TIDMAGTA
RNS Number : 3740G
Agriterra Ltd
20 November 2015
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
20 November 2015
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 2015.
Chairman's statement
Agriterra continues to centre on building a sustainable
agricultural business with its portfolio focussed on beef and maize
in Mozambique and cocoa in Sierra Leone. As reflected in the
results, the period has been mixed in terms of success. The beef
division has emerged as a solid revenue generator and a stable base
from which to pursue the Group's expansion objectives in the short
to medium term, while the impact of external factors beyond our
control in Sierra Leone, in particular the Ebola outbreak, caused
the curtailment of investment in our operations, with our fleet and
warehousing being used by the International Red Cross, World Health
Organisation and World Food Programme.
Large scale agriculture projects require heavy investment in
order to establish an effective operating platform that can deliver
long-term and sustainable growth. We have invested significantly in
building a base that the Board believes has the potential to
increase our revenue generation capability and profitability moving
forward. We continue to look at optimising our business and seek to
maximise efficiencies across our divisions, to capitalise on
revenue generation, to reduce operating expenditure and to improve
margins so as to drive shareholder value.
With regards to our beef operations, we have invested in and
built a valuable platform of ranches, feedlot, an abattoir,
infrastructure, logistics and retail units. This division continues
to show its potential to grow as a solid revenue generator, with a
31% increase in revenues to $5,366,000 from $4,081,000 in the 2014
financial year, in spite of a 6.5% fall in the average Metical to
US$ exchange rate (in Metical terms, revenues increased by over
40%). This notable growth in revenue reflects the increasing
volumes being moved through our feedlot and in particular the
expansion of our retail units, which are the final link in
Agriterra's beef value chain, from field to fork.
Of particular note during the year has been the establishment of
our butchery and distribution centre in Nampula, Mozambique's third
largest city and the central commercial hub for Northern
Mozambique. We opened our doors to the public in April 2015 and, by
October 2015, monthly sales (retail and wholesale) have already
achieved in excess of $150,000 a month. We expect that this growth
will continue, by optimising performance and utilising the full
distribution capacity of our Nampula property as a staging post for
the other northern retail sites, as we push on with our expansion
strategy into the north of the country.
The success at Nampula has reinforced the Board's belief in our
retail expansion strategy, to further leverage the increasing
demand for quality beef products and the apparent increase in
activity from the LNG sector, notwithstanding the macro oil and gas
environment. We now have six outlets and for the 2016 calendar
year, we are targeting new sites in the north of the country in
Pemba and Nacala as well as opportunities in the capital, Maputo.
We expect that the additional volumes supplied from these sites,
along with growth in revenues from our existing sites, will provide
a material contribution to revenue growth in FY2016.
The Vanduzi feedlot continues to grow in terms of capacity and
is processing cattle sourced from our own ranches as well as
locally purchased animals. Overall, we feel that the beef division
has now established itself sufficiently to enable expansion both in
terms of wholesale and retail sales in country, as well as by
exploring the potential in the export market.
Elsewhere, our maize and cocoa divisions have been impacted by
external factors beyond our control. In Mozambique, political
instability leading up to the presidential elections in October
2014 made transport of maize meal to the South and North of the
country difficult. Further, heavy rains affected both Mozambique
and Malawi in the second half of the year, temporarily cutting off
the road links between the Group's production and processing
facilities in central Mozambique, and the Northern markets. These
factors, in addition to a bumper maize harvest saturating the
market and reducing the demand for our processed products resulted
in lower revenues of $5,517,000 (2014: $9,716,000) for the year.
Whilst this is disappointing, we are confident that this coming
year will present a much more favourable market opportunity for the
Group. In particular the current maize crop appears to have
returned to more typical levels, with consequent higher sales
prices of maize meal and higher absolute margins achievable per
tonne of maize meal sold. Furthermore, and as a result of current
exchange rates between the US$ and Metical, the price of rice -
which is often seen as a substitute to maize meal - has increased
significantly, further driving the demand of maize meal. With a
more favourable sales and pricing environment this year, we expect
to achieve a significant improvement in this division in
FY2016.
The serious and prolonged Ebola crisis suffered in West Africa
heavily impacted our Sierra Leone operations, which in addition to
our cocoa division includes 45,000 hectares of brownfield
agricultural land in an area suitable for palm oil production in
the south of the country. Due to a combination of factors including
the restrictions of movement imposed in the country, together with
the imperative to protect our employees and the reduced
international investment appetite, we have placed the further
development of our Cocoa plantation on hold for the present time.
During this period of "care and maintenance", our plantation assets
in country are being maintained and operations are ready to
recommence when and if feasible. In order to support the country in
its fight against, and recovery from, Ebola, we have leased part of
our vehicle fleet and some of our warehousing infrastructure to
international aid organisations. In addition we have effected food
distribution for the World Food Programme in our area of operations
around the Kenema region. Seedlings from our nursery, together with
fertiliser and rice, have also been distributed to local farmers in
partnership with a major cocoa industry player to support the
region's recovery.
Despite the slowdown in the development of our plantation, our
current activities have allowed us to maintain a presence in the
country during this challenging time in Sierra Leone's history and
provide a revenue stream to the Group which currently offsets most
of the cash costs of the cocoa division.
Despite the challenges facing our Cocoa operations, we are now
encouraged by what appears to be the end of Sierra Leone's fight
against Ebola, with the country declared Ebola free by the World
Health Organisation in early November 2015. We hope that a start to
Sierra Leone's regeneration will now be possible, which will
require innovative solutions to the challenges the country faces.
As a first step, our Sierra Leone subsidiary company, Tropical
Farms Limited ('Tropical Farms'), has entered into a trading
agreement to use its organic certification and buying networks to
source and supply up to 500 Mt of Sierra Leonean cocoa beans to a
leading global company focused on natural, organic and specialty
foods (the 'Offtaker'). In exchange, the Offtaker will provide
Tropical Farms with pre-financing for the purchase of beans and pay
a fee per tonne of beans purchased on behalf of the Offtaker. While
relatively modest in scale, we hope that this first step in post
Ebola Sierra Leone may lead to future opportunities.
Corporate Update
During the period, in April 2015, Euan Kay and Michael Pelham
stepped down from the Board as non-executive directors in order to
focus on their other interests. I would like to thank both Euan and
Mike for their support and hard work for Agriterra over the years,
and wish them well for the future.
Financial Overview
While we continue to build our business towards profitability,
ultimately we are still in the investment phase of the Group's
development. Our results continue to reflect the significant
investment and development in our infrastructure - in particular
within our beef business through the development of our farms - as
we expand to critical mass. In the beef division our revenues now
cover all of the cash operating costs of our retail, abattoir and
feedlot operations, with the increasing scale of our operations
contributing to the ongoing costs of the farms. As we expand our
herd numbers, we expect the farms themselves to move to
profitability.
Despite the 31% increase in beef revenues to $5,366,000 (from
$4,081,000 in 2014), the unfavourable market conditions in the
maize division contributed to a decrease in overall revenue to
$11,787,000 (from $13,797,000 in 2014).
As a result of Ebola's detrimental impact on Sierra Leone, the
Board has adopted a conservative approach and taken the prudent
decision to impair all of the palm oil operations and substantially
all of the cocoa assets. The resulting impairment charges of
$9,860,000 (2014: $nil) are a significant component of the Group's
loss of $13,387,000 (2014: $8,016,000). Despite these impairments,
we remain optimistic about the intrinsic value of these assets and
remain hopeful that further value may be realised from the cocoa
operations in future, through investment & development, joint
venture, sale or a combination of these events.
(MORE TO FOLLOW) Dow Jones Newswires
November 20, 2015 02:00 ET (07:00 GMT)
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 unrest 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 and accordingly, as announced on 17 September 2014, a
successful settlement was reached in respect of such interests
resulting in income of US$5,659,000 to the Group. Following the
settlement, the Company and Group has no further current economic
interest in South Sudan.
Going forward, we are focussed on improving cost efficiency
across all divisions, and expanding revenues, to build a profitable
business. We believe that our cash balances of $6,421,000 at 31 May
2015, combined with our overdraft and other borrowing facilities of
179,000,000 Metical (approximately $4,850,000 at the 31 May 2015
Metical to US$ exchange rate) for our grain operations and a
further 105,000,000 Metical ($2,845,000 at the 31 May 2015 Metical
to US$ exchange rate) to fund our beef operations, are sufficient
for the Group to continue its development programme.
In light of the Group's future prospects, available cash and
banking facilities, and a Net Asset Value of $29,842,000, the
Directors are of the opinion that the Company is currently
significantly undervalued at a market cap of approximately
$8,250,000.
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. We are now beginning to
demonstrate the "proof of concept" in our beef operations and look
forward to a transition into profitability.
I would like to conclude by thanking our team who have worked
tirelessly in assisting us in the development of the business.
PH Edmonds
Chairman
19 November 2015
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 Europe Tel: +44 (0) 20 7894
7000
Michael Reynolds Cantor Fitzgerald Europe Tel: +44 (0) 20 7894
7000
John Beaumont Peat & Co. Tel: +44 (0) 20 3540
1723
Charlotte Heap St Brides Partners Ltd Tel: +44 (0) 20 7236
1177
Hugo de Salis St Brides Partners Ltd Tel: +44 (0) 20 7236
1177
OPERATIONS REVIEW
In Mozambique, Agriterra has successfully built a vertically
integrated, 'field to fork' beef operation, Mozbife Limitada
('Mozbife'), from which it now looks to achieve scalable growth. We
now have in place three established ranches (totalling 20,350
hectares), a feedlot facility (with current capacity for up to
3,500 animals), an abattoir (with capacity for 4,000 head per
month), and six retail units.
A major component in achieving growth in our beef operations is
the roll-out of our retail units. Each new retail site adds sales
volumes and revenues, which in turn increases the throughput at the
abattoir and the feedlot. We have already reached net positive cash
flows from these components of the business and additional volumes
now translate to increasing profit at the bottom line. Identifying
appropriate locations for new retail units is therefore a priority
for the Group and will be a key aspect in making the beef division
cash generative as a whole in the short to medium term.
During the roll-out planning, Nampula, in Northern Mozambique,
was quickly identified as a priority target for retail expansion.
Northern Mozambique is developing rapidly, and is anticipated to
continue to develop, mainly due to significant international
investment, principally in natural resources and is therefore a key
growth market within Mozambique. Nampula is an ideal location from
which to expand into this market not only because is it the central
commercial hub for Northern Mozambique, but it also has a large
domestic population (being the third largest city in the country,
with a population of approximately 605,000 people in 2014), with an
established, and rapidly growing, market for quality butchered beef
products. For these reasons, during the period we opened a new
600m(2) distribution centre and retail unit in Nampula, to
establish our sixth retail site, adding to existing retail units in
Beira, Chimoio, Tete (two sites) and Manica.
It is our intention to leverage this established northern
presence to further build on these revenues. Nacala and Pemba,
located in the northern provinces of Nampula and Cabo Delegado
respectively, have been identified as strategic locations in which
to open new retail stores in the future (FY2016 and FY2017), which
would be supplied from our Nampula distribution centre. In
addition, we have identified two potential retail units in Maputo,
which as the capital and largest city, offers significant revenue
and growth potential. Furthermore, due to its southern location,
our presence here would notably increase our supply reach, making
Mozbife a Mozambique wide supplier. We also continue to assess the
potential to open smaller satellite retail units in the major
cities that we already supply, namely Beira and Nampula, which
would utilise the Group's existing infrastructure and increase our
reach to the significant, but disperse, populations in these
cities. Export opportunities are being evaluated which, if
successful, could scale up our beef business in the medium
term.
In order to keep our retail units stocked with the highest
quality beef products, and to ensure the full uplift in value is
secured within the Group's own operations, all beef sold within
Mozbife's retail units is sourced from the Group's state-of-the-art
abattoir at Chimoio. 5,013 animals were processed through the
abattoir during the period, an increase over the 4,285 animals
processed during FY2014. With a current run rate of approximately
700 animals per month, the abattoir continues to perform well. With
a monthly slaughter capacity of approximately 4,000 head, there
remains considerable flexibility to increase slaughter rates as the
beef operations expand.
In order to achieve the best price for our cattle when
slaughtered, our animals spend time at our Vanduzi feedlot, which
has a current carrying capacity of approximately 3,500 head to
provide approximately 1,000 head for slaughter each month to the
abattoir. At the period end there were 1,804 animals in the
feedlot, sourced from Mozbife's own ranches or from cattle
purchased from the surrounding areas. In addition to feeding pens,
the feedlot also has 1,050 hectares of land used for feed
production which provides the twin benefits of reducing costs and
providing certainty of supply. Furthermore, the feedlot works
strategically with other companies in the Group, by using bran, the
by-product from the grain processing facilities, as a feed
supplement for the cattle. By the end of October 2015, and due to
the increasing demand for our products, we have approximately 3,350
animals in the feedlot. We are now expanding the feedlot pens and
expect to add capacity for a further 1,000 animals during
FY2016.
In order to supply our retail outlets and capitalise on
potential export opportunities with high quality beef products, it
is imperative that we have a strong supply of beef. Our ranches
(the 2,350 hectare Mavonde ranch, the 2,500 hectare Inhazonia ranch
and the 15,500 hectare Dombe ranch, all located in Central
Mozambique) therefore remain central to the medium to long term
revenue generative capacity of the beef division, delivering a very
high quality animal, either pure Beefmaster, premium quality
imported animals, or local breeds cross-bred with pedigrees to rear
larger animals. The very best cuts can be obtained from these high
quality animals which, in turn, command the highest retail prices
in our retail units.
Our herd size at the ranches at the end of May 2015 stood at
5,363 head (2014: 6,400 head), bringing Mozbife's total head to
7,167 (2014: 8,230 head) including the feedlot animals at that
date. Our focus for the ranches remains centred on increasing our
herd size in order to utilise our land capacity, which will
positively impact our operating efficiencies and profit margins. To
support this on-going growth in herd size, additional pivot
irrigation has been completed at Mavonde and Inhazonia, thereby
increasing the irrigated land by 195 hectares to 368 hectares, and
by 88 hectares to 118 hectares respectively. Different varieties of
grass have now been planted on these lands to produce grass which
is suitable both for grazing and for hay bailing. This
diversification will provide important flexibility for Mozbife as
it continues its expansion strategy to maximise stocking ratios
across the ranches.
With our existing installed irrigation, we have a current
capacity for approximately 10,000 head across our ranches, with
scope for further expansion in capacity through expansion of
irrigation and/or land bank. This established infrastructure and
capacity potential mean that we are well placed for growth. As the
pastures further establish and support an increasing herd,
increased birth rates and herd sizes will positively impact the
number of animals available for slaughter.
(MORE TO FOLLOW) Dow Jones Newswires
November 20, 2015 02:00 ET (07:00 GMT)
In summary, we are well advanced in implementing our strategy
for the beef division. Our feedlot, abattoir and retail units are
generating net positive cash flows and, with the current irrigation
at our Mavonde and Inhazonia ranches (provided we continue to
increase our herd size), we expect our farms to start contributing
to the bottom line in the short to medium term. Our extensive
infrastructure and the capacity to scale up our operations across
all aspects of this division means that we are now poised to
capitalise on the ever increasing demand for beef products, both
domestically in Mozambique and overseas.
Agriterra's maize operations are focussed on its 35,000 tonne
storage capacity facility in Chimoio in central Mozambique, and its
15,000 tonne storage capacity facility in Tete, in north-west
Mozambique. The established maize buying and processing business
purchases 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 over 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
totalled approximately 28,700 tonnes (2013-2014 season: 32,000
tonnes).
Sales were slow during the period, with 18,100 tonnes of maize
milled (2014: 24,500 tonnes) and 13,600 tonnes of maize meal sold
(2014: 18,700 tonnes), producing total sales of $5,517,000 (2014:
$9,716,000). The Board believes that the low sales volumes are due
to a number of factors, though primarily reflect an exceptionally
large harvest - estimated at around 2.3 million tonnes - which
saturated the local market and reduced the demand for processed
products from Desenvolvimento E Comercialização Agricola Limitada
('DECA') and Compagri Limitada ('Compagri'). This exceptionally
large harvest also impacted the price achievable for the Group's
products, with prices reducing from an average of US$496 per tonne
of meal during 2014, to US$403 per tonne of meal for 2015.
Political instability leading up to the presidential elections
in October 2014 made transport to the South and North of the
country difficult and further compounded the disappointing sales
achieved during the period. Further, heavy rains affected both
Mozambique and Malawi in the second half of the year, temporarily
cutting off the road links between the Group's production and
processing facilities in central Mozambique, and the Northern
markets, with a consequential adverse effect on sales volumes.
It is anticipated that the maize market will return to more
typical figures in the 2015-2016 season. While this pushes buying
prices up, it has impacted more favourably on the pricing
environment, and demand, for milled products. This has been helped
further by a significant increase in the price of competing
imported products, such as rice, due to the recent depreciation of
the Metical - the Metical is now trading at approximately 43
Metical per US$, compared to an average of 32.45 Metical per US$ in
FY2015.
With approximately 11,200 tonnes of maize in inventory at 31 May
2015, purchased at lower prices during the plentiful 2013-2014
season, we have a relatively cheap maize supply for a significant
proportion of our forecast sales in FY2016. With milling capacity
in excess of 75,000 tonnes of maize per annum, a favourable sales
environment, and steady supplies of raw maize, we are optimistic
that FY2016 will be a more profitable, and cash generative year for
the maize division.
Agriterra's cocoa division consists of a 3,200 hectare cocoa
plantation, located 40km from Kenema in south-east Sierra Leone,
which is supported by a 2.2 hectare nursery. Subject to the
acquisition of an additional block of approximately 1,600 hectares
of land adjacent to the existing plantation, the Group's initial
plan for the cocoa plantation was to plant a total of 4,000
hectares, with the ultimate aim of producing a minimum of 8,000
tonnes of cocoa per annum. The Group also owns a 2,000m(2) state of
the art warehouse in Kenema.
As announced in September 2014 and as a result of the
well-publicised Ebola outbreak affecting West Africa, including
Sierra Leone, the Board made the decision to suspend current
development activities at the plantation. In addition to the
significant restrictions in movement in country causing a shortage
of labour, the Board assessed that it was unsafe to pursue an
expansion of the plantation at that 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. Due to the
restriction in the scope of operations in the year and the
uncertainty regarding the region, the Board took the decision to
write down the cocoa division's assets and recorded an impairment
charge of $6,791,000 (2014: $nil).
However, in spite of the recent reduction in scale of operations
in response to the Ebola outbreak, the Group believes there is
potential for 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 and the
Group, with its established plantation and supportive
infrastructure, is well placed to capitalise on this, which will in
turn also support the recovery of the country. Subject to an
improvement in the investment conditions in Sierra Leone, the
Directors believe that the Group has the opportunity to obtain the
necessary financing to bring the cocoa assets into production in
time to capitalise on this supply shortage.
In addition to maintaining the Group's infrastructure and fleet
during the Ebola outbreak, the Group has deployed many of its
vehicle and warehousing resources to assist several major NGOs
working in the Ebola relief efforts. This support has provided the
Group with a significant role to play during the Ebola outbreak at
a time when many aid agencies were in critical need of in-country
support. Through the utilisation of its warehousing, which has been
used for storage of food and essential supplies, and vehicles
utilised for distribution as well as medical and humanitarian
services, the Group has supported the relief effort in Sierra
Leone. Further, the income of $904,000 (2014: $nil) from these
rentals has contributed to mitigating the cash requirements of this
division while the development operations are curtailed.
In addition to the development of the plantation and until early
2014, the Group also operated a small cocoa trading business from
Kenema where beans were purchased from local out-growers and
processed ready for sale to the international market. This
operation, whilst an important foothold in this area of Sierra
Leone, was loss-making at the time and following a series of poor
harvests and the Ebola outbreak, the decision was taken to
discontinue these activities. No cocoa sales were made during the
period and expenditure of US$174,000 (2014: net loss of $986,000)
relating to the trading operations is presented as "discontinued"
within the consolidated financial statements.
FINANCIAL STATEMENTS
Consolidated income statement
For the year ended 31 May 2015
2015 2014
Note US$000 US$000
--------- ---------
CONTINUING OPERATIONS
Revenue 6 11,787 13,797
Cost of sales (10,662) (12,475)
--------- ---------
Gross profit 1,125 1,322
Increase in value of biological assets 23 1,910 290
Operating expenses (10,643) (8,338)
Impairment of current and non-current assets 12.1 (6,791) -
Other income 33 77
Profit on disposal of property, plant and equipment 76 149
Operating loss 8 (14,290) (6,500)
Investment revenues 13 19 146
Other gains and losses 14 (849) 936
Finance costs 15 (683) (209)
Loss before taxation (15,803) (5,627)
Taxation 16 (81) (25)
--------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
November 20, 2015 02:00 ET (07:00 GMT)
Loss for the year from continuing operations (15,884) (5,652)
DISCONTINUED OPERATIONS
Profit / (loss) for the year from discontinued operations 17 2,497 (2,364)
Loss for the year attributable to owners of the Company (13,387) (8,016)
US cents US cents
LOSS PER SHARE
Basic and diluted loss per share from continuing operations 18 (1.50) (0.53)
========= =========
Basic and diluted loss per share from continuing and discontinued operations 18 (1.26) (0.76)
========= =========
Consolidated statement of comprehensive income
For the year ended 31 May 2015
2015 2014
US$000 US$000
--------- --------
Loss for the year (13,387) (8,016)
--------- --------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (4,435) (1,612)
--------- --------
Other comprehensive income for the year (4,435) (1,612)
--------- --------
Total comprehensive income for the year attributable to owners of the Company (17,822) (9,628)
========= ========
Consolidated statement of financial position
As at 31 May 2015
2015 2014
Note US$000 US$000
---------- ----------
Non-current assets
Goodwill 19 - 576
Property, plant and equipment 20 19,746 36,268
Interests in associates 21 4 4
Investments in quoted companies 22 376 1,225
Biological assets 23 2,246 3,071
---------- ----------
22,372 41,144
---------- ----------
Current assets
Biological assets 23 1,019 1,201
Inventories 24 2,892 4,900
Trade and other receivables 25 1,594 1,148
Cash and cash equivalents 26 6,421 6,994
---------- ----------
11,926 14,243
---------- ----------
Total assets 34,298 55,387
---------- ----------
Current liabilities
Borrowings 27 3,079 2,668
Trade and other payables 28 1,377 2,170
---------- ----------
4,456 4,838
---------- ----------
Net current assets 7,470 9,405
---------- ----------
Net assets 29,842 50,549
---------- ----------
Share capital 30 1,960 1,960
Share premium 148,622 148,622
Shares to be issued 31.1 - 2,940
Share based payment reserve 1,914 1,859
Translation reserve 31.2 (8,243) (3,808)
Accumulated losses (114,411) (101,024)
---------- ----------
Equity attributable to equity holders of the parent 29,842 50,549
---------- ----------
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 19 November 2015.
Signed on behalf of the Board of Directors by:
PH Edmonds
Chairman
19 November 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 May 2015
Share
Shares based
Share Share to be payment Translation Accumulated Total
capital premium issued reserve reserve losses equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- -------- -------- -------- ------------ ------------ ---------
Balance at 1
June 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 32 - - - 149 - - 149
Balance at 31
May 2014 1,960 148,622 2,940 1,859 (3,808) (101,024) 50,549
Loss for the
year - - - - - (13,387) (13,387)
Other
comprehensive
income:
Exchange
translation
loss on
foreign
operations - - - - (4,435) - (4,435)
--------- -------- -------- -------- ------------ ------------ ---------
Total
comprehensive
income for
the year - - - - (4,435) (13,387) (17,822)
Share-based
payments 32 - - - 55 - - 55
Released to
profit and
loss 12.2 - - (2,940) - - - (2,940)
Balance at 31
May 2015 1,960 148,622 - 1,914 (8,243) (114,411) 29,842
========= ======== ======== ======== ============ ============ =========
Consolidated cash flow statement
For the year ended 31 May 2015
2015 2014
(re-presented - note 4)
Note US$000 US$000
--------- ------------------------
Cash flows from operating activities
Loss before tax from continuing operations (15,803) (5,627)
Adjustments for:
Depreciation 20 2,211 1,766
Profit on disposal of property, plant and equipment (76) (149)
Share based payment expense 55 149
Foreign exchange loss / (gain) 177 (52)
Increase in value of biological assets 23 (1,910) (290)
Finance costs 15 683 209
Investment revenues 13 (19) (146)
Decrease / (increase) in fair value of quoted investments 22 849 (936)
Impairment of current and non-current assets 12.1 6,791 -
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Operating cash flows before movements in working capital (7,042) (5,076)
Decrease in inventories 1,158 197
(Increase) / decrease in trade and other receivables (848) 971
Decrease in trade and other payables (719) (173)
Net decrease / (increase) in biological assets held for slaughter
purposes 23 2,281 (219)
--------- ------------------------
Cash used in operating activities by continuing operations (5,170) (4,300)
Corporation tax paid (9) (25)
Finance costs (683) (209)
Interest received 19 146
Net cash used in operating activities by continuing operations (5,843) (4,388)
--------- ------------------------
Net cash provided by / (used in) operating activities by discontinued
operations 5,627 (879)
--------- ------------------------
Net cash used in operating activities (216) (5,267)
--------- ------------------------
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment 291 202
Acquisition of property, plant and equipment 20 (1,555) (5,935)
Purchase of investment in quoted companies 22 - (285)
Net cash used in investing activities by continuing operations (1,264) (6,018)
--------- ------------------------
Net cash from investing activities by discontinued operations - -
--------- ------------------------
Net cash used in investing activities (1,264) (6,018)
--------- ------------------------
Cash flows from financing activities
Net draw down of overdraft 1,376 1,129
Repayment of loans 27 (200) (1,500)
Net cash from / (used in) financing activities from continuing
operations 1,176 (371)
--------- ------------------------
Net cash used in financing activities by discontinued operations - -
--------- ------------------------
Net cash from / (used in) financing activities 1,176 (371)
--------- ------------------------
Net decrease in cash and cash equivalents (304) (11,656)
Effect of exchange rates on cash and cash equivalents (269) (98)
--------- ------------------------
Cash and cash equivalents at beginning of the year 6,994 18,748
--------- ------------------------
Cash and cash equivalents at end of the year 6,421 6,994
========= ========================
Notes to the consolidated financial statements
1. GeNERAL INFORMATION
Agriterra is incorporated and domiciled in Guernsey, the Channel
Islands, with registered number 42643. Further details, including
the address of the registered office, are available on the
Company's website. The nature of the Group's operations and its
principal activities are set out in the Directors' report. 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
39.
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
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 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)
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)
IFRIC 21 Levies (effective for annual periods beginning on or after 1 January 2014)
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 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 41 Amendments bringing bearer plants into the scope of IAS 16 (effective
for annual periods beginning
on or after 1 January 2016)
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 5.1 to the consolidated
financial statements.
3.2. Basis of consolidation
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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.
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 each
month, unless exchange rates fluctuate significantly during the
month, 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
2015 2014 2015 2014
------- ------ ------- ------
Mozambican Meticais: US$ 32.45 30.23 36.90 31.00
Sierra Leone Leones: US$ 4,301 4,284 4,295 4,290
======= ====== ======= ======
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's services are rendered.
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 and 31 May 2015
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 acquiree.
Acquisition related costs are recognised in profit and loss as
incurred.
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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 profit and loss.
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. 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
expenses.
Depreciation is charged on a straight-line basis over the
estimated useful lives of each item, as follows:
Land and buildings:
Land Nil
Buildings and leasehold improvements 2% - 33%
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.
3.15. 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 of
disposal 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.
3.16. 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 value
is 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.
3.17. 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.
3.18. 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.
3.18.1. 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.
3.18.1.1. 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.
3.18.1.2. 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 within other gains and losses in the income statement.
Fair value is determined in the manner described in note 22.
3.18.1.3. 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.
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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.
3.18.1.4. 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.
3.18.2. 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.
3.18.2.1. 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.
3.18.2.2. 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.
3.18.2.2.1. 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.
3.18.2.2.2. Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
4. REPRESENTATIONS TO THE CASH FLOW STATEMENT
In the financial year ended 31 May 2014, and consistent with
preceding financial periods, the Group presented all cash flows for
the purchase, sale, slaughter or disposal by other means of its
cattle within a single line in the Consolidated cash flow statement
entitled 'Increase in biological assets', a component of 'Cash
flows from investing activities'. This reflected the fact that,
historically, a significant portion of the Group's cash flows for
the purchase of animals related to the purchase of the breeding
herd.
In the current and preceding financial year, the Group did not
purchase cattle to increase its breeding herd - all cattle
purchases were for slaughter herd animals, generally being animals
taken directly into the feedlot. Cash flows of this nature are more
appropriately reflected within cash flows from operating
activities. Accordingly, the Group has altered its presentation for
the purchase of slaughter herd animals, which are now included
within the line item of the Consolidated cash flow statement
entitled 'Net decrease / (increase) in biological assets held for
slaughter purchases', within 'Net cash used in operating
activities'. The comparative of $219,000 outflow has been
reclassified from cash flows from investing activities resulting in
an increase in 'Net cash used in operating activities by continuing
operations' and 'Net cash used in operating activities' by $219,000
and a corresponding decrease in 'Net cash used in investing
activities by continuing operations' and 'Net cash used in
investing activities'. The representation has no effect on net cash
flows for the year ended 31 May 2014, nor any effect on the
Consolidated income statement or on the Consolidated statement of
financial position.
5. 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.
5.1. 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, working capital and additional property plant and
equipment that are expected to be required.
The Directors believe that with existing resources, including
available undrawn borrowing facilities, the Group and Company is
able to manage its business risks and successfully grow its
operating businesses. 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.
5.2. 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 asset or cash generating unit is compared with its
fair value. The impairment review is sensitive to various
assumptions, including the expected sales forecasts, cost
assumptions, capital requirements, and discount rates among others.
Details of impairments recorded in the period are included in note
12.
5.3. 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 in Mozambique of a similar
age and breed, less the estimated costs to bring them to market,
converted to US$ at the exchange rate prevailing at the period end.
Changes in any estimates could lead to the recognition of
significant fair value changes in the consolidated income
statement, or significant changes in the foreign currency
translation reserve for changes in the Metical to US$ exchange
rate. At 31 May 2015 the value of the breeding herd disclosed as a
non-current asset was $2,246,000 (2014: $3,071,000). The value of
the herd held for slaughter disclosed as a current asset was
$1,019,000 (2014: $1,201,000).
5.4. 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 2014 and 31 May 2015. As at 31
May 2015, the gross and net IVA recoverable assets are respectively
$1,319,000 (2014: $1,345,000) and $nil (2014: $nil) at the US$ to
Metical exchange rate of 36.90 (2014: 31.00) at that date.
6. Revenue
An analysis of the Group's revenue is as follows:
2015 2014
US$000 US$000
------ ------
Continuing operations
Sale of goods 10,839 13,797
Hire of equipment and machinery 948 -
------ ------
11,787 13,797
Investment revenues (note 13) 19 146
------ ------
11,806 13,943
Discontinued operations
Sales of goods (note 17.2) - 1,907
------ ------
11,806 15,850
====== ======
7. Segment reporting
The ExCom 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.
7.1. Segment revenue and results
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The following is an analysis of the Group's revenue and results
by operating segment:
Year ending 31 May Grain Beef Cocoa(3) Unallo-cated Discon- Elimina-tions Total
2015 Tinued(4)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------- -------- --------- ------------- ----------- -------------- ---------
Revenue
External sales(2) 5,517 5,366 904 - - - 11,787
Inter-segment
sales(1) 524 - - - - (524) -
-------- -------- --------- ------------- ----------- -------------- ---------
6,041 5,366 904 - - (524) 11,787
-------- -------- --------- ------------- ----------- -------------- ---------
Segment results
- Operating loss (2,128) (2,317) (7,853) (2,166) 174 - (14,290)
- Interest
(expense) / income (680) 2 - 14 - - (664)
- Other gains and
losses - - - (849) - - (849)
-------- -------- --------- ------------- ----------- -------------- ---------
Loss before tax (2,808) (2,315) (7,853) (3,001) 174 - (15,803)
-------- -------- --------- ------------- ----------- -------------- ---------
Income tax (78) (3) - - - - (81)
-------- -------- --------- ------------- ----------- -------------- ---------
Loss for the period
from continuing
operations (2,886) (2,318) (7,853) (3,001) 174 - (15,884)
======== ======== ========= ============= =========== ============== =========
Year ending 31 Grain Beef Cocoa Unallo-cated Discon-tinued(4) Elimina-tions Total
May 2014
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)
======= ======== ======== ============= ================= ============== ========
(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 within Sierra Leone
during the year (2014: supplied to the world market).
(3) Revenue reported in the Cocoa segment for the 12 months ended 31 May
2015 arises on the rental of certain of the Cocoa division's assets
in aid of the relief effort against the Ebola crisis in Sierra Leone.
(4) Amounts reclassified to discontinued operations in both periods presented
relate to the Cocoa segment - refer to note 17.2.
The segment items included in the consolidated income statement
for the year are as follows:
Year ending 31 May Grain Beef Cocoa Unallo-cated Discon-tinued(1) Elimina-tions Total
2015
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- ----------------- -------------- -------
Depreciation 386 1,122 628 136 (61) - 2,211
Impairment of
assets (note 12.1) - - 6,791 - - - 6,791
======= ======= ======= ============= ================= ============== =======
Year ending 31 May Grain Beef Cocoa Unallo-cated Discon-tinued(1) Elimina-tions Total
2014
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- ----------------- -------------- -------
Depreciation 504 1,124 133 138 (133) - 1,766
======= ======= ======= ============= ================= ============== =======
(1) Amounts reclassified to discontinued operations in both periods presented
relate to the Cocoa segment - refer to note 17.2.
7.2. Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and
equipment, biological assets, 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 additions to property, plant and
equipment and intangible assets, including capitalised depreciation
and amortisation where applicable.
The segment assets and liabilities at 31 May 2015 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 9,603 16,057 1,656 6,982 34,298
Liabilities (3,297) (228) (146) (785) (4,456)
Capital expenditure 49 1,168 484 - 1,701
======== ======= ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 27,316 3,671
Unallocated:
Property, plant and equipment 78 -
Investments 380 -
Other receivables 495 -
Cash 6,029 -
Trade payables - 627
Accruals and deferred income - 158
Total 34,298 4,456
------- ------------
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
======= ============
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Unallocated property, plant and equipment includes $nil (2014:
$5,880,000) in respect of the lease over 45,000 hectares of
brownfield land suitable for Palm oil production and $76,000 (2014:
$837,000) of Aviation assets. The Group's interest in the
aforementioned lease was impaired in the period as more fully
described in note 12.2.
7.3. Significant customers
In the year ended 31 May 2015 one of the Beef division's
customers generated $1,515,000 of revenue being 13% of Group
revenue. In the year ended 31 May 2014 one of the Cocoa division's
customers generated $1,884,000 of revenue being 14% of Group
revenue.
8. Operating loss
Operating loss has been arrived at after charging /
(crediting):
2015 2014
US000 US$000
------ -------
Depreciation of property, plant and equipment 2,211 1,766
(Profit) / loss on disposal of property, plant and equipment (76) (149)
Net foreign exchange loss / (gain) 177 (52)
Impairment of assets (see note 12.1) 6,791 -
Staff costs (see note 10) 4,921 4,581
====== =======
9. Auditors Remuneration
Amounts payable to RSM UK Audit LLP (formerly Baker Tilly UK
Audit LLP) and their associates in respect of audit services are as
follows:
2015 2014
US$000 US$000
---------------------- ------
Fees payable to the Company's auditor for the audit of the Company's accounts 153 132
Fees payable to the Company's auditor and their associates for other services to
the Group:
The audit of the Company's subsidiaries 52 58
---------------------- ------
Total audit fees 205 190
---------------------- ------
Other than as disclosed above, the Company's auditor and their
associates have not provided additional services to the Group.
10. Staff costs
The average monthly number of employees (including executive
Directors) employed by the Group for the year was as follows:
2015 2014
Number Number
------- -------
Office and Management 48 61
Operational 814 910
------- -------
862 971
======= =======
Of which relating to:
Continuing operations 849 900
Discontinued operations 13 71
--- ---
862 971
=== ===
Their aggregate remuneration comprised:
2015 2014
US$000 US$000
------- -------
Wages and salaries 5,008 5,429
Social security costs 104 94
Share based payment charge 55 149
------- -------
5,167 5,672
Less: capitalised and included in assets under construction (169) (685)
------- -------
Amount charged to profit and loss 4,998 4,987
======= =======
Of which relating to:
Continuing operations 4,921 4,581
Discontinued operations 77 406
----- -----
4,998 4,987
===== =====
11. REMUNERATION OF DIRECTORS
Year ended 31 May 2015 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
--------- -------- -------------------- --------
PH Edmonds 159 - - 159
AS Groves 159 - - 159
DL Cassiano-Silva 215 - 11 226
EA Kay 47 - 15 62
MN Pelham 50 - - 50
630 - 26 656
========= ======== ==================== ========
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
========= ======== ==================== ========
12. IMPAIRMENT OF CURRENT AND NON-CURRENT ASSETS
In accordance with IAS 36, Impairment of assets, the Group
conducted an impairment review of its tangible and intangible
assets as at 31 May 2015, resulting in an impairment against its
cocoa division assets and palm lease assets, all held in Sierra
Leone, as follows:
2015
US$000
-------
Cocoa division 6,791
-------
Impairment against continuing operations 6,791
-------
Palm activities 3,069
-------
Impairment against discontinued operations 3,069
9,860
=======
Further details are provided below.
12.1. Impairment of cocoa division current and non-current assets
As announced in September 2014 and as a result of the
well-publicised Ebola outbreak affecting Western Africa, including
Sierra Leone, the Board made the decision to suspend development
activities at the cocoa plantation in Sierra Leone, having already
ceased its cocoa trading activities by then. In addition to the
significant restrictions in movement in country causing a shortage
of labour, the Board assessed that it was unsafe to pursue an
expansion of the plantation at that stage, which could increase the
risk of Ebola developing on the plantation site and place staff at
risk.
The Board continued to monitor the situation regarding Ebola in
Sierra Leone and acknowledges that important strides have been made
to control the virus and restore confidence in investing in the
country. However, the investment landscape in Sierra Leone has not
returned to the favourable environment that was present pre-Ebola,
and, in the Board's opinion, significant further regeneration and
international development support is needed in the short to medium
term to facilitate further significant private sector
investment.
In light of these developments, and following a review by the
Board of its Group investment strategy and priorities, the Board
has maintained the suspension in development funding for its Cocoa
operations in Sierra Leone; activities at the plantation continue
to be maintained at the level sufficient to protect staff while
maintaining the Group's assets in country. The Group's primary
focus is now on the development of the Beef business in
Mozambique.
As required by IFRS, the Group conducted an impairment review of
all of the Group's cocoa division assets in Sierra Leone, which
principally comprise goodwill, property, plant and equipment, long
term prepayments, and inventory. The impairment review resulted in
an impairment against the cocoa division's assets in Sierra Leone
of $6,791,000 (2014: $nil), analysed as follows:
2015
US$000
-------
Impairment of goodwill 575
Impairment of property, plant and equipment 5,998
Impairment of non-current receivables 159
Impairment of inventory 59
6,791
=======
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Where assets are capable of generating cash flows that are
largely independent from those generated by other assets, the
impairment review compared the carrying value of individual assets
to their recoverable amount. Examples of such assets are
warehouses, vehicles, nurseries etc. Where the asset does not
generate cash flows that are independent from other assets, the
Group estimated the recoverable amount of the cash-generating unit
to which the asset belongs. Examples of such assets are the
plantation development assets, including the land itself, clearing
costs, planting, maintenance and other expenditure related to the
growing of cocoa plants at the plantation. Due to the suspension of
funding for the cocoa operations, recoverable amount was generally
determined for assets or cash generating units based on fair value
less costs of disposal, where fair value was based on the Directors
best estimates of the likely realisable value for individual assets
within Sierra Leone. Where, given the current investment landscape
in Sierra Leone there was no basis for making a reliable estimate
of fair value less costs of disposal - such as for the plantation
development assets - recoverable amount was measured by reference
to value in use alone. This was estimated at $nil because the
relevant assets, at their present stage of development, are not
capable of generating positive cash returns without further
development funding. The impairment review resulted in a write down
of the cocoa divisions goodwill and non-current receivables (which
represented long term land lease rental payments) to $nil, and its
property, plant and equipment to $1,180,000.
In the medium to long term, the Board remains positive about the
future development potential in Sierra Leone for the cocoa
plantation, as well as the palm (refer below). With a projected
cocoa bean deficit of up to one million metric tonnes by 2020/2021
driving prices upwards, the fundamentals of the cocoa market remain
strong. The Board remains hopeful that further value may be
realised from its Cocoa operations in future periods, through
development or sale, and accordingly the operations continue to be
presented as continuing operations.
12.2. Impairment of palm activities' non-current assets
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
lease was acquired in 2012 and the Board has continued to evaluate
this property and its potential for commercialisation. Due to the
factors described above which resulted in an impairment against the
Group's cocoa division assets, the Group has decided to suspend any
activity on this lease. The assets have accordingly been impaired
to $nil and presented within discontinued operations.
The carrying value of these assets, included within Property,
plant and equipment was $6,009,000, which includes the initial
purchase price of the lease, deferred consideration (refer to note
31.1) and expenditure incurred on maintaining the lease (such as
annual lease rental payments). The deferred consideration was to be
settled in Ordinary Shares in the Company, following the initial
development of 1,000 hectares of the leasehold land. Due to the
impairment, the Group no longer intends to complete this initial
development and accordingly the related obligation to issue shares
(included within the 'Shares to be issued reserve', a component of
the Group and Company equity, with a carrying value of $2,940,000)
has been released to profit and loss, reducing the impairment
arising on the palm activities to $3,069,000, which is included in
the results of discontinued operations (refer to note 17.3).
13. Investment revenues
2015 2014
US$000 US$000
------- -------
Interest revenues:
Bank deposits 19 58
Other loans and receivables - 88
Total interest revenues 19 146
------- -------
All investment revenues are earned on financial assets
classified as loans and receivables (including cash and bank
balances).
14. Other gains and losses
2015 2014
US$000 US$000
------- -------
(Decrease) / increase in fair value of quoted investments (note 22) (849) 936
======= =======
15. Finance costs
2015 2014
US$000 US$000
------- -------
Interest expense:
Bank borrowings 683 197
Loan notes - 12
Total finance expense 683 209
======= =======
16. Taxation
2015 2014
US$000 US$000
--------- --------
Loss before tax from continuing activities (15,803) (5,627)
--------- --------
Tax credit at the Mozambican corporation tax rate of 32% (2014:32%) (5,057) (1,801)
Tax effect of expenses that are not deductible in determining taxable profit 67 73
Tax effect of losses not allowable 1,556 432
Tax effect of losses not recognised in overseas subsidiaries (net of effect of different
rates) 3,434 1,296
Statutory taxation payments irrespective of income 9 25
Adjustment in respect of prior years 72 -
Tax expense 81 25
========= ========
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 $nil (2014: charge of
$1,000,000) in respect of the 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
$17,500,000 (31 May 2014: $14,570,000). In addition, the Group has
further deductible timing differences amounting to approximately
$34,680,000 (31 May 2014: $21,047,000). 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 (2014: 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).
17. Discontinued operations
The profit / (loss) after tax arising on discontinued operations
during the period is analysed by business operation as follows:
2015 2014
US$000 US$000
-------- --------
Oil and gas activities 5,740 (1,378)
Cocoa trading activities (174) (986)
Palm activities (3,069) -
-------- --------
Net profit / (loss) after tax attributable to discontinued operations
(attributable to owners of the Company) 2,497 (2,364)
======== ========
17.1. 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.
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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 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 was incurred in this matter during the year
ended 31 May 2014. This matter was resolved in the current
financial year through the payment to the Company of GBP3,412,000
(being $5,659,000) in cash which has been recognised in the current
financial period within discontinued operations. A further net
credit of $81,000 has been recorded with respect to the
re-imbursement of expenditure incurred in pursuing this claim.
17.2. 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 ceased its Cocoa trading operations
in Sierra Leone in the financial year ended 31 May 2014. The Cocoa
trading operations represented a significant component of 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 amounts recorded in the
current financial year relate to the winding down of the Cocoa
Trading operations between June and August 2014. From 1 September
2014, all expenditure in the Cocoa division has been included
within continuing operations, relating either to the cocoa
plantation activities, or the logistics activities undertaken to
provide assistance in the Ebola relief efforts.
The results of the discontinued Cocoa trading operations, which
have been included in the Consolidated income statement, were as
follows:
2015 2014
US$000 US$000
------- --------
Loss in the year from the Cocoa trading operations:
Revenue - 1,907
Expenses (174) (2,748)
Finance expense - (1)
Loss before taxation (174) (842)
Taxation - -
------- --------
Loss after tax from discontinued Cocoa trading operations in the period (174) (842)
------- --------
Loss on cessation of the Cocoa trading operations:
Loss on impairment of goodwill - (144)
Net loss attributable to discontinued Cocoa trading operations (attributable to owners of
the Company) (174) (986)
======= ========
17.3. Palm activities
The amount reported within discontinued operations for palm
activities represents the impairment against the carrying value of
the Group's 45,000 hectare lease in the Pujehun District of Sierra
Leone, net of the release of amounts deferred consideration no
longer expected to be due, as more fully described in note
12.2.
18. (LOSS) / Earnings per share
The calculation of the basic and diluted (loss) / earnings per
share is based on the following data:
2015 2014
US$000 US$000
-------------- --------------
Loss for the purposes of basic and diluted earnings per share from continuing
activities (15,884) (5,652)
Profit / (loss) for the purposes of basic and diluted earnings per share from
discontinued
activities 2,497 (2,364)
Loss for the purposes of basic and diluted earnings per share (loss for the year
attributable
to equity holders of the parent) (13,387) (8,016)
============== ==============
Weighted average number of Ordinary Shares for the purposes of basic and diluted
(loss) /
earnings per share 1,061,818,478 1,061,818,478
============== ==============
Basic and diluted loss per share (1.26) (0.76)
-------------- --------------
Basic and diluted loss per share from continuing activities (1.50) (0.53)
-------------- --------------
Basic and diluted earnings / (loss) per share from discontinued activities 0.24 (0.22)
-------------- --------------
19. Goodwill
US$000
-------
BOOK VALUE
At 1 June 2013 697
Eliminated in the period (144)
Exchange rate adjustment 23
At 31 May 2014 576
Eliminated in the period (575)
Exchange rate adjustment (1)
At 31 May 2015 -
-------
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 year ended 31 May 2014 (refer to note 17.2), the
proportion of the goodwill attributed to that business was
eliminated and is included in the computation of the net loss from
discontinued operations for the year ended 31 May 2014. The
remaining balance of $576,000 attributed to the cocoa plantation
has been reviewed for impairment in accordance with the Group's
accounting policy and written off in full in the current period as
more fully described in note 12.1.
20. Property, plant and equipment
Land and Plant and Motor Other Assets under
buildings machinery vehicles Aviation assets construction Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 June
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
Additions 1,039 529 38 10 85 - 1,701
Disposals (1) (291) (241) - (18) - (551)
Transfers 2,195 200 - - - (2,395) -
Exchange rate
adjustment (2,425) (1,483) (735) (202) (87) - (4,932)
At 31 May
2015 25,185 9,524 4,932 986 575 - 41,202
------------- ------------- -------------- --------- -------- ------------- --------
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November 20, 2015 02:00 ET (07:00 GMT)
Accumulated
Depreciation
and
impairment
At 1 June
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)
Exchange rate
adjustment 547 (1,383) 464 (20) (9) - (401)
------------- ------------- -------------- --------- -------- ------------- --------
At 31 May
2014 864 3,067 4,187 341 257 - 8,716
Charge for
the year 421 1,101 645 174 77 - 2,418
Disposals - (112) (219) - (5) - (336)
Impairment
loss (note
12) 11,766 175 32 - 34 12,007
Exchange rate
adjustment (160) (456) (620) (72) (41) - (1,349)
At 31 May
2015 12,891 3,775 4,025 443 322 - 21,456
------------- ------------- -------------- --------- -------- ------------- --------
Net book
value
31 May 2015 12,294 5,749 907 543 253 - 19,746
============= ============= ============== ========= ======== ============= ========
31 May 2014 23,513 7,502 1,683 837 338 2,395 36,268
============= ============= ============== ========= ======== ============= ========
Additions to land and buildings include $399,000 (2014:
$1,897,000) of acquisition and development costs of the Group's
cocoa plantation in Sierra Leone, incurred between 1 June and 30
September 2014. Included in this sum is $146,000 (2014: $471,000)
of depreciation in respect of plant and equipment and $169,000
(2014: $558,808) of wages and salaries. Subsequent to 30 September
2014, all expenditure incurred in connection with the cocoa
plantation has been expensed to profit and loss and included within
continuing operations.
A depreciation charge of $2,211,000 (2014: $1,766,000) has been
included in the consolidated income statement within operating
expenses and $61,000 (2014: $133,000) has been included with
discontinued operations.
Land and buildings with a carrying amount of $2,173,000 (2014:
$2,694,000) have been pledged to secure the Group's bank overdraft
(note 27). The Group is not allowed to pledge these assets as
security for other borrowings or sell them to another entity.
Details of additional assets pledged as security for new bank
borrowings subsequent to the period end are provided in note
35.1
At 31 May 2015, the Group had no contractual commitments for the
acquisition of property, plant and equipment (2014: commitments of
$49,000).
21. 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 all periods presented
was $nil. The share of the cumulative results and net assets of AMS
is $4,000 (2014: $4,000). The Company's investment in AMS was
$nil.
22. 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 2015, these investments comprise 8,337,682 (31 May 2014:
8,337,682) ordinary shares in Atlas Development & Support
Services Limited ('ADS') (formerly African Oilfield Logistics
Limited), 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. Movements in the value
of the investment in ADS were as follows:
US$000
-------
At 1 June 2013 4
Purchase of investments at cost 285
Increase in fair value (note 14) 936
-------
At 31 May 2014 1,225
Decrease in fair value (note 14) (849)
-------
At 31 May 2015 376
=======
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.
23. Biological assets
US$000
--------
Fair value
At 1 June 2013 4,007
Purchase of biological assets 2,195
Sale, slaughter or other disposal of biological assets (1,976)
Change in fair value 290
Foreign exchange adjustment (244)
At 31 May 2014 4,272
Purchase of biological assets 1,666
Sale, slaughter or other disposal of biological assets (3,947)
Change in fair value 1,910
Foreign exchange adjustment (636)
--------
At 31 May 2015 3,265
========
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:
2015 2014 2015 2014
Head Head US$000 US$000
------ ------ ------- -------
Non-current asset 4,395 5,481 2,246 3,071
Current asset 2,772 2,749 1,019 1,201
------ ------ ------- -------
7,167 8,230 3,265 4,272
====== ====== ======= =======
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.
24. Inventories
2015 2014
US$000 US$000
------- -------
Consumables and spares 120 127
Raw materials 2,452 4,438
Work in progress 27 34
Finished goods 293 301
2,892 4,900
======= =======
During the year inventories amounting to $8,191,000 (2014:
$8,084,000) were included in cost of sales and $nil (2014:
$2,179,000) were included within discontinued operations.
Inventories with a carrying amount of $2,140,000 (2014:
$4,237,000) have been pledged to secure the Group's bank overdraft
(note 27).
25. Trade and other receivables
2015 2014
US$000 US$000
------- -------
Trade receivables 1,018 459
Other receivables 492 393
Prepayments 84 296
1,594 1,148
======= =======
'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 5.4) are as follows:
US$000
--------
At 1 June 2013 1,310
Charged to profit and loss 118
Foreign exchange gain (83)
--------
At 31 May 2014 1,345
Charged to profit and loss 224
Foreign exchange gain (250)
--------
At 31 May 2015 1,319
========
The increase in the allowance account during both periods
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 $350,000 (2014: $122,000) due from
related parties (see note 33).
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 (2014: $nil).
Further details on the Group's financial assets are provided in
note 29.
26. Cash and cash equivalents
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Included within the Company and Group's cash and cash
equivalents is $nil (2014: $107,000) of restricted cash held on
deposit as security for certain supplier guarantees.
27. Borrowings
2015 2014
US$000 US$000
------- -------
Bank overdraft 3,079 2,468
Other - 200
------- -------
3,079 2,668
======= =======
The Group has an overdraft facility of 179,000,000 Metical
(approximately $4,850,000 at the 31 May 2015 Metical to US$
exchange rate) (2014: 179,000,000 Metical (approximately
$6,000,000)) to provide funding for its Grain operations in
Mozambique. It is secured against certain of the Group's property,
plant and equipment (note 20) and all maize inventory and finished
maize products (note 24). Interest is charged at the counterparty
bank's prime lending rate less 3%, being a current rate of 13%
(2014: 13%). Unless it is cancelled by either party, the facility
renews annually on 31 May.
Other borrowings at 31 May 2014 represented customer
pre-financing for the Group's Cocoa trading operations, was
unsecured, bore no interest and was repaid during the year.
28. Trade and other payables
2015 2014
US$000 US$000
------- -------
Trade payables 314 77
Other payables 623 666
Accrued liabilities 440 1,413
Corporation tax - 14
1,377 2,170
======= =======
'Trade payables', 'Other payables' and 'Accrued liabilities'
principally comprise amounts outstanding for trade purchases and
ongoing costs. No interest is charged on any balances.
The Directors consider that the carrying amount of financial
liabilities approximates their fair value.
29. FINANCIAL INSTRUMENTS
29.1. 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 27 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 company 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 maintained its overdraft facility
in Mozambique to finance its Grain operations of 179,000,000
Mozambique Metical (note 27). Further and subsequent to the period
end, the Group has secured additional borrowing facilities in
Mozambique for its Beef operations (refer to note 35.1).
29.2. Categories of financial instruments
The following are the Group and Company financial instruments as
at 31 May:
Group Company
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------- ------- ------- -------
Financial assets
Cash and bank balances 6,421 6,994 6,027 5,747
Fair value through profit and loss:
Held for trading 376 1,225 376 1,225
Loans and receivables 1,510 852 22,052 41,752
------- ------- ------- -------
8,307 9,071 28,455 48,724
------- ------- ------- -------
Financial liabilities
Amortised cost 4,456 4,824 785 1,040
------- ------- ------- -------
4,456 4,824 785 1,040
3,851 4,247 27,670 47,684
======= ======= ======= =======
29.3. 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 2015 with an impact on financial
instruments are summarised below.
29.4. 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.
29.4.1. 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 functional currency
of the relevant Group company are as follows:
Assets Liabilities
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------------- ------------- ------------ -------
United States Dollar ('US$')(1) 6,880 7,202 786 1,510
Mozambique Metical ('MZN') 1,143 1,588 3,524 3,209
Sierra Leone Leones ('SLL') 284 169 146 95
Other - 112 - 10
------------- ------------- ------------ -------
8,307 9,071 4,456 4,824
============= ============= ============ =======
(1) The Company's functional currency is
US$ and accordingly, all amounts for
the Company are included within this
category.
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$. The Group
does not hedge against this transactional risk. As at 31 May 2014
and 31 May 2015, the Group and Company's outstanding foreign
currency denominated monetary items were principally exposed to
changes in the US$ / 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 negative number indicates a decrease 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 positive.
Group GBP Impact MZN Impact
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------- ------- -------- --------
Profit or loss (1) (10) (61) - -
Other equity (2) - 12 (2,910) (2,755)
Company GBP Impact MZN Impact
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------- ------- ------- -------
Profit or loss (1) (10) (61) - -
Other equity - 3 - -
(1) This is mainly due to the exposure arising from investments in quoted
companies where the related company's equity securities are quoted in
GBP.
(2) This is mainly due to the exposure arising on the translation of US$
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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.
29.4.2. 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 The Company is further exposed to interest
rate risk on loans provided to subsidiary companies at floating
interest rates. As at 31 May 2015, 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 financed
through the overdraft facility. 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 0.59% (2014: 1.05%). The weighted average interest
on drawings under the overdraft facility was 14% (2014: 16%), on
the customer advances was nil% (2014: nil%) and on the short term
loan note was nil% (2014: 10%). The Group does not hedge interest
rate risk.
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
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------- ------- ------- -------
+ 20 bp increase in interest rates (7) (9) 115 110
+ 50 bp increase in interest rates (17) (23) 289 276
29.4.3. Other price risk
The Group and Company is exposed to equity price risk on its
investments in quoted securities which are measured at fair value
(refer to note 22). Investments in quoted companies comprise
investments in one company, ADS. If ADS's share price increased /
(decreased) by 10% and the US$ / GBP exchange rate remained
unchanged, the Group and Company net profit would increase /
(decrease) by $38,000.
29.5. 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 are 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 note 29.2. Details
of provisions against financial assets are provided in note 25.
29.6. 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 2015 the Group held cash deposits of $6,421,000 (2014:
$6,994,000). At 31 May 2015 the Company held cash deposits of
$6,027,000 (2014: $5,747,000). At 31 May 2015 the Group had an
overdraft facility of approximately $4,850,000 (2014: approximately
$6,000,000) of which $3,079,000 (2014: $2,468,000) was drawn. The
Group had other borrowings / short term loan note outstanding of
$nil (2014: $200,000) (see note 27). 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
2015 2014 2015 2014
US$000 US$000 US$000 US$000
------- ------- -------------------------- -------
1 month 1,410 2,389 785 1,040
2 to 3 months 67 65 - -
12 months 3,379 2,764 - -
------- ------- -------------------------- -------
4,856 5,218 785 1,040
======= ======= ========================== =======
29.7. 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 2015 and
31 May 2014.
30. Share capital
Group and company
Authorised Allotted and fully paid
Number Number US$000
-------------- ------------------------ -------
At 31 May 2014 and 31 May 2015:
Ordinary shares of 0.1p each 2,345,000,000 1,061,818,478 1,722
Deferred shares of 0.1p each 155,000,000 155,000,000 238
-------------- ------------------------ -------
Total share capital 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. The deferred shares may be converted into ordinary
shares by resolution of the Board.
31. 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.
31.1. 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. Following the development of
1,000 hectares of the leasehold land, deferred consideration of
37,800,000 Ordinary Shares would become payable under the purchase
agreement. The 'Shares to be issued' reserve recorded the Group's
potential obligation to issue such Ordinary Shares. The Group has
impaired this leasehold land asset during the year as more fully
described in note 12.2 and accordingly the balance included within
this reserve has been released to profit and loss within
discontinued operations.
31.2. 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.
32. Share based payments
32.1. Charge in the period
The Group recorded a charge within other operating expenses for
share based payments of $55,000 (2014: $149,000). The Company
recorded a charge of $11,000 (2014: $55,000) and recorded an
increase in its investments in subsidiary undertakings of $44,000
(2014: $94,000).
32.2. 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.
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The following table provides a reconciliation of share options
outstanding during the period:
2015
Options Weighted average 2014 Weighted average
Number exercise price Options Number exercise price
At 1 June 42,249,998 4.6p 44,750,000 3.7p
Granted in the year - - 2,500,000 1.5p
Lapsed in the year (5,750,000) 3.0p (5,000,002) 5.5p
At 31 May 36,499,998 3.4p 42,249,998 4.6p
============ ======================= ================ =======================
Exercisable at year end 27,500,004 3.3p 27,750,002 3.0p
============ ======================= ================ =======================
The fair value of the options granted during the year ended 31
May 2014 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 was 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 was 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 ended
31 May 2014 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 the Incentive Options.
32.3. Share Options
At 31 May 2015, the following options over ordinary shares of
0.1p each have been granted and remain unexercised:
Date of grant Total Exercisable Exercise price
options options Exercise period
----------------- ----------- ------------ --------------- -----------------------------------
13 July 2011 5,000,000 5,000,000 3.0p 13 July 2012 to 13 July 2017
1 December 2011 10,000,000 10,000,000 2.0p 1 December 2011 to 1 December 2016
29 July 2012 7,499,999 3,000,002 3.5p 29 July 2013 to 29 July 2023
29 July 2012 7,499,999 7,000,002 5.5p 29 July 2013 to 11 January 2020
01 May 2013 2,000,000 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 2,500,000 500,000 1.47p 15 May 2015 to 15 May 2024
----------- ------------
36,499,998 27,500,004
=========== ============
32.4. Warrants
Subsequent to the period end and as more fully described in note
35.2, the Company and Group issued 22,500,000 new warrants to
subscribe for ordinary shares in the Company at 0.65p per new
ordinary share.
33. 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') and African Management Services Limited
('AMS'). In addition and during the period, AS Groves is, or was, a
Director of African Potash Limited ('African Potash'), Atlas
Development and Support Services Limited ('ADS'), East Africa
Packaging Limited ('EAPC') and African Property Corporation
('APC'). The Company and Group have transacted with these companies
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
$388,000 (2014: $587,000). The Group also incurred certain
expenditures on behalf of AMS, which was refunded in full during
the year. As at 31 May 2015 the Group and Company was owed $107,000
by AMS (2014: owed $33,000 by AMS).
At 31 May 2015 the Group and Company was due $89,000 from LCC
(2014: $89,000).
During the year the Group and Company and Sable incurred certain
expenses on each other's behalf, which was refunded in full during
the year. At 31 May 2015, the amount due to Sable was $nil (2014:
$nil).
During the year the Group and Company incurred certain expenses
on behalf of African Potash, which was refunded in full during the
year. At 31 May 2015, the amount due to African Potash was $nil
(2014: $nil).
During the year the Group and Company advanced $nil (2014:
$500,000) to Ardan Risk and Support Services Limited ('Ardan'), a
company controlled by MN Pelham.
During the year the Group and Company invested $nil (2014:
$285,000) in the purchase of ordinary shares of ADS.
During the year the Group and Company incurred certain expenses
on behalf of, or advanced loan funding to, EAPC. At 31 May 2015,
the amount due from EAPC was $151,000 (2014: $nil).
During the year the Group and Company incurred certain expenses
on behalf of, or advanced loan funding to, APC. At 31 May 2015, the
amount due from APC was $3,000 (2014: $nil).
The remuneration of the Directors, who are the key management
personnel of the Group, is set out in note 11.
34. 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:
2015 2014
US$000 US$000
------- -------
Within one year 138 79
In the second to fifth years inclusive 95 -
------- -------
233 79
======= =======
Operating lease rentals recognised as an expense in the
Consolidated income statement were as follows:
Land and buildings 209 125
==== ====
35. Events subsequent to the balance sheet date
35.1. Provision of new lending facilities to the Beef division
On 24 June 2015, the Group agreed new lending facilities
totalling 105,000,000 Metical ($2,845,000 at the 31 May 2015
exchange rate) to finance its Beef division in Mozambique. The
facilities comprise 75,000,000 Metical of term loans for the
purchase of cattle, irrigation equipment, butchery equipment,
refrigerated vehicles and general capital purposes, and a
30,000,000 Metical overdraft. The term loans can be drawn until 24
December 2015, carry interest at the bank's prime lending rate plus
0.25% (currently 13.75%), and have a five year term from draw down
with a moratorium on capital repayments of 15 months. The overdraft
renews annually and carries interest at the bank's prime lending
rate (currently 13.50%). The lending facilities are secured against
the Group's abattoir in Chimoio and all cattle and meat
inventories.
35.2. Allocation of warrants
On 1 June 2015 the Group created a warrant instrument (the
'Instrument') to provide suitable incentives to the Group's
employees, consultants and agents, and in particular those based,
or those spending considerable time, on site at the Group's
operations. Up to 100,000,000 warrants (the 'Warrants') to
subscribe for new Ordinary Shares in the Company (the 'Warrant
Shares') may be issued pursuant to the Instrument. The exercise
price of each Warrant is 0.65p (the share price of the Company
being approximately 0.6p when the Instrument was created) and the
subscription period during which time the Warrants may be exercised
and Warrants Shares issued is the 5-year period from 1 June 2016 to
1 June 2021. Subject to various acceleration provisions, a holder
of Warrants is not entitled to sell more than 100,000 Warrant
Shares in any day nor more than 1m Warrant Shares (in aggregate) in
any calendar month, without board consent. 22,500,000 Warrants have
been issued subsequent to the period end to employees.
35.3. Cocoa trading agreement
On 12 November 2015 the Group, through its Sierra Leone
subsidiary company, Tropical Farms Limited ('Tropical Farms'),
entered into a trading agreement with a leading global company
focused on natural, organic and specialty foods.
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Under the terms of the trading agreement, Tropical Farms will
use its organic certification and buying networks to source and
supply up to 500 Mt of Sierra Leonean cocoa beans to the Offtaker
during the 2015/2016 buying season; the Offtaker will provide
Tropical Farms with pre-financing for the purchase of beans.
The trading agreement will leverage Tropical Farms' extensive
infrastructure in Sierra Leone, including a state-of-the-art
warehouse in Kenema. In addition to Tropical Farms sourcing and
supplying cocoa, the Offtaker has expressed its interest in
additional produce and both parties have committed to explore
opportunities for organic coffee and other organic food crops.
Company statement of financial position
As at 31 May 2015
2015 2014
Note US$000 US$000
---------- ----------
Non-current assets
Property, plant and equipment 38 - 1
Investments in subsidiaries 39 21,714 47,591
Interests in associates 21 - -
Investments in quoted companies 22 376 1,225
---------- ----------
22,090 48,817
---------- ----------
Current assets
Trade and other receivables 40 495 166
Cash and cash equivalents 6,027 5,747
---------- ----------
6,522 5,913
---------- ----------
Total assets 28,612 54,730
---------- ----------
Current liabilities
Trade and other payables 41 785 1,040
---------- ----------
785 1,040
---------- ----------
Net current assets 5,737 4,873
---------- ----------
Net assets 27,827 53,690
---------- ----------
Share capital 30 1,960 1,960
Share premium 148,622 148,622
Shares to be issued 31.1 - 2,940
Share based payment reserve 1,914 1,859
Translation reserve 31.2 2,621 2,621
Accumulated losses (127,290) (104,312)
---------- ----------
Total equity 27,827 53,690
---------- ----------
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 19 November 2015.
Signed on behalf of the Board of Directors by:
PH Edmonds
Chairman
19 November 2015
Company statement of changes in equity
For the year ended 31 May 2015
Share
Shares based
Share Share to be payment Translation Accumulated Total
capital premium issued reserve reserve losses equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------- -------- -------- -------- ------------ ------------ ---------
Balance at 1
June 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 32 - - - 149 - - 149
Balance at 31
May 2014 1,960 148,622 2,940 1,859 2,621 (104,312) 53,690
Loss and total
comprehensive
income for
the year - - - - - (22,978) (22,978)
Share-based
payments 32 - - - 55 - - 55
Released to
profit and
loss 12.2 - - (2,940) - - - (2,940)
Balance at 31
May 2015 1,960 148,622 - 1,914 2,621 (127,290) 27,827
========= ======== ======== ======== ============ ============ =========
Company cash flow statement
For the year ended 31 May 2015
2015 2014
Note US$000 US$000
--------- ---------
Cash flows from operating activities
Loss before tax from continuing operations (25,777) (1,336)
Adjustments for:
Depreciation 38 1 -
Profit on disposal of property, plant and equipment - (8)
Share based payment expense 32 11 55
Impairment of loans to subsidiary undertakings 39 23,680 1,038
Foreign exchange loss 177 37
Finance costs - 12
Investment revenues (1,100) (1,186)
Decrease / (increase) in fair value of quoted investments 14 849 (936)
Operating cash flows before movements in working capital (2,159) (2,324)
(Increase) / decrease in trade and other receivables (330) 1,026
Decrease in trade and other payables (255) (252)
--------- ---------
Net cash used in operating activities by continuing operations (2,744) (1,550)
Finance costs - (12)
Interest received 14 140
Net cash used in operating activities by continuing operations (2,730) (1,422)
--------- ---------
Net cash provided by / (used in) operating activities by discontinued operations 5,740 (378)
--------- ---------
Net cash provided by / (used in) operating activities 3,010 (1,800)
--------- ---------
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment - 42
Purchase of investments in quoted companies 22 - (285)
Loans to subsidiary undertakings 39 (2,569) (8,449)
Net cash used in investing activities by continuing operations (2,569) (8,692)
--------- ---------
Net cash from investing activities in discontinued operations - -
--------- ---------
Net cash used in investing activities (2,569) (8,692)
--------- ---------
Cash flow from financing activities
Repayment of borrowings - (1,500)
Net cash outflow from financing activities from continuing operations - (1,500)
--------- ---------
Net increase / (decrease) in cash and cash equivalents 441 (11,992)
Effect of exchange rates on cash and cash equivalents (161) (31)
--------- ---------
Cash and cash equivalents at beginning of period 5,747 17,770
--------- ---------
Cash and cash equivalents at end of period 6,027 5,747
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November 20, 2015 02:00 ET (07:00 GMT)
========= =========
36. Company ACCOUNTING POLICIES
The financial statements have been 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.
36.1. 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.
37. 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 $22,978,000 (2014: loss of $2,713,000).
38. PROPERTY, PLANT AND EQUIPMENT
Motor Other
Vehicles assets Total
US$000 US$000 US$000
Cost
At 1 June 2013 42 16 58
Disposals (42) - (42)
At 31 May 2014 - 16 16
Disposals - (16) (16)
At 31 May 2015 - - -
---------- -------- -------
Accumulated depreciation
At 1 June 2013 8 15 23
Eliminated on disposals (8) - (8)
---------- -------- -------
At 31 May 2014 - 15 15
Charge for the year - 1 1
Eliminated on disposals - (16) (16)
---------- -------- -------
At 31 May 2015 - - -
---------- -------- -------
Net book value
31 May 2015 - - -
========== ======== =======
31 May 2014 - 1 1
========== ======== =======
39. INVESTMENT IN SUBSIDIARIES
Investment Loans Total
US$000 US$000 US$000
Cost
At 1 June 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
Loans advanced in the year - 2,569 2,569
Interest accrued - 1,086 1,086
Capital contribution 44 - 44
Foreign exchange loss - (16) (16)
At 31 May 2015 9,818 72,607 82,425
----------- ------- -------
Provision for irrecoverable amounts
At 1 June 2013 3,801 25,000 28,801
Charge for the year - 1,038 1,038
Foreign exchange loss - 1,312 1,312
----------- ------- -------
At 31 May 2014 3,801 27,350 31,151
Charge for the year 5,880 23,680 29,560
At 31 May 2015 9,681 51,030 60,711
----------- ------- -------
Net book value
31 May 2015 137 21,577 21,714
=========== ======= =======
31 May 2014 5,973 41,618 47,591
=========== ======= =======
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
impairment of the Group's cocoa plantation operations during the
period and reductions in the value of the underlying businesses as
a result of movements in exchanges rates (2014: 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).
As set out in note 17.1, 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 2015, 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
Aviação Agriterra 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
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
40. Trade and other receivables
2015 2014
US$000 US$000
------- -------
Other receivables 475 134
Prepayments 20 32
495 166
======= =======
'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 (2014: $nil). Further details on the
Company's financial assets are provided in note 29.
Other receivables include $350,000 (2014: $122,000) due from
related parties (see note 33).
41. Trade and other payables
2015 2014
US$000 US$000
------- -------
Trade payables 101 78
Other payables 527 573
Accrued liabilities 157 389
------- -------
785 1,040
======= =======
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 29.
42. RELATED PARTIES
Transactions and balances due at the period end with related
parties, other than with subsidiary undertakings, are disclosed in
note 33.
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