial direct costs are also added to the
amount capitalised. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to profit or loss.
Contingent rents, if any, are charged as expenses in the periods in
which they are incurred.
3. Summary of significant accounting policies (cont'd)
3.21 Leases (cont'd)
As lessee (cont'd)
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease term, if there
is no reasonable certainty that the Group will obtain ownership by
the end of the lease term.
Operating lease payments are recognised as an expense in profit
or loss on a straight-line basis over the lease term. The aggregate
benefit of incentives provided by the lessor is recognised as a
reduction of rental expense over the lease term on a straight-line
basis.
3.22 Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured, regardless of when the payment is made. Revenue
is measured at the fair value of consideration received or
receivable, taking into account contractually defined terms of
payment and excluding discounts, rebates, and sales taxes or duty.
The Group assesses its revenue arrangements to determine if it is
acting as principal or agent. The Group has concluded that it is
acting as a principal in all of its revenue arrangements. The
following specific recognition criteria must also be met before
revenue is recognised:
Sales of goods
Revenue from sale of goods is recognised upon the transfer of
significant risk and rewards of ownership of the goods to the
customer. Revenue is not recognised to the extent where there are
significant uncertainties regarding recovery of the consideration
due, associated costs or the possible return of goods.
Interest income
Interest income is recognised using the effective interest
method.
3.23 Taxes
(a) Current income tax
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or
substantially enacted by the end of the reporting period, in the
countries where the Group operates and generates taxable
income.
Current income taxes are recognised in profit or loss except to
the extent that the tax relating to items recognised outside the
profit or loss is recognised, either in other comprehensive income
or directly in equity. Management periodically evaluates positions
taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
3. Summary of significant accounting policies (cont'd)
3.23 Taxes (cont'd)
(b) Deferred tax
Deferred tax is provided using the liability method on temporary
differences at the end of reporting period between the tax bases of
assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognised for all temporary
differences, except:
- where the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss; and
- in respect of temporary differences associated with
investments in subsidiaries, where the timing of the reversal of
the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable
future.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences and
carry forward of unused tax credits and unused tax losses can be
utilised except:
- where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
- in respect of deductible temporary differences associated with
investments in subsidiaries, deferred tax assets are recognised
only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are reassessed at the
end of each reporting period and are recognised to the extent that
it has became probable that future taxable income will allow the
deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised on the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the end of
each reporting period.
3. Summary of significant accounting policies (cont'd)
3.23 Taxes (cont'd)
(b) Deferred tax (cont'd)
Deferred tax relating to items recognised outside profit or loss
is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transaction either in
other comprehensive income or directly in equity and deferred tax
arising from a business combination is adjusted against goodwill on
acquisition.
Deferred tax assets and liabilities are offset, if a legally
enforceable right exist to set off current income tax assets
against current income tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation
authority.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date,
would be recognised subsequently if new information about facts and
circumstances changed. The adjustment would either be treated as a
reduction to goodwill (as long as it does not exceed goodwill) if
it incurred during the measurement period or in profit or loss.
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount
of sales tax except:
- where the sales tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case the sales tax is recognised as part of the cost of acquisition
of the asset or as part of the expense item as applicable; and
- receivables and payables that are stated with the amount of
sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
3.24 Segment reporting
The Group is organised and managed as one segment and the Chief
Operating Decision Makers ("CODM") reviews profit or loss of the
entity as a whole. Thus it does not present separate segmental
information.
3. Summary of significant accounting policies (cont'd)
3.25 Contingencies
A contingent liability is:
(a) a possible obligation that arises from past events and whose
existence will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly
within the control of the Group; or
(a) a present obligation that arises from past events but is not
recognised because:
(i) It is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or
(ii) The amount of the obligation cannot be measured with
sufficient reliability.
A contingent asset is a possible asset that arises from past
events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly
within the control of the Group.
Contingent liabilities and assets are not recognised on the
statement of financial position, except for contingent liabilities
assumed in a business combination that are present obligations and
which the fair values can be reliably determined.
3.26 Related parties
A party is considered to be related to the Group if:
(a) The party, directly or indirectly through one or more
intermediaries,
(i) controls, is controlled by, or is under common control with,
the Group;
(ii) has an interest in the Group that gives it significant
influence over the Group; or
(iii) has joint control over the Group;
(b) The party is an associate;
(c) The party is a jointly-controlled entity;
(d) The party is a member of the key management personnel of the
Group or its parent;
(e) The party is a close member of the family of any individual
referred to in (a) or (d);
(f) The party is an entity that is controlled, jointly
controlled or significantly influenced by or for which significant
voting power in such entity resides with, directly or indirectly,
any individual referred to in (d) or (e); or
(g) The party is a post-employment benefit plan for the benefit
of the employees of the Group, or of any entity that is a related
party of the Group.
4. Significant accounting judgements and estimates
The preparation of the consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities at the
end of the reporting date. However, uncertainty about these
assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amount of the asset
or liability affected in the future period.
4.1 Judgements made in applying accounting policies
In the process of applying the Group's accounting policies,
management has made the following judgements, apart from those
involving estimations, which has the most significant effect on the
amounts recognised in the consolidated financial statements:
(a) Determination of functional currency
The Group measures foreign currency transactions in the
respective functional currencies of the Company and its
subsidiaries. In determining the functional currencies of the
entities in the Group, judgement is required to determine the
currency that mainly influences sales prices for goods and services
and of the country whose competitive forces and regulations mainly
determines the sales prices of its goods and services. The
functional currencies of the entities in the Group, which have been
determined to be RM, are based on management's assessment of the
economic environment in which the entities operate and the
entities' process of determining sales prices.
(b) Fair value of biological assets (immature plantation)
The biological assets are stated at fair value. Management made
the judgement that cost approximates fair value of the biological
asset for immature plantation because it involved a new oil palm
plantation and that little biological transformation has taken
place since its initial cost incurrence. The carrying amount of the
immature plantation as at 31 December 2010 is USD 8,927,000 (2009:
USD 4,537,000).
4.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the end of each reporting date, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below:
(a) Biological assets (mature plantation)
The Group measured its mature plantation included in the
biological assets at fair value less estimated costs to sell, based
on a discounted cash flow model. The inputs to the cash flow model
are derived from management's assumptions of the crude palm oil
prices, fresh fruit bunches yield and oil extraction ratio based on
observable market data over the remaining useful life of the mature
plantation. The cash flow model does not include cash flows from
financing assets, taxation or re-establishing biological assets
after harvest.
4. Significant accounting judgements and estimates (cont'd)
4.2 Key sources of estimation uncertainty (cont'd)
(a) Biological assets (mature plantation) (cont'd)
The amount of changes in fair values would differ if there are
changes to the assumptions used. Any changes in fair values of
these plantations would affect the profit or loss and equity. The
carrying amount of the mature plantation as at 31 December 2010 is
USD 940,000 (2009: USD 847,000). Further details of the key
assumptions used are disclosed in Note 13.
(b) Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated on a
straight-line basis over the property, plant and equipment's
estimated economic useful lives. Management estimates the useful
lives of these property, plant and equipment to be within 5 to 25
years. These are common life expectancies applied in the oil palm
industry. Changes in the expected level of usage and technological
developments could impact the economic useful lives and the
residual values of these assets, therefore, future depreciation
charges could be revised. The carrying amount of the property,
plant and equipment as at 31 December 2010 is disclosed in Note
12.
(c) Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash
generating unit exceeds its recoverable amount, which is the higher
of its fair value less costs to sell and its value in use. The fair
value less costs to sell calculation is based on available data
from binding sales transactions in an arm's length transaction of
similar assets or observable market prices less incremental costs
for disposing the asset. The value in use calculation is based on a
discounted cash flow model. The cash flows are derived from the
budget for the 25 years and do not include restructuring activities
that the Group is not yet committed to or significant future
investments that will enhance the asset's performance of the cash
generating unit being tested. The recoverable amount is most
sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash inflows and the growth
rate used for extrapolation purposes. Further details of the key
assumptions applied in the impairment assessment of goodwill and
brands, are given in Note 15.
4. Significant accounting judgements and estimates (cont'd)
4.2 Key sources of estimation uncertainty (cont'd)
(d) Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to
the extent that it is probable that taxable profit will be
available against which the losses can be utilised. Significant
management judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon the likely
timing and level of future taxable profits together with future tax
planning strategies.
The carrying value of recognised tax losses at 31 December 2010
was USD 2.444 million (2009: USD 0.786 million).
5. Revenue
2010 2009
USD'000 USD'000
Sales of fresh fruit bunches 314 -
6. Other income
2010 2009
USD'000 USD'000
Interest income 42 -
Exchange gain 3 48
Sundry income 26 -
71 48
7. Administrative expenses
2010 2009
USD'000 USD'000
Professional fees:
- audit fee 125 138
- acquisition advisory fee 355 -
- listing related advisory fee - 460
- others 353 195
Stamp duty on agreements 200 168
Bank charges 54 119
Employee benefit expenses 603 30
Directors' fees (Note 26) 82 10
Depreciation of property, plant and
equipment 43 2
Others 392 184
2,207 1,306
7. Administrative expenses (cont'd)
Employee benefit expenses comprise:
2010 2009
USD'000 USD'000
Salaries, bonus and allowances 1,302 338
Contributions to defined contribution
plans 108 40
Social security costs 6 2
1,416 380
Less: Capitalised to biological assets
(Note 13) (813) (350)
603 30
8. Other expenses
2010 2009
USD'000 USD'000
Amortisation of land use rights (Note
14) 406 105
Stamp duties incurred related to
plantation - 2
Costs associated with the acquisition
of subsidiaries 234 -
Others 171 -
811 107
9. Finance expenses
2010 2009
USD'000 USD'000
Interest expense on loans and borrowings 893 22
10. Income tax benefit
(a) Major components ofincome tax benefit
The major components of income tax benefit for the financial
years ended 31 December are as follows:
2010 2009
USD'000 USD'000
Restated
Current income tax (10) -
Deferred tax (Note 22)
- relating to origination and
reversal of temporary differences 195 145
Income tax benefit recognised
in profit and loss 185 145
(b) Relationship between tax benefit and accounting loss
The reconciliation between income tax benefit and the product of
accounting loss multiplied by the applicable corporate tax rate for
the financial years ended 31 December is as follows:
2010 2009
USD'000 USD'000
Restated
Loss before taxation (3,796) (1,387)
Tax benefit at domestic rate applicable
to losses
in the countries where the Group
operates (838) (276)
Adjustments:
Income not subject to tax - (8)
Non-deductible expenses 653 139
Income tax benefit recognised
in profit or loss (185) (145)
For the current financial year, the corporate income tax rate
applicable to the Singapore and Malaysian companies in the Group
was 17% (2009: 17%) and 25% (2009: 25%) respectively.
The above reconciliation is prepared by aggregating separate
reconciliations for each national jurisdiction.
11. Loss per share
Basic loss per share amounts are calculated by dividing loss for
the year, net of tax, attributable to owners of the parent by the
weighted average number of ordinary shares outstanding during the
financial year.
Diluted loss per share amounts are calculated by dividing loss
for the year, net of tax, attributable to owners of the parent by
the weighted average number of ordinary shares outstanding during
the financial year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares. There is no
dilutive potential ordinary share as at year ended 2010 and
2009.
The following tables reflect the loss and share data used in the
computation of basic loss and diluted per share for the years ended
31 December:
2010 2009
USD'000 USD'000
Restated
Loss, net of tax, attributable to
owners of the parent (3,611) (1,226)
-
============= =============
No. of shares No. of shares
'000 '000
Weighted average number of ordinary
shares for basic and diluted loss
per share computation 31,084 20,019
-
============= =============
Asian Plantations Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2010
12. Property, plant and equipment
Office
equipment,
computers,
furniture
Motor and Plant and Assets under
Building vehicles fittings Renovation machinery Infrastructure construction Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January 2009 33 51 22 - 51 - 264 421
Acquisition of
subsidiaries 39 18 5 - - 154 1,800 2,016
Additions 152 69 26 - 127 - 2,250 2,624
Reclassifications 124 - - - - - (124) -
Exchange
differences 8 2 2 - 4 - 64 80
At 31 December
2009 and 1
January 2010 356 140 55 - 182 154 4,254 5,141
Acquisition of
subsidiaries 76 4 16 - 10 1,172 140 1,418
Additions 367 233 171 33 317 406 1,423 2,950
Exchange
differences 51 25 13 - 30 181 362 662
At 31 December
2010 850 402 255 33 539 1,913 6,179 10,171
12. Property, plant and equipment (cont'd)
Office
equipment,
computers,
furniture
Motor and Plant and Assets under
Building vehicles fittings Renovation machinery Infrastructure construction Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Accumulated
depreciation
At 1 January
2009 4 7 3 - 6 - - 20
Charge for the
year 12 15 6 - 22 - - 55
Exchange
differences - 1 - - 2 - - 3
-
At 31
December
2009 and 1
January
2010 16 23 9 - 30 - - 78
Acquisition
of
subsidiaries 9 2 1 - 3 117 - 132
Charge for the
year 33 58 28 1 67 168 - 355
Exchange
differences 3 10 3 - 6 8 - 30
At 31
December
2010 61 93 41 1 106 293 - 595
Net carrying
amount
At 31 December
2010 789 309 214 32 433 1,620 6,179 9,576
At 31
December
2009 340 117 46 - 152 154 4,254 5,063
12. Property, plant and equipment (cont'd)
Assets held under finance leases
During the financial year, the Group acquired property, plant
and equipment at an aggregate cost of USD 2,950,000 (2009: USD
2,624,000) of which USD 320,000 (2009: USD 150,000) were acquired
by means of finance leases arrangements. Net carrying amount of
property, plant and equipment held under finance leases
arrangements which comprise plant and machinery and motor vehicles
amounted to USD 250,000 (2009: USD 96,000) and USD 232,000 (2009:
USD 67,000) respectively.
Leased assets are pledged as security for the related finance
lease liabilities.
Assets under construction
The Group's assets under construction mainly included terraces,
roads and bridges/culverts with net carrying amount of USD
6,179,000 (2009: USD 4,254,000).
Depreciation of property, plant and equipment of the Group
capitalised to biological assets for the financial year ended 31
December 2010 amounted to USD 312,000 (2009: USD 53,000) (Note
13).
13. Biological assets
Biological assets comprise primarily development activities for
oil palm plantations and maintenance of nurseries with the
following movements in their carrying value:
2010 2009
USD'000 USD'000
At fair value
At 1 January 6,093 1,019
Additions 4,121 2,062
Acquisition of subsidiary - 2,941
Exchange differences 808 71
At 31 December 11,022 6,093
Represented by:
Mature plantation 940 847
Immature plantation 8,927 4,537
Nursery 1,155 709
Total 11,022 6,093
Mature oil palm trees produce FFBs which are used to produce
Crude Palm Oil ("CPO"). The fair values of oil palm plantations are
determined by using the discounted future cash flows of the
underlying plantations. The expected future cash flows of the oil
palm plantations are determined using the projected selling prices
of CPO in the market.
13. Biological assets (cont'd)
Significant assumptions made in determining the fair values of
the mature oil palm plantations, using a discounted cash flow
model, are as follows:
(a) no new planting or re-planting activities are assumed;
(b) oil palm trees have an average life that ranges from 28
years (2009: 28 years), with the first three years as immature and
the remaining years as mature;
(c) discount rate used for the Group's plantation operations
which is applied in the discounted future cash flows calculation is
9.6% (2009: 8.9%);
(d) FFB price is derived by applying the oil extraction rate to
the estimated CPO price of USD 741 (2009: USD 584) per metric
tonne; and
(e) yield per hectare of oil palm trees is based on the standard
yield profile of the industry.
There are no gain or loss arising from changes in fair value
less estimated costs to sell during the financial years ended 2010
and 2009.
2010 2009
Hectares Hectares
Planted area:
Mature plantation 200 200
Immature plantation 3,851 2,462
Total 4,051 2,662
Depreciation of property, plant and equipment capitalised to
biological assets for the financial year ended 31 December 2010
amounted to USD 312,000 (2009: USD 53,000) (Note 12).
Employee benefit expenses capitalised to biological assets for
the financial year ended 31 December 2010 amounted to USD 813,000
(2009: USD 350,000) (Note 7).
The plantations have not been insured against the risks of fire,
diseases and other possible risks.
The Group is exposed to a number of risks related to its
oil-palm plantations:
Regulatory and environmental risks
The Group is subject to laws and regulations in Malaysia. The
Group has established environmental policies and procedures aimed
at compliance with local environmental and other laws. Management
performs regular reviews to identify environmental risks and to
ensure that the systems in place are adequate to manage those
risks.
13. Biological assets (cont'd)
Climate and other risks
The Group's oil-palm tree plantations are exposed to the risk of
damage from climatic changes, diseases and other natural forces.
The Group has extensive processes in place aimed at monitoring and
mitigating those risks, including regular tree health inspections
and industry pest and disease surveys.
14. Land use rights
2010 2009
USD'000 USD'000
At 1 January 20,950 6,178
Arising from acquisition of subsidiary
(Note 1) 10,702 14,808
Amortisation charge for the year (406) (105)
Exchange differences 2,300 69
At 31 December 33,546 20,950
Amount to be amortised
- Not later than one year 605 379
- Later than one year but not more
than five years 2,419 1,516
- Later than five years 30,522 19,055
33,546 20,950
Land use rights represent the cost of land use rights owned by
the Group. The land use rights are transferable and have a
remaining tenure of 53 to 57 years (2009: 54 to 58 years).
Land use rights arose from the acquisition of the subsidiaries.
The subsidiaries were granted a provisional registered lease in
accordance with the provisions of the Land Code of Sarawak,
Malaysia, for the use of the agricultural land for a period of 60
years by the relevant government agency. As has been the practise
in East Malaysia to date, registered leases are able to be renewed
at expiry for a further period of 60 years with the payment of a
modest land premium per acre set annually by the State of
Sarawak.
The land use rights were pledged to secure the bank overdraft,
short term revolving credit and term loans facilities as mentioned
in Note 21.
15. Goodwill on consolidation
2010 2009
USD'000 USD'000
Restated
At 1 January 4,365 192
Arising from the acquisition of a
subsidiary 2,712 4,003
Arising from the acquisition of additional
equity
interest in a subsidiary - 168
Exchange differences 483 2
At 31 December 7,560 4,365
Goodwill has an indefinite useful life and is subject to annual
impairment testing.
(a) Impairment testing of goodwill
Goodwill arising from business combinations is allocated to the
cash-generating unit for the purpose of impairment testing. The
cash-generating unit is as follows:
2010 2009
USD'000 USD'000
Restated
Plantation Estates
Goodwill 7,560 4,365
The recoverable value of the goodwill of plantation estates as
at 31 December 2010 was determined based on value-in-use
calculations using cash flow projections, covering a period of 25
productive years of oil palms, from financial budgets approved by
management. The calculations were based on the following key
assumptions:
2010 2009
Discount rate (pre-tax) 9.6% 8.9%
Projected CPO price USD 741/tonne USD 584/tonne
(b) Key assumptions used in value-in-use calculations
The calculations of value-in-use are most sensitive to the
following assumptions:
CPO price - The CPO price is based on Peninsula Malaysia
delivered price as published by the Malaysia Palm Oil Board.
Discount rate - The discounted rate reflects the current market
assessment of the risk specific to palm oil industry. The discount
rate applied to the cash flow projection is pre-tax and derived
from the weighted average cost of equity and cost of debt,
calculated based on the subsidiaries' actual composition of the
equity and debt of the plantation estates.
Based on the above analysis, management has assessed that the
goodwill is not impaired as at 31 December 2010 and 2009.
16. Inventories
2010 2009
USD'000 USD'000
At cost:
Chemicals and fertilisers 64 20
Consumable supplies 58 25
122 45
17. Trade and other receivables
2010 2009
USD'000 USD'000
Trade receivables 48 25
Other receivables:
Deposits 72 3
Sundry receivables 73 152
Total trade and other receivables 193 180
Add: Cash and bank balances (Note 18) 1,247 4,174
Total loans and receivables 1,440 4,354
Trade receivables
Trade receivables are non-interest bearing and are generally 7
to 15 days' (2009: 7 to 15 days') terms. They are recognised at
their original invoice amounts which represent their fair values on
initial recognition.
Trade and other receivables are not denominated in the
functional currencies of the respective entities are as
follows:
2010 2009
USD'000 USD'000
Singapore Dollars ("SGD") 33 6
Sterling Pound ("GBP") - 23
Other information on financial risk of trade and other
receivables is disclosed in Note 28(a).
18. Cash and bank balances
2010 2009
USD'000 USD'000
Cash on hand and at banks 1,247 4,174
Cash at banks earn interest at floating rates based on daily
bank deposit rates.
As at 31 December 2010, the amount of undrawn borrowing
facilities that may be available in the future amounts to USD
14,489,000 (2009: USD 5,758,000).
Cash and bank balances are not denominated in the functional
currencies of the respective entities are as follows:
2010 2009
USD'000 USD'000
SGD 184 1,040
USD 1 -
GBP 5 -
For the purpose of the consolidated cash flow statement, cash
and cash equivalents comprise the following at the end of the
reporting period:
2010 2009
USD'000 USD'000
Cash on hand and at banks 1,247 4,174
Bank overdraft (Note 21) (228) -
1,019 4,174
19. Trade and other payables
2010 2009
USD'000 USD'000
Trade payables 470 239
Other payables 325 345
Amount due to a Director of a subsidiary - 1
Total trade and other payables 795 585
Add:
- Other liabilities (Note 20) 253 798
- Loans and borrowings (Note 21) 38,571 22,479
Total financial liabilities carried
at amortised cost 39,619 23,862
19. Trade and other payables (cont'd)
Trade and other payables are not denominated in the functional
currencies of the respective entities are as follows:
2010 2009
USD'000 USD'000
SGD 14 1
GBP - 93
Trade payables/other payables
These amounts are non-interest bearing. Trade payables are
normally settled on 60 days (2009: 60 days) terms while other
payables have an average term of 180 days (2009: 180 days).
Amount due to a Director of a subsidiary
The amount was non-interest bearing, unsecured and repayable on
demand.
Other information on financial risks of trade and other payables
is disclosed in Note 28(b).
20. Other liabilities
2010 2009
USD'000 USD'000
Accrued operating expenses 168 695
Retention monies 69 103
Deposits received 16 -
253 798
Retention monies represent a 5% deduction of each progress
payment claimed by contractors and it shall be payable to the
contractors four months after completion of work, less any
deductions for breaches of contracts.
21. Loans and borrowings
2010 2009
USD'000 USD'000
Bank overdraft 228 -
Short term revolving credit 1,946 1,752
Term loans 35,956 20,582
38,130 22,334
Add: Obligations under finance leases
(Note 25(c)) 441 145
38,571 22,479
Current
Bank overdraft 228 -
Short term revolving credit 1,946 1,752
Term loans 6 765
Obligations under finance leases 87 27
2,267 2,544
Non-current
Term loans 35,950 19,817
Obligations under finance leases 354 118
36,304 19,935
Total loans and borrowings 38,571 22,479
Maturity of loans and borrowings (excluding
obligations under finance leases)
Within one year 2,180 2,517
After one year but not more than five
years 4,086 13,496
More than five years 31,864 6,321
38,130 22,334
21. Loans and borrowings (cont'd)
Details of the loans and borrowings are as follows:
Bank overdraft
The bank overdraft is denominated in RM and bears interest at
base lending rate plus 1% per annum. It is repayable on demand and
is secured by over a long leasehold land of which the Group has
prepaid the rights to use the land as disclosed in Note 14.
Short term revolving credit and term loans
The short term revolving credit is denominated in RM and bears
interest at the rate of the bank's cost of fund plus 1.75% per
annum. It is repayable on demand and has a six months' rollover
period upon maturity.
The term loans are denominated in RM and bear interest ranging
from the rate of the bank's cost of fund plus 1.75% per annum to
base lending rate plus 1% per annum. They are repayable over a
range of 6 to 6.5 years.
The short term revolving credit and term loans of the
subsidiaries are secured by 1st party 1st legal charge, 1st party
2nd legal charge and 3rd party 4th legal charge over the rights to
use a long term leasehold land of which the Group has prepaid the
lease payments relating to the land as disclosed in Note 14.
Obligations under finance leases
The Group entered into finance leases agreements denominated in
RM for the purchase of certain property, plant and equipment
incidental to the ordinary course of the business. These finance
leases expire within the next 2 to 5 years. The interest rates of
these finance leases range from 4.92% to 8.37% (2009: 6.09% to
7.86%) per annum.
Future minimum lease payments under finance leases together with
the present value of the net minimum lease payments are disclosed
Note 25(c).
22. Deferred tax liabilities
Deferred tax liabilities comprise the following:
At 1 Arising from Recognised At 31
January acquisition of in profit Exchange December
Group 2010 subsidiary or loss differences 2010
USD'000 USD'000 USD'000 USD'000 USD'000
Restated
Deferred tax
liabilities
Accelerated
depreciation
for tax
purpose 44 266 672 34 1,016
Biological
assets 779 - 892 123 1,794
Revaluation of
land
use rights to
fair
value 4,751 2,281 (92) 520 7,460
5,574 2,547 1,472 677 10,270
Deferred tax assets
Unutilised tax
losses (786) (561) (970) (127) (2,444)
Unabsorbed
capital and
agricultural
allowances (1,106) (62) (697) (151) (2,016)
(1,892) (623) (1,667) (278) (4,460)
Total 3,682 1,924 (195) 399 5,810
22. Deferred tax liabilities (cont'd)
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current income tax assets
against current income tax liabilities and when the deferred taxes
relate to the same taxation authority. The following amounts,
determined after appropriate offsetting, were shown in the
statement of financial position.
2010 2009
USD'000 USD'000
Deferred tax assets - -
Deferred tax liabilities 5,810 3,682
The availability of the unutilised tax losses and unabsorbed
capital and agricultural allowances for offsetting against future
taxable profits of the subsidiaries are subject to the provisions
of the Malaysian Income Tax Act, 1967.
23. Share capital
2010 2009
No. of shares No. of shares
'000 USD'000 '000 USD'000
Issued and fully
paid ordinary shares
At 1 January 29,577 35,459 20,260 5,849
Adjustment due
to pooling of interest
method - - (20,260) (5,849)
Addition during
the year 3,868 6,752 7,077 8,714
Issuance of new
shares as consideration
for acquisition
of a subsidiary
company - - 22,500 26,905
Share issuance
expenses - - - (160)
At 31 December 33,445 42,211 29,577 35,459
The holders of ordinary shares are entitled to receive dividends
as and when declared by the Company. Each ordinary share carries
one vote per share without restriction. The ordinary shares have no
par value.
24. Other reserves
The composition of other reserves is as follows:
2010 2009
USD'000 USD'000
Restated
Merger reserve (20,256) (20,256)
Foreign currency translation reserve 1,261 (192)
(18,995) (20,448)
Merger reserve
This represents the difference between the consideration paid
and the share capital of the "acquired" entity, APS.
Foreign currency translation reserve
The foreign currency translation reserve is used to record
exchange differences arising from the translation of the financial
statements of companies in the Group whose functional currencies
are different from that of the Group's presentation currency.
2010 2009
USD'000 USD'000
Restated
At 1 January (192) 13
Foreign currency translation adjustments 1,453 (205)
At 31 December 1,261 (192)
25. Commitments and contingencies
(a) Capital commitments
Capital commitments contracted for at the end of the reporting
period not recognised in the financial statements are as
follows:
2010 2009
USD'000 USD'000
Approved and contracted for:
- property, plant and equipment 337 608
- biological assets - 3,607
Approved and not contracted
for:
- property, plant and equipment 17,157 4,446
- biological assets 6,546 1,552
24,040 10,213
(b) Operating lease commitments
As lessee
The Group has no operating lease commitments other than the land
use rights as mentioned in Note 14.
25. Commitments and contingencies (cont'd)
(c) Finance leases
As lessee
The Group has finance leases for certain property, plant and
equipment. These leases have terms of renewal but no purchase
options and escalation clauses. Renewals are at the option of the
specific entity that holds the lease.
Future minimum lease payments under finance leases together with
the present value of the net minimum lease payments are as
follows:
2010 2009
Present value Present value
Minimum of minimum Minimum of minimum
lease lease lease lease
payments payments payments payments
USD'000 USD'000 USD'000 USD'000
Not later
than one
year 115 87 37 27
Later than
one year
but not
more than
five years 329 287 134 118
More than
five years 67 67 - -
Total minimum
lease
payments 511 441 171 145
Less: Amount
representing
finance
charges (70) - (26) -
Present value
of minimum
lease
payments 441 441 145 145
26. Related party disclosures
In addition to those related party information provided
elsewhere in the relevant notes to the consolidated financial
statements, the following are the significant transactions between
the Group and related parties (who are not members of the Group)
that took place during the financial years ended 31 December 2010
and 2009 at the terms agreed between the parties, which are
conducted at arm's length.
2010 2009
USD'000 USD'000
(a) Transactions with Directors:
- Repayment of advances from a Director
of a subsidiary - 103
(b) Transactions with related companies
- Construction of estate housing 643 -
- Expenses payable 113 -
Compensation of key management personnel
2010 2009
USD'000 USD'000
Directors' salaries 338 22
Directors' fees (Note 7) 82 10
Short term employee benefits 189 54
Contributions to defined contribution
plans 23 6
632 92
Comprise amounts paid to:
- Directors of the Company 420 32
- Other key management personnel 212 60
632 92
27. Fair value of financial instruments
(a) Fair value of financial instruments that are carried at fair
value
The Group does not have any financial instruments carried at
fair value.
(b) Fair value of financial instruments by classes that are not
carried at fair value and whose carrying amounts are reasonable
approximation of fair value
Trade and other receivables, Cash and bank balances, Trade and
other payables, Other liabilities and Loans and borrowings
(excluding obligations under finance leases).
The carrying amounts of these financial assets and liabilities
are reasonable approximation of fair values, either due to their
short-term nature or they are floating rate instruments that are
re-priced to market interest rates on or near the end of the
reporting period.
(c) Fair value of financial instruments by classes that are not
carried at fair value and whose carrying amounts are not reasonable
approximation of fair value
The fair value of financial assets and liabilities by classes
that are not carried at fair value and whose carrying amounts are
not reasonable approximation of fair value are as follows:
Carrying Amount Fair Value
2010 2009 2010 2009
USD'000 USD'000 USD'000 USD'000
Financial liabilities:
- Obligations under
finance leases 441 145 463 151
28. Financial risk management objectives and policies
The Group are exposed to financial risks arising from its
operations and the use of financial instruments. The key financial
risks include credit risk, liquidity risk and interest rate risk.
The board of Directors reviews and agrees policies and procedures
for the management of these risks. It is, and has been throughout
the current and previous financial year, that the Group's policy is
that no derivatives shall be undertaken except for the use as
hedging instruments where appropriate and cost-efficient.
The following sections provide details regarding the Group's
exposure to the above-mentioned financial risks and the objectives,
policies and processes for the management of these risks.
There has been no change to the Group's exposure to these
financial risks or the manner in which it manages and measures the
risks.
(a) Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation. The Group's exposure to credit risk arises
primarily from trade receivables.
The Group currently does not have significant exposure to credit
risk as majority of the oil palm plantation is still in development
stage. There is minimal credit risk arising from other receivables
as the amount is mainly on advance of diesel to contractors and
will be set off against services provided by those contractors (or
debtors) to the Group. Cash are placed in accounts with licensed
banks.
Exposure to credit risk
At the end of the reporting period, the Group's maximum exposure
to credit risk is represented by the carrying amount of each class
of financial assets recognised in the statement of financial
position.
Credit risk concentration profile
The Group determines concentrations of credit risk by monitoring
individual customers' outstanding balances on an ongoing basis. The
trade receivables at the end of reporting period is relating to
only one customer (2009: one customer).
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor
impaired are due from creditworthy debtors with good payment record
with the Group. Cash at banks that are neither past due nor
impaired are placed with or entered into with reputable financial
institutions or companies with high credit ratings and no history
of default.
Financial assets that are either past due or impaired
The Group does not have any financial assets that are either
past due or impaired.
28. Financial risk management objectives and policies
(cont'd)
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with financial
liabilities.
The Group's exposure to liquidity risk arise primarily from
mismatches of the maturities of financial assets and
liabilities.
To manage the liquidity risk, the Group actively monitors its
cash flows and reduces unnecessary operational expenditure and
limits capital expenditure to key assets. Sufficient banking
facilities are maintained to meet the Group's liquidity
requirements. The Group is given four years moratorium period for
its loan repayment which will only commence when the Group is able
to generate steady income from crop sale in the fifth year from
planting. Short term revolving credit was drawn for a period of six
months and can be rolled over upon maturity as it is an ongoing
working capital facility offered by the bank. In addition, the
Company will increase equity through share placement as and when
required.
Analysis of financial instruments by remaining contractual
maturities
The table below summarises the financial assets and liabilities
at the end of the reporting period based on contractual
undiscounted repayment obligations.
1 year 1 to 5 Over 5
or less years years Total
USD'000 USD'000 USD'000 USD'000
2010
Financial assets:
Trade and other receivables 193 - - 193
Cash and bank balances 1,247 - - 1,247
Total undiscounted
financial assets 1,440 - - 1,440
Financial liabilities:
Trade and other payables (795) - - (795)
Other liabilities (253) - - (253)
Loans and borrowings (2,304) (6,561) (30,291) (39,156)
Total undiscounted
financial liabilities (3,352) (6,561) (30,291) (40,204)
Total net undiscounted
financial liabilities (1,912) (6,561) (30,291) (38,764)
28. Financial risk management objectives and policies
(cont'd)
(b) Liquidity risk (cont'd)
Analysis of financial instruments by remaining contractual
maturities (cont'd)
1 year 1 to 5 Over 5
or less years years Total
Group USD'000 USD'000 USD'000 USD'000
2009
Financial assets:
Trade and other receivables 180 - - 180
Cash and bank balances 4,174 - - 4,174
Total undiscounted
financial assets 4,354 - - 4,354
Financial liabilities:
Trade and other payables (585) - - (585)
Other liabilities (798) - - (798)
Loans and borrowings (1,789) (2,287) (18,535) (22,611)
Total undiscounted
financial liabilities (3,172) (2,287) (18,535) (23,994)
Total net undiscounted
financial assets/(liabilities) 1,182 (2,287) (18,535) (19,640)
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of the Group's financial instruments will fluctuate
because of changes in market interest rates.
The Group's exposure to interest rate risk mainly arises from
its financial assets and liabilities which bear interest at
floating rates.
Borrowings with floating interest rates expose the Group to
certain elements of risk when there are unexpected adverse interest
rate movements. The Group's policy is to manage its interest rate
risk on an on-going basis, decision on whether to borrow at fixed
or floating interest rates depends on the situation and the outlook
of the financial market.
28. Financial risk management objectives and policies
(cont'd)
(c) Interest rate risk (cont'd)
Sensitivity analysis for interest rate risk
As at 31 December 2010, had the interest rates of the financial
assets and liabilities which are at floating rates been 1%
higher/lower (2009: 1%), ceteris paribus, the impact would be as
follows:
2010 2009
USD'000 USD'000
Effect on borrowing cost:
- +1% 291 223
- -1% (291) (223)
29. Capital management
The primary objective of the Group's capital management is to
ensure that it maintains healthy capital ratios in order to support
its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to
it, in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue
new shares. No changes were made in the objectives, policies or
processes during the financial years ended 31 December 2010 and
2009.
The Group monitors capital using a gearing ratio, which is loans
and borrowings divided by total equity plus loans and borrowings.
The Group's policy is to keep the gearing ratio below 75%.
2010 2009
USD'000 USD'000
Restated
Loans and borrowings (Note 21) 38,571 22,479
Total equity 18,002 13,408
Gearing ratio 68% 63%
30. Segment information
The Group is organised and managed as one segment and the CODM
reviews the profit or loss of the entity as a whole, which is the
plantation segment and in one geographical location, Malaysia.
Accordingly, no segmental information is prepared based on business
segment or on geographical distribution as it is not
meaningful.
31. Pooling of interest method of accounting
Pursuant to an agreement dated 9 November 2009, the Company
acquired the entire issued and paid-up capital of APS at par,
comprising 22,500,000 ordinary shares of RM 1 each, in exchange for
22,500,000 shares of the Company. As this arrangement constitutes a
combination of entities under common control, the pooling of
interest method of accounting was adopted in the preparation of the
consolidated financial statements of the Group. Under this method
of accounting, the results and cash flows of the Company and its
subsidiaries and their assets and liabilities are combined at the
amounts at which they were previously recorded as if they had been
part of the Group for the whole of the current and preceding
periods.
32. Prior year adjustments
Prior year adjustments comprise deferred tax liability arising
from fair value acquisition of subsidiary in prior year and
reversal of temporary difference on deferred tax. These adjustments
have been made in accordance with the provisions of IFRS 3 Business
Combinations (revised) and represent adjustments to complete the
initial accounting for the acquisition of subsidiary arising from
purchase price allocation.
The effects of these changes on accumulated losses are as
follows:
Effect on accumulated losses:
USD'000
Balance at 1 January 2009, as previously
reported (377)
Loss attributable to owners of the parent,
as previously reported (1,371)
Effect of prior year adjustments 145
--------
Loss attributable to owners of the parent,
as restated (1,226)
Balance at 31 December 2009, as restated (1,603)
Balance at 1 January 2010, as previously
reported (1,748)
Effect of prior year adjustments 145
Balance at 1 January 2010, as restated (1,603)
Loss attributable to owners of the parent (3,611)
Balance at 31 December 2010 (5,214)
32. Prior year adjustments (cont'd)
The following comparative figures in the consolidated income
statement, consolidated statement of comprehensive income and
consolidated statement of financial position have been restated for
the prior year adjustments: -
As
previously
As restated reported
USD'000 USD'000
Consolidated income
statement and consolidated
statement of comprehensive
income
For the year ended 31
December 2009
Income tax benefit 145 -
Loss for the year (1,242) (1,387)
Other comprehensive income (199) (203)
Total comprehensive income
for the year (1,441) (1,590)
Loss attributable to owners
of the parent (1,226) (1,371)
Total comprehensive income
attributable
to owners of the parent (1,431) (1,580)
============== ===========
As previously Prior year As
stated adjustments restated
USD'000 USD'000 USD'000
Consolidated statement
of
financial position
At 31 December 2009
Goodwill on
consolidation 534 3,831 4,365
Deferred tax
liabilities - (3,682) (3,682)
Other reserves (20,452) 4 (20,448)
Accumulated losses (1,748) 145 (1,603)
33. Events occurring after the reporting period
On 19 November 2010, one of the Company's shareholders agreed to
purchase a convertible unsecured bond of USD1 million which bears a
cash interest coupon of 1.75% p.a., repayable semi-annually until
the maturity date on 18 November 2014. The net proceeds from the
bond are intended to be used for general working capital purposes
augmenting the Company's existing working capital position. The
convertible bond may be converted, in whole only, into 313,383 new
ordinary shares of no par value in the Company, at any time until
the maturity date at the bondholder's election. This represents a
conversion price of 201 pence per share, at 21.8% premium to the
closing price on 18 November 2010. In the event of non-conversion,
the Company shall redeem the bond in whole at maturity date, such
that the amount paid by the Company on redemption results in the
bondholder having achieved, in respect of the bond, including
coupon payments, an internal rate of return of 10%. Funds from the
issuance of the bond were received on 6 January 2011 and therefore
are not reflected in the financial statements for the current
financial year.
On 22 February 2011, the Company has obtained the shareholders'
approval on the Company Share Option Scheme. The initial options
shall entitle the participants, on a cumulative basis, to subscribe
for up to 3,568,000 ordinary shares, representing 8.76% of the
enlarged share capital of the Company. This scheme will be adopted
in order for the Company to be able to retain qualified and
experienced key personnel and recruit new personnel with the
necessary capabilities and high performance standards, which the
Directors believe to be essential for the effectiveness and
profitability of the Company.
On 28 February 2011, the Company raised an additional
GBP16,000,001 (equivalent to USD 25,817,000) in equity through the
placement of 7,272,728 shares. Proceeds of this placing, net of
brokerage commissions, were GBP 15,426,796 (equivalent to USD
24,892,000). These additional funds enable the Group to continue
its land acquisition strategy and provide working capital for
plantation development.
34. Comparatives
The consolidated statement of financial position as at 1 January
2009 is not presented as there was no changes arising from the
prior year adjustments.
35. Authorisation of financial statements for issue
The consolidated financial statements for the financial year
ended 31 December 2010 were authorised for issue in accordance with
a resolution of the Directors on 14 April 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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