TIDMPALM
RNS Number : 5821D
Asian Plantations Limited
30 April 2013
30 April 2013
Asian Plantations Ltd
("APL" or the "Company")
Final Results for the year ended 31 December 2012
& Notice of Annual General Meeting
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 2012.
Highlights
-- Approximately 13,627 hectares of land planted as at year-end,
with a further 157 hectares being used for the mill site, seedling
nurseries, staff housing, quarry and related infrastructure
works.
-- Milling complex completed and fully operational. Significant
third party fresh fruit bunches ("FFB") contracts have been secured
for processing into crude palm oil.
-- US$2,820,000 of revenue reported (2011: US$578,000), an
increase of 388%, based on production and sale of 17,838 tonnes of
fresh fruit bunches (FFB). The Company expects to process over
200,000 tonnes of third-party and internally produced FFB in
2013.
-- Announcement of an attractively priced green-field land
acquisition to complement the Company's existing estates.
Post-Balance Sheet Events
-- Successful issuance of the second and final tranche of the
RM255,000,000 bond programme.
-- Successful issuance of a US$5,000,000 convertible bond, with
an implied conversion price of 286 pence per share, to OCBC
Bank.
Graeme Brown, APL's Joint Chief Executive Officer,
commented:
"We are pleased with the results for 2012 which culminated in
the completion of our milling facilities. As an integrated palm oil
estate, we are now looking forward to substantially increasing our
in-house production of FFB and third party processing volumes."
In addition to its final results for 2012, the Company announces
that the Annual General Meeting ("AGM") relating to its financial
year ended 31 December 2012 will be held at The American Club at 10
Claymore Hill, Singapore 229573 on 14 June 2013 at 9:30 am (local
time). The AGM notice has been published and is available for
download from the Company's website at
www.asianplantations.com.
-END-
For further information contact:
Asian Plantations Limited
Graeme Brown, Co-Founder & Joint Chief Tel: +65 6325 0970
Executive Officer
Dennis Melka, Co-Founder & Joint Chief
Executive Officer
Strand Hanson Limited
James Harris Tel: +44 (0) 20 7409
James Spinney 3494
Macquarie Capital (Europe) Limited
Steve Baldwin Tel: +44 (0) 203
Dan Iacopetti 037 2000
Panmure Gordon (UK) Limited
Tom Nicholson Tel: +65 6824 8204
Callum Stewart Tel: +44 (0) 20 7459
3600
Bankside Consultants
Simon Rothschild Tel: +44 (0) 20 7367
8871
CHAIRMAN'S STATEMENT
As per previous Annual Statements, we will update the Company's
shareholders with some macro level observations which, in our
opinion, create and validate the investment thesis for our
corporate investment activities.
SOUTHEAST ASIAN PALM OIL AS AN ESSENTIAL FOOD INGREDIENT TO THE
WORLD
Humans require edible oils and fats to survive (in particular
saturated fats). In the simplest of terms, as the world's human
population continues to rise, so does demand for edible oils; a
process further accelerated by rising income levels. This equation
has driven the global vegetable oil industry for the last four
decades, particularly as butter and animal fats were proved
insufficient to meet demand or were shunned by consumers in the
post-WWII period. In 1970, based on the USDA's annual reports
(which detail the world's nine major edible oils), there were 3.7bn
humans consuming 15.7m tonnes of vegetable oil (of which 1.9m was
palm oil, approximately 13% market share). In 2012, 7.0bn humans
consumed 150.3m tonnes of vegetable oils (of which 54.8m was palm
oil, now approximately 36% market share). This represents a
compound annual growth rate (CAGR) for the edible oil sector of
5.5% over four decades, versus a population growth CAGR of
1.5%.
Whilst palm oil's continuing growth and increase in market share
is impressive, it is important to realize the crop's critical
importance in the global export markets. Palm oil now dominates
over 60% of the world's trade in edible oil, virtually all of which
originates from Malaysia and Indonesia. These two countries are
essential in the world supply chain for edible oils and fats and
provide a reliable, naturally produced source of cost-effective
calories for billions of people annually.
Whilst critics of our industry live comfortably in their city
homes, far from the realities of the billions of working poor
seeking a better life and improved diets in the emerging markets,
we continually remind people that we are fundamentally in the
business of producing affordable food for the world in a socially
responsible and environmentally sustainable manner. Palm oil is:
(i) largely produced on land owned by small-holders (nearly 50%),
contrary to public opinion, with the remainder in corporate
ownership such as Asian Plantations' estates; (ii) not subsidized
by the government (compared with western agriculture which often
relies heavily on redistributive government policies or "mandates"
to survive), and is furthermore a significant taxpayer to the
Malaysian and Indonesian governments; (iii) non-genetically
modified (GM), as there is no GM in the palm oil industry in
contrast to western cereal crops; (iv) naturally irrigated,
compared with many forms of agriculture which deplete natural
aquifiers; (v) non-mechanized, thereby creating tremendous
employment requirements (a 10,000 ha palm oil estate will create on
average 1,500 direct full-time positions, compared with a
mechanized corn or soya farm which will employ less then 20 staff);
and (vi) environmentally sustainable in that one hectare of mature
palm can annually produce over six tonnes of oil per hectare,
compared with a half tonne of oil from competing cereal crops. Per
tonne, palm oil has the smallest environmental footprint with
respect to land, fertilizer and chemical usage, a fact conveniently
ignored by our industry's critics.
SOUTHEAST ASIAN PALM OIL IS THE GLOBAL LOW COST COMPETITOR
As mentioned above, the palm oil tree's immense productivity
gives it the lowest cost of production for all edible oil crops. 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. The cash cost of production (excluding taxes) is
approximately USD375 per tonne of crude palm oil (CPO), compared
with a current market selling price of approximately USD750 per
tonne. Whilst CPO price has been negatively impacted over the last
two years, it is important to note that even at these current
prices, palm oil remains a highly profitable agricultural crop.
IN 10 YEARS FROM NOW...
By 2021 (only nine years from now), the United Nations estimates
that the global population will rise to 7.7bn, an increase of over
700m people. Based on the historical correlation between
population, emerging market incomes and edible oils, global edible
oil production needs to rise to over 230m tonnes per annum in 2021
of which palm oil would be over 100m tonnes, and this assumes soya
oil would be over 60m tonnes. To put these figures in context, all
of Malaysia produced approximately only 18.2m tonnes of palm oil in
2012 on 5m ha of palm oil estates. Thus, in less than nine years,
the world needs the productive palm oil output of more than two
additional "Malaysias" - implying a planting requirement rate of
nearly 1m hectares per annum. Whilst it is clear that Indonesia
will cover a portion of this requirement, it can not meet this need
in its entirety.
Historically, Malaysia has planted over 100,000 ha per annum for
the last 30 years, but this is widely acknowledged to be likely to
fall to negligible levels in the next few years as Malaysian
agricultural land inventories near depletion. Indonesian planting
rates have historically been over 350,000 ha per annum for the last
decade but have recently reset to a 200,000 - 250,000 ha per annum
rate due to increased environmental protection and government
regulation. Despite the recent downward trend in CPO price, we
remain of the opinion that a long-term imbalance is building in the
global edible oil complex in favour of the producers, particularly
the low cost palm oil producers in Southeast Asia.
The human population continues to grow and palm oil is the only
crop that can satisfy our society's requirements for edible oils.
We remain confident that patient investors will be well rewarded in
our industry despite the recent down-turn in commodity prices.
Since the Company's inception, we have experienced two volatile
price cycles; we encourage investors to see through this short term
volatilty and take a medium term view on CPO price.
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 titled land available for purchase in the State of Sarawak;
yet, we estimate this purchasable supply will also be depleted by
2015, resulting in a situation similar to that of Peninsular
Malaysia and the State of Sabah. Over the last two years, we have
seen first hand a dramatic tightness in the availability, or lack
thereof, in agriculturally titled land for palm oil
development.
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 (i.e. "bankable" titles). 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 30 November 2009, we have
completed three acquisitions, taking our total land resource to
20,770 ha (51,323 acres) and exceeding our original listing target.
We continue to review select acquisition opportunities which will
complement the Company's existing estates.
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. Current all-in-cost of acquisition,
ownership and development in Sarawak, over a four year period, is
approximately USD9,500 per ha (excluding mill construction costs
and assuming a land acquisition price of USD2,500 per ha). 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 consistently valued at up to USD25,000 to USD30,000
per ha in the public equity markets; this presents a meaningful
premium when compared to valuations in other palm oil producing
countries. As such, the Directors believe that green-field land
acquisitions in Malaysia, at valuations of approximately USD2,500
per ha, are accretive in value to all shareholders of the
Company.
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 political 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 six per cent 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 Company enjoys strong relations with its
funding banks. The availability of low-cost bank finance for
plantation development in Malaysia dramatically enhances the
Company's long-term equity returns, comparing most favourably with
alternative destinations in the emerging markets suitable for the
cultivation of palm oil. Equally important, most of the largest,
best capitalized plantations companies in the world are based in
Malaysia.
FINANCIAL PERFOMANCE
For 2012, the Company reported increased revenue and
substantially reduced operating loss per share.
31.12.12 (USD) 31.12.11 (USD)
Revenue 2,820,000 578,000
Other Income 2,507,000 4,190,000
Administrative Expenses 5,139,000 12,676,000
Other Expenses 1,554,000 819,000
Finance Expenses 3,481,000 1,732,000
Loss before Taxation 7,072,000 10,833,000
Income Tax (Expense)
/ Benefit 193,000 (722,000)
Loss for the Year 6,879,000 11,555,000
Loss per share
Basic and diluted 14.8 28.2
FINANCIAL POSITION
The Company is pleased to report revenue of USD2,820,000 in
2012, an increase of 388% over the 2011 result. The Company's
balance sheet as at 31 December 2012 shows a net assets position of
USD57,030,000 (2011: USD59,122,000). The Company has gross
indebtedness of USD123,468,000 (2011: USD44,342,000); a large
portion of this increase in indebtedness was related to
construction of the Company's recently opened state-of-the-art
crushing mill complex. Cash balances were USD15,785,000 at year-end
2012. During 2013, the Company expects to process and sell over
200,000 tonnes of fresh fruit bunches (FFB) consisting of
approximately 150,000 tonnes of third party FFB and approximately
50,000 tonnes of internally produced FFB; this represents a
substantial increase over the 17,838 tonnes of FFB sold in
2012.
FINANCING ACTIVITIES
On 10 May 2012, the Company issued the Initial Tranche of notes
under a RM255,000,000 bond programme. The Initial Tranche was
composed of a RM65,000,000 (approximately USD21,200,000) ten year
maturity note (due 2022) and a RM35,000,000 (approximately
USD11,400,000) nine year maturity note (due 2021). The all-in
interest cost to the Company, including the annual bank guarantee
fee, is 6.00% and 6.10% for the nine and ten year notes,
respectively. This represents a 244 basis point ("bps") premium for
the nine year tranche over the equivalent nine year Malaysian
Government Securities (MGS), then trading at 3.56% and a 252 bps
premium over the equivalent ten year MGS trading at 3.58%.
The Second Tranche of the bond program totalling RM155,000,000
(USD49,800,000) was issued on 15 March 2013. The successful
issuance of the bond programme better matches the Company's
liabilities with its long-term asset base.
By year-end 2013, we expect the Company to have gross cash
(equity and debt) invested in excess of USD250,000,000.
OPERATIONS & PLANTING STRATEGY
We have four wholly-owned estates:
BJ Corporation 4,795 ha
Incosetia 5,839 ha (acquired 30(th) December
2009)
Fortune 5,136 ha (acquired 30(th) December
2010)
Dulit 5,000 ha (acquired 28(th) February
2012)
Total 20,770 ha (approximately 51,323
acres)
As at year-end 2012, the Company had approximately 13,627
hectares of land planted, with a further 157 hectares being used
for the mill site, seedling nurseries, staff housing, quarry and
related infrastructure works essential for plantation operations.
This compares favourably with 9,322 hectares planted as at year-end
2011. As at year-end 2012, the Company had four seedling nurseries
in operation on its estates and collectively employed over 1,200
people. Subject to the successful closing of the Grand Performance
acquisition, the Company expects to have over 18,000 hectares
planted by year-end 2013 and planting works fully completed by
year-end 2014 with an estimated 22,000 ha planted (pro forma for
the pending acquisition).
Our FFB processing mill opened in the first quarter of 2013,
thereby enabling the Company to maximise operating margins. The
mill complex has a total potential capacity of 120 tonnes per hour,
provided via two lines of 60 tonnes per hour. The first line opened
in first quarter 2013 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 methane recapture for processing of the effluent water.
Through the combination of these two technologies, we are of the
opinion that the Company has one of the most advanced processing
mill complexes in the palm oil plantation industry globally.
Compared to the industry standard "horizontal sterilizer" mill
(which is effectively pre-WWII British era technology), the
Company's mill has a lower all-in construction cost and higher oil
extraction ratio (OER).
It is important to note that the Company'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
Company 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, and we also take this
opportunity to thank our bankers at Malayan Banking Berhad for
their continued support of our operations. Founded in 2008, the
Company is now in its sixth year of heavy capital investment. We
expect this investment to yield substantial cash flows to
shareholders in the medium to long term, as our planting works are
completed and estates mature.
The remainder of 2013 will be an exciting period for the
Company, as we continue to plant out the estates and increase
volumes at our milling facility. We look forward to updating you on
our process in the months ahead.
TAN SRI Datuk Linggi
Non-Executive Chairman
30 April 2013
CORPORATE PHILOSOPHY
As a Company, we are committed to improving the lives of the
rural communities living in the general vicinity of our estates,
with approximately three villages and 200 people within 20km of the
Company's plantations. It is important to note that no native
communities live, or previously lived, on the Company's land.
Malaysia has an advanced titling regime, established by the
British government prior to Malaysia's independence, which protects
local and indigenous peoples' land rights under Native Customary
Rights (NCR) zoning. Agriculturally titled land in Malaysia
dedicated for palm oil development cannot 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 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 nearly
two decades ago.
Further to adhering fully with the agricultural regime outlined
above, we have undertaken a variety of CSR initiatives:
CLEAN WATER SUPPLY
Each of the communities now has a consistent, year-round, clean
water supply for the first time in their existence due to our
construction of clean water systems. Our gravity-fed water system
utilizes mini-reservoirs and a piping system to the villages. The
Company provides all equipment and materials to staff, who work
hand-in-hand with the residents to build and maintain the water
delivery system.
EMPLOYMENT OPPORTUNITIES & IMPROVED ACCESS
We employ all village residents who seek to work with the
Company. Approximately 83 residents are currently employed in a
variety of field and office roles.
In the first quarter of 2013, the Company also initiated
construction of its own bridge across the Tinjar River to provide
improved access between the Fortune and BJ Estates. The bridge will
also serve to: (i) provide certain isolated communities greatly
improved access to the regional town of Lapok which has government
schools and medical facilities; and, (ii) encourage palm oil
plantings by these communities as they will for the first time ever
have access to a milling facility (the Company's). The bridge will
open in the second half of 2013.
MEDICAL SERVICES
The Company'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 Company's
involvement, there was no regular medical service in these
communities.
SUSTAINABLE COMMUNITY DEVELOPMENT THROUGH AGRICULTURE
As part of Company's continued efforts to combat rural poverty
and to improve the lives of small villages in the vicinity of our
estates, the Company has developed an innovative joint-venture
model with several indigenous Kenyah villages. With local native
rights lawyers, we have assisted two Kenyah villages in forming
their first-ever palm oil co-operative, entitled Koperasi Majumung
Luyang Lemeting Baram Berhad ("Koperasi"). On 23 February 2012, the
Company signed a joint venture agreement (the "JV Agreeement") with
Koperasi to develop a palm oil estate on native owned land (the
"Koperasi Estate") which was witnessed by nearly all members of the
villages, community leaders, state officials and representatives
of
the Company.
The innovative joint venture is 60% owned by the Company and 40%
by Koperasi, which has contributed the land for development for
minimal financial consideration. As at year-end 2012, 200 hectares
have been planted. The Company believes that the Koperasi Estate is
an important development that will substantially improve the lives
of several hundred rural families and assist with the Company's
RSPO certification process. This planting is in addition to the
Company's primary and proprietary planting programme described
above.
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
Company 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 Company's
community and village relations.
ROUNDTABLE ON SUSTAINABLE PALM OIL
On 15 March 2012, the Executive Board of the Roundtable on
Sustainable Palm Oil accepted Asian Plantations Limited as an
Ordinary Member. The Company is committed to ensuring best practice
at its estate with a view towards eventually securing field level
certification of its estates.
Consolidated Income Statement
For the year ended 31 December 2012
Note 2012 2011
USD'000 USD'000
Revenue 6 2,820 578
Cost of sales 7 (2,225) (374)
Gross profit 595 204
Other operating income 8 2,507 4,190
Administrative expenses 9 (5,139) (12,676)
Other operating expenses 10 (1,554) (819)
Operating loss (3,591) (9,101)
Finance costs 11 (3,481) (1,732)
Loss before tax (7,072) (10,833)
Income tax benefit/(expense) 13 193 (722)
Loss for the year (6,879) (11,555)
Attributable to:
Owners of the Company (6,879) (11,555)
Non-controlling interests -* -
(6,879) (11,555)
Loss per share attributable to owners
of the Company (cents per share)
Basic 14 (14.8) (28.2)
Diluted 14 (14.8) (28.2)
* Amount less than USD1,000
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2012
2012 2011
USD'000 USD'000
Loss for the year (6,879) (11,555)
Other comprehensive income
Foreign currency translation adjustments 2,453 (1,978)
Total comprehensive income for the
year, net of tax (4,426) (13,533)
Attributable to:
Owners of the Company (4,426) (13,533)
Non-controlling interests -* -
(4,426) (13,533)
* Amount less than USD1,000
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Financial Position
As at 31 December 2012
Note 2012 2011
USD'000 USD'000
Assets
Non-current assets
Deferred tax assets 13 178 -
Property, plant and equipment 15 53,227 15,600
Biological assets 16 55,287 22,811
Land use rights 17 53,517 32,158
Goodwill on consolidation 18 7,619 7,335
169,828 77,904
Current assets
Inventories 19 1,724 345
Trade and other receivables 20 6,714 4,780
Income tax recoverable 99 7
Prepayments 21 2,308 1,575
Cash and short-term deposits 22 15,785 28,052
26,630 34,759
Total assets 196,458 112,663
Equity and liabilities
Equity
Issued capital 23 88,594 87,321
Accumulated losses (23,645) (16,769)
Other reserves 24 (7,916) (11,430)
Equity attributable to owners of the
Company 57,033 59,122
Non-controlling interests (3) -
Total equity 57,030 59,122
Non-current liabilities
Loans and borrowings 25 102,709 38,942
Convertible bonds 26 1,995 2,681
Deferred tax liabilities 13 6,556 6,325
111,260 47,948
Consolidated Statement of Financial Position
As at 31 December 2012 (cont'd)
Note 2012 2011
USD'000 USD'000
Current liabilities
Trade and other payables 27 6,810 1,271
Other current financial liabilities 28 2,464 1,086
Loans and borrowings 25 18,764 2,719
Derivative financial instruments 26 130 517
28,168 5,593
Total liabilities 139,428 53,541
Total equity and liabilities 196,458 112,663
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2012
Attributable to the owners
of the Company
-----------------------------------------
Share Other Accumulated Non-controlling
Capital reserves losses Total interests Total equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2012 87,321 (11,430) (16,769) 59,122 - 59,122
Loss for the year - - (6,879) (6,879) - * (6,879)
Other comprehensive income
Foreign currency translation adjustments - 2,453 - 2,453 - 2,453
Total comprehensive income for the year - 2,453 (6,879) (4,426) - * (4,426)
Issuance of ordinary shares pursuant to
share-based
payment plans 97 (67) - 30 - 30
Share-based payment transactions (Note 29) - 1,128 - 1,128 - 1,128
Issuance of ordinary shares pursuant to
conversion
of convertible bond 1,176 - - 1,176 - 1,176
Dilution of interest in a subsidiary - - 3 3 (3) -
At 31 December 2012 88,594 (7,916) (23,645) 57,033 (3) 57,030
* Amount less than USD1,000
Consolidated Statement of Changes in Equity
For the year ended 31 December 2012 (cont'd)
Attributable to the owners
of the Company
------------------------------------------
Share Other Accumulated Non-controlling
capital reserves losses Total interests Total equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2011 42,211 (18,995) (5,214) 18,002 - 18,002
Loss for the year - - (11,555) (11,555) - (11,555)
Other comprehensive income
Foreign currency translation adjustments - (1,978) - (1,978) - (1,978)
Total comprehensive income for the year - (1,978) (11,555) (13,533) - (13,533)
Issuance of ordinary shares for cash 46,252 - - 46,252 - 46,252
Share issuance expenses (1,142) - - (1,142) - (1,142)
Share-based payment transactions (Note 29) - 9,543 - 9,543 - 9,543
At 31 December 2011 87,321 (11,430) (16,769) 59,122 - 59,122
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
2012 2011
USD'000 USD'000
Operating activities
Loss before tax (7,072) (10,833)
Adjustments to reconcile loss before tax
to net cash flows:
Amortisation of land use rights 924 624
Depreciation of property, plant and equipment 251 140
Gain arising on fair value changes in biological
assets (1,989) (3,499)
Gain arising from changes in fair value
of embedded
derivative of the convertible bonds (172) (109)
Loss/(gain) on disposal of property, plant
and equipment 1 (6)
Impairment of goodwill 5 37
Interest income (280) (93)
Interest expense 3,481 1,732
Share-based payment transaction expense 1,001 9,866
Unrealised (gain)/loss on foreign exchange (159) 191
Working capital adjustments:
Increase in inventories (1,366) (223)
Increase in trade and other receivables
and prepayments (2,417) (6,030)
Increase in trade and other payables 6,822 1,314
Cash flows used in operating activities (970) (6,889)
Income taxes paid, net of refund (89) (1)
Interest received 280 93
Interest paid (3,190) (1,514)
Net cash flows used in operating activities (3,969) (8,311)
Investing activities
Purchase of property, plant and equipment (37,056) (6,423)
Proceeds from sale of property, plant and
equipment 20 18
Purchase of land use rights (21,044) (196)
Additions to biological assets (27,912) (8,297)
Acquisition of a subsidiary (Note 1(b)) (3) -
Net cash flows used in investing activities (85,995) (14,898)
Consolidated Statement of Cash Flows
For the year ended 31 December 2012 (cont'd)
2012 2011
USD'000 USD'000
Financing activities
Proceeds from exercise of share options 30 -
Proceeds from issuance of ordinary shares - 46,252
Share issuance expenses - (1,142)
Repayment of term loan (5) (5)
Proceeds from term loans 45,349 3,111
Proceeds from Bank Guaranteed Medium Term
Notes Programme 31,954 -
Short-term deposit pledged for a banking
facility and supply of goods (888) (96)
Payment of finance lease liabilities (380) (128)
Proceeds from issuance of convertible bonds - 3,100
Issuance expense on liability of convertible
bonds - (27)
Net cash flows from financing activities 76,060 51,065
Net (decrease)/increase in cash and cash
equivalents (13,904) 27,856
Net foreign exchange difference 714 (1,497)
Cash and cash equivalents at 1 January 27,378 1,019
Cash and cash equivalents at 31 December
(Note 22) 14,188 27,378
The accompanying accounting policies and explanatory notes form
an integral part of the financial statements.
1.
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 2012, the details of subsidiaries are as
follows:
Proportion
of ownership
interest
-----------------
Country
Subsidiaries of incorporation Activities 2012 2011
---------------------------------- ------------------ ------------ ------ -----
% %
Asian Plantations (Sarawak) Investment
Sdn. Bhd. ("APS") (1) Malaysia holding 100 100
Asian Plantations (Sarawak)
II Sdn. Bhd. ("APS II") Investment
(1) Malaysia holding 100 100
Asian Plantations (Sarawak)
III Sdn. Bhd. ("APS III") Investment
(1) Malaysia holding 100 100
South Asian Farms Sdn.
Bhd. ("SAF") (1) Malaysia Dormant 100 -
Held through APS:
BJ Corporation Sdn. Bhd. Oil-palm
("BJ") (1) Malaysia plantation 100 100
Incosetia Sdn. Bhd. ("Incosetia") Oil-palm
(1) Malaysia plantation 100 100
Fortune Plantation Sdn. Oil-palm
Bhd. Malaysia plantation 100 100
("Fortune") (1)
Asian Plantations Milling Oil-palm
Sdn. Bhd. ("APM") (1) Malaysia milling 100 100
Held through APS II :
Kronos Plantation Sdn. Oil-palm
Bhd. ("KP") (1) Malaysia plantation 100 100
Held through APS III
:
Jubilant Paradise Sdn. Oil-palm
Bhd. ("JP") (1) Malaysia plantation 60 100
(1) Audited by member firm of Ernst & Young Global in
Malaysia.
1. General (cont'd)
(b) Subsidiaries (cont'd)
Acquisition in 2012
On 24 September 2012, the Group acquired a new subsidiary, SAF,
which is a dormant company, and therefore does not have a material
effect on the financial results and financial position of the
Group. There are no acquisition related expenses arising from the
acquisition of this subsidiary. As SAF is a dormant company, there
is no fair value adjustment to be recognised. At the date of
acquisition of SAF, the only identifiable assets and liabilities
are payables of USD2,000. Goodwill arising on initial recognition
of USD5,000 was subsequently impaired in view of the inactivity of
this company. The purchase consideration for the acquisition of SAF
amounted to USD3,000.
Acquisitions in 2011
In the previous financial year, the Group acquired three new
subsidiaries, APS II, APS III and KP. The acquisition dates were 17
March 2011, 21 April 2011 and 25 October 2011, respectively. The
three subsidiaries are dormant companies at acquisition date and
therefore do not have a material effect on the financial results
and financial position of the Group. There are no acquisition
related expenses arising from the acquisition of these
subsidiaries. There is no fair value adjustment as these companies
are dormant. Goodwill arising on initial recognition of USD37,000
was subsequently impaired in view of the inactivity of these
subsidiaries.
(c) Dilution of interest in a subsidiary
On 11 June 2012, the Group's equity interest in JP was diluted
from 100% to 60% equity interest pursuant to a Shareholders'
Agreement with a Malaysian entity to mutually develop oil palm
plantation land. The dilution was effected via the issuance of 98
new ordinary shares of RM1 each by JP of which the Group only took
up the allotment to achieve a 60% equity interest in JP. Prior to
the allotment of new ordinary shares, the Group held 2 ordinary
shares of RM1 each in JP.
The following summarises the effect of the change in the Group's
ownership interest in JP on the equity attributable to owners of
the Company:
USD
Increase in equity attributable to owners
of the Company 3,000
=====
Decrease in equity attributable to non-controlling 3,000
=====
2. Fundamental accounting concept
The Group incurred a loss of USD6,879,000 for the financial year
ended 31 December 2012 and as at that date, the Group's current
liabilities exceeded its current assets by USD1,538,000. The
consolidated financial statements have been prepared under the
going concern basis as subsequent to year end, the Directors have
successfully refinanced loans and borrowings amounting to
USD43,229,400 (of which USD17,644,000 are due within one year)
through the issuance of the second tranche of a bank guaranteed
medium term notes programme (the "MTN Programme") in 2013, as
announced by the Company on 15 March 2013. Further details on the
MTN Programme are elaborated in Note 25.
3.1 Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB").
The consolidated financial statements have been prepared on a
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 where otherwise
indicated.
3.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2012.
Subsidiaries are consolidated from the date of acquisition,
being the date on which the Group obtains control, and continue to
be consolidated until the date on which 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.
Total comprehensive income within a subsidiary is attributed to
the non-controlling interest even if it 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 Company's share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate.
3.3 Summary of significant accounting policies
a) Business combinations and goodwill
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 Group elects
whether to measures the non-controlling interest in the acquiree at
fair value or at the proportionate share of the acquiree's
identifiable net assets. Acquisition-related costs are expensed as
incurred and included in other operating expenses.
3.3 Summary of significant accounting policies (cont'd)
a) Business combinations and goodwill (cont'd)
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
previously held equity interest is remeasured at its acquisition
date fair value and any resulting gain or loss is recognised in
profit or loss.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Contingent consideration classified as an asset or liability that
is a financial instrument and within the scope of IAS 39 Financial
Instruments: Recognition and Measurement, is measured at fair value
with changes in fair value recognised either in profit or loss or
as a change to other comprehensive income. If the contingent
consideration is not within the scope of IAS 39, it is measured in
accordance with the appropriate IFRS. Contingent consideration that
is classified as equity is not remeasured and subsequent settlement
is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifiable
assets acquired and liabilities assumed. If the fair value of the
net assets acquired is in excess of the aggregate consideration
transferred, the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
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 combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and
part of the operation within that unit is disposed of, the goodwill
associated with disposed operation is included in the carrying
amount of the operation when determining the gain or loss on
disposal. Goodwill disposed in this circumstance is measured based
on the relative values of the disposed operation 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 3.3(c).
3.3 Summary of significant accounting policies (cont'd)
a) Business combinations and goodwill (cont'd)
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.
b) 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's 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 Company.
c) 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"). 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. The Group has elected to recycle the gain or
loss that arises from the direct method of consolidation, which is
the method the Group uses to complete its consolidation.
i) Transactions and balances
Transactions in foreign currencies are initially recorded by the
Group entities at their respective functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency spot rate of
exchange at the reporting date.
3.3 Summary of significant accounting policies (cont'd)
c) Foreign currency (cont'd)
i) Transactions and balances (cont'd)
Differences arising on settlement or translation of monetary
items are recognised in profit or loss with the exception of
monetary items that are designated as part of the hedge of the
Group's net investment of a foreign operation. These are recognised
in other comprehensive income until the net investment is disposed
of, at which time, the cumulative amount is reclassified to profit
or loss. Tax charges and credits attributable to exchange
differences on those monetary items are also recorded in other
comprehensive income.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates 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 is determined. The
gain or loss arising on retranslation of non-monetary items
measured at fair value is treated in line with the recognition of
gain or loss on change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss is also recognised in
other comprehensive income or profit or loss, respectively).
ii) Group companies
On consolidation the assets and liabilities of foreign
operations are translated into USD at the rate of exchange
prevailing at the reporting date and their income statements are
translated at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on translation for
consolidation 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.
Any goodwill arising on the acquisition of foreign operation and
any fair value adjustments to the carrying amounts of assets and
liabilities arising on the acquisition are treated as assets and
liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
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.
d) Revenue recognition
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 the 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 against specific
criteria 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 specific recognition criteria described
below must also be met before revenue is recognised:
3.3 Summary of significant accounting policies (cont'd)
d) Revenue recognition (cont'd)
Sale 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, usually on delivery of goods. 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
For all financial instruments measured at amortised cost and
interest bearing financial assets, interest income is recorded
using the effective interest rate (EIR). EIR is the rate that
exactly discounts the estimated future cash payments or receipts
over the expected life of the financial instrument or a shorter
period, where appropriate, to the net carrying amount of the
financial asset or liability. Interest income is included in other
operating income in profit or loss.
e) Taxes
Current income tax
Current income tax assets and liabilities for the current period
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 substantively
enacted, at the reporting date, in the countries where the Group
operates and generates taxable income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in profit or loss.
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.
Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognised for all temporary
differences, except:
- when 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, when 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.
3.3 Summary of significant accounting policies (cont'd)
e) Taxes (cont'd)
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised,
except:
- when 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 each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are
recognised to the extent that it has became probable that future
taxable profits 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 or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
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.
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists 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, are
recognised subsequently if new information about facts and
circumstances changed. The adjustment is either treated as a
reduction to goodwill (as long as it does not exceed goodwill) if
it incurred during the measurement period or recognised in profit
or loss.
3.3 Summary of significant accounting policies (cont'd)
e) Taxes (cont'd)
Sales tax
Expenses and assets are recognised net of the amount of sales
tax, except:
- when 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
- when receivables and payables 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.
f) Property, plant and equipment
All items of property, plant and equipment are initially
recorded at cost. Subsequent to initial recognition, property,
plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses. 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 3.3(h). 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.
When significant parts of property, plant and equipment are
required to be replaced at intervals, the Group recognises such
parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major inspection is
performed, its cost is recognised in the carrying amount of the
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 - 1.67% to 20%
Renovation - 20%
Infrastructure - 4%
Office equipment, computers, furniture
and fittings - 10% to 20%
Plant and machinery - 20%
Motor vehicles - 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.
3.3 Summary of significant accounting policies (cont'd)
f) Property, plant and equipment (cont'd)
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.
An item of property, plant and equipment and any significant
part initially recognised 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 (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the year the
asset is derecognised.
The residual values, useful lives and methods of depreciation
are reviewed at each financial year end and adjusted prospectively,
if appropriate.
g) Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at inception
date. The arrangement is assessed for 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 or assets, even
if that right is not explicitly specified in an arrangement.
Group as a lessee
Finance leases that transfer substantially all the risks and
benefits incidental to ownership of the leased item to the Group,
are capitalised at the commencement 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 recognised in finance costs in
profit or loss. Contingent rents, if any, are charged as expenses
in the period in which they are incurred.
A leased asset is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset and the lease term.
Operating lease payments are recognised as an operating 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.
3.3 Summary of significant accounting policies (cont'd)
h) 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.
i) Financial instruments - initial recognition and subsequent measurement
i) Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as
financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, available-for-sale
financial assets, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Group
determines the classification of its financial assets at initial
recognition.
All financial assets are recognised initially at fair value plus
transaction costs, except in the case of financial assets recorded
at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the market place (regular way trades) are recognised on the
trade date, i.e., the date that the Group commits to purchase or
sell the asset.
The Group has only one class of financial assets, namely loans
and receivables.
Subsequent measurement
The subsequent measurement of loans and receivables is as
follows:
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial measurement, such financial assets are
subsequently measured at amortised cost using the EIR method, 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. The EIR amortisation is included in
finance income in profit or loss. The losses arising from
impairment are recognised in profit or loss in finance costs for
loans and in cost of sales or other operating expenses for
receivables.
3.3 Summary of significant accounting policies (cont'd)
i) Financial instruments - initial recognition and subsequent measurement (cont'd)
i) Financial assets (cont'd)
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, it
evaluates if and to what extent it has retained the risks and
rewards of ownership. When it 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.
All regular way purchases and sales of financial assets are
recognised or derecognised on the trade date i.e., the date that
the Group commits to purchase or sell the asset. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the period generally established
by regulation or convention in the marketplace concerned.
3.3 Summary of significant accounting policies (cont'd)
i) Financial instruments - initial recognition and subsequent measurement (cont'd)
ii) Impairment of financial assets
The Group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred 'loss
event') and that loss event has an impact on the estimated future
cash flows of the financial asset or the group of financial assets
that can be reliably estimated. Evidence of impairment may include
indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first
assesses 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 has been
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 (excluding future expected credit
losses that have not yet been incurred). The present value of the
estimated future cash flows is 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 EIR.
The carrying amount of the asset is reduced through the use of
an allowance account and the loss is recognised in profit or loss.
Interest income continues to be accrued on the reduced carrying
amount and is accrued using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as part of finance income in
profit or loss. Loans together with the associated allowance are
written off when there is no realistic prospect of future recovery
and all collateral has been realised or has been transferred to the
Group. If, in a subsequent period, the amount of the estimated
impairment loss increases or decreases because of an event
occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the
allowance account. If a future write-off is later recovered, the
recovery is credited to finance costs in profit or loss.
3.3 Summary of significant accounting policies (cont'd)
i) Financial instruments - initial recognition and subsequent measurement (cont'd)
iii) Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified
as financial liabilities at fair value through profit or loss,
other financial liabilities, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
Financial liabilities are recognised 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 financial liabilities not at fair value through
profit or loss, net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their
classification as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities are classified as held for trading if they
are acquired for the purpose of selling in the near term. This
category includes derivative financial instruments entered into by
the Group that are not designated as hedging instruments in hedge
relationships as defined by IAS 39. Separated embedded derivatives
are also classified as held for trading unless they are designated
as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised
in profit or loss.
Financial liabilities designated upon initial recognition at
fair value through profit and loss are designated at the initial
date of recognition, and only if criteria of IAS 39 are
satisfied.
Subsequent to initial recognition, financial liabilities at fair
value through profit or loss are measured at fair value. Any gains
or losses arising from changes in fair value of the financial
liabilities are recognised in profit or loss.
3.3 Summary of significant accounting policies (cont'd)
i) Financial instruments - initial recognition and subsequent measurement (cont'd)
iii) Financial liabilities (cont'd)
Subsequent measurement (cont'd)
Other financial liabilities
After initial recognition, other financial liabilities are
subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in profit or loss when the liabilities
are derecognised as well as 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. The EIR amortisation is included as finance costs
in profit or loss.
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 the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or
loss.
iv) 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.
v) Fair value of financial instruments
The fair value of financial instruments that are traded in
active markets at each reporting date is determined by reference to
quoted market prices or dealer price quotations (bid price for long
positions and ask price for short positions), without any deduction
for transaction costs.
3.3 Summary of significant accounting policies (cont'd)
i) Financial instruments - initial recognition and subsequent measurement (cont'd)
v) Fair value of financial instruments (cont'd)
For financial instruments not traded in an active market, the
fair value is determined using appropriate valuation techniques.
Such techniques may include:
- Using recent arm's length market transactions
- Reference to the current fair value of another instrument that
is substantially the same
- A discounted cash flow analysis or other valuation models.
An analysis of fair values of financial instruments and further
details as to how they are measured are provided in Note 32.
j) Inventories
Inventories are valued 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.
k) 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 estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or cash-generating
unit's ("CGU") fair value less costs to sell and its value in use.
Recoverable amount is determined for an individual asset, unless
the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU 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 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, recent market transactions are taken into account.
If no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation
multiples or other available fair value indicators.
3.3 Summary of significant accounting policies (cont'd)
k) Impairment of non-financial assets (cont'd)
The Group bases its impairment calculation on detailed budgets
and forecast calculations, which are prepared separately for each
of the Group's CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally cover a period of
five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth
year.
Impairment losses, are recognised in profit or loss in expense
categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have
decreased. If such indication exists, the Group estimates the
asset's or CGUs recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment loss was recognised. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in profit or loss.
The following asset has specific characteristics for impairment
testing:
Goodwill
Goodwill is tested for impairment annually as at 31 December and
when circumstances indicate that the carrying value may be
impaired.
Impairment is determined for goodwill by assessing the
recoverable amount of each CGU (or group of CGUs) to which the
goodwill relates. When the recoverable amount of the CGU is less
than its carrying amount, an impairment loss is recognised.
Impairment losses relating to goodwill cannot be reversed in future
periods.
l) Cash and short-term deposits
Cash and short-term deposits in the statement of financial
position comprise cash at banks and on hand, and short-term
deposits with a maturity of three months or less.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short-term deposits
as defined above, net of outstanding bank overdrafts.
m) Convertible bonds and embedded derivatives
When convertible bonds are issued, the total proceeds are
allocated to the liability component and conversion option, which
are separately presented on the statements of financial position.
The conversion option is recognised initially at its fair value and
is accounted for as a derivative liability. The difference between
the total proceeds and the conversion option is allocated to the
liability component. The liability component is subsequently
carried at amortised cost using EIR method until the liability is
extinguished on conversion or redemption of the bonds.
3.3 Summary of significant accounting policies (cont'd)
m) Convertible bonds and embedded derivatives (cont'd)
Derivative financial instruments are initially recognised at
fair value on the date on which a derivative contract is entered
into and are subsequently remeasured at fair value. Derivative
financial instruments are carried as assets when the fair value is
positive and as liabilities when the fair value is negative. Any
gain or losses arising from changes in fair value on derivative
financial instruments are taken to profit or loss for the financial
year.
n) 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 resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of obligation.
Provisions are reviewed at each reporting date 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.
o) Employee benefits
i) Defined contribution plans
The Group participates in the national pension schemes as
defined by the laws of the countries in which it has operations. 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. Such contributions to
defined contribution pension schemes are recognised as an expense
in the period in which the related service is performed.
ii) 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 each reporting date.
iii) 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 each reporting date
and are measured at the amounts expected to be paid when they are
settled.
3.3 Summary of significant accounting policies (cont'd)
p) Share-based payment
Directors, employees and consultants of the Group receive
remuneration in the form of share-based payment transactions,
whereby the directors, employees and consultants render services as
consideration for equity instruments (equity-settled
transactions).
The cost of equity-settled transactions is recognised, together
with a corresponding increase in share-based payment transaction
reserve in equity, over the period in which the performance and/or
service conditions are fulfilled. The cumulative expense recognised
for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The expense or credit in
profit or loss for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period and
is recognised, depending on type of services rendered, as part of
professional fees or employee benefits expense, and if related to
the development of biological assets, the expense are allocated
proportionately based on the area of mature and immature
plantations.
No expense is recognised for awards that do not ultimately vest,
except for equity-settled transaction for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled transaction award are
modified, the minimum expense recognised is the expense as if the
terms had not been modified, if the original terms of the award are
met. An additional expense is recognised for any modification that
increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee as measured
at the date of modification.
When an equity-settled award is cancelled, it is treated as if
it vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. This includes
any award where non-vesting conditions within the control of either
the entity or the employee are not met. However, if a new award is
substituted for the cancelled award, and designated as a
replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted earnings
per share (further details are given in Note 14).
3.3 Summary of significant accounting policies (cont'd)
q) 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 years 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.
r) 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.
s) Share capital and share issuance 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.
3.3 Summary of significant accounting policies (cont'd)
t) 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
(b) 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.
u) Related parties
A related party is defined as follows:
(a) A person or a close member of that person's family is
related to the Group and the Company if that person:
(i) has control or joint control over the Company;
(ii) has significant influence over the Company; or
(iii) is a member of the key management personnel of the company
or of a parent of the Company.
3.3 Summary of significant accounting policies (cont'd)
u) Related parties (cont'd)
(b) An entity is related to the Group and the Company if any of
the following conditions applies:
(i) The entity and the Company are members of the same group
(which means that each parent, subsidiary and fellow subsidiary is
related to the others).
(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a group of
which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the
other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit
of employees of either the Company or an entity related to the
Company. If the Company is itself such a plan, the sponsoring
employers are also related to the Company.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a) (i) has significant influence
over the entity or is a member of the key management personnel of
the entity (or of a parent of the entity).
3.4 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 in the current financial year, the
Group has adopted all the new and revised standards that are
effective for annual periods beginning as of 1 January 2012. The
adoption of these standards did not have any effect on the
financial performance or position of the Group and the Company
except for the following amendments to IFRS:
-- IFRS 7 Financial Instruments: Disclosures - Enhanced
Derecognition Disclosure Requirements
The adoption of the standards is described below:
IFRS 7 Financial Instruments: Disclosures - Enhanced
Derecognition Disclosure Requirements
The amendment requires additional disclosure about financial
assets that have been transferred but not derecognised to enable
the user of the Group's financial statements to understand the
relationship with those assets that have not been derecognised and
their associated liabilities. In addition, the amendment requires
disclosures about the entity's continuing involvement in
derecognised assets to enable the users to evaluate the nature of,
and risks associated with, such involvement. The amendment is
effective for annual periods beginning on or after 1 July 2011. The
Group does not have any assets with these characteristics so there
has been no effect on the presentation of its financial
statements.
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 period. 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:
Fair value of biological assets (nursery)
The biological assets are stated at fair value. Management made
the judgement that cost approximates fair value of the biological
asset for nursery because little biological transformation has
taken place since its initial cost incurrence. The carrying amount
of nursery as at 31 December 2012 is USD1,742,000 (2011:
USD1,053,000) as disclosed in Note 16.
4.2 Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the 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 described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
(a) Biological assets (mature and immature plantation)
As at 31 December 2012, the Group measured its mature and
immature plantation included in the biological assets at fair value
less estimated costs to sell, based on a discounted cash flow model
by engaging a professional valuer. The inputs to the cash flow
model are derived from the professional valuer'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 and immature plantation. The cash flow model
does not include cash flows from financing assets, taxation or
re-establishing biological assets after harvest.
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. The total
carrying amount of the mature and immature plantation as at 31
December 2012 was USD27,442,000 (2011: USD1,628,000) and
USD26,103,000 (2011: USD20,130,000) respectively. Further details
of the key assumptions used and the sensitivity analysis are
disclosed in Notes 16 and 33(d), respectively.
4. Significant accounting judgements and estimates (cont'd)
4.2 Estimates and assumptions (cont'd)
(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 60
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 of these
assets, therefore, future depreciation charges could be revised.
The carrying amount of the property, plant and equipment as at 31
December 2012 is disclosed in Note 15. A 5% difference in the
expected useful lives of these assets from management's estimates
would result in less than 1% (2011: less than 1%) variance in the
Group's loss for the year.
(c) Impairment of goodwill
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
value in use calculation is based on a discounted cash flow model.
The cash flows are derived from projected net cash flows over a
period of 25 productive years of oil palms from financial budgets
approved by management 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. Further details
of the key assumptions applied in the impairment assessment of
goodwill, are given in Note 18.
(d) Taxes
Uncertainties exist with respect to the interpretation of
complex tax regulations, changes in tax laws, and the amount and
timing of future taxable income. Given the wide range of
international business relationships and the long-term nature and
complexity of existing contractual agreements, differences arising
between the actual results and the assumptions made, or future
changes to such assumptions, could necessitate future adjustments
to tax income and expense already recorded. The Group establishes
provisions, based on reasonable estimates, for possible
consequences of audits by the tax authorities of the respective
counties in which it operates. The amount of such provisions is
based on various factors, such as experience of previous tax audits
and differing interpretations of tax regulations by the taxable
entity and the responsible tax authority. Such differences of
interpretation may arise on a wide variety of issues depending on
the conditions prevailing in the respective domicile of the Group
of companies.
The carrying amount of income tax recoverable at 31 December
2012 was USD99,000 (2011: USD7,000).
4. Significant accounting judgements and estimates (cont'd)
4.2 Estimates and assumptions (cont'd)
(d) Taxes (cont'd)
Deferred tax assets are recognised for all unused tax losses,
unabsorbed capital and agricultural allowances to the extent that
it is probable that taxable profit will be available against which
the losses, unabsorbed capital and agricultural allowances 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 the level of future taxable profits
together with future tax planning strategies.
Further details on taxes are disclosed in Note 13.
(e) Share-based payment
The Group measures the cost of equity-settled transactions with
directors, employees and consultants by reference to the fair value
of the equity instruments at the date at which they are granted.
Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which is
dependent on the terms and conditions of the grant. This estimate
also requires determinination the most appropriate inputs to the
valuation model including the expected life of the share option,
volatility and dividend yield and making assumptions about them.
The assumptions and models used for estimating fair value for
share-based payment transactions are disclosed in Note 29.
5. Standards issued but not yet effective
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's financial
statements are disclosed below. The Group intends to adopt these
standards, if applicable, when they become effective.
IAS 1 Presentation of Items of Other Comprehensive Income -
Amendments to IAS 1
The amendments to IAS 1 change the grouping of items presented
in other comprehensive income (OCI). Items that could be
reclassified (or 'recycled') to profit or loss at a future point in
time (for example, actuarial gains and losses on defined benefit
plans and revaluation of land and buildings) would be presented
separately from items that will never be reclassified (for example,
net gain on hedge of net investment, exchange differences on
translation of foreign operations, net movement on cash flow hedges
and net loss or gain on available-for-sale financial assets). The
amendment affects presentation only and has no impact on the
Group's financial position or performance. The amendment becomes
effective for annual periods beginning on or after 1 July 2012.
IAS 32 Offsetting Financial Assets and Financial Liabilities -
Amendments to IAS 32
These amendments clarify the meaning of "currently has a legally
enforceable right to set-off". The amendments also clarify the
application of the IAS 32 offsetting criteria to settlement systems
(such as central clearing house systems) which apply gross
settlement mechanisms that are not simultaneous. These amendments
are not expected to impact the Group's financial position or
performance and become effective for annual periods beginning on or
after 1 January 2014.
5. Standards issued but not yet effective (cont'd)
IFRS 7 Disclosures - Offsetting Financial Assets and Financial
Liabilities - Amendments to IFRS 7
These amendments require an entity to disclose information about
rights to set-off and related arrangements (e.g., collateral
agreements). The disclosures would provide users with information
that is useful in evaluating the effect of netting arrangements on
an entity's financial position. The new disclosures are required
for all recognised financial instruments that are set off in
accordance with IAS 32 Financial Instruments: Presentation. The
disclosures also apply to recognised financial instruments that are
subject to an enforceable master netting arrangement or similar
agreement, irrespective of whether they are set off in accordance
with IAS 32. These amendments will not impact the Group's financial
position or performance and become effective for annual periods
beginning on or after 1 January 2013.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9, as issued, reflects the first phase of the IASB's work
on the replacement of IAS 39 and applies to classification and
measurement of financial assets and financial liabilities as
defined in IAS 39. The standard was initially effective for annual
periods beginning on or after 1 January 2013, but Amendments to
IFRS 9 Mandatory Effective Date of IFRS 9 and Transition
Disclosures, issued in December 2011, moved the mandatory effective
date to 1 January 2015. In subsequent phases, the IASB will address
hedge accounting and impairment of financial assets. The adoption
of the first phase of IFRS 9 will have an effect on the
classification and measurement of the Group's financial assets, but
will not have an impact on classification and measurements of
financial liabilities. The Group will quantify the effect in
conjunction with the other phases, when the final standard
including all phases is issued.
IFRS 10 Consolidated Financial Statements, IAS 27 Separate
Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate
Financial Statements that addresses the accounting for consolidated
financial statements. It also addresses the issues raised in SIC-12
Consolidation - Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all
entities including special purpose entities. The changes introduced
by IFRS 10 will require management to exercise significant
judgement to determine which entities are controlled and therefore
are required to be consolidated by a parent, compared with the
requirements that were in IAS 27. Based on the preliminary analyses
performed, IFRS 10 is not expected to have any impact on the
currently held investments of the Group.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all of the disclosures that were previously in
IAS 27 related to consolidated financial statements, as well as all
of the disclosures that were previously included in IAS 31 and IAS
28. These disclosures relate to an entity's interests in
subsidiaries, joint arrangements, associates and structured
entities. A number of new disclosures are also required, but has no
impact on the Group's financial position or performance. This
standard becomes effective for annual periods beginning on or after
1 January 2013.
5. Standards issued but not yet effective (cont'd)
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how
to measure fair value under IFRS when fair value is required or
permitted. The Group is currently assessing the impact that this
standard will have on the financial position and performance, but
based on the preliminary analyses, no material impact is expected.
This standard becomes effective for annual periods beginning on or
after 1 January 2013.
Annual Improvements May 2012
These improvements will not have an impact on the Group but
include:
IAS 1 Presentation of Financial Statements
This improvement clarifies the difference between voluntary
additional comparative information and the minimum required
comparative information. Generally, the minimum required
comparative information is the previous period.
IAS 16 Property Plant and Equipment
This improvement clarifies that major spare parts and servicing
equipment that meet the definition of property, plant and equipment
are not inventory.
IAS 32 Financial Instruments, Presentation
This improvement clarifies that income taxes arising from
distributions to equity holders are accounted for in accordance
with IAS 12 Income Taxes.
IAS 34 Interim Financial Reporting
The amendment aligns the disclosure requirements for total
segment assets with total segment liabilities in interim financial
statements. This clarification also ensures that interim
disclosures are aligned with annual disclosures.
These improvements are effective for annual periods beginning on
or after 1 January 2013.
6. Revenue
2012 2011
USD'000 USD'000
Sale of fresh fruit bunches ("FFBs") 2,820 578
7. Cost of sales
2012 2011
USD'000 USD'000
FFBs harvesting 351 61
FFBs external transportation 245 17
Field upkeep and maintenance 766 165
Estate general charges 228 45
Mill overheads 92 -
Employee benefits expense (Note 12) 432 58
Depreciation of property, plant and
equipment 100 25
Rental expense 11 3
2,225 374
8. Other operating income
2012 2011
USD'000 USD'000
Interest income 280 93
Gain on disposal of property, plant
and equipment - 6
Net foreign exchange gain - 413
Sale of seedlings 66 70
Gain arising on fair value changes
in biological assets 1,989 3,499
Gain arising from changes in fair
value of
embedded derivative of the convertible
bonds 172 109
2,507 4,190
9. Administrative expenses
2012 2011
USD'000 USD'000
Professional fees:
- audit fee 129 74
- share-based payment transaction
for consultants (Note 29) - 147
- consultancy 631 31
- MTN Programme 195 -
- others 391 374
Stamp duty on agreements 2 -
Bank charges 29 59
Employee benefits expense (Note 12) 2,812 11,075
Directors' fees (Note 31) 187 172
Loss on disposal of property, plant
and equipment 1 -
Depreciation of property, plant and
equipment 151 115
Rental expense 55 49
Others 556 580
5,139 12,676
10. Other operating expenses
2012 2011
USD'000 USD'000
Amortisation of land use rights (Note
17) 924 624
Repair and maintenance 117 104
Motor vehicle running expenses 10 3
Cost of seedlings sold 54 51
Impairment of goodwill (Note 1(b)) 5 37
Net foreign exchange loss 444 -
1,554 819
11. Finance costs
2012 2011
USD'000 USD'000
Interest expense on loans and borrowings 3,115 1,476
Interest expense on convertible bonds 75 38
Accretion of interest on the convertible
bonds 291 218
3,481 1,732
12. Employee benefits expense
2012 2011
USD'000 USD'000
Included in cost of sales (Note 7):
Salaries, bonus and allowances 342 51
Contributions to defined contribution
plans 50 6
Social security costs 2 1
Share-based payment transaction
(Note 29) 38 -
432 58
Included in cost of biological assets
(Note 16):
Salaries, bonus and allowances 1,461 1,285
Contributions to defined contribution
plans 173 146
Social security costs 10 8
Share-based payment transaction
(Note 29) 150 25
1,794 1,464
Included in cost of administrative
expenses (Note 9):
Salaries, bonus and allowances 1,738 1,288
Contributions to defined contribution
plans 107 65
Social security costs 4 3
Share-based payment transaction
(Note 29) 963 9,719
2,812 11,075
Total employee benefits expense 5,038 12,597
13. Income tax (benefit)/expense
Major components of income tax (benefit)/expense
The major components of income tax (benefit)/expense for the
financial years ended 31 December are as follows:
2012 2011
USD'000 USD'000
Income tax:
- Based on current year results - 20
- Over provision in prior year (3) (10)
(3) 10
13. Income tax (benefit)/expense (cont'd)
Major components of income tax (benefit)/expense (cont'd)
2012 2011
USD'000 USD'000
Deferred tax:
- relating to origination and reversal
of temporary differences (242) 601
- Under provision in prior year 52 111
(190) 712
(193) 722
Relationship between tax (benefit)/expense and accounting
loss
The reconciliation between income tax (benefit)/expense and the
product of accounting loss multiplied by the applicable corporate
tax rate for the financial years ended 31 December is as
follows:
2012 2011
USD'000 USD'000
Accounting loss before tax (7,072) (10,833)
Tax benefit at domestic rate applicable
to losses
in the countries where the Group operates (1,461) (1,791)
Adjustments:
Income not subject to tax - (94)
Non-deductible expenses 1,219 2,506
Over provision of income tax in prior
year (3) (10)
Under provision of deferred tax in
prior year 52 111
(193) 722
For the current financial year, the corporate income tax rate
applicable to the Singapore and Malaysian companies in the Group
was 17% (2011: 17%) and 25% (2011: 25%) respectively.
The above reconciliation is prepared by aggregating separate
reconciliations for each national jurisdiction.
Included in non-deductible expenses is the tax effects of
share-based payment transaction of USD173,000 (2011:
USD1,677,000).
13. Income tax (benefit)/expense (cont'd)
Deferred tax
Deferred tax relates to the following:
Consolidated statement Consolidated income
of financial position statement
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Accelerated depreciation
for tax purposes (3,765) (2,055) 1,619 1,111
Biological assets (7,987) (4,372) 3,419 2,734
Revaluation of land
use rights to fair
value (7,245) (7,108) (137) (139)
Unutilised tax losses 4,649 2,593 (1,941) (1,100)
Unabsorbed capital
and agricultural
allowances 7,970 4,617 (3,150) (1,894)
Deferred tax (benefit)/
expense (190) 712
Net deferred tax
liabilities (6,378) (6,325)
Reflected in the
statement of financial
position as follows:
Deferred tax assets 178 -
Deferred tax liabilities (6,556) (6,325)
Deferred tax liabilities,
net (6,378) (6,325)
Reconciliation of deferred tax liabilities, net
2012 2011
USD'000 USD'000
Opening balance as of 1 January (6,325) (5,810)
Recognised in profit or loss 190 (712)
Exchange differences (243) 197
Closing balance as at 31 December (6,378) (6,325)
13. Income tax (benefit)/expense (cont'd)
Reconciliation of deferred tax liabilities, net (cont'd)
The Group offsets tax assets and liabilities if and only if it
has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by the same tax
authority.
The Group has unutilised tax losses and unabsorbed capital and
agricultural allowances totaling USD50,476,000 (2011:
USD28,800,000). 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.
14. Loss per share
Basic loss per share amounts are calculated by dividing loss for
the year, net of tax, attributable to owners of the Company 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 Company 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 2012 and
2011.
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:
2012 2011
USD'000 USD'000
Loss, net of tax, attributable to
owners of the Company (6,879) (11,555)
-
============= =============
No. of shares No. of shares
'000 '000
Weighted average number of ordinary
shares for basic and diluted loss
per share computation* 46,382 40,937
-
============= =============
* The weighted average number of ordinary shares takes into
account the weighted average effect of changes in ordinary shares
transactions during the year
The potential ordinary shares from unsecured convertible bonds
and options granted pursuant to the Company's share option scheme
have not been included in the calculation of diluted loss per share
because they are anti-dilutive.
15. 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 2011 850 402 255 33 539 1,913 6,179 10,171
Additions 139 267 92 6 1,115 3,526 2,193 7,338
Disposal - - (3) - (34) - - (37)
Reclassifications 1,378 45 4 - - 5,045 (6,414) 58
Exchange
differences (29) 7 (8) - (72) (311) (102) (515)
At 31 December
2011 and
1 January 2012 2,338 721 340 39 1,548 10,173 1,856 17,015
Additions 220 396 261 - 1,799 9,823 25,817 38,316
Disposal - (24) - - - - - (24)
Reclassifications 2,640 1 32 - (37) 1 (2,637) -
Exchange
differences 90 35 18 2 75 484 292 996
At 31 December
2012 5,288 1,129 651 41 3,385 20,481 25,328 56,303
15. 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 2011 61 93 41 1 106 293 - 595
Charge for the
year 112 128 54 8 179 352 - 833
Disposals - - (1) - (22) - - (23)
Reclassifications 3 45 4 - - 6 - 58
Exchange
differences (6) (17) (2) - (1) (22) - (48)
At 31 December
2011 and
1 January 2012 170 249 96 9 262 629 - 1,415
Charge for the
year 273 164 83 8 452 614 - 1,594
Disposals - (3) - - - - - (3)
Reclassifications 10 - - - (10) - - -
Exchange
differences 10 12 4 - 14 30 - 70
At 31 December
2012 463 422 183 17 718 1,273 - 3,076
Net carrying
amount
At 31 December
2012 4,825 707 468 24 2,667 19,208 25,328 53,227
At 31 December
2011 2,168 472 244 30 1,286 9,544 1,856 15,600
15. Property, plant and equipment (cont'd)
Capitalised borrowing costs
The Group started the construction of the vertical sterilizer
crushing mill and the mill is expected to be completed and commence
operations in early year 2013. The carrying amount of the mill at
31 December 2012 included in assets under construction was
USD21,428,000 (2011: USD605,000). The construction of this mill is
financed by a bridging loan and Bank Guaranteed Medium Term Notes
Programme. Details of these borrowings are disclosed in Note
25.
The amount of borrowing costs capitalised during the year ended
31 December 2012 was USD1,208,000 (2011: Nil). The rates used to
determine the amount of borrowing costs eligible for capitalisation
range from 1.65% per annum to 5.95% per annum ("p.a.") (2011: Nil),
depending on the source of financing.
Assets held under finance leases
During the financial year, the Group acquired property, plant
and equipment at an aggregate cost of USD38,316,000 (2011:
USD7,338,000) of which USD1,260,000 (2011: USD915,000) were
acquired by means of finance leases. Leased assets are pledged as
security for the related finance lease liabilities.
Net carrying amount of property, plant and equipment held under
finance leases arrangements which comprise plant and machinery and
motor vehicles amounted to USD969,000 (2011: USD1,063,000) and
USD457,000 (2011: USD269,000), respectively.
Assets pledged for banking facilities
A building of the Group with net carrying amount of USD318,000
(2011: USD305,000) is pledged for banking facilities as disclosed
in Note 25.
Assets under construction
The Group's assets under construction mainly included a palm oil
mill, workers quarters, terraces, roads and bridges/culverts with
total net carrying amount of USD25,328,000 (2011: USD1,856,000).
The construction of the oil palm mill as mentioned above represent
the main asset under construction as at the reporting date.
Depreciation capitalised to biological assets
Depreciation of property, plant and equipment of the Group
capitalised to biological assets for the financial year ended 31
December 2012 amounted to USD1,343,000 (2011: USD693,000) (Note
16).
16. Biological assets
Biological assets comprise primarily development activities for
oil palm plantations and maintenance of nurseries with the
following movements in their carrying value:
2012 2011
USD'000 USD'000
At fair value
At 1 January 22,811 11,022
Additions 29,405 9,011
Gain arising from changes in fair
value 1,989 3,499
Exchange differences 1,082 (721)
At 31 December 55,287 22,811
Represented by:
Mature plantation 27,442 1,628
Immature plantation 26,103 20,130
Nursery 1,742 1,053
Total 55,287 22,811
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 long term average CPO price
in the market.
Significant assumptions made in determining the fair values of
the mature and immature 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 of 28 years (2011: 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
range from 10.5% to 11.3% (2011: 10.0% to 11.0%);
(d) FFB price is derived by applying the oil extraction rate to
the estimated long term average CPO price of USD907 (2011: USD867)
per metric tonne; and
(e) yield per hectare of oil palm trees is based on the standard
yield profile of the industry.
16. Biological assets (cont'd)
Gain arising from changes in fair value less estimated costs to
sell during the financial year ended 2012 amount to USD1,989,000
(2011: USD3,499,000).
2012 2011
Hectares Hectares
Planted area:
Mature plantation 3,559 230
Immature plantation 4,591 4,180
Total 8,150 4,410
Depreciation of property, plant and equipment capitalised to
biological assets for the financial year ended 31 December 2012
amounted to USD1,343,000 (2011: USD693,000) (Note 15).
Employee benefit expenses capitalised to biological assets for
the financial year ended 31 December 2012 amounted to USD1,794,000
(2011: USD1,464,000) (Note 12).
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.
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.
17. Land use rights
2012 2011
USD'000 USD'000
At 1 January 32,158 33,546
Additions 21,044 196
Amortisation charge for the year
(Note 10) (924) (624)
Exchange differences 1,239 (960)
At 31 December 53,517 32,158
Amount to be amortised
- Not later than one year 1,040 535
- Later than one year but not more
than five years 4,160 2,140
* Later than five years 48,317 29,483
53,517 32,158
Land use rights are in respect of:
(a) cost of land use rights over six pieces (2011: five pieces)
of long-term leasehold land owned by the Group, for the oil palm
plantation development activities of the Group. The land use rights
are transferable and have a remaining tenure of 51 to 60 years
(2011: 52 to 60 years). The Group was 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 practice 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
Government of Sarawak.
(b) deferred land rights acquisition costs representing the cost
associated with the legal transfer or renewal for titles of land
rights such as, among others, legal fees, land survey and
re-measurement fees, taxes and other related expenses. Such costs
are also deferred and amortised on a straight-line basis over the
tenure of the related land rights.
Acquisition during the financial year:
On 28 February 2012, the Group completed the acquisition of
5,000 hectares of semi-developed plantation land for a total
consideration of RM102 million (approximately USD34 million). As
this acquisition represents purchase of assets by the Group, at
initial recognition the purchase price was allocated between land
use rights for the amount of USD18 million and fair value of
biological assets acquired of USD16 million.
Assets pledged as security
The land use rights were pledged to secure the bank overdrafts,
short term revolving credit, term loans facilities and the MTN
Programme as disclosed in Note 25.
18. Goodwill on consolidation
2012 2011
USD'000 USD'000
At 1 January 7,335 7,560
Arising from the acquisition of a
subsidiary (Note 1(b)) 5 37
Impairment of goodwill (5) (37)
Exchange differences 284 (225)
At 31 December 7,619 7,335
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:
2012 2011
USD'000 USD'000
Plantation Estates
Goodwill 7,619 7,335
The recoverable value of the goodwill of plantation estates as
at 31 December 2012 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:
2012 2011
Discount rate (pre-tax) 10.5% to 11.3% 10.0% to 11.0%
Projected CPO price USD907/tonne USD867/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 long term average CPO price is based on
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.
18. Goodwill on consolidation (cont'd)
(b) Key assumptions used in value-in-use calculations (cont'd)
Based on the above analysis, management has assessed that the
goodwill is not impaired as at 31 December 2012 and 2011. Changes
to the assumptions used by management to determine the recoverable
amounts can have an impact on the results of the assessment.
Management is of the opinion that no reasonably possible change in
any of the key assumptions stated above would cause the carrying
amount of the goodwill for each of the CGUs to materially exceed
their recoverable amount.
(c) Impairment loss recognised
During the financial year, an impairment loss was recognised on
the initial recognition of goodwill due to the inactivity of newly
acquired subsidiary as described in Note 1(b).
19. Inventories
2012 2011
USD'000 USD'000
At cost:
Chemicals and fertilisers 1,020 140
Consumable supplies 704 205
1,724 345
20. Trade and other receivables
2012 2011
USD'000 USD'000
Trade receivables 259 49
Other receivables:
Deposits 5,820 4,529
Sundry receivables 635 202
Total trade and other receivables 6,714 4,780
Add: Cash and short-term deposits (Note
22) 15,785 28,052
Total loans and receivables carried
at amortised cost 22,499 32,832
Trade receivables
Trade receivables are non-interest bearing and are generally 30
days' (2011: 30 days') terms. They are recognised at their original
invoice amounts which represent their fair values on initial
recognition.
20. Trade and other receivables (cont'd)
Deposits
Included in deposits is amount totalling USD4,828,000 (2011:
USD4,351,000) paid for the proposed acquisition of Malaysian
companies and land use rights.
Other receivables that are not denominated in the functional
currencies of the respective entities are as follows:
2012 2011
USD'000 USD'000
Singapore Dollars ("SGD") 25 22
Other information on financial risk of trade and other
receivables is disclosed in Note 33(a).
21. Prepayments
Prepayments comprise prepaid operating expenses.
22. Cash and short-term deposits
2012 2011
USD'000 USD'000
Cash at banks and on hand 5,255 25,438
Short-term deposits 10,530 2,614
15,785 28,052
Short-term deposits earn interest at 3% (2011: 3%) p.a..
As at 31 December 2012, the amount of undrawn borrowing
facilities that may be available in the future amounts to
USD53,609,000 (2011: USD7,176,000).
The Group has pledged a part of its short-term deposits
amounting to USD149,000 (2011: USD96,000) to fulfil collateral
requirements for supply of goods and USD835,000 (2011: Nil) as
security for a term loan facility as disclosed in Note 25.
Cash and bank balances that are not denominated in the
functional currencies of the respective entities are as
follows:
2012 2011
USD'000 USD'000
SGD 1,188 308
USD 2,088 17,499
GBP 1,725 7,239
22. Cash and short-term deposits (cont'd)
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents comprise the following at the end of the
reporting period:
2012 2011
USD'000 USD'000
Cash and short-term deposits 15,785 28,052
Less: Short-term deposits pledged for
supply of goods (149) (96)
Less: Short-term deposits pledged for
a banking facility (Note 25) (835) -
14,801 27,956
Bank overdraft (Note 25) (613) (578)
14,188 27,378
23. Issued capital
2012 2011
No. of shares No. of shares
'000 USD'000 '000 USD'000
Issued and fully
paid ordinary shares
At 1 January 46,175 87,321 33,445 42,211
Issuance during
the year 336 1,273 12,730 46,252
Share issuance
expenses - - - (1,142)
At 31 December 46,511 88,594 46,175 87,321
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.
Issuance of shares
On 16 April 2012, the Board approved the allotment of 23,000
shares pursuant to the exercise of initial options granted to a
consultant in accordance with the Company's share option scheme and
these shares were subsequently listed on AIM on 30 April 2012.
On 28 May 2012, the Board approved the conversion of the
convertible bond with face value of USD1,000,000 to 313,383
ordinary shares of the Company and these shares were subsequently
listed on AIM on 7 June 2012.
24. Other reserves
The composition of other components of other reserves is as
follows:
2012 2011
USD'000 USD'000
Merger reserve (20,256) (20,256)
Foreign currency translation reserve 1,736 (717)
Share-based payment transaction reserve
(Note 29) 10,604 9,543
(7,916) (11,430)
Merger reserve
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 RM1 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.
Merger reserve 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.
2012 2011
USD'000 USD'000
At 1 January (717) 1,261
Foreign currency translation adjustments 2,453 (1,978)
At 31 December 1,736 (717)
24. Other reserves (cont'd)
Share-based payment transaction reserve
The share-based payment transaction reserve is used to recognise
the value of equity-settled share-based payment transaction
provided to directors, employees and consultants as part of their
remuneration or compensation for services rendered. Refer Note 29
for further details of these plans.
2012 2011
USD'000 USD'000
At 1 January 9,543 -
Expense recognised during the year 1,128 9,543
Pursuant to issuance of ordinary
shares (Note 23) (67) -
At 31 December 10,604 9,543
25. Loans and borrowings
2012 2011
USD'000 USD'000
Bank overdraft 613 578
Short term revolving credit 1,962 1,889
Bank Guaranteed Medium Term Notes
Programme 31,954 -
Term loans 84,821 38,007
119,350 40,474
Add: Obligations under finance leases
(Note 30(c)) 2,123 1,187
121,473 41,661
25. Loans and borrowings (cont'd)
2012 2011
Maturity USD'000 USD'000
Current
Bank overdraft BLR* + 1.0%
p.a. On demand 613 578
Short term revolving credit
COF** + 2.5% p.a. On demand 1,962 1,889
Term loan BLR - 1.5% 2013 5 5
Term loans BLR + 1.0% p.a. 2013 2,292 -
Term loans COF + 2.5% p.a. 2013 964 -
Bridging loan COF + 1.75%
p.a. 2013 12,426 -
Obligations under finance
leases
(Note 30(c)) 2013 502 247
18,764 2,719
Non-current
2014 -
Term loan BLR - 1.5% p.a. 2031 177 177
2014 -
Term loans BLR + 1.0% p.a. 2020 46,947 25,106
2014 -
Term loans COF + 2.0% p.a. 2020 12,118 2,268
2014 -
Term loans COF + 2.5% p.a. 2019 9,892 10,451
Bank Guaranteed Medium Term 2017 -
Notes Programme 2020 31,954 -
Obligations under finance
leases 2014 -
(Note 30(c)) 2017 1,621 940
102,709 38,942
Total loans and borrowings 121,473 41,661
* BLR refers to Base Lending Rate
** COF refers to Cost of Fund
Details of the loans and borrowings, which are all denominated
in RM, are as follows:
Obligations under finance leases
These obligations are secured by a charge over the leased assets
(Note 15). Interest rates of the leases range from 4.68% to 6.23%
(2011: 4.97% to 7.95%) p.a.. Future minimum lease payments under
finance leases together with the present value of the net minimum
lease payments are disclosed Note 30(c).
Short-term revolving credit COF + 2.5% p.a.
The short-term revolving credit is repayable on demand with a
six months rollover period. It is secured over a leasehold land of
the Group in which it has prepaid the rights to use the land as
disclosed in Note 17. This revolving credit includes a financial
covenant which requires the subsidiary company to maintain a
gearing ratio not exceeding 70%. This short-term revolving credit
will be wholly re-financed through the MTN Programme in Year 2013
as elaborated below.
25. Loans and borrowings (cont'd)
Bank overdrafts BLR + 1.0% p.a.
There are three (2011: two) bank overdrafts facilities which
bear interest of BLR + 1% p.a. and with a total combined amount of
USD2.6 million (2011: USD1.7 million) are currently available for
use by the Group. As at the reporting date, the Group has only
utilised one of these facilities. The bank overdrafts are secured
over leasehold lands of the Group in which it has prepaid the
rights to use the lands as disclosed in Note 17. This bank
overdraft includes a financial covenant which requires the
subsidiary company to maintain a gearing ratio not exceeding
70%.
Term loan BLR - 1.5% p.a.
This term loan which is obtained for the purchase of a building
is secured over the said building as disclosed in Note 15 and is
repayable over a period of 22 years.
Term loans BLR + 1.0% p.a.
There are three (2011: two) term loans which bear interest of
BLR + 1% p.a. obtained for the purpose of acquisition of
subsidiaries and land use rights. One of the term loans amounting
to USD18 million which is due to commence repayment in Year 2013
will be wholly re-financed through the MTN Programme in Year 2013
as elaborated below. The second term loan amounting to USD8 million
is due to commence repayment in Year 2014. During the year, the
Group has also drawn down a third term loan of USD23.4 million
being partial financing for the acquisition of a semi-developed
plantation land as disclosed in Note 17 and repayment will commence
in Year 2015.
All term loans are repayable over a period of six years and are
secured over certain leasehold land of the Group in which the Group
has prepaid the rights to use the land as disclosed in Note 17. The
third term loan of USD23.4 million is further secured by a fixed
deposit of USD835,000 (2011: Nil) as disclosed in Note 22 and a
corporate guarantee provided by the Company. These loans include
financial covenants which require the subsidiary company to
maintain a gearing ratio not exceeding 70%.
Term loan COF + 2.0% p.a
There are two (2011: one) term loans which bear interest of COF
+ 2.0% p.a. obtained for the purpose of oil palm development
activities. The total facility amount available from the term loans
is USD27 million (2011: USD14 million), and is to be drawn down in
four tranches. As at the reporting date, the Group has only drawn
down USD12 million, and the balance is available for further draw
down until 31 December 2016. The term loans will commence repayment
in Year 2014 and Year 2015, respectively, for a period of six
years.
The term loans are secured over leasehold land of the Group in
which the Group has prepaid the rights to use the land as disclosed
in Note 17. This loan includes a financial covenant which requires
the subsidiary company to maintain a gearing ratio not exceeding
70%.
25. Loans and borrowings (cont'd)
Term loans COF + 2.5% p.a
There are two term loans which bear interest of COF + 2.5% p.a.
obtained for the purpose of partial financing of acquisition of a
subsidiary and land use rights, and oil palm development
activities. The total amount of loan obtained for these term loans
amounted to USD11 million and the Group has fully drawn down this
amount in previous years. Both term loans which are due to commence
repayment in Year 2013 will be wholly re-financed through the MTN
Programme in Year 2013 as elaborated below.
The term loans are secured over a leasehold land of the Group in
which the Group has prepaid the rights to use the land as disclosed
in Note 17. These loans include financial covenants which require
the subsidiary company to maintain a gearing ratio not exceeding
70%.
Bank Guaranteed Medium Term Notes Programme
During the year, the Group completed the issuance of the MTN
Programme of up to RM255 million (approximately USD85 million) in
nominal value. The guarantor for MTN Programme is Malayan Banking
Berhad, who guarantees the full principal redemption of up to RM255
million and one semi-annual coupon payment. The proceeds from this
programme will be utilised towards the construction of the Group's
first vertical steriliser oil palm mill, refinancing of the Group's
certain loans and borrowings that are due for repayment as
mentioned in the preceding paragraphs, and to also finance the
plantation development expenditure including working capital
requirements for BJ.
As at 31 December 2012, the Group has drawn down the first
tranche of the MTN Programme amounting to RM100 million (USD33
million). The second tranche totaling RM155 million (USD52 million)
is drawn down on 15 March 2013.
Of the first tranche of the MTN Programme, RM35 million (USD12
million) bears a coupon rate of 4.35% p.a., while the balance of
RM65 million (USD21 million) bears a coupon rate of 4.45% p.a..
Tenure of the MTN Programme is up to 10 years from the date of the
first issuance and repayment is to commence 5 years from the date
of first issue.
The MTN Programme is secured over all the leasehold land of the
Group in which the Group has prepaid rights to use the land as
disclosed in Note 17 and a corporate guarantee provided by the
Company.
The MTN Programme includes the financial covenants which require
the Group on a consolidated level, to maintain the following:
(a) Maximum Debt to Equity ratio of 2.25:1
(b) Minimum Debt Service Cover Ratio of 1.50:1
(c) Minimum Equity of USD92 million (or RM276 million) as at 31
December 2013
Bridging Loan COF + 1.75% p.a.
In the interim period to the drawdown of the MTN Programme, the
Group obtained a bridging loan facility from Malayan Banking Berhad
to part finance the construction of the vertical sterilizer oil
palm mill and BJ's development expenditure. This bridging loan will
be repaid in 2013 upon the issuance of the second tranche of the
MTN Programme. This loan is secured over all the leasehold land of
the Group in which the Group has prepaid rights to use the land as
disclosed in Note 17 and a corporate guarantee provided by the
Company.
26. Convertible bonds
2012 2011
Maturity USD'000 USD'000
USD1.0 million 18 November 2014 - 926
USD2.1 million 8 August 2015 1,995 1,755
1,995 2,681
On 28 May 2012, the unsecured convertible bond of USD1 million,
which bears a cash interest coupon of 1.75% p.a., was converted to
313,383 ordinary shares of no par value in the Company,
representing a conversion price of 201 pence per share.
The unsecured convertible bonds of USD2.1 million bear a cash
interest coupon of 2.5% per annum and is payable semi-annually. The
convertible bonds may be converted, in whole only, into 434,700 new
ordinary shares of no par value in the Company. This represents a
conversion price 294 pence per share, at any time until the
maturity date at the bondholder's election. In the event of
non-conversion, the Company shall redeem the convertible bonds, in
whole, on maturity date such that the amount paid by the Company on
redemption results in the bondholder having achieved, in respect of
the convertible bonds, including coupon payments, an internal rate
of return of 10%.
The carrying amount of liability component of the convertible
bonds at reporting date is as follows:
2012 2011
USD'000 USD'000
Face value of the convertible bonds 2,100 3,100
Less: Embedded derivative (403) (606)
Less: Transaction costs on liability
component (27) (27)
Liability component at initial recognition 1,670 2,467
Add: Accretion of interest on the convertible
bonds 325 214
1,995 2,681
Embedded derivative relating to the conversion option of the
convertible bond is recorded as a "fair value through profit or
loss" financial instrument with a balance of USD130,000 as at 31
December 2012 (2011: USD517,000).
27. Trade and other payables
2012 2011
USD'000 USD'000
Trade payables 3,776 784
Other payables 3,034 487
Total trade and other payables 6,810 1,271
Add:
* Other liabilities (Note 28) 2,464 1,086
* Loans and borrowings (Note 25) 121,473 41,661
* Convertible bonds (Note 26) 1,995 2,681
Total financial liabilities carried
at amortised cost 132,742 46,699
Other payables that are not denominated in the functional
currencies of the respective entities are as follows:
2012 2011
USD'000 USD'000
SGD 135 68
USD 75 3
GBP 1 1
Trade and other payables
These amounts are non-interest bearing. Trade payables are
normally settled on 60 days (2011: 60 days) terms while other
payables have an average term of 150 days (2011: 150 days).
Other information on financial risks of trade and other payables
is disclosed in Note 33(b).
Included in other payables are amounts of USD1.1 million (2011:
Nil) payable to contractors for the construction of mill and USD1
million (2011: Nil) payable for the construction of
infrastructures, respectively.
28 Other current financial liabilities
2012 2011
USD'000 USD'000
Accrued operating expenses 1,118 785
Retention monies 1,346 285
Deposits received - 16
2,464 1,086
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.
29. Share-based payment plans
The Company's share option scheme (the "Scheme"), as outlined
and adopted in the Extraordinary General Meeting on 22 February
2011 (the "Adoption Date"), is a share incentive scheme to retain
and to give recognition to employees, consultants and directors of
the Group, and to recognise their contributions to the success and
development of the Group. The Scheme also promotes an ownership
culture by giving employees, consultants and directors an
opportunity to have a real and personal direct interest in the
Group and to align the interests of such persons with those of the
shareholders so as to motivate them to contribute to the future
growth and profitability of the Group. There are no cash settlement
alternatives for this Scheme.
The Scheme will be administered by a committee comprising
directors of the Company, duly authorised and appointed by the
Board of Directors (the "Committee"). There are two categories of
options namely Initial Option and Additional Option. Initial Option
refers to options that are to be granted to the directors,
employees, and consultants to subscribe for up to 3,568,000 shares
whereas Additional Option refers to the additional options granted
or to be granted pursuant to the Scheme subsequent to the grant of
the Initial Option.
The aggregate amount of shares granted under the Scheme, when
added to the amount of shares issued and issuable in respect of all
options granted under the Scheme, shall not exceed 10% of the
issued share capital of the Company (on a fully diluted basis) on
the day preceding the Date of Grant.
Subscription Price for each share underlying the Initial Options
shall equal SGD1.55 (approximately the equivalent of 75 pence).
Subject to a non-cash variation condition in the issued ordinary
share capital of the Company, Subscription Price for each share
underlying the Additional Options shall be the higher of:
(i) the prevailing Market Price (converted to Singapore Dollars
on the relevant date at the prevailing spot rate) on the Date of
Grant of such Additional Options; and
(ii) the aggregate of (a) 1 pence and (b) the highest placement
price per share (converted to Singapore Dollars on the relevant
date at the prevailing spot rate) of any placement effected by the
Company.
The Scheme shall continue to be in force at the absolute
discretion of the Committee, subject to a maximum period of 10
years, commencing on the Adoption Date, provided always that the
Scheme may continue beyond the above stipulated period with the
approval of the Shareholders by ordinary resolution in a general
meeting and of any relevant authorities which may then be
required.
The vesting conditions for the grant of Additional Options shall
be determined by the Committee prior to the Date of Grant of
Additional Options. Vesting conditions on Initial Options are
outlined as follows:
29. Share-based payment plans (cont'd)
Vesting conditions
(a) Directors
The Options granted to each director, both executive and
non-executive, under the Scheme shall, subject to certain
performance criteria being fulfilled, be granted in four tranches
as follows:
1) the first tranche of the Initial Options comprising 25% of
the award shall vest to such director when
a) the average market price of the Shares is not less than 205
pence for 30 consecutive Market Days; and
b) the CPO Crushing Mill license has been issued to the Company
by the Malaysian Palm Oil Board, or similar related regulatory
authority, in the course of 2011.
2) the second tranche of the Initial Options comprising a
further 25% of the award shall be granted to such director when
a) the average Market Price of the Shares is not less than 205
pence for 30 consecutive Market Days; and
b) the BJ Plantation is fully planted by 31 March 2012;
3) the third tranche of Options under the Scheme comprising a
further 25% of the Earmarked Director Shares shall be granted to
such director when, in 2012, the average Market Price of the Shares
is not less than 225 pence for 30 consecutive Market Days; and
4) in relation to each director, the fourth tranche of Options
granted under the Scheme comprising the final 25% of the Earmarked
Director Shares shall be granted to such director when the average
Market Price of the Shares is not less than 300 pence for 30
consecutive Market Days.
As at 31 December 2011, the directors were granted a total of
2,850,000 Initial Options, in cumulative for all four tranches and
800,000 Additional Options. The contractual term of each option
granted is 10 years. The first tranche comprising 712,500 shares
(or 25% of the award) from Initial Options are vested as at 31
December 2011. The remaining Initial Options and Additional Options
were granted but not vested.
As at 31 December 2012, the first, second and third tranches
totalling 2,137,500 Initial Options and 800,000 Additional Options,
that were granted in year 2011, are vested. The remaining fourth
tranche of 712,500 shares (or 25% of the award) from Initial
Options are not vested due to vesting conditions not met.
29. Share-based payment plans (cont'd)
Vesting conditions (cont'd)
(b) Employees
Any confirmed full time employee of the Group, excluding
executive directors, the Initial Options which is granted to an
employee are exercisable on or after 1 January 2015; however
options granted for the calendar year 2010 are exercisable on or
after 31 January 2013 if the BJ, Fortune and Incosetia estates are
fully planted by end of calendar year 2012.
As at 31 December 2011, certain employees were granted a total
of 48,000 Initial Options and these options will only vest on or
after 1 January 2015. The contractual term of each option granted
is 10 years.
As at 31 December 2012, certain employees were granted a total
of 220,000 Initial Options and these options will only vest on or
after 1 January 2015. The contractual term of each option granted
is 10 years.
(c) Consultants
An Option granted to a consultant is exercisable in accordance
with the Scheme.
On 26 May 2011, certain consultants were granted a total of
49,000 Initial Options and these options vested on 1 October 2011.
The contractual term of each option granted is 10 years.
On 16 April 2012, a consultant has exercised 23,000 Initial
Options (Note 23).
Fair value of share options
The fair value of share options granted is estimated at the date
of the grant using a Monte-Carlo simulation model, taking into
account the terms and conditions upon which the share options were
granted. The model takes into account historic and expected
dividends, and share price fluctuations covariance of the Group and
companies in similar industries to predict the distribution of
relative share performance.
The expense recognised for this equity-settled share-based
payment transaction amount to USD1,151,000 (2011: USD9,891,000), of
which USD150,000 (2011: USD25,000) has been capitalised to
biological assets.
There has been no cancellation or modification to the Scheme
during the years ended 31 December 2012 or 2011.
29. Share-based payment plans (cont'd)
Movements in the year
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the year:
2012 2012 2011 2011
Number WAEP Number WAEP
USD USD
Outstanding at 1 January 3,747,000 1.83 - -
Granted during the year 220,000 2.51 3,747,000 1.83
Exercised during the
year (23,000)* 1.27 - -
Outstanding at 31 December 3,944,000 1.92 3,747,000 1.83
Exercisable at 31 December 2,963,500 2.05 761,500 1.19
* The weighted average share price at the date of exercise of
this option was USD4.22
The weighted average remaining contractual life for the share
options outstanding as at 31 December 2012 is 7.39 years (2011:
8.29 years).
The range of exercise price for options outstanding at the end
of the year was SGD1.55 (approximately USD1.27) to SGD5.07
(approximately USD4.15) per share (2011: SGD1.55 (approximately
USD1.19) per share).
The weighted average fair value of options granted during the
year, estimated by using a Monte-Carlo simulation model was USD2.30
(2011: USD1.96).
The following table list the inputs to the Monte-Carlo
simulation model:
2012 2011
Dividend yield (%) 0 0
Expected volatility (%) 36.98 35.9 - 41.3
Risk-free rate * *
Expected life of share options (years) 10 5 - 10
Share price (pence) (%) 247 249 - 278.5
* Based on GBP Libor rates and Swap rates at valuation date
The expected life of the share options is based on historical
data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects
the assumption that the historical volatility over a period similar
to the life of the options is indicative of future trends, which
may also not necessarily be the actual outcome.
30. Commitments
(a) Capital commitments
Capital commitments contracted for at the end of the reporting
period not recognised in the financial statements are as
follows:
2012 2011
USD'000 USD'000
Approved and contracted for:
* property, plant and equipment 10,434 3,526
* biological assets - -
Approved and not contracted
for:
* property, plant and equipment 19,970 40,910
* biological assets 10,162 7,975
40,566 52,411
(b) Operating lease commitments
As lessee
In addition to the land use rights disclosed in Note 17, the
Group has no other operating leases.
(c) Finance leases commitments
As lessee
The Group has finance leases for various items of plant and
equipment and motor vehicles. 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.
30. Commitments (cont'd)
(c) Finance leases commitments (cont'd)
Future minimum lease payments under finance leases together with
the present value of the net minimum lease payments are as
follows:
2012 2011
Present Present
value of value of
Minimum minimum Minimum minimum
lease payments lease payments lease payments lease payments
USD'000 USD'000 USD'000 USD'000
Not later than
one year 622 502 318 247
Later than one
year but not more
than five years 1,782 1,621 952 844
More than five
years - - 99 96
Total minimum
lease
payments 2,404 2,123 1,369 1,187
Less: Amount representing
finance charges (281) - (182) -
Present value
of minimum lease
payments 2,123 2,123 1,187 1,187
31. 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 2012
and 2011, which are conducted at mutually agreed terms between the
parties.
2012 2011
USD'000 USD'000
Transactions with related parties
* Rental expense 42 -
* Payment of expenses on behalf of related parties 9 -
* Construction of building - 308
* Administrative costs charged 157 124
Amount due from related parties 2 -
Amount due to related parties 42 5
31. Related party disclosures (cont'd)
Amounts due from/(to) related parties are non-trade related,
unsecured, non-interest bearing and are repayable in cash on
demand.
Amount due from/(to) related parties are included within the
line items in Notes 20 and 27.
Related parties represent companies in which certain directors
of the Group have financial interest and are also directors of
these companies.
Compensation of key management personnel
2012 2011
USD'000 USD'000
Directors' salaries 723 662
Directors' fees (Note 9) 187 172
Short term employee benefits 532 388
Contributions to defined contribution
plans 86 44
Share-based payment transactions 1,032 9,735
2,560 11,001
Compensation comprise
Amounts paid to:
- Directors of the Company 904 827
- Directors of a subsidiary company 6 6
- Other key management personnel 618 433
1,528 1,266
Share-based payment transactions
expense:
- Directors of the Company 958 9,716
- Other key management personnel 74 19
1,032 9,735
2,560 11,001
The amounts disclosed above are the amounts recognised as an
expense during the reporting period related to key management
personnel.
31. Related party disclosures (cont'd)
Compensation of key management personnel (cont'd)
Directors' and other key management personnel interests in the
Company's share option scheme ("the Scheme")
Share options held by directors (Note 29) and other key
management personnel under the Scheme have the following expiry
dates and exercise price:
Expiry date Exercise price Number outstanding
Directors 2012 2011
Issue date:
- 2011 2021 SGD1.55 2,850,000 2,850,000
- 2011 2021 SGD5.07 800,000 800,000
Other key management
personnel
Issue date:
- 2011 2021 SGD1.55 32,000 32,000
- 2012 2022 SGD4.89 100,000 -
32. Fair value of financial instruments
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly
Level 3: techniques that use inputs that have a significant effect on the recorded fair value
that are not based on observable market data
As at 31 December, the Group held the following financial
instruments carried at fair value in the statements of financial
position:
(a) Fair value of financial instruments that are carried at fair value
The Group does not have any financial instruments carried at
fair value other than the derivative component of the unquoted
convertible bonds. Fair value of the derivative component is valued
using a binomial model based on both observable data and
non-observable data. The non-observable inputs to the model include
assumptions regarding the future financial performance of the
investee, its risk profile, and economic assumptions regarding the
industry and geographical jurisdiction in which the investee
operates.
32. Fair value of financial instruments (cont'd)
Fair value hierarchy (cont'd)
(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 and MTN Programme)
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
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Financial liabilities:
- Obligations under
finance leases 2,123 1,187 2,129 1,194
- Convertible bonds 1,995 2,681 * *
- Bank Guarantee Medium
Term Notes Programme 31,954 - 31,938 -
* It is not practicable and cost outweighs benefits to determine
the fair value of the unquoted convertible bonds
33. Financial risk management objectives and policies
The Group is 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.
33. Financial risk management objectives and policies (cont'd)
(a) Credit risk
Credit risk the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily trade and other
receivables) and from its financing activities, mainly deposits
with banks.
Trade and other receivables
The Group managed customer credit risk through the Group's
established policy, procedures and control relating to customer
credit risk management. Credit quality of a customer is assessed
based on an extensive credit worthiness assessment. Credit risk for
the Group is also minimised by the oil palm industry norm whereby
all trade debtors (i.e., mill operators) are required to settle
their outstanding balances within 14 days from date FFBs are
received by the mill. The limited supply of FFBs in the Group's
area of operations for mill consumption had also encouraged mill
operators to make settlement within the industry norm to ensure
continuous supply of FFBs by oil palm developers to their
respective mills.
Currently, the Group does not have significant exposure to
credit risk in trade receivables 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 deposits
Deposits placed have minimal credit risk as these are placed
with creditworthy counterparties and are refundable. Cash and
short-term deposits 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 relates to three
customers (2011: two customers).
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 and short-term deposits 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.
33. 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 arises 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 three to 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
2012
Financial assets:
Trade and other receivables 6,714 - - 6,714
Cash and bank balances 15,785 - - 15,785
Total undiscounted
financial assets 22,499 - - 22,499
Financial liabilities:
Trade and other payables (6,810) - - (6,810)
Other liabilities (2,464) - - (2,464)
Loans and borrowings* (26,323) (73,672) (65,318) (165,313)
Derivative financial
instruments (130) - - (130)
Convertible bonds** - (1,995) - (1,995)
Total undiscounted
financial liabilities (35,727) (75,667) (65,318) (176,712)
Total net undiscounted
financial liabilities (13,228) (75,667) (65,318) (154,213)
33. 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
USD'000 USD'000 USD'000 USD'000
2011
Financial assets:
Trade and other receivables 4,780 - - 4,780
Cash and bank balances 28,052 - - 28,052
Total undiscounted
financial assets 32,832 - - 32,832
Financial liabilities:
Trade and other payables (1,271) - - (1,271)
Other liabilities (1,086) - - (1,086)
Loans and borrowings* (5,630) (29,879) (19,346) (54,855)
Derivative financial
instruments (517) - - (517)
Convertible bonds** - (3,319) - (3,319)
Total undiscounted
financial liabilities (8,504) (33,198) (19,346) (61,048)
Total net undiscounted
financial assets/(liabilities) 24,328 (33,198) (19,346) (28,216)
* The contractual undiscounted repayment obligations is assumed
based on the bankers' BLR and COF as at the reporting date
** Assuming the convertible bonds are redeemed on maturity
rather than converted to shares during period of issue
33. Financial risk management objectives and policies (cont'd)
(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.
Sensitivity analysis for interest rate risk
As at 31 December 2012, had the interest rates of the financial
assets and liabilities which are at floating rates been 1%
higher/lower (2011: 1%), ceteris paribus, the impact would be as
follows:
2012 2011
USD'000 USD'000
Effect on total borrowing cost:
- +1% 618 314
- -1% (618) (314)
The assumed movement in percentage for interest rate sensitivity
analysis is based on the currently observable market
environment.
(d) Commodity price risk
The Group's fair value measurement of its biological assets is
susceptible to the volatility in the crude palm oil ("CPO") prices
in Malaysia. The Group's policy in measuring fair value of the
biological assets is to adopt an average CPO price over a period of
five years given CPO trend over the last 30 years has been
significantly volatile. This average CPO price will also be more
relevant as it is reflective of the increase in production cost and
impact of inflation in recent years.
Sensitivity analysis for commodity price risk
As at 31 December 2012, had the average CPO price used in
measuring fair value of the biological assets been 3% higher/lower
(2011: 3%), ceteris paribus, the impact on loss before tax would be
as follows:
2012 2011
USD'000 USD'000
Effect on fair value changes in
biological assets:
- +3% 5,666 3,057
- -3% (6,478) (3,057)
34. 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 2012 and
2011.
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 80%.
2012 2011
USD'000 USD'000
Loans and borrowings (Note 25) 121,473 41,661
Total equity 57,030 59,122
Gearing ratio 68% 41%
The Group has complied with financial loan covenants for all the
loans and borrowings as at 31 December 2012 and 2011.
35. Segment information
For management purposes, the Group is organised into business
units based on its products and services and has three reportable
segments as follows:
-- The oil palm plantation segment, which produces FFBs and develop oil palm plantation;
-- The oil palm mill segment, which, when the vertical
sterilizer crushing mill is operational, produces CPOs and PKs;
and
-- Investment holding segment, which provides corporate services to the Group.
No operating segments have been aggregated to form the above
reportable operating segments.
The Executive Management Committee monitors the operating
results of its business units separately for the purpose of making
decisions about resource allocation and performance assessment.
Segment performance is evaluated based on operating profit or loss
and is measured consistently with operating profit or loss in the
consolidated financial statements. However, certain Group financing
(including the interest expense and interest income) and income
taxes are managed on a Group basis and are not allocated to
operating segments. Financing obtained for the specific purpose of
each segment is recognised within the segment itself.
Transfer prices between operating segments are on an arm's
length basis in a manner similar to transactions with third
parties.
No segmental information is prepared based on geographical area
as all operations are located within one location, Malaysia.
35. Segment information (cont'd)
Oil palm
Year ended Plantation milling Investment Adjustments
31 December 2012 activities activities holding Total segments and eliminations Consolidated
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Revenue
External customers 2,820 - - 2,820 - 2,820
Inter-segment - - - - - -
Total revenue 2,820 - - 2,820 - 2,820
Results
Depreciation and
amortisation 1,038 21 116 1,175 - 1,175
Gain arising on fair
value changes in
biological assets 1,989 - - 1,989 - 1,989
Interest expense 2,065 2 - 2,067 - 2,067
Segment loss (1,943) (341) (2,858) (5,142) - (5,142)
Segment assets 148,734 30,987 75,988 255,709 (67,147) 188,562
Segment liabilities 117,777 29,594 1,020 148,391 (67,147) 81,244
Other disclosures
Capital expenditure 67,643 21,090 32 88,765 - 88,765
Inter-segment revenues are eliminated upon consolidation and
reflected in the "adjustments and eliminations" column. All other
adjustments and eliminations are part of detailed reconciliations
presented further below.
35. Segment information (cont'd)
Oil palm
Year ended Plantation milling Investment Adjustments
31 December 2011 activities activities holding Total segments and eliminations Consolidated
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Revenue
External customers 578 - - 578 - 578
Inter-segment - - - - - -
Total revenue 578 - - 578 - 578
Results
Depreciation and
amortisation 654 - 110 764 - 764
Gain arising on fair
value changes in
biological assets 3,499 - - 3,499 - 3,499
Interest expense 188 - - 188 - 188
Segment profit/(loss) 2,033 (21) (1,600) 412 - 412
Segment assets 71,501 1,576 55,129 128,206 (22,885) 105,321
Segment liabilities 40,996 24 6,895 47,915 (22,885) 25,030
Other disclosures
Capital expenditure 15,776 624 145 16,545 - 16,545
35. Segment information (cont'd)
Interest income and certain finance costs, gain arising from
changes in fair value of embedded derivative of the convertible
bonds are not allocated to individual segments as the underlying
instruments are managed on a group basis.
Current taxes, deferred taxes, share-based payment transaction
expense, goodwill on consolidation and certain liabilities are not
allocated to those segments as they are also managed on a group
basis.
Capital expenditure consists of additions to property, plant and
equipment, biological assets and land use rights.
Inter-segment revenues are eliminated on consolidation.
2012 2011
Reconciliation of loss before tax USD'000 USD'000
Segment (loss)/profit (5,142) 412
Interest income 280 93
Interest expense (1,414) (1,544)
Share-based payment transaction (963) (9,866)
Gain arising from changes in fair
value of embedded derivative of the
convertible bonds 172 109
Impairment of goodwill (5) (37)
Group loss (7,072) (10,833)
2012 2011
Reconciliation of assets USD'000 USD'000
Segment assets 188,562 105,321
Deferred tax assets 178 -
Goodwill arising on consolidation 7,619 7,335
Income tax recoverable 99 7
Total assets 196,458 112,663
2012 2011
Reconciliation of liabilities USD'000 USD'000
Segment liabilities 81,244 25,030
Deferred tax liabilities 6,556 6,325
Loans and borrowings 49,503 18,988
Derivative financial instruments 130 517
Convertible bonds 1,995 2,681
Total liabilities 139,428 53,541
Information about major customer
Revenue from one major customer amounted to USD2,165,000 (2011:
USD535,000), arising from sales by the plantation activities.
36. Significant event
Proposed acquisition of 100% equity interest in a Malaysian
Company
On 28 September 2012, a subsidiary of the Group entered into a
conditional agreement for the proposed acquisition of a Malaysian
company to acquire the entire issued share capital of Grand
Performance Sdn. Bhd. ("GP") (the "Proposed Acquisition"), which
owns approximately 7,000 hectares of land zoned for the development
of palm oil in Sarawak, Malaysia (the "GP Estate"). The GP Estate
is adjacent to the Group's Incosetia Estate and ideally located to
generate additional volume for the Group's vertical sterilizer
crushing mill.
The total consideration for the Proposed Acquisition is RM45
million (approximately USD14.7 million). As a condition to enter
into the Proposed Acquisition, the Group paid a refundable deposit
of RM1.7 million (approximately USD0.5 million).
The Proposed Acquisition is subject to a number of conditions
precedent, which include, inter alia, various regulatory approvals,
completion of legal and financial due diligence in respect of the
GP Estate and approval by the board of directors of GP.
It is envisaged that the Proposed Acquisition will be completed
in the near future, and as such the Group will seek to secure the
required funding via a combination of an equity fund raise and/or a
new debt facility (Note 37).
37. Event occurring after the reporting period
Issuance of USD15 million convertible unsecured bonds
On 9 January 2013, the Company entered into an agreement to
issue convertible unsecured bonds ("Convertible Bonds") totalling
up to USD15 million, via a Company sponsored placing, to OCBC
Capital Investment I Pte. Ltd., a wholly owned subsidiary of OCBC
Bank. The Convertible Bonds bear a cash interest coupon of 3 months
Libor + 2.00% p.a., which is payable quarterly in arrears until the
three year maturity is reached in 2016 (the "Maturity Date").
Proceeds from the issuance of the Convertible Bonds will be applied
to the Group's general working capital requirements.
The Convertible Bonds, if fully issued to USD15 million, may be
converted at any time, in aggregate, into a maximum of 3,260,041
new ordinary shares of no par value in the Company (the "Ordinary
Shares"), representing approximately 7.01% of the Company's
currently issued share capital, until the Maturity Date at the
individual bondholder's election. This implies a conversion price
of 286 pence per Ordinary Share, based on the current exchange rate
(the "Conversion Price"). The Conversion Price represents a 25%
premium to the 20 day volume weighted average price.
The Company shall redeem all outstanding, non-converted
Convertible Bonds, in whole, on the Maturity Date, such that the
amounts paid by the Company on redemption result in the bondholders
having achieved, in respect of the Convertible Bonds, including
coupon payments and issuance fees, an internal rate of return of
15%.
On 14 January 2013, the first tranche of USD5 million was
disbursed to the Company. The remaining USD10 million is subject to
certain conditions precedent including, inter alia, completion of
the proposed acquisition of Grand Performance Sdn. Bhd. as
mentioned in Note 36. The Company expects the issuance of the
remaining tranche in the near future.
38. Authorisation of financial statements for issue
The consolidated financial statements for the financial year
ended 31 December 2012 were authorised for issue in accordance with
a resolution of the Directors made on 30 April 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMGFDLGFGFZG
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