TIDMAGTA
RNS Number : 4171V
Agriterra Ltd
28 October 2014
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
28 October 2014
Agriterra Ltd ('Agriterra' or 'the Group')
Final Results
Agriterra Limited, the AIM listed pan-African agricultural
company, announces its audited final results for the year ended 31
May 2014. A full version of the results can be found below.
For further information please visit www.agriterra-ltd.com or
contact:
Andrew Groves Agriterra Ltd Tel: +44 (0) 20
7408 9200
David Foreman Cantor Fitzgerald Tel: +44 (0) 20
Europe 7894 7684
Rick Thompson Cantor Fitzgerald Tel: +44 (0) 20
Europe 7894 7684
Andy Cuthill Peat & Co. Tel: +44 (0) 20
3540 1722
John Beaumont Peat & Co. Tel: +44 (0) 20
3540 1723
Susie Geliher St Brides Media & Tel: +44 (0) 20
Finance Ltd 7236 1177
Chairman's statement
In line with our previously stated growth strategy, Agriterra
continues to invest in building operational platforms that will
provide a basis for sustainable long-term cash generation and
profitability across our multi-divisional business.
Successful agricultural businesses are based on long term
investment programmes that provide a foundation for profitability
and which accommodate the realisation of a growth strategy. Our
focus therefore remains on establishing strong foundations -
primarily within our beef and maize operations in Mozambique -
building our asset base towards "critical mass" and vertically
integrating operations wherever possible. The rationale behind our
growth strategy is to generate revenues from our own produce whilst
improving efficiencies, maximising margins and thereby driving up
shareholder value.
In Sierra Leone our early-stage cocoa plantation project, which
was conceived with a view to tapping into the predicted supply
deficit in the world cocoa market, must now be considered and
viewed in the light of the ongoing Ebola crisis in West Africa; the
Board will continually review the position in respect of this
project over future months.
During the period under review we assigned capital to implement
our growth strategy and whilst we are still in the growth and
development phase of our beef and cocoa operations. As a result of
these and previous investments made, we are now beginning to see
the benefits of our structured development plan being realised in
financial terms, with a reduction in losses and a trend towards
profitability.
Beef operations - Mozambique
Momentum continues to build throughout the beef division, with
significantly increased cattle throughput at our feedlot and
abattoir, which, in tandem with the expansion of our retail
offering, has resulted in increased revenues of $4,081,000 (2013:
$2,230,000) in this division.
To fuel future growth within the beef division, we remain
committed to expanding our range of retail units and pursuing
longer term supply contracts to maximise our sales of final beef
products. Unfortunately our planned retail unit expansion scheme
was curtailed somewhat during the period as a result of political
unrest in Mozambique. This political unrest resulted in the
imposition of significant logistical restrictions and it was, for a
considerable time, not possible to travel safely to the North,
North East or South of the country from our base of operations in
the Manica province. As a result of these restrictions, it became
necessary to close our retail butchery in Matola and to place
on-hold the implementation of our expansion plans for new retail
units in the North and North Eastern areas of the country. As
political stability has returned we are now in position to reignite
our retail expansion plans, primarily to service the growth
engendered by the significant natural resource investment into
North and North East Mozambique.
Notwithstanding the constraints faced during the year we
nevertheless opened new retail sites at Beira (a full butchery) and
Manica (a satellite unit) and subsequent to the year end, we have
opened a further satellite retail site at Moatize in Tete which we
hope will show good growth. We now have three full butcheries in
Chimoio, Tete and Beira, and two satellite sites in Manica and
Moatize. We are now looking at further sites for potential
butcheries in the North and North East of Mozambique and hope to be
able to announce the opening of new sites in the near future.
I am pleased to note that the key revenue generating elements of
our vertically integrated beef operations (namely the retail units,
abattoir and feedlot) are now generating positive cash flows, and
these are expected to further improve in the current financial
year, as the benefits of the new retail units and the expansion in
our supply contracts impact the bottom line.
Our cattle herd expansion programme is also on track to reach
10,000 head (excluding feedlot animals) during 2015 and,
importantly, a successful breeding season has delivered a 28%
year-on-year increase in births. The key to our future success from
ranching operations is critical mass; to this end, work to increase
the carrying capacity of our ranches, through further land
clearance and a phased irrigation programme, has been undertaken
during the year. Once the newly irrigated land is able to support
cattle, we hope to accelerate our herd growth through the
acquisition of further cattle from South Africa. This accelerated
growth will enable us to reach cash break-even on our ranching
operations more quickly than previously anticipated by increasing
the total number of births each year (thereby increasing the number
of animals available for slaughter, 15 to 18 months
thereafter).
With a positive outlook predicted for Mozambique, due to
continued strong economic development and the growth of foreign
direct investment into the country our vertically integrated
operations leave the Group well positioned to maximise financial
returns across the entire 'field to fork' value chain. We are
therefore optimistic about the future prospects of the beef
division in supplying the Mozambique market. In addition to the
domestic market we are actively investigating potential export
markets and opportunities, particularly in the Middle East.
With the necessary critical pillars to support growth in place
and a defined investment programme in progress, the Board believe
that our Mozambique beef operations are set to become
self-sustaining and profitable, which should in turn have a
favourable impact on the Group's performance in the years
ahead.
Cocoa plantation - Sierra Leone
In Sierra Leone during the period we continued to invest in our
cocoa plantation, an exciting project which, once mature, has the
potential to generate significant cash flow. We completed the
initial phase of planting during the financial year with 250,000
seedlings planted on 200 hectares. A further 300,000 seedlings are
currently growing in our nursery; these seedlings were cultivated
in anticipation of the next planned phase in our planting schedule
(250 hectares), which we initially expected to complete in the
first half of the 2015 financial year, but as a result of external
events has now been put on hold and is under review.
Due to the well-publicised Ebola outbreak, the Group has
re-aligned its short term strategy regarding the cocoa plantation.
In accordance with best practices and in an effort to protect local
staff during the outbreak, our 3,200 hectare plantation and
nursery, including all plant, machinery, equipment, housing, office
and other infrastructure are being stewarded by on-site workers who
are ensuring that the existing cocoa plants are being maintained
and that our assets remain secure. We are closely monitoring the
Ebola outbreak to ensure we protect the health of our employees and
our assets in country, with a view to resuming operations once the
situation improves to an acceptable level of risk. In the meantime,
we are also rigidly enforcing general hygiene protocols to ensure
that staff and visitors are not placed at unnecessary risk.
Despite the current difficult conditions in Sierra Leone arising
from the Ebola outbreak, we believe our cocoa plantation remains a
valuable asset in the medium to long term. The scalability of the
operation, the attainable production targets and the dynamics of
the cocoa market were all crucial factors in our decision to invest
in this business and these factors have not changed when viewed
with a longer term outlook. We have excellent infrastructure in
place and a strong in-country foundation; we believe that the
strong demand fundamentals for cocoa will repay our investment when
the on-ground situation improves and we can continue our planting
schedule and plantation growth. In particular, the supply/demand
dynamic for cocoa, driven by significant growth in demand in Asia
and a supply deficit as West African small scale farmers struggle
with under-achieving farms or switch to other cash crops such as
rubber, is expected to continue to cause cocoa prices to increase.
Notwithstanding its compelling investment rationale, the Board
recognise - particularly in light of the ongoing Ebola crisis -
that completion of the plantation development plans will require
considerable capital investment and accordingly are regularly
investigating financing and strategic options that will support the
plantation's growth and development targets.
Other operations - Sierra Leone and Mozambique
Due to the Ebola outbreak and the associated precautionary
restrictions on travelling in Sierra Leone, coupled with the poor
performance of the cocoa trading operation in the year, the Board
has suspended the cocoa trading operations. We are confident that
ceasing trading will not have a material effect on the Group's
financial performance. This division was focussed primarily on
building a presence in-country and providing a market entry point
for buyers as a precursor to the establishment of our own
plantation, and the implementation of programmes involving the
upgrading of local growers plant quality through plant
distribution. In this regard the operation fulfilled its
objective.
The Group is currently assisting the Ebola relief effort in
Sierra Leone through the provision of vehicles, warehouse
facilities and other assets previously used by the Group's trading
division to various international aid and health organisations.
The Group's maize milling and trading operation in Mozambique
continues to be an important aspect of our vertically integrated
business model, generating a considerable revenue stream and
producing an important component of feed for the beef feedlot as a
by-product of the maize milling process. Although mealie meal
volumes declined (mainly due to political instability referred to
above which led to difficulties transporting maize product),
purchases for the 2014/2015 season have been strong. Due to a
strong focus and major emphasis on price and margin control, gross
profit is improving, and the Board believe this is a good sign for
the future. The political environment in Mozambique has improved
considerably since the Group's year end, and subsequently, despite
a slow start to mealie meal sales, the Board is optimistic that
sales and revenues will improve during the latter part of the 2015
financial year.
We are also assessing additional 'value add' products that can
complement our mealie meal offering and generate additional
revenues from our existing assets with minimal additional
investment. These include maize based snacks and other agricultural
products.
Legacy oil interests
In addition to our current operations, the Board has continued
to actively pursue the realisation of value from its legacy oil and
gas operations. In light of the continuing civil war in South
Sudan, the Board took the view that it would be prudent to expedite
settlement in respect of the claims arising from the Group's legacy
oil interests in South Sudan and accordingly, as announced on 17
September 2014, a successful settlement was reached in respect of
such interests. Following the settlement, the Company and Group has
no further current economic interest in South Sudan.
Financial results
In order to achieve critical mass and a foundation for growth
and profitability in the future, our focus remains on expanding our
growth divisions - primarily our beef operations - and optimising
returns across all divisions. As shareholders will appreciate, it
is incumbent on the Board to maintain a continuous review of the
position regarding the cocoa operations, particularly in light of
the Ebola outbreak.
Even though we remain in the investment phases of both our beef
and cocoa operations, our investment strategy is beginning to be
reflected in our results. While revenue during the period decreased
to $13,797,000 (2013: $18,073,000) reflecting lower maize volumes
offset by increasing beef sales, the pre-tax loss on continuing
operations decreased by 13.9% to $5,627,000 (2013: $6,533,000). The
progress made in improving cost efficiency across all divisions,
the focus on margin improvement in our grain business and the
positive impact in our beef business from both the establishment of
retail units and the organic growth in our herd mitigated the loss
of margin arising from the lower sales in our grain division.
The net assets of the Group were $50,549,000 at the period end
and cash balances were US$6,994,000 (2013: $18,748,000) against a
current market cap of approximately $16,100,000. Subsequent to the
period end, we have received a cash injection of approximately
$5,600,000 through the settlement of certain claims relating to our
legacy oil and gas assets which, in combination with the platform
we now have in place, will allow us to continue with our
development plan.
Corporate review
The period under review saw the appointment of several key new
personnel to support the Group's growth. These hires included the
appointments of Mr Daniel Cassiano-Silva, a highly experienced
financial professional with a background in African focussed
publicly listed companies, as Finance Director and Mr Gert (George)
Naude, a highly experienced agricultural manager with a proven
background in large scale commercial agri-operations in Mozambique,
as Chief Operating Officer (Mozambique). Mr Naude replaced Mr Euan
Kay, who retired from day-to-day management but remains a
consultant to the Group in addition to providing senior level
guidance and support through his non-executive position on the
Board.
Outlook
The African agriculture market remains an area of exceptional
growth potential. While we are still in the development phase, the
Board is confident that the progress we have made to date has
created a strong and sustainable platform for our transition into
profitability.
I would like to conclude by thanking our team who have worked
tirelessly in delivering on our vision and assisting us in the
development of the business.
PH Edmonds
Chairman
27 October 2014
Operations review
Agriterra currently has three operational agricultural
divisions:
-- Beef, which conducts cattle ranching, feedlot, abattoir
operations and retail units through Mozbife Limitada
('Mozbife')
-- Cocoa, which manages the Group's cocoa farming activities
and, during the year under review, also managed the cocoa trading,
through the Tropical Farms group of companies ('TFL')
-- Grain, which operates maize purchasing and processing businesses through Desenvolvimento E Comercialização Agricola Limitada ('DECA') and Compagri Limitada ('Compagri')
Beef Operations (Mozambique)
Agriterra remains focussed on expanding its vertically
integrated "field to fork" beef operations which comprise three
ranches totalling 19,850 hectares, a feedlot facility with capacity
for up to 3,000 animals with an additional 1,050 hectares of land
available for cropping activities, a 4,000 head per month abattoir
and five retail units in Mozambique.
The Group's strategy is to increase value by virtue of being a
vertically integrated producer, supplementing our herd by local
cattle purchases, where necessary. Agriterra rear and breed beef
cattle at the Mavonde, Inhazonia and Dombe ranches, fatten at the
Vanduzi feedlot, and slaughter and butcher at the Chimoio abattoir,
which in turn supplies the retail units in Chimoio, Tete, Beira,
Manica and Moatize. Once fully established, this integrated
business approach will enable the Group to maximise revenues and
margins from the entire value chain.
We are well advanced in implementing our strategy for the Beef
division. Our feedlot, abattoir and butcheries are now generating
net positive cash flows and, with the irrigation programme underway
at our Mavonde and Inhazonia ranches, we expect our farms to start
contributing in the short to medium term. With our extensive
infrastructure and the capacity to scale up our operations in all
aspects of this division, we are now poised to capitalise on the
ever increasing demand for beef products, both domestically (in
Mozambique) and overseas.
The Ranches
The beef division has three ranches, being the 2,350 hectare
Mavonde ranch, the 2,500 hectare Inhazonia ranch and the 15,000
hectare Dombe ranch, all located in Central Mozambique. The total
herd across the ranches stood at approximately 6,400 head as at 31
May 2014, being a 30% increase over the 4,900 head on the ranches
as at 31 May 2013. The increase reflects the successful calving
during the year with 1,635 (2013: 1,281) animals born.
The ongoing expansion of the herd remains a key focus for the
Group in order to maximise the number of animals on our ranches and
yield a cash generative number of animals for slaughter each year.
Our ranches also provide a very high quality animal from which the
very best cuts can be obtained. Our animals are either pure
Beefmaster, premium quality imported animals, or local breeds which
we are cross breeding with our pedigree animals to rear larger
animals which are naturally acclimatised to conditions in
Mozambique.
To support the growth in the herd size, additional pivot
irrigation has been implemented at Mavonde to increase the
irrigated land by 195 hectares to 368 hectares, and at Inhazonia,
to increase the irrigated land by 88 hectares to 118 hectares. As
at the date of this report, all land clearing, pivot installation
and irrigation commissioning has been completed, with current
activities focussed on the final grass planting. In order to
provide greater flexibility in our feeding regimes throughout the
year, we are varying the grass types under the new pivots between
grass suitable for grazing and grass suitable for hay bailing. Our
experience with the different grass types will inform our future
use of the irrigated land to maximise the animal feed we produce
and therefore maximise the animals that each ranch can support.
Water for the irrigation systems is provided by our 48 billion
litre dam on the Mavonde ranch and the Nyadzonya river which runs
through the Inhazonia ranch.
We anticipate minimum stocking ratios of seven cows and seven
calves per hectare of irrigated land, although we hope this will
increase as the irrigated pastures mature. In accordance with our
plan, we expect to introduce animals onto the newly irrigated land
from December 2014, in anticipation of the early 2015 calving
season.
Once the newly irrigated pastures are established and the farms
are appropriately stocked, we expect to be able to carry a
sufficient number of animals on our ranches to generate a positive
cash return from the ranching operations measured on a standalone
basis. Once this platform is established, we can further expand our
irrigation programme on a scalable basis to support a ranch herd
well in excess of 10,000 head.
The Vanduzi Feedlot
The Vanduzi Feedlot has a 20 pen line with a potential rolling
capacity of approximately 3,000 head every 90 days. The feedlot
sources animals from our own ranches and from cattle purchased from
the surrounding areas. The feedlot is critical to our operation as
it allows us to produce a well finished, high quality animal for
slaughter ensuring premium grade meat is available to supply our
butcheries and wholesale operations.
By carefully regulating the quantity and mix of feed, we
maximise the weight gains attainable from our animals on a
profitable basis per animal. We now provide approximately 500
animals a month to the abattoir which makes the feedlot a net cash
generating operation.
In conjunction with the feeding pens, Vanduzi also has 1,050
hectares of land for pasture and production of feed. This helps to
keep feed costs down, provides certainty of feed supply and
maintains an integrated operation. Furthermore, the feedlot works
strategically with other companies in the Group, for example by
using bran, the by-product from the grain processing facilities, as
a feed supplement for the cattle.
The Chimoio Abattoir and Retail Units
The abattoir and retail units are important components in the
Group's vertically integrated business model, and enable the Group
to benefit from the full uplift in value from grass reared animals
on the ranches, to premium butchered beef products.
Since commencing operations in December 2012 slaughter rates at
the abattoir have consistently increased; 4,285 animals were
slaughtered in FY2014, nearly doubling the 2,145 animals
slaughtered (or sold live) during FY2013. Our current monthly run
rate is now approximately 450 animals. At this level of animals
slaughtered per month, the abattoir recovers its operating costs in
full from the sales of skin, offal, hooves and heads (the '5th
quarter') and is now making a net contribution to the cash
generation of the beef operations.
The abattoir has a monthly slaughter capacity of approximately
4,000 head. This spare capacity provides the Group with significant
flexibility to increase slaughter rates as the beef operations
expand.
To capitalise on the value uplift arising on the selling price
of butchered meat (when compared to carcasses), and to increase the
distribution channels for its products, the Group has established a
network of retail units in Chimoio, Tete, Manica and Beira which
opened in December 2012, February 2013, December 2013 and February
2014 respectively. In addition to these larger retail units, the
Group a further satellite unit at Moatize in Tete. The retail units
have performed well for the Group, underpinned by the strong
internal market demand for meat, and are already contributing a net
positive cash flow to the beef division. Whilst the implementation
of the planned retail expansion programme was delayed during the
period as a result of travel restrictions resulting from political
unrest in the region, as political stability has returned we are
now in position to recommence our retail expansion plans, primarily
to service the growth engendered by the significant natural
resource investment into North and North East Mozambique.
Revenue from the Group's abattoir and retail units during the
year was $4,081,000, an 83% increase on sales of $2,230,000 in the
year ended 31 May 2013. The Group's average monthly turnover from
all units, including the abattoir, is now approximately $500,000.
In order to continue our expansion, the Group's roll out of its
retail units is expected to continue in 2015, with sales growth
opportunities identified in the north, north-east and centre of the
country. In addition, the Group is focussed on advancing several
wholesale contracts directly through the abattoir, with large
international blue-chip clients which operate in the region. In
line with this, several significant tenders are underway which have
the ability to materially enhance turnover in the coming year.
Cocoa Plantation & Trading (Sierra Leone)
The Cocoa division's primary focus during the year was the
development and expansion of its existing 3,200 hectare cocoa
plantation, located 40km from Kenema in south-east Sierra Leone.
Subject to the acquisition of an additional block of approximately
1,600 hectares of land adjacent to the plantation, the Group's long
term plan for the cocoa plantation is to plant a total of 4,000
hectares, with the ultimate aim of producing a minimum of 8,000
tonnes of cocoa per annum, initially anticipated by 2020/2021. As
more fully explained below, the implementation of this plan has
been curtailed due to the well-publicised Ebola outbreak affecting
Western Africa, including Sierra Leone. Despite the recent
reduction in scale of operations in response to the Ebola outbreak,
the Group remains optimistic about the future development of the
cocoa division. With a projected cocoa bean deficit of up to one
million metric tonnes by 2020 driving prices upwards, the
fundamentals of the cocoa market remain strong. Subject to an
effective international response to the Ebola outbreak, the Group
is well positioned to obtain the necessary financing to bring the
cocoa assets into production in time to capitalise on this supply
shortage.
The planting season for cocoa in Sierra Leone runs between July
and October, with preparatory activities such as land clearing and
preparation, and seedling establishment in the nursery, undertaken
between November and June. In accordance with this schedule,
250,000 seedlings were planted on 200 hectares of cleared land
during the early part of the financial year. A further 300,000
plants were established in the nursery in anticipation of planting
a further 250 hectares during the early part of financial year
2015. Land clearing and preparation activities were also initiated
for this next phase of planting, including the purchase and
delivery of all necessary fertiliser.
Despite all reasonable efforts to continue with the
implementation of the planned planting schedule subsequent to the
period end, the Group's activities have been significantly impacted
by the Ebola outbreak. In addition to the significant restrictions
in movement in country causing a shortage of labour, the Board has
assessed that it is unsafe to pursue an expansion of the plantation
at this stage which could increase the risk of Ebola developing on
the plantation site and place staff at risk.
Accordingly, activities at the plantation have been curtailed to
a level sufficient to protect staff while maintaining the Group's
assets in country. In accordance with this plan, the Group is
operating with a reduced labour force to ensure that the hectares
planted to date are maintained, as is the plantation infrastructure
including warehousing, accommodation and equipment. The Group is
also rigidly enforcing general hygiene protocols to ensure staff
and visitors are not placed at unnecessary risk.
The nursery continues to house approximately 300,000 plants
which will now be used, if circumstances permit, to accelerate the
Group's local initiatives to increase the quality of the local
growers' stock. It is envisaged that this distribution programme
will be run in tandem with international agencies and companies
looking to expand the productivity of cocoa farmers in West Africa.
In addition, the Company continues to support the local communities
and Government representatives, providing assistance where
practicable as detailed in below.
This gradual phasing of the planting schedule, in conjunction
with appropriate agronomical technical expertise, remains critical
to the future development of the plantation. The modular planting
system allows the Group to perfect its planting activities under
controlled conditions, with each successive year of planting
building on the practical and technical lessons learnt. An area of
significant interest identified during the year is likely to be the
final assessment of whether part, or all, of the future planting
may now use hybrid plants from the Ivory Coast. These plants are
under technical review but early signs show they could both
increase the average yields to be obtained per hectare and also
accelerate the period to full yield.
In addition to the planting completed during the year and prior
to the Ebola outbreak, the Group further continued to develop the
plantation infrastructure through the construction of management
accommodation on site and an administration block, road
development, and expansion of the state of the art nursery from 1.7
to 2.2 hectares. Once the expansion of the nursery is completed, it
will be capable of housing 1,100,000 seedlings which is sufficient
to plant up to 1,000 hectares in any given year. In the longer
term, the nursery is also expected to support outgrower programmes
and facilitate the development of the cocoa plantation into a
centre of excellence for cocoa growing in Sierra Leone, an asset
which will be much needed when the country rebuilds following the
Ebola outbreak.
Further infrastructure development was completed at the Group's
2,000 square metre warehouse and processing-to-export facility on
the outskirts of Kenema which is now complete. This facility will
provide the Group with a key asset in the cocoa logistics chain,
connecting the up-country cocoa growing and buying infrastructure
with export markets. The warehouse is currently being utilised by
international aid agencies for food and aid storage in connection
with the relief efforts for the Ebola outbreak.
Turning to the cocoa trading business, the cocoa harvest for the
period under review was impacted by a poor harvest. Lower available
purchase volumes resulted in sales of 736 tonnes (2013: 1,200) of
cocoa beans. To address the losses arising in the previous
financial year, the Group completed a significant restructuring of
the operation, to concentrate on three main buying hubs in Kenema,
Kono and Kailahun, with outpost spokes (compared to prior year with
over 50 buying points). This streamlining delivered cost reductions
and a reduced loss of $1,029,000 compared to $1,569,000 in the
previous period. Despite the reduction in loss, the disappointing
financial performance and the significant impact of the Ebola
outbreak, led the Board to cease operations within the cocoa
trading business. The results of the cocoa trading operations are
presented as discontinued within the consolidated financial
statements.
Grain Processing (Mozambique)
The Group's maize operations are focussed on its 35,000 tonne
capacity facility in Chimoio in central Mozambique, and its 15,000
tonne capacity facility in Tete, in north-west Mozambique. The
established maize buying and processing business is focussed on
purchasing maize from local out-growers through a network of buying
stations, which is then processed and stored before being sold to
the retail market as maize meal, a key staple food in the region
and country.
The Group purchases maize directly from in excess of 250,000
local smallholder farmers at specific buying points, thereby
supporting economic activity in the relevant rural areas. Having
purchased the grain, it is transported back to purpose-built
storage and processing facilities where it is dried, fumigated,
prepared and processed into maize meal.
Maize purchases during the season were strong with approximately
32,000 tonnes of maize purchased (2012-2013 season: approximately
40,000). Maize milled however showed a reduction on prior year to
24,500 tonnes (2013: 46,600 tonnes) with maize meal sales at
approximately 18,700 tonnes (2013: 34,500 tonnes), resulting in
revenues decreasing year on year by $6,127,000 to $9,716,000 (2013:
$15,843,000).
In order to maximise returns and profitability in the grain
division, the Group's primary focus this period has been on
maximising the price and margins generated from our maize products.
As a result, the grain division's gross profit margin has increased
to 18.6% in 2014 from 13.6% in 2013. The improved margin and other
margin, cost and efficiency improvement measures, have however been
outweighed by the decrease in volumes resulting in in the Group
reporting a small increase in loss for the period from $456,000 in
2013 to $630,000 in 2014.
The decrease in volumes sold reflects in significant part the
recent political difficulties in Mozambique which created delays in
transporting maize products to certain parts of the country. The
political environment in Mozambique has improved considerably since
the Group's year end, and subsequently, the Board is optimistic
that sales and revenues will improve during the current year.
Additionally, the current buying season has been favourable, with
approximately 28,600 tonnes bought to date, at approximately $75
less per tonne than the previous period.
The Group is now focussing its efforts on developing additional
revenue streams within the Grain division in order to leverage its
infrastructure. Areas under review include additional maize based
products such as maize crisps, and additional agricultural
products.
Palm Oil Operations (Sierra Leone)
The Group controls a lease of approximately 45,000 hectares of
brownfield agricultural land suitable for palm oil production in
the Pujehun District in the Southern Province in Sierra Leone. The
Board continues to evaluate this property and its potential for
commercialisation. Further updates will be provided when
appropriate.
Consolidated income statement
For the year ended 31 May 2014
2014 2013
(represented - note 15)
Note US$000 US$000
--------- ------------------------
CONTINUING OPERATIONS
Revenue 5 13,797 18,073
Cost of sales (12,475) (15,151)
--------- ------------------------
Gross profit 1,322 2,922
Increase in value of biological assets 21 290 770
Operating expenses (8,338) (9,703)
Other income 226 124
Share of result of associates 19 - (5)
Operating loss 7 (6,500) (5,892)
Investment revenues 11 146 43
Other gains and losses 12 936 -
Finance costs 13 (209) (684)
Loss before taxation (5,627) (6,533)
Taxation 14 (25) (13)
--------- ------------------------
Loss for the year from continuing operations (5,652) (6,546)
DISCONTINUED OPERATIONS
(Loss) / profit for the year from discontinued operations 15 (2,364) 27,485
(Loss) / profit for the year attributable to owners of the Company (8,016) 20,939
US cents US cents
(LOSS) / EARNINGS PER SHARE
Basic and diluted loss per share from continuing operations 16 (0.53) (0.62)
========= ========================
Basic (loss) / earnings per share from continuing and discontinued
operations 16 (0.76) 1.98
========= ========================
Diluted (loss) / earnings per share from continuing and discontinued
operations 16 (0.76) 1.90
========= ========================
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
For the year ended 31 May 2014
2014 2013
US$000 US$000
-------- --------
(Loss) / profit for the year (8,016) 20,939
-------- --------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (1,612) (2,492)
-------- --------
Other comprehensive income for the year (1,612) (2,492)
-------- --------
Total comprehensive income for the year attributable to owners of the Company (9,628) 18,447
======== ========
Consolidated statement of financial position
As at 31 May 2014
2014 2013
Note US$000 US$000
---------- ---------
Non-current assets
Goodwill and other intangible assets 17 576 697
Property, plant and equipment 18 36,268 33,241
Interests in associates 19 4 4
Investments in quoted companies 20 1,225 4
Biological assets 21 3,071 2,060
---------- ---------
41,144 36,006
---------- ---------
Current assets
Biological assets 21 1,201 1,947
Inventories 22 4,900 5,456
Trade and other receivables 23 1,148 3,378
Cash and cash equivalents 24 6,994 18,748
---------- ---------
14,243 29,529
---------- ---------
Total assets 55,387 65,535
---------- ---------
Current liabilities
Borrowings 25 (2,668) (3,091)
Trade and other payables 26 (2,170) (2,416)
---------- ---------
(4,838) (5,507)
---------- ---------
Net current assets 9,405 24,022
---------- ---------
Net assets 50,549 60,028
---------- ---------
Share capital 28 1,960 1,960
Share premium 148,622 148,622
Shares to be issued 29.1 2,940 2,940
Share based payment reserve 1,859 1,710
Translation reserve 29.2 (3,808) (2,196)
Accumulated losses (101,024) (93,008)
---------- ---------
Equity attributable to equity holders of the parent 50,549 60,028
---------- ---------
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 27 October 2014.
Signed on behalf of the Board of Directors by:
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 May 2014
Share
based
Share Share Shares to payment Translation Accumulated Total
capital premium be issued reserve reserve losses equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- ----------- ----------- ---------- ------------ ------------ --------
Balance at 1
June 2012 1,957 148,530 2,940 1,620 296 (113,947) 41,396
Profit for the
year - - - - - 20,939 20,939
Other
comprehensive
income:
Exchange
translation
loss on
foreign
operations - - - - (2,492) - (2,492)
--------- ----------- ----------- ---------- ------------ ------------ --------
Total
comprehensive
income for the
year - - - - (2,492) 20,939 18,447
Share-based
payments 30 - - - 90 - - 90
Issue of share
capital 28 3 92 - - - - 95
Balance at 31
May 2013 1,960 148,622 2,940 1,710 (2,196) (93,008) 60,028
Loss for the
year - - - - - (8,016) (8,016)
Other
comprehensive
income:
Exchange
translation
loss on
foreign
operations - - - - (1,612) - (1,612)
--------- ----------- ----------- ---------- ------------ ------------ --------
Total
comprehensive
income for the
year - - - - (1,612) (8,016) (9,628)
Share-based
payments 30 - - - 149 - - 149
Balance at 31
May 2014 1,960 148,622 2,940 1,859 (3,808) (101,024) 50,549
========= =========== =========== ========== ============ ============ ========
Consolidated cash flow statement
For the year ended 31 May 2014
2014 2013
(represented - note 15)
Note US$000 US$000
--------- ------------------------
Cash flows from operating activities
Loss before tax from continuing operations 6.1 (5,627) (6,533)
Adjustments for:
Depreciation 18 1,766 1,840
(Profit) / loss on disposal of property, plant and equipment (149) 1
Share based payment expense 149 90
Foreign exchange (gain) / loss (52) 529
Increase in value of biological assets 21 (290) (770)
Finance costs 13 209 684
Investment revenues 11 (146) (43)
Increase in fair value of quoted investments 20 (936) -
Operating cash flows before movements in working capital (5,076) (4,202)
Decrease in inventories 197 895
Decrease in trade and other receivables 971 1,032
(Decrease) / increase in trade and other payables (173) 315
--------- ------------------------
Cash used in operating activities by continuing operations (4,081) (1,960)
Corporation tax paid (25) (125)
Finance costs (209) (684)
Interest received 146 43
Net cash used in operating activities by continuing operations (4,169) (2,726)
--------- ------------------------
Net cash used in operating activities by discontinued operations (879) (907)
--------- ------------------------
Net cash used in operating activities (5,048) (3,633)
--------- ------------------------
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment 202 14
Acquisition of property, plant and equipment 18 (5,935) (10,505)
Purchase of investment in quoted companies 20 (285) (4)
Increase in biological assets 21 (219) (773)
Net cash used in investing activities by continuing operations (6,237) (11,268)
--------- ------------------------
Net cash from investing activities by discontinued operations - 27,110
--------- ------------------------
Net cash (used in) / from investing activities (6,237) 15,842
--------- ------------------------
Cash flow from financing activities
Net draw down of overdraft 1,129 1,468
Draw down of loans - 6,000
Repayment of loans 25 (1,500) (4,500)
Net cash (used in) / from financing activities from continuing operations (371) 2,968
--------- ------------------------
Net cash used in financing activities by discontinued operations - -
--------- ------------------------
Net cash (used in) / from financing activities (371) 2,968
--------- ------------------------
Net (decrease) / increase in cash and cash equivalents (11,656) 15,177
Effect of exchange rates on cash and cash equivalents (98) 18
--------- ------------------------
Cash and cash equivalents at beginning of the year 18,748 3,553
--------- ------------------------
Cash and cash equivalents at end of the year 6,994 18,748
========= ========================
Notes to the consolidated financial statements
1. GeNERAL INFORMATION
Agriterra is incorporated and domiciled in Guernsey, the Channel
Islands, with registered number 42643. A list of the significant
investments in subsidiaries and associate companies held directly
and indirectly by the Company during the period and at the period
end, including the name, country of incorporation, operation and
ownership interest is given in note 31.
The reporting currency for the Company and Group is the US
Dollar ('$' or 'US$') as it most appropriately reflects the Group's
business activities in the agricultural sector in Africa and
therefore the Group's financial position and financial
performance.
The financial statements have been prepared in accordance with
IFRSs as adopted by the EU.
2. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
1.
2.1. New Standards and Interpretations adopted with no
significant effect on the financial statements
The following new and revised Standards and Interpretations have
been adopted in these financial statements. Their adoption has not
had any significant impact on the amounts reported in these
financial statements, but may impact the accounting for future
transactions and arrangements.
IFRS 7 (amended) Financial Instruments: Disclosures - Amendments; Disclosures - Transfers of Financial Assets
(effective 1 January 2013)
IFRS 13 Fair value measurement (effective 1 January 2013)
IAS 19 (revised) Employee Benefits (effective 1 January 2013)
2.2. New Standards and Interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations are in issue but not yet
effective (and in some cases had not yet been adopted by the
EU):
IFRS 9 Financial Instruments: Classification (effective for annual periods
beginning on or after
1 January 2018)
IFRS 10 Consolidated Financial Statements (effective for annual periods
beginning on or after 1 January
2014)
IFRS 11 Joint Arrangements (effective for annual periods beginning on or after
1 January 2014)
IFRS 12 Disclosure of Interests in Other Entities (effective for annual periods
beginning on or after
1 January 2014)
IFRS 14 Regulatory deferral accounts (effective for annual periods beginning on
or after 1 January
2016)
IFRS 15 Revenue from contracts with customers (effective for annual periods
beginning on or after
1 January 2017)
IAS 16 Amendments bringing bearer plants into the scope of IAS 16 (effective
for annual periods beginning
on or after 1 January 2016)
IAS 27 Separate Financial Statements (as amended 2011) (effective for annual
periods beginning on
or after 1 January 2014)
IAS 28 Investments in Associates and Joint Ventures (as amended 2011)
(effective for annual periods
beginning on or after 1 January 2014)
IAS 32 Financial Instruments: Presentation - Amendment; Offsetting Financial
Assets and Financial
Liabilities (effective for annual periods beginning on or after 1
January 2014).
IAS 41 Amendments bringing bearer plants into the scope of IAS 16 (effective
for annual periods beginning
on or after 1 January 2016)
IFRIC 21 Levies (effective for annual periods beginning on or after 1 January
2014)
September 2014 Annual Improvements to IFRSs Effective for annual periods beginning on or after 1 January 2016
The Directors do not anticipate that the adoption of these
Standards and Interpretations will have a material impact on the
Group's financial statements in the period of initial
application.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared on a historical cost
basis, except for certain financial instruments and share based
payments. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets acquired. The
principal accounting policies adopted are set out below in this
note.
3.1. Going concern
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and Group
have adequate resources to continue in operational existence for
the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements.
Further detail is provided in note 4.1 to the consolidated
financial statements.
3.2. 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 May. Control is achieved when the
Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its
activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. The consolidated financial statements include the Group's
share of the total recognised income and expenses of associates on
an equity accounted basis, from the date that significant influence
commences until the date that significant influence ceases. When
the Group's share of losses exceeds its interest in an associate,
the Group's carrying amount is reduced to nil and recognition of
further losses is discontinued except to the extent that the Group
has a binding obligation to make payments on behalf of an
associate.
Intra-group transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
3.3. Foreign currency
The individual financial statements of each company in the Group
are prepared in the currency of the primary economic environment in
which it operates (its 'functional currency'). The consolidated
financial statements are presented in US Dollars which is also the
functional currency of the Company.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the date of the transaction. At
each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not
retranslated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's operations are translated
at exchange rates prevailing at the balance sheet date. Income and
expense items are translated at the average exchange rates for the
period, unless exchange rates fluctuate significantly during the
period, in which case exchange rates at the date of transactions
are used. Exchange differences arising from the translation of the
net investment in foreign operations and overseas branches are
recognised in other comprehensive income and accumulated in equity
in the translation reserve. Such translation differences are
recognised as income or expense in the year in which the operation
or branch is disposed of.
The following are the material exchange rates applied by the
Group:
Average Rate Closing Rate
2014 2013 2014 2013
------- ------ ------- ------
Mozambican Meticais: US$ 30.23 29.20 31.00 29.17
Sierra Leone Leones: US$ 4,284 4,324 4,290 4,278
3.4. Operating segments
The Chief Operating Decision Maker is the Group Executive
Committee (the 'ExCom'), comprising the Chairman, the Chief
Executive and the Finance Director. The ExCom reviews the Group's
internal reporting in order to assess performance of the business.
Management has determined the operating segments based on the
reports reviewed by the ExCom which consider the activities by
nature of business.
3.5. Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable for goods and services provided in the
normal course of business, net of discounts, value added taxes and
other sales related taxes.
Sales of goods are recognised when goods are delivered and title
has passed. Delivery occurs when the products have arrived at the
specified location, and the risks and rewards of ownership have
been transferred to the customer.
3.6. Operating loss
Operating loss is stated before investment revenues, other gains
and losses, finance costs and taxation.
3.7. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. The Group did not incur any borrowing costs
in respect of qualifying assets in the period.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
3.8. Share based payments
The Company issues equity-settled share-based payments to
certain employees of the Group. These payments are measured at fair
value (excluding the effect of non-market based vesting conditions)
at the date of grant and the value is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of the
shares that will eventually vest and adjusted for non-market based
vesting conditions.
Fair value is measured by use of the Black Scholes model. The
expected life used in the model is adjusted, based on management's
best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
3.9. Employee benefits
3.9.1. Short term employee benefits
Short-term employee benefits include salaries and wages,
short-term compensated absences and bonus payments. The Group
recognises a liability and corresponding expense for short-term
employee benefits when an employee has rendered services that
entitle him / her to the benefit.
3.9.2. Post-employment benefits
The Group does not contribute to any defined retirement plan for
its employees, either defined contribution or defined benefit.
Social security payments to state schemes are charged to profit and
loss as the employee has rendered services.
3.10. Leases
Leases that transfer substantially all the risks and reward of
ownership are classified as finance leases. All other leases are
classified as operating leases. As at 31 May 2014 the Group does
not have any finance leases. During the periods presented in these
financial statements, the Group was counterparty to certain
operating lease contracts. Rentals payable under operating leases
are charged to income on a straight-line basis over the term of the
relevant lease.
3.11. Taxation
The Company is resident for taxation purposes in Guernsey and
its income is subject to income tax, presently at a rate of zero
per cent per annum. The income of overseas subsidiaries is subject
to tax at the prevailing rate in each jurisdiction.
The income tax expense for the period comprises current and
deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised in other
comprehensive income or directly in equity, when tax is recognised
in other comprehensive income or directly in equity as appropriate.
Taxable profit differs from accounting profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
Current tax expense is the expected tax payable on the taxable
income for the year. It is calculated on the basis of the tax laws
and rates enacted or substantively enacted at the balance sheet
date, and includes any adjustment to tax payable in respect of
previous years. Deferred tax is calculated using the balance sheet
liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
assets are recognised to the extent that it is probable that
taxable profit will be available against which the asset can be
utilised. This requires judgements to be made in respect of the
availability of future taxable income.
The Group's deferred tax assets and liabilities are calculated
using tax rates that are expected to apply in the period when the
liability is settled or the asset realised based on tax rates that
have been enacted or substantively enacted by the reporting
date.
Deferred income tax assets and liabilities are offset only when
there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax
assets and liabilities relate to income taxes levied by the same
taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances
on a net basis.
No deferred tax asset or liability is recognised in respect of
temporary differences associated with investments in subsidiaries,
branches and joint ventures where the Group is able to control the
timing of reversal of the temporary differences and it is probable
that the temporary differences will not reverse in the foreseeable
future.
3.12. Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of acquisition is measured at the
aggregate of the fair values, at the date of acquisition, of assets
given, liabilities incurred or assumed and equity instruments
issued by the Group in exchange for control of the acquire.
Acquisition related costs are recognised in profit and loss as
incurred.
The assets, liabilities and contingent liabilities of the
acquiree are measured at their fair value at the date of
acquisition. Any excess of the fair value of the consideration paid
over the fair value of the identifiable net assets acquired is
recognised as goodwill. If the fair value of the consideration is
less than the fair value of the identifiable net assets acquired,
the difference is recognised directly in the income statement.
3.13. Goodwill
Goodwill arising on the acquisition of subsidiaries is
recognised as an asset.
Goodwill is reviewed for impairment at least annually. Any
impairment is recognised immediately in profit or loss and is not
subsequently reversed. For the purpose of impairment testing,
goodwill is allocated to cash generating units of the acquirer
which represent the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. On disposal of a
subsidiary, associate or joint venture, the attributable amount of
goodwill is included in the determination of the profit or loss on
disposal.
3.14. Other intangible assets - concessions
All costs incurred prior to obtaining the legal right to a
concession are written off as incurred. Costs arising following the
acquisition of a concession are carried at historical costs less
impairment losses recognised on a project-by-project basis, pending
determination of the technical feasibility commercial viability of
the project. Costs incurred include technical expenses and
allocated administrative overheads. Intangible assets arising on
consolidation are stated at fair value less any impairment losses
recognised.
3.15. Property, plant and equipment
All items of property, plant and equipment are stated at
historical cost less accumulated depreciation (see below) and
impairment. Historical cost includes expenditure that is directly
attributable to the acquisition. Subsequent costs are included in
the asset's carrying value when it is considered probable that
future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably.
Assets in the course of construction for production, rental or
administrative purposes are carried at cost, less any identified
impairment loss. Cost includes professional fees and associated
administrative expenses.
Depreciation is charged to the income statement on a
straight-line basis over the estimated useful lives of each item,
as follows:
Land and buildings:
Land Nil
Buildings and leasehold improvements 5% - 25%
Plant and machinery 7% - 25%
Motor vehicles 20% - 25%
Aviation 20%
Other assets 10% - 33%
Assets under construction Nil
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date. Gains and
losses on disposals are determined by comparing proceeds received
with the carrying amount of the asset immediately prior to disposal
and are included in profit and loss.
3.16. Impairment of property, plant and equipment and intangible assets excluding goodwill.
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets (other than goodwill
which is assessed in accordance with the policy described above) to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit and loss because the Group does not record any assets at a
revalued amount.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit and
loss.
3.17. Biological assets
Consumer biological assets, being the beef cattle herd, are
measured in accordance with IAS 41, 'Agriculture' at fair value
less costs to sell, with gains and losses in the measurement to
fair value recorded in profit and loss. The herd comprises breeding
and non-breeding cattle. The breeding cattle comprise bulls, cows
and heifers. As these are expected to be held for more than one
year, breeding cattle are classified as non-current assets. The
non-breeding cattle comprise animals (principally steers) that will
be grown and sold for slaughter and are classified as current
assets.
Cattle are recorded as assets at the year end and the fair
valueis determined by the size of the herd and market prices at the
reporting date.
The cost of forage is charged to the income statement over the
period it is consumed.
3.18. Inventories
Inventories are stated at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion
and selling expenses. The cost of inventories is based on the
weighted average principle and includes expenditure incurred in
acquiring the inventories and bringing them to their existing
location and condition.
3.19. Provisions
The Group recognises a provision when it has a present legal or
constructive obligation as a result of a past event, and it is
probable that the Group will be required to settle the obligation
and the amount concerned can be estimated reliably. Provisions are
measured based on the best estimate of the expenditure required to
settle the present obligation at the reporting date. Where the
effect of the time value of money is material, the amount of the
provision is discounted to present value using a pre-tax rate that
reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. The
increase in the amount of the provision as a result of the passage
of time is recorded in profit or loss for the year.
3.20. Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
3.20.1. Financial assets
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except
for those financial assets classified as at fair value through
profit and loss ('FVTPL'), which are initially measured at fair
value.
Financial assets are classified into the following specified
categories: financial assets at 'FVTPL', 'held-to-maturity'
investments, 'available-for-sale' financial assets and 'loans and
receivables'. The classification depends on the nature and purpose
of the financial asset and is determined at the time of initial
recognition. The Company and Group currently have financial assets
in the category of 'loans and receivables' and FVTPL.
3.20.1.1. Loans and receivables
Trade receivables, loans receivable, bank balances, cash in hand
and other receivables that have fixed or determinable payments that
are not quoted in an active market are classified as 'loans and
receivables'. Loans and receivables are measured at amortised cost
using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
The effective interest method is a method of calculating the
amortised cost of a financial instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees paid or received that form an integral part of
the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the instrument, or,
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
3.20.1.2. Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial
asset is either held for trading or is designated as at FVTPL upon
initial recognition. The Group holds certain investments in quoted
companies which are designated as held for trading. Financial
assets at FVTPL are stated at fair value, with any gains and losses
arising on re-measurement recognised in profit or loss. The net
gain or loss incorporates any dividends, interest earned, or
foreign exchange gains and losses on the financial asset and is
included in the 'Other gains and losses' line item in the income
statement. Fair value is determined in the manner described in note
20.
3.20.1.3. Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each balance sheet date. Financial
assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows
of the investment have been affected.
For loans and receivables carried at amortised cost, the amount
of the impairment is the differences between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced through
the use of an allowance account. When a financial asset is
considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off
are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or
loss.
If in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit and loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
3.20.1.4. Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
3.20.2. Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
3.20.2.1. Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
3.20.2.2. Financial liabilities
Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'. The Group
only has financial liabilities in the category of other financial
liabilities.
3.20.2.2.1. Other financial liabilities
Other financial liabilities are initially measured at fair
value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
3.20.2.2.2. Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
3.20.3. Derivative financial instruments
Derivative financial instruments are initially recognised at
fair value at the date a derivative contract is entered into and
are subsequently remeasured to their fair value at each balance
sheet date. The resultant gain or loss is recognised in profit or
loss. The Group did not have any derivative instruments in any
period presented.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies which are
described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The effect on the financial statements of changes in estimates in
future periods could be material.
4.1. Going concern
The Group has prepared forecasts for the Group's ongoing
businesses covering the period of at least 12 months from the date
of approval of these financial statements. These forecasts are
based on assumptions including, inter alia, that there are no
significant disruptions to the supply of maize or cattle to meet
its projected sales volumes and take into account the investment in
the beef herd, cocoa plantation, other working capital and
additional property plant and equipment that are expected to be
required.
The Directors believe that with existing resources, the Group
and Company is well placed to manage its business risks
successfully despite the current uncertain economic outlook. The
Directors have a reasonable expectation that the Group and Company
have adequate resources to continue in operational existence for
the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing these financial
statements.
4.2. Impairments
Impairment reviews for non-current assets are carried out at
each balance sheet date in accordance with IAS 36, Impairment of
Assets. Where there are indicators of impairment, the net book
value of the cash generating unit is compared with the associated
fair value. The impairment review is sensitive to various
assumptions, including the expected sales forecasts, cost
assumptions, capital requirements, and discount rates among
others.
On 6 January 2009, the shareholders approved the adoption of the
investing strategy to acquire or invest in businesses or projects
operating in the agricultural and associated civil engineering
industries in Southern Africa. Concurrently, the Directors
suspended exploration activities in the Group's oil and gas
operations and reduced expenditure to the minimum required in order
to retain exploration licenses. Consequently the exploration and
evaluation and other related intangible assets were fully impaired.
The provision for impairment is written back to profit and loss
within 'Discontinued operations' upon receipt of funds. Subsequent
to the period end and as more fully described in note 33, the
Company and Group reached full and final settlement with respect to
ongoing claims arising from its legacy oil interests in the
Republic of South Sudan realising GBP3,412,000 (approximately
$5,600,000) in cash which has been recognised in the financial year
ended 31 May 2015.
4.3. Biological assets
Cattle are accounted for as biological assets and measured at
their fair value at each balance sheet date. Fair value is based on
the estimated market value for cattle of a similar age and breed,
less the estimated costs to bring them to market. Changes in any
estimates could lead to recognition of significant fair value
changes in the consolidated income statement. At 31 May 2014 the
value of the breeding herd disclosed as a non-current asset was
$3,071,000 (2013: $2,060,000). The value of the herd held for
slaughter disclosed as a current asset was $1,201,000 (2013:
$1,947,000).
4.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax ('IVA') operates in a similar manner
to UK Value Added Tax ('VAT'). The Group is exempt from IVA on its
sales of Maize under the terms of Mozambique tax law. The Group is
able to recover input sales tax on substantially all of the
purchases of the Grain division. The Group is always therefore in a
net recovery position of IVA in respect of its Grain operations. To
date the Group has not succeeded in recovering IVA from the
Mozambique Government. Due to the significant uncertainty over the
recoverability of these IVA balances, the Group has provided in
full against the assets as at 31 May 2013 and 31 May 2014.
As at 31 May 2014, the gross and net IVA recoverable assets are
respectively $1,345,000 (2013: $1,310,000) and $nil (2013: $nil) at
the US$ to Metical exchange rate of 31.00 (2013: 29.17) at that
date. The Group is now preparing all necessary documentation to
submit its IVA re-imbursement claims and, while the Group is
optimistic that substantially all of the gross IVA asset will be
recovered, the timing of recovery remains uncertain due to factors
outside of the control of the Group, including (1) the procedures
in process / to be undertaken by the Mozambique Tax Authority to
validate the Group's IVA claims and the timing of those procedures;
and (2) the Mozambique Government's budgeted amounts for annual
repayment of IVA and the inclusion of the Group's repayments in
those budgeted amounts. Due to the above uncertainties, the IVA
recoverable asset is fully provided against (refer to note 23).
5. Revenue
An analysis of the Group's revenue is as follows:
2014 2013
(represented - note 15)
US$000 US$000
------ -----------------------
Continuing operations
Sales of goods 13,797 18,073
Investment revenues (note 11) 146 43
------ -----------------------
13,943 18,116
Discontinued operations
Sales of goods (note 15) 1,907 3,140
------ -----------------------
15,850 21,256
====== =======================
6. Segment reporting
As set out in the operating review, the Directors consider that
the Group's operating activities comprise the segments of Grain,
Beef and Cocoa, all undertaken in Africa. In addition, the Group
has certain other unallocated expenditure, assets and liabilities,
either located in Africa or held as support for the Africa
operations.
6.1. Segment revenue and results
The following is an analysis of the Group's revenue and results
by operating segment:
Year ending 31 May 2014 Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- -------- -------- ------------- -------------- -------------- --------
Revenue
External sales(2) 9,716 4,081 1,907 - (1,907) - 13,797
Inter-segment sales(1) 412 - - - - (412) -
------- -------- -------- ------------- -------------- -------------- --------
10,128 4,081 1,907 - (1,907) (412) 13,797
------- -------- -------- ------------- -------------- -------------- --------
Segment results
- Operating loss (421) (3,436) (1,028) (2,456) 841 - (6,500)
- Interest (expense) / income (193) 2 (1) 128 1 - (63)
- Other gains and losses - - - 936 - - 936
------- -------- -------- ------------- -------------- -------------- --------
Loss before tax (614) (3,434) (1,029) (1,392) 842 - (5,627)
------- -------- -------- ------------- -------------- -------------- --------
Income tax (16) (9) - - - - (25)
------- -------- -------- ------------- -------------- -------------- --------
Loss for the period from
continuing operations (630) (3,443) (1,029) (1,392) 842 - (5,652)
======= ======== ======== ============= ============== ============== ========
Year ending 31 May 2013 Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
(represented - note 15)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- -------- -------- ------------- -------------- -------------- --------
Revenue
External sales(2) 15,843 2,230 3,140 - (3,140) - 18,073
Inter-segment sales(1) 470 - - - - (470) -
------- -------- -------- ------------- -------------- -------------- --------
16,313 2,230 3,140 - (3,140) (470) 18,073
------- -------- -------- ------------- -------------- -------------- --------
Segment results
- Operating loss (108) (2,639) (1,564) (2,961) 1,380 - (5,892)
- Interest (expense) / income (335) 2 (5) (308) 5 - (641)
Loss before tax (443) (2,637) (1,569) (3,269) 1,385 - (6,533)
------- -------- -------- ------------- -------------- -------------- --------
Income tax (13) - - - - - (13)
------- -------- -------- ------------- -------------- -------------- --------
Loss for the period from
continuing operations (456) (2,637) (1,569) (3,269) 1,385 - (6,546)
======= ======== ======== ============= ============== ============== ========
(1) Inter-segment sales are charged at prevailing market
prices.
(2) Revenue represents sales to external customers and is
recorded in the country of domicile of the group company
making the sale. Sales from the Grain and Beef divisions
are principally for supply to the Mozambican market.
Sales from the Cocoa division are supplied to the world
market.
The segment items included in the consolidated income statement
for the year are as follows:
Year ending 31 May 2014 Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- -------------- -------------- -------
Depreciation 504 1,124 133 138 (133) - 1,766
======= ======= ======= ============= ============== ============== =======
Year ending 31 May 2013 Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
(represented - note 15)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- -------------- -------------- -------
Depreciation 767 932 369 141 (369) - 1,840
======= ======= ======= ============= ============== ============== =======
6.2. Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and
equipment, inventories and trade and other receivables and cash and
cash equivalents. Segment liabilities comprise operating
liabilities, including overdraft financing facilities in the Grain
segment.
Capital expenditure comprises of additions to property, plant
and equipment and intangibles.
The segment assets and liabilities at 31 May 2014 and capital
expenditure for the year then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
-------- ------- ------- ------------ --------
Assets 13,440 19,269 8,728 13,950 55,387
Liabilities (2,775) (442) (334) (1,287) (4,838)
Capital expenditure 409 1,203 4,048 746 6,406
======== ======= ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 41,437 3,551
Unallocated:
Property, plant and equipment 6,716 -
Investments 1,229 -
Other receivables 161 -
Cash 5,844 -
Trade payables - 540
Accruals and deferred income - 747
Total 55,387 4,838
------- ------------
The segment assets and liabilities at 31 May 2013 and capital
expenditure for the year then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
-------- ------- ------- ------------ --------
Assets 14,935 18,434 5,750 26,416 65,535
Liabilities (1,928) (407) (15) (3,157) (5,507)
Capital expenditure 466 6,174 4,162 45 10,847
======== ======= ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 39,119 2,350
Discontinued activities 226 606
Unallocated:
Property, plant and equipment 6,232 -
Investments 8 -
Other receivables 2,175 -
Cash 17,775 -
Trade payables - 709
Accruals and deferred income - 342
Loan note - 1,500
------- ------------
Total 65,535 5,507
======= ============
Unallocated property, plant and equipment includes $5,880,000
(2013: $5,880,000) in respect of the lease over 45,000 hectares of
brownfield land suitable for Palm oil production and $837,000
(2013: $317,000) of Aviation assets.
6.3. Significant customers
In the year ended 31 May 2014 one of the Cocoa division's
customers generated $1,884,000 of revenue being 12% of Group
revenue (2013: $2,911,000 being 14% of Group revenue). The customer
related to the Cocoa trading operations which have been
discontinued in the period (refer to note 15.2).
7. Operating loss
Operating loss has been arrived at after charging /
(crediting):
2014 2013
(represented - note 15)
US000 US$000
------ ------------------------
Depreciation of property, plant and equipment 1,766 1,840
(Profit) / loss on disposal of property, plant and equipment (149) 1
Net foreign exchange loss (52) 3
Staff costs (see note 9) 4,581 4,219
====== ========================
8. Auditors Remuneration
Amounts payable to Baker Tilly UK Audit LLP and their associates
in respect of audit services are as follows:
2014 2013
US$000 US$000
------------ ------
Fees payable to the Company's auditor for the audit of the Company's accounts 132 149
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries 58 75
------------ ------
Total audit fees 190 224
------------ ------
Other than as disclosed above, the Company's auditor and their
associates have not provided additional services to the Group.
9. Staff costs
The average monthly number of employees (including executive
Directors) employed by the Group for the year was as follows:
2014 2013
Number Number
------- -------
Office and Management 61 52
Operational 910 980
------- -------
971 1,032
======= =======
Of which relating to:
Continuing operations 900 942
Discontinued operations 71 90
--- -----
971 1,032
=== =====
Their aggregate remuneration comprised:
2014 2013
US$000 US$000
------- -------
Wages and salaries 5,429 5,212
Social security costs 94 84
Share based payment charge 149 90
------- -------
5,672 5,386
Less: capitalised and included in assets under construction (685) (881)
------- -------
Amount charged to profit and loss 4,987 4,505
======= =======
Of which relating to:
Continuing operations 4,581 4,219
Discontinued operations 406 286
----- -----
4,987 4,505
===== =====
10. REMUNERATION OF DIRECTORS
Year ended 31 May 2014 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
--------- -------- -------------------- --------
PH Edmonds 165 - - 165
AS Groves 162 - - 162
DL Cassiano-Silva 134 42 - 176
EA Kay 154 - 24 178
MN Pelham - - - -
615 42 24 681
========= ======== ==================== ========
Year ended 31 May 2013 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
--------- -------- -------------------- --------
PH Edmonds 78 250 - 328
AS Groves 156 250 - 406
EA Kay 174 78 24 276
MN Pelham - 280 - 280
--------- -------- -------------------- --------
408 858 24 1,290
========= ======== ==================== ========
11. Investment revenues
2014 2013
US$000 US$000
------- -------
Interest revenues:
Bank deposits 58 43
Other loans and receivables 88 -
Total interest revenues 146 43
------- -------
All investment revenues are earned on financial assets
classified as loans and receivables (including cash and bank
balances).
12. Other gains and losses
2014 2013
US$000 US$000
------- -------
Change in fair value of quoted investments designated as at FVTPL at initial recognition (note
20) 936 -
======= =======
13. Finance costs
2014 2013
(represented - note 15)
US$000 US$000
------- ------------------------
Interest expense:
Bank borrowings (197) (324)
Loan notes (12) (160)
Facility fees - (200)
Total finance expense (209) (684)
======= ========================
14. Taxation
2014 2013
(represented - note 15)
US$000 US$000
-------- ------------------------
Loss before tax from continuing activities: (5,627) (6,533)
-------- ------------------------
Tax at the Mozambican corporation tax rate of 32% (2012:32%) (1,801) (2,091)
Tax effect of expenses that are not deductible in determining taxable profit 73 75
Tax effect of losses not allowable 432 1,308
Tax effect of losses not recognised in overseas subsidiaries (net of effect of
different rates) 1,296 721
Statutory taxation payments irrespective of income 25 -
Tax expense 25 13
======== ========================
The tax reconciliation has been prepared using a 32% tax rate,
the corporate income tax rate in Mozambique, as this is where the
Group's principal assets of its continuing operations are
located.
The Group has recognised a tax charge of $1,000,000 (2013:
credit of $1,000,000) in respect of disposal of its Ethiopian oil
and gas interests, reported within discontinued operations.
The Group has operations in a number of overseas jurisdictions
where it has incurred taxable losses which may be available for
offset against future taxable profits amounting to approximately
$14,570,000 (31 May 2013: $13,611,000). In addition, the Group has
further deductible timing differences amounting to approximately
$6,513,000 (31 May 2013: $2,964,000). No deferred tax asset has
been recognised for these tax losses and other deductible timing
differences as the requirements of IAS 12, 'Income taxes', have not
been met.
The Company is resident for taxation purposes in Guernsey and
its income is subject to Guernsey income tax, presently at a rate
of zero percent. per annum (2013: zero percent. per annum). No tax
is payable for the year due to losses incurred. Deferred tax has
not been provided for, as brought forward tax losses are not
recoverable under the Income Tax (Zero 10) (Guernsey) Law, 2007 (as
amended).
15. Discontinued operations
The (loss) / profit after tax arising on discontinued operations
during the period is analysed by business operation as follows:
2014 2013
(represented - note 15)
US$000 US$000
-------- ------------------------
Oil and gas activities (1,378) 29,380
Cocoa trading activities (986) (1,385)
Other - (510)
-------- ------------------------
Net (loss) / profit after tax attributable to discontinued operations
(attributable to owners of the Company) (2,364) 27,485
======== ========================
15.1. Oil and gas
On 6 January 2009, the Shareholders approved the adoption of the
investing strategy to acquire or invest in businesses or projects
operating in the agricultural and associated civil engineering
industries in Southern Africa. At the same time the Group suspended
all exploration activities and reduced expenditure to the minimum
required in order to retain exploration licenses and extract
potential value for Shareholders. Consequently the oil and gas
activities were reclassified as a discontinued operation.
In the financial year ended 31 May 2013, on 17 January 2013, the
Group completed the disposal of its oil and gas interests in
Ethiopia, realising a gain before tax of $40,380,000. After
deduction of tax due on this gain of $12,000,000 net of an expected
tax rebate of $1,000,000, the after tax profit realised was
$29,380,000. This gain was written back against the impairment
provision made in prior years. During the year ended 31 May 2014
and due to uncertainties on the timing and amount of the tax rebate
to be recovered, the Group has provided against the $1,000,000
expected tax rebate.
During the year ended 31 May 2014 the Group incurred expenditure
on formal arbitration proceedings to recover the compensation
assessed by the National Petroleum Commission as being due to the
Company for works undertaken by the Company in the Republic of
South Sudan and acknowledged as being due by the Ministry of
Petroleum and Mining of the Republic of South Sudan in April 2012.
Expenditure of $378,000 has been incurred in this matter during the
year ended 31 May 2014. This matter was resolved subsequent to the
period end through the payment to the Company of GBP3,412,000
(approximately $5,600,000) in cash which has been recognised in the
financial year ended 31 May 2015.
15.2. Cocoa trading
Due to the serious and well-publicised Ebola outbreak and the
associated precautionary restrictions on travelling in Sierra
Leone, accompanied by the ongoing losses suffered by the Cocoa
trading operations, the Group has ceased its Cocoa trading
operations in Sierra Leone. The Cocoa trading operation was
focussed primarily on building a presence in-country and providing
a market entry point for buyers as a precursor to the establishment
of the Group's own plantation, and the implementation of programmes
involving the upgrading of local growers plant quality through
plant distribution. The Group anticipates that the cessation of the
Cocoa trading operations will allow it to realise the value of
certain assets previously utilised by that operation, and to focus
all of the Cocoa division's efforts on the development of the
Group's cocoa plantation. The Company is confident that ceasing
trading will not have a materially adverse effect on its financial
performance.
The Cocoa trading operations represented a business segment of
the Group and accordingly, as required by IFRS 5, 'Non-current
Assets Held for Sale and Discontinued Operations', the results of
the Cocoa trading operations are presented as discontinued
operations within the consolidated income statement. Cash flows
pertaining to the Cocoa trading operations are presented in the
consolidated cash flow statement along with all cash flows relating
to discontinued operations. The results of operations and cash
flows reported for the period ended 31 May 2013 have been
re-presented for these discontinued operations as required by IFRS
5.
The results of the discontinued Cocoa trading operations, which
have been included in the consolidated income statement, were as
follows:
2014 2013
(represented - note 15)
US$000 US$000
-------- ------------------------
Loss in the year from the Cocoa trading operations:
Revenue 1,907 3,140
Expenses (2,748) (4,520)
Finance expense (1) (5)
Loss before taxation (842) (1,385)
Taxation - -
-------- ------------------------
Loss after tax from discontinued Cocoa trading operations in the period (842) (1,385)
-------- ------------------------
Loss on cessation of the Cocoa trading operations:
Loss on impairment of goodwill (note 17) (144) -
Net loss attributable to discontinued Cocoa trading operations (attributable to
owners of
the Company) (986) (1,385)
======== ========================
15.3. Other
In the financial year ended 31 May 2013 the Group closed its
maize meal importation business in Zimbabwe and its port
development concession in Conakry realising a pre and post-tax loss
of $510,000. No amounts have been recognised in respect of these
discontinued operations for the year ended 31 May 2014.
16. (LOSS) / Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2014 2013
(represented - note 15)
US$000 US$000
-------------- ------------------------
Loss for the purposes of basic and diluted earnings per share from
continuing activities (5,652) (6,546)
(Loss) / profit for the purposes of basic and diluted earnings per share
from discontinued
activities (2,364) 27,485
(Loss) / profit for the purposes of basic and diluted earnings per share
(loss for the year
attributable to equity holders of the parent) (8,016) 20,939
Weighted average number of Ordinary Shares for the purposes of basic (loss)
/ earnings per
share 1,061,818,478 1,059,963,899
Potential Ordinary Shares - 43,447,117
-------------- ------------------------
Weighted average number of Ordinary Shares for the purposes of diluted
(loss) / earnings per
share 1,061,818,478 1,103,411,016
-------------- ------------------------
Basic (loss) / earnings per share (0.76) 1.98
-------------- ------------------------
Basic (loss) / earnings per share - diluted (0.76) 1.90
-------------- ------------------------
Loss per share from continuing activities (0.53) (0.62)
-------------- ------------------------
{Loss) / earnings per share from discontinued activities (0.22) 2.59
-------------- ------------------------
{Loss) / earnings per share from discontinued
activities - diluted (0.22) 2.49
-------------- ------------------------
There is no dilutive effect from potential Ordinary Shares on
the loss per share on continuing activities because the Group's
result from continuing operations for each period presented is a
loss.
17. Goodwill AND OTHER Intangible Assets
Concession
Goodwill Agreement Total
US$000 US$000 US$000
--------- ----------- --------
Cost
At 1 June 2012 697 266 963
Disposal - (269) (269)
Exchange rate adjustment - 3 3
At 31 May 2013 697 - 697
Eliminated in period (144) - (144)
Exchange rate adjustment 23 - 23
At 31 May 2014 576 - 576
--------- ----------- --------
Net book value
31 May 2014 576 - 576
========= =========== ========
31 May 2013 697 - 697
========= =========== ========
The Group's goodwill balance arose on the acquisition of the
Cocoa operations, comprising the cocoa plantation and cocoa trading
business in Sierra Leone. Due to the cessation of the Cocoa trading
operations in the period (refer to note 15.2), the proportion of
the goodwill attributed to that business has been eliminated during
the period and is included in the computation of the net loss from
discontinued operations. The remaining balance of $576,000
attributed to cocoa plantation has been reviewed for impairment in
accordance with the Group's accounting policy. The review includes
an assessment of the present value of potential returns from the
asset, being the cocoa plantation, over a period of 25 years, being
the expected life cycle of the cocoa trees planted in the initial
planting phase. The recoverable amount of the cash generating unit
to which the goodwill has been allocated is determined on value in
use calculations. The discount rate used in the Group's estimated
average cost of capital is 15%. The review performed at the
reporting date did not result in the impairment of goodwill as the
estimated recoverable amount exceeds its carrying value.
18. Property, plant and equipment
Land and Plant and Other Assets under
buildings machinery Motor vehicles Aviation assets construction Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 June 2012 18,083 8,055 6,190 643 662 - 33,633
Additions 5,754 3,976 1,025 - 92 - 10,847
Disposals (292) (445) (1,698) - (181) - (2,616)
Exchange rate
adjustment (798) (469) (306) (70) (27) - (1,670)
---------------- ---------------- --------------- --------- -------- --------------- --------
At 31 May 2013 22,747 11,117 5,211 573 546 - 40,194
Additions 1,880 1,039 285 739 68 2,395 6,406
Disposals - (20) (195) (62) (4) - (281)
Transfers 307 (409) 93 - 9 - -
Exchange rate
adjustment (557) (1,158) 476 (72) (24) - (1,335)
At 31 May 2014 24,377 10,569 5,870 1,178 595 2,395 44,984
---------------- ---------------- --------------- --------- -------- --------------- --------
Accumulated
Depreciation
At 1 June 2012 271 2,655 4,010 142 312 - 7,390
Charge for the
year 3 1,389 957 129 75 - 2,553
Disposals (269) (445) (1,679) - (181) - (2,574)
Exchange rate
adjustment - (208) (180) (15) (13) - (416)
---------------- ---------------- --------------- --------- -------- --------------- --------
At 31 May 2013 5 3,391 3,108 256 193 - 6,953
Charge for the
year 312 1,067 775 142 74 - 2,370
Disposals - (8) (160) (37) (1) - (206)
Transfers - - - - - - -
Exchange rate
adjustment 547 (1,383) 464 (20) (9) - (401)
At 31 May 2014 864 3,067 4,187 341 257 - 8,716
Net book value
31 May 2014 23,513 7,502 1,683 837 338 2,395 36,268
================ ================ =============== ========= ======== =============== ========
31 May 2013 22,742 7,726 2,103 317 353 - 33,241
================ ================ =============== ========= ======== =============== ========
Additions to land and buildings include $1,897,000 (2013:
$1,280,000) of acquisition and development costs of the Group's
cocoa plantation in Sierra Leone. Included in this sum is $471,000
(2012: $344,000) of depreciation in respect of plant and equipment
and $558,808 (2013: $445,138) of wages and salaries.
A depreciation charge of $1,766,000 (2013: $1,840,000) has been
included in the consolidated income statement within operating
expenses and $133,000 (2013: $369,000) has been included with
discontinued operations.
Land and buildings with a carrying amount of $2,694,000 (2013:
$nil) have been pledged to secure the Group's bank overdraft (note
25). The Group is not allowed to pledge these assets as security
for other borrowings or sell them to another entity.
At 31 May 2014, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $49,000 (2013: $nil).
19. Interests in Associates
The Company and Group's interest in associates represents a 40%
equity investment in African Management Services Limited ('AMS').
The Group's share of the result of AMS for the period ended 31 May
2014 was $nil (2013: loss $5,000). The share of the cumulative
results and net assets of AMS is $4,000 (2013: $4,000). The
Company's investment in AMS was $nil.
20. Investments in quoted companies
'Investments in quoted companies' held by the Company and Group
comprise financial assets at FVTPL. Changes in market value are
recorded in profit and loss within other gains and losses. As at 31
May 2014, these investments comprise 8,337,682 (31 May 2013:
2,500,000) ordinary shares in African Oilfield Logistics Limited
('AOL'), an AIM quoted company focussed on the logistics support
industry in respect of oil and gas exploration and other
development projects in sub-Saharan Africa. The investment presents
the Group with opportunity for return through dividend income and
trading gains, providing exposure to the expanding infrastructure
support market in sub-Saharan Africa. Movements in the value of the
investment in AOL were as follows:
US$000
-------
At 1 June 2012 -
Purchase of investments at cost 4
-------
At 31 May 2013 4
Purchase of investments at cost 285
Increase in fair value (note 12) 936
-------
At 31 May 2014 1,225
=======
The fair value has been determined based on quoted market prices
in an active market and comprises a level 1 fair value in the IFRS
13 fair value hierarchy.
21. Biological assets
US$000
--------
Fair value
At 1 June 2012 2,660
Purchase of biological assets 1,623
Sale of biological assets (906)
Change in fair value 770
Foreign exchange (140)
At 31 May 2013 4,007
Purchase of biological assets 2,195
Sale of biological assets (1,976)
Change in fair value 290
Foreign exchange (244)
--------
At 31 May 2014 4,272
========
Biological assets comprise cattle in Mozambique held for
breeding purposes (the 'Breeding herd') or for slaughter (the
'Slaughter herd'). The Slaughter herd has been classified as a
current asset. The Breeding herd is classified as a non-current
asset. Biological assets are accordingly classified as current or
non-current assets as follows:
2014 2013 2014 2013
Head Head US$000 US$000
------ ------ ------- -------
Non-current asset 5,481 4,091 3,071 2,060
Current asset 2,749 2,788 1,201 1,947
------ ------ ------- -------
8,230 6,879 4,272 4,007
====== ====== ======= =======
For valuation purposes, cattle are grouped into classes of
animal (e.g. bulls, cows, steers etc). A standard animal weight per
breed and class is then multiplied by the number of animals in each
class to determine the estimated total live weight of all animals
in the herd. The herd is then valued by reference to market prices
for meat in Mozambique, less estimated costs to sell. The valuation
is accordingly a level 2 valuation in the IFRS 13 hierarchy whereby
inputs other than quoted prices that are observable for the asset
are used.
22. Inventories
2014 2013
US$000 US$000
-------------- -------
Consumables and spares 127 305
Raw materials 4,438 4,955
Work in progress 34 27
Finished goods 301 169
4,900 5,456
============== =======
During the year inventories amounting to $8,084,000 (2013:
$12,137,000) were included in cost of sales and $2,179,000 (2013:
$2,827,000) were included within discontinued operations.
Inventories with a carrying amount of $4,237,000 (2013: $nil)
have been pledged to secure the Group's bank overdraft (note
25).
23. Trade and other receivables
2014 2013
US$000 US$000
------- -------
Trade receivables 459 796
Other receivables 393 1,297
Corporation tax recoverable - 1,088
Prepayments 296 197
1,148 3,378
======= =======
'Trade receivables' and 'Other receivables' disclosed above are
classified as loans and receivables and measured at amortised
cost.
Included in 'Other receivables' are receivables which have been
provided against. Movements in the allowance account against 'Other
receivables', which principally relate to input IVA recoverable in
Mozambique (refer to note 4.4) is as follows:
US$000
--------
At 1 June 2012 1,237
Charged to profit and loss 144
Foreign exchange gain (71)
--------
At 31 May 2013 1,310
Charged to profit and loss 118
Foreign exchange gain (83)
--------
At 31 May 2014 1,345
========
The increase in the allowance account during both period
presented reflects the increase in the underlying input IVA balance
recorded by the Group and the effect of the devaluation of the
Mozambique Metical against the United States Dollar.
Other receivables include $122,000 (2013: $1,088,000) due from
related parties (see note 31).
The Directors consider that the carrying amount of financial
assets approximates their fair value. There are no significant
amounts past due which have not been provided against (2013: $nil).
Further details on the Group's financial assets are provided in
note 27.
24. Cash and cash equivalents
Included within the Company and Group's cash and cash
equivalents is $107,000 (2013: $107,000) of restricted cash held on
deposit as security for certain supplier guarantees.
25. Borrowings
2014 2013
US$000 US$000
------- -------
Bank overdraft 2,468 1,591
Loan note - 1,500
Other 200 -
------- -------
2,668 3,091
======= =======
The Group has an overdraft facility of 189,000,000 Mozambique
Metical (approximately $6,000,000) (2013: 62,000,000 Metical
(approximately $2,000,000) to provide funding for its Grain
operations in Mozambique. It is secured against certain of the
Group's property, plant and equipment (note 18) and all maize
inventory and finished maize products (note 22). Interest is
charged at the Mozambique prime rate less 3%, being a current rate
of 13% (2013: Mozambique prime rate less 0.5%, being a rate of
22%). The facility is renewable annually on 31 May upon agreement
of the parties.
Other borrowings represent customer pre-financing for the
Group's Cocoa trading operations, is unsecured, bears no interest
and was repaid subsequent to the period end.
The loan note outstanding as at 31 May 2013 was unsecured, due
within one year and carried a coupon of 10%. The loan note was
repaid during the year in accordance with its terms.
26. Trade and other payables
2014 2013
US$000 US$000
------- -------
Trade payables 77 159
Other payables 666 1,093
Accrued liabilities 1,413 1,164
Corporation tax 14 -
2,170 2,416
======= =======
'Trade payables', 'Other payables' and 'Accrued liabilities'
principally comprise amounts outstanding for trade purchases and
ongoing costs. No interest is charged on any balances.
Other payables includes $nil (2013: $165,000) payable to related
parties (see note 31).
The Directors consider that the carrying amount of financial
liabilities approximates their fair value.
27. FINANCIAL INSTRUMENTS
27.1. Capital risk management
The Group and Company manages its capital to ensure that
entities in the Group will be able to continue as going concerns
while maximising the return to shareholders. The capital structure
of the Group comprises its net debt (the borrowings disclosed in
note 25 after deducting cash and bank balances) and equity of the
Group as shown in the balance sheet. The Company and Group are not
subject to any externally imposed capital requirements.
The ExCom reviews the capital structure on a regular basis and
seeks to match new capital requirements of subsidiary companies to
new sources of external debt funding denominated in the currency of
operations of the relevant subsidiary. Where such additional
funding is not available, the Group funds the subsidiary companies
by way of loans from the Company. The Group and Company place funds
which are not required in the short term on deposit at the best
interest rates it is able to secure from its bankers. In accordance
with this policy, the Group has increased its overdraft facility in
Mozambique to finance its Grain operations from approximately
$2,000,000 as at 31 May 2013 to approximately $6,000,000 (note
25).
27.2. Categories of financial instruments
The following are the Group and Company financial instruments as
at 31 May:
Group Company
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
Financial assets
Cash and bank balances 6,994 18,748 5,747 17,770
Fair value through profit and loss:
Held for trading 1,225 4 1,225 4
Loans and receivables 852 2,093 41,752 34,225
------- ------- ------- -------
9,071 20,845 48,724 51,999
------- ------- ------- -------
Financial liabilities
Amortised cost 4,824 5,507 1,040 2,693
------- ------- ------- -------
4,824 5,507 1,040 2,693
4,247 15,338 47,684 49,306
======= ======= ======= =======
27.3. Financial risk management objectives
The Group manages the risks arising from its operations, and
financial instruments at ExCom and Board level. The Board has
overall responsibility for the establishment and oversight of the
Group's risk management framework and to ensure that the Group has
adequate policies, procedures and controls to manage successfully
the financial risks that the Group faces.
While the Group does not have a written policy relating to risk
management of the risks arising from any financial instruments
held, the close involvement of the ExCom in the day to day
operations of the Group ensures that risks are monitored and
controlled in an appropriate manner for the size and complexity of
the Group. Financial instruments are not traded, nor are
speculative positions taken. The Group and Company have not entered
into any derivative or other hedging instruments.
The Group's key financial market risks arise from changes in
foreign exchange rates ('currency risk'). To a lesser extent the
Group is exposed to interest rate risk and other price risk (in
respect of its investments in quoted companies). The Group is also
exposed to credit risk and liquidity risk. The principal risks that
the Group faces as at 31 May 2014 with an impact on financial
instruments are summarised below.
27.4. Market Risk
The Group and Company are exposed to currency risk, interest
risk and other price risk (in respect of its investments in quoted
companies). These are discussed further below:
27.4.1. Currency risk
Certain of the Group companies have functional currencies other
than US$ and the Group is therefore subject to fluctuations in
exchange rates in translation of their results and financial
position into US$ for the purposes of presenting consolidated
accounts. The Group does not hedge against this translation
risk.
The Group's financial assets and liabilities by currency are as
follows:
Assets Liabilities
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
United States Dollar ('US$') 5,977 18,910 1,510 3,153
Sterling ('GBP') 1,225 4 - -
Mozambique Metical ('MZN') 1,588 1,553 3,209 2,337
Sierra Leone Leones ('SLL') 169 257 95 15
Other 112 121 10 2
------- ------- ------- -------
9,071 20,845 4,824 5,507
======= ======= ======= =======
The Company's financial assets and liabilities to transactional
currency risk are as follows:
Assets Liabilities
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
US$ 47,360 51,817 963 2,553
GBP 1,243 40 77 140
Other 121 142 - -
------- ------- ------- -------
48,724 51,999 1,040 2,693
======= ======= ======= =======
The Group and Company transact with suppliers and / or customers
in currencies other than the functional currency of the relevant
group company (foreign currencies), and hold investments in quoted
companies which are traded in currencies other than US$. The Group
does not hedge against this transactional risk. As at 31 May 2013
and 31 May 2014, the Group and Company's outstanding foreign
currency denominated monetary items were principally exposed to
changes in the US$ / GBP and US$ / MZN exchange rate. The following
table details the Group and Company's exposure to a 5 per cent
increase and decrease in the US$ against GBP and separately against
MZN. The sensitivity analysis includes only outstanding foreign
currency denominated items and excludes the translation of foreign
subsidiaries and operations into the Group's presentation currency.
The sensitivity also includes intra-group loans where the loan is
in a currency other than the functional currency of the lender or
borrower. A positive number indicates an increase in profit and
other equity when the US$ strengthens against the relevant currency
by 5 per cent. For a 5 per weakening of the US$ against the
relevant currency, there would be a comparable impact on the profit
and other equity, and the balances would be negative.
Group GBP Impact MZN Impact
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
Profit or loss (1) 61 - - -
Other equity (2) (12) (15) 2,755 2,419
Company GBP Impact MZN Impact
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
Profit or loss (1) 61 - - -
Other equity (3) (5) - -
(1) This is mainly due to the exposure arising from investments
in quoted companies where the related company's equity
securities are quoted in GBP.
(2) This is mainly due to the exposure arising on the translation
of US$ denominated intra-group loans provided to MZN
functional currency entities which are included as part
of the Company and Group's net investment in the related
entities.
27.4.2. Interest rate risk
The Group and Company are exposed to interest rate risk because
entities in the Group hold cash balances and borrow funds at
floating interest rates. As at 31 May 2014, the Group and Company
have no interest bearing fixed rate instruments. The Group and
Company maintain cash deposits at variable rates of interest for a
variety of short term periods, depending on cash requirements. The
Grain operations in Mozambique are also partially financed through
the overdraft facility and the Group's Cocoa operations were
partially financed by customer advances (refer to note 25). The
rates obtained on cash deposits are reviewed regularly and the best
rate obtained in the context of the Group's and Company's needs.
The weighted average interest rate on deposits was 1.05% (2013:
0.85%). The weighted average interest on drawings under the
overdraft facility was 16% (2013: 22%), on the customer advances
was nil% (2013: nil%) and on the short term loan note was 10%
(2013: 10%).
The Group and Company exposure to interest rates on financial
assets and liabilities is detailed below. The Group does not hedge
interest rate risk.
2014 2013
US$000 US000
-------- --------
Group
Financial assets at floating rates 6,994 18,748
Financial liabilities at floating rates (2,468) (1,591)
-------- --------
4,526 17,157
Financial liabilities at fixed rates (200) (1,500)
-------- --------
4,326 15,657
======== ========
Company
Financial assets at floating rates 5,747 17,770
Financial liabilities at fixed rates - (1,500)
-------- --------
5,747 16,270
======== ========
The following table details the Group and Company's exposure to
interest rate changes, all of which affect profit and loss only
with a corresponding effect on accumulated losses. The sensitivity
has been prepared assuming the liability outstanding at the balance
sheet date was outstanding for the whole year. In all cases
presented, a positive number in profit and loss represents an
increase in interest income / decrease in finance expense. The
sensitivity is presented assuming interest rates increase by either
20bp or 50bp. A 20bp or 50bp decrease in interest rates would have
the opposite effect.
Group Company
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- ------- -------
+ 20 bp increase in interest rates 9 34 11 35
+ 50 bp increase in interest rates 23 86 29 88
27.4.3. Other price risk
The Group and Company is exposed to equity price risk on its
investments in quoted securities which are measured at fair value
(refer to note 20). Investments in quoted companies comprise
investments in one company, AOL. If AOL's share price increased /
(decreased) by 10% and the US$ / GBP exchange rate remained
unchanged, the Group and Company net profit would increase /
(decrease) by $123,000.
27.5. Credit risk
Credit risk arises from cash and cash equivalents, and deposits
with banks and financial institutions, as well as outstanding
receivables. The Group's and Company's principal deposits were held
with various banks with a high credit rating to diversify from a
concentration of credit risk. Receivables are regularly monitored
and assessed for recoverability.
The maximum exposure to credit risk is the carrying value of the
Group and Company financial assets disclosed in notes 23 and
27.2.
27.6. Liquidity risk
The Group and Company's policy throughout the year has been to
ensure that it has adequate liquidity by careful management of its
working capital. The ExCom continually monitors the Group and
Company's actual and forecast cash flows and cash positions. The
ExCom pays particular attention to ongoing expenditure, both for
operating requirements and development activities, and matching of
the maturity profile of the Group's overdraft to the processing and
sale of the Group's maize products.
At 31 May 2014 the Group held cash deposits of $6,994,000 (2013:
$18,748,000). At 31 May 2014 the Company held cash deposits of
$5,747,000 (2013: $17,770,000m). At 31 May 2014 the Group had an
overdraft facility of approximately $6,000,000 (2013: approximately
$2,000,000) of which $2,468,000 (2013: $1,591,000) was drawn. The
Group had other borrowings / short term loan note outstanding of
$200,000 (2013: $1,500,000) (see note 25). Subsequent to the period
end, the Group realised an exceptional cash inflow of approximately
$5,600,000 from the settlement of certain claims regarding oil
exploration blocks in the Republic of South Sudan (refer to note
33). As at the date of this report the Group has adequate liquidity
to meet its obligations as they fall due.
The following table details the Group and Company's remaining
contractual maturity of its financial liabilities. The table is
drawn up utilising undiscounted cash flows and based on the
earliest date on which the Group and Company could be required to
settle its obligations. The table includes both interest and
principal cash flows. To the extent that interest cash flows are
floating rate, the undiscounted amount is derived using the current
interest rate, which is not expected to change significantly during
the period to maturity.
Group Company
2014 2013 2014 2013
US$000 US$000 US$000 US$000
------- ------- --------------- -------
1 month 2,389 3,937 1,040 2,693
2 to 3 months 65 42 - -
12 months 2,764 1,782 - -
------- ------- --------------- -------
5,218 5,761 1,040 2,693
======= ======= =============== =======
27.7. Fair values
The Directors have reviewed the financial statements and have
concluded that there is no significant difference between the
carrying values and the fair values of the financial assets and
liabilities of the Group and of the Company as at 31 May 2014 and
31 May 2013.
28. Share capital
Group and company
Authorised Allotted and fully paid
Ordinary shares of 0.1p each Number Number US$000
-------------- ------------------------ -------
At 31 May 2012 2,345,000,000 1,059,716,238 1,719
Issue of shares - 2,102,240 3
-------------- ------------------------ -------
At 31 May 2013 and 31 May 2014 2,345,000,000 1,061,818,478 1,722
Deferred shares of 0.1p each
-------------- -------------- ------
At 1 June 2012, 31 May 2013 and 31 May 2014 155,000,000 155,000,000 238
-------------- -------------- ------
Total share capital
-------------- -------------- ------
At 31 May 2013 and 31 May 2014 2,500,000,000 1,216,818,478 1,960
-------------- -------------- ------
The Company has one class of ordinary share which carries no
right to fixed income.
The deferred shares carry no right to any dividend; no right to
receive notice, attend, speak or vote at any general meeting of the
Company; and on a return of capital on liquidation or otherwise,
the holders of the deferred shares are entitled to receive the
nominal amount paid up after the repayment of GBP1,000,000 per
ordinary share. In the event that disputes over certain oil and gas
assets are satisfactorily resolved, the deferred shares may be
converted into ordinary shares by resolution of the Board.
On 18 April 2013 the Company issued 2,102,240 ordinary shares of
0.1p each at 3p per shareas part of the consideration paid to
acquire beef ranching assets in Mozambique.
29. RESERVES
Movements in the Group and Company reserves are included in the
consolidated statement of changes in equity and the Company
statement of changes in equity respectively. A description of each
reserve is provided below.
29.1. Shares to be issued reserve
In the financial year ended 31 May 2012 the Group acquired Red
Bunch Ventures (SL) Limited ('Red Bunch') which holds a lease over
approximately 45,000 hectares of agricultural land suitable for
palm oil production in Sierra Leone. Deferred consideration is due
of 37,800,000 Ordinary Shares upon the development of 1,000
hectares of the leasehold land. The 'Shares to be issued' reserve
records the Group's potential obligation to issue such Ordinary
Shares. As at 31 May 2014 and 31 May 2013, the obligation to issue
the Ordinary Shares had not crystallised.
29.2. Translation reserve
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the Balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
taken to the translation reserve.
30. Share based payments
30.1. Charge in the period
The Group recorded a charge within other operating expenses for
share based payments of $149,000 (2013: $90,000). The Company
recorded a charge of $55,000 (2013: $90,000) and recorded an
increase in its investments in subsidiary undertakings of $94,000
(2013: $nil).
30.2. Equity - settled share option plan
The Group, through the Company, has two unapproved share option
schemes which were established to provide equity incentives to the
Directors of, employees of and consultants to the Group. The
schemes' rules provide that the Board shall determine the exercise
price for each grant which shall be at least the average mid-market
closing price for the three days immediately prior to the grant of
the options. The minimum vesting period is generally one year. If
options remain unexercised after a period of 4 or 5 years from the
date of grant, or vesting, the options expire. Options are
forfeited if the employee leaves the Group before the options
vest.
The following table provides a reconciliation of share options
outstanding during the period:
2014
Options Weighted average exercise 2013 Weighted average exercise
Number price Options Number price
At 1 June 44,750,000 3.7p 20,750,000 2.5p
Granted in the year 2,500,000 1.5P 24,000,000 4.6p
Lapsed in the year (5,000,002) 5.5P - -
At 31 May 42,249,998 4.6p 44,750,000 3.7p
============ ============================ ================ =============================
Exercisable at year end 27,750,002 3.0p 20,750,000 2.5p
============ ============================ ================ =============================
The fair value of the options granted during the period was
determined using the Black-Scholes option pricing model using the
following assumptions:
- Share price at the date of grant was the average mid-market
closing price for the three days immediately prior to grant, being
1.47p.
- The risk free rate ranged from 0.53% to 1.87% based on the
gilt yield over the expected life of the options at the date of
grant.
- The annual dividend yield is expected to be nil based on the
Board's immediate intention to reinvest operating cash flows.
- The annual volatility ranged from 60% to 89% and is derived
from the historic daily share prices of the Company over periods
matching the expected life of the options at the date of grant.
- The options were granted on 15 May 2014 and vest at 20% per
annum from the date of grant. The options can be exercised within a
five year period from the date they vest.
- The options have a fair value ranging between 0.4p and 1.0p
with the total fair value of options granted during the year
calculated at $30,000.
On 12 January 2010, options over 50,000,000 ordinary shares with
an exercise price of 5.5p were issued to Ely Place Nominees Limited
('EPN') to be held on trust to be issued at the discretion of the
Board as incentives to Directors, employees or consultants (the
'Incentive Options'). Between January 2010 and 15 May 2014,
14,999,999 Incentive Options were allocated. On 15 May 2014 and in
light of the share price at that date, the Directors concluded that
these Incentive Options would not provide an appropriate mechanism
for incentivising Directors, employees and consultants. As such,
and with the agreement of EPN, EPN waived their rights to the
Incentive Options, which were cancelled and replaced by 35,000,001
new incentive options granted at the prevailing price on 15 May
2014 (rounded up to the nearest half penny) of 1.5p, otherwise to
be held on the same terms as Incentive Options.
30.3. Share Options
At 31 May 2014, the following options over ordinary shares of
0.1p each have been granted and remain unexercised:
Date of grant Number of shares Exercise price Exercise period
----------------- ----------------- --------------- -----------------------------------
9 January 2009 5,750,000 3.0p 9 January 2010 to 9 January 2019
13 July 2011 5,000,000 3.0p 13 July 2012 to 13 July 2017
1 December 2011 10,000,000 2.0p 1 December 2011 to 1 December 2016
29 July 2012 7,499,999 3.5p 29 July 2013 to 29 July 2023
29 July 2012 7,499,999 5.5p 29 July 2013 to 11 January 2020
01 May 2013 2,000,000 2.8p 01 May 2014 to 30 April 2019
01 May 2013 2,000,000 5.5p 01 May 2014 to 11 January 2020
15 May 2014 2,500,000 1.47p 15 May 2015 to 15 May 2024
31. Related party disclosures
PH Edmonds and AS Groves, directors of the Company, are also
directors of Sable Mining Africa Limited ('Sable'), Liberian Cocoa
Corporation ('LCC'), African Potash Limited ('African Potash'),
African Oilfield Logistics Limited ('AOL') and African Management
Services Limited ('AMS'), companies with which the Company and
Group have transacted during the year. Related party transactions
are entered into on an arm's length basis. No provisions have been
made in respect of amounts owed by or to related parties.
During the year AMS provided accounting, treasury and
administrative services to the Group for a management fee of
$587,000 (2013: $587,000). The Group also incurred certain
expenditures on behalf of AMS. As at 31 May 2014 the Group was owed
$33,000 by AMS (2013: owed to AMS $77,000).
At 31 May 2014 the Group was due $89,000 from LCC (2013:
$89,000).
During the year the Group and Sable incurred certain expenses on
each other's behalf. At 31 May 2014, the amount due to Sable was
$nil (2013: $32,000).
During the year the Group incurred certain expenses on behalf of
African Potash. At 31 May 2014, the amount due to African Potash
was $nil (2013: $56,000).
During the year the Group advanced $500,000 (2013: $1,000,000)
to Ardan Risk and Support Services Limited ('Ardan'), a company
controlled by MN Pelham. The total amount due by Arden of
$1,563,000 including interest of $63,000 was repaid in the
financial year.
During the year the Group invested $285,000 (2013: $4,000) in
the purchase of ordinary shares of AOL.
The remuneration of the Directors, who are the key management
personnel of the Group, is set out in note 10.
32. Operating Leases
At 31 May the Group had commitments for future minimum lease
payments under non-cancellable operating leases for land and
buildings, which fall due as follows:
2014 2013
US$000 US$000
------- -------
Within one year 79 74
======= =======
Operating lease rentals recognised as an expense in the income
statement were as follows:
Land and buildings 125 38
==== ===
33. Events subsequent to the balance sheet date
33.1. Sierra Leone
As a result of the serious and well-publicised Ebola outbreak
and the associated precautionary restrictions on travelling in
Sierra Leone, the Company has curtailed its activities in the
region. The on-going development of the Group's Sierra Leone Cocoa
plantation has, until September 2014, continued during the Ebola
outbreak, however, due to the current circumstances and the
resultant restrictions in movement causing a shortage of labour,
the original planting and clearance schedule has been restricted.
The hectares planted to date are being maintained, as is the
plantation infrastructure including warehousing, accommodation and
equipment. The state-of-the-art nursery continues to house plants
which will now be used, if circumstances allow, to accelerate the
Company's local initiatives to increase the quality of the local
growers' stock. It is envisaged that this distribution programme
will be run in tandem with international agencies and companies
looking to expand the productivity of cocoa farmers in West
Africa.
Until the Group has further clarity on the development of the
Ebola outbreak, investment in the Cocoa plantation will be
maintained at a minimum level and no further planting will be
undertaken. Where appropriate, the labour force and operating costs
have been reduced commensurate with the reduced level of
activity.
The demand/supply model remains highly attractive for cocoa
producers and West Africa remains a region suitable for mass
production operations. The Group remains optimistic about the
future prospects for the Cocoa plantation.
As discussed more fully in note 15.2, the Group has ceased its
Cocoa trading operations. Vehicles, warehouse facilities and other
assets of this business are now being utilised in country in the
Ebola relief efforts.
33.2. Settlement of claims with respect to legacy oil interests in the South Sudan
In September 2014, the Company and Group reached a successful
settlement (receiving approximately US$5.6m in cash) with the
Republic of South Sudan and Nile Petroleum Corporation Limited in
respect of the Company's claims arising from its legacy oil
interests in South Sudan. Following the settlement the Company and
Group has no further current economic interest in that country.
Company statement of financial position
As at 31 May 2014
2014 2013
Note US$000 US$000
---------- ----------
Non-current assets
Property, plant and equipment 36 1 35
Investments in subsidiaries 37 47,591 39,040
Interests in associates 19 - -
Investments in quoted companies 20 1,225 4
---------- ----------
48,817 39,079
---------- ----------
Current assets
Trade and other receivables 38 166 2,098
Cash and cash equivalents 5,747 17,770
---------- ----------
5,913 19,868
---------- ----------
Total assets 54,730 58,947
---------- ----------
Current liabilities
Borrowings 39 - (1,500)
Trade and other payables 39 (1,040) (1,193)
---------- ----------
(1,040) (2,693)
---------- ----------
Net current assets 4,873 17,175
---------- ----------
Net assets 53,690 56,254
---------- ----------
Share capital 28 1,960 1,960
Share premium 148,622 148,622
Shares to be issued 29.1 2,940 2,940
Share based payment reserve 1,859 1,710
Translation reserve 29.2 2,621 2,621
Accumulated losses (104,312) (101,599)
---------- ----------
Total equity 53,690 56,254
---------- ----------
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 27 October 2014.
Signed on behalf of the Board of Directors by:
Company statement of changes in equity
For the year ended 31 May 2014
Share
based
Share Share Shares to payment Translation Accumulated Total
capital premium be issued reserve reserve losses equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- ----------- ----------- ---------- ------------ ------------ --------
Balance at 1
June 2012 1,957 148,530 2,940 1,620 3,515 (114,245) 44,317
Profit for the
year - - - - - 12,646 12,646
Other
comprehensive
income:
Exchange
translation
loss - - - - (894) - (894)
--------- ----------- ----------- ---------- ------------ ------------ --------
Total
comprehensive
income for the
year - - - - (894) 12,646 11,752
Share-based
payments 30 - - - 90 - - 90
Issue of share
capital 28 3 92 - - - - 95
Balance at 31
May 2013 1,960 148,622 2,940 1,710 2,621 (101,599) 56,254
Loss and total
comprehensive
income for the
year - - - - - (2,713) (2,713)
Share-based
payments 30 - - - 149 - - 149
Balance at 31
May 2014 1,960 148,622 2,940 1,859 2,621 (104,312) 53,690
========= =========== =========== ========== ============ ============ ========
Company cash flow statement
2014 2013
Note US$000 US$000
--------- ---------
Cash flows from operating activities
Loss before tax from continuing operations (1,336) (16,093)
Adjustments for:
Depreciation 36 - 12
Profit on disposal of property, plant and equipment (8) -
Share based payment expense 30 55 90
Impairment of loans to subsidiary undertakings 1,038 13,423
Foreign exchange loss 37 -
Finance costs 12 -
Investment revenues (1,186) (571)
Increase in fair value of quoted investments 12 (936) -
Operating cash flows before movements in working capital (2,324) (3,139)
Decrease in trade and other receivables 1,026 662
Decrease in trade and other payables (252) (50)
--------- ---------
Net cash used in operating activities by continuing operations (1,550) (2,527)
Finance costs (12) (339)
Interest received 140 31
Net cash used in operating activities by continuing operations (1,422) (2,835)
--------- ---------
Net cash used in operating activities by discontinued operations (378) -
--------- ---------
Net cash used in operating activities (1,800) (2,835)
--------- ---------
Cash flows from investing activities
Acquisition of property, plant and equipment - (43)
Proceeds from disposal of property, plant and equipment 42 -
Purchase of investments in quoted companies 20 (285) (4)
Loans to subsidiary undertakings 37 (8,449) (10,453)
Net cash used in investing activities by continuing operations (8,692) (10,500)
--------- ---------
Net cash from investing activities in discontinued operations - 27,171
--------- ---------
Net cash (used in) / from investing activities (8,692) 16,671
--------- ---------
Cash flow from financing activities
New borrowings - 6,000
Repayment of borrowings 39 (1,500) (4,500)
Net cash (outflow) / inflow from financing activities from continuing operations (1,500) 1,500
--------- ---------
Net (decrease) / increase in cash and cash equivalents (11,992) 15,336
Effect of exchange rates on cash and cash equivalents (31) -
--------- ---------
Cash and cash equivalents at beginning of period 17,770 2,434
--------- ---------
Cash and cash equivalents at end of period 5,747 17,770
========= =========
Notes to the Company financial statements
34. Company ACCOUNTING POLICIES
The financial statements have being prepared in accordance with
IFRS as adopted by the EU.
The financial statements have been prepared on the historical
cost basis except for the measurement of certain financial
instruments, and share based payments. The principal accounting
policies adopted are the same as those set out in note 3 to the
consolidated financial statements, other than as noted below.
34.1. Investments in subsidiary undertakings
Investments are recorded at cost, less provision for impairment.
The Company includes within the carrying value of investments in
subsidiary undertakings the fair value of the consideration paid
for the subsidiary. Additional investment in the subsidiary
undertakings, in the form of capital subscriptions, capital
contributions or share based payment obligations assumed on behalf
of the subsidiary is added to the cost of the investment in the
period in which it arises.
35. RESULT FOR THE YEAR
As permitted by Guernsey law, the Company has elected not to
present its own income statement. The Company reported a loss for
the year of $2,713,000 (2013: profit of $12,646,000).
36. PROPERTY, PLANT AND EQUIPMENT
Motor Other
Vehicles assets Total
US$000 US$000 US$000
Cost
At 1 June 2012 - 15 15
Additions 42 1 43
At 31 May 2013 42 16 58
Disposals (42) - (42)
At 31 May 2014 - 16 16
---------- -------- -------
Accumulated depreciation
At 1 June 2012 - 11 11
Charge for the year 8 4 12
---------- -------- -------
At 31 May 2013 8 15 23
Eliminated on disposals (8) - (8)
---------- -------- -------
31 May 2014 - 15 15
---------- -------- -------
Net book value
31 May 2014 - 1 1
========== ======== =======
31 May 2013 34 1 35
========== ======== =======
37. INVESTMENT IN SUBSIDIARIES
Investment Loans Total
US$000 US$000 US$000
Cost
At 1 June 2012 9,680 47,245 56,925
Loans advanced in the year - 10,453 10,453
Interest accrued - 463 463
At 31 May 2013 9,680 58,161 67,841
Loans advanced in the year - 8,449 8,449
Interest accrued - 1,046 1,046
Capital contribution 94 - 94
Foreign exchange gain - 1,312 1,312
At 31 May 2014 9,774 68,968 78,742
----------- ------- -------
Provision for irrecoverable amounts
At 1 June 2012 3,801 11,577 15,378
Charge for the year - 13,423 13,423
----------- ------- -------
At 31 May 2013 3,801 25,000 28,801
Charge for the year - 1,038 1,038
Foreign exchange loss - 1,312 1,312
31 May 2014 3,801 27,350 31,151
----------- ------- -------
Net book value
31 May 2014 5,973 41,618 47,591
=========== ======= =======
31 May 2013 5,879 33,161 39,040
=========== ======= =======
Capital contributions represent increases or decreases in
investment arising from the grant, lapse or termination of share
options or Ordinary Shares to employees of subsidiary
undertakings.
Loans to subsidiaries fall due after more than one year. The
provision against loans to subsidiaries in the year reflects the
cessation of the Group's cocoa trading activities and reductions in
the value of the underlying businesses as a result of movements in
exchanges rates (2013: reductions in the value of the underlying
businesses as a result of movements in exchanges rates).
As set out in note 27, the Company and Group have suspended
further expenditure on all oil and gas exploration and evaluation
projects. Accordingly the Company's investment and loans provided
to subsidiary undertakings conducting such operations were fully
provided against in prior periods.
As at 31 May 2014, the Company held equity interests in the
following principal undertakings:
Direct investments
Subsidiary undertakings Proportion held Country of incorporation Nature of business
Agriterra (Mozambique) Limited 100% Guernsey Holding Company
P A Energy Africa Limited 100% British Virgin Islands Inactive
Agriterra Aviation (Pty) Limited 100% South Africa Aviation services
Agriterra East Africa Limited 100% Mauritius Trading
Agriterra Guinea SA 100% Guinea Infrastructure
West Africa Cocoa Services Limited 100% British Virgin Islands Holding Company
Shawford Investments Inc 100% British Virgin Islands Holding Company
Branca Tide Limited 100% British Virgin Islands Holding Company
Indirect investments of Agriterra Mozambique Limited
Subsidiary undertakings Proportion held Country of incorporation Nature of business
Desenvolvimento E Comercialização
Agricola Limitada 100% Mozambique Grain
Compagri Limitada 100% Mozambique Grain
Mozbife Limitada 100% Mozambique Beef
Carnes de Manica Limitada 100% Mozambique Beef
Agriterra Aviação Limitada 100% Mozambique Aviation services
Indirect investments of West Africa Cocoa Services Limited
Subsidiary undertakings Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------
Tropical Farms (SL) Limited 100% Sierra Leone Cocoa & Coffee
Indirect investments of Branca Tide Limited
Subsidiary undertakings Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------
Tropical Farms Plantation (SL) Limited 100% Sierra Leone Cocoa Plantation
37.1. Indirect investments of Shawford Investments Inc.:
Subsidiary undertakings Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------
Red Bunch Ventures (SL) Limited 100% Sierra Leone Palm Oil
38. Trade and other receivables
2014 2013
US$000 US$000
------- -------
Other receivables 134 1,064
Corporation tax recoverable - 1,000
Prepayments 32 34
166 2,098
======= =======
'Trade receivables' and 'Other receivables disclosed' above are
classified as loans and receivables and measured at amortised cost.
The Directors consider that the carrying amount of these financial
assets approximates their fair value. There are no significant
amounts past due which have not been provided against (2013: $nil).
Further details on the Company's financial assets are provided in
note 27.
Other receivables include $122,000 (2013: $1,088,000) due from
related parties (see note 31).
39. FINANCIAL liabilities
2014 2013
US$000 US$000
------- -------
Borrowings
Loan note - 1,500
------- -------
- 1,500
======= =======
Trade and other payables
Trade payables 78 140
Other payables 573 679
Accrued liabilities 389 374
------- -------
1,040 1,193
======= =======
Other payables includes $nil (2013: $165,000) payable to related
parties (see note 31).
The loan note outstanding as at 31 May 2013 was unsecured, due
within one year and carried a coupon of 10%. The loan note was
repaid during the year in accordance with its terms.
The Directors consider that the carrying amount of financial
liabilities approximates their fair value. Further details on the
Company's financial liabilities are provided in note 27.
40. RELATED PARTIES
Transactions and balances due at the period end with related
parties, other than with subsidiary undertakings, are disclosed in
note 31.
Related party transactions are entered into on an arm's length
basis. No provisions have been made in respect of amounts owed by
or to related parties except where disclosed.
Subsidiary companies are financed by means of parent company
loans which bare market rates of interest. The Company provided
funding to its subsidiaries of $8,449,000 (2013: $10,453,000)
during the year and at 31 May 2014 had outstanding amounts
receivable of $68,968,000 (2013: $58,161,000). Interest due on the
loans in the period was $1,046,000 (2013: $463,000) which was
accrued but unpaid in the year. With the continued depreciation of
the Mozambican Metical and the cessation of the Group's cocoa
trading operations, the Company has made a provision against
amounts receivable from subsidiary undertakings of $1,038,000
(2013: $13,423,000) during the year. Further details on the
Company's receivables from subsidiary undertakings are provided in
note 37.
41. Ultimate controlling party
The Directors are of the opinion that there is no controlling
party of the Company.
42. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
Details of events subsequent to the balance sheet date, all of
which relate to the Company, are included in note 33.
**ENDS**
This information is provided by RNS
The company news service from the London Stock Exchange
END
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