RNS Number:3871M
Tea Plantations Inv Tst PLC
17 June 2003
INTERIM REPORT 2003
INVESTMENT MANAGER'S REPORT
RESULTS
The unaudited results for the six months ended 31 March 2003 shows a gross revenue of #37,494 and after deducting
management expenses, interest and taxation, the return on ordinary activities after taxation was a loss of #63,151.
The board has received and adopted an independent valuation for the unquoted investments in the portfolio at 31 March
2003 which increases the value of the unquoted investments by #165,335 or 1.6p per share, compared with their
valuation at 30 September 2002. The valuation principles applied are consistent with previous periods. Given the
significance of the un-quoted portfolio, a copy of this valuation will be made available to shareholders on request.
Following this valuation the undiluted net asset value per Ordinary Share was 46.74p.
TRADING REVIEW
The Tamil Tigers temporary withdrawal from the peace process (and subsequent cancellation of peace talks) should not
derail the peace process indefinitely. This has not stopped the positive momentum created by the peace talks however,
which has lead to International Aid commitments estimated at $2.3bn over the next three years. This would have a very
real impact on Sri Lanka as the main aim of the funds is the development of infrastructure and reconstruction in the
northern and eastern provinces. Annual GDP growth is estimated to reach 5.1% in 2003 following the injection of funds
and the plantations will look to benefit from these funds by receiving compensation for new highways planned through
some of the low country estates. The plantations which control large areas of land, typically around 10,000 hectares
each, see this kind of land development as an interesting prospect for the future and although it may take a number
of years to come through, one plantation has already received significant compensation for an area of land that will
have no discernable impact on that company's profitability. Not only will some of the plantations benefit from direct
compensation from highway development, but also from the possibility to develop land for other uses such as golf
courses and housing. The Government has relaxed the restrictions on the ability of plantations to actively manage
their land. Two of the companies in our portfolio have entered into long leases for their rubber divisions and others
are also looking to sell or lease estates that do not fit their business. This development potential is providing
plantations with a much needed degree of flexibility to raise cash as poor tea prices have resulted in disappointing
results. Poor tea prices in the auctions have continued and the war in Iraq certainly affected volumes and orders
from the Middle East in the first quarter of 2003. Plantation cash flows remain poor, as wage increases have
increased the cost of production and tea prices have remained at similar levels, thereby squeezing margins. Most
plantations continue to carry significant debt however the sale of development of land should help to alleviate this
situation.
Since the last review, the Sri Lankan Government has taken action to limit the management fees that Plantation
Management Companies ("PMCs") earn. This followed considerable and prolonged protests from the minority shareholders
who complained that PMCs have been extracting a disproportionate amount of management fees in relation to the
management services provided. As we have highlighted in previous reports, should the PMCs agree to charge management
fees as a specified percentage of earning before interest, depreciation, tax and amortization ("EBITA"), rather than
as a percentage of turnover, the Government will give them access to low interest finance and freeze or reduce lease
payments on plantation lands. At current tea prices although the fee change would roughly halve the fees that PMCs
earn, it does enable them to access the new funds to date, two of the four PMCs in our portfolio have changed their
management contracts to an EBITDA basis.
Aiken Spence Plantation Managements Limited ("ASPM") and Keells Plantation Management Services (Private) Limited
("KPMS") have adjusted the management fees they earn from their plantations, Elpitiya Plantations and Namunukula
respectively, however, Forbes Plantations Management Services Limited and Ceytea Plantation Management Limited have
yet to indicate their intentions. Although the Government would prefer the PMCs to adjust their management fees
voluntarily, there is a strong possibility that in time the Government will make the change in fee calculation
mandatory. We consider it prudent to reflect the reduction in management fees in the valuation of all the PMCs not
just ASPM and KPMS.
Blakeney Management Limited
16 June 2003
STATEMENT OF TOTAL RETURN
Six months Six months
to 31 March 2003 to 31 March 2002
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
# # # # # #
Losses on investments - (152,351) (152,351) - (562,765) (562,765)
Income from investments 32,607 - 32,607 20,549 - 20,549
Interest receivable 4,887 - 4,887 12,324 - 12,324
Investment management (12,368) (12,368) (24,736) (14,782) (14,782) (29,564)
fee
Other expenses (86,441) - (86,441) (90,262) - (90,262)
Return on ordinary
activities
before taxation (61,315) (164,719) (226,034) (72,171) (577,547) (649,718)
Taxation on ordinary (1,836) - (1,836) (2,092) - (2,092)
activities
Return on ordinary
activities
after taxation (63,151) (164,719) (227,870) (74,263) (577,547) (651,810)
Transfer to/(from) (63,151) (164,719) (227,870) (74,263) (577,547) (651,810)
reserves
Return per Ordinary share (0.60)p (1.56)p (2.16)p (0.70)p (5.47)p (6.17)p
BALANCE SHEET
As at As at As at
31 March 2003 31 March 2002 30 September 2002
# # #
(Unaudited) (Unaudited) (Audited)
Fixed asset investments
Listed (at market value) 3,047,078 2,494,372 3,440,484
Unquoted (at directors' 1,578,059 1,581,243 1,412,724
valuation)
4,625,137 4,075,615 4,853,208
Current assets
Debtors 16,733 22,097 64,962
Cash at Bank 264,343 895,845 238,541
281,076 917,942 303,503
Creditors - amounts (35,184) (50,031) (57,812)
falling due within one
year
Net current assets 245,892 867,911 245,691
Total assets less 4,871,029 4,943,526 5,098,899
current liabilities
Share capital and
reserves
Share capital 2,639,429 2,639,429 2,639,429
Share premium account 5,662,800 5,662,800 5,662,800
Warrant reserve - 2,499,403 -
Capital reserve (3,215,950) (5,743,538) (3,051,231)
Revenue reserve (215,250) (114,568) (152,099)
4,871,029 4,943,526 5,098,899
Net asset value per 46.74p 46.82p 48.30 p
Ordinary share
SUMMARISED CASH FLOW STATEMENT
For the six For the six For the
months to months to Year to
31 March 2003 31 March 2002 30 September 2002
# # #
(Unaudited) (Unaudited) (Audited)
Net cash outflow (53,609) (40,979) (126,666)
from operating
activities
Net tax received 3,691 1,352 1,352
Capital expenditure
and financial
investment
Purchases of (1,524,592) - (821,852)
investments
Sales of investments 1,600,312 749,523 999,758
Net cash inflow from 75,720 749,523 177,906
capital expenditure
and financial
investment
Net cash inflow 25,802 709,896 52,592
Increase in cash 25,802 709,896 52,592
INVESTMENT HOLDINGS
Market Value
Company Country at 31 March 2003
#
Metropolitan Resource Holdings Limited Sri Lanka 743,950
Ceylon Tea Services Limited Sri Lanka 734,161
Sri Lanka Telecom Sri Lanka 569,059
Ceytea Plantations Management Limited* Sri Lanka 542,617
Forbes Plantation Limited* Sri Lanka 420,919
Linton Park plc UK 386,000
James Finlay Colombo Limited Sri Lanka 372,763
Aitken Spence Plantation Management Limited* Sri Lanka 357,455
Keells Plantation Management Services Limited* Sri Lanka 257,067
Kegalle Plantations Limited Sri Lanka 234,687
Hapugastenne Plantations Limited Sri Lanka 4,143
Horana Plantations Limited Sri Lanka 2,316
#4,625,137
* Unquoted investments at Directors valuation
Exchange rate used #1 = 153.23615 LKR
The above financial information does not constitute statutory financial statements as defined in Section 240 of the
Companies Act 1985. The statutory financial statements for the year ended 30 September 2002, on which the auditors,
Ernst & Young LLP, gave an unqualified report, have been delivered to the Registrar of Companies and did not contain
a statement required under Section 237 (2) or (3) of the Companies Act 1985.
-ends-
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