REA Finance B.V.

HALF YEARLY REPORT 2018

The director presents the half yearly report and condensed annual accounts of REA Finance B.V. (the "Company") for the six-month period ended June 30, 2018.

General

The Company is a private company with limited liability incorporated under the laws of the Netherlands and acts as a finance company. The ultimate holding company is R.E.A. Holdings plc (hereinafter "REAH"), London, United Kingdom. The REA Group is principally engaged in the cultivation of oil palms in the province of East Kalimantan in Indonesia and in the production of crude palm oil and by-products from fruit harvesting from its oil palms.

 

Overview of activities

At January 1, 2018 and June 30, 2018 the Company had outstanding £31.852 million nominal of 8.75 per cent guaranteed sterling notes 2020 (the "2020 sterling notes") and a loan of  £32.327 million to REAH bearing interest at 8.9283 per cent. The 2020 sterling notes and the loan are repayable on August 20, 2020.

During the period under review the Company received interest on the loan from the Company to REAH and paid interest to the holders of the 2020 sterling notes and to REAH.

Result 

The result after taxation for the period of six months ended June 30, 2018 was a profit of £13,862.

(June 30, 2017: £31,477). The net asset value of the Company as at June 30, 2018 amounted to £934,012 (June 31, 2017: £895,097).

Risks and uncertainties

The principal risks and uncertainties facing the Company relate to the due performance by REAH of its obligations under the loan agreement with the Company. Any shortfall in performance would impact negatively on the Company's ability to perform its obligations to the holders of the 2020 sterling notes.  Further details of these risks and uncertainties were set out on page 4 of the Company's annual report and accounts for the year ended December 31, 2017 (the "2017 Annual report"), a copy of which is available on REAH's website at www.rea.co.uk.

To date there has been no subsequent change in the principal risks and uncertainties facing the business, or in the arrangements designed to limit the extent of the principal risks.

Risk management objectives

The Company's risk management objectives were set out on page 4 of the 2017 Annual Report and there has been no subsequent change.

Related party transactions

There has been no change to related party transactions since June 30, 2018.

 

 

 

Future outlook

In the Interim Management Report in the 2018 Half Yearly Report the directors of REAH included the following in the section "Financing":

 

"As announced on 28 August 2018, the group has recently arranged and drawn down two new medium term rupiah loans equivalent in total to some $32.5 million.  In anticipation of this, on 8 August 2018 the group repaid rupiah term loan and revolving credit facilities amounting to $10.2 million. The proceeds of the new loans will be used to refinance the monies used for that repayment and, as to the balance, in augmenting the group's working capital.

 

Subsequent completion of the sale of Putra Bongan Jaya ("PBJ"), resulted in the bank debt of PBJ, equivalent to some $24.1 million being repaid in full. The cash inflow to the group arising from the sale amounted to some $56.4 million which will be used to reduce group indebtedness, further augment working capital and provide funding for the group's planned expansion programme.

 

The group is continuing discussions with its Indonesian bankers with a view to reducing interest costs and to better aligning the repayment profile of its bank loans to its projected future cash availability.

 

Outlook

 

The latest bunch census indicates that crop levels for the remaining months of the year will be maintained at close to recent levels.  The directors therefore expect a record Fresh fruit bunches ("FFB") crop for the year with every likelihood of still higher crops going forward. With improved harvester availability, an expanded transport fleet and more resilience in the group's infrastructure, crop collection should further improve.

 

Whilst higher crops and better extraction rates should continue to enhance operational performance, the benefit to revenue and profits is currently being reduced by low crude palm oil ("CPO") prices.  The current CPO price weakness follows a significant increase in CPO production during 2018 to date but there are now indications that growth in palm oil consumption, supported by increases in mandated use of CPO in the manufacture of bio-fuels, should have a positive effect on prices in the coming months and 2019.  Any increase in the price of CPO will directly flow through to group revenue, profits and cash flow.

 

The resumption of mining operations at the group's main coal concession, following on from the imminent sale of the existing coal stockpile, will have a further positive impact on future results.

 

Following completion of the PBJ sale and with new bank facilities of some $32.5 million in place, the group is now funded to press ahead rapidly with development of the new planting areas and necessary expansion of oil mills.

 

With the significant improvement in the group's financial position and with recent successful operational initiatives helping to secure the recovery in the group's operations, the prospects for the group going forward are markedly better."

 

Statement of directors' responsibilities

The sole director of the Company is Corfas B.V. The director confirms that this condensed set of half-year annual accounts has been prepared in accordance with Dutch Generally Accepted Accounting Principles as applicable to interim reports, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Conduct Authority, paragraph DTR 4.2.7.

Amsterdam, September 26 2018

 

 

Corfas B.V.

Balance Sheet at June 30, 2018

			June 30, 2018			June 30, 2017			Dec 31, 2017
		Notes		£'000			£'000		£'000
Fixed assets
Loans to parent company		1		32,327			31,852		32,327
				32,327			31,852		32,327
Current assets
Loan to parent company		1		-			11,259		-
Amounts due from parent company				378			381		449
Prepayments and accrued income				10			8		-
Taxation receivable				26			9		7
Cash and cash equivalents				55			29		15
				469			11,686		471
Current liabilities (due within one year)
Amounts due to third parties				10			7		25
Amount due to parent company		2		-			2,460		-
Taxation payable				-			-		1
2017 sterling notes		3		-			8,324		-
				10			10,791		26
Current assets less current liabilities				459			895		445
Total assets less current liabilities				32,786			32,747		32,772
Long term liabilities (due after one year)
Amounts due to group entities		2		-			-		-
2020 sterling notes		3		31,852			31,852		31,852
Total long term liabilities				31,852			31,852		31,852
Capital and reserves		4
Paid up and called up share capital				16			16		15
Share premium				475			475		475
Translation reserve				(4)			(3)		(3)
Other reserves				433			376		376
Unappropriated results				14			31		57
Total shareholder's equity				934			895		920
Total long term liabilities and share capital and reserves				32,786			32,747		32,772

 

 

 

 

Profit and Loss account for the period of six months ended June 30, 2018

			June 30, 2018				June 30, 2017		December 31, 2017
	Notes		£'000				£'000		£'000
Finance activities
Interest income on loans to parent company			1,444				1,967		3,898
Interest expense on loan from parent company			-				(105)		(203)
Interest expense on sterling notes			(1,394)				(1,789)		(3,573)
			50				73		122
Other financial income and expenses
Currency exchange rate differences			(4)				(12)		(12)
			(4)				(12)		(12)
Other income and expenses
Operational income			-				5		32
General and administrative expenses			(29)				(27)		(74)
			(29)				(22)		(42)
Result on ordinary activities before taxation					17		39		69
Taxation charge for the period	5		(3)				(8)		(12)
Result after taxation			14				31		57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the accounts for the period of six months ended June 30, 2018

General information

The Company was incorporated as a private company with limited liability under the laws of the Netherlands on November 7, 2006 and has its statutory seat in Amsterdam, the Netherlands. The ultimate holding company is R.E.A. Holdings plc in London, United Kingdom. The principal activity of the Company is to act as a finance company, and its place of business is at Amstelveenseweg 760, 1081 JK Amsterdam, the Netherlands.

 

The functional currency of the Company is GBP, which is also the presentation currency of the accounts.

 

Basis of preparation

The condensed financial information for the period of six months ended June 30, 2018 comprises the unaudited results for the six months ended June 30, 2018 and June 30, 2017 together with the audited annual accounts for the year ended December 31, 2017 on which the auditors gave an unqualified report and did not draw attention to any matters by way of emphasis.

The condensed half-year annual accounts for the period of six months ended June 30, 2018 have been prepared in accordance with accounting principles generally accepted in the Netherlands and in conformity with provisions governing annual accounts as contained in Part 9 of Book 2 of the Dutch Civil Code, and should be read in conjunction with the audited annual accounts for the year ended December 31, 2017.

The same accounting policies, presentation and methods of computation are followed in this condensed set of half-year annual accounts as applied in the Company's latest audited annual accounts.

Exchange rates

The exchange rates used are:

		June 30, 2018		June 30, 2017		December 31, 2017
1 GBP (pound sterling) = EUR (euro)		1.13		1.14		1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Loans to parent company

 

		June 30, 2018		June 30, 2017		December 31, 2017
		£'000		£'000		£'000
R.E.A. Holdings plc (due within one year)		-		11,259		-
R.E.A. Holdings plc (due after one year)		32,327		31,852		32,327
Total loans to parent company		32,327		43,111		32,327

 

The Company's parent company is R.E.A. Holdings plc ("REAH"), a company incorporated in the United Kingdom whose share capital is listed on the London Stock Exchange.

The loan to REAH bears interest at 8.9283 per cent and is repayable on August 20, 2020. The loan  represents the on-lending of proceeds the 8.75 per cent guaranteed sterling notes 2020 (the "2020 sterling notes") on such terms that permit the Company to earn such interest margin as is specified by the Advance Pricing Agreement referred to in note 15 from the annual accounts for the year ended December 31, 2017.

2. Amount due to parent company  

		June 30, 2018		June 30, 2017		December 31, 2017
		£'000		£'000		£'000
R.E.A. Holdings plc: Loan account		-		2,460		-
		-		2,460		-

 

The sterling loan from REAH incurred interest at 8.5% and is repaid in full.

3. Sterling notes

		June 30, 2018		June 30, 2017		December 31, 2017
		£'000		£'000		£'000
2017 9.5 per cent guaranteed sterling notes  (due within one year)		-		8,324		-
2020 8.75 per cent guaranteed sterling notes (due after one year)		31,852		31,852		31,852
		31,852		40,176		31,852

 

The sterling notes are listed on the London Stock Exchange and are irrevocably and unconditionally guaranteed by REAH and R.E.A. Services Limited ("REAS"), a subsidiary of REAH incorporated in the United Kingdom. The 2020 sterling notes are repayable on August 20, 2020.

 

 

 

 

 

 

 

 

 

 

4. Capital and reserves
 

The authorised share capital of the Company amounts to EUR 90,000 divided into 90,000 shares of EUR 1 each, of which 18,000 shares have been issued, fully paid.  The share capital is recorded at the rate of exchange at the balance sheet date. At June 30, 2018 the rate was 1 GBP = 1.13 EUR.

		Share capital		Share premium		Translation reserve		Other reserves		Unappropriated results
		£'000		£'000		£'000		£'000		£'000
Unaudited balance as at June 30, 2017		16		475		(3)		376		31
Revaluation		(1)		-		-		-		-
Result for the period		-		-		-				26
Appropriation of result		-		-		-		-		-
Audited balance as at Dec 31, 2017		15		475		(3)		376		57
Revaluation		1		-		(1)		-		-
Result for the period		-		-		-		-		14
Appropriation of result		-		-		-		57		(57)
Unaudited balance as at June 30, 2018		16		475		(4)		433		14

 

5. Taxation charge for the period

 

		June 30, 2018		June 30, 2017		December 31, 2017
		£'000		£'000		£'000
Corporate income tax - current period		(3)		(8)		(12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

Shareholder information

The Company's report and condensed half-year annual accounts for the six months ended June 30, 2018 (the "half yearly report") is available for downloading from REAH's web site at www.rea.co.uk.

Statutory rules relating to the appropriation of results

In accordance with article 18 of the Company's articles of association, and Book 2 of the Dutch Civil Code, the allocation of profits accrued in a financial year shall be determined by the general meeting. If the general meeting does not adopt a resolution regarding the allocation of the profits prior to or at latest immediately after the adoption of the annual accounts, the profits will be reserved.

The general meeting has the authority to make distributions. If the Company is required by law to maintain reserves, this authority only applies to the extent that the equity exceeds these reserves. No resolution of the general meeting to distribute shall have effect without the consent of the management board. The management board may withhold such consent only if it knows or reasonably should expect that after the distribution, the Company will be unable to continue the payment of its debts as they fall due.

Subsequent events

No events have occurred since the balance sheet date which would change the financial position of the Company and which would require adjustment of or disclosure in, the half yearly report and condensed half-year annual accounts now presented.