Company Announcements

M.P.EVANS GROUP PLC

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), the producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2021.

The Group's 2021 annual report is available on its website at www.mpevans.co.uk .

Highlights

Financial

−  Profit for the year up by 314% to US$91.8 million (2020 US$22.2 million)

−  Operating profit up by 266% to US$114.6 million (2020 US$31.3 million)

−  Average mill-gate price for Group CPO up by 37% to US$810 per tonne (US$591 per tonne)

−  Sustainability premia increased to US$4.3 million (2020 US$2.6 million)

−  Reduction in net debt to US$5.4 million (2020 US$78.1 million)

−  Basic EPS up by 296% to 115.6 pence (2020 - 29.2 pence)

−  59% increase in normal dividend for the year with proposed final dividend of 25p per share (2020 - 17p per share)

−  Special dividend of 5p per share paid on Malaysian land sale

Operational

−  Total crop processed up 13% to 1.4 million tonnes

−  100% of Group and scheme-smallholder crop grown to sustainability standards

−  55% of total output currently certified sustainable pending formal certification of newer mills

−  Group crops up to 810,000 tonnes, a 12% increase

−  Planting at youngest estate, Musi Rawas, exceeded 9,000 hectares

−  Crude-palm-oil production up 15% to 313,000 tonnes

−  New Group mill at Bumi Mas began production in August 2021

Group value

−  Group equity value of £12.65 per share at 31 December 2021

Current trading

−  Seasonal, 10%, downturn in crop in early 2022: recovery to long-term growth pathway expected as year progresses

−  Significant increase in palm-oil price in same period, average mill-gate US$1,050

−  Strength in price partly attributable to restricted vegetable oil supply due to tragic events in Ukraine

−  Year-end net debt eliminated: net cash US$27 million by mid-March

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans, said: "2021 has been an excellent year for the Group. Crop and production have risen further in line with our long-term strategic plans, whilst the palm-oil market has gone from strength to strength. Profit and cash generation have risen sharply, with retained profit of US$91.8 million, and the Group's net debt almost wholly eliminated by the year end.

The Group recently paid a special dividend of 5p per share in relation to the completed sale of the Group's Bertam Estate in Malaysia and the board now recommends a final dividend of 25p per share, bringing total normal dividends in respect of 2021 up to 35p per share. This is a notable increase from the total of 22p paid in respect of the previous year, and marks another significant step in the Group's progressive dividend policy."

Enquiries:

An analysts' meeting will be held today at 09.30 at the offices of Hudson Sandler, 25 Charterhouse Square, London EC1M 6AE, 020 7796 4133.

Results

The Group delivered a record gross profit for the year of US$103.6 million, treble the previous year's result. This significant achievement was chiefly attributable to a further increase in crops and production and was supported by the strong palm-oil prices in the year. Production rose as the Group reaped the benefits from the maturing of its Indonesian oil-palm estates. The Group also recognised a one-off profit of US$13.9 million on disposal of its 70-hectare Bertam Estate land in Malaysia. Earnings per share were 115.6 pence, a significant increase on the 29.2 pence in 2020. This has translated into substantial cash generation, with cash generated by operating activities of US$109 million. It has supported the Group's ongoing capital investment programme, the reduction of net debt from US$78 million to US$5 million, and is supporting the Group's acquisition programme. Furthermore, it forms the basis for increasing shareholder returns.

Dividend

An interim dividend of 10p per share (2020 - 5p per share) was paid on 5 November 2021, and the board is recommending a final dividend of 25p per share (2020 - 17p per share). This represents an increase of 59% in the normal dividend for the year to a total of 35p, following a 24% increase in the previous year. In addition, the Company has already paid a 5p special dividend in February 2022 connected to the Bertam Estate land sale which completed in October 2021.

The board intends, wherever possible, to continue the Group's long-term trend of increasing dividends, which have accelerated in recent years. The board believes that the projected increases in both crop and production form a sound basis for further dividend increases. Debt fell substantially in 2021 as cash generation increased.

Palm-oil market

The CPO price followed an upward pattern for the majority of the year, ending at US$1,305 per tonne cif Rotterdam in response to recovering demand for palm oil combined with some continuing restrictions on supply, particularly relating to labour controls in Malaysia. The Group does not receive the full benefit of the high quoted CPO prices. Its net mill-gate price is received on a tender basis, which is after adjustments to take account of the Indonesian export tax and levy, as well as transport and insurance costs. Over the course of 2021, the average mill-gate price received for the Group's CPO was US$810 per tonne, 37% higher than the US$591 per tonne in 2020.

Prices for palm kernels also increased in 2021, reflecting stronger demand for palm-kernel oil and an ongoing shortage of coconut oil. The Group's palm kernels sold for an average price of US$533 per tonne in the year, 69% higher than the US$316 per tonne in 2020.

Strategic developments

The Group acts responsibly at all times, whilst striving for excellence in all its operations. It is focused on growth for the long term, and delivering increasing yield to its shareholders. The Group's strategy continues to centre on the development, maintenance and expansion of sustainable oil-palm plantations in Indonesia, providing investment for the long term, supporting the establishment of well-run smallholder schemes for the benefit of the local community, and providing high-quality working environments for the Group's workforce.

The Group continues to invest in its milling capacity, and at the end of 2021 had five operational palm-oil mills. The Group's fifth mill was completed during 2021 at Bumi Mas, and started processing the increasing crop there, as well as taking in independent crop at the end of the year. Construction work has already begun on the Group's sixth mill, being built at Musi Rawas, which is expected to start processing Group crop around the end of 2022. Alongside development of the core milling facility, the Group also constructs composting and biogas facilities as part of its sustainability and zero-waste commitment.

The Group is actively exploring the acquisition of new land. At Kota Bangun, East Kalimantan, the board is engaged in extending the Group's area from the currently-planted 15,200 hectares to bring the project size closer to the equivalent of two 10,000-hectare units. Similarly in Aceh, the Group is assessing a potential acquisition of new land close to its Simpang Kiri estate which, if acquired, may justify building a mill to process the larger combined crop.

Sustainability

The Group is committed to the production of certified sustainable palm oil, and sustainability is at the core of its strategic and operational decision-making. Certified sustainable CPO production increased to 173,600 tonnes in 2021 representing 55% (2020 - 143,900 tonnes representing 53%) of total output. The Group continues to target 100% certified production, and will see the proportion of its certified output increase both as newly constructed mills achieve accreditation as certified producers, and as additional milling capacity is introduced.

The Group received US$4.3 million in sustainability premia during 2021, significantly higher than the US$2.6 million achieved in the previous year. CPO and PK were sold in the year with both RSPO and ISCC certifications dependent on demand and where the best premia could be achieved. The average premium for CPO when sold as certified oil was US$17.40 per tonne (2020 US$13.30) and PK premia increased substantially in the year, reaching approximately US$85 per tonne by year end, resulting in an average when sold as certified during the year of US$55.20 per tonne (2020 US$25.20).

Operational developments

Crop increased at all the Group's estates during 2021, with an overall rise of 12% to 809,700 tonnes. Similarly, crop from associated scheme-smallholder areas, attached to some of the Group's estates, rose across the board, by a total of 19% to 229,300 tonnes. To maximise the utilisation of its milling capacity, the Group also purchased 327,200 tonnes from outside suppliers, 13% more than in 2020, resulting in total crop processed of 1,366,200 tonnes (2020 - 1,207,000 tonnes). These increases are in line with the Group's plans and demonstrate the continuing benefits of the Group's long-term investment in its Indonesian oil-palm projects.

The average extraction rate achieved by the Group's mills has increased in the year, from 23.1% in 2020, to 23.3%. The main reason is a particularly strong performance at the Bangka mill, where the extraction rate increased by almost 1%. This reflects the excellent work achieved by both the estate and mill teams working together, helped by a reduction in the proportion of outside supply, which is not of the same quality as that harvested from the Group's own areas. Also of note is the rate of 22.5% achieved at the Rahayu mill at Kota Bangun from almost exclusively outside supply, and 22.8% at Bumi Mas in only the first few months of operation.

Planting restarted in the middle of the year at the Musi Rawas project, once the RSPO had formally confirmed that the Group continued to operate in compliance with all of their requirements, as revised and enhanced. Since the restart, the Group has planted a further 935 hectares for itself and the scheme smallholders bringing the total planted area to just over 9,000 hectares. It remains the Group's intention to plant a minimum total of 10,000 hectares at Musi Rawas.

At the end of 2021, the Group managed 52,600 hectares of oil palm on behalf of itself and its scheme smallholders. The effective ownership of planted oil palm hectarage by the Group's shareholders, taking account of minority-shareholder interests, amounted to 38,300 hectares.

Group valuation

The Group's value per share increased during the year to £12.65, based on an independent valuation at the end of the year, and allowing for the Group's other assets and liabilities. This reflected the ongoing development of the estates as areas continued to mature and crops increased, supported by the strength of the market, along with the increasing strength of the Group balance sheet.

Share buyback authority

Given the recent discount of the Group's share price below the independent valuation, and the Group's strongly cash generative nature, the directors are seeking authority to reinstate a programme of share buybacks at the forthcoming AGM.

Current trading and prospects

Total crop processed was 10% lower than last year in the first two months of 2022, mainly due to crop seasonality.  However, the Group expects the long-term trend of increasing crop to reassert itself as the year progresses. The lower crops in the early part of the year were more than compensated for by higher prices, and the Group has continued to be highly cash generative. Having started the year with net debt of US$5 million, by mid-March 2022, the Group had reached a net cash position of US$27 million.

As reported above, CPO prices were on a largely upward trend in 2021, and cif Rotterdam prices averaged US$1,195 per tonne for the year, whilst the Group's average mill-gate prices for its sales were US$810 per tonne. The market has strengthened further in early 2022, with cif Rotterdam prices recently reaching historic highs of over US$1,900 per tonne, partly in response to the distressing events in Ukraine and the consequent pressure on global vegetable oil supplies. During the first two months of the year, the Group's average tender price when selling its CPO has been approximately US$1,050 per tonne. As announced on 18 March 2022, the Indonesian government has increased its export levy by up to US$200 per tonne. Nonetheless, strong mill-gate prices of over US$1,050 are still being achieved by the Group.

The ongoing investment at Musi Rawas has progressed well in the early part of 2022. New planting is continuing, and development of the palm-oil mill there remains on schedule in support of the Group's strategic aims. The Group continues to pursue new acquisition opportunities.

The board remains firmly of the view that sustainable palm oil, as a high yielding and low-cost product, will continue to offer attractive returns, and that prospects for the Group remain bright.

Peter Hadsley-Chaplin

Chairman

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2021

CONSOLIDATED BALANCE SHEET

As at 31 December 2021

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2021

Notes

1.             Dividends paid and proposed

Following the year end, the board has proposed a final dividend for 2021 of 25p per 10p share, amounting to US$18.0 million.

2.             Basic and diluted earnings per share

The calculation of earnings per 10p share is based on:-

*The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

3.             Financial information

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the financial year ended 31 December 2021 have been reported on by the Group's auditors, BDO LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

4.             International Accounting Standards

This announcement is based on the Group's financial statements which were prepared in accordance with UK-adopted International Accounting Standards.

5.             Distribution timetable

The Group's 2021 annual report is available on the Group's website and will be despatched to shareholders on or before 31 March 2022. Printed copies of the Group's 2021 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Friday 10 June 2022.

By order of the board

Katya Merrick

Company secretary