M.P. Evans Group (LSE:MPE) — Full Year Results Investor Presentation

0:02 Good afternoon, ladies and gentlemen. Welcome to the MPEvans Group Full Year Results Investor Presentation. Q and A tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question you received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your InvestoMe company dashboard, and you'll be notified once these

0:32 are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Peter Hassie Chapman, Chairman Tristan Price, CEO and Matthew Colson, CFO of MPEvans Group PLC. Good afternoon. Hello. Thank you, Paul, and good afternoon to you all, and thank you so much for tuning in this afternoon and hearing our presentation. This is essentially our post results presentation following the results for 2020, which were recently released. But it's also perhaps an opportunity for any new prospective investors, anybody interested in our company and what we do to become acquainted with us.

1:26 So it won't be just about the results, although it will be largely focused on the 2020 results. So let me start by moving to the the first slide. Who are we? We are, well, we we've been around a long time. We're we've we've been a plantation company for nigh on a hundred and fifty years. We've been involved in various crops in various countries. But, in recent years, our focus has been very much on, sustainable Indonesian palm oil, and this is where we have been concentrating our expansionary efforts.

2:12 We've established over many years a track record of both growth and financial returns, and we believe that there are significant growth opportunities opportunities and financial returns still to come as you'll hear about. You'll see from the map, I don't know how clearly you can see it, but we are essentially focused on Indonesia. Just touching briefly on the remnants of what we used to have in in Malaysia, we have one single plantation area, which is more of a property development venture these days. It's number eight that you may see in in Malaysia, right at the top left hand part of the of the map. And that's where we own a small estate, Bertam, which is in the course of being sold to the joint venture property development project called Bertam Properties in which we've been shareholders for about thirty years now.

3:23 And that company, Burton Properties, has been developing a new town, and we are now in the course of selling the remaining part of Burton Estate into that property development company for a price of about $25,000,000, and we expect that to be settled in about the next three or four months, which will be useful cash. But we will maintain our investment in Burton Properties, which will continue to develop out the remaining part of that land to complete the development of that township at Bertam. For the rest of what we own is all in Indonesia. It's about sustainable palm oil, and we have a diverse portfolio of high quality, sustainably managed plantations there.

4:12 And I think it's important to emphasize the word diverse because they're well distributed mainly across Sumatra Island and across Kalimantan, that Indonesian part of Borneo. And each of those plantations, bar one, is large enough to warrant having its own separate mill. And in one case, in East Kalimantan, the project is big enough to warrant two mills. We currently have four mills, and by next year, as we'll hear you'll hear more from Tristan, we will have a total of six mills. But in a way, it's good to have that distribution because there are sometimes changes in weather and sometimes there are drier spells in some regions.

5:06 And so by and large, by having estates well distributed across different parts of Indonesia, we don't suffer the effects of any particularly prolonged dry spell, for instance, throughout the entire estate as it were.

5:27 One of the benefits of MPEvans is that our the average age of our estates compared to many, if not most, plantation companies is is young. It's about eight years. An oil palm generally has a lifespan of about twenty five years before it's felled and replanted. And because we have been expanding rapidly in the last fifteen years or so, it means we have an unusually high proportion of younger palms. So the average age of our palms is is eight years compared to the perhaps industry normal of about thirteen or fourteen years. Now an oil palm is planted after being for about a year in the nursery, and then following planting out in the field, it's able to produce its first fruit after about thirty months, two and a half years, and then it progresses quickly up to a point of reaching, if you like, maturity producing its peak yields by about year eight and nine, which is why we're just, as an average, hitting peak yields shortly.

6:44 And then it remains at those high yields for about another ten years until about year nineteen when it gradually starts to take off before we then replant at about year twenty five.

7:00 So as you can tell by our young average palm age, we have a very attractive earnings profile ahead of us which will lead, as we talk more about, to sharply increasing profits and indeed dividends. So if we move to the next slide. We aim for operational excellence, and this has been borne out in in our results. In 2020, our crop was up the crop that we processed in our mills was up by twenty one percent to 1,200,000 tonnes.

7:49 Our average palm oil extraction rate in our mills was 23%, which is high by industry standards. It would be even higher if it weren't for the fact that we take in quite a quite a large amount of outside crop, pending the, production increases from crops from our own,

8:13 young areas. We're buying in fruit from outside, and the quality of that crop tends to be of of of a lower level with lower extraction rates able to be achieved, but it's still profitable as, again, you'll you'll hear more about later. But our average oil extraction rate is still at a good industry stand level of 23%. We we are increasingly being being regarded as a reference point. We're not a huge company by any means, but we're being regarded as as as a reference point in the industry for our high agricultural standards, for our oil extraction rates, and for our approach to sustainability and traceability about, which you'll hear more shortly too, for our general professionalism. And partly, this is because we have a policy of having even the most senior managers, bar just a few, actually resident on the ground on the estates.

9:11 So it's only those who really need to be in head office who are based there, but anyone who we can have on the estates where the action is as it were is there. And, again, that's not not always the case with other plantation companies who sometimes have their more senior managers based in their head offices. So if we move to the next slide. I mean, about fifteen years ago in 2005, we we undertook quite a radical new policy. We we decided to sell our small Malaysian estates, which had some of them a certain amount of underlying real estate property development value. We did keep one of those, as I referred to earlier, Burtham Estate, but we sold the rest.

10:00 But with the proceeds, having sold what amounted to 5,000 hectares, we've been able to develop five times that area, 25,000 hectares on top of what we already owned. So that brings us to something like 37,000 hectares plus the areas of small smallholders attached to our projects, which have been developed to the same high standards as our own, which just brings us to well over 50,000 hectares. And that has all been achieved in the last fifteen years. And as as a result of that, an incident that we spent over $500,000,000 in in investing in these new development projects in in Indonesia.

10:50 It's been another record year, as I alluded to earlier, for both crops and for CPO production, and our operating profit is up 94% compared with last year. Following the payment of the interim dividend of 5p per share last November, we have proposed a final dividend of 17p per share. This is up from 12.75 p in the previous year and indeed in the preceding three years or so before that. So for the first time in three or four years, we are increasing the total dividend from $17.75 to 22 p per share, a 24% increase.

11:48 And furthermore, we are very, very confident both of our production prospects and the price prospects for palm oil, and we do not believe it is in any way reckless or irresponsible based on what we can see coming through to state our intention to pay a 30p per share dividend for, the year the year in which we're in 2021, so that effectively within a couple of years, the dividend, which where the norm had been 17p or so, the new norm will become 30%. So getting on for double what we've been paying for the last number of years, reflecting

12:37 the significantly better results which will be coming through and rewarding shareholders for their patience, for supporting us, and I hope encouraging new shareholders to come aboard as well. So perhaps I can now pass across to Tristan to talk about initially about the market. Thank you, Peter. I think if I could just give you an overview of what happened in the palm oil market in in 2020. It was a very unusual year, not only because of COVID, but because palm oil production fell during 2020. That's not something that's happened since the the late nineteen nineties. So that's a very unusual period in the palm oil market.

13:28 And palm oil, rather like the rest of the world, has suffered an abrupt shock in February 2020. And as you can see from the chart on the right of this slide, the palm oil price fell quite quickly and quite abruptly. I think what's really noticeable, though, is how fast the price of palm oil reached the the bottom of the trough that you see there and how emphatically it then rebounded all through the remainder of 2020 and indeed then that momentum carrying through into 2021.

14:15 I think we have to acknowledge that we haven't had the full benefit of that price rise because the Indonesian government introduced a new export levy at the end of twenty twenty. Officially, it took hold in December, but in fact, it would be widely anticipated. And in fact, the effect of that was that from about October, we felt the the effect of that new levy. And it means that the Indonesian government takes much of the benefit of the the price above $700 per ton, so if Rotterdam and and takes that for itself, there is still some slight improvement for for for the group.

15:05 But the corollary of that is that as the price starts to fall, that doesn't affect the the price that the group receives at its mill gate. So the palm oil is is at very high levels at the moment, but falls in that price do not feed through to the price that the group receives at the Millgate. And the current Millgate price is one that leaves a very acceptable margin for us, and it's an attractive price. So the story of 2020 in terms of the price was a COVID fall followed by an emphatic rebound. And looking at the reasons for that, I think, firstly, it was a very unusual year in that COVID affected consumption. It affected people's behavior. People people didn't go out to restaurants and hotels in the way that they had before, so there was a fall in consumption.

16:06 But there was an even faster fall in production of palm oil, and you can see that very clearly in the chart that in that first quarter, there was a significantly greater fall in production than in consumption. As we move through the year, then the production production builds back a bit faster than than consumption does, but that that big fall in production certainly is one reason why the price reached its its trough so quickly after COVID had had taken taken hold. I think the other feature of the the palm oil market during 2020 is to look at what happened to stocks of palm oil and to look at trade in palm oil.

17:01 You can see from the orange bars on the chart here as you move through the quarters of twenty twenty that trade fell along with everything else quite strongly in the first quarter. They didn't recover that much during the second quarter, but as you move through the third and the fourth quarters, trade really recovered quite strongly. I think the other thing that you really see in this chart is that stock fell also in the first quarter. I think what we saw happen was that production fell fell very strongly in the first quarter as we've just seen, and consumption didn't didn't didn't fall so quickly, and and the gap was made up by people drawing down on their stocks.

17:53 As production resumed, to some extent in the second quarter that stocks built back, but through the rest of the year, the stock position actually diminished again. So worldwide, by the end of twenty twenty, stocks were at quite low levels again. And indeed, the the ratio of of palm oil stocks to typical consumption were at their lowest level for more more than five years. And that situation was was mirrored too in other vegetable oils. So we enter 2021 with relatively low levels of stock and a situation where competing vegetable oils find themselves in a similar position.

18:42 So the market for 2020 was a complicated one in some ways, but the key point for us and our results was how strongly the price recovered and how that momentum has carried through into the current year and how the environment in the market suggests that, that strength is going to continue at least for the medium term. Having mentioned our results, could I perhaps, at this point, ask Matthew to take you through the results for 2020. Great. Thank you, Tristan, and a very good afternoon to everybody.

19:28 So let's just turn to some some highlights of the 2020 results themselves. And you can see on on the slide here some some of those highlights. Let's start with with revenue. And you can see rev revenue was up by almost half compared to the previous year, so up by 46% to a $174,500,000. And as always, and as I'm sure I've said previously in these presentations, the determination of our of our revenue is a a relatively straightforward exercise. It's it's all about production, and it's all about price. And you've heard something about both of those things already. So a strong increase in production.

20:16 So the amount of crop processed was at a record level this year at 1,200,000 tonnes. And then you also heard about the story of price during 2020 as well and the significant recovery in price that took place after the dip at the start of the year. Overall, that meant that the average price for CPO, looking at the SIF Rotterdam measure,

20:44 was at $716 per tonne in the year, and that's over a quarter. So that's 26% up on the price in the previous year. And if we translate that into what we what we receive as our Millgate price, our Millgate price was up by a similar amount, and we received just under $600 per ton. I think it was $590 per ton at Millgate. So we take those two together,

21:14 the increase in production, the increase in average price, and that contributes to our 46% increase in revenue.

21:25 Then as Peter has already mentioned, we almost doubled our operating profit, 94% up on operating profit from £16,000,000 to just over £31,000,000 in the year. And the reason we saw such a big increase in operating profit compared to the increase in revenue really was because we were able to keep very tight control over our costs.

21:46 Again, it's something we've talked about a lot before, but we pride ourselves on being what we consider to be a very low cost producer of CPO, and that continued into 2020. You can see there that production costs actually fell slightly during the course of 2020. In 2019, our production cost was $345 per ton, and we were able to push that down slightly during the course of twenty twenty to three hundred and forty dollars per ton. We think that as as production continues to increase, that we recognize we're approaching, you know, the bottom of that cost curve. But with production costs that at that level, we believe we'll be able to continue to achieve very healthy margins.

22:38 And then as we work our way down to the bottom of the income statement, so a doubling at almost doubling at operating profit level becomes an almost trebling retained profit for the year, and you can see the increase there to just over $22,000,000, which translates to an earnings per share figure of just over 37¢ per share or just under if we translate it, just under 30p. I think it's 29.2p per share in terms of earnings.

23:14 Moving on and looking at some of the other key highlights. Always very important to focus on cash generation, and you can see an increase there as well. So almost 20% up in terms of cash generation. As before, we report operating cash before tax and interest payments. So what we would consider to be

23:36 a fairly pure, a fairly true operating cash measure, And you can see where it was just over $40,000,000 in 2019. So it's just a shade under $50,000,000, $49,600,000 in terms of operating cash in 2020. And perhaps you whilst we're on cash, a word more more about 'twenty one perhaps in 2020. We we signed an agreement during the course of 2020 as we as we reported in July to sell our our wholly owned Malaysian land asset, development land at Burton Estate to our our joint venture partner, Burton Properties.

24:23 And that will contribute significant cash once that once that contract completes, which we expect it to be during the course of of 2021. So just a significant note for looking forward into 2021 from a cash perspective.

24:41 In terms of uses of cash, our capital investment program marched forward during the course of 2020. And you can see we again, we deployed over $40,000,000 towards that capital investment program, another year of over $40,000,000 of capital investment, whereas $46,000,000 in 2019, dollars 41,000,000 in 2020.

25:06 Again, a significant part of that is on our mill building program. So our second mill at Kotabang and the Rahayu mill opened during the course of 2020. We continue to invest in our in our project at Boomi Mass. So significant investment during the year in infrastructure there. So, you know, road building and and housing development at Boomi Mass, but also making a start on mill number five. So mill number five is well underway at Bemi Mass, and we look forward to opening mill number five during the course of 2021.

25:45 And a final word just on the balance sheet. You can see the continuing strength in the balance sheet with net assets of over $370,000,000 and what we consider to be perfectly reasonable and modest levels of net debt at $78,000,000 which is very competitively priced, leaving us with net gearing under 20%, net gearing at 17% at the end of the year.

26:13 So that's all I wanted just to highlight from 2020 results. And at that point, I will pass you back to Tristan.

26:29 I think that takes us, I think, from the results themselves. We'd like to emphasize at this point that what we're producing is certified sustainable Indonesian palm oil. So the results need to be seen in that context is that we are approaching this in a way that takes account of the environment, that takes account of how we produce sustainably and takes account of the impact that we have on our communities. And indeed, we have a structure, a framework that we apply

27:09 to our operations that very specifically takes those things into account. So in terms of our protection of the environment, we think about the greenhouse gases that we emit. We've captured methane from three of our three of our mills, and we use that to to generate electricity and to to participate in producing compost as well. I hope it goes without saying that we do not deforest. We're extremely careful about not encroaching into forest areas and maintaining conservation areas on all of our projects. In terms of sustainable production, where we're very careful about managing water, and that includes, for example, in those peat areas for which we're responsible, making sure that they remain wet.

28:08 And in terms of traceability, there's something in particular I think I'd like to highlight in that the roundtable for sustainable palm oil, the RSPO, which sets the principal sustainable standard for us, has introduced a way in which independent smallholders, so really small independent producers in Indonesia, it provides a way that they can become sustainable producers. And we are running a project at our our banker plantation to try and draw independent smallholders into this traceability network so that they can become part of a sustainable production chain.

28:58 In terms of our communities, I think we run extremely good smallholder schemes for all those attached to our projects, and we are very careful about the way we treat our workforce. We should emphasize again that all of the palm oil that's produced by us in terms of the land that we operate on behalf of the group, on behalf of the scheme smallholders, is operated to RSPO standards. However, the RSPO itself doesn't certify plantation land, it certifies mills. And I think you've already heard from Matthew that we're not yet quite at the end of our mill building program.

29:47 So at the moment, the RSPO certifies 53% of our production as being sustainable. As we complete our mills, that will rise towards 100%, and we do have a target to certify all of our palm oil as being sustainably produced. In the meantime, we have a zero waste philosophy. We turn empty bunches into compost. I've mentioned the methane capture that we do to generate electricity both for ourselves and for supply to our own housing and workers' housing and to the local electricity grid. We invest a lot of effort and time in building the relationship with the communities where we are.

30:37 And I think it is important to mention that 2020 was the year in which the first year in which we produced a self standing sustainability report. Over the years, we have given a lot of information about what we do in this area, but we felt it was right to bring it all together and present it in one place. So there is a self standing sustainability report and indeed a lot of additional disclosure that you can find on our website. Moving specifically to the operations in 2020 and what happened there, we can say that our operations were really not affected by COVID-nineteen.

31:26 Harvesting carried on, our mills continued working and extraction at the good levels that Peter mentioned in his introduction. If we're looking for reasons for that, I think we could point at the way our operations are very dispersed. They're quite remote, typically not very close to city centers. And the workforce is quite young and so has proved quite resilient, I think, to COVID-nineteen. So our staffing levels remain in full strength. And we've also introduced in our Jakarta office much of what has become very recognizable in The UK. So lots of people working from home, the use of laptops, the use of video conferencing. But also true to say that Indonesia was was much faster to introduce ways in which people could still travel by air.

32:21 So the they had protocols for testing in advance of flying, of socially distanced transport that enabled our most senior managers to continue visits to supervise our operations. And the main point to come out really from 2020 was that it was another year where our crop grew. So our fresh fruit bunches grew 9% from 2019. The scheme smallholders, a little bit more than that at 12%, and we were very successful in buying bunches from independent smallholders, have a year first 20. Half And we have very steep upward part of their yield curve as their palms mature.

33:26 And those are at Bumimas and Mussirallas. At Mussirallas, we have paused planting whilst we have assessed new rules introduced by the RSPO that they clarified should be applied retrospectively. And we've filed all of those reports and that assessment with the RSPO, and we'll continue planting once we get the green light from them. And we hope that, that will take place in the middle of this year. And indeed, we expect to be able to plant in this location everything that was planned.

34:15 And the growth that we saw in 2020 isn't very much, isn't the end of the story. I think we have a very upward trend in crop that will continue 2027 or more. We have a very young average palm age. Peter explained about the yield profile in his introduction. And so not only do we have additional mature hectares being added to the group's productive capacity, but we have that natural maturing of the palms that is producing this growth in the group's crop.

35:01 Overall, we expect planting from the existing land to reach 53,600 hectares, so we only have a small area left to plant. And it's important to emphasize that this crop growth is essentially from palms that are already planted. This is not about planting that we plan to do in future. It's from from palms that are already in the ground. And when we get to 2027, the crop doesn't start going downhill. It reaches that peak and then is essentially on a plateau for for a number of years before before there's any expectation of that diminishing. And, naturally, if we do manage to acquire additional hectare, then that would both make the peak higher and would push into the future the point at which that peak happened.

36:03 But for the time being, we've been focusing very much on developing our our mills and our milling capacity. And the reason for that is that our mills extract a really good margin, much better than than the margin that you get from selling your fruit to to other millers, outsiders. We commissioned a new mill in Kotterbangan in September 2020. Matthew's already led you a little bit through the the construction that's already underway. So we have another one that is coming on stream in a few months' time in the middle of this year, another one at the end of next year.

36:49 So that by the end of twenty twenty two, the group the group plans to have six mills in operation. And there just might be a seventh. We're looking at we're looking at our land in in Achie, where we have a very good plantation that's just not quite big enough to justify its own mill, and we're looking to see whether we can acquire additional hectare in that region that would justify the the building of a a seventh mill. And when we build our mills, we build them to be able to process our own crop, which, of course, we expect to rise over time through through that natural maturity and the increasing yield of the palms.

37:38 And we aim to put the capacity in place to match that growth in crop. So by the end of twenty twenty two, when we complete that sixth mill, we expect to be milling some 96% of the group's quarrel. If we are successful in acquiring land at Simpang Curie, then that will move towards a 100%. It is right that the independent fruit that we buy in to fill up that capacity is extremely profitable, but it does bring down the average oil extraction rates that we can report because the fruit is just not as good a quality as that that we produce ourselves.

38:25 But, of course, that that is reflected in the price that that we paid for that crop. And the picture on the right there shows the combination of the group's own crop scheme, smallholders crop attached to the group, as well as the the independent fruit that we look to buy in and how that matches against our milling capacity and the very sharp increase in mill capacity that we've managed to put in place. And as you've heard, this this capital program is coming to an end. We've very little planting left at Mussurawas, maybe 2,000 hectares.

39:12 In the meantime, we've made excellent progress on the civil engineering that that all plantations require, so the roads, the housing, the water management. We build bulking sites, and we've got two small regional offices. Those will all be finished by by the end of this year, 2021. And then by the time we get through the completion of the mills, we should bring capital expenditure to that maintenance level by about 2024. So where does that leave us? Well, we wanted to suggest to you that that we're we're at an inflection point. It brings the business to a really important and rather exciting point in its development.

40:08 You see here in earnings per share what we produced in 2019 and 2020 on the basis of milling a million tonnes of fruit and 1,200,000 tonnes of fruit. And we wanted to present to you an illustration based on some assumptions, but an illustration of where we might be if we get to processing 1,600,000 tonnes, which, you know, we think is something which is achievable in the really, really quite near future. If you make some assumptions about the price on the left hand side here, $600 a tonne mill gate is is significantly less than we are at the moment, and we feel is an entirely reasonable assumption to make along with costs of $400 per ton to generate a margin of $200 per ton, and you combine that with some assumptions about about central costs and about the exchange rate, then milling 1,600,000 tonnes brings you to an earnings per share figure of more than 80p per share. And I think it's that perspective that is quite important to bear in mind when you think about the points that Peter was making about the dividend and about its increase and about where it might get go.

41:33 The reason for this is, you know, the underlying reason is the higher crop, the crop that is still growing, the deepening margin that we're getting from having our own mills and and milling our own fruit, combined with the the the cash generation that Matthew covered, you know, leading to falling debt and and then falling capital expenditures, we reach the end of that program that that gives the accelerating cash flow that gives scope not only higher dividends, but gives scope for us to continue investing in the business and being in a position to to invest in in in the future.

42:21 So at that point, if I could hand back to Peter perhaps to say a few words in conclusion, to bring the the formal part, at least, of the the the presentation to an end. Yes. Thank you, Tristan. Well, to to conclude, and as I hope has been illustrated from a number of the points made through the presentation, we we believe we have a a a very bright future ahead, not least that we have a past of a hundred and fifty years, but we have a very promising future, and we we have achieved an extraordinary amount in the last twenty twenty years or so to enable us to increase very substantially our our production of sustainable Indonesian palm oil.

43:20 We we in which we have huge confidence. Our focus will continue to be on majority owned plantations. So we're in charge of running them. We own them. We manage them. And on behalf of our scheme smallholders, producing sustainable palm oil. And we've touched a couple of times on the value that we are still extracting from our remaining Malaysian assets in in the sale of Bertrand Estate to Bertrand Properties, and then, again, the continuing value to be derived from the the development out of the the remainder of the Burton Properties township.

44:11 The the the the crops and revenues from the existing plantations are on the rise and will continue to to rise as you've seen until at least 2027. And, of course, as as Tristan said, if we're to buy more land, then we have the possibility to increase that peak and to push back the time when the the peak level to to beyond 2027. And at one point, it doesn't just slip away. It then plateaus out. So we'll we'll see crops and production levels then continue on at significantly higher levels than where we are now for many years to come.

45:01 And as a result of this, we are able with confidence to say that we're looking at the prospect of sharply increasing dividends, which provides both yield, but it's not just about yield increase. It's also about continuing capital growth. So the two side by side, yield and capital growth. So that concludes our presentation. Thank you for listening to that. We'd now be delighted to to receive questions. We we've seen there are a number have come through, and I think Tristan's going to be in charge of fielding them.

45:50 I didn't know whether Paul, you wanted to say anything. I'm just going quickly say, Peter, thank you very much. Thank you to yourself, Tristan, Matthew for the presentation. And ladies and gentlemen, as as Peter said, we've had a number of questions come through. So do please continue to submit your questions using the Q and A tab just situated on the right hand corner of the screen. But just by the company take a few moments to review those questions that we've had submitted already, I'd like to just remind you that a copy of the presentation along with recording and availability of the slides will be available on the investor meet company platform on your dashboard. I'd also like to remind you that your feedback is important to the company immediately after the presentation has ended you will be redirected for your opportunity Thank Thank you. You. Thank you for the questions that you've already put up and indeed we received one or two in advance as well.

46:56 Could I begin one for Matthew, I think. We've got a question about cost. And the question says that the business looks in very good shape going forward and that we manage costs very well. But the question is then do you see any room to reduce costs further? And are you seeing inflationary pressures? Okay, fine. Well, I mean, I think the questionnaire is right to highlight those points. Yes, of course, like any business, we do see inflationary pressures. However, as you would have seen through the slides that we shared with you, we also see, over the coming years, significant increases in production and in yields.

47:47 And our objective in the coming years is through the increasing yields and, therefore, the opportunity to spread those fixed elements within our our our cost base over that larger production is to is to have have the one at least offset the other. So we have the benefit of the increasing production spreading those costs over that over that larger that that larger yield, allowing us to offset any increased cost by inflation to to manage our costs per per ton and keep those as low as we can. As I say, whilst we may be coming towards the bottom of the cost curve, we don't expect there to be substantial steps downwards.

48:36 Our objective is to keep them at the current level. Very good. Thank you. I think there's a pair of questions, I think, that are related now. One of them following on from your point on costs is, say, what is the political backdrop about potentially increasing tax yet further given the attractive economics of the business? And another one about whether there is a domestic market that avoids the tax. I think if I could answer that perhaps on the looking first at the question of the political backdrop and the attractive economics. And I think the attractive economics are particularly relevant to us because of the cost control that Matthew has been talking about. I mean, I don't think we're a typical producer. I think we're a low cost producer.

49:47 And I think that's what the economics for us particularly attractive. And I think the government is very conscious that a number of its the voters might not be so cost efficient. And I think that would be a significant disincentive to increasing the tax in its current form. And the related question is, is there a domestic market that would avoid the tax? And I'm very pleased that was asked because I think it is absolutely the case that there is a premium in the local market to what you might expect if you start with the SIF Rotterdam price and just deduct the levies and the taxes, there is absolutely a premium in the local market. Partly, we feel as a result of the Indonesian government having offered incentives for people to build refineries over the last decade.

50:51 And that's been quite successful with the result that there are a lot of refineries in Indonesia looking for crude palm oil feedstock. And that means that there is quite a premium in the local market for palm If I could just add more generally on tax, and this is not a comment related specifically to our industry, but I think it's probably an important point for people to be aware of. The Indonesian government last year announced a reduction in the headline rate of of corporate tax in Indonesia, which benefits us along along with everybody in Indonesia. And so previously, for a long time, the headline rate of corporation tax in Indonesia had been 25%.

51:42 That's reduced, and we see the impact of that in our 2020 results in the corporation tax in Indonesia reduced to 22%. And then next year, so not the year we're in now, but next year in 2022, the headline rate in Indonesia will reduce again to 20%. So clearly, that has a significant bearing on us in terms of retained profits. Thank you, Matthew. Can I ask actually ask you to answer the next question as well, which is the question says, value is the group equity value that we publish in the annual report given that our share price trades consistently below it?

52:29 Yes, of course. So as we have for a number of years now, so again, in 2020, we've provided in full detail of the group equity value in the annual report, and yeah, people will find that on page 94 of the annual report that's available via our website as of yesterday. What that shows us is that the total equity value has increased in in US Dollar terms compared to last year. Because of, you know, the way the exchange rate has changed in the year, it actually then comes back to a figure in in pence per share that that it's almost exactly the same as as it was at the end of twenty nineteen. So it's within a penny. It's £11 per share.

53:23 In in terms of how how that's how that's determined, it's important to note that that's based upon a valuation of of all of the group's property assets, which is performed by an independent valuer. And in terms of how how that's done, clearly, you know, our understanding is, you know, clearly, the valuer thinks about values of properties based upon transactions in the marketplace. But primarily, you know, the valuer is thinking about, well, to what extent are those properties able to generate cash and be able to generate cash returns for investors in those properties and the owners of those properties. And that is the fundamental basis upon which those valuations have been performed.

54:17 Thank you, Matthew. Peter, could I ask you, there's a question saying, will there be a special dividend after the sale of the Bertam property? And perhaps connected to that, another question saying, could detail the cash proceeds from the Bertam sale? Yes. Well, you for those respective questions. The Board has not formally made any decision, but it would not be anticipated that there would be a special additional dividend paid following the sale of Burgham Estate. I mean, as as we've said earlier, we have announced our intention to pay a very significantly higher dividend in respect of 2021, which does take a number of things into account, including the likely sale of Burgham Estate. And we believe it's highly likely that it would be sold.

55:28 I mean, it's it's again, we stated our intention. It's highly likely that intention will be will be followed up. I I think it's it's it's so likely that we will sell Burton properties that there's no Burton estate. There's no point in speculating about whether it won't be sold until next year. But so, essentially, the answer is that it it that's not likely, you know, that there'll be a separate special dividend in relation to that sale. In terms of the sale proceeds, it it settlement is expected to take place in around the middle of this year, and the actual payment installments are coming in in stages.

56:17 There was a 10% deposit paid at the outset. When settlement takes place, a further 50% will be paid. So that would bring us up to a total of 60% of the 24,000,000 or so, which was the sale amount agreed. And then the balance will be paid around eighteen months later. Thank you, Peter. And I think there was a nice short one here for Matthew. What is your maintenance CapEx by 2024? So we talked about the fact that the capital expenditure program is coming towards an end.

57:03 Once that is completed, clearly, with the there is ongoing capital expenditure required in terms of replanting or maintaining the infrastructure on on our estates. In terms of the cost of that, we would give you an indication that we would expect that to be in the single figures of millions of dollars per annum. You, Matthew. A two parted question next for me, I think, is what limits do you see on your growth as a business? And how long does it take a mill to be sanctioned and built? But on to the second part first, which is about the mills. I would say that if you allow eighteen months from beginning the design work through contract tendering and construction, then you've built it quite quickly.

58:00 And you would be disappointed if it took as much as two years. So I think that's in terms of the mills. Bear in mind that we also, of course, build composting facilities and biogas facilities as an integrated unit with our mills, which does add to the construction time. What are the limits on our growth? Well, I think in the first part, you have to move you have to have land for crop. And land is a constraint. In Indonesia. Quite rightly, the Indonesian government, I think, has introduced tougher rules and regulations around the use of land and is monitoring them more carefully and enforcing them more carefully.

58:52 But I think also that the kind of scale of land that we are looking at would still be available within Indonesia. So I think land is the ultimate is the limit on growth. But that for the time being, we feel confident that the kinds of size of land parcels that we would be looking for to grow would still be available. There was another question around the political backdrop to the tax. But I think we've addressed the likelihood of the tax. And I think perhaps I can link this to another question, which is around the history of taxes, the export tax in Indonesia. And all I can say is that over the last nearly fifteen years, there have only been three revisions to the structure.

1:00:07 And I think including the third one happened at the end of last year. So broadly speaking, the tax structure is quite stable. And I think the government has also rolled back taxes where they felt that they were becoming a burden. And that was particularly during that period, low or relatively low palm oil prices. But they, in fact, removed temporarily some of the taxes. So I don't think it's a one way ratchet, I think, what the question has said. I don't think it's a one way ratchet. If I could perhaps ask Peter, we have a question that was put about the share buybacks.

1:01:02 And it says, do you intend to propose a share buyback again at this year's AGM? Thank you. We've decided not to reinstate that as the proposed resolution this year. Rather, we thought that we would be a little bit more generous in the dividend proposed. I mean, obviously, shareholders are always at liberty to buy shares themselves if they feel the shares are undervalued. So we thought this year, we would perhaps given that there are still some calls on cash in terms of the CapEx and that we have borrowings and we wanted to start giving back to shareholders by way of a higher dividend.

1:01:55 So we have decided this year not to reinstate that resolution, but we may well come back to review that in future years. We've had a number of years in the past where it's been in play and then it's been removed and then we've brought it back in again. So we will look at it each year and on the merits of it. That we don't believe that the shares represent good value at the current price. Two different questions for Matthew, if I may. The first one is, is Malaysian real property gains tax payable on the sale of Bertam property?

1:02:41 And then a different finance question, but could you explain about the way depreciation works on plantings in the group's estates? Yes, certainly. So dealing with the Malaysian question first, the question there is exactly right. We anticipate paying an RPGT, real property gains tax in Malaysia on the disposal of the Burghese state land. We expect to pay tax at 10% on the gain arising on the disposal of that land. On the depreciation question, when it comes to oil palm plantings, the depreciation policy we adopt is very straightforward in that depreciation starts at the point at which the plantings become mature and and start to become start to be harvested and generated generates their first yield.

1:03:52 We then set a depreciation policy that is designed to last for the productive life of those plantings until you get to the next cycle and you get to the next planting. So the objective is to match the depreciation charge for the cost of those plantings against the productive life. Thank you. A question here about the disposal of an asset. The questioner asks, what about Carassane? Carassane is a 38% owned estate in Sumatra. The majority owner is a Belgian plantation group that manages it.

1:04:42 And I think we've said quite explicitly that this is an asset that we would certainly consider disposing. But for the time being, it's we regard it as a well managed asset that produces good profit and a good dividend for us. And we would consider disposing of it at the right price, but for the time being, it's quite a remunerative asset. Could I come back to Peter, if I could? The questioner says, have you had any conversations with Kuala Lumpur Kippon about their long term strategy towards our group, given the increase in their shareholding during the year?

1:05:30 Thank you. Well, Kok, our largest shareholder, we've known them for many years. They've, in the last four or five years, acquired a significant holding, which is now over 20%. But no, there will be no separate discussions open above the usual presentations that we give to them following our results. In fact, we'll be speaking to them on Monday, taking them through our results. And we speak to them at least half yearly and the relations remain cordial. Thank you. I've got a question here. We've a question there. How do you assess the political risk as a UK based company?

1:06:20 And I think we see the very little risk as being a UK based company. Think the Indonesian government has a long track record of treating foreign investment quite well. And we don't feel constrained in terms of our ability repatriate dividends or being discriminated against. I mean, it's very noticeable that the long term leases that we get for our properties are exactly the same for us as they are for any Indonesians. And the risks of operating, we see very much more as local risks. It's in terms of having a good relationship with the communities where you operate. So I think if people talk about the risk of operating in Indonesia, I don't think it's that top level political risk that we see as being the most relevant.

1:07:23 It's about managing your relationship at a much more local level. Perhaps the tax has been a very, very popular theme here for questions. So Matthew, could I maybe ask you to address the questioner who says that has the Indonesian government really taken away everything above $700 per tonne? Is there any benefit to us from prices above $700 per tonne? And the answer to that question is that, yes, there is still benefit to us as prices increase above that level. Clearly, not as much as they would have been if they hadn't made the change, but there is still a benefit to us as prices increase above that level. Specifically to to the questioner, but also to to for everybody's interest, if people want to look at that in in more detail, I would direct people to the announcement that we made in in December when the change happened.

1:08:36 And in that announcement, which is on the website, you can see a detailed analysis of various price bands of how how the net price after the levy and tax changes at various levels of price. And you can see that whilst, yes, there is a sort of stability of net price in quite quite a band, yes, it it does still increase as the headline price goes up. Possibly a final question to address is the questioner asked, is there any benefit in planting higher yielding varieties of oil palm? And I think if I could answer that by saying is when we do replant and when we plant new plantings, we take great care in the seeds that we use and to get varieties that yield very strongly.

1:09:37 Over time, I think the observation is that it's not so much that the peak yield has increased very much. It's more that the growth in yield early in the palm's life has really accelerated. So whereas it used to take a number of years for Palms to reach their maximum level, which they then hold on to for a period, that those early yields have improved dramatically. And you get to your peak yield much faster than you used to. Peter, Tristan, Matti, I think you've been very generous with your your answers. They've answered an awful lot of questions, and they've pretty much covered everything off. So thank you very much indeed. And, of course, if there are any further questions that do come through from investors, you'll be able to review those later on the platform.

1:10:39 Peter, perhaps before we just redirect investors to give you a a little bit of feedback, perhaps I could just ask you for a few final words, please. Thank you, Paul. And well, really, I'd just like to thank you all for hearing our presentation and for so many interesting questions, stimulating, taxing, dare I say it. But very much appreciated and I I hope you've learned something more about MPEvans. And if there are any unanswered questions, we will seek to to reply to those at some point very soon. So thank you very much.

1:11:25 Again, we look forward to seeing meeting you perhaps in person before before too too long. So thank you. Peter, thank you. Tristan, Matthew, thank you as well for updating investors today. Could I please ask investors not to close the session as you'll be automatically redirected for the opportunity to provide your feedback? If you've accessed the meeting from our website, the feedback page will appear. If you've accessed the meeting via the link sent to you in the email, you'll be asked to simply log in and just, give your feedback directly to the company. Please do so. It only takes a few minutes, and it's greatly received. On behalf of the management team of MPEvans GROUP PLC, we'd like to thank you for attending today's presentation. Thank you. Good afternoon.