TIDMAEP

RNS Number : 4861N

Anglo-Eastern Plantations PLC

20 May 2020

Correction: The following amendment has been made to the 'Final Results for year ended 31 December 2019' announcement released on 19 May 2020 at 16.26 under RNS No 3916N

The date in note 32 was not correct. The relevant sentence should have read: ' The Annual Financial Report will be posted to shareholders on or before 3 June 2020.'

In addition, the following text remains unchanged but is now formatted in black text: 'The financial information does not constitute the company's statutory accounts for the years ended 31 December 2019 or 2018. Statutory accounts for the years ended 31 December 2019 and 31 December 2018 have been reported on by the Independent Auditor. The Independent Auditor's Reports on the Annual Report and Financial Statements for the years ended 31 December 2019 and 31 December 2018 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2019 will be delivered to the Registrar in due course.'

All other details remain unchanged. The full amended text is shown below.

Anglo-Eastern Plantations Plc

("AEP", "Group" or "Company")

Final results for year ended 31 December 2019

The group comprising Anglo-Eastern Plantations Plc and its subsidiaries (the "Group"), a major producer of palm oil and rubber with plantations across Indonesia and Malaysia amounting to some 128,200 hectares, has today released its results for the year ended 31 December 2019.

Financial Highlights

 
                                          2019       2018 
                                            $m         $m 
 
 Revenue                                 219.1      250.9 
 Profit before tax: 
 - before biological asset ("BA") 
  movement                                15.6       33.2 
 - after BA movement                      18.9       30.9 
 
 Basic Earnings per ordinary share 
  ("EPS"): 
  - before BA movement                35.37cts   32.50cts 
  - after BA movement                 40.61cts   28.79cts 
 Dividend (cents)                       0.5cts     3.0cts 
 

Enquiries:

 
 Anglo-Eastern Plantations Plc 
 Dato' John Lim Ewe Chuan          +44 (0)20 7216 4621 
 
 Panmure Gordon (UK) Limited 
 Dominic Morley                    +44 (0)20 7886 2954 
 

Chairman's Statement

We are indeed facing unprecedented uncertainty as countries around the world are trying to stop the spread of Coronavirus. My Board and I would like to take this opportunity to show our appreciation in saying a big thank you to the health workers in the three countries we are in, i.e. the United Kingdom, Malaysia and Indonesia for their selfless endeavours to continue to care and to save lives during this pandemic. Our thoughts are also with those who are infected and those who have lost loved ones from the Coronavirus.

Although Malaysia and parts of Indonesia are in lockdown, our plantations and mills are operating close to normal, albeit our administration staff are working from home to comply with the Stay At Home measures. As most of our plantation staff are continuing working legitimately on sites, I would convey the Board's sentiment to stay safe and observe social distancing at all times. We also have precautionary measures in place to protect our staff and our business in the event of serious Coronavirus infections in any of our plantations.

The Group's fresh fruit bunches ("FFB") production in 2019 fell 1% to 1.03 million mt, from last year of 1.04 million mt due to generally dry weather. Rainfalls were particularly poor across all our plantations in Indonesia for a greater part of the year. A sharp 10% decline in production in Riau on the back of a record harvest last year also indicated that the palms were suffering from biological stress. While in Bengkulu production was lower by 11%. The lower crop appeared to be weather induced as a similar trend was experienced by other plantations in the region. FFB bought-in from surrounding smallholders was 0.91 million mt, 10% lower than 2018 of 1.01 million mt due to stiff competition from newly commissioned mills on the purchase of external crops. Smallholders which contributed the bulk of the Group's external crops also had to endure lower yield, the direct effect of reduced fertiliser application in the last two years due to low crude palm oil ("CPO") prices. The mills, as a result, processed 7% less FFB with the CPO production down by 6% to 394,700 mt (2018: 418,800mt).

The CPO prices for the first half of the year were weak tumbling to a year low of $481/mt in July 2019. A turnaround in sentiment from the second half of the year saw the prices rallied to a high of $858/mt before the year end. The surge was in response to the slowing palm oil production as well as to optimism over pick-up in demand for palm in biodiesel and the increase in imports by China. A successful implementation of B20 and B30 biodiesel blending mandated in Malaysia and Indonesia respectively could drive demand which reportedly could consume up to 4 million mt of palm oil annually. Palm biodiesel after all is a renewable, biodegradable and environmentally friendly fuel when compared to fossil fuel. The average CPO price ex-Rotterdam in 2019 was nevertheless 5% lower at $565/mt, compared to $595/mt in 2018.

With lower production and CPO prices the Group's revenue was lower by 13% at $219.1 million, compared to $250.9 million achieved in 2018. The operating profit for the Group in 2019, before biological asset ("BA") movement was $12.2 million, 61% lower compared to $30.9 million achieved in 2018. However, earnings per share, before BA movement, increased by 9% to 35.37cts, from 32.50cts in 2018 due mainly to the impact of the write off of significant intercompany loans within operating subsidiaries which have non-controlling interest bearing part of this cost. The Group's operating profit after BA movement for 2019 was at $15.4 million after an upward BA movement of $3.3 million as compared to 2018 operating profit of $28.6 million after a downward BA movement of $2.3 million.

The Group's new planting including plasma for 2019 totalled 1,757ha compared to 1,563ha last year. The low rate of planting was due to protracted land compensation negotiations. New planting in Central Kalimantan was also delayed until the fourth quarter as the Group awaits results of a peer review of the high carbon stock sustainability study which will determine areas which cannot be planted with oil palm due to high conservation and high carbon stock values.

The three biogas plants with a combined capacity of four megawatts generated over 17,200MWh of electricity in 2019 compared to 13,800MWh last year. The revenue from the sale of surplus electricity to the national grid was $0.91 million, 6% higher than last year of $0.86 million, notwithstanding the long delay in signing the renewal of contract for the sale of electricity to the national grid by a plant in North Sumatera. The loss of revenue during the seven months delay was estimated at $200,000. The frequent breakdown and tripping in the state transmission lines also affected the uptake of electricity production from the Bengkulu plant. We expect there to be less disruption next year due to a major upgrade being underway as old transmission lines are being replaced. The Group's fourth biogas plant in North Sumatera costing $2.8 million is expected to be commissioned by the second quarter of 2020. The use of clean energy will further reduce the mills' reliance on fossil fuels and improve the Group's carbon footprint.

As the El Nino weather phenomena returns, lower rainfall and soaring temperature were seen across Indonesia and Malaysia. It brought wide spread forest fires and resulting haze not seen in these regions since 2015. Several outbreaks of fire were reported in the Group's plantations which were quickly put out by our in-house fire team. It is not uncommon for economic-motivated fires to rage out of control in this dry condition. The Group does not practise open burning and it is inconceivable for a responsible planter to risk doing so with the Indonesian government imposing heavy fines, imprisonment and revocation of planting licenses. But despite these stiff penalties, some smallholders and farmers of cash crops continue to practise slash and burn given it is the fastest way to clear their land resulting in the dreadful haze. The pressure for palm oil companies to produce sustainably is only going to grow.

In early 2019 the European Union ("EU") adopted the Renewable Energy Directive II which classified palm oil as an unsustainable source of biofuel. If this initiative is agreed by the EU Parliament and the EU countries, the economic bloc will start to reduce the use of palm oil for biofuel in 2024 and will completely phase it out by the year 2030. The French government has started the initiative by removing the tax breaks for palm oil in biofuel from 2020. In addition, the EU also reintroduced tariffs on palm oil imports from the second half of this year. The adverse perception of palm oil as an environmentally unfriendly and non-renewable source, particularly in EU, continues to feature in recent years, touching on issues including deforestation, emission of greenhouse gases, planting on peatland and land rights.

As I mentioned earlier, we are in a period of unprecedented uncertainty caused by the Coronavirus pandemic. The prolonged lockdown of most countries will no doubt have an economic and social impact, possibly leading to a worldwide recession. It can take anything from a year or more for economies to adjust and to recover. The indications are , the Coronavirus pandemic is dragging the major economies of the world into high unemployment and low Gross Domestic Product ("GDP"), possibly trending towards a worldwide recession which could have an adverse impact on the consumption and usage of palm oil even when economic activities are on their way to normality or near normality.

In determining the amount of dividends to be paid to our shareholders, the Board in previous years had been consistent with a balanced approach to the requirement of funds in the Company to expand to enhance shareholders' value and at the same time cognisant of shareholders' wish to have dividends as a form of income. This year the Board has the added considerations of a period of unprecedented uncertainty ahead and an obligation to ensure that the Group has adequate funds to maintain it as a going concern for the foreseeable future in a near worse case scenario, not to mention the sentiments from some quarters that dividends should be withheld in the current climate. With all these in mind, the Board has declared a final dividend of 0.5cts per share, in line with our reporting currency, in respect of the year to 31 December 2019 (2018: 3.0cts). In the absence of any specific instructions up to the date of closing of the register on 12 June 2020, shareholders with addresses in the UK will be deemed to have elected to receive their dividends in Pounds Sterling and those with addresses outside of UK will be deemed to have elected to receive their dividends in US Dollars. Subject to the approval by shareholders at the AGM, the final dividend will be paid on 17 July 2020 to those shareholders on the register on 12 June 2020.

This year's AGM scheduled on 29 June 2020 will be held in Kuala Lumpur instead of it being in London because of practical reasons linked to this pandemic. The Board is conscious that shareholders would want to interact with Board members, normally at the AGM, and therefore a meeting will be organised in London when it is appropriate to do so, with less formality, for shareholders to meet with some of the Board members.

On behalf of the Board of Directors, I would like to convey our sincere thanks to our management and employees of the Group for their dedication, loyalty, resourcefulness, commitment and contribution to the preservation of the Group's operation as a going concern during this difficult and trying period. No doubt they would continue to do so if local and global adversity worsen.

I would also like to take this opportunity to thank shareholders, business associates, government authorities and all other stakeholders for their continued confidence, understanding and support for the Group.

Madam Lim Siew Kim

Chairman

19 May 2020

Strategic Report

Introduction

The Strategic Report has been prepared to provide shareholders with information to complement the financial statements. This report may contain forward-looking statements, which have been included by the Board in good faith based on information available up to the time of approval of this report. Such statements should be treated with caution going forward given the uncertainties inherent with economic and business risks of the Group.

Business Model

The Group will continue to focus on its strength and expertise, which is planting more oil palms and production of CPO. This includes replanting old palms with low yield, replacing old rubber trees with palm trees and building more mills to process the FFB. The Group has, over the years, created value to shareholders through expansion in a responsible way. The Group remains committed to use its available resources to develop the land bank in Indonesia as regulatory constraints permit. The Indonesian government has, in recent years, passed laws to prioritise domestic investments and to limit foreign direct investments over national interest, including a limit of 20,000ha per province and a national total of 100,000ha on the licensed development of oil palms for companies that are not listed in Indonesia or with less than a majority local ownership.

The Group's objectives are to provide appropriate returns to investors in the long-term from its operations as well as through the expansion of the Group's business, to foster economic progress in localities of the Group's activities and to develop the Group's operations in accordance with the best corporate social responsibility and sustainability standards.

We believe that sustainable success for the Group is best achieved by acting in the long-term interests of our shareholders, our partners and society.

Our Strategy

One of the Group's objectives is to provide an appropriate level of return to the investors and to enhance shareholder value. Profitability, however, is very much dependent on the CPO price, which is volatile and is determined by supply and demand. The Group believes in the long-term viability of palm oil as it can be produced more economically than other competing oils and remains the most productive source of vegetable oil in a growing population. Soybean crops would require up to eight times as much land to produce an equivalent weight of palm oil. It was reported that amongst the major oilseeds, oil palm occupies about 10% of the total agricultural land but contributes more than 40% of the world's supply of oils and fats.

The Group's strategies, therefore, focus on maximising yield per hectare above 22mt/ha, mill production efficiency of 110% , minimising production costs below $300/mt and streamlin ing estate management . For the year under review, the Group achieved a yield of 18.1mt/ha, 132% mill efficiency and production cost of $285/mt on the Indonesian operations. This compared to 2018 where the Group achieved a yield of 19.3mt/ha, 143% mill efficiency and production cost of $284/mt. Despite stiff competition for external crops from surrounding millers, the Group is committed to purchasing more external crops from third parties at competitive, yet fair prices, to maximise the production efficiency of the mills. With higher throughput, the mills would achieve economies of scale in production. A mill achieves 100% mill efficiency when it operates 16 hours a day for 300 days per annum.

In line with the commitment to reduce its carbon footprint, the Group plans to construct, in stages, biogas plants at all of its mills to trap the methane gas emitted from the treatment of palm mill effluents to generate electrical power and at the same time reduce the consumption of fossil fuel. It plans to sell the surplus electricity and progressively reduce the greenhouse gas emissions per metric ton of CPO produced in the next few years.

The Group will continue to follow-up and offer competitive and fair compensation to villagers so that land can be cleared and be planted.

Financial Review

The financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.

For the year ended 31 December 2019, revenue for the Group was $219.1 million, 13% lower than $250.9 million reported in 2018 due primarily to the lower CPO prices and lower production.

The Group's operating profit for 2019, before biological asset movement, was $12.2 million, 61% less than $30.9 million in 2018.

FFB production for 2019 was 1.03 million mt, 1% lower than the 1.04 million mt produced in 2018. The overall yield for the Indonesian plantations was lower at 18.1mt/ha due to the dry weather which delayed the ripening of FFB bunches. In Riau palms suffered from biological stress after a bumper harvest last year. Bengkulu region appeared to suffer the most from the effect of dry weather as production was down 11%. FFB bought-in from local smallholders in 2019 was 0.91 million mt (2018: 1.01 million mt), 10% lower compared to 2018. The supply of external crops was affected by greater competition from new mills and also lower productivity amongst smaller plantations as they reduced the fertilizer application during the period of low CPO prices. During the year, the Group's mills processed 1.87 million mt of FFB, 7% lower than last year of 2.02 million mt. CPO production, as a result, was 6% lower at 394,700mt, compared to 418,800mt in 2018.

Profit before tax and after BA movement for the Group was $18.9 million, 39% lower compared to a profit of $30.9 million in 2018. The BA movement was a credit of $3.3 million, compared to a debit of $2.3 million in 2018. The BA movement was mainly due to a change in FFB price which was higher in 2019. The profit before tax was affected by reversal of impairment charge on the development cost of the plantation amounting to $7.6 million and impairment on land amounting to $1.0 million compared to an impairment charge amounting to $4.3 million in 2018. The profit before tax was also impacted by the expected credit loss from Plasma receivables amounting to $6.1 million in 2019 (2018: $0.1 million) attributed to the additional amounts allocated for plasma development during the year. There was a gain of exchange in translation of foreign operations totalling $18.7m for 2019 against an exchange loss of $29.5m in the previous year due to the strengthening of Indonesian rupiah at year end. The retirement benefits due to the employees for 2019 calculated by the actuary increased to $11.3m from $8.2m last year due to an increase in the number of full-time workers. The cash movement including loan of the Group for 2019 is covered under Going Concern in the Strategic Report.

The average CPO price ex-Rotterdam for 2019 was $565/mt, 5% lower than 2018 of $595/mt.

Earnings per share before BA movement increased by 9% to 35.37cts compared to 32.50cts in 2018. Earnings per share after BA movement increased from 28.79cts to 40.61cts. Earnings per share have increased notwithstanding the decrease in profit after tax as compared to 2018 due mainly to the impact of the write off of significant intercompany loans within operating subsidiaries which have non-controlling interest bearing part of this cost.

Going Concern

The Group's balance sheet remains strong. As at 31 December 2019, the Group had cash and cash equivalents of $84.8 million (2018: $112.2 million) and borrowings of $8.2 million (2018: $19.3 million), giving it a net cash position of $76.6 million, compared to $92.9 million in 2018. The net cash inflow from operating activities during the year was lower at $14.6 million by 26% compared to $19.8 million in 2018 due mainly to the lower CPO price and higher operating expenses. The cash position was also lower in 2019 due to capex, development costs and loan repayment exceeding profits during the year. The outstanding loan of $8.2 million is scheduled for full repayment in 2020 in line with the terms and conditions of the loan. As the result of the pandemic and the uncertainty it causes on demand for palm oil and CPO price, we do not expect a significant improved cash flow in 2020. The tax recoverable for 2020 amounted to $49.5 million, a 12% increase over the previous year of $44.3 million. The substantial increase is due to the value added tax ("VAT") paid which is refundable by tax authority after tax audit. A detailed description is provided in note 8.

The Directors have a reasonable expectation, having made the appropriate enquiries, that the Group has control of the monthly cashflows and that the Group has sufficient cash resources to cover the fixed cashflows for a period of at least 12 months from the date of approval of these financial statements, including having to make full repayment of the bank loan. For these reasons, the Directors adopted a going concern basis in preparation of the financial statements. The Directors have made this assessment after consideration of the Group's budgeted cash flows and related assumptions including appropriate stress testing of identified uncertainties, specifically on the potential shut down of the entire operations if all the plantations are infected with Coronavirus as well as the impact on the demand for palm oil due to the Coronavirus pandemic. Stress testing of other identified uncertainties was undertaken on primarily commodity prices and currency exchange rates.

Business Review

Indonesia

The performance of the Indonesian operations is divided into five geographical regions.

North Sumatera

FFB production in North Sumatera, which aggregates the estates of Tasik, Anak Tasik, Labuhan Bilik ("HPP"), Blankahan, Rambung, Sg Musam and Cahaya Pelita ("CPA") produced 314,600mt in 2019 about 9% above last year (2018: 289,700mt). The increase in matured areas to 15,025ha from 13,469ha contributed to a higher production. The prolonged dry weather had affected the annual yield which dropped to 20.9mt/ha from previous high of 21.1mt/ha. Rainfall in CPA, one of the wettest parts in North Sumatera averaged 4,487mm, 11% lower than the previous year of 5,019mm. Despite the lower rainfall, occasional flash floods recurred due to a combination of seasonal monsoon rain and high tide.

Rainfall in Tasik has steadily declined from an average of 3,100mm per annum in 2013 to 2,263mm in the last six years. Male flowers were prevalent, an indication of moisture stress which is likely to affect yield in the short term.

Rhinoceros beetle or Oryctes damage was observed in Tasik Raja and Anak Tasik which is expected given the largescale replanting undertaken in the last two years. It was also observed that the average bunch weight for 2014 planting dropped due to relatively high number of parthenocarpic bunches in newly matured fields caused by poor pollination and fruit set. A variety of planting materials would be considered in future to provide variability and pollens. In the meantime, hand pollination was carried out to reduce abnormal bunches.

Higher production can be expected in coming years as new planting and replanted areas of 3,800 ha matured and bear fruits. The entire Anak Tasik estate was replanted with more resistant anti-Ganoderma material which hopefully would reduce the threat of the stem rot disease prevalent in this area. In HPP, oil palms are recovering from the desiccation of fronds as the affected area has reduced to 185ha from about 1,500ha as water gates and canals provide better water management. About 230ha of aged palms in CPA will be replanted next year with raised platforms in flood prone areas to improve growth and help in the evacuation of fruits.

The Blankahan biogas plant had a disappointing year. It sold about 2,200MWh (2018: 5,700MWh) of surplus electricity and generated $0.14 million in revenue, 67% lower than previous year of $0.42 million. It took seven months to conclude the renewal of contract for the sale of electricity due to the change in procedure which require approvals from various government departments from Jakarta and very often government officers were not available. The Indonesian Presidential election during the year further exacerbated the delay. In the coming months biogas production is likely to be affected as lower amount of FFB are processed in the mill due to intense competition for external crops from the two new surrounding mills. Outside crops currently made up about 73% of the total crops processed by the mill. The sales from the biomass plant were also lower in 2019 at $0.73 million compared to $0.91 million last year, as the plant exported 4% less dried long fibres at 6,689mt compared to 6,959mt last year due to the lower FFB processed and prices were also not favourable.

Bengkulu and South Sumatera

FFB production in Bengkulu and South Sumatera, which aggregates the estates of Puding Mas ("MPM"), Alno, Karya Kencana ("KKST"), Empat Lawang ("ELAP") and Riau Agrindo ("RAA") produced 326,700mt (2018: 358,400mt), 9% lower than 2018. Production was badly affected by lower rainfall. In Bengkulu rainfall was down 37% to 2,861mm from 4,550mm recorded last year. South Sumatera did not fare any better as rainfall was below the minimum 150mm per month for five months. The yield in Bengkulu as a result was lower at 16.9mt/ha from 19.1mt/ha last year while in South Sumatera the yield was 7.4mt/ha compared to the previous year of 6.7mt/ha.

During the year about 25,000 new palms were spot planted in South Sumatera which raised the stems count to 98 stems per hectare. The objective is to improve the density to 105 stems, highest possible under the steep terrain condition. The high gradient cannot support a higher number of trees as terraces need to be carved in the slopes.

Fire is common in the dry weather and fires from unknown sources in third quarter of the year destroyed 107 palms and damaged 715 palms in ELAP and KKST. Our in-house fire-fighting team put out the fires promptly and made police reports to facilitate investigations. It is not uncommon for smallholders and farmers to slash and burn and at times the fire may go out of control and spread cross the estate boundary. The Group continues to encourage and engage the smallholders to drive a change to sustainable practices and prevent wildfire.

Lower rainfall provided opportunities to repair and realign the roads to improve transport of crops. Good condition of main and collection roads allowed single handling and minimised overnight crops.

In the previous year the mills at MPM and Sumindo reported high free fatty acids ("FFA') in their CPO production due to transport and workforce problems resulting from late deliveries of FFB to the mills. With the implementation of a new system, the management is happy to report that the FFA at the two mills was kept below the 5% level for the whole year. With external crops making up about 47% of the crops processed by the two mills, they faced heated competition from new mill as external crops dropped by 13.2% to 283,200mt from 326,100mt in 2018.

About 550ha of palms will be replanted from next year as the palms in Alno and MPM reach the average age of 17 and 20 years respectively. The replanting is also fast track as the dura palms constituted a significant portion of the planted areas. Fruits from dura palms have thin mesocarp which ultimately produce less oil.

The MPM biogas plant sold over 9,300MWh (2018: 8,100MWh) of surplus electricity and generated $0.44million in revenue in 2019 similar to last year due to the lower electricity rate. The biogas plant performed below its optimum two megawatt capacity as frequent breakdowns in the old transmission lines disrupted the electricity uptake.

MPM and Alno received their International Sustainability and Carbon Certification ("ISCC") for its mill and three estates. There was however no price advantage as the mill was unable to sell its CPO at a premium due to the absence of buyers.

Riau

FFB production in the Riau region, comprising Bina Pitri estates, produced 129,400mt in 2019 (2018: 143,200mt), 10% lower than 2018. Although annual rainfall remained about the same as last year at 2,649mm, rainfalls for four months in particular were below the minimum level considered critical for fruits production. The yield for the year dropped to 26.6mt/ha as the palms also show sign of recovery following a record harvest last year at 29.4mt/ha. Replanting is planned for the coming years as 78% of the palms are between the age of 22 to 25 years.

External crop purchase at the mill was 7% lower at 208,600mt compared to 225,400mt last year. Overall CPO production was lower by 7% to 66,800mt compared to 72,100mt in 2018. Despite the high yield, the region is contaminated by dura palms which made up 62% of the crops processed by the mill. The mill therefore had a low Oil Extraction Rate ("OER") of 19.8% slightly above last year of 19.6%.

Bangka

FFB production in the Bangka region, comprising Bangka Malindo Lestari estates, produced 6,000mt in 2019 (2018: 3,300mt), 82% higher than 2018. Higher crop was due to larger area in harvesting and more palms reached peak maturity. Yield improved from 7.3mt/ha to 11.2mt/ha in 2019. Planting in Bangka including plasma expanded to 1,994ha from 1,227ha in 2018.

Kalimantan

FFB production in Kalimantan which comprises of the Sawit Graha Manunggal ("SGM") and Kahayan Agro Plantation ("KAP") estates was 231,400mt in 2019 (2018: 222,700mt) 4% higher than 2018 as more palms matured and reached the peak production age. The average age of palms in SGM and KAP were eight and four years respectively. During the year 860ha of palms matured in KAP leading to its first harvest. The yield in Kalimantan reached 18.0mt/ha compared to 19.2mt/ha in 2018. Rainfall was 16% lower than last year of 3,151mm and was below 90mm per month for three consecutive months in the third quarter of the year.

During the dry weather wildfire damaged 4ha of the plantation. Majority of the palms are however expected to recover.

SGM continued with its mechanization of infield collection of harvested crops by the purchase of light all-terrain vehicles called Quick which were cheaper and easier to maintain. Additional units will be added to the current fleet to help with the crops evacuation.

The purchase of external crops in SGM reached 49,000mt in 2019 which was lower by 11% compared to 55,000mt last year. The OER for the mill averaged 24.1% for the year compared to 23.6% last year and continue to outperform the rest of the mills in the Group.

The SGM biogas plant started commercial operation in February 2019 and generated over 5,700MWh of electricity worth $0.33 million.

Most of the Group's new planting will take place in SGM and KAP next year. The long-term prospect for Kalimantan remains bright.

During the year a Malaysian based agronomist made monthly field visits to underperforming estates in Indonesia to provide advice on optimizing field disciplines and improving crop yields. The Board believes that the monitoring of field performance more closely has resulted in improvements in the underperforming estates which should further improve the crop yield in the coming years.

Overall bought-in crops for Indonesian operations were 10% lower at 0.91 million mt for the year 2019 (2018: 1.01 million mt). The average OER for our mills improved marginally to 21.1% in 2019 (2018: 20.7%).

Malaysia

FFB production in 2019 was 8% lower at 17,000mt, compared to 18,500mt in 2018. Aside from some improvement lately, the Malaysian operations continued to face a severe shortage of workers due to difficulty in recruiting foreign workers which hampered harvesting and estate maintenance work such as fertilising, pruning, weeding and replanting. The shortage of labour is the biggest challenge the industry is facing in Malaysia. The palms with an average age of 22 years faced declining yield as fertiliser program was not followed. The Malaysian plantation in 2019 generated a loss before tax after BA movement of $0.9 million which included an impairment loss of $0.3 million compared to loss before tax after BA movement of $0.5 million in 2018. The plantation has begun the process of obtaining Malaysian Sustainable Palm Oil ("MSPO") certification. In order to ensure compliance to national sustainability standard, the Malaysian government from next year will impose fines and penalise estates of more than 100 acres including cancellation of license to operate if they are not MSPO certified.

The financial performances of the various regions are reported in note 6 on segmental information.

Commodity Prices

The CPO ex-Rotterdam price started the year at $517/mt (2018: $678/mt) and trended downwards for the first half of the year due to high inventory and subdued demand. The price was lowest in July 2019 at $481/mt before a sharp turnaround due to positive sentiments. The Chairman had explained in her statement the reasons for the price rally in the second half of the year. The price peaked towards the end of the year at $858/mt before ending the year at $856/mt (2018: $506/mt), averaging $565/mt for the year, 5% lower than last year (2018: $595/mt). CPO prices continued to push higher at the start of year 2020 after India cut import duties on CPO and refined CPO. The Indian tax revision has made palm oil slightly more competitive against alternative soft oils like soybean and sunflower oil. Prices have since retracted because of the lockdown of major economies around the world due to the spread of Coronavirus. Palm oil meteoric price rally from the second half of the year will almost certainly come with a cost. Palm's discount to top rival soybean oil has contracted to the smallest margin in almost a decade reducing its traditional appeal as a cheaper vegetable oil especially in price sensitive markets like India.

Over a period of ten years, CPO price has touched a monthly average high of $1,284/mt and a monthly average low of $472/mt. The monthly average price over the ten years is about $790/mt. The price remains volatile due to discriminatory actions in EU to reduce and phase out the use of palm oil in biodiesel by 2030. EU ' s move and the potential weaker demand due to the global pandemic of Coronavirus would likely put downward pressure on prices.

Rubber prices averaged $1,272/mt for 2019 (2018: $1,243/mt). Our small area of 262ha of mature rubber contributed a revenue of $0.7 million in 2019 (2018: $0.8 million). Rubber continues to struggle with low prices. Our rubber trees are also affected by fungus disease called Pestalotiopasis sp fungus which causes abnormal defoliation that severely lowers latex production.

Corporate Development

In 2019, the Group opened up new land and planted 1,757ha of oil palm mainly in Kalimantan, boosting planted area including the smallholder cooperative scheme, known as Plasma, by 2% to 71,481ha (2018: 69,792ha). The Group continues to face difficulties in concluding fair prices with some villagers over land compensation. Nevertheless the pace of compensation settlement had picked up in Bangka following positive feedback from the former land owners over the progress of plasma development. In 2020, the Group plans to plant 3,100ha of oil palm which includes replanting of 800ha in Alno and CPA.

The construction of the fourth biogas plant in Rantau Prapat costing $3.8 million was beset by delays following the collapse of the embankment of the anaerobic reactor lagoon on two occasions. The lagoon was finally relocated after a geotechnical study suggested a safer and more economical option. The biogas engine of 1.2MW capacity had since been installed with all buildings, electrical and piping works completed. Testing is expected to commerce early next year. The inspection and certification by local authorities may however take up to six months before the plant can upload the electricity onto the national grid.

The earthworks for the seventh mill in North Sumatera costing $19 million was completed after some setbacks due to inclement weather and numerous soil investigations. Due to the nature of the peat soil, concrete piles of up to 52-metre-long are now required to support and house building, storage tanks and critical machineries. It is currently evaluating the bids for civil and structural works including the design of effluents treatment plant for liquid and solid wastes to fully comply with environmental impact assessment. The project is earmarked for completion by 2021.

FFB production in KAP in Kalimantan where 4,887ha had so far been planted is projected to reach 33,000mt by next year and 190,000mt by the year 2030 as planting increases and more palms come of age. FFB are now sent to SGM mill which is about 600km away but during wet season, the FFB are instead sold to local millers. This is because transport time more than doubles as lorries are frequently stuck in mud as untarred public roads are easily damaged by incessant rain and floods. The Group is conducting a feasibility study to build a 45mt/hr mill in KAP to support its operation and to reduce the current high logistic cost.

In 2019 the three mills in MPM, Sumindo and SGM completed their expansion of storage facilities for palm kernels by constructing additional bulking silos at a cost of $800,000 to meet storage needs during peak harvest. A new boiler with a steaming capacity of 40 tph was added to the Sumindo mill at a cost of $800,000.

Corporate Social Responsibility

Corporate Social Responsibility ("CSR") is an integral part of corporate self-regulation incorporated into our business model. Our Group embraces responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. In engaging the social dimension of CSR, the Group's business has taken cognizance of the contribution and further enrichment of its employees while continuing to make contributions to improve the well-being of the surrounding community. The Group was awarded one of the best CSR providers in 2019 by the Regent of North Bengkulu in recognition of our significant contribution to road and bridge repairs and street light maintenance.

The majority of employees and their dependents in the plantations and mills are housed in self-contained communities built by the Group. The employees and their dependents are provided with free housing, clean water and electricity. The Group also builds, provides and repairs places of worship for workers of different religious faiths as well as schools and sports facilities in these communities. Over the years, the Group has built a total of seventy-five mosques and nineteen churches across its estates. During the fasting month, the management team frequently broke fast with the employees from the estates and mills as well as with surrounding villagers. It also sponsored and donated cows for sacrifice to celebrate religious festivals. The Group spent $254,600 in 2019 to maintain these amenities and to support the communal activities.

The Group p rovides free education for all employees ' children in the local plantations and communities where they work. The access to education and the spread of knowledge to hundreds of children across remote locations provide a chance to overcome poverty, whom otherwise may be deprived and without prospect for the future. In addition, t he G roup provides computers and funding to construct educational facilities including laboratories and libraries. The salaries of teachers in the estates and the cost of buying and running the school buses to transport employees' child ren are provided by the Group . Over the years a total of thirty-eight schools which comprised of twenty-one pre-schools, eleven primary schools, five secondary schools and one high school were built with a combined enrolment of over 4,300 students. It currently employs one hundred and fifty-six teachers in the estates . The Group operated forty vehicles and spent some $ 906,000 on running the schools and operating the buses in 2019 .

As part of the Group's contribution to education, it provides scholarships to qualified students from the communities as well as our employees' children to pursue tertiary education. It started a partnership with a university in North Bengkulu in 2013 to sponsor and to provide students with the chance to pursue higher education. Up to 2019, over three hundred and seventy-eight scholarships had been awarded at a cost of $138,000. Similarly, one hundred and ten children of our employees were sponsored, which cost over $119,300 since its introduction in 1999, to study in various universities in Indonesia. The popular courses ranged from Engineering, Education, Economics to Agriculture. Fifty-three of them had successfully graduated from the universities with some of them now working for the Group.

The Group continues to provide free comprehensive health care for all its workers as we believe that every employee and their dependents should have easy access to health services . We have established twenty-three clinics operated by qualified doctors , nurses and hospital assistants in the estates. The Group upgraded two of its clinics in North Sumatera and Bengkulu to meet the minimum standard required by the government under the country's Health and Social Security Agency. The upgraded clinics also provided health care services to the surrounding community without the need to travel to faraway cities for medical treatment. The Group also operates 15 ambulances to support emergency transportation needs within the estates, mills and surrounding villages. In addition, the Group organised fogging to prevent the spread of dengue mosquitoes.

In remote and isolated locations where piped water is not available, the Group drilled tube wells to provide clean water. Related healthcare expenses for full and part-time field workers including monthly contributions to Health and Social Security Agency in 2019 were $ 884 ,000 .

A strong commitment to CSR has a positive impact on employees' attitudes and boosts employee recruitment. The Group realises that employees are valuable assets in order to run an efficient, effective, profitable and sustainable business and operations. Selected employees are given the opportunity to attend seminars and external training to enhance their working skills and capability. The Group constantly recruits potential field employees who are now sent to the Group's central training facilities in Blankahan, set up in 2014, to undergo a rigorous twelve-month training programme which includes theory and practical fieldwork. A total of four hundred and ninety employees have participated in the programme since its inception in 1993 with 33% of participants still working for the Group. Over the years, one employee has successfully been promoted to General Manager level with another twenty-one being employed in various senior positions in the head office, plantations and mills.

The Group also recognises its obligations to the wider farming communities in which it operates. The Indonesian authorities have established that not less than 20% of the newly planted areas acquired from 2007 onwards are to be reserved for the benefit of the smallholder cooperative scheme, known as Plasma, and the Group is integrating such smallholder developments alongside its estates. The Plasma development has commenced in stages for its estates in Sumatera and Kalimantan. Out of the 7,479ha plasma commitment, the Group has planted oil palm in 3,561ha. In 2019 the Group received 31,000mt of FFB from Plasma schemes compared to 25,800mt the previous year. Total revenue generated by Plasma cooperatives was $3.1 million in 2019 against $2.4 million in 2018.

In order to aid the development of Plasma schemes, the Group provided corporate guarantees of over $17 million through its subsidiaries to local banks to cover loans raised by the cooperatives. The Group also assisted the cooperatives to obtain the proper land rights certification from the local land office, in which 1,097ha were approved and certified in 2019.

The Group supported the Kas Desa smallholder village development programme to supplement the livelihood of the villages. The Group has to-date financed, developed and managed twenty-three smallholder village schemes of oil palm across four companies.

In addition, the Group also develops infrastructure such as the construction and repair of bridges and maintained over 167km of external roads in 2019. The Group also provides initial aid and seed capital to villagers such as fruit seedlings, fish fry, cattle and ducks to start community sustainable programs.

The Group started a vegetable farm in a one-hectare site in North Sumatera in 2018 where it planted various organic vegetables. The produce was sold to employees at subsidized prices to reduce their cost of living as well as to promote heathy living. It also donated some vegetables to local charitable homes.

Indonesian Sustainable Palm Oil ("ISPO")

The ISPO certification is legally mandatory for all plantations in Indonesia. In March 2012, ISPO, which is fundamentally aligned to Roundtable on Sustainable Palm Oil ("RSPO") principles, has become the mandatory standard for Indonesian planters. In comparison, RSPO has the most comprehensive social impact assessment requirements and the strongest measures for biodiversity protection. While ISPO may be less stringent, protection for biodiversity was enhanced through the Presidential Decree 8/2018 that imposed a three-year moratorium on the clearance of primary forest for plantations. It was reported that the Indonesia forest-clearing ban was made permanent in 2019.

A Steering Committee was established to work out a roadmap to support the ISPO implementation at mills and estates. Workshops and training sessions on occupational safety and healthcare were carried out to inculcate a safety culture in workplaces at all the estates and mills. The Group compiles and reviews statistics on work related accidents in its operations. Any incident resulting in fatality or serious injury will be rigorously investigated to identify the cause so that corrective action can be implemented to prevent future incident. In 2019 the Ministry of Labour awarded four operating companies the Zero Accident Awards in North Sumatera in recognition of the companies' effort to reduce accidents at workplaces. The Group continued to upgrad e its agricultural chemical stores and diesel fuel storage tanks in various plantations and mills to meet safety and environmental standards.

Every estate under ISPO is required to have a fire team with each personnel fully trained and equipped with certificate of competence issued by the fire departments. Our Group conducts a fire drill at least once a year. Watch towers are constructed in every estate to monitor fire outbreaks. The watch towers are manned constantly particularly during the dry weather. Standard operating procedures were refined and documented based on sustainable oil palm best practices. It also conducts internal audits using an audit checklist adopted from the above practices to determine the level of compliance.

The Group worked closely with appointed certification consultants in the implementation of ISPO standard. SGM was awarded the ISPO certification in 2019. To-date eleven companies have been ISPO certified. The certification audits for the remaining five companies have started. The second stage of certification process however cannot proceed until the companies obtain their land titles or Hak Guna Usaha ("HGU"). ISPO certification provides third party verification and confirmation that the companies are operating according to national and international standards. The Group targets full ISPO compliance by 2020.

At the same time the Malaysian plantation has also begun the process to obtain the MSPO certification which is expected to be completed by 2020.

Environment Social and Governance Practices

Environmentally friendly plantation practices are a must to maintain the industry's long-term prospects. The Group has been consistently practising good agricultural practices such as zero burning, integrated pest management, soil and water conservation and recycling of biomass. When it comes to replanting, the old palms felled are chipped and shredded and left to decompose at the site. This mitigates the greenhouse gas emissions commonly associated with open burning when land is cleared through the traditional method of slash-and-burn. It also enriches the organic matter in the soil and recycled nutrients back onto the soil. Where the land is undulating, we build terraces for planting which helps to prevent landslides, conserve the water and nutrients effectively and provide better accessibility for operations. Legume cover crops are planted to minimise soil erosion, preserve the soil moisture and improve soil chemical and physical properties. In mature areas, fronds and EFB are placed inter-rows to allow the slow release of organic nutrients while minimising soil erosion especially sandy soil and degradation. Estates with sandy areas use soft grass, Nephrolepis biserrata ferns and cut fronds to cover bare ground which increase soil moisture and improve organic matter contents. Conservation pits and sumps are constructed to harvest and contain rainwater.

The effluents discharged from the mills are fully treated in anaerobic lagoons and in some mills, there are extended aeration tanks for further treatment of the effluent to reduce its biological oxygen demand ("BOD"). The final discharge is applied to the estate's land where it is used as fertilisers. The BOD is tested regularly to ensure that it is below the legal limit for land application in Indonesia. The Group is working towards a zero-effluent policy whereby no by-products from the production of CPO is discharged into rivers.

The Group's three biogas plants will enhance the effluent treatment in the mills and at the same time mitigate greenhouse biogas emissions. The trapped biogas will be used to generate and supply power to its biomass plant and national grid without dependency on fossil fuel s . A fourth biogas plant is in the final stage of construction. S imilar undertakings for the Group's mills are planned and shall be implemented in stages . The Group intends to sell the surplus power generated from future biogas plants.

The Group is committed to implementing good agricultural practices as spelt out in its standard operating procedures for the planting of oil palm. Integrated Pest Management has been adopted to control the population of damaging pests and to improve biological balance while reducing dependence on chemical pesticides. Barn owls which are natural predators, were introduced to control the rat population. We do not use rat baits to control the rat population. Beneficial plants of Turnera subulata, Cassia cobanensis and Antigonon leptopus were planted to attract natural predators for biological control of bagworms and leaf-eating caterpillars.

Weeds are controlled selectively by using more environmentally friendly and broad spectrum weed control herbicides.

We are committed to minimiz e the usage of toxic pesticide and herbicide and will not hesitate to phase them out once a suitable substitute is available . The sprayers are also trained in safety and spraying techniques by using judicious dosages . The chemicals are kept in designated storage and examined at regular intervals. Employees who handle the use of chemicals are provided with convenient on-site washing facilities, and undergo medical examination routinely. The Group reinforced the standard occupational safety measures like the use of protective suits and equipment when mixing, loading and applying the pesticides which is mandatory by the Manpower and Transmigration Ministerial Decree No. 08/2010. Managers and employees risked being penalized and disciplined as safety standards compliance are audited from time to time. ISPO certified companies are also prohibited from using 36 banned active ingredients used in pesticides which can cause various health issues in humans and the environment. Highly toxic pesticides such as Paraquat have been completely eliminated in our practice. Pesticides that fall under the WHO Class 1A and 1B classification, as well as those that fall under the Stockholm and Rotterdam Conventions are used only under exceptional circumstances and under strict supervision. In the meantime, different cocktails of safer pesticides are being evaluated as alternatives. The Group has in place standard operating procedure that required the management to be informed for instances of pesticides poisoning among its pesticide applicators.

In order to minimize accidents at workplaces, regular training and refresher courses are held to instill the importance of safe working practices. Warnings and reminders are displayed at the mills and estates to remind the workers on their safety. Warning signs are placed at strategic locations such as speed limits in housing estates and warning against crossing Irish bridges when river water is at danger level.

The Group continues to comply and preserve the High Conservative Value ( " HCV " ) areas recognised by the Department of Forestry. All HCV areas were mapped with boundaries clearly indicated by independent surveyors to ensure that the Group does not plant in these sensitive areas. The Group patrols these protected areas to ensure no encroachment and committed to zero deforestation and to preserve the flora and fauna species in these areas. The Group has identified about 7,831ha as riparian reserves and another 4,955ha as areas of HCV within its land. N atural v egetation on uncultivable land s such as deep peat, very steep area s and riparian zones along watercourses are maintained to preserve biodi v ersity and wildlife corridor s as well as to check erosion .

In Indonesia where drought occurs regularly, an emergency response team is set up in every estate armed with proper equipment and gear to put out fire and prevent them from spreading during the dry months. Regular training on fire-fighting techniques and safety is provided by the fire departments. The plantation had invested in modern technology like drones. They help to pinpoint areas of fire outbreak after security stationed at watchtowers detect smoke. The drones are particularly useful in remote areas where accessibility is restricted. In September 2019, HPP was awarded a certificate of appreciation by the local government for assistance to put out a fire outbreak in an adjacent estate. According to Indonesian Law No. 41/1999 on forestry, a deliberate act of forest burning could lead to 15 years imprisonment and a fine of up to Rp5 billion or about $350,000, while negligence act that leads to a forest fire is punishable by a 5 years imprisonment and a fine of up to Rp1.5 billion or $105,000 for environmental crime. The government is stepping up its enforcement.

All sacred and customary lands are set aside and also preserved by the Group out of respect for the local tribes and customs to pray and conduct their ritual ceremonies. Some of these locations are posted on the company's websites.

The six mills in the Group are operating in compliance with criteria set by Program for Pollution Control Evaluation and Rating ("PROPER") overseen by the Indonesian Department of Environment. Many of the criteria set by PROPER are also part of the ISPO requirement. Five of the mills are officially graded Blue and rated to adhere to the criteria set for the management of waste and compliance to environmental conservation over water resources, land development, air and sea pollution, dangerous and toxic waste treatment which impact the environment. Although no official grading is required for the remaining one mill, it is in full compliance to the PROPER criteria.

The International Sustainability and Carbon Certification ("ISCC") is issued by ISCC System GmbH, a global certification body based in Cologne, Germany. The criteria used in the certification process are:

   --     Implement social and ecological sustainability criteria 
   --     Monitor deforestation-free supply chains 
   --     Avoid conversion of biodiverse grassland 
   --     Calculate and reduce greenhouse gas ("GHG") emissions 
   --     Establish traceability in global supply chains 

The mill in Alno together with its three estates were ISCC certified in 2019.

A certification identifies a company as a responsible player in the industry that has taken efforts to produce sustainable CPO.

During the year the Group has formalised a policy which incorporates the requirement of sustainability standards and regulations to which the Group is already practicing and committed. More details may be obtained from the Company's website under our Sustainability dashboard which covers the Environment, CSR, Workers' rights and safety, Corporate Governance and Sustainability certification.

Principal and emerging risks and uncertainties

The Group's business involves risks and uncertainties of which the Directors currently consider the following to be material. There are or may be other risks and uncertainties faced by the Group that the Directors currently deem immaterial, or of which they are unaware, that may have a material adverse impact on the Group. The Board carries out a robust assessment of the principal and emerging risks facing the Group on an annual basis.

 
 Nature of the risk                The likelihood and                  Mitigating or other 
  and its origin                    impact of the risk                  relevant considerations 
                                    and the circumstances 
                                    under which the risk 
                                    might be most relevant 
                                    to the Company 
 Country and regulatory 
--------------------------------  ----------------------------------  ------------------------------------------------ 
 
   The Group's operations            Political upheaval                  The country has recently 
   are located substantially         and deterioration                   benefited from a period 
   in Indonesia and therefore        in the security situation           of relative political 
   significantly rely                may cause disruption                stability, steady economic 
   on economic and political         on the operation and                growth and stable financial 
   stability in Indonesia.           consequently financial              system. But during the 
                                     loss.                               Asian financial crisis 
                                                                         in late 1990, there 
                                                                         was civil unrest attributed 
                                                                         to ethnic tensions in 
                                                                         some parts of Indonesia. 
                                                                         The Group's operations 
                                                                         were not interrupted 
                                                                         by the regional security 
                                                                         problems including occasional 
                                                                         racial conflicts. 
                                  ----------------------------------  ------------------------------------------------ 
 
   Introduction of measures          Transfer of profit                  The Board is not aware 
   to rein in the country's          from Indonesia to                   of any attempt by the 
   fiscal deficits. This             the United Kingdom                  government to impose 
   included the exchange             ("UK") will be restricted           exchange controls that 
   controls and restriction          affecting servicing                 would restrict the transfer 
   on repatriation of                of UK obligations                   of profits from Indonesia 
   profit through payment            and payment of dividends            to the UK. The Board 
   of dividends.                     to shareholders.                    perceives that the Group 
                                                                         will be able to continue 
                                                                         to extract profits from 
                                                                         its subsidiaries in 
                                                                         Indonesia for the foreseeable 
                                                                         future. 
                                  ----------------------------------  ------------------------------------------------ 
 
   Changes in land legislation.      Mandatory reduction                 The Group realises that 
   Based on National Land            of foreign ownership                there is a possibility 
   Agency Law 2 / 1999,              in Indonesian plantations           that foreign owners 
   mandatory restriction             could force divestment              may be required over 
   to land ownership by              of interests in Indonesia           time to partially divest 
   non-state plantation              at below market values.             ownership of Indonesia 
   companies and companies                                               oil palm operations 
   not listed in Indonesia                                               but has no reason to 
   to 20,000ha per province                                              believe that such divestment 
   and a total of 100,000ha                                              would be anything other 
   in Indonesia.                                                         than at market value. 
                                  ----------------------------------  ------------------------------------------------ 
 
   Group failure to meet             Reputational damage                 The Group continues 
   the standards expected            and criminal sanctions.             to maintain strong controls 
   in relation to bribery                                                in this area as Indonesia 
   and corruption.                                                       has been classified 
                                                                         as relatively high risk 
                                                                         by the International 
                                                                         Transparency Corruption 
                                                                         Perceptions index. 
                                  ----------------------------------  ------------------------------------------------ 
 
   Imposition of import              Reduced revenue and                 The Indonesian government 
   controls or taxes in              reduction in cash                   allows free export of 
   consuming and exporting           flow and profit. The                CPO but applies a sliding 
   countries. Efforts                higher import levy                  scale of duties on exports 
   by EU to ban the use              will raise the price                which allows producers 
   of palm oil and palm              of CPO and make it                  economic margins. Despite 
   biodiesel on sustainable          less competitive in                 the imminent ban on 
   issues.                           the global oil market,              use of palm biodiesel 
                                     thus reducing demand.               in EU, CPO remains amongst 
                                     It will be more difficult           the cheapest source 
                                     to export palm oil                  and most productive 
                                     to EU either for food               of vegetable oil in 
                                     or palm biodiesel                   a growing population. 
                                     and will hurt the 
                                     demand of CPO in EU 
                                     which is the third 
                                     largest consumer of 
                                     CPO. 
--------------------------------  ----------------------------------  ------------------------------------------------ 
 Exchange rates 
 
   CPO is a US Dollar                Adverse movements                   The Board has taken 
   denominated commodity             of Rupiah against                   the view that these 
   and a significant proportion      US Dollar can have                  risks are inherent in 
   of operating costs                a negative effect                   the business and feels 
   in Indonesia (such                on the operating costs              that adopting hedging 
   as fertiliser and fuel)           and raise funding                   mechanisms to counter 
   and development costs             costs.                              the negative effects 
   (such as heavy machinery                                              of foreign exchange 
   and mill equipment)                                                   volatility are both 
   are imported and are                                                  difficult to achieve 
   US Dollar related.                                                    and would not be cost 
                                                                         effective. 
--------------------------------  ----------------------------------  ------------------------------------------------ 
 Produce prices 
---------------------------------------------------------------------------------------------------------------------- 
 
   CPO is a primary commodity        This may lead to significant          Directors believe that 
   and is affected by                price swings. The                     such swings should be 
   the world economy,                profitability and                     moderated by continuous 
   levels of inflation,              cash flow of the plantation           demand in economies 
   and availability of               operations depend                     like China, India and 
   alternative soft oils             upon world prices                     Indonesia. Larger exports 
   such as soybean oil.              of CPO and upon the                   would lead to a lower 
   CPO price also historically       Group's ability to                    inventory of CPO which 
   moves in tandem with              sell CPO at price                     augurs well for future 
   crude oil prices which            levels comparable                     produce price. In the 
   determine the competitiveness     with world prices,                    short term, the prices 
   of CPO as a source                unlike soybean which                  and demand will be volatile 
   of biodiesel.                     is sown annually and                  due to the pandemic. 
                                     production can be 
                                     increased or decreased 
                                     to match demand and 
                                     prevailing prices. 
                                  ------------------------------------  ---------------------------------------------- 
 Social, community and human rights issues 
---------------------------------------------------------------------------------------------------------------------- 
 
   Any material breakdown            Communication breakdown               The Group mitigates 
   in relations between              would cause disruption                this risk by liaising 
   the Group and the host            on the operation and                  regularly with village 
   population in the vicinity        consequently financial                representatives to mediate 
   of the operations could           loss. Access to areas                 on disputes. It develops 
   disrupt the Group's               of disputed compensation              a close relationship 
   operations. The plantations       is restricted due                     with villagers by improving 
   hire large numbers                to blockages by the                   local living standards 
   of people and have                communities.                          through mutually beneficial 
   significant economic                                                    economic and social 
   importance for local                                                    interaction with the 
   communities in the                                                      local villages. The 
   areas of the Group's                                                    Group, when possible, 
   operations. Disputes                                                    gives priority to applications 
   over compensation for                                                   for employment from 
   land allocated to the                                                   the local population 
   Group which were previously                                             and supports specific 
   used by the communities                                                 initiatives to encourage 
   for their livelihood.                                                   local farmers and tradesmen 
                                                                           to act as suppliers 
                                                                           to the Group, its employees 
                                                                           and their dependents. 
                                                                           The Group spends considerable 
                                                                           money constructing new 
                                                                           roads and bridges and 
                                                                           maintaining existing 
                                                                           roads used by villagers. 
                                                                           The Group also provides 
                                                                           technical and management 
                                                                           expertise to villagers 
                                                                           to develop oil palm 
                                                                           plots or villages and 
                                                                           Plasma schemes surrounding 
                                                                           the operating estates. 
                                                                           The returns from these 
                                                                           plots are used to improve 
                                                                           villages' community 
                                                                           welfare. 
                                  ------------------------------------  ---------------------------------------------- 
 The COVID-19 pandemic             Our plantations and                   The Group imposed travel 
  as we are experiencing            mills could be seriously              restriction and strict 
  has affected national             infected which may                    movement on workers 
  and world economies.              require a total shut                  housed in our mills 
  COVID-19 and similar              down of the infected                  and estates. Workers 
  pandemics could disrupt           part of our operations                leaving the housing 
  the Group's operation.            to contain and eradicate              and workplace must seek 
                                    the infection.                        prior approval from 
                                                                          management and will 
                                                                          be subjected to 14-day 
                                                                          quarantine upon return. 
                                                                          All outside casual workers 
                                                                          hired are assigned to 
                                                                          different parts of the 
                                                                          estates isolated and 
                                                                          with no or minimum contact 
                                                                          with our regular workers. 
                                                                          Wearing a face mask 
                                                                          is mandatory. To maintain 
                                                                          the workers hygiene, 
                                                                          additional areas are 
                                                                          provided for them to 
                                                                          wash their hands with 
                                                                          soaps and apply sanitizers. 
                                                                          Temperatures of all 
                                                                          workers are taken daily 
                                                                          before they start work. 
                                                                          Workers with high temperature 
                                                                          will be required to 
                                                                          self quarantine and 
                                                                          necessary tests conducted 
                                                                          by qualified doctors 
                                                                          to determine their condition. 
                                                                          Administration and finance 
                                                                          staff in Medan are divided 
                                                                          into two teams with 
                                                                          each team working from 
                                                                          home on an alternative 
                                                                          basis to reduce exposure 
                                                                          to the virus and mitigate 
                                                                          disruption. The Group 
                                    The local governments                 also stock up on essential 
                                    where the Group operates              goods and spare parts 
                                    could enforced a total                to minimise disruption 
                                    lockdown requiring                    to estate and mills 
                                    a total shutdown of                   operation should the 
                                    the Group's operations.               government order a lockdown 
                                                                          or impose further movement 
                                                                          control. 
 
                                                                          The Group has budgeted 
                                                                          cash requirement on 
                                                                          a minimum spend basis 
                                                                          that would sustained 
                                                                          the continuity of the 
                                                                          Group for at least twelve 
                                                                          months. 
                                  ------------------------------------  ---------------------------------------------- 
 Weather and natural disasters 
---------------------------------------------------------------------------------------------------------------------- 
 
   Oil palms rely on regular         Dry periods, in particular,       Where appropriate, bunding 
   sunshine and rainfall             will affect yields                is built around flood 
   but these weather patterns        in the short and medium           prone areas and canals/drainage/retention 
   can vary and extremes             term. It may result               ponds constructed and 
   such as unusual dry               in wildfire that may              adapted either to evacuate 
   periods or, conversely,           damage and destroy                surplus water or to 
   heavy rainfall leading            the palms. Drought                maintain water levels 
   to flooding in some               induces moisture stress           in areas quick to dry 
   locations can occur.              in palm trees. High               out. Where practical, 
   Indonesia, where most             levels of rainfall                natural disasters are 
   of its plantations                can disrupt estate                covered by insurance 
   are located, frequently           operations and result             policies. Certain risks 
   experience natural                in harvesting delays              (including the risk 
   disasters like earthquake,        with loss of FFB or               of crop loss through 
   forest fire and tsunami.          deterioration in fruit            fire, earthquake, flood 
                                     quality. Delay in                 and other perils potentially 
                                     collection of harvested           affecting the planted 
                                     FFB could raise the               areas on the Group's 
                                     level of free fatty               estates) if they materialise 
                                     acid ("FFA") in the               could dent the potential 
                                     CPO. CPO with high                revenues, for which 
                                     FFA would be sold                 insurance cover is either 
                                     at a discount to market           not available or would 
                                     prices. Low level                 in the opinion of the 
                                     of sunshine could                 Directors be disproportionately 
                                     result in delay in                expensive, are not insured. 
                                     formation of FFB resulting        These risks of floods, 
                                     in potential loss                 earthquake, fires or 
                                     of revenue. Any natural           haze are mitigated by 
                                     disaster could result             the geographical spread 
                                     in a shortage of workers          of the plantations but 
                                     and incur temporary               an occurrence of an 
                                     work stoppage due                 adverse uninsured event 
                                     to damage to the plantation       could result in the 
                                     or mill.                          Group sustaining material 
                                                                       losses. 
--------------------------------  --------------------------------  -------------------------------------------------- 
 Hedging risk 
---------------------------------------------------------------------------------------------------------------------- 
 
   The Group's subsidiaries          The Group could face                    The risk is partially 
   have borrowings in                significant exchange                    mitigated by US Dollar 
   US Dollar.                        losses in the event                     denominated cash balances 
                                     of depreciation of                      and the higher average 
                                     their local currency                    interest rate on Rupiah 
                                     (i.e. strengthening                     deposits which is 4.44% 
                                     of US Dollar) and vice                  higher than on US Dollar 
                                     versa.                                  deposits whereas the 
                                                                             interest rate for Rupiah 
                                                                             borrowings is about 
                                                                             2.72% higher compared 
                                                                             to US Dollar borrowings. 
--------------------------------  --------------------------------------  -------------------------------------------- 
 Information Technology ("IT") security risk 
---------------------------------------------------------------------------------------------------------------------- 
 
   The security threats              Failure to combat cyberattack           The Group has measures 
   faced by the Group                could cause disruption                  in place including 
   include threats to                to our business operations.             appropriate tools and 
   its IT infrastructure,            Potential loss of financial             techniques to monitor 
   unlawful attempts to              records leading to                      and mitigate this risk. 
   gain access to classified         error or misstatement                   The Group through its 
   information and potential         in financial statements.                IT Consultant has in 
   for business disruptions                                                  place antivirus, threat 
   associated with IT                                                        detection, log analysis, 
   failures.                                                                 DDOS protection and 
                                                                             Firewalls. 
--------------------------------  --------------------------------------  -------------------------------------------- 
 
 

Gender diversity

The AEP Plc Board is composed of three men and one woman with extensive knowledge in their respective fields of experience. The Board has taken note of the recent legislative initiatives with regard to the representation of women on the boards of Directors of listed companies and will make every effort to conform based on legislative requirement.

 
                                       2019 average employed during 
                                                 the year 
 Group Headcount                        Women         Men       Total 
 Board (Company and subsidiaries)           3          12          15 
 Senior Management (GM 
  and above)                                -           5           5 
 Managers & Executives                     34         426         460 
 Full Time                                245       6,200       6,445 
 Part-time Field Workers                3,969       5,316       9,285 
 Total                                  4,251      11,959      16,210 
 %                                        26%         74%        100% 
 
 
                                       2018 average employed during 
                                                 the year 
 Group Headcount                        Women         Men       Total 
 Board (Company and subsidiaries)           3          13          16 
 Senior Management (GM 
  and above)                                -           6           6 
 Managers & Executives                     33         380         413 
 Full Time                                225       5,664       5,889 
 Part-time Field Workers                4,956       5,903      10,859 
 Total                                  5,217      11,966      17,183 
 %                                        30%         70%        100% 
 

Although the Group provides equal opportunities for female workers in the plantations, the male workers make up a majority of the field workers due to the nature of work and the remote location of plantations from the towns and cities. The number of female part-time field workers decreased by 20% from 4,956 to 3,969 in 2019. Overall, the number of female workers within the Group decreased from 5,217 (30%) in 2018 to 4,251 (26%) in 2019. The reduction in female workers was mainly due to the termination of fertiliser program for plantations which are scheduled for replanting from 2020 to 2022.

Employees

Oil palm cultivation is a labour-intensive industry. In 2019, the number of full-time workers averaged 6,925 (2018: 6,324) while the part-time labour averaged 9,285 (2018: 10,859). The total headcount in 2019 was lower by 5.7% due to a reduction of part-time workers employed as explained above in the Gender diversity. The Group has introduced mechanisation in the field to boost productivity. Mechanisation though has its limits but where possible could help relieve the acute shortage of labour and reduce the cost pressure from rising minimum wages.

The Group has formal processes for recruitment, particularly for key managerial positions, where psychometric testing is conducted to support the selection and hiring decisions. Exit interviews are also conducted with departing employees to ensure that management can address any significant issues.

Existing employees are selected on a regular basis for training programmes organised by the Group's training centre that provide grounding and refresher courses in technical aspects of oil palm estate and mill management. The training centre also conducts regular programmes for all levels of employees to raise the competency and quality of employees in general. These programmes are often supplemented by external management development courses including attending industry conferences for technical updates. A wide variety of topics are covered including work ethics, motivat ion , self-improvement , company values and health and safety. The Group spent $106,700 on staff training and professional development in 2019 against $131,300 for the previous year.

The Group operates a cadet program where graduates from local universities are selected to undergo theory and field training over a twelve-month period. On successful completion, they are assigned as assistants to various mills and estates.

All the plantations are at various stages of introducing finger printing to record and mark attendance of daily workers and to pay all workers through bank transfer to improve the efficiency of estate operations.

A large workforce and their families are housed across the Group's plantations. The benefits provided to them were extensively covered under CSR in the Strategic Report. On top of competitive salaries and bonuses, these extensive benefits and privileges help the Group to retain and motivate its employees. The Group complied with the minimum wage policy issued by the Indonesian government. It respects the rights of employees and does not exploit workers, use child or forced labour and is not involved in human trafficking as described in the UK's Modern Slavery Act 2015.

The employees are covered by Governmental mandatory personal accident scheme with death benefits covering up to forty-eight months of workers' monthly salaries. The employees' spouses and children are also privately insured for death benefits by the Group.

The rights of employees and their extensive benefits covering every aspect of employment from salary review, allowance, bonus, housing, study and training for improvement, work safety and health and code of conduct are contained in the Company's handbook which is available and accessible to all employees.

The Group promotes a policy for the creation of equal and ethnically diverse employment opportunities including with respect to gender.

The Group has in place key performance-linked indicators to determine increment and bonus entitlements for its employees. The human resources engage members of the labour unions representing full-time workers at least once a year on their yearly performance bonuses and grievances.

A whistle-blower policy was introduced this year to allow workforce to raise concerns in confidence and if they wish anonymously to the Board of the holding company for independent investigations and follow-up actions. The full details of the policy can be downloaded from the Company's website.

The Group promotes and encourages employee involvement in every aspect wherever practical as it recognises employees as a valuable asset and is one of the key contributions to the Group's success. The employees contribute their ideas, feedback and voice out their concerns through formal and informal meetings, discussions and annual performance appraisals. In addition, various work related and personal training programmes are carried out annually for employees to promote employee engagement and interaction. The Group organises an annual dinner to recognise high achievers in the plantation and mill operations. It also has an annual family gathering to foster camaraderie among its employees.

Although the Group does not have a specific policy on the employment of disabled persons, it, however, employs disabled persons as part of its workforce. The Group welcomes disabled persons joining the Group based on their suitability.

Outlook

FFB production for the three months to March 2020 was 3% higher against the same period in 2019 mainly due to the increase in production from Bengkulu region. It is too early to forecast whether the production will be better for the rest of the year.

The CPO price ex-Rotterdam opened the year at $878/mt and averaged about $725 for the first three months of 2020. CPO prices and export demand suffered temporary setback following the outbreak of Coronavirus in China which has since spread to many parts of the world. Depending on the length of economic lockdown amongst the major consumers of palm oil, the common consensus amongst the industrial experts is that CPO prices are expected to be fairly better for 2020 due to higher demand from palm biodiesel mandates in Indonesia and Malaysia, on top of a potential shortfall in FFB production due to the dry weather in 2019 and the lower application of fertiliser. New planting in palm oil industry has also slowed from 2015, partly due to a forest moratorium imposed by the Indonesian government that limits the conversion of forests and peat land for oil palm development which also help to cap supply.

The reported lower soybean output in United States in the coming year further reinforced the positive sentiment for palm oil price.

A rising CPO price may however discourage discretionary uptake as cost of blending palm biodiesel may be more expensive than the traditional fossil fuel. It is likely that at some point forward, some demand may shift back to soybean oil as China's relationship with United States improves and the demand of soybean meal picked up as it recovered from the culling of hog population due to the African swine flu.

The rising material costs and wages in Indonesia are expected to increase the overall production cost in 2020. The Indonesian government recently announced the 2020 national minimum wage increase averaging 8.5%. These wage hikes will raise overall estate costs and may erode profit margins.

Nevertheless, barring any unforeseen circumstances, the Group is confident that CPO demand will be sustainable in the long-term and we can expect a satisfactory trading outturn and cash flow for 2020.

Statement by directors in performance of their statutory duties in accordance with Sec 172 (1) of the Companies Act 2006.

The Board of Directors of Anglo-Eastern Plantations Plc consider, both individually and collectively, that they have acted in good faith, in the way they consider would be most likely to promote the success of the Company for the benefit of its members as a whole, having regard to the stakeholders and matters set out in Sec 172 (1) (a) to (f) of the Act in decisions taken during the year ended 31 December 2019.

-- Our business model and strategy as highlighted in the Strategic Report are designed to have a long-term beneficial impact on the Company and contribute to its success in delivering consistent and appropriate returns to the shareholders. We will continue to operate our business within tight budgetary controls and regulatory targets. To deliver these goals, the Company continues to work in close partnership with local communities to bring development and economic progress as well as generate goodwill in the localities in which it operates.

-- Our employees are fundamental to the delivery of our business goals. We aim to be a responsible employer in our approach to the pay and benefits our employees receive. The health, safety and well-being of our employees is one of our primary considerations in the way we do business. Many of these continuing efforts are covered under CSR and Employees sections of the Strategic Report.

-- We aim to act responsibly and fairly in how we engage with our suppliers, creditors and customers, all of whom are integral to the successful delivery of our business plan. The Company adopts a transparent approach in price negotiation, tenders and observe the credit terms. The Board provides a channel of communication and feedback from suppliers and customers to voice their concerns through the whistle-blowers policy which is displayed in the Company's website.

-- Our business plan takes into account the impact of the Company's operations on the community and environment and our wider social responsibilities, and in particular how we impact the regions we operate. CSR is part of the Company's culture which includes responsibility to safeguard the environment and is highlighted in the Strategic Report. Several of our measures to deliver environmental improvements are covered in detail in the Sustainable Palm Oil Certification and Environmental Social and Governance Practices sections of the same report.

-- As the Board of Directors, our intention is to behave responsibly and ensure that management operates the business in a responsible manner, operating within the high standards of business conduct and good governance expected for a business such as ours and in doing so, will contribute to the delivery of our business goals. See Corporate Governance and Audit Committee Report. The intention is to nurture our reputation that reflects our responsible behaviour.

-- It is the intention of the Board of Directors, to behave responsibly toward our shareholders and treat them fairly and equally, so that they too may benefit from the successful delivery of our business plan.

Restructuring within the Group

During 2019 there was restructuring in the Group involving a few subsidiaries, principally relating to intercompany loans and interest charges so that more cash is retained in the Group. The exercise was diligently put together by the Group's senior management, having had consultations with a reputable firm of accountants in Jakarta, Indonesia. The proposal to restructure was then put forward to the Board to evaluate and approved. As the impact of the restructuring affected the non-controlling interests in those subsidiaries, a process of consultation with those non-controlling interests took place prior to restructuring.

On behalf of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

19 May 2020

Directors' Responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU. The Directors have elected to prepare the Company financial statements in accordance with FRS 101 Reduced Disclosure Framework under the UK Generally Accepted Accounting Practice ("UK GAAP"). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the income statement for the Group for that period.

In preparing these financial statements, the Directors are required to:

   --    select suitable accounting policies and then apply them consistently; 
   --    make judgements and accounting estimates that are reasonable and prudent; 

-- state whether they have been prepared in accordance with applicable accounting standards, subject to any material departures disclosed and explained in the financial statements;

-- prepare a Strategic Report, a Director's Report and Director's Remuneration report which comply with the requirements of the Companies Act 2006; and

   --    make an assessment of the Company and Group's ability to continue as a going concern. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with the legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' responsibilities pursuant to DTR4

All of the Directors confirm to the best of their knowledge:

-- The Group financial statements have been prepared in accordance with IFRSs as adopted by the EU and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and income statement of the Group.

-- The Strategic Report in the annual report includes a fair review of the development and performance of the business and the financial position of the Group, together with a description of the principal risks and uncertainties that they face.

-- The annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

19 May 2020

Consolidated Income Statement

For the year ended 31 December 2019

 
                                                  2019                                                        2018 
                                       Result                                    Result 
                                       before                                    before 
      Continuing                  BA movement    BA movement                BA movement    BA movement 
      operations          Note                                     Total                                     Total 
 
                                         $000           $000        $000           $000           $000        $000 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ---------- 
 Revenue                  3           219,136              -     219,136        250,859              -       250,859 
 Cost of sales                      (199,515)          3,255   (196,260)      (206,224)        (2,286)     (208,510) 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Gross profit                          19,621          3,255      22,876         44,635        (2,286)        42,349 
 Administration 
  expenses                            (8,068)              -     (8,068)        (9,060)              -       (9,060) 
 Reversal of 
  impairment 
  / (Impairment 
  losses)                 11            6,590              -       6,590        (4,339)              -       (4,339) 
 Provision for 
  expected 
  credit loss             15          (5,965)              -     (5,965)          (308)              -         (308) 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Operating profit                      12,178          3,255      15,433         30,928        (2,286)        28,642 
 Exchange gains / 
  (losses)                                251              -         251        (1,250)              -       (1,250) 
 Finance income           4             4,169              -       4,169          5,048              -         5,048 
 Finance expense          4             (980)              -       (980)        (1,511)              -       (1,511) 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Profit before tax        5            15,618          3,255      18,873         33,215        (2,286)        30,929 
 Tax (expense) / 
  credit                  8           (1,885)          (814)     (2,699)       (13,633)            571      (13,062) 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Profit for the year                   13,733          2,441      16,174         19,582        (1,715)        17,867 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Attributable to: 
  - Owners of the 
   parent                              14,019          2,077      16,096         12,882        (1,469)        11,413 
  - Non-controlling 
   interests                            (286)            364          78          6,700          (246)         6,454 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
                                       13,733          2,441      16,174         19,582        (1,715)        17,867 
---------------------  -------  -------------  -------------  ----------  -------------  -------------  ------------ 
 Earnings per share 
  for profit 
  attributable 
  to the owners of 
  the parent during 
  the year 
                          9                                     40.61cts                                    28.79cts 
   *    basic 
                          9                                     40.61cts                                    28.79cts 
   *    diluted 
 
 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2019

 
                                                        2019          2018 
                                                        $000          $000 
------------------------------------------------  ----------  ------------ 
 
  Profit for the year                                 16,174        17,867 
------------------------------------------------  ----------  ------------ 
 
 
    Other comprehensive expenses: 
 
  Items may be reclassified to profit or loss: 
 
    Gain / (Loss) on exchange translation of 
     foreign operations                               18,680      (29,550) 
 
  Net other comprehensive income / (expenses) 
   may be reclassified to profit or loss              18,680      (29,550) 
------------------------------------------------  ----------  ------------ 
 
  Items not to be reclassified to profit or 
   loss: 
 
    Unrealised (loss) / gain on revaluation 
     of leasehold land, net of tax                   (1,715)           137 
 
    Remeasurement of retirement benefits plan, 
     net of tax                                        (768)           894 
 
  Net other comprehensive (expenses) / income 
   not being reclassified to profit or loss          (2,483)         1,031 
------------------------------------------------  ----------  ------------ 
  Total other comprehensive income / (expenses) 
   for the year, net of tax                           16,197      (28,519) 
  Total comprehensive income / (expenses) 
   for the year                                       32,371      (10,652) 
 
  Attributable to: 
   - Owners of the parent                             28,550      (11,527) 
   - Non-controlling interests                         3,821           875 
------------------------------------------------  ----------  ------------ 
                                                      32,371      (10,652) 
------------------------------------------------  ----------  ------------ 
 

Consolidated Statement of Financial Position

As at 31 December 2019

Company Number: 1884630

 
 
                                                        31.12.2019     31.12.2018 
                                               Note           $000           $000 
-------------------------------------------  ------  -------------  ------------- 
  Non-current assets 
  Property, plant and equipment                 11         367,891        340,367 
  Receivables                                   12          16,500         11,020 
  Deferred tax assets                           18          11,251         11,147 
 
                                                           395,642        362,534 
-------------------------------------------  ------  -------------  ------------- 
  Current assets 
  Inventories                                   13           8,752          9,540 
  Tax receivables                               8           49,527         44,310 
  Biological assets                             14           7,574          4,093 
  Trade and other receivables                   15           5,774          5,203 
  Cash and cash equivalents                                 84,846        112,212 
 
                                                           156,473        175,358 
-------------------------------------------  ------  -------------  ------------- 
  Current liabilities 
  Loans and borrowings                          16         (8,203)       (11,078) 
  Trade and other payables                      17        (16,110)       (20,083) 
  Tax liabilities                               8          (2,898)        (5,626) 
  Dividend payables                                           (23)           (37) 
  Lease liabilities                             29           (222)              - 
-------------------------------------------  ------  -------------  ------------- 
                                                          (27,456)       (36,824) 
-------------------------------------------  ------  -------------  ------------- 
  Net current assets                                       129,017        138,534 
-------------------------------------------  ------  -------------  ------------- 
  Non-current liabilities 
  Loans and borrowings                          16               -        (8,203) 
  Deferred tax liabilities                      18        (17,047)       (20,040) 
  Retirement benefits - net liabilities         19        (11,338)        (8,244) 
  Lease liabilities                             29           (456)              - 
-------------------------------------------  ------  -------------  ------------- 
                                                          (28,841)       (36,487) 
-------------------------------------------  ------  -------------  ------------- 
  Net assets                                               495,818        464,581 
-------------------------------------------  ------  -------------  ------------- 
  Issued capital and reserves attributable 
   to owners of the parent 
  Share capital                                 20          15,504         15,504 
  Treasury shares                               20         (1,171)        (1,171) 
  Share premium                                             23,935         23,935 
  Capital redemption reserve                                 1,087          1,087 
  Revaluation reserves                                      48,413         51,308 
  Exchange reserves                                      (229,026)      (245,170) 
  Retained earnings                                        542,415        526,487 
-------------------------------------------  ------  -------------  ------------- 
                                                           401,157        371,980 
  Non-controlling interests                                 94,661         92,601 
-------------------------------------------  ------  -------------  ------------- 
  Total equity                                             495,818        464,581 
-------------------------------------------  ------  -------------  ------------- 
 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

 
                                                                                                 Capital 
                                                                 Share   Treasury     Share   redemption   Revaluation    Exchange   Retained               Non-controlling       Total 
                                                               capital     shares   premium      reserve      reserves    reserves   earnings       Total         interests      equity 
                                                                  $000       $000      $000         $000          $000        $000       $000        $000              $000        $000 
 
 Balance at 31 December 2017                                    15,504    (1,171)    23,935        1,087        51,288   (221,435)    515,884     385,092            91,799     476,891 
 Items of other comprehensive 
  income 
 
   *    Unrealised gain on revaluation of leasehold land, ne 
  t 
        of tax                                                       -          -         -            -            20           -          -          20               117         137 
 -Remeasurement of retirement 
  benefit plan, net of tax                                           -          -         -            -             -           -        775         775               119         894 
 -Loss on exchange translation 
  of foreign operations                                              -          -         -            -             -    (23,735)          -    (23,735)           (5,815)    (29,550) 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Total other comprehensive income 
  / (expenses)                                                       -          -         -            -            20    (23,735)        775    (22,940)           (5,579)    (28,519) 
 Profit for the year                                                 -          -         -            -             -           -     11,413      11,413             6,454      17,867 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Total comprehensive income / 
  (expenses) for the year                                            -          -         -            -            20    (23,735)     12,188    (11,527)               875    (10,652) 
 Dividends paid                                                      -          -         -            -             -           -    (1,585)     (1,585)              (73)     (1,658) 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Balance at 31 December 2018                                    15,504    (1,171)    23,935        1,087        51,308   (245,170)    526,487     371,980            92,601     464,581 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Items of other comprehensive 
  income 
 
   *    Unrealised (loss) / gain on revaluation of leasehold 
        land, net of tax                                             -          -         -            -       (3,040)       1,211          -     (1,829)               114     (1,715) 
 
   *    Remeasurement of retirement benefit plan, net of tax         -          -         -            -             -           -      (650)       (650)             (118)       (768) 
 -Gain on exchange translation 
  of foreign operations                                              -          -         -            -             -      14,933          -      14,933             3,747      18,680 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Total other comprehensive (expenses) 
  / income                                                           -          -         -            -       (3,040)      16,144      (650)      12,454             3,743      16,197 
 Profit for the year                                                 -          -         -            -             -           -     16,096      16,096                78      16,174 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Total comprehensive (expenses) 
  / income for the year                                              -          -         -            -       (3,040)      16,144     15,446      28,550             3,821      32,371 
 Issue of subsidiaries shares 
  to non-controlling interests                                       -          -         -            -             -           -          -           -               512         512 
 Accretion from change in stake                                      -          -         -            -           145           -      1,671       1,816           (1,816)           - 
 Dividends paid                                                      -          -         -            -             -           -    (1,189)     (1,189)             (457)     (1,646) 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 Balance at 31 December 2019                                    15,504    (1,171)    23,935        1,087        48,413   (229,026)    542,415     401,157            94,661     495,818 
------------------------------------------------------------  --------  ---------  --------  -----------  ------------  ----------  ---------  ----------  ----------------  ---------- 
 

Consolidated Statement of Cash Flows

For the year ended 31 December 2019

 
                                                                    2019       2018 
                                                       Note         $000       $000 
---------------------------------------------------  ------  -----------  --------- 
   Cash flows from operating activities 
   Profit before tax                                              18,873     30,929 
   Adjustments for: 
      BA movement                                                (3,255)      2,286 
      Gain on disposal of property, plant and 
       equipment                                                    (83)       (21) 
      Depreciation                                                18,590     16,752 
      Retirement benefit provisions                                2,152      1,250 
      Net finance income                                         (3,189)    (3,537) 
      Unrealised (gain) / loss in foreign exchange                 (251)      1,250 
      Property, plant and equipment written 
       off                                                           261        620 
      (Reversal of impairment) / Impairment 
       losses                                                    (6,590)      4,339 
      Provision for expected credit loss                           5,965        308 
   Operating cash flow before changes in 
    working capital                                               32,473     54,176 
       Decrease / (Increase) in inventories                        1,185      (746) 
       (Increase) / Decrease in non-current, 
        trade and other receivables                              (1,586)       620* 
      (Decrease) / Increase in trade and other 
       payables                                                  (4,629)      3,986 
---------------------------------------------------  ------  -----------  --------- 
   Cash inflow from operations                                    27,443     58,036 
      Interest paid                                                (939)    (1,511) 
      Retirement benefits paid                                     (475)      (257) 
      Overseas tax paid                                         (11,438)   (36,508) 
---------------------------------------------------  ------  -----------  --------- 
   Net cash flow from operating activities                        14,591     19,760 
---------------------------------------------------  ------  -----------  --------- 
 
   Investing activities 
   Property, plant and equipment 
 
         *    purchases                                         (33,169)   (30,282) 
 
         *    sales                                                  135         42 
   Interest received                                               4,169      5,048 
   Increase in receivables from cooperatives 
    under plasma scheme                                          (5,116)   (2,939)* 
---------------------------------------------------  ------  -----------  --------- 
   Net cash used in investing activities                        (33,981)   (28,131) 
---------------------------------------------------  ------  -----------  --------- 
 
   Financing activities 
   Dividends paid to the holders of the 
    parent                                                       (1,240)    (1,585) 
   Dividends paid to non-controlling interests                     (457)       (73) 
   Issue of subsidiaries shares to non-controlling                   512          - 
    interests 
   Repayment of existing long-term loans                        (11,078)    (8,594) 
   Repayment of lease liabilities - principal                      (169)          - 
   Repayment of lease liabilities - interest                        (41)          - 
---------------------------------------------------  ------  -----------  --------- 
   Net cash used in financing activities                        (12,473)   (10,252) 
---------------------------------------------------  ------  -----------  --------- 
   Net decrease in cash and cash equivalents                    (31,863)   (18,623) 
 
   Cash and cash equivalents 
   At beginning of year                                          112,212    139,489 
   Exchange gains / (losses)                                       4,497    (8,654) 
---------------------------------------------------  ------  -----------  --------- 
   At end of year                                                 84,846    112,212 
---------------------------------------------------  ------  -----------  --------- 
   Comprising: 
   Cash at end of year                                   28       84,846    112,212 
---------------------------------------------------  ------  -----------  --------- 
 

* These amounts had been reclassified according to the nature of the transaction which were classified in the operating cashflow.

Notes

   1    Basis of preparation 

Anglo-Eastern Plantations Plc ("AEP") is a company incorporated in the United Kingdom under the Companies Act 2006 and is listed on the London Stock Exchange. The registered office of AEP is located at Quadrant House, 6(th) Floor, 4 Thomas More Square, London E1W 1YW, United Kingdom. The principal activity of the Group is plantation agriculture, mainly in the cultivation of oil palm.

The financial information does not constitute the company's statutory accounts for the years ended 31 December 2019 or 2018. Statutory accounts for the years ended 31 December 2019 and 31 December 2018 have been reported on by the Independent Auditor. The Independent Auditor's Reports on the Annual Report and Financial Statements for the years ended 31 December 2019 and 31 December 2018 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2018 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2019 will be delivered to the Registrar in due course.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, except as detailed in the following paragraph.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS as adopted by the EU.

The Directors have a reasonable expectation, having made the appropriate enquiries, that the Group has control of the monthly cashflows and that the Group has sufficient cash resources to cover the fixed cashflows for a period of at least 12 months from the date of approval of these financial statements, including having to make full repayment of the bank loan. For these reasons, the Directors adopted a going concern basis in preparation of the financial statements. The Directors have made this assessment after consideration of the Group's budgeted cash flows and related assumptions including appropriate stress testing of identified uncertainties, specifically on the potential shut down of the entire operations if all the plantations are infected with Coronavirus as well as the impact on the demand for palm oil due to the Coronavirus pandemic. Stress testing of other identified uncertainties was undertaken on primarily commodity prices and currency exchange rates.

Changes in accounting standards

a) The following amendments are effective for the first time for accounting periods beginning on or after 1 January 2019 in these financial statements:

   --       IFRS 16 Leases 
   --       IFRIC 23 Uncertainty over Income Tax Treatments 
   --       Amendments to IFRS 9 Prepayment Features with Negative Compensation 
   --       Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures 

-- Annual Improvements to IFRSs 2015-2017 Cycle (IFRS 3 Business Combinations and IFRS 11 Joint Arrangements, IAS 12 Income Taxes, and IAS 23 Borrowing Costs)

   --       Amendments to IAS 19: Plan Amendment, Curtailment or Settlement 

All the new and amended standards and Interpretations listed above that will apply for the first time in these financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies except IFRS 16 Leases.

   b)      New standards, interpretations and amendments not yet effective. 

Except for IFRS 17, the following new standards, interpretations and amendments are effective for periods beginning on 1 January 2020 and have not been applied in these financial statements:

   --       Amendments to References to the Conceptual Framework in IFRS Standards 
   --       Amendments to IFRS 3: Definition of a Business 
   --       Amendments to IAS 1 and IAS 8: Definition of Material 
   --       Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) 
   --       IFRS 17 Insurance Contracts (effective 1 January 2021) 

None of the above new standards, interpretations and amendments are expected to have a material effect on the Group's future financial statements.

   2    Accounting policies 
   (a)    Basis of consolidation 

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. The Company controls a subsidiary if all three of the following elements are present; power over the subsidiary, exposure to variable returns from the subsidiary, and the ability of the investor to use its power to affect those variable returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. In respect of cooperatives under the Plasma scheme, the Group has not consolidated these results on the basis that the Company does not have control over those entities.

   (b)    Business combinations 

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisitions of entities that comprise principally land with no active plantation business do not represent business combinations, in such cases, the amount paid for each acquisition is allocated between the identifiable assets/liabilities at the acquisition date.

   (c)     Foreign currency 

The individual financial statements of each subsidiary are presented in the currency of the country in which it operates (its functional currency) with the exception of the Company and its UK subsidiaries which are presented in US Dollar. The presentation currency for the consolidated financial statements is also US Dollar, chosen because, as internationally traded commodities, the price of the bulk of the Group's products are ultimately linked to the US Dollar.

On consolidation, the results of overseas operations are translated into US Dollar at average exchange rates for the year unless exchange rates fluctuate significantly in which case the actual rate is used. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on re-translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the "exchange reserves"). Exchange differences recognised in the income statement of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the exchange reserves if the item is denominated in the presentational currency of the Group or of the overseas operation concerned.

On disposal of a foreign operation, the cumulative exchange differences recognised in the exchange reserves relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal.

All other exchange profits or losses are credited or charged to the income statement.

   (d)    Revenue recognition 

The Group derives its revenue from the sale of CPO, palm kernel, FFB, shell nut, biomass products, biogas products and rubber slab. Revenue for CPO, palm kernel and shell nut are recorded net of sales and related taxes and levies, including export taxes and recognised when the delivery order is issued to a purchaser. The delivery order is not issued until goods are paid for. Revenue for FFB, biomass and biogas are recognised upon delivery. Sales of latex are recognised on signing of the sales contract, this being the point at which control is transferred to the buyer.

The transacted price for each product is based on the market price or predetermined monthly contract value. There is no right of return nor warranty provided to the customers on the sale of products and services rendered.

   (e)    Tax 

UK and foreign corporation tax are provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

The directors consider that the carrying amount of tax receivables approximates its fair value.

   (f)      Dividends 

Equity dividends are recognised when they become legally payable. The Company pays only one dividend each year as a final dividend which becomes legally payable when approved by the shareholders at the next annual general meeting.

   (g)    Fair value measurement 

A number of assets and liabilities included in the Group's financial statements require measurement at, and/or disclosure of, fair value. The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

-- Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

   --        Level 3 - unobservable inputs for the asset or liability. 

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.

The Group measures the following assets at fair value:

   --        Revalued land - Property, plant and equipment (note 11) 
   --        Biological assets (note 14) 

For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes.

   (h)    Property, plant and equipment 

All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the items. After initial recognition, all items of property, plant and equipment except land and construction in progress, are stated at cost less accumulated depreciation and any accumulated impairment losses.

Plantations comprise of the cost of planting and development on oil palm and other plantation crops. Costs of new planting and development of plantation crops are capitalised from the stage of land clearing up to the stage of maturity or subject to certificate of Land Exploitation Rights (HGU) being obtained, whichever is earlier. The costs of immature plantations consist mainly of the accumulated cost of land clearing, planting, fertilising and maintaining the plantation, borrowing costs and other indirect overhead costs up to the time the trees are harvestable and to the extent appropriate. Oil palm plantations are considered mature within three to four years after planting and generating average annual CPO of four to six metric tons per hectare. Immature plantations are not depreciated.

The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. The land rights are usually renewed without significant cost subject to compliance with the laws and regulations of Indonesia. Therefore, the Group has classified the land rights as leasehold land and accounted for as an indefinite finance lease. The leasehold land is recognised at cost initially and is not depreciated. The land is subsequently carried at fair value, based on periodic valuations on an open market basis by a professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on the revaluation reserve, or reversal of such a transaction, is recognised in income statement. On the disposal of a revalued estate, any related balance remaining in the revaluation reserve is transferred to retained earnings as a movement in reserves.

Construction in progress is stated at cost. The accumulated costs will be reclassified to the appropriate class of assets when construction is completed and the asset is ready for its intended use. Construction in progress is also not depreciated until such time when the asset is available for use.

Interest on third party loans directly related to field development is capitalised in the proportion that the opening immature area bears to the total planted area of the relevant estate. Interest on loans related to construction in progress (such as an oil mill) is capitalised up to the commissioning of that asset. These interest rates are booked at the rate prevailing at the time.

Plantations, buildings and oil mills are depreciated using the straight-line method. All other property, plant and equipment items are depreciated using the double-declining-balance method. The yearly rates of depreciation are as follows:

Plantations - 5% per annum

Buildings - 5% to 10% per annum

Oil Mill - 5% per annum

Estate plant, equipment & vehicle - 12.5% to 50% per annum

Office plant, equipment & vehicle - 25% to 50% per annum

   (i)      Biological assets 

Biological assets comprise an estimation of the fair value less costs to sell of unharvested FFB at balance sheet date. Changes in the fair value of biological assets are charged or credited to the income statement within the cost of sales.

   (j)      Leased assets 

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

-- Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

-- Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

   --   The amount expected to be payable by the lessee under residual value guarantees; 

-- The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

-- Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

-- The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

-- The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

-- A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group did not make any such adjustments during the periods presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented together in the property, plant and equipment in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in 'Other expenses' in income statement (see Note 11). As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For a contract that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

Land rights are held at fair value and revalued at the balance sheet date.

   (k)     Impairment 

Impairment tests on property, plant and equipment are undertaken annually on 31 December. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use or fair value, less costs to sell), the asset is written down accordingly. Impairment charges are included in the administrative expenses in the income statement, except to the extent they reverse gains previously recognised in the statement of recognised income and expense.

   (l)      Inventories 

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. In the case of processed produce for sale which comprises palm oil and kernel, cost represents the monthly weighted-average cost of production and appropriate production overheads. Estate and mill consumables are valued on a weighted average cost basis.

   (m)   Financial assets 

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. All the Group's receivables and loans are non-derivative financial assets with cash flows that are solely payments of principal and interest. They are recognised at fair value at inception and subsequently at amortised cost as this is what the Group considers to be most representative of the business model for these assets.

Cash and cash equivalents consist of cash in hand and short-term deposits at banks with an original maturity not exceeding three months. Bank overdrafts are shown within loans and borrowings under current liabilities on the balance sheet.

The Group considers a trade receivable or other receivable as credit impaired when one or more events that have a detrimental impact on the estimated cash flow have occurred. Trade and other receivables are written off when there is no expectation of recovery based on the assessment performed. If the receivables are subsequently recovered, these are recognised in income statement.

The Group use three categories for those receivables which reflect their credit risk and how the loss provision is determined for those categories. These include trade receivables using the simplified approach and debt instruments at amortised costs other than trade receivables and financial guarantee contracts using the three-stage approach.

   (n)    Financial liabilities 

All the Group's financial liabilities are non-derivative financial liabilities.

Bank borrowings and long-term development loans are initially recognised at fair value and subsequently at amortised cost, which is the total of proceeds received net of issue costs. Finance charges are accounted for on an accruals basis and charged in the income statement unless capitalised according to the policy as set out in the property, plant and equipment policy.

Trade and other payables are shown at fair value at recognition and subsequently at amortised cost.

   (o)    Deferred tax 

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base except for differences in the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

The Group recognises deferred tax liabilities arising from taxable temporary differences on investments in subsidiaries, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is possible that taxable profit will be available against which the difference can be utilised.

Deferred tax is recognised on temporary differences arising from property revaluation surpluses or deficits.

Deferred tax is determined using the tax rates that are enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, such as revaluations, in which case the deferred tax is also dealt with in other comprehensive income; in this case assets and liabilities are offset.

   (p)    Retirement benefits 

Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the consolidated income statement in the year to which they relate.

Defined benefit schemes

The Group operates a number of defined benefit schemes in respect of its Indonesian operations. These schemes' surpluses and deficits are measured at:

   --        The fair value of plan assets at the reporting date; less 

-- Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus

   --        Unrecognised past service costs; less 
   --        The effect of minimum funding requirements agreed with scheme trustees. 

Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:

   --        Actuarial gains and losses; 
   --        Return on plan assets (interest exclusive); and 
   --        Any asset ceiling effects (interest inclusive). 

Service costs are recognised in comprehensive income and include current and past service costs as well as gains and losses on curtailments.

Net interest expense / (income) is recognised in comprehensive income, and is calculated by applying the discount rate used to measure the defined benefit obligation / (asset) at the beginning of the annual period to the balance of the net defined benefit obligation / (asset), considering the effects of contributions and benefit payments during the period.

Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in comprehensive income. Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

   (q)    Treasury shares 

Consideration paid or received for the purchase or sale of the Company's own shares for holding in treasury is recognised directly in equity, where the cost is presented as the treasury shares. Any excess of the consideration received on the sale of treasury shares over the weighted average cost of shares sold is taken to the share premium account.

Any shares held in treasury are treated as cancelled for the purpose of calculating earnings per share.

   (r)     Financial guarantee contracts 

Where the Company and its subsidiaries enter into financial guarantee contracts and guarantee the indebtedness of other companies within the Group and/or third party entities, these are accounted for under IFRS 9. The details of financial guarantee contracts are disclosed in note 25.

   (s)     Critical accounting estimates and judgements 

The preparation of the Group financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported assets and liabilities and reported revenue and expenses. Actual results could differ from those estimates and accordingly, they are reviewed on an on-going basis. The main areas in which estimates are used are the fair value of biological assets, property, plant and equipment, deferred tax and retirement benefits.

Revisions to accounting estimates are recognised in the period in which the estimate is revised or the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

Assumptions regarding the valuation of property, plant and equipment and biological assets are set out in note 11 and note 14 respectively. The Group's policy with regard to impairment of such assets is set out above.

Details on deferred tax are given in note 18 and retirement benefits in note 19.

   3    Revenue 

Disaggregation of Revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

-- Depict how the nature, amount and uncertainty of revenue and cash flows are affected by timing of revenue recognition; and

-- Enable users to understand the relationship with revenue segment information provided in note 6.

There is no right of return and warranty provided to the customers on the sale of products and services rendered.

 
                                     CPO, 
                                     palm 
      Year to 31 December          kernel     Rubber     Shell     Biomass      Biogas     Others 
      2019                        and FFB                  nut    products    products                  Total 
                                     $000       $000      $000        $000        $000       $000        $000 
 
    Contract counterparties 
    Government                          -          -         -           -         908          -         908 
    Non-government 
      *    Wholesalers            214,416        653     2,224         733           -        202     218,228 
                                  214,416        653     2,224         733         908        202     219,136 
                               ----------  ---------  --------  ----------  ----------  ---------  ---------- 
 
    Timing of transfer 
     of goods 
     Delivery to customer 
      premises                      5,624        653         -           -           -          -       6,277 
     Delivery to port of 
      departure                         -          -         -         733           -          -         733 
     Customer collect from 
      our mills / estates         208,792          -     2,224           -           -          -     211,016 
    Upon generation / others            -          -         -           -         908        202       1,110 
                                  214,416        653     2,224         733         908        202     219,136 
                               ----------  ---------  --------  ----------  ----------  ---------  ---------- 
 
 
 
 
                                     CPO, 
                                     palm 
      Year to 31 December          kernel     Rubber     Shell     Biomass      Biogas     Others 
      2018                        and FFB                  nut    products    products                  Total 
                                     $000       $000      $000        $000        $000       $000        $000 
 
    Contract counterparties 
    Government                          -          -         -           -         863          -         863 
    Non-government 
      *    Wholesalers            245,595        792     2,047         914           -        648     249,996 
                                  245,595        792     2,047         914         863        648     250,859 
                               ----------  ---------  --------  ----------  ----------  ---------  ---------- 
 
    Timing of transfer 
     of goods 
     Delivery to customer 
      premises                      2,696        792         -           -           -          -       3,488 
     Delivery to port of 
      departure                         -          -         -         914           -          -         914 
     Customer collect from 
      our mills / estates         242,899          -     2,047           -           -          -     244,946 
    Upon generation / others            -          -         -           -         863        648       1,511 
                                  245,595        792     2,047         914         863        648     250,859 
                               ----------  ---------  --------  ----------  ----------  ---------  ---------- 
 
 
   4    Finance income and expense 
 
                                                                    2019               2018 
                                                                    $000               $000 
 
    Finance income 
    Interest receivable on: 
    Credit bank balances and time deposits                         4,169              5,048 
 
    Finance expense 
    Interest payable on: 
    Development loans (note 16)                                    (939)            (1,511) 
    Interest expense on lease liabilities (note                     (41)                  - 
     11) 
                                                                --------         ---------- 
                                                                   (980)            (1,511) 
                                                                                 ---------- 
    Net finance income recognised in income statement              3,189              3,537 
                                                                --------         ---------- 
 
   5    Profit before tax 
 
                                                                 2019             2018 
                                                                 $000             $000 
 
    Profit before tax is stated after charging 
    Purchase of FFB                                            92,004              104,210 
    Depreciation (note 11)                                     18,590               16,752 
    Reversal of impairment (note 11)                          (8,868)                    - 
    Impairment losses (note 11)                                 2,278                4,339 
    Provision for expected credit loss (note 
     15)                                                        5,965                  308 
    Exchange (gains) / losses                                   (251)                1,250 
    Movement of inventories                                       788                (142) 
    Operating lease expense 
     - Property                                                   409                  528 
    Legal and professional fees                                 1,236                1,422 
    Staff costs (note 7)                                       41,668               37,991 
    Remuneration received by the Group's auditor 
     or associates of the Group's auditor: 
    - Audit of parent company                                       5                    5 
    - Audit of consolidated financial statements                  140                  137 
    - Audit of consolidated financial statements 
     (prior year)                                                   5                  (1) 
    - Audit related assurance service                               6                    6 
    - Audit of UK subsidiaries                                     13                   13 
                                                           ----------         ------------ 
       Total audit services                                       169                  160 
                                                           ----------         ------------ 
 
       Audit of overseas subsidiaries 
        - Malaysia                                                 21                   19 
        - Indonesia                                                78                   86 
                                                           ----------         ------------ 
       Total audit services                                        99                  105 
                                                           ----------         ------------ 
 
    Total auditor's remuneration                                  268                  265 
                                                           ----------         ------------ 
 
 
   6    Segment information 

Description of the types of products and services from which each reportable segment derives its revenues

In the opinion of the Directors, the operations of the Group comprise one class of business which is the cultivation of plantation in Indonesia and Malaysia. From the cultivation of plantation, the Group produced the crude palm oil and associated products such as palm kernel, shell nut, biomass products, biogas products and rubber.

Factors that management used to identify reportable segments in the Group

The reportable segments in the Group are strategic business units based on the geographical spread. Operating segments are consistent with the internal reporting provided to the Board of Directors. The Board of Directors is responsible for allocating resources and assessing the performance of the operating segments. The Board decision is implemented by the Executive Committee, that is made up of a Senior General Manager in Malaysia, the Chief Executive Officer, the Chief Operating Officer, Finance Director and the Engineering Director.

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS but excluding non-recurring losses, such as share based payments.

Inter-segment transactions are made based on terms mutually agreed by the parties to maximise the utilisation of Group's resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the current and prior period.

The Group's assets are allocated to segments based on geographical location.

 
                              North                  South                                         Total 
                           Sumatera   Bengkulu    Sumatera       Riau    Bangka   Kalimantan   Indonesia    Malaysia          UK      Total 
                               $000       $000        $000       $000      $000         $000        $000        $000        $000       $000 
    2019 
    Total sales revenue 
    (all external) 
 
   *    CPO, palm kernel 
   and FFB                   75,933     65,102       2,487     36,060       513       32,679     212,774       1,642           -    214,416 
 
   *    Rubber                  653          -           -          -         -            -         653           -           -        653 
 
   *    Shell nut               674        582           -        929         -           39       2,224           -           -      2,224 
 
   *    Biomass products        733          -           -          -         -            -         733           -           -        733 
 
   *    Biogas products         141        442           -          -         -          325         908           -           -        908 
 
   *    Others                   25         57          32          -         -           88         202           -           -        202 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
    Total revenue            78,159     66,183       2,519     36,989       513       33,131     217,494       1,642           -    219,136 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 
 Profit / (loss) before 
  tax                         6,174      7,727     (8,933)      8,514       244        4,868      18,594     (1,264)     (1,712)     15,618 
 BA movement                    927      1,086         108        307        23          806       3,257         (2)           -      3,255 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 Profit / (loss) for the 
  year before 
  tax per consolidated 
  income statement            7,101      8,813     (8,825)      8,821       267        5,674      21,851     (1,266)     (1,712)     18,873 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 
    Interest income           1,921      1,789           3        299         -           29       4,041         124           4      4,169 
    Interest expense           (73)          -           -          -         -        (901)       (974)         (6)           -      (980) 
    Depreciation            (4,791)    (4,470)     (2,465)      (916)     (281)      (5,146)    (18,069)       (521)           -   (18,590) 
    Reversal of 
     impairment                   -          -       5,151          -       600        3,117       8,868           -           -      8,868 
    Impairment losses             -          -     (1,595)          -         -        (431)     (2,026)       (252)           -    (2,278) 
    (Provision) / 
     Reversal for 
     expected 
     credit loss              (124)          4     (5,998)          -         4          163     (5,951)           -        (14)    (5,965) 
    Inter-segment 
     transactions          (40,471)    (2,027)      25,745      (581)     1,198       15,760       (376)         153         223          - 
    Inter-segmental 
     revenue                 23,395      1,981       1,847          -         -        1,274      28,497           -           -     28,497 
    Tax expense               8,851      (995)     (3,418)    (2,009)     (234)      (4,884)     (2,689)         186       (196)    (2,699) 
 
    Total assets            206,764    104,756      39,151     31,083    14,667      127,746     524,167      21,678       6,270    552,115 
    Non-current assets      121,161     73,106      37,553     18,166    13,970      111,159     375,115      16,944       3,583    395,642 
    Non-current assets - 
     additions               10,342      3,950       2,919        333     4,265       11,881      33,690         351           -     34,041 
 
                              North                  South                                         Total 
                           Sumatera   Bengkulu    Sumatera       Riau    Bangka   Kalimantan   Indonesia    Malaysia          UK      Total 
                               $000       $000        $000       $000      $000         $000        $000        $000        $000       $000 
    2018 
    Total sales revenue 
    (all external) 
 
   *    CPO, palm kernel 
   and FFB                   84,771     79,652           1     43,970       261       34,848     243,503       2,092           -    245,595 
 
   *    Rubber                  792          -           -          -         -            -         792           -           -        792 
 
   *    Shell nut               651        432           -        930         -           34       2,047           -           -      2,047 
 
   *    Biomass products        914          -           -          -         -            -         914           -           -        914 
 
   *    Biogas products         417        446           -          -         -            -         863           -           -        863 
 
   *    Others                  519         38          18          -         -           73         648           -           -        648 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
    Total revenue            88,064     80,568          19     44,900       261       34,955     248,767       2,092           -    250,859 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 
 Profit / (loss) before 
  tax                        12,993     18,753     (7,445)     13,112     (531)        (557)      36,325       (894)     (2,216)     33,215 
 BA movement                  (296)    (1,074)        (93)      (272)       (4)        (479)     (2,218)        (68)           -    (2,286) 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 Profit / (loss) for the 
  year before 
  tax per consolidated 
  income statement           12,697     17,679     (7,538)     12,840     (535)      (1,036)      34,107       (962)     (2,216)     30,929 
                          ---------  ---------  ----------  ---------  --------  -----------  ----------  ----------  ----------  --------- 
 
    Interest income           1,594      2,978           3        318         -           20       4,913         133           2      5,048 
    Interest expense          (141)          -           -          -         -      (1,370)     (1,511)           -           -    (1,511) 
    Depreciation            (4,031)    (4,120)     (2,530)      (900)     (234)      (4,425)    (16,240)       (512)           -   (16,752) 
    Impairment losses             -          -       (914)          -         -      (3,425)     (4,339)           -           -    (4,339) 
    Provision for 
     expected credit 
     loss                      (10)       (13)        (24)          -       (4)        (206)       (257)         (1)        (50)      (308) 
    Inter-segment 
     transactions             4,887    (2,021)       (700)      (579)      (94)      (1,870)       (377)         103         274          - 
    Inter-segmental 
     revenue                 24,409      1,608       3,710          -         -        1,049      30,776           -           -     30,776 
    Tax expense             (7,872)    (2,994)       1,862    (5,351)       151        1,154    (13,050)          19        (31)   (13,062) 
 
    Total assets            188,266    118,098      41,074     36,900    11,815      113,186     509,339      22,347       6,206    537,892 
    Non-current assets      103,648     70,237      39,672     17,884    11,588       99,738     342,767      16,783       2,984    362,534 
    Non-current assets - 
     additions                8,578      4,460       3,753        472     1,647       11,355      30,265         110           -     30,375 
 

Below is an analysis of revenue from the Group's top 4 customers, incorporating all those contributing greater than 10% of the Group's external revenue in accordance with the requirements of IFRS 8. In year 2019, revenue from top 4 customers of the Indonesian segment represents approximately $113.6m (2018: $115.4m) of the Group's total revenue. Although Customer 1 to 4 made up over 10% of the Group's total revenue, there was no over reliance on these Customers as tenders were performed on a weekly basis. Two of the top four customers were the same as in the prior year.

 
                  North                  South                                       Total 
               Sumatera   Bengkulu    Sumatera     Riau   Bangka   Kalimantan    Indonesia   Malaysia     UK     Total 
                   $000       $000        $000     $000     $000         $000         $000       $000   $000      $000 
 2019 
 Customer 1       3,107     20,376           -    6,091        -       13,228       42,802          -      -    42,802 
 Customer 2      27,751          -           -        -        -            -       27,751          -      -    27,751 
 Customer 3       9,657      8,345           -    4,965        -            -       22,967          -      -    22,967 
 Customer 4           -          -           -   20,036        -            -       20,036          -      -    20,036 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
                 40,515     28,721           -   31,092        -       13,228      113,556          -      -   113,556 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
 
 2018 
 Customer 1       1,909     17,768           -    6,613        -       10,806       37,096          -      -    37,096 
 Customer 2           -     29,604           -        -        -            -       29,604          -      -    29,604 
 Customer 3      24,933          -           -        -        -            -       24,933          -      -    24,933 
 Customer 4      21,042          -           -        -        -        2,735       23,777          -      -    23,777 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
                 47,884     47,372           -    6,613        -       13,541      115,410          -      -   115,410 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
 
                      %          %           %        %        %            %            %          %      %         % 
 2019 
 Customer 1         1.4        9.3           -      2.8        -          6.0         19.5          -      -      19.5 
 Customer 2        12.7          -           -        -        -            -         12.7          -      -      12.7 
 Customer 3         4.4        3.8           -      2.3        -            -         10.5          -      -      10.5 
 Customer 4           -          -           -      9.1        -            -          9.1          -      -       9.1 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
                   18.5       13.1           -     14.2        -          6.0         51.8          -      -      51.8 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
 
 2018 
 Customer 1         0.8        7.1           -      2.6        -          4.3         14.8          -      -      14.8 
 Customer 2           -       11.8           -        -        -            -         11.8          -      -      11.8 
 Customer 3         9.9          -           -        -        -            -          9.9          -      -       9.9 
 Customer 4         8.4          -           -        -        -          1.1          9.5          -      -       9.5 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
                   19.1       18.9           -      2.6        -          5.4         46.0          -      -      46.0 
             ----------  ---------  ----------  -------  -------  -----------  -----------  ---------  -----  -------- 
 

Save for a small amount of rubber, all the Group's operations are devoted to oil palm. The Group's report is by geographical area, as each area tends to have different agricultural conditions.

   7    Employees' and Directors' remuneration 
 
                                                                 2019              2018 
                                                               Number            Number 
    Average numbers employed (primarily overseas) 
     during the year: 
    - full time                                                 6,925             6,324 
    - part-time field workers                                   9,285            10,859 
                                                            ---------         --------- 
                                                               16,210            17,183 
                                                            ---------         --------- 
 
                                                                 2019              2018 
                                                                 $000              $000 
    Staff costs (including Directors) comprise: 
    Wages and salaries                                         36,986            34,846 
    Social security costs                                       1,835             1,399 
    Retirement benefit costs 
       - United Kingdom                                             -                64 
    - Indonesia (note 19)                                       2,791             1,651 
    - Malaysia                                                     56                31 
                                                            ---------         --------- 
                                                               41,668            37,991 
                                                            ---------         --------- 
 
 
                                                                    2019             2018 
                                                                    $000             $000 
 
    Directors emoluments                                             215              226 
 
                                                                    2019             2018 
                                                                    $000             $000 
    Remuneration expense for key management personnel 
     comprise: 
    Salaries                                                       1,742            1,666 
    Social security costs                                              -                - 
    Retirement benefit costs                                           -                6 
                                                                --------         -------- 
                                                                   1,742            1,672 
                                                                --------         -------- 
 

The Executive Director, Non-Executive Directors and senior management (general managers and above) are considered to be the key management personnel.

   8    Tax expense 
 
                                                                2019              2018 
                                                                $000              $000 
 
    Foreign corporation tax - current year                     5,222            16,852 
    Foreign corporation tax - prior year                          12                70 
    Deferred tax adjustment - origination and 
     reversal of temporary differences (note 18)             (2,535)           (3,860) 
    Total tax charge for year                                  2,699            13,062 
                                                           ---------         --------- 
 

Corporation tax rate in Indonesia is at 25% whereas Malaysia is at 24%. The standard rate of corporation tax in the UK for the current year is 19%. The Group's charge for the year differs from the standard UK rate of corporation tax as explained below:

 
                                                                     2019              2018 
                                                                     $000              $000 
 
     Profit before tax                                             18,873            30,929 
                                                                ---------         --------- 
 
     Profit before tax multiplied by standard rate 
      of UK corporation tax of 19% (2018: 19%)                      3,586             5,877 
     Effects of: 
      Rate adjustment relating to overseas profits                  1,108             1,905 
      Group accounting adjustments not subject to 
       tax                                                        (1,916)             1,212 
      Expenses not allowable for tax                                  344             4,994 
      Deferred tax assets not recognised                               48                 - 
      Income not subject to tax                                   (1,223)           (1,260) 
      Under provision of prior year income tax                         12                70 
      Utilisation of tax losses brought forward                       836                90 
      (Over) / Under provision of prior year deferred 
       tax assets                                                    (96)               174 
     Total tax charge for year                                      2,699            13,062 
                                                                ---------         --------- 
 

The tax receivables represent the corporate income tax ("CIT") and value added tax ("VAT") that have yet to be refunded by the Indonesia tax authority. The tax receivables relating to CIT arose due to over payment of tax. The tax receivables relating to VAT arose because the majority of the Groups' CPO was sold to bonded zones which do not attract output VAT and thus the input VAT incurred is claimable. Upon submission of a tax return (for CIT) or a request letter (for VAT refund), a tax audit will be conducted by the tax authority and the refund process may take up to 12 months or more.

The breakdown of the tax receivables and tax liabilities is as follows:

 
                                    2019             2018 
                                    $000             $000 
 
    Tax Receivables 
    Income tax                    14,348                7,110 
    Other taxes                   35,179               37,200 
                              ----------         ------------ 
                                  49,527               44,310 
                              ----------         ------------ 
 
    Tax Liabilities 
    Income tax                   (1,512)              (1,094) 
    Other taxes                  (1,386)              (4,532) 
                              ----------         ------------ 
                                 (2,898)              (5,626) 
                              ----------         ------------ 
 
   9    Earnings per ordinary share ("EPS") 
 
                                                           2019              2018 
                                                           $000              $000 
 
    Profit for the year attributable to owners 
     of the Company before BA movement                   14,019            12,882 
    BA movement                                           2,077           (1,469) 
                                                     ----------        ---------- 
    Earnings used in basic and diluted EPS               16,096            11,413 
                                                     ----------        ---------- 
 
                                                         Number            Number 
                                                           '000              '000 
 
    Weighted average number of shares in issue 
     in year 
    - used in basic EPS                                  39,636            39,636 
    - dilutive effect of outstanding share options            -                 - 
                                                     ----------        ---------- 
    - used in diluted EPS                                39,636            39,636 
                                                     ----------        ---------- 
 
    Basic and diluted EPS before BA movement           35.37cts          32.50cts 
    Basic and diluted EPS after BA movement            40.61cts          28.79cts 
 

10 Dividends

 
                                                               2019               2018 
                                                               $000               $000 
 
     Paid during the year 
     Final dividend of 3.0cts per ordinary share 
      for the year ended 31 December 2018 (2017: 
      4.0cts)                                                 1,189              1,585 
                                                         ----------         ---------- 
 
     Proposed final dividend of 0.5cts per ordinary 
      share for the year ended 31 December 2019 (2018: 
      3.0cts)                                                   198              1,189 
                                                         ----------         ---------- 
 

The proposed dividend for 2019 is subject to shareholders' approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements.

11 Property, plant and equipment

 
                                                                                  Estate      Office   Right-of-use 
                              Plantations                                         plant,      plant,         assets 
                                                       Leasehold               equipment   equipment                  Construction 
                                               Mill         land   Buildings   & vehicle   & vehicle                   in progress      Total 
                                     $000      $000         $000        $000        $000        $000           $000           $000       $000 
 Cost or valuation 
 At 1 January 2018                201,097    68,406      138,348      51,384      15,536       1,088              -          1,179    477,038 
 Exchange translations           (12,641)   (4,475)      (8,308)     (3,336)       (981)        (51)              -          (102)   (29,894) 
 Reclassification                     138         -        (138)       5,180          27           -              -        (5,207)          - 
 Revaluations                           -         -          182           -           -           -              -              -        182 
 Additions                             29     5,467        3,172          30       2,686          57              -          6,861     18,302 
 Development costs 
  capitalised                      12,073         -            -           -           -           -              -              -     12,073 
 Disposal / Written off             (819)   (1,278)            -       (120)       (410)         (1)              -              -    (2,628) 
 At 31 December 2018              199,877    68,120      133,256      53,138      16,858       1,093              -          2,731    475,073 
 Exchange translations              8,110     2,970        5,135       2,307         669          34             14             83     19,322 
 Reclassification                       -       143            -       7,557          26         (2)              -        (7,724)          - 
 Revaluations                           -         -      (2,292)           -           -           -              -              -    (2,292) 
 Additions                            411     7,732        5,861          45       1,562         193            832          5,971     22,607 
 Development costs 
  capitalised                      11,434         -            -           -           -           -              -              -     11,434 
 Disposals / Written off          (5,782)     (606)      (1,297)       (219)     (1,125)        (41)              -              -    (9,070) 
 At 31 December 2019              214,050    78,359      140,663      62,828      17,990       1,277            846          1,061    517,074 
                            -------------  --------  -----------  ----------  ----------  ----------  -------------  -------------  --------- 
 
 Accumulated depreciation 
 and 
 impairment 
 At 1 January 2018                 73,277    20,775          805      15,581      12,000         920              -              -    123,358 
 Exchange translations            (4,531)   (1,374)         (67)     (1,010)       (733)        (41)              -              -    (7,756) 
 Charge for the year                8,926     3,462            -       2,939       1,361          64              -              -     16,752 
 Impairment losses                  3,418         -          921           -           -           -              -              -      4,339 
 Disposal / Written off             (308)   (1,225)            -        (74)       (379)         (1)              -              -    (1,987) 
 At 31 December 2018               80,782    21,638        1,659      17,436      12,249         942              -              -    134,706 
 Exchange translations              3,098       960           87         753         481          26              3              -      5,408 
 Reclassification                       -      (15)            -           -          15           -              -              -          - 
 Charge for the year                9,646     3,850            -       3,222       1,625          63            184              -     18,590 
 (Reversal of impairment) 
  / 
  Impairment losses               (7,571)         -          981           -           -           -              -              -    (6,590) 
 Disposal / Written off           (1,121)     (590)            -       (123)     (1,075)        (22)              -              -    (2,931) 
                                           --------  -----------  ----------  ----------  ----------  -------------  ------------- 
 At 31 December 2019               84,834    25,843        2,727      21,288      13,295       1,009            187              -    149,183 
                            -------------  --------  -----------  ----------  ----------  ----------  -------------  -------------  --------- 
 
 Carrying amount 
 At 31 December 2017              127,820    47,631      137,543      35,803       3,536         168              -          1,179    353,680 
 At 31 December 2018              119,095    46,482      131,597      35,702       4,609         151              -          2,731    340,367 
 At 31 December 2019              129,216    52,516      137,936      41,540       4,695         268            659          1,061    367,891 
 

The Group engaged Muttaqin Bambang Purwanto Rozak Uswatun & Rekan (MBPRU) with its head office located in Jakarta, Indonesia to undertake the land valuation for the Group. The valuation was carried out independently by MBPRU who has the appropriate professional qualifications and recent experience in the location and category of the properties being valued. Further information of MBPRU can be obtained from ' www.kjpp-mbpru.com '. For the year ended 31 December 2019, valuations were undertaken on the land of nine subsidiaries in Indonesia and Malaysia. The quantum per hectare derived from the current valuation was then applied to the land value of the remaining companies in the same geographical location to derive the fair value of land as at 31 December 2019. For the year ended 31 December 2018, independent land valuations were undertaken for eight subsidiaries companies in Indonesia. The same methodology to fair value land was adopted to value the land of the remaining companies as at 31 December 2018. Unplantable land was excluded in this exercise since it has zero value. Land is valued on a rotational basis and all the land is valued by qualified valuers every two years. Had the revalued land been measured on a historical cost basis, their net book value would have been $56,978,000 (2018: $50,571,000).

PT Simpang Ampat's land was valued on the basis that its highest and best use is oil palm plantation. At present the land is planted with rubber trees, however, the Group has the intention to replace the ageing rubber trees with palm oil trees.

Details of the information about the fair value hierarchy in relation to land at 31 December are as follows:

 
                        Level   Level     Level   Fair value 
                            1       2         3 
                         $000    $000      $000         $000 
 
 Land 
 At 31 December 2019        -       -   137,936      137,936 
 At 31 December 2018        -       -   131,597      131,597 
 

There was no item classified under Level 1 and Level 2 and thus there was no transfer between Level 1 and Level 2 during the year.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of land and the inter-relationship between key unobservable inputs and fair value are set out in the table below:

 
 Item   Valuation approach          Inputs used          Inter-relationship 
                                                          between key unobservable 
                                                          inputs and fair value 
 Land   Selling prices of           Selling prices       The higher the selling 
         comparable land             of comparable        price, the higher 
         in similar location         land.                the fair value. 
         adjusted for differences 
         in key attributes.          Location, legal      These are qualitative 
         The valuation model         title, land area,    inputs which require 
         is based on price           land type and        significant judgement 
         per hectare.                topography.          by professional valuer, 
                                                          MBPRU. 
       --------------------------  -------------------  -------------------------- 
 

There was no change to the valuation techniques during the year.

The fair value measurement is based on the above items' highest and best use, which does not differ from their actual use.

Th e capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is based on the percentage of immature area of each estate against total planted area in the estate. The average capitalisation rate was 9.6% (2018: 10.4%). The estates included $96,000 (2018: $160,000) of interest and $4,850,000 (2018: $4,245,000) of overheads capitalised during the year in respect of expenditure on estates under development.

The Indonesian authorities have granted certain land exploitation rights and operating permits for the estates. In the case of established estates in North Sumatera, these rights and permits expire between 2023 and 2054 with rights of renewal thereafter. As of estates in Bengkulu land titles were issued between 1994 and 2016 and the titles expire between 2028 and 2051 with rights of renewal thereafter for two consecutive periods of 25 and 35 years respectively. In Riau, land titles were issued in 2003 and expire in 2033. In Kalimantan, land titles were issued between 2016 and 2019 and expire between 2019 and 2054. In Bangka, land titles were issued in 2018 and expire between 2021 and 2053. The land title for South Sumatera were issued between 2011 and 2015.

Subject to compliance with the laws and regulations of Indonesia, land rights are usually renewed. The cost of renewing the land rights is not significant. On the basis that the Group has an indefinite right to renew, leasehold land is not depreciated.

The land title of the estate in Malaysia is a long-term lease expiring in 2084.

Impairment for plantations is measured by comparing its carrying amount with its recoverable amount, which is the higher of the fair value less cost to sell and its value in use. The impairment assessment is based on each cash generating unit ("CGU") which is defined as each estate. In 2018, the impairment loss of $3,418,000 was due to the higher cost of new planting and the decrease in CPO price. The reversal of impairment loss of $7,571,000 recognised in 2019 was primarily due to the increase in CPO price, attributed to amounts being reclassified to plasma receivables during the year and decreases in the pre-tax discount rates.

Given the volatility of CPO prices, the recoverable amount of the Group's plantations in 2019 was based on value in use calculations and that it will be higher than fair value less cost to sell. The recoverable amount of the Group's plantations carried at value in use was $32,962,000 (2018: $21,514,000).

The value in use is the net present value of the projected future cash flows over the expected 20-year economic life of the asset discounted at 16.6% (2018: 18.7%). Projected future cash flows are calculated based on historical data, industry performance, economic conditions and any other readily available information.

The value in use is computed by the professional valuer, MBPRU using discounted cash flow ("DCF") over the expected 20-year economic life of the asset. The following table sets out the key assumptions in the valuation along with the impact on the impairment charge of a 1% change:

 
                                      2019                2018 
                                  ----------  --------------------------  -------------- 
                                  Assumption        Increase  Assumption        Increase 
                                     applied   in impairment     applied   in impairment 
                                                        $000                        $000 
 
     CPO price - decrease of 
      1%                             $635/mt           1,459     $600/mt             975 
     Pre-tax discount rate -        16.51% - 
      increase by 1%                  16.60%           2,600       18.7%           1,725 
     Inflation rate - increase 
     by 1%                             3.38%           2,241       4.66%           1,620 
 
 

12 Receivables: non-current

 
                                                   2019          2018 
                                           ------------------  ------  ------ 
                                           Book value    Fair    Book    Fair 
                                                        value   value   value 
                                                 $000    $000    $000    $000 
 
     Due from non-controlling interests         3,571   1,994   2,965   1,833 
     Due from cooperatives under Plasma 
     scheme                                    12,929  11,924   8,055   6,240 
                                               16,500  13,918  11,020   8,073 
                                           ----------  ------  ------  ------ 
 
 

The non-controlling interests in PT Alno Agro Utama and PT Cahaya Pelita Andhika have acquired their interests on deferred terms (see note 25 , Credit risk). In 2017, there was a change in the ownership of the non-controlling interests in PT Sawit Graha Manunggal, PT Karya Kencana Sentosa Tiga, PT Riau Agrindo Agung and PT Empat Lawang Agro Plantation which was similarly acquired on deferred terms (see note 25, Credit risk).

Plasma scheme is an initiative by the Indonesian Government that mandated plantation owners to allocate a percentage of their land acquired to the surrounding community and to further provide financial and technical assistance to cultivate oil palm on that land to improve the income and welfare of the community or cooperatives. During the year, certain subsidiary companies have funded plasma of $19,078,000 (2018: $8,136,000) which is recoverable from the cooperatives, the details are disclosed in note 15.

The fair values disclosed above are for disclosure purposes and all non-current receivables are classified as Level 3 in the fair value hierarchy.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of non-current receivables, as well as the inter-relationship between key unobservable inputs and fair value, are set out in the table below:

 
 Item                       Valuation approach       Inputs used   Inter-relationship 
                                                                    between key unobservable 
                                                                    inputs and fair value 
 Due from non-controlling   Based on cash flows      Discount      The higher the discount 
  interests                  discounted using         rate          rate, the lower the 
                             current lending rate                   fair value. 
                             of 6% (2018: 6%). 
                           -----------------------  ------------  -------------------------- 
 Due from cooperatives      Based on cash flows      Discount      The higher the discount 
  under Plasma               discounted using         rate          rate, the lower the 
  scheme                     an estimated current                   fair value. 
                             lending rate of 6.78% 
                             (2018: 6.58%). 
                           -----------------------  ------------  -------------------------- 
 

The details of the expected credit losses ("ECL") are disclosed in note 15.

13 Inventories

 
                                              2019            2018 
                                              $000            $000 
 
     Estate and mill consumables             5,332           5,916 
     Processed produce for sale              3,420           3,624 
                                           -------         ------- 
                                             8,752           9,540 
                                           -------         ------- 
 

14 Biological assets

 
                                                            2019               2018 
                                                            $000               $000 
 
    At 1 January                                           4,093              6,772 
    Changes in fair value less cost to sell               89,706             92,758 
    Decreases due to harvest                            (86,451)           (95,044) 
    Exchange translations                                    226              (393) 
                                                                         ---------- 
    At 31 December                                         7,574              4,093 
                                                      ----------         ---------- 
 

The valuation of the unharvested FFB was carried out internally for each plantation of the Group and confirmed by external valuers. It involved an estimation of the weight of unharvested FFB at balance sheet date multiplied by the sum of average FFB selling price less average harvesting cost of the last month prior to the balance sheet date. The weight was derived from the computation of the percentage of growth based on the data extracted from the research reference "The Reflection of Moisture Content on Palm Oil Development during the Ripening Process of Fresh Fruits" multiplied with the estimated FFB harvested two months' post balance sheet date.

The fair value of biological assets is classified as Level 3 in the fair value hierarchy.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of biological assets, as well as the inter-relationship between key unobservable inputs and fair value, are set out in the table below:

 
 Item           Valuation approach         Inputs used    Inter-relationship between 
                                                           key unobservable inputs 
                                                           and fair value 
 Biological     Based on FFB               FFB weight     The higher the weight, the 
  assets -       weight multiplied                         higher the fair value 
  Unharvested    by the sum of              FFB selling 
  produce        FFB selling                price          The higher the selling price, 
                 price less harvesting                     the higher the fair value 
                 cost                       Harvesting 
                                            cost           The higher the harvesting 
                                                           cost, the lower the fair 
                                                           value 
               -----------------------  ---------------  ------------------------------- 
 

15 Trade and other receivables

 
                                                 2019             2018 
                                                 $000             $000 
 
    Trade receivables                           1,775            1,123 
    Other receivables                           3,610            3,638 
    Prepayments and accrued income                389              442 
                                                              -------- 
                                                5,774            5,203 
                                             --------         -------- 
 

The carrying amount of trade and other receivables classified as amortised cost approximates fair value.

As at 31 December 2019, trade receivables of $1,490,000 (2018: $860,000) were past due but not impaired. They were related to the customers with no default history and substantially secured by bank guarantee. The ageing analysis of trade receivables of the Group are as follows:

 
                                                2019            2018 
                                                $000            $000 
 
    Neither past due nor impaired                285             263 
    Past due but not impaired 
                                            --------         ------- 
     31 to 60 days                             1,091             518 
     61 to 90 days                               258             154 
     91 to 120 days                              141             146 
     > 120 days                                    -              42 
                                            --------         ------- 
                                               1,490             860 
                                                             ------- 
                                               1,775           1,123 
                                            --------         ------- 
 

The Group applies the IFRS 9 simplified approach to measure ECL using a lifetime ECL provision for trade receivables. To measure ECL on a collective basis, trade receivables are grouped based on similar credit risk and age.

The expected loss rate is based on a combination of the Group's historical credit losses experienced over the 10-year period prior to the year end and forward-looking information on macroeconomic factors affecting the Group's customers. The historical loss rate for trade receivables is considered to be 0% hence no ECL have been recognised.

The Group assesses the ECL associated with its debt instruments carried at amortised cost on a forward-looking basis using the three stage approach. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Group considers the probability of default upon initial recognition of an asset and whether there has been significant increase in credit risk on an on-going basis at each reporting date. To assess whether there is a significant increase in credit risk, the Group compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. The Group considers available, reasonable and supportable forward-looking information, such as:

   -       internal credit rating; 
   -       external credit rating (as far as available); 

- actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtor's ability to meet its obligation;

- significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements; or

- significant changes in the expected performance or behaviour of the debtor, including changes in the payment status of the debtor.

There has not been a significant increase in credit risk since initial recognition on any of the group's financial assets therefore 12-month ECL have continued to be recognised on all balances other than trade receivables which are discussed above.

Movements on the Group's loss provision on current and non-current other receivables and financial guarantee contracts are as follows:

 
                                                 2019            2018 
                                                 $000            $000 
 
    At 1 January                                  308               - 
    Loss provision during the year              5,965             308 
    At 31 December                              6,273             308 
                                             --------         ------- 
 

At 31 December 2019, the expected loss provision for other receivables is as follows:

 
                                                          Gross          Loss    Net carrying 
                                                       carrying     provision          amount 
                                                         amount          $000            $000 
                                                           $000 
  2019 
  Other receivables (note 15)                             3,654          (44)           3,610 
            Receivables: non-current (note 
             12) 
            - Due from non-controlling interests          3,607          (36)           3,571 
            - Due from cooperatives under 
             Plasma scheme                               19,078       (6,149)          12,929 
                                                         26,339       (6,229)          20,110 
                                                    -----------  ------------  -------------- 
  Financial guarantee contracts 
   (note 24)                                                  -          (44)            (44) 
                                                    -----------  ------------  -------------- 
                                                         26,339       (6,273)          20,066 
                                                    -----------  ------------  -------------- 
 
 
                                                    Gross          Loss    Net carrying 
                                                 carrying     provision          amount 
                                                   amount          $000            $000 
                                                     $000 
  2018 
  Other receivables (note 15)                       3,673          (35)           3,638 
            Receivables: non-current (note 
             12) 
            - Due from non-controlling 
             interests                              2,995          (30)           2,965 
            - Due from cooperatives under 
             Plasma scheme                          8,136          (81)           8,055 
                                                   14,804         (146)          14,658 
                                              -----------  ------------  -------------- 
  Financial guarantee contracts 
   (note 24)                                            -         (162)           (162) 
                                              -----------  ------------  -------------- 
                                                   14,804         (308)          14,496 
                                              -----------  ------------  -------------- 
 

16 Loans and borrowings

 
                                                        2019                  2018 
                                               ----------------------  ------------------ 
                                               Book value  Fair value  Book value    Fair 
                                                                                    value 
                                                     $000        $000        $000    $000 
 
       Non-current 
       Long-term loan (b)                               -           -       8,203      7,742 
                                                        -           -       8,203      7,742 
                                               ----------  ----------  ----------  --------- 
       Current 
       Long-term loan (a)                               -           -       1,312      1,312 
       Long-term loan (b)                           8,203       7,943       9,766      9,766 
                                               ----------  ----------  ----------  --------- 
                                                    8,203       7,943      11,078     11,078 
                                               ----------  ----------  ----------  --------- 
 
       Total loans and borrowings                   8,203       7,943      19,281     18,820 
 
       Amounts repayable after more than 
        one year, as follows: 
         in more than one year but not more 
          than two years                                -                   8,203 
         in more than two years but not more            -                       - 
          than five years 
                                                        -                   8,203 
                                               ----------              ---------- 
 
 

(a) A subsidiary company, PT Hijau Pryan Perdana, has obtained a long-term loan of $10 million for a period of seven years (including two years grace repayment period) to support the capital expenditure requirement for planting, development and maintenance of oil palm estate and to finance mill construction and other property, plant and equipment owned by the subsidiary company as well as to utilise for repayment of amount due to related parties. It is secured by the subsidiary company's land with a carrying amount of $6.3 million (2018: $5.9 million) measured at fair value and its plantation with a carrying amount of $6.3 million (2018: $6.6 million) as at 31 December 2019. The loan is also guaranteed by PT Tasik Raja and by the Company. This loan bears interest at a rate based on Base Lending Rate which is payable quarterly in arrears . Average interest rate in 2019 was about 6.78% (2018: 6.48%). The loan was fully paid during the year.

(b) Another subsidiary company, PT Sawit Graha Manunggal, has obtained a long-term loan of $35 million for a period of eight years (including four years grace repayment period) to support the capital expenditure requirement for planting, development and maintenance of oil palm estate and to finance oil mill construction and other property, plant and equipment owned by the subsidiary company. It is secured by the subsidiary company's land with a carrying amount of $5.8 million (2018: $5.3 million) measured at fair value and its plantation with a carrying amount of $23.0 million (2018: $23.4 million) as at 31 December 2019 and is guaranteed by the Company. This loan bears interest at a rate based on SIBOR + 4.5% + Liquidity Premium which is payable quarterly in arrears. Average interest rate in 2019 was about 6.78% (2018: 6.68%). The loan is repayable from 30 December 2016 to 30 September 2020.

All the loans and borrowings are denominated in USD. The effect of changes in foreign exchange rates is disclosed in note 25.

The fair value of the items classified as loans and borrowings is disclosed below and is classified as Level 3 in the fair value hierarchy:

 
                                       2019                  2018 
                              ----------------------  ------------------ 
                              Book value  Fair value  Book value    Fair 
                                                                   value 
                                    $000        $000        $000    $000 
 
       Loans and borrowings        8,203       7,943      19,281  18,820 
 

The fair value for disclosure purposes has been determined using discounted cash flows. Significant inputs include the discount rate used to reflect the credit risk associated with the Group. The fair value reduces as higher discount rate being used.

17 Trade and other payables

 
                                  2019              2018 
                                  $000              $000 
 
    Trade payables               5,028             7,483 
    Other payables               3,588             4,724 
    Accruals                     7,494             7,876 
                             ---------         --------- 
                                16,110            20,083 
                             ---------         --------- 
 

The carrying amount of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

18 Deferred tax

The movement on the deferred tax account as shown below:

 
                                                              2019               2018 
                                                              $000               $000 
 
    At 1 January                                           (8,893)           (13,081) 
     Recognised in income statement: 
       Tax expense                                           3,220              3,059 
       BA movement                                           (930)                571 
       Revaluation of leasehold land                           245                230 
     Recognised in other comprehensive income: 
       Revaluation of leasehold land                           577               (45) 
       Retirement benefits                                     256              (298) 
     Exchange differences                                    (271)                671 
     At 31 December                                        (5,796)            (8,893) 
                                                         ---------         ---------- 
 

The deferred tax asset and liability, together with the amounts recognised in income statement and other comprehensive income are detailed as follows:

 
                                                                          (Charged)/ 
                                                                            credited     (Charged)/ 
                                                                                  to       credited 
                                        Asset     Liability        Net        income      to equity 
                                         $000          $000       $000     statement           $000 
                                                                                $000 
    2019 
    Revaluation surplus                     -      (22,479)   (22,479)           245            577 
    Retirement benefits                 2,834             -      2,834           420            256 
    BA movement                             -       (2,010)    (2,010)         (930)              - 
    Unutilised tax losses              14,170             -     14,170         1,152              - 
    Unremitted earnings                     -         (319)      (319)             -              - 
    Other temporary differences         2,008             -      2,008         1,648              - 
                                     --------  ------------  ---------  ------------  ------------- 
    Tax assets / (liabilities)         19,012      (24,808)    (5,796)         2,535            833 
    Set off of tax                    (7,761)         7,761          -             -              - 
                                     --------  ------------  ---------  ------------  ------------- 
    Net tax assets / (liabilities)     11,251      (17,047)    (5,796)         2,535            833 
                                     --------  ------------  ---------  ------------  ------------- 
 
    2018 
    Revaluation surplus                     -      (22,316)   (22,316)           230           (45) 
    Retirement benefits                 2,056             -      2,056           248          (298) 
    BA movement                             -       (1,022)    (1,022)           571              - 
    Unutilised tax losses              12,459             -     12,459         2,656              - 
    Unremitted earnings                     -         (292)      (292)             -              - 
    Other temporary differences           111           111        222           155              - 
                                     --------  ------------  ---------  ------------  ------------- 
    Tax assets / (liabilities)         14,626      (23,519)    (8,893)         3,860          (343) 
    Set off of tax                    (3,479)         3,479          -             -              - 
                                     --------  ------------  ---------  ------------  ------------- 
    Net tax assets / (liabilities)     11,147      (20,040)    (8,893)         3,860          (343) 
                                     --------  ------------  ---------  ------------  ------------- 
 
 
                                                         2019     2018 
                                                         $000     $000 
    A deferred tax asset has not been recognised 
     for the following items: 
    Unutilised tax losses                              19,142   17,228 
 

The Groups recognised tax assets arising from the unutilised tax losses of certain subsidiaries as the Group believes that the tax assets of these subsidiaries can be realised in the future periods based on their budget , due to their respective plantation assets becoming more mature and historically this resulting in the companies becoming profitable. However, the Group does not recognise the tax losses in certain companies within the Group as tax assets as the future recoverability of losses of these companies cannot be certain. The time limit on utilisation of tax losses is subject to the agreement of the relevant tax authorities. As of 31 December 2019, the relevant time limits are 5 years in Indonesia, 7 years in Malaysia and unlimited in UK.

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was $635,809,000 (2018 - $650,475,000). No liability has been recognised in respect of these differences because either the Group is in a position to control the timing of the reversal of the temporary differences, or such a reversal would not give rise to an additional tax liability.

19 Retirement benefits

The Group operates two defined benefit schemes in respect of its Indonesian operations in accordance with Indonesia Labour Law No. 13/2003 ("the Law") dated 25 March 2003. The law does not impose funding requirements on the Company to create a fund asset to pay the defined benefit obligations.

The first scheme is a defined benefit pension scheme offered to certain employees. This scheme is funded and managed by SKU UKINDO Pension Fund authorised by the Ministry of Finance of the Republic of Indonesia. When an employee reaches the mandatory retirement age, dies or becomes disabled, the Group shall pay the higher of the benefit from the pension scheme and the benefit calculated under the Law. The asset value of the pension scheme is adequate to fund the annual payment of benefits.

The Group also established a funding programme through a savings plan managed by PT Asuransi Allianz Life Indonesia for the payment of severance / pension for eligible staff. The assets of the fund are to be used only to settle defined benefit obligations. The asset value of the funding programme is adequate to fund the annual payment of benefits.

The scheme is valued by an actuary at the end of each financial year. The major assumptions used by the actuary were:

 
                                             2019         2018 
 
    Rate of increase in wages                8.0%         8.0% 
    Rate of return on scheme assets          8.5%         8.5% 
    Discount rate                            8.0%         8.5% 
    Mortality rate*                     100% TMI3    100% TMI3 
    Disability rate                      10% TMI3     10% TMI3 
 

* Mortality rate was derived from observation of Indonesian life insurance policyholders released in 2011 and load 10% to allow for disability.

The Group also operates a non-contributory non-funded retirement plan for staff in Indonesia. Retirement benefits are paid to employees in a single lump sum at the time of retirement. Retirement benefits are accrued by the Group and charged in the income statement based on individual employee's service up to the end of the financial year.

The Group provides other long-term employee benefits in the form of Long Service Award. Employees who have 10, 20 or 25 years of continuous service will receive Long Service Award amounting up to 2 months of basic salary.

 
                                           2019     2018 
                                           $000     $000 
    Service cost 
      Current service cost                1,597    1,538 
      Past service cost                     427    (445) 
    Net interest expense                    734      635 
    Actuarial gain / (loss)                  31     (77) 
                                        -------  ------- 
    Total employee benefits expense       2,789    1,651 
                                        -------  ------- 
 
   (i)   Reconciliation of defined benefit obligation and fair value of scheme assets 
 
                              Defined benefit obligation        Fair value of scheme           Net defined scheme 
                                                                        assets                      liability 
                            Funded   Unfunded               Funded   Unfunded              Funded   Unfunded 
                            scheme     scheme       Total   scheme     scheme     Total    scheme     scheme     Total 
                              $000       $000        $000     $000       $000    $000        $000       $000      $000 
 
    At 1 January 2018      (7,957)    (5,379)    (13,336)    4,314          -     4,314   (3,643)    (5,379)   (9,022) 
 
        Service cost - 
         current             (629)      (909)     (1,538)        -          -         -     (629)      (909)   (1,538) 
        Service cost - 
         past                  268        177         445        -          -         -       268        177       445 
        Interest (cost) 
         / income            (545)      (402)       (947)      312          -       312     (233)      (402)     (635) 
        Actuarial gain           -         77          77        -          -         -         -         77        77 
                          --------  ---------  ----------  -------  ---------  --------  --------  ---------  -------- 
    Included in 
     comprehensive 
     income                  (906)    (1,057)     (1,963)      312          -       312     (594)    (1,057)   (1,651) 
 
    Remeasurement gain / 
    (loss) 
        Actuarial gain / 
        (loss) from: 
                          --------  ---------  ----------  -------  ---------  --------  --------  ---------  -------- 
           Adjustments 
            (experience)       106       (27)          79        -          -         -       106       (27)        79 
           Financial 
            assumptions        655        648       1,303        -          -         -       655        648     1,303 
        Return on plan 
         assets (exclude 
         interest)               -          -           -    (190)          -     (190)     (190)          -     (190) 
                          --------  ---------  ----------  -------  ---------  --------  --------  ---------  -------- 
    Included in other 
     comprehensive 
     income                    761        621       1,382    (190)          -     (190)       571        621     1,192 
 
        Effect of 
         movements in 
         exchange 
         rates                 510        352         862    (283)          -     (283)       227        352       579 
        Employer 
         contributions           -          -           -      401          -       401       401          -       401 
        Benefits paid          346        142         488    (231)          -     (231)       115        142       257 
                          --------  ---------  ----------  -------  ---------  --------  --------  ---------  -------- 
    Other movements            856        494       1,350    (113)          -     (113)       743        494     1,237 
 
    At 31 December 2018    (7,246)    (5,321)    (12,567)    4,323          -     4,323   (2,923)    (5,321)   (8,244) 
                          --------  ---------  ----------  -------  ---------  --------  --------  ---------  -------- 
 
 
                            Defined benefit obligation        Fair value of scheme          Net defined 
                                                                     assets                    scheme 
                                                                                             liability 
                            Funded   Unfunded              Funded   Unfunded             Funded   Unfunded 
                            scheme     scheme      Total   scheme     scheme    Total    scheme     scheme      Total 
                              $000       $000       $000     $000       $000     $000      $000       $000       $000 
 
    At 31 December 2018    (7,246)    (5,321)   (12,567)    4,323          -    4,323   (2,923)    (5,321)    (8,244) 
 
        Service cost - 
         current             (675)      (922)    (1,597)        -          -        -     (675)      (922)    (1,597) 
        Service cost - 
         past                (420)        (7)      (427)        -          -        -     (420)        (7)      (427) 
        Interest (cost) 
         / income            (630)      (485)    (1,115)      381          -      381     (249)      (485)      (734) 
        Actuarial loss           -       (31)       (31)        -          -        -         -       (31)       (31) 
                          --------  ---------  ---------  -------  ---------  -------  --------  ---------  --------- 
    Included in 
     comprehensive 
     income                (1,725)    (1,445)    (3,170)      381          -      381   (1,344)    (1,445)    (2,789) 
 
     Remeasurement 
     (loss) / gain 
        Actuarial (loss) 
        / gain from: 
                          --------  ---------  ---------  -------  ---------  -------  --------  ---------  --------- 
           Adjustments 
            (experience)     (144)         41      (103)        -          -        -     (144)         41      (103) 
           Financial 
            assumptions      (391)      (367)      (758)        -          -        -     (391)      (367)      (758) 
         Return on plan 
          assets 
          (exclude 
          interest)              -          -          -    (162)          -    (162)     (162)          -      (162) 
                          --------  ---------  ---------  -------  ---------  -------  --------  ---------  --------- 
    Included in other 
     comprehensive 
     income                  (535)      (326)      (861)    (162)          -    (162)     (697)      (326)    (1,023) 
 
         Effect of 
          movements in 
          exchange 
          rates              (335)      (250)      (585)      192          -      192     (143)      (250)      (393) 
        Employer 
         contributions           -          -          -      637          -      637       637          -        637 
        Benefits paid          475        198        673    (199)          -    (199)       276        198        474 
                          --------  ---------  ---------  -------  ---------  -------  --------  ---------  --------- 
    Other movements            140       (52)         88      630          -      630       770       (52)        718 
 
    At 31 December 2019    (9,366)    (7,144)   (16,510)    5,172          -    5,172   (4,194)    (7,144)   (11,338) 
                          --------  ---------  ---------  -------  ---------  -------  --------  ---------  --------- 
 
 

(ii) Disaggregation of defined benefit scheme assets

The fair value of the funded assets is analysed as follows:

 
                         2019    2018 
                         $000    $000 
 Bonds 
 - Corporate bonds         24       - 
 - Government bonds         -      28 
 - Mutual fund bonds      288     214 
                       ------  ------ 
                          312     242 
 
 Mutual funds               -     351 
 Cash / deposits        4,860   3,730 
                       ------  ------ 
                        5,172   4,323 
                       ------  ------ 
 

(iii) Defined benefit obligation - sensitivity analysis

The following table exhibits the sensitivity of the Group's retirement benefits to the fluctuation in the discount rate, wages and mortality rate:

 
                          Reasonably     Defined benefit obligation 
                            Possible        Increase       Decrease 
                              Change            $000           $000 
 
                              (+ / - 
 Discount rate                   1%)         (1,559)          1,723 
                              (+ / - 
 Growth in wages                 1%)           1,775        (1,629) 
                              (+ / - 
 Future mortality rate          10%)              68           (74) 
 

The weighted average duration of the defined benefit obligation is 14.65 years (2018: 15.55 years).

The company expects to pay contributions of $620,000 to the funded plans in 2020. For the unfunded plans, the company pays the benefits directly to the individuals; the company expects to make direct benefit payments of $282,000 in 2020.

At 31 December 2019, the following benefits, which reflect expected future service as appropriate, are expected to be paid:

 
 Year               $000 
 2020                902 
 2021 to 2024      5,061 
 2025 to 2029     12,868 
 after 2029      129,942 
 Total           148,773 
                -------- 
 

20 Share capital and treasury shares

 
                                                     Issued                 Issued                   Issued 
                                     Authorised         and    Authorised      and    Authorised        and 
                                         Number       fully        GBP000    fully          $000      fully 
                                                       paid                   paid                     paid 
                                                     Number                 GBP000                     $000 
      Ordinary shares of 
       25p each 
      Beginning and end 
       of year                       60,000,000  39,976,272        15,000    9,994        23,865     15,504 
                                   ------------  ----------  ------------  -------  ------------  --------- 
 
                                                                                            Cost       Cost 
                                                       2019          2018                   2019       2018 
     Treasury shares:                                Number        Number                  $'000      $'000 
      Beginning of year                             339,900       339,900                (1,171)    (1,171) 
      Share options exercised                             -             -                      -          - 
                                                 ----------  ------------           ------------  --------- 
      End of year                                   339,900       339,900                (1,171)    (1,171) 
                                                 ----------  ------------           ------------  --------- 
 
      Market value of treasury                                                                        $'000 
       shares: 
      Beginning of year 
       (568.0p/share)                                                                                 2,465 
      End of year (574.0p/share)                                                                    2,577 
 

No treasury share was purchased in 2019 (2018: Nil).

All fully paid ordinary shares have full voting rights, as well as to receive the distribution of dividends and repayment of capital upon winding up of company.

21 Ultimate controlling shareholder

At 31 December 2019 , Genton International Limited ("Genton"), a company registered in Hong Kong, held 20,247,814 (2018: 20,247,814) shares of the Company representing 51.1% (2018: 51.1%) of the issued share capital of the Company. Together with other deemed interested parties, the Genton's shareholding totals 20,551,914 or 51.9%. Madam Lim Siew Kim, a Director of the Company, has advised the Company that she is the controlling shareholder of Genton International Limited.

22 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

During the year the Company engaged UHY Hacker Young LLP, an accounting firm of which Dato' John Lim Ewe Chuan was a partner (until 30 April 2019), to provide company secretarial and taxation services for a fee of $25,229 (2018: $32,517). The services provided are on an arm's length basis. The balance outstanding at the year end was $204 (2018: $6,999).

An office premises lease agreement was entered with Infra Sari Sdn Bhd, a company controlled by Madam Lim Siew Kim. The rental paid during the year was $352,845 (2018: $314,259). There was no balance outstanding at the year end (2018: Nil).

In 2019, a land lease agreement was entered with Kuang Rong Holdings Sdn Bhd, company controlled by Madam Lim Siew Kim. The rental paid during the year was $33,871. There was no balance outstanding at the year end.

In 2019, the final dividend paid to Genton International Limited, a company controlled by Madam Lim Siew Kim, was $607,434 for the year ended 31 December 2018 (2018: $809,913 for the year ended 31 December 2017). The final dividend paid to other companies controlled by Madam Lim Siew Kim was $9,123 for the year ended 31 December 2018 (2018: $12,164 for the year ended 31 December 2017). There was no balance outstanding at the year end.

23 Reserves

Nature and purpose of each reserve:

   Share capital                                    Amount of shares subscribed at nominal value. 

Share premium Amount subscribed for share capital in excess of nominal value.

Capital redemption reserve Amounts transferred from share capital on redemption of issued shares.

   Treasury shares                               Cost of own shares held in treasury. 

Revaluation reserves Gains/losses arising on the revaluation of the Group's property, net of tax.

Exchange reserves Gains/losses arising from translating the net assets of overseas operations into US Dollar.

Retained earnings Cumulative net gains and losses recognised in the consolidated income statement.

24 Guarantees and other financial commitments

 
                                                             2019              2018 
                                                             $000              $000 
  Capital commitments at 31 December 
  Contracted but not provided - normal estate 
   operations                                                  14               285 
  Authorised but not contracted - plantation 
   and mill development                                    13,073            22,667 
 

A subsidiary company, PT Sawit Graha Manunggal ("SGM") has provided a corporate guarantee to Koperasi Bartim Sawit Sejahtera ("KBSS"), a party under Plasma scheme as disclosed in note 12, in relation to a loan taken by KBSS from PT Bank Mandiri (Persero) Tbk. of Rp226.02 billion ($16.3 million) (2018: Rp226.02 billion, $15.6 million). The corporate guarantee remains until the loan is fully settled by 23 December 2027. The HGU (land right) that belongs to the Plasma scheme is currently held under SGM's master title. An application to separate the HGU was submitted to the Land Office and the land and its plantation with a total carrying amount of $9.5 million as at 31 December 2019 will be pledged to the bank as security once the title separation approval is obtained. In addition, the terms and conditions of the loan agreement also require KBSS to sell all its FFB produce to SGM and the plantation estate is to be managed by SGM. In view of these, the Group exposure to this contingent liability is minimised.

On 3 February 2017, a subsidiary company, PT Alno Agro Utama and Koperasi Perkebunan Plasma Maju Sejahtera ("KPPM") signed a Refinancing Agreement with PT Bank Syariah Mandiri ("BSM") to fund its plasma development. The Agreement provides a loan of Rp 8.75 billion ($0.6 million), with 10 (Ten) years maturity period effective from 24 July 2017 with an interest rate of 13.25% per annum. KPPM pledges its 147.04 hectares oil palm plantation located in Desa Serami Baru, Kecamatan Malin Deman, Kabupaten Mukomuko, Bengkulu and its plantation with a carrying amount of $0.7 million as at 31 December 2019 as security under the agreement while the Company provides corporate guarantee amounting to Rp 8.75 billion ($0.6 million).

The Group's loss provision on financial guarantee was $44,000 (2018: $162,000). The details of the ECL were disclosed in note 15.

25 Disclosure of financial instruments and other risks

The Group's principal financial instruments comprised cash, short and long-term bank loans, trade receivables and payables and receivables from local partners in respect of their investments.

The Group's accounting classification of each class of financial asset and liability at 31 December 2019 and 2018 were:

 
                                                   Financial 
                                    Amortised    liabilities    Total carrying 
                                         cost             at             value 
                                         $000      amortised              $000 
                                                        cost 
                                                        $000 
2019 
Non-current receivables                16,500              -            16,500 
Trade and other receivables             5,385              -             5,385 
Cash and cash equivalent               84,846              -            84,846 
Loans and borrowings due within 
 one year                                   -        (8,203)           (8,203) 
Trade and other payables                    -       (16,110)          (16,110) 
                                      106,731       (24,313)            82,418 
                                  -----------  -------------  ---------------- 
 
                                                   Financial 
                                                 liabilities    Total carrying 
                                    Amortised   at amortised             value 
                                         cost           cost              $000 
                                         $000           $000 
2018 
Non-current receivables                11,020              -            11,020 
Trade and other receivables             4,761              -             4,761 
Cash and cash equivalent              112,212              -           112,212 
Loans and borrowings due within 
 one year                                   -       (11,078)          (11,078) 
Trade and other payables                    -       (20,083)          (20,083) 
Loans and borrowings due after 
 one year                                   -        (8,203)           (8,203) 
                                  -----------  -------------  ---------------- 
                                      127,993       (39,364)            88,629 
                                  -----------  -------------  ---------------- 
 

Financial instruments not measured at fair value

Financial instruments not measured at fair value include cash and cash equivalents, trade and other receivables, trade and other payables, and borrowings due within one year.

Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, trade and other payables approximates their fair value.

Please refer to the applicable notes for details of the fair value hierarchy, valuation techniques, and significant unobservable inputs related to determining the fair value of the following items:

     -   Non-current receivables (note 12); and 
     -   Loans and borrowings (note 16). 

The principal financial risks to which the Group is exposed are:

           -   commodity selling price changes; 
           -   exchange movements; and 

which, in turn, can affect financial instruments and/or operating performance.

With the exception described below, the Company does not hedge any of its risks. Its trade credit risks are low. There are no financial assets or liabilities that are held at fair value through the profit or loss.

The Board is directly responsible for setting policies in relation to financial risk management and monitors the levels of the main risks through review of regular operational reports.

Commodity selling prices

The Group does not normally contract to sell produce more than one month ahead.

Currency risk

Most of the Group's operations are in Indonesia. The Company and Group accounts are prepared in US Dollar which is not the functional currency of the operating subsidiaries. The Group does not hedge its net investment in its overseas subsidiaries and is therefore exposed to a currency risk on that investment. The historical cost of investment (including intercompany loans) by the parent in its subsidiaries amounted to $55,797,000 (2018: $57,989,000), while the balance sheet value of the Group's share of underlying assets at 31 December 2019 amounted to $401,157,000 (2018: $371,980,000).

All the Group's sales are made in local currency and any trade receivables are therefore denominated in local currency. No hedging is therefore necessary.

Selling prices of the Group's produce are directly related to the US Dollar denominated world prices. Appreciation of local currencies, therefore, reduces profits and cash flow of the Indonesian and Malaysian subsidiaries in US Dollar terms and vice versa.

The Group's subsidiaries which are borrowing in US Dollar, as set out under Liquidity Risk below could face significant exchange losses in the event of depreciation of their local currency - and vice versa. This risk is mitigated to some extent by US Dollar denominated cash balances in those subsidiaries. The Company will continue to partially match US Dollar cash balances with US Dollar financial liabilities. The average interest rate on local currency deposits was 4.44% higher (2018: 4.85% higher) than on US Dollar deposits whereas interest rate for local currency borrowing was about 2.72% higher (2018: 4.09% higher) as compared to US Dollar borrowing. The unmatched balance at 31 December 2019 is represented by the $5,910,000 shown in the table below (2018: $806,000). If the Group's net cash position continues to improve then US Dollar cash balances will continue to increase through 2020.

The table below shows the net monetary assets and liabilities of the Group as at 31 December 2019 and 2018 that were not denominated in the operating or functional currency of the operating unit involved.

 
                                        Net foreign currency assets/(liabilities) 
                                   -------------------------------------------------- 
                                          US Dollar          Sterling           Total 
   Functional currency of Group                $000              $000            $000 
   operation 
 2019 
 Rupiah                                       3,882                 -           3,882 
 US Dollar                                        -               475             475 
 Ringgit                                      2,028                 -           2,028 
                                   ----------------    --------------    ------------ 
 Total                                        5,910               475           6,385 
                                   ----------------    --------------    ------------ 
 
   2018 
 Rupiah                                     (1,921)                 -         (1,921) 
 US Dollar                                        -               991             991 
 Ringgit                                      1,115                 -           1,115 
                                   ----------------    --------------    ------------ 
 Total                                        (806)               991             185 
                                   ----------------    --------------    ------------ 
 

The following table summarises the sensitivity of the Group's financial assets and financial liabilities to foreign exchange risk. The impact on profit before tax and equity if Ringgit or Rupiah strengthen or weaken by 10% against US Dollar is:

 
                                               2019                        2018 
                                         ----------------            ----------------- 
                                         -10% in  +10% in  Carrying      -10%  +10% in 
                               Carrying                                    in 
                                          Rp : $   Rp : $    Amount      Rp :   Rp : $ 
                                             and      and       US$     $ and      and 
                                 Amount   RM : $   RM : $                RM :   RM : $ 
                                    US$                                     $ 
                                   $000     $000     $000      $000      $000     $000 
 Financial Assets 
 Non-current receivables         16,500  (1,172)    1,432    11,020     (730)      892 
 Trade and other receivables      5,385    (305)      372     4,761     (246)      301 
 Cash and cash equivalents       84,846  (7,651)    9,352   112,212  (10,093)   12,335 
 
 Financial Liabilities 
 Borrowings due within 
  one year                      (8,203)      746    (911)  (11,078)     1,007  (1,231) 
 Trade and other payables      (16,110)    1,349  (1,649)  (20,083)     1,713  (2,094) 
 Borrowings due after 
  one year                            -        -        -   (8,203)       746    (911) 
                                         -------  -------            --------  ------- 
 Total (decrease) / 
  increase                               (7,033)    8,596             (7,603)    9,292 
                                         -------  -------            --------  ------- 
 

Liquidity risk

Profitability of new sizable plantations normally requires a period of between six and seven years before cash flow turns positive. Because oil palms do not begin yielding significantly until four years after planting, this development period and the cash requirement is affected by changes in commodity prices.

The Group attempts to ensure that it is likely to have either self-generated funds or further loan/equity capital to complete its development plans and to meet loan repayments. Long-term forecasts are updated twice a year for review by the Board. In the event that falling commodity prices reduce self-generated funds below expectations and to a level where Group resources may be insufficient, further new planting may be restricted. Consideration is given to the funds required to bring existing immature plantings to maturity.

The Group's trade and tax payables are all due for settlement within a year. At 31 December 2019, the Group had the following loans and facilities:

 
                                             Borrowings   Facilities    Repayable 
                                                   $000         $000 
 Indonesia: 
        US Dollar denominated - long-term                              2020 (note 
         loan                                     8,203       35,000          16) 
 

The total loan borrowings together with interest at current rates are as follows:

 
                                                     2019          2018 
                                                     $000          $000 
 
 Principal                                          8,203        19,281 
 Interest                                             278         1,275 
                                             ------------       ------- 
 Total                                              8,481        20,556 
                                             ------------       ------- 
 
 Amount repayable within one year                   8,481        12,079 
 Amount repayable after one year but 
  not more than two years                               -         8,477 
                                                    8,481        20,556 
                                             ------------       ------- 
 

Forecasts prepared in December 2019 indicate that the Group has sufficient funds to meet its development plans and financial commitments through 2020.

All the long-term loans include varying covenants covering minimum net worth and cash balances, dividend and interest cover and debt service ratios. The subsidiary companies concerned have complied with the covenants as stated in the loan agreement.

Interest rate risk

Both the Group's surplus cash and its borrowings are subject to variable interest rates. The Group had net cash throughout 2019, so the effect of variations in borrowing rates is more than offset. A 1% change in the borrowing or deposit interest rate would not have a significant impact on the Group's reported results as shown in the table below. The rates on borrowings are set out in note 16.

 
                                              2019                            2018 
                                      --------------------            -------------------- 
                            Carrying     -1% in     +1% in  Carrying     -1% in     +1% in 
                              amount   interest   interest    amount   interest   interest 
                                           rate       rate                 rate       rate 
                                $000       $000       $000      $000       $000         $000 
Financial Assets 
Cash and cash equivalents     84,846      (810)        810   112,212    (1,053)        1,053 
 
Financial Liabilities 
Borrowings due within 
 one year                    (8,203)         82       (82)  (11,078)        111        (111) 
Borrowings due after 
 one year                          -          -          -   (8,203)         82         (82) 
Total (decrease) 
 / increase                               (728)        728                (860)          860 
                                      ---------  ---------            ---------  ----------- 
 
 

There is no policy to hedge interest rates, partly because of the net cash position and the net interest income position of the Group.

Interest rate profiles of the Group's financial assets (comprising non-current receivables, trade and other receivables and cash) at 31 December were:

 
              Total  Fixed rate  Variable  No interest 
                                     rate 
               $000        $000      $000         $000 
2019 
Sterling        475           -        20          455 
US Dollar    17,868       3,607     8,892        5,369 
Rupiah       83,991           -    68,687       15,304 
Ringgit       4,397           -     3,393        1,004 
            -------  ----------  --------  ----------- 
Total       106,731       3,607    80,992       22,132 
            -------  ----------  --------  ----------- 
 
2018 
Sterling        991           -        19          972 
US Dollar    22,556       2,995    11,660        7,901 
Rupiah       99,286           -    89,368        9,918 
Ringgit       5,160           -     4,292          868 
            -------  ----------  --------  ----------- 
Total       127,993       2,995   105,339       19,659 
            -------  ----------  --------  ----------- 
 

Long-term receivables of $3,607,000 (2018: $2,995,000) comprise US Dollar denominated amounts due from non-controlling interests as described in note 12 on which interest is due at a fixed rate of 6%.

Average US Dollar deposit rate in 2019 was 2.43% (2018: 1.88%) and Rupiah deposit rate was 6.86% (2018: 6.73%).

Interest rate profiles of the Group's financial liabilities (comprising bank loans and other financial liabilities and trade and other payables) at 31 December were:

 
               Total  Fixed rate  Variable  No interest 
                                      rate 
                $000        $000      $000         $000 
2019 
Sterling           -           -         -            - 
US Dollar    (9,338)           -   (8,203)      (1,135) 
Rupiah      (14,750)           -         -     (14,750) 
Ringgit        (225)           -         -        (225) 
            --------  ----------  --------  ----------- 
Total       (24,313)           -   (8,203)     (16,110) 
            --------  ----------  --------  ----------- 
 
2018 
Sterling           -           -         -            - 
US Dollar   (20,383)           -  (19,281)      (1,102) 
Rupiah      (18,620)           -         -     (18,620) 
Ringgit        (361)           -         -        (361) 
            --------  ----------  --------  ----------- 
Total       (39,364)           -  (19,281)     (20,083) 
            --------  ----------  --------  ----------- 
 

Weighted average interest rate on variable rate borrowings was 6.78% in 2019 (2018: 6.66%).

Credit risk

The Group has two types of financial assets that are subject to the ECL model:

   --          Trade receivables for sales of goods and services; and 
   --          Debt instruments carried at amortised cost. 

The Group also has financial guarantee contracts for which the ECL model is also applicable.

While cash and cash equivalents are also subject to the impairment requirements as set out in IFRS 9, there is no impairment loss identified given the financial strength of the financial institutions in which the Group have a relationship with. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. The Group has taken necessary steps and precautions in minimising the credit risk by lodging cash and cash equivalents only with reputable licensed banks, and particularly in Indonesia, independently rated banks with a minimum rating of "A". The cash and cash equivalents are in US dollars, Rupiah, Ringgit and Sterling according to the requirements of the Group. The list of the principal banks used by the Group is given on the inside of the back cover of this report.

The Group use three categories for those receivables which reflect their credit risk and how the loss provision is determined for those categories.

   (i)      Trade receivables using the simplified approach 

The Group applies the simplified approach under IFRS 9 to measure ECL, which uses a lifetime expected loss provision for all trade receivables. To measure the expected losses, trade receivables have been grouped based on shared credit risk characteristics and days past due.

The expected loss rates are based on historical payment profiles of sales and the corresponding historical credit losses experienced during these periods. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors (such as palm product prices and crude oil price) affecting the ability of the customers to settle the receivables. The historical loss rates will be adjusted based on the expected changes in these factors. No significant changes to estimation techniques or assumptions were made during the reporting period.

In determining the expected loss rates, the Group also takes into consideration the collateral or payments received in advance, as set out below:

Receivables are generally collected within the credit term and therefore there is minimal exposure to doubtful debts. Upfront payments are also collected for certain sales made by the Group's subsidiaries in Indonesia.

The Group's maximum exposure to credit risk and loss provision recognised as at 31 December 2019 is disclosed in note 15. The remaining amount in which no ECL provision was recognised is deemed to be recoverable, with low probability of default.

In respect of the previous financial years, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables were assessed to determine whether there was objective evidence that a loss event had occurred and a provision for impairment was recognised accordingly when the loss event occurred. Information in respect of the provision for impairment loss in the prior financial year is disclosed in note 15.

(ii) Debt instruments at amortised costs other than trade receivables using the three-stage approach

All of the Group's debt instruments at amortised costs other than trade receivables are considered to have a low credit risk as these were considered to be performing, have low risks of default and historically there were minimal instances where contractual cash flow obligations have not been met. There has not been a significant increase in credit risk since initial recognition.

The 12-month ECL has been calculated at 1% on the majority of balances (unless it has been considered there to be no ECL), with the exception of amounts due from cooperatives under Plasma scheme which is calculated as the excess over the value of the associated land and plantation assets.

The maximum exposure to credit risks for debt instruments at amortised cost other than trade receivables are represented by the carrying amounts recognised in the statements of financial position.

   (iii)    Financial guarantee contracts using the three-stage approach 

All of the financial guarantee contracts are considered to be performing, have low risks of default and historically there were no instances where these financial guarantee contracts were called upon by the parties of which the financial guarantee contracts were issued to. Accordingly,12-month ECL have been recognised at 1% on the financial guarantee contracts and disclosed in note 24.

Information regarding other non-current assets and trade and other receivables that are neither past due nor impaired is disclosed in notes 12 and 15 respectively. Amounts receivable from local partners, amounting to $3,607,000 (2018: $2,995,000), in relation to their investments in operating subsidiaries are secured on those investments and are repayable from their share of dividends from those subsidiaries.

Amounts receivable due from cooperatives under Plasma scheme, as disclosed in note 12, are unsecured and are to be repaid from FFB supplied by the cooperatives. The provision of ECL for amounts receivable due from cooperatives under Plasma scheme had been disclosed in note 15.

Deposits with banks and other financial institutions, investment securities and derivatives 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.

As the Group does not hold any collateral, the maximum exposure to credit risk for each class of financial instrument is the carrying amount presented on the statement of financial position, except in the case of the financial guarantee contracts offered by two subsidiaries to cooperatives in order for them to obtain bank loans in 2013 and 2017, which are not held on the statement of financial position of the Group. See note 24.

Capital

The Group defines its Capital as Share capital and Reserves, shown in the statement of financial position as "Issued capital attributable to owners of the parent" and amounting to $401,157,000 at 31 December 2019 (2018: $371,980,000).

Group policy presently attempts to fund development from self-generated funds and loans and not from the issue of new share capital. At 31 December 2019, the Group had no net borrowings (2018: Nil) but, depending on market conditions, the Board is prepared for the Group to have net borrowings.

Plantation industry risk

Please refer to Principal and emerging risks and uncertainties in the Strategic Report.

26 Subsidiary companies

The principal subsidiaries of the Company all of which have been included in these consolidated financial statements are as follows:

 
                                                      Country of                              Non-controlling 
                                                   incorporation           Proportion               interests 
                                                   and principal         of ownership               ownership 
                                                        place of             interest       / voting interest 
    Name                                                business       at 31 December          at 31 December 
                                                                       2019      2018        2019        2018 
    Principal sub-holding company 
                                                          United 
        Anglo-Indonesian Oil Palms Limited               Kingdom       100%      100%           -           - 
 
    Management company 
                                                          United 
        Indopalm Services Limited                        Kingdom       100%      100%           -           - 
        Anglo-Eastern Plantations Management 
         Sdn Bhd                                        Malaysia       100%      100%           -           - 
        PT Anglo-Eastern Plantations 
         Management Indonesia                          Indonesia       100%      100%           -           - 
 
    Operating companies 
        Anglo-Eastern Plantations (M) 
         Sdn Bhd                                        Malaysia        55%       55%         45%         45% 
        All For You Sdn Bhd                             Malaysia       100%         -           -           - 
        PT Alno Agro Utama                             Indonesia        90%       90%         10%         10% 
        PT Anak Tasik                                  Indonesia       100%      100%           -           - 
        PT Bangka Malindo Lestari*                     Indonesia        95%       95%          5%          5% 
    PT Bina Pitri Jaya                                 Indonesia        80%       80%         20%         20% 
        PT Cahaya Pelita Andhika*                      Indonesia        90%       90%         10%         10% 
        PT Empat Lawang Agro Perkasa*                  Indonesia        95%       95%          5%          5% 
        PT Hijau Pryan Perdana                         Indonesia        80%       80%         20%         20% 
       PT Kahayan Agro Plantation*                     Indonesia        78%       95%         22%          5% 
        PT Karya Kencana Sentosa Tiga*                 Indonesia        95%       95%          5%          5% 
        PT Mitra Puding Mas                            Indonesia        90%       90%         10%         10% 
        PT Musam Utjing                                Indonesia        75%       75%         25%         25% 
        PT Riau Agrindo Agung*                         Indonesia        95%       95%          5%          5% 
        PT Sawit Graha Manunggal                       Indonesia        82%       82%         18%         18% 
        PT Simpang Ampat                               Indonesia       100%      100%           -           - 
        PT Tasik Raja                                  Indonesia        80%       80%         20%         20% 
        PT United Kingdom Indonesia 
         Plantations                                   Indonesia        75%       75%         25%         25% 
 
    Dormant companies 
       The Ampat (Sumatra) Rubber Estate                  United 
        (1913) Limited                                   Kingdom       100%      100%           -           - 
                                                          United 
       Gadek Indonesia (1975) Limited                    Kingdom       100%      100%           -           - 
                                                          United 
       Mergerset (1980) Limited                          Kingdom       100%      100%           -           - 
                                                          United 
       Musam Indonesia Limited                           Kingdom       100%      100%           -           - 
 
 

* Following a restructure of the group's subsidiaries during the year, the Company's effective ownership was decreased for a number of entities however there was no loss of control. The resulting impact on the equity attributable to owners of the parent was an increase of $1,816,000.

The principal United Kingdom sub-holding company, UK management company and UK dormant companies are registered in England and Wales and are direct subsidiaries of the Company. The Malaysian operating companies are incorporated in Malaysia and are direct subsidiaries of the Company. The Indonesian operating companies are incorporated in Indonesia and are direct subsidiaries of the principal sub-holding company. The principal activity of the operating companies is plantation agriculture. The registered office of the principal subsidiaries are disclosed below:

 
 Subsidiaries by country             Registered address 
 UK registered subsidiaries                     Quadrant House, 6(th) Floor 
                                                 4 Thomas More Square 
                                                 London E1W 1YW 
                                                 United Kingdom 
 Malaysia registered subsidiaries    7(th) Floor, Wisma Equity 
                                      150 Jalan Ampang 
                                      50450 Kuala Lumpur 
                                      Malaysia 
 Indonesia registered subsidiaries   3(rd) Floor, Wisma HSBC, Jalan Diponegoro, 
                                      Kav 11 
                                      Medan 20152 
                                      North Sumatera 
                                      Indonesia 
 

27 Non-controlling interests

The Group identified subsidiaries with material non-controlling interests ("NCI") based on the total assets in relation to the Group. A subsidiary's NCI is material if the subsidiary contributed more than 10% of the Group's total assets. The subsidiaries identified and their summarised financial information, before intra-group eliminations, are presented below:

 
   Entity                      PT Tasik Raja              PT Mitra         PT Alno Agro         PT Bina Pitri    PT Sawit 
                                                        Puding Mas                Utama                  Jaya       Graha 
                                                                                                                Manunggal 
                                                                                                                      18% 
   NCI percentage                        20%                   10%                  10%                   20% 
   Summarised income 
   statement 
      For the year          2019        2018       2019       2018       2019      2018       2019       2018        2019       2018 
      ended 31 
      December 
                            $000        $000       $000       $000       $000      $000       $000       $000        $000       $000 
                      ----------  ----------  ---------  ---------  ---------  --------  ---------  ---------  ----------  --------- 
      Revenue             45,786      47,054     27,121     32,557     40,403    49,149     36,060     43,970      32,022     34,507 
      (Loss) / 
       Profit after 
       tax              (31,473)      12,043      3,898      6,689      1,653     5,632      6,225     16,158      12,482    (3,458) 
      Other 
       comprehensive 
       income 
       / (expense)         7,208    (12,219)      3,384    (4,845)      3,962   (5,205)      6,438    (8,953)        (21)        203 
      Total 
       comprehensive 
       (expenses) 
       / income         (24,265)       (176)      7,280      1,844      5,615       427     12,663      7,205      12,461    (3,255) 
 
      (Loss) / 
       Profit 
       allocated 
       to NCI            (6,295)       2,409        390        669        165       563      1,245      3,232       2,272      (629) 
      Other 
       comprehensive 
       income 
       / (expenses) 
       allocated to 
       NCI                 1,442     (2,444)        338      (485)        396     (521)      1,288    (1,791)         (4)         37 
      Total 
       comprehensive 
       (expenses) 
       / income 
       allocated to 
       NCI               (4,853)        (35)        728        184        561        42      2,533      1,441       2,268      (592) 
      Dividends paid 
       to NCI                  -           -         56          8          3        11         32         32           -          - 
 
   Summarised 
   statement of 
   financial 
   position 
     As at 31               2019        2018       2019       2018       2019      2018       2019       2018        2019       2018 
     December 
                            $000        $000       $000       $000       $000      $000       $000       $000        $000       $000 
                      ----------  ----------  ---------  ---------  ---------  --------  ---------  ---------  ----------  --------- 
     Non-current 
      assets             123,795     252,877     76,145     35,923     66,899    49,829    129,742    106,720      81,655     80,325 
     Current assets       15,948      40,901      7,158     41,094     25,386    36,560     12,927     25,233      14,941     40,137 
     Non-current 
      liabilities        (4,686)   (123,803)    (3,807)    (3,332)    (8,088)   (7,069)    (3,561)    (3,209)    (77,001)   (82,382) 
     Current 
      liabilities        (3,600)    (12,912)    (3,656)    (4,183)    (3,377)   (3,575)    (3,915)    (4,917)    (11,089)   (42,033) 
     Net assets          131,457     157,063     75,840     69,502     80,820    75,745    135,193    123,827       8,506    (3,953) 
 
     Accumulated NCI      26,291      31,413      7,584      6,950      8,082     7,575     27,039     24,765       1,548      (719) 
 
   Summarised cash 
   flows 
     For the year           2019        2018       2019       2018       2019      2018       2019       2018        2019       2018 
     ended 31 
     December 
                            $000        $000       $000       $000       $000      $000       $000       $000        $000       $000 
                      ----------  ----------  ---------  ---------  ---------  --------  ---------  ---------  ----------  --------- 
     Cash flows 
      (used in) / 
      from 
      operating 
      activities           (505)      16,548   (13,443)   (13,805)      9,688   (2,308)      4,158     16,591      15,404      (942) 
     Cash flows from 
      / (used in) 
      investing 
      activities         103,978    (21,005)      (631)    (1,958)   (17,593)   (3,187)   (12,654)   (20,502)     (5,285)    (7,519) 
     Cash flows 
      (used in) / 
      from 
      financing 
      activities       (122,378)      25,697      (557)       (77)        (5)      (21)       (45)      (159)    (10,575)      9,247 
     Net cash 
      (outflows) / 
      inflows           (18,905)      21,240   (14,631)   (15,840)    (7,910)   (5,516)    (8,541)    (4,070)       (456)        786 
 
 

28 Notes supporting statement of cash flows

Cash and cash equivalents for purposes of the statement of cash flows comprised:

 
                                        2019      2018 
                                        $000      $000 
 
 Cash at bank available on demand     29,443    28,485 
 Short-term deposits                  55,381    83,707 
 Cash in hand                             22        20 
                                     -------  -------- 
                                      84,846   112,212 
                                     -------  -------- 
 
 
 Significant non-cash transactions from investing     2019   2018 
  activities are as follows: 
                                                      $000   $000 
 
 Property, plant and equipment purchased but 
  not yet paid at year end                             312    286 
 

Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions as follows:

 
                                   Non-current       Current     Non-current 
                                     loans and     loans and           lease         Current 
                                    borrowings    borrowings     liabilities           lease      Total 
                                                                                 liabilities 
                                          $000          $000            $000            $000       $000 
 At 1 January 2019                     (8,203)      (11,078)               -               -   (19,281) 
 Cash Flows                                  -        11,096               -             210     11,306 
 Non-cash flows 
  - Effect of foreign 
   exchange                              (169)           151             (9)             (4)       (31) 
  - New lease                                -             -           (474)           (464)      (938) 
  - Loans and borrowings 
   classified as non-current 
   at 31 December 2018 becoming 
   current during 2019                   8,372       (8,372)               -               -          - 
  - Interest accruing 
   during the year                           -             -              27              36         63 
                                  ------------  ------------  --------------  --------------  --------- 
                                             -       (8,203)           (456)           (222)    (8,881) 
                                  ------------  ------------  --------------  --------------  --------- 
 
                                   Non-current       Current 
                                     loans and     loans and     Non-current         Current 
                                    borrowings    borrowings           lease           lease      Total 
                                                                 liabilities     liabilities 
                                          $000          $000            $000            $000       $000 
 At 1 January 2018                    (19,281)       (8,594)               -               -   (27,875) 
 Cash Flows                                  -         8,735               -               -      8,735 
 Non-cash flows 
  - Effect of foreign 
   exchange                                  -         (141)               -               -      (141) 
  - Loans and borrowings 
   classified as non-current 
   at 31 December 2017 becoming 
   current during 2018                  11,078      (11,078)               -               -          - 
                                       (8,203)      (11,078)               -               -   (19,281) 
                                  ------------  ------------  --------------  --------------  --------- 
 

29 Leases

 
                             2019 
                             $000 
 Analysed as: 
            Non-current     (456) 
            Current         (222) 
                           ------ 
                            (678) 
                           ------ 
 

The following table sets out the carrying amounts, the weighted average incremental borrowing rate per annum is 6.8%.

 
                                                  2019 
                                                  $000 
 Maturity analysis 
 Within one year                                 (222) 
 Later than one year but not more than two 
  years                                          (237) 
 Later than two years but not more than five 
  years                                          (219) 
            Later than five years                    - 
                                                ------ 
                                                 (678) 
                                                ------ 
 

The Group does not face a significant liquidity risk with regard to its lease liabilities.

Amounts recognised in income statement:

 
                                                                 2019 
                                                                 $000 
 
     Depreciation expense on right-of-use assets                (184) 
     Interest expense on lease liabilities                       (41) 
     Expense relating to short-term leases                      (403) 
     Expense relating to leases of low value assets               (6) 
                                                                (634) 
                                                              ------- 
 

At 31 December 2019, the Group is committed to $0.01 million for short-term leases.

All the lease payment is fixed payments. The total cash outflow for leases amount to $0.21 million.

The Group leases a piece of land and office under the right-of-use assets. The lease term is between 3 to 4 years. (2018: 0 year). On expiry the Group has the options to renew based on mutually agreed future rental. The right-of-use assets is classified as part of property, plant and equipment in note 11.

Right-of-Use assets

 
                               Land   Building   Total 
                               $000       $000    $000 
 At 1 January 2019                -          -       - 
 Additions                      221        611     832 
 Amortisation                  (31)      (153)   (184) 
 Effect of foreign exchange       3          8      11 
 At 31 December 2019            193        466     659 
                              -----  ---------  ------ 
 
 

Lease liabilities

 
                                Land   Building   Total 
                                $000       $000    $000 
 At 1 January 2019                 -          -       - 
 Additions                     (224)      (622)   (846) 
 Interest expense                (6)       (35)    (41) 
 Lease payments                   34        176     210 
 Effect of foreign exchange        -        (1)     (1) 
 At 31 December 2019           (196)      (482)   (678) 
                              ------  ---------  ------ 
 

30 First time adoption of IFRS 16

In the current year, the Group has applied IFRS 16 Leases (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019.

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. Details of these new requirements are described in Note 2. There is no impact of the adoption of IFRS 16 on the Group's consolidated financial statements during the date of initial application.

   (a)   Impact of the new definition of a lease 

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those leases entered or changed before 1 January 2019.

The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on 'risks and rewards' in IAS 17 and IFRIC 4.

The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or changed on or after 1 January 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a lease for the Group.

   (b)   Impact on Lessee Accounting 

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet.

Applying IFRS 16, for all leases (except as noted below), the Group:

a. Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments, with the right-of-use asset adjusted by the amount of any prepaid or accrued lease payments in accordance with IFRS 16:C8(b)(ii)

b. Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated income statement;

c. Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.

Lease incentives (e.g. rent free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses on a straight line basis.

Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.

For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within 'other expenses' in income statement.

31 Significant event subsequent to the end of the reporting period

The World Health Organisation declared the 2019 Novel Coronavirus infection ("COVID-19") a pandemic on 11 March 2020. This is the first pandemic caused by a coronavirus.

Since these developments occurred subsequent to the end of the reporting period, the COVID-19 pandemic is treated as a non-adjusting event in accordance with IAS 10 Events after the Reporting Period. Consequently, the financial statements for the financial year ended 31 December 2019 do not reflect the effects arising from this non-adjusting event.

The effects of COVID-19 would potentially impact the judgements and assumptions used in the preparation of the financial statements for the financial year ending 31 December 2020, such as expected credit losses of financial assets.

The Group is in the process of assessing the financial reporting impact of COVID-19 pandemic since ongoing developments remain uncertain and cannot be reasonably predicted as at the date of authorisation of the financial statements.

The Group anticipates that any potential financial reporting impact of COVID-19 would be recognised in the financial statements of the Group during the financial year ending 31 December 2020.

32 Posting of annual financial report

The Annual Financial Report will be posted to shareholders on or before 3 June 2020. Copies of the Annual Financial Report will then be available from the offices of the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More Square, London E1W 1YW and on the Company's website at www.angloeastern.co.uk .

Copies of this announcement are available from the offices of the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More Square, London E1W 1YW and on the Company's website.

Note: The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR GCGDUXXDDGGG

(END) Dow Jones Newswires

May 20, 2020 05:47 ET (09:47 GMT)

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