TIDMAGTA
RNS Number : 5118P
Agriterra Ltd
18 November 2016
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
18 November 2016
Agriterra Ltd ('Agriterra' or 'the Group')
Final Results
Agriterra Limited, the AIM listed African agricultural company,
announces its audited final results for the year ended 31 May
2016.
CHAIR'S STATEMENT
Having taken on the role of Chair of the Board of Agriterra on
29 April 2016, this is my first substantive opportunity to
communicate with shareholders and I am pleased to be able to
provide an update on our recent activity and outline our plans for
the future.
Since 2009 Agriterra has focussed on building an agricultural
business with a portfolio centred on beef and maize in Mozambique
and cocoa in Sierra Leone. As discussed more fully below, the
Group's operations are now focussed entirely on Mozambique
following the sale of our cocoa operations in Sierra Leone in a
management buy-out transaction (after the end of FY2016).
As shareholders are aware, the economic environment in
Mozambique has altered substantially during the 2016 calendar year,
most notably due to the combination of a decline in commodity
prices, a prolonged and severe drought and the significant
weakening of the Mozambique Metical against the United States $
(110% since 31 May 2015) and the South African Rand (100% since 31
May 2015). As a result, Mozambique is experiencing high inflation
rates (reaching 25.5% for the 12 months to 31 October 2016),
accompanied by a rapid increase in interest rates (prime lending
rates are now at 28.0% compared to 16% at 31 May 2015). In addition
to the economic complexities, Mozambique is experiencing military
tension, particularly in the centre of the country.
Clearly these economic and political factors, together with the
continuing ongoing operational losses that the Group has
experienced, present real and significant hurdles to overcome.
Having said this, there is still scope for Agriterra to capitalise
on the growth opportunities present in Mozambique. In order to do
so, we will need to continue to reduce our costs, wherever
possible, to ensure that we operate as efficiently as possible,
whilst also addressing and minimising the inherent challenges of
operating in the African agriculture sector. Market conditions in
Mozambique are such that our long-term aim should be to become a
pre-eminent player in the national Mozambique beef and maize flour
markets through effective implementation of our strategy by our
operational teams. We are currently part-way through a period of
consolidation, streamlining and optimisation around our existing
operations, and I am hopeful that following completion we will see
significant mid-term leveraging of the considerable investment
which Agriterra has already made into Mozambique in order to build
shareholder value.
The current situation in Mozambique presents both opportunities
and challenges for businesses operating in the country. On the one
hand, prices of imported products have risen rapidly, at a rate
faster than inflation. This reduced competitiveness of imported
products, combined with the lack of foreign currency available in
country, has made our products more competitive; this is
particularly reflected in the case of our beef products - we are
now able to supply the Maputo market, the largest and most affluent
market in Mozambique. On the other hand, wages have risen at a
slower pace than inflation and therefore progressively more of a
typical household budget is consumed by the purchase of fewer
products. While our maize flour products continue to sell well in
this environment - being a staple food produced from locally
sourced maize - this has left less household income available for
purchase of protein products, which has the effect of reducing the
demand for our beef products. The net effect so far has been
positive, with record volumes and revenue in Metical terms in our
Beef division in FY2016, and the second highest year in terms of
volumes and highest year in terms of Metical revenue in our Grain
division. These trends have continued since the period end, with
our highest ever month of sales in the Beef division occurring in
August 2016 (generating revenues of approximately 35.5 million
Metical). In this context, the Board believe that we are able to
continue to strengthen our market position in both the Grain and
Beef divisions.
In addition to improving efficiencies and driving revenue
generation, our focus on reducing Group-wide costs and disposing of
non-revenue generating assets (such as our aircraft) has also been
important during FY2016. The savings made from these programmes
have contributed to the Grain division returning an overall profit
before depreciation of $561,000 (2015: loss of $2,500,000) and
after depreciation of $322,000 (2015: loss of $2,886,000). Despite
the positive effect of cost savings, the Beef division returned an
operating loss during FY2016, before impairments, of $2,912,000
(2015: loss of $2,317,000), reflecting, in part, the investment and
development in our farming infrastructure. Subsequent to the end of
FY2016, the Board took the decision to de-stock the cattle farms
and place them in care and maintenance. This decision was made in
light of the military tension in country and the need to protect
the value of the herd and security of our employees. This programme
is well under way, and the Inhazonia and Mavonde ranches are now
substantially de-stocked. While the Board continue to see the
longer term potential of the farms, it is uncertain if and when the
political and military tensions will be resolved and, until such
time as resolution is reached, there will inevitably be significant
uncertainty regarding the security of investment in certain parts
of the country. This uncertainty, along with the general economic
climate in Mozambique, has led to an impairment against the Beef
division assets of $3,069,000 (2015: $nil).
Although placing the farms into "care and maintenance" is a
significant change in our previously conceived strategy for the
Beef division, it reduces the cash requirements of continuing the
ongoing development of these assets; at the same time, the revised
approach provides sizeable cash inflow through the de-stocking of
the animals. This cash inflow, along with the income from the
disposal of surplus, non-revenue generating assets, will be applied
to reducing the Beef division's existing bank finance, which was
taken during the expansion period, prior to the development of the
current economic and political situation in country.
With regards to our cocoa operations in Sierra Leone, the Group
had placed its plantation assets in "care and maintenance" during
FY2015, with the assets being maintained and ready to return to
operations when and if circumstances permitted. At the same time
during FY2015, in order to support the country in its fight against
and its recovery from the Ebola crisis, we leased part of our
vehicle fleet and some of our warehousing infrastructure to
international aid organisations. The country was initially declared
Ebola free by the World Health Organisation in early November 2015
and finally in March 2016. While the Group successfully established
and maintained the necessary infrastructure from which a large
scale commercial cocoa plantation and trading business can be
developed, the next stage in the development of these assets
requires significant capital investment. Given the impact of Ebola
on the West African region as a whole and the lack of investment
appetite from traditional finance sources, the Board formed the
view, after due investigations and careful consideration, that the
Group would be unlikely to be able to raise the finance to continue
with the development of the cocoa plantation in the foreseeable
future. In this context, the Board therefore believed that it was
in the best interests of the Group to dispose of the cocoa division
in a management buy-out transaction to bolster the Group's cash
reserves and to enable the management team behind the cocoa
division to access other finance sources, such as dedicated
development and sustainability funds. The cocoa operations were
sold after the end of FY2016 for cash consideration of $750,000
which is payable by 9 January 2017.
Corporate Update
On 22 April 2016, Phil Edmonds stepped down as Chairman of the
Board. Phil has been retained by the Company in a part-time
consultancy capacity, providing us with ongoing access to his
significant knowledge of the Group's operations and the benefit of
his insights and experience of operating in Africa. I would like to
thank Phil for his continued support and hard work for Agriterra
over the years, and wish him well for the future.
Outlook
The African agriculture market remains an area of growth
potential, with Mozambique having particularly strong prospects
because of the eagerly anticipated establishment of a liquefied
natural gas industry in the north of the country. As and when this
industry gains significant development and production traction in
Mozambique, it is expected to significantly change the economy of
the entire country, which will translate into consequential growth
in our revenue potential.
Subject to certain assumptions on the development of the natural
gas resources in Mozambique, estimates by the IMF (in January 2016)
suggest that average real GDP growth rates could achieve 24%
between 2021 and 2025, thereafter stabilising at 3 - 4% from 2028
once liquefied natural gas production peaks (6 - 6.5% for the
non-liquefied natural gas sector). This level of development will
inevitably result in a significant increase in national demand for
our products, initially to provide food products for staff in
direct and related support industries during project construction
phases, and later within a general population with higher
disposable incomes (liquefied natural gas alone is expected to be
sufficient to raise the country from one of the poorest in the
world to a low middle income country). The development of
Mozambique's liquefied natural gas resources is of course dependent
on macroeconomic factors, not least of which is the demand for gas
in Asia where the premium markets are, the available supply of gas
worldwide, and the price of substitutes such as oil. Final
investment decisions on the development of liquefied natural gas
projects are expected later this year, or early in 2017.
Encouragingly in late September 2016, multinational oil and gas
company Eni S.p.A. ('ENI') confirmed that it has approached bankers
regarding project finance for the development of its first offshore
floating liquefied natural gas platform, and it is also reported to
have agreed initial terms with BP for the sale of liquefied natural
gas from Mozambique. Further, Exxon Mobil is reported to have
acquired a multi-billion dollar stake in certain other Mozambique
assets from ENI. The fundamentals for the energy markets remain
strong and there is now general optimism that the projects will be
developed. We hope to capitalise on this growth and are already
working with sizeable contractors in the camp management arena
supplying services to the gas sector.
In the shorter term, with particular focus on FY2017, the
significant cost savings which we implemented during FY2016 will
yield their full benefit during FY2017. We have progressed well in
our maize buying programme during the 2016 buying season and have
already secured most of our maize requirement; subject to achieving
our forecast selling prices, we expect the Grain division to return
positive cash flows again in FY2017. With respect to the Beef
division, once the farms are de-stocked and in "care and
maintenance", subject to achieving targeted operating parameters,
we hope to be at monthly break even in cash terms by the end of
FY2017; as the farms are de-stocked we will continue to buy animals
from the national herd to satisfy our retail and wholesale targets,
with a view to adding value during the time the animals spend in
our feedlot. Within the Beef division we are also exploring options
for the acquisition of mobile abattoir units to maximise
efficiencies in our logistics chain.
Taking account of the inherent operational, economic and
political risks which our business has to address on an ongoing
basis, we remain committed to developing our business so as to
increase value for all stakeholders. As we move forwards towards
achieving this objective I wish to thank our entire team for their
continued commitment and our shareholders for their ongoing
support.
CSO Havers
Chair
17 November 2016
For further information please visit www.agriterra-ltd.com or
contact:
Andrew Groves Agriterra Ltd Tel: +44 (0)
20 7408 9200
Daniel Cassiano-Silva Agriterra Ltd Tel: +44 (0)
20 7408 9200
David Foreman Cantor Fitzgerald Tel: +44 (0)
Europe 20 7894 7684
Michael Reynolds Cantor Fitzgerald Tel: +44 (0)
Europe 20 7894 7684
OPERATIONAL AND FINANCIAL REVIEW
The Group loss for the year from continuing operations - which
excludes the results of the discontinued cocoa operations - reduced
from $8,205,000 in FY2015 to $7,677,000 in FY2016. Excluding
non-recurring impairments recorded against property, plant and
equipment in the Beef division of $3,069,000 (2015: $nil), the loss
has decreased by 44% to $4,608,000. The decrease in loss reflects
both an increase in gross profit of $1,251,000, primarily in the
Grain division, combined with a decrease in other operating
expenses of $2,222,000, primarily in the Grain division and central
corporate overheads. Overall, the operating profit of the Grain
division was $811,000 compared to an operating loss of $2,128,000
in FY2015, while the operating loss of the Beef division, excluding
impairments of property, plant and equipment increased from
$2,317,000 to $2,912,000.
Grain Division
Agriterra operates its established maize buying and processing
business from its Desenvolvimento E Comercialização Agricola
Limitada ('DECA') facility in Chimoio, central Mozambique, which
has a 35,000 tonne storage capacity, and its 15,000 tonne capacity
Compagri Limitada ('Compagri') facility in Tete, north-west
Mozambique. Maize is purchased from local out-growers through a
network of buying stations, which is then stored and processed
before being sold to the retail market.
The performance in the Grain division has been particularly
encouraging this year, where revenues (before elimination of bran
sales to the Beef division) increased in underlying Metical terms
by nearly 190% on a 118% increase in the total volume of products
sold. The increase in US$ terms was nearly 122%, from $5,517,000 to
$12,246,000 - the lower percentage increase resulting from the
relative weakening of the Metical to US$ exchange rate year on
year, which moved from an average rate of 32.45 Metical / US$ in
FY2015 to 43.61 Metical / US$ in FY2016. Total volume of maize
products sold in the year was 39,400 tonnes compared to 18,100
tonnes in FY2015, with 27,900 tonnes of maize flour sold compared
to 13,600 tonnes in FY2015; this represents the Group's second
highest volume ever sold of maize flour.
The increase in volume reflects in part a return to a more
normal maize growing season in Mozambique at an estimated 1.7
million tonnes; the FY2015 results reflected an exceptionally large
harvest, estimated at around 2.3 million tonnes, which saturated
the local market and reduced the demand for processed products
which we market under our DECA brand.
In the main though, the increase in volume reflects successful
implementation of our strategy in this division, which has been to
reduce our cost base to allow us to price our products more
competitively in the market, at marginally lower prices than our
competitors. This has allowed us to position DECA as a lower price
brand, thereby providing a solid base on which to develop the
business in the current economic climate in Mozambique, where price
is a key factor. The Mozambique consumer is now facing a
significant reduction in purchasing power as a result of wages
increasing at a much slower pace than inflation. In addition, the
2016 maize harvest has been significantly impacted by an El-Nino
induced drought in Sub-Saharan Africa, reducing available volumes
and significantly increasing price. Substitute products are also
increasing rapidly in price due to the significant devaluation in
the Metical. This has left the Mozambique consumer with limited
choice, spending an increasing amount of the household income on
buying staple food products, of which maize flour is the preferred
product. With DECA's products competitively priced, we expect to
continue to gain market share.
In addition to maize flour, the Grain division produces maize
bran as a by-product. This bran has historically been sold directly
to our Beef division or third party customers. In order to improve
the quality of animal feed for our Beef division, as well as to
capitalise on the maximum potential uplift in value from the bran,
we have recently acquired an animal feed pelletizer. This allows us
to pre-mix animal feed, ensuring the optimum ratio of ingredients
to provide feed with the appropriate nutritional characteristics
for our cattle, as determined by specialist animal nutritionists.
At present we are able to supply all of the Beef division's feed
requirements from the pelletiser and have spare capacity for sales
to the Mozambique animal feed market. We are currently finalising
the development of appropriate feed products and, subject to the
availability of surplus bran, expect to start supplying some volume
to this market in H2-2017.
The Grain division's working capital is financed by a 300
million Metical overdraft facility provided by Standard Bank in
Mozambique (approximately $5,034,000 at the 31 May 2016 exchange
rate). Interest rates have risen rapidly in Mozambique to a prime
rate of 28.0% as at the date of this report. Despite this high
rate, with milling capacity in excess of 75,000 tonnes of maize per
annum, storage capacity in excess of 50,000 tonnes, a favourable
sales environment, and steady supplies of raw maize coming from our
established buying network, we are optimistic that FY2017 will
continue to be a profitable and cash generative year for the Grain
division.
Beef Division
In Mozambique, Agriterra operates its Beef division through
Mozbife Limitada ('Mozbife'). The Group has a feedlot facility, an
abattoir and own branded retail units in addition to three ranches
which are in the process of being destocked.
In line with our strategy, the Beef division has continued to
grow its revenues in the year, with a 52% increase in volume sold
and Metical revenues. After adjusting for the weaker Metical to US$
exchange rate, this is an increase in US$ revenues of 17% from
$5,366,000 to $6,265,000. Subsequent to the period end in August
2016, the Beef division achieved record monthly revenues in excess
of 35,500,000 Metical which, at the average exchange rate for
FY2016, would equate to a monthly revenue of approximately
$815,000. The growth in revenue has principally been from our
existing operations, as we have sought to reduce the planned roll
out of additional large retail sites in light of the economic and
political developments in the country. In particular, the delay in
the development of the LNG projects in the Northern provinces has
put on hold our previously announced expansion plans into Pemba and
Nacala; these sites remain under review and, if the LNG projects go
ahead, will likely become development targets again.
A promising development in our retail business has been the
expansion of sales into Maputo towards the end of FY2016 and into
FY2017. Maputo, as the capital, is the largest and most affluent
market in Mozambique. Due to its proximity to South Africa, it has
historically been supplied with imported products. The devaluation
in the Metical, and the lack of availability of foreign currency,
has made these imports very expensive while making our products
price competitive, opening up this attractive market to us. Our
existing sales are currently to wholesalers and are supplied from
our Chimoio abattoir, avoiding the need for us to establish a
costly fixed presence in this market. With the Maputo market open,
Mozbife is the only Mozambique wide supplier of domestically
produced beef products.
The weakness in the Metical has also increased the price
competitiveness of Mozambique beef in international markets. These
markets require a relatively high quality animal and, as previously
announced, export activities were being investigated by the Group,
which relied on animals being reared or fattened on our ranches.
The need for a reliable source of high quality animals to supply
the affluent segment of the national market, as well as to provide
animals for export opportunities, was the driving factor behind the
Group's development plans for the ranches, where the Group had
invested extensively to increase our stocking capacity. The
expansion of the herd, where we have capacity for over 10,000 head
across our ranches, was supported by capital investment in pivot
irrigation at the farms, which now stands at 258 hectares at
Mavonde and 118 hectares at Inhazonia. In addition to the pivot
irrigation, we have an additional 110 hectares at Mavonde under
line irrigation.
Disappointingly and despite all efforts, the recent military
tension in the areas surrounding our ranches, coupled with the
economic environment in Mozambique, led the Board to suspend the
development of the ranches and destock the cattle to safeguard and
crystallise its considerable livestock capital. The circa 4,200
head of cattle that we had on the ranches at 31 May 2016 are
currently gradually being transferred to the Vanduzi feedlot and
processed to slaughter; we expect the final animals to be taken off
the ranches by the end of April 2017. Once the ranches are
de-stocked, we will maintain a skeleton workforce to ensure our
assets are maintained in readiness for future development.
In the longer run the farms remain an important asset in order
to supply our retail outlets and capitalise on potential export
opportunities with high quality beef products. This established
infrastructure and capacity potential mean that we are well placed
for growth once appropriate investment conditions for this more
rural infrastructure are re-established in Mozambique.
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. 9,705 animals were processed through the
abattoir during the period, an increase over the 5,013 animals
processed during FY2015. With a current run rate of approximately
900 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 4,000 head to
provide in excess of 1,000 head for slaughter each month to the
abattoir. At the period end there were 2,600 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, or more recently, pelletized animal
feed. Performance in the feedlot was adversely impacted in the
latter half of the year due to the El Niño drought conditions which
resulted in locally sourced animals being under weight, weak, and
poorly conditioned at purchase. This has led to additional feed
costs and lower average live exit weights than would normally be
the case. These issues have continued in the early part of FY2017,
but the effects have been partially offset by the higher quality
animals coming off our farms due to the destocking process. The
rainy season is now starting in the areas where we buy cattle and
normal to higher-than-normal precipitation is expected, which
should help improve the local cattle source. In addition, the
pelletized feed produced by DECA has started to be fed in the
feedlot, which we expect will improve feeding efficiencies.
The economic, political and military environment in Mozambique
led the Group to complete an impairment review of its property,
plant and equipment in the Beef division, resulting in an
impairment of $3,069,000 (2015: $nil).
The Beef division is partially funded by bank finance of
approximately 105 million Metical (approximately $1,760,000 at the
31 May 2016 exchange rate). Due to the recent increase in interest
rates, and the de-stocking of the farms, the Group is utilising
cash savings to pay down these bank facilities wherever
possible.
Cocoa Division
In addition to the Grain and Beef divisions, the Group operated
its Cocoa division in Sierra Leone during FY2016. This division was
sold subsequent to the period end for cash consideration of
$750,000, which is payable by 9 January 2017. The net assets of the
Cocoa division at 31 May 2016 were $433,000. The Cocoa division
returned a loss of $965,000 (2015: $7,853,000, including impairment
of goodwill, property, plant and equipment, non-current receivables
and inventory of $6,791,000) which is presented within discontinued
operations.
As a result of the well-publicised Ebola outbreak affecting West
Africa, including Sierra Leone, the Board made the decision to
suspend development activities at the plantation in FY2015.
Accordingly, during all of FY2016, activities at the plantation
were significantly reduced and maintained solely at a level
sufficient to protect staff while maintaining the Group's assets in
country.
While the Group had successfully established and maintained the
necessary infrastructure from which a large scale commercial cocoa
plantation and trading business can be developed in Sierra Leone,
the next stage in the development of these assets requires
significant capital investment. Given the impact of Ebola on the
West African region as a whole and the lack of investment appetite
from traditional finance sources, the Board formed the view, after
due investigations and careful consideration, that the Group would
be unlikely to be able to raise sufficient finance to continue with
the development of the cocoa plantation in the foreseeable future.
In this context, the Board therefore believed that it was in the
best interests of the Group to dispose of the Cocoa division in a
management buy-out transaction to bolster the Group's cash reserves
and to enable the management team behind the Cocoa division to
access other finance sources, such as dedicated development and
sustainability funds.
Conclusion
While we continue to strive to build our business towards
profitability, ultimately we are still in the investment phase of
the Group's development, particularly in the Beef division; that
investment is now on hold until the military tension and economic
uncertainties in the country are resolved. Our strategy has now
adapted to this change in circumstances with a greater short term
focus being placed on operating efficiencies and cash generation
across our businesses. We continue to believe that Mozambique has
enormous potential and that our businesses are well positioned to
take advantage of this potential.
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 31 May 2016
2016 2015
(re-presented - note 16)
Note US$000 US$000
--------- -------------------------
Continuing operations
Revenue 5 18,511 10,883
Cost of sales (16,779) (10,402)
--------- -------------------------
Gross profit 1,732 481
Increase in value of biological assets 22 1,637 1,910
Operating expenses (6,863) (9,085)
Impairment of current and non-current assets 11.1 (3,069) -
Other income 57 22
(Loss) / profit on disposal of property, plant and equipment and
adjustments to the carrying
value of assets classified as held for sale (110) 61
Operating loss 7 (6,616) (6,611)
Investment revenues 12 11 19
Other gains and losses 13 (360) (849)
Finance costs 14 (678) (683)
Loss before taxation (7,643) (8,124)
Taxation 15 (34) (81)
--------- -------------------------
Loss for the year from continuing operations (7,677) (8,205)
Discontinued operations
Loss for the year from discontinued operations 16 (778) (5,182)
Loss for the year attributable to owners of the Company (8,455) (13,387)
US cents US cents
--------- -------------------------
LOSS PER SHARE
Basic and diluted loss per share from continuing operations 17 (0.72) (0.77)
========= =========================
Basic and diluted loss per share from continuing and discontinued
operations 17 (0.80) (1.26)
========= =========================
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2016
2016 2015
Note US$000 US$000
--------- ---------
Loss for the year (8,455) (13,387)
--------- ---------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (8,139) (4,435)
--------- ---------
Other comprehensive income for the year (8,139) (4,435)
--------- ---------
Total comprehensive income for the year attributable to owners of the Company (16,594) (17,822)
========= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 May 2016
2016 2015
Note US$000 US$000
---------- -----------
Non-current assets
Property, plant and equipment 19 7,505 19,746
Interests in associates 20 4 4
Investments in quoted companies 21 16 376
Biological assets 22 888 2,246
---------- -----------
8,413 22,372
---------- -----------
Current assets
Biological assets 22 1,106 1,019
Inventories 23 1,357 2,892
Trade and other receivables 24 1,290 1,594
Assets classified as held for sale 25 860 -
Cash and cash equivalents 4,055 6,421
---------- -----------
8,668 11,926
---------- -----------
Total assets 17,081 34,298
---------- -----------
Current liabilities
Borrowings 26 1,812 3,079
Trade and other payables 27 708 1,377
Liabilities directly associated with assets classified as held for sale 25 142 -
---------- -----------
2,662 4,456
---------- -----------
Net current assets 6,006 7,470
---------- -----------
Non-current liabilities
Borrowings 26 1,105 -
----------
1,105 -
---------- -----------
Total liabilities 3,767 4,456
---------- -----------
Net assets 13,314 29,842
========== ===========
Share capital 29 1,960 1,960
Share premium 148,622 148,622
Share based payment reserve 1,980 1,914
Translation reserve 30.1 (16,382) (8,243)
Accumulated losses (122,866) (114,411)
Equity attributable to equity holders of the parent 13,314 29,842
========== ===========
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 17 November 2016.
Signed on behalf of the Board of Directors by:
CSO Havers
Chair
17 November 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 May 2016
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 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 31 - - - 55 - - 55
Released to
profit and
loss 11.3 - - (2,940) - (2,940)
Balance at 31
May 2015 1,960 148,622 - 1,914 (8,243) (114,411) 29,842
Loss for the
year - - - - - (8,455) (8,455)
Other
comprehensive
income:
Exchange
translation
loss on
foreign
operations - - - - (8,139) - (8,139)
--------- -------- -------- -------- ------------ ------------ ---------
Total
comprehensive
income for
the year - - - - (8,139) (8,455) (16,594)
Share-based
payments 31 - - - 66 - - 66
Balance at 31
May 2016 1,960 148,622 - 1,980 (16,382) (122,866) 13,314
========= ======== ======== ======== ============ ============ =========
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 May 2016
2016 2015
(re-presented - note 16)
Note US$000 US$000
-------- -------------------------
Cash flows from operating activities
Loss before tax from continuing operations (7,643) (8,124)
Adjustments for:
Depreciation 19 1,160 1,644
Profit on disposal of property, plant and equipment (15) (61)
Adjustments to the carrying value of assets classified as held for
sale 125 -
Share based payment expense 31.1 66 55
Foreign exchange (gain) / loss (37) 177
Increase in value of biological assets 22 (1,637) (1,910)
Finance costs 14 678 683
Investment revenues 12 (11) (19)
Decrease in fair value of quoted investments 21 360 849
Impairment of current and non-current assets 11.1 3,069 -
Operating cash flows before movements in working capital (3,885) (6,706)
Decrease in inventories 122 1,158
Increase in trade and other receivables (291) (848)
Decrease in trade and other payables (325) (719)
Net decrease in biological assets 22 1,592 2,281
-------- -------------------------
Cash used in operating activities by continuing operations (2,787) (4,834)
Corporation tax paid (34) (9)
Finance costs (678) (683)
Interest received 11 19
Net cash used in operating activities by continuing operations (3,488) (5,507)
-------- -------------------------
Net cash (used in) / provided by operating activities by discontinued
operations (133) 5,291
-------- -------------------------
Net cash used in operating activities (3,621) (216)
-------- -------------------------
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment net of
expenses incurred 105 239
Acquisition of property, plant and equipment 19 (465) (1,217)
Net cash used in investing activities by continuing operations (360) (978)
-------- -------------------------
Net cash from / (used in) investing activities by discontinued
operations 106 (286)
-------- -------------------------
Net cash used in investing activities (254) (1,264)
-------- -------------------------
Cash flows from financing activities
Net draw down of overdrafts 53 1,376
Net draw down of loans 1,721 -
Net cash from financing activities from continuing operations 1,774 1,376
-------- -------------------------
Net cash used in financing activities by discontinued operations - (200)
-------- -------------------------
Net cash from financing activities 1,774 1,176
-------- -------------------------
Net decrease in cash and cash equivalents (2,101) (304)
Effect of exchange rates on cash and cash equivalents (265) (269)
-------- -------------------------
Cash and cash equivalents at beginning of the year 6,421 6,994
-------- -------------------------
Cash and cash equivalents at end of the year 4,055 6,421
======== =========================
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 given on page 48. The
nature of the Group's operations and its principal activities are
set out in the Directors' report. A list of the 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 3.2.
The reporting currency for the 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 Amendment 2015 Consolidated Financial Statements: Amendments deferring the effective date of the
September
2014 amendments (effective immediately)
IAS 28 Amendment 2015 Investments in Associates and Joint Ventures: Amendments deferring the effective date of
the
September 2014 amendments (effective immediately)
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 2 Amendment 2016 Amendments to clarify the
classification and measurement of
share-based payment transactions
(effective for annual periods
beginning on or after 1 January
2018)
IFRS 4 & IFRS 9 Amendment 2016 Amendments regarding the interaction
of IFRS 4 and IFRS 9. (An entity
choosing to apply the
overlay approach retrospectively to
qualifying financial assets does so
when it first applies
IFRS 9. An entity choosing to apply
the deferral approach does so for
annual periods beginning
on or after 1 January 2018)
IFRS 9 (2014) New 2009, Amendment 2010, 2011, 2013 Financial instruments (Hedge
and 2014 Accounting and amendments to IFRS 9,
IFRS 7 and IAS 39) (effective
for annual periods beginning on or
after 1 January 2018)
IFRS 10, IFRS 12, IAS 27 and IAS 28 Amendment 2014 Sale or contribution of assets and
application of the consolidation
exemption (effective for
annual periods beginning on or after
1 January 2016)
IFRS 11 Amendment 2014 Acquisition of an interest in a
joint operation (effective for
annual periods beginning on
or after 1 January 2016)
IFRS 14 New 2014 Regulatory deferral accounts
(effective for annual periods
beginning on or after 1 January
2016)
IFRS 15 New 2014, Amendments 2015 and 2016 Revenue from contracts with
customers (effective for annual
periods beginning on or after
1 January 2018)
IFRS 16 New 2016 Leases (effective for annual periods
beginning on or after 1 January
2019)
IAS 12 Amendment 2016 Amendments regarding the recognition
of deferred tax assets for
unrealised losses (effective
for annual periods beginning on or
after 1 January 2017)
IAS 16 Amendments 2014 Amendments bringing bearer plants
into the scope of IAS 16 and
clarifying acceptable methods
of depreciation (effective for
annual periods beginning on or after
1 January 2016)
IAS 38 Amendments 2014 Amendment clarifying acceptable
methods of amortisation (effective
for annual periods beginning
on or after 1 January 2016)
IAS 41 Amendment 2014 Amendments bringing bearer plants
into the scope of IAS 16 (effective
for annual periods beginning
on or after 1 January 2016)
Disclosure initiative Amendments 2014 Amendments resulting from the
disclosure initiative (effective for
annual periods beginning
on or after 1 January 2016)
Disclosure initiative Amendments 2016 Amendments resulting from the
disclosure initiative (effective for
annual periods beginning
on or after 1 January 2017)
September 2014 Annual Improvements to Amendments 2014 Effective for annual periods
IFRSs 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, biological assets
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 has adequate
resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting in preparing the financial statements. Further detail is
provided in note 4.1 to the financial statements.
3.2. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 May. Control is achieved when the
Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its
activities.
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.
As at 31 May 2016, the Company held equity interests in the
following undertakings:
Direct investments
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Agriterra (Mozambique) Limited 100% Guernsey Holding company
Agriterra Aviation (Pty) Limited 100% South Africa Aviation services
Agriterra East Africa Limited 100% Mauritius Trading
West Africa Cocoa Services Limited (1) 100% British Virgin Islands Holding company
Shawford Investments Inc. 100% British Virgin Islands Holding company
Baranca Tide Limited (1) 100% British Virgin Islands Holding company
Associate undertakings
African Management Services Limited 40% United Kingdom Business support services
Indirect investments of Agriterra (Mozambique) Limited
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Desenvolvimento E Comercialização
Agrícola 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
Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------------
Subsidiary undertakings
Tropical Farms (SL) Limited(1) 100% Sierra Leone Cocoa and coffee trading
Indirect investments of Baranca Tide Limited
Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------
Subsidiary undertakings
Tropical Farms Plantation (SL) Limited (1) 100% Sierra Leone Cocoa plantation
Indirect investments of Shawford Investments Inc.
Proportion held Country of incorporation Nature of business
---------------- ------------------------- -------------------
Subsidiary undertakings
Red Bunch Ventures (SL) Limited 100% Sierra Leone Palm oil
(1) These companies form part of the Cocoa disposal group.
Refer to note 25 for further details.
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.
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
2016 2015 2016 2015
------- ------ ------- ------
Mozambican Meticais: US$ 43.61 32.45 59.61 36.90
Sierra Leone Leones: US$ 5,067 4,301 6,200 4,295
======= ====== ======= ======
3.4. Operating segments
The Chief Operating Decision Maker is the ExCom. 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.
Income arising from the rental of surplus plant and machinery is
stated on an accruals basis at the amount due for rental until 31
May of the relevant financial year.
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 retirement plan for its
employees. 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 2015 and 31 May 2016
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.
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. 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.
Other than for Aviation assets, 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 5% - 25%
Motor vehicles 20% - 25%
Other assets 10% - 33%
Assets under construction Nil
Depreciation on Aviation assets is charged based on the separate
components of the aircraft, on an hours flown basis for engines and
on a straight-line basis over 15 years for the airframe.
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.
3.14. Impairment of property, plant and equipment
At each balance sheet date, the Group reviews the carrying
amounts of its tangible assets 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.
3.15. 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.
Cattle ceases to be a biological asset from the point it is
slaughtered, after which it is accounted for in accordance with the
accounting policy below for inventories.
The cost of forage is charged to the income statement over the
period it is consumed.
3.16. 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.
3.17. Non-current assets held for sale
Non-current assets (and disposal groups) held for sale are
measured at the lower of carrying amount and fair value less costs
to sell.
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset
(or disposal group) is available for immediate sale in its present
condition. Management must be committed to the sale which should be
expected to qualify for recognition as a completed sale within one
year from the date of classification.
When the Group is committed to a sale plan involving the loss of
control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria above
are met.
A non-current asset is not depreciated (or amortised) while it
is classified as held for sale, or while it is part of a disposal
group classified as held for sale.
Interest and other expenses attributable to the liabilities of a
disposal group classified as held for sale are recognised in profit
or loss.
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 21.
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 asset have been affected.
For loans and receivables carried at amortised cost, the amount
of the impairment is the differences between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced through
the use of an allowance account. When a financial asset is
considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off
are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or
loss.
If in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit and loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
3.18.1.4. De-recognition of financial assets
The Group de-recognises 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. De-recognition of financial liabilities
The Group de-recognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
3.19. Fair value measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place
either in the principal market for the asset or liability or, in
the absence of a principal market, in the most advantageous market
for the asset or liability. The principal or the most advantageous
market must be accessible to the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
For all other financial instruments not traded in an active
market, the fair value is determined by using valuation techniques
deemed to be appropriate in the circumstances. Valuation techniques
include the market approach (i.e., using recent arm's length market
transactions adjusted as necessary and reference to the current
market value of another instrument that is substantially the same)
and the income approach (i.e., discounted cash flow analysis and
option pricing models making as much use of available and
supportable market data as possible).
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable
Level 3 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing the categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at
the end of each reporting period.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies which are
described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The effect on the financial statements of changes in estimates in
future periods could be material.
4.1. Going concern
The Group has prepared forecasts for the Group's ongoing
businesses covering the period of at least 12 months from the date
of approval of these financial statements. These forecasts are
based on assumptions including, inter alia, that there are no
significant disruptions to the supply of maize or cattle to meet
its projected sales volumes and that key inputs are achieved, such
as anticipated sales price increases to reflect underlying
inflation in Mozambique, and projected weight gains of cattle in
the feedlot. They further take into account the expected meat to be
obtained by de-stocking the beef herd from the beef ranches,
planned disposals of property plant and equipment, general working
capital requirements and available borrowing facilities.
The Directors believe that with existing resources, including
available undrawn borrowing facilities, the Group and Company is
able to manage its business risks. The Directors have a reasonable
expectation that the Group and Company have adequate resources to
continue in operational existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in
preparing these financial statements.
4.2. Impairment
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
11.
4.3. Biological assets
Cattle are accounted for as biological assets and measured at
their fair value at each balance sheet date. Fair value is based on
the estimated market value for cattle 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.
The herd is further categorised as either breeding herd of
slaughter herd, depending on whether it is principally held for
reproduction or slaughter. At 31 May 2016 the value of the breeding
herd disclosed as a non-current asset was $888,000 (2015:
$2,246,000). The value of the herd held for slaughter disclosed as
a current asset was $1,106,000 (2015: $1,019,000). Subsequent to
the period end the Group has commenced de-stocking its cattle farms
(where the breeding herd is held) into the feedlot and these
animals are being processed for slaughter. The de-stocking is
expected to be complete by the end of April 2017 and accordingly,
the value of the breeding herd will now be realised within 12
months of the balance sheet date. The decision to close the cattle
ranches was not made until after the period end and, accordingly,
the breeding herd continues to be disclosed as a non-current asset
as at 31 May 2016. Further details on the de-stocking are included
in note 34.1 and the Chair's statement.
4.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax ('IVA') operates in a similar manner
to UK Value Added Tax ('VAT'). The Group is exempt from IVA on its
sales of maize products 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 2015 and 31 May
2016. As at 31 May 2016, the gross and net IVA recoverable assets
are respectively $837,000 (2015: $1,319,000) and $nil (2015: $nil)
at the US$ to Metical exchange rate of 59.61 (2015: 36.90) at that
date.
4.5. Presentation of 'Other cocoa activities' as discontinued
operations and classification of related assets and liabilities as
held for sale
As discussed in note 16.3, the results of the Group's Cocoa
division are presented as discontinued operations in the period and
the related assets and liabilities are classified as a disposal
group held for sale (refer to note 25). The classification
requires, inter alia, that:
-- the disposal group is available for immediate sale in its
present condition, subject only to terms that are usual and
customary for the sale of such a group; and
-- the sale of the disposal group must be highly probable.
As at 31 May 2016, the Board had reached the decision to sell
the Cocoa division if an appropriate offer was made and
confidential discussions had been initiated with a number of
parties including the incumbent management team of the Cocoa
division. These discussions indicated that the disposal of the
disposal of the Cocoa division would achieve a realistically
acceptable price and accordingly, its sale within twelve months of
the balance sheet date was considered highly probable. Accordingly
the Cocoa division was classified as available for sale as at 31
May 2016. Subsequent to the period end, the incumbent management
team of the Cocoa division agreed the detailed purchase terms for
the holding companies that control the Cocoa division, confirming
this assessment. Further details are provided in note 34.2.
5. REVENUE
An analysis of the Group's revenue is as follows:
2016 2015
(re-presented - note 16)
US$000 US$000
------ ------------------------
Continuing operations
Sale of goods 18,334 10,839
Hire of equipment and machinery 177 44
------ ------------------------
18,511 10,883
Investment revenues (note 12) 11 19
------ ------------------------
18,522 10,902
Discontinued operations
Sales of goods (note 16) 161 -
Hire of equipment and machinery (note 16) 228 904
------ ------------------------
389 904
18,911 11,806
====== ========================
6. 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.
6.1. Segment revenue and results
The following is an analysis of the Group's revenue and results
by operating segment:
Year ending 31 May Grain Beef Cocoa(3) Unallo-cated Discon- Elimina-tions Total
2016 tinued(4)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- -------- --------- ------------- ----------- -------------- --------
Revenue
External sales(2) 12,246 6,265 389 - (389) - 18,511
Inter-segment
sales(1) 660 - - - - (660) -
------- -------- --------- ------------- ----------- -------------- --------
12,906 6,265 389 - (389) (660) 18,511
------- -------- --------- ------------- ----------- -------------- --------
Segment results
- Operating profit /
(loss) 811 (5,981) (965) (1,446) 965 - (6,616)
- Interest (expense)
/ income (473) (205) - 11 - - (667)
- Other gains and
losses - - - (360) - - (360)
------- -------- --------- ------------- ----------- -------------- --------
Profit / (loss)
before tax 338 (6,186) (965) (1,795) 965 - (7,643)
------- -------- --------- ------------- ----------- -------------- --------
Income tax (16) (18) - - - - (34)
------- -------- --------- ------------- ----------- -------------- --------
Profit / (loss) for
the period from
continuing
operations 322 (6,204) (965) (1,795) 965 - (7,677)
======= ======== ========= ============= =========== ============== ========
Year ending 31 May 2015 Grain Beef Cocoa(3) Unallo-cated Discon-tinued(4) Elimina-tions Total
(re-presented - note 16)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------- -------- --------- ------------- ----------------- -------------- --------
Revenue
External sales(2) 5,517 5,366 904 - (904) - 10,883
Inter-segment sales(1) 524 - - - - (524) -
-------- -------- --------- ------------- ----------------- -------------- --------
6,041 5,366 904 - (904) (524) 10,883
-------- -------- --------- ------------- ----------------- -------------- --------
Segment results
- Operating loss (2,128) (2,317) (7,853) (2,166) 7,853 - (6,611)
- Interest (expense) /
income (680) 2 - 14 - - (664)
- Other gains and losses - - - (849) - - (849)
Loss before tax (2,808) (2,315) (7,853) (3,001) 7,853 - (8,124)
-------- -------- --------- ------------- ----------------- -------------- --------
Income tax (78) (3) - - - - (81)
-------- -------- --------- ------------- ----------------- -------------- --------
Loss for the period from
continuing operations (2,886) (2,318) (7,853) (3,001) 7,853 - (8,205)
======== ======== ========= ============= ================= ============== ========
(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 Mozambique market. $161,000 of sales
from the Cocoa division were supplied to the world
market during the year, with the remainder supplied
within Sierra Leone (2015: supplied in full within
Sierra Leone during the year).
(3) $228,000 (2015: $904,000) of revenue reported
in the Cocoa segment for the year ended 31 May
2016 arises on the rental of certain of the Cocoa
division's assets, principally 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 notes 16.2 and 16.3.
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
2016
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- ----------------- -------------- -------
Depreciation 239 889 391 32 (391) - 1,160
Impairment of
assets (note 11.1) - 3,069 - - - - 3,069
======= ======= ======= ============= ================= ============== =======
Year ending 31 May 2015 Grain Beef Cocoa Unallo-cated Discon-tinued(1) Elimina-tions Total
(re-presented - note 16)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- ----------------- -------------- -------
Depreciation 386 1,122 628 136 (628) - 1,644
Impairment of assets (note
11.2) - - 6,791 - (6,791) - -
======= ======= ======= ============= ================= ============== =======
(1) Amounts reclassified to discontinued operations
in both periods presented relate to the Cocoa segment
- refer to notes 16.2 and 16.3.
6.2. Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and
equipment, biological assets, inventories, trade and other
receivables and cash and cash equivalents. Segment liabilities
comprise operating liabilities, including an overdraft financing
facility in the Grain segment, and bank loans and overdraft
financing facilities in the Beef segment.
Capital expenditure comprises additions to property, plant and
equipment, including capitalised depreciation where applicable in
the year ended 31 May 2015.
The segment assets and liabilities at 31 May 2016 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 6,167 6,401 - 4,513 17,081
Liabilities (1,496) (1,889) - (382) (3,767)
Capital expenditure (85) (380) - - (465)
======== ======== ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 12,568 3,385
Unallocated:
Investments in quoted companies and interests in associates 20 -
Other receivables 568 -
Assets classified as held for sale 607
Cash and cash equivalents 3,318 -
Liabilities directly associated with assets classified as held for sale - 142
Trade payables - 96
Accrued liabilities - 144
Total 17,081 3,767
======= ============
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 in quoted companies and interests in associates 380 -
Other receivables 495 -
Cash and cash equivalents 6,029 -
Trade payables - 627
Accrued liabilities - 158
Total 34,298 4,456
======= ============
6.3. Significant customers
In the year ended 31 May 2016, no single customer contributed
more than 10% of the Group's revenue. During the year ended 31 May
2015, one of the Beef division's customers generated $1,515,000 of
revenue being 13.9% of Group revenue.
7. OPERATING LOSS
Operating loss has been arrived at after charging /
(crediting):
2016 2015
(re-presented - note 16)
US000 US$000
------ -------------------------
Depreciation of property, plant and equipment 1,160 1,644
Profit on disposal of property, plant and equipment (15) (61)
Loss on re-measurement of assets classified as held for sale 125 -
Net foreign exchange (gain) / loss (37) 177
Impairment of assets (see note 11.1) 3,069 -
Staff costs (see note 9) 3,360 4,326
====== =========================
8. AUDITORS REMUNERATION
Amounts payable to RSM UK Audit LLP and their associates in
respect of audit services are as follows:
2016 2015
US$000 US$000
------ ------
Fees payable to the Company's auditor for the audit of the Company's accounts 121 153
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries - 52
------ ------
Total audit fees 121 205
====== ======
Other than as disclosed above, the Company's auditor and their
associates have not provided additional services to the Group.
9. STAFF COSTS
The average monthly number of employees (including executive
Directors) employed by the Group for the year was as follows:
2016 2015
(re-presented - note 16)
Number Number
------- -------------------------
Office and Management 47 48
Operational 746 814
------- -------------------------
793 862
======= =========================
Of which relating to:
Continuing operations 730 707
Discontinued operations 63 155
--- ---
793 862
=== ===
Their aggregate remuneration comprised:
2016 2015
(re-presented - note 16)
US$000 US$000
------- -------------------------
Wages and salaries 3,615 5,008
Social security costs 78 104
Share based payment charge 66 55
------- -------------------------
3,759 5,167
Less: capitalised and included in property, plant and equipment - (169)
------- -------------------------
Amount charged to profit and loss 3,759 4,998
======= =========================
Of which relating to:
Continuing operations 3,360 4,326
Discontinued operations 399 672
----- -----
3,759 4,998
===== =====
10. REMUNERATION OF DIRECTORS
Year ended 31 May 2016 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
--------- -------- -------------------- --------
PH Edmonds 136 13 - 149
CS Havers 4 - - 4
AS Groves 149 13 - 162
DL Cassiano-Silva 202 16 13 231
491 42 13 546
========= ======== ==================== ========
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
========= ======== ==================== ========
11. IMPAIRMENT OF CURRENT AND NON-CURRENT ASSETS
In accordance with IAS 36, Impairment of assets, the Group
conducted an impairment review of its tangible assets as at 31 May
2016, resulting in an impairment against its Beef division assets
held in Mozambique. The equivalent impairment review conducted as
at 31 May 2015 resulted in an impairment against the tangible and
intangible cocoa and palm lease assets, all held in Sierra Leone.
Details of the recorded impairments are as follows:
2016 2015
(re-presented - note 16)
US$000 US$000
------- -------------------------
Beef division 3,069 -
------- -------------------------
Impairment against continuing operations 3,069 -
------- -------------------------
Cocoa division - 6,791
Palm activities - 3,069
------- -------------------------
Impairment against discontinued operations - 9,860
-------
3,069 9,860
======= =========================
Further details are provided below.
11.1. Impairment of Beef division non-current assets in the financial year ended 31 May 2016
The economic environment in Mozambique has altered substantially
during the 2016 calendar year, having been affected by a
combination of a decline in commodity prices, the strong
devaluation of the Metical, a rise in inflation, natural disasters
and military conflict in the central regions of the country. On the
one hand, this changing economic environment has presented
significant sales opportunities for the Group, particularly in the
ability to supply local product to substitute previously preferred
imported goods which are now relatively more expensive. The
increased price competitiveness of our beef products in particular
has opened up the sizeable Maputo market and we are now seeing
record monthly sales volumes as a result. On the other hand, it is
uncertain if and when the political and military tensions will be
resolved and, until these matters are resolved, there will
inevitably be significant uncertainty regarding the security of
investment in certain parts of the country. This uncertainty, along
with the general economic climate in Mozambique, led the Board to
initiate the de-stocking of the animals from the cattle farms in
June 2016. Further details are provided in note 34.1 and the
Chair's statement.
As a result of the above, and as required by IFRS, the Group
conducted an impairment review of the Beef division assets in
Mozambique, resulting in an impairment against property, plant and
equipment in the Beef division of $3,069,000 (2015: $nil).
Where assets were capable of generating cash flows that were
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 were mainly
vehicles, agricultural equipment, heavy plant and machinery etc.
Where the asset did not generate cash flows that were independent
from other assets, the Group estimated the recoverable amount of
the cash-generating unit to which the asset belonged. Examples of
such assets were (1) the farm and feedlot development assets (for
each of Mavonde, Inhazonia, Dombe and Vanduzi), including the land
itself, clearing costs, planting, maintenance and other
expenditure, and (2) the abattoir and retail units.
$2,408,000 of the impairment charge relates to the farming
assets, which comprise in the main the initial purchase price of
the land, fixed land improvements (such as land clearing and
preparation or the construction of the Mavonde dam) and semi-fixed
improvements (such as fencing). Given the political and military
tensions in Mozambique, and their consequential impact on the
investment landscape, there was no basis for making a reliable
estimate of fair value less costs of disposal and therefore
recoverable amount was measured by reference to value in use alone.
This was estimated at $nil because the farm assets at their stage
of development as cattle farms, are not capable of generating
positive cash returns without further development funding.
$197,000 of the impairment charge relates to vehicles, heavy
plant and machinery and agricultural equipment (including
irrigation pivots). Recoverable amount was 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
Mozambique.
The remaining charge of $464,000 was recorded against the
Vanduzi feedlot assets where recoverable amount was estimated based
on a value in use discounted cash flow basis. The retail and
abattoir assets were also assessed for impairment on a value in use
discounted cash flow basis. No impairments were recorded against
these assets. The impairment review utilised the cash flow
forecasts for the Beef division (which are not reliant on the
ongoing supply of animals from the cattle farms) are based on the
most recent financial budgets approved by management for the next
five years. Cash flows were estimated in real terms. No growth is
assumed in subsequent years which are maintained at constant
levels. The key assumptions in the value in use calculations are
those regarding the discount rate, expected changes to selling
prices and, for the feedlot, expected daily weight gains. Where
appropriate, the expected cash flows have been probability weighted
in respect of these key assumptions. Management estimates discount
rates using pre-tax rates that reflect the current market
assessments of the time value of money and the risks specific to
the cash generating unit. Changes in selling prices are based on
expectations of future changes in the market and, in particular,
reflect the expected price rises that should be achievable given
the recent devaluation in the Metical and inflation which have not
as yet been reflected in the selling prices. Daily weight gains in
the feedlot are estimated based on past experience. The rate used
to discount cash flows was 17.5%, reflecting the estimated real
interest rate in Mozambique of 12.5% and a 5% adjustment for risks
specific to the assets which have not been reflected in the
underlying cash flows.
The Board notes that the impairment review does not reflect the
significant upside potential in Mozambique from the development of
the liquefied natural gas ('LNG') operations in the North. Further
detail regarding the current status of these projects is included
in the Chair's statement.
11.2. Impairment of Cocoa division current and non-current
assets in the financial year ended 31 May 2015
During the year ended 31 May 2015, and as a result of the Ebola
outbreak affecting Western Africa, including Sierra Leone, the
Company suspended development activities at the cocoa plantation in
Sierra Leone. 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. Further,
despite significant efforts to eradicate the virus and restore
confidence in the country, the Board was of the opinion that the
investment landscape in Sierra Leone had not returned to the
favourable environment that was present pre-Ebola, and, in the
Board's opinion, significant further regeneration and international
development support was needed in the short to medium term to
facilitate further significant private sector investment.
Activities at the plantation have since been maintained at the
level sufficient to protect staff while maintaining the Group's
assets in country.
As required by IFRS, in 2015, the Group conducted an impairment
review of all of the Group's Cocoa division assets in Sierra Leone,
which principally comprised 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, 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
=======
Where assets were capable of generating cash flows that were
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 were
warehouses, vehicles, nurseries etc. Where the asset did not
generate cash flows that were independent from other assets, the
Group estimated the recoverable amount of the cash-generating unit
to which the asset belonged. Examples of such assets were 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 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 stage of development, were 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.
The impairment of the Cocoa division assets was presented within
continuing operations in the year ended 31 May 2015 because, in the
medium to long term, the Board remained positive about the future
development potential in Sierra Leone for the cocoa plantation. As
more fully described in note 16.3, during the year ended 31 May
2016, the Board made the decision to dispose of all of the Cocoa
division's assets through sale. Accordingly and as required by IFRS
5. 'Non-current Assets Held for Sale and Discontinued Operations',
the comparative amounts, including the impairment charge, have been
reclassified to discontinued operations.
11.3. Impairment of palm activities' non-current assets in the financial year ended 31 May 2015
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 in the financial year ended 31 May
2015, the Group decided to suspend any activity on this lease. The
assets were accordingly impaired to $nil and presented within
discontinued operations in the financial year ended 31 May
2015.
The carrying value of these assets, included within Property,
plant and equipment was $6,009,000, which included the initial
purchase price of the lease, deferred consideration, 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 intended to complete this initial development and
accordingly the related obligation to issue shares (which was
included within the 'Shares to be issued reserve', a component of
the Group equity, with a carrying value of $2,940,000) was released
to profit and loss, reducing the impairment arising on the palm
activities to $3,069,000, which was included in the results of
discontinued operations (refer to note 16.4).
12. INVESTMENT REVENUES
2016 2015
US$000 US$000
------- -------
Interest income on bank deposits 11 19
======= =======
All investment revenues are earned on cash and bank balances
which are financial assets classified as loans and receivables.
13. OTHER GAINS AND LOSSES
2016 2015
US$000 US$000
------- -------
Decrease in fair value of quoted investments (note 21) 360 849
======= =======
14. FINANCE COSTS
2016 2015
US$000 US$000
------- -------
Interest expense on bank borrowings 678 683
======= =======
15. TAXATION
2016 2015
(re-presented - note 16)
US$000 US$000
-------- -------------------------
Loss before tax from continuing activities (7,643) (8,124)
-------- -------------------------
Tax credit at the Mozambican corporation tax rate of 32% (2015: 32%) (2,446) (2,600)
Tax effect of expenses that are not deductible in determining taxable profit 55 67
Tax effect of losses not allowable 463 1,556
Tax effect of losses not recognised in overseas subsidiaries (net of effect of
different rates) 1,928 977
Statutory taxation payments irrespective of income 14 9
Adjustment in respect of prior years 20 72
Tax expense 34 81
======== =========================
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 credit of $187,000 (2015: $nil)
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
$9,652,000 (31 May 2015: $13,460,000). In addition, the Group has
further deductible timing differences amounting to approximately
$31,285,000 (31 May 2015: $13,575,000). 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 (2015: 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).
16. DISCONTINUED OPERATIONS
The loss after tax arising on discontinued operations during the
period is analysed by business operation as follows:
2016 2015
(re-presented - note 16.3)
US$000 US$000
------- ---------------------------
Oil and gas activities 187 5,740
Cocoa trading activities - (174)
Other cocoa activities(1) (965) (7,679)
Palm activities - (3,069)
------- ---------------------------
Net loss after tax attributable to discontinued operations
(attributable to owners of the Company) (778) (5,182)
======= ===========================
(1) The corresponding amounts for 'Other cocoa activities'
were previously reported within continuing operations
for the year ended 31 May 2015. For the reasons described
in note 16.3, these activities are classified as discontinued
operations in the year ended 31 May 2016 and, as required
by IFRS 5, 'Non-current Assets Held for Sale and Discontinued
Operations', the comparative amounts have been reclassified.
16.1. Oil and gas
On 6 January 2009, the Shareholders approved the adoption of the
investing strategy to acquire or invest in businesses or projects
operating in the agricultural and associated civil engineering
industries in Southern Africa. At the same time the Group suspended
all exploration activities and reduced expenditure to the minimum
required in order to retain exploration licenses and extract
potential value for Shareholders. Consequently the oil and gas
activities were reclassified as a discontinued operation.
In the financial year ended 31 May 2013 the Group completed the
disposal of its oil and gas interests in Ethiopia. The gain on
disposal was taxed in full in Ethiopia in that year, without taking
into consideration certain tax deductible expenditure incurred by
the Group. In the current financial year the Group has been
successful in recovering $187,000 as full and final settlement of
amounts due to the Group from overpaid tax arising on the
aforementioned gain on disposal.
During the year ended 31 May 2015 the Group was paid
GBP3,412,000 (being $5,659,000) in cash as compensation due to the
Company by the Government of the Republic of South Sudan for works
undertaken by the Company in the Republic of South Sudan. A further
net credit of $81,000 was recorded in the year ended 31 May 2015
with respect to the re-imbursement of expenditure incurred in
pursuing this claim. No amounts were recorded in respect of this
matter in the current financial year.
16.2. 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 the results of the
cocoa trading operations were presented as discontinued operations
within the consolidated income statement. No amounts are recorded
with respect to the cocoa trading operations in the current
financial year. The amounts recorded in the consolidated income
statement in the preceding financial year, which relate to the
winding down of the cocoa trading operations between June and
August 2014, were as follows:
2015
US$000
-------
Expenses (174)
Loss before taxation (174)
Taxation -
-------
Loss after tax and net loss attributable to the discontinued cocoa trading operations in the
period (attributable to owners of the Company) (174)
=======
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.
16.3. Other cocoa activities
From 1 September 2014 and following the cessation of all cocoa
trading related activities (refer to note 16.2), the Cocoa division
focussed its efforts on maintaining the cocoa plantation assets,
while undertaking revenue generating logistics activities,
principally providing assistance in the Ebola relief efforts
(collectively the 'Other cocoa activities'). Due to the significant
efforts undertaken to control the Ebola epidemic by international
aid and health organisations, Sierra Leone was declared Ebola free
during the current financial year, initially in November 2015 and
subsequently in March 2016. Consequently, the logistics activities
which were being undertaken to provide cash support for the Cocoa
division reduced in scale such that the available income from these
activities no longer substantially covered the costs of the Cocoa
division.
While the Group has successfully established and maintained the
necessary infrastructure from which a large scale commercial cocoa
plantation and trading business can be developed in Sierra Leone,
the next stage in the development of these assets requires
significant capital investment. Given the impact of Ebola on the
West African region as a whole and the lack of investment appetite
from traditional finance sources, the Board formed the view, after
due investigations and careful consideration that the Group would
be unlikely to be able to raise the finance to continue with the
development of the cocoa plantation in the foreseeable future. In
this context, the Board therefore believed that it was in the best
interests of the Group to sell the Cocoa division to bolster the
Group's cash reserves and to enable the Cocoa division to access
other finance sources, such as dedicated development and
sustainability funds.
The Other cocoa activities represented a business segment of the
Group and accordingly the results of the Other cocoa activities are
presented as discontinued operations within the consolidated income
statement. Comparative amounts have been represented as required by
IFRS 5. The amounts recorded in the consolidated income statement
related to the Other cocoa activities were as follows:
2016 2015
US$000 US$000
-------- --------
Revenue 389 904
Cost of sales (277) (260)
-------- --------
Gross profit 112 644
Operating expenses (1,126) (1,558)
Profit on disposal of property, plant and equipment 49 15
Other income - 11
Impairment of current and non-current assets (note 11.2) - (6,791)
Loss before taxation (965) (7,679)
Taxation - -
-------- --------
Loss after tax and net loss attributable to the discontinued Other cocoa activities in the
period (attributable to owners of the Company) (965) (7,679)
======== ========
Cash flows pertaining to the Other cocoa activities are
presented in the consolidated cash flow statement along with all
cash flows relating to discontinued operations.
The net assets of the Cocoa division, all of which related to
the Other cocoa activities, are classified as held for sale as at
31 May 2016. Further details are provided in notes 4.5 and 25.
The Cocoa division was sold subsequent to the period end for
cash consideration of $750,000. Further details are provided in
note 34.2.
16.4. Palm activities
The amount reported within discontinued operations for palm
activities during the year ended 31 May 2015 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 deferred consideration which was assessed as no longer being
due, as more fully described in note 11.3.
17. LOSS PER SHARE
The calculation of the basic and diluted loss per share is based
on the following data:
2016 2015
(re-presented - note 16)
US$000 US$000
-------------- -------------------------
Loss for the purposes of basic and diluted earnings per share from
continuing activities (7,677) (8,205)
Loss for the purposes of basic and diluted earnings per share from
discontinued activities (778) (5,182)
Loss for the purposes of basic and diluted earnings per share (loss for
the year attributable
to equity holders of the Company) (8,455) (13,387)
============== =========================
Weighted average number of Ordinary Shares for the purposes of basic and
diluted loss per
share 1,061,818,478 1,061,818,478
============== =========================
Basic and diluted loss per share (0.80) (1.26)
-------------- -------------------------
Basic and diluted loss per share from continuing activities (0.72) (0.77)
-------------- -------------------------
Basic and diluted loss per share from discontinued activities (0.08) (0.49)
-------------- -------------------------
18. GOODWILL
The movements in the carrying value of the Group's goodwill are
as follows:
US$000
-------
At 1 June 2014 576
Eliminated in the period (575)
Exchange rate adjustment (1)
-------
At 31 May 2015 and 31 May 2016 -
=======
The Group's goodwill balance, which related to the cocoa
plantation, was written off in full in the year ended 31 May 2015
as more fully described in note 11.2.
19. 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
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
Additions 124 151 92 78 20 - 465
Disposals (5) (297) (427) - - - (729)
Transfer to
assets
classified
as held for
sale (4,510) (1,020) (623) (1,000) (53) - (7,206)
Exchange rate
adjustment (6,858) (3,471) (1,722) (64) (213) - (12,328)
At 31 May
2016 13,936 4,887 2,252 - 329 - 21,404
------------- ------------- ------------- --------- -------- ------------- ---------
Accumulated
depreciation
and
impairment
At 1 June
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
11) 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
Charge for
the year 283 762 417 44 45 - 1,551
Disposals - (209) (361) - - - (570)
Impairment
loss (note
11) 2,497 546 25 - 1 - 3,069
Transfer to
assets
classified
as held for
sale (4,182) (996) (538) (434) (53) - (6,203)
Exchange rate
adjustment (2,245) (1,491) (1,490) (53) (125) - (5,404)
At 31 May
2016 9,244 2,387 2,078 - 190 - 13,899
------------- ------------- ------------- --------- -------- ------------- ---------
Net book
value
31 May 2016 4,692 2,500 174 - 139 - 7,505
============= ============= ============= ========= ======== ============= =========
31 May 2015 12,294 5,749 907 543 253 - 19,746
============= ============= ============= ========= ======== ============= =========
Additions to land and buildings include $nil (2015: $399,000) of
acquisition and development costs of the Group's cocoa plantation
in Sierra Leone. Included in this sum is $nil (2015: $146,000) of
depreciation in respect of plant and equipment and $nil (2015:
$169,000) of wages and salaries.
A depreciation charge of $1,160,000 (2015: $1,644,000) has been
included in the consolidated income statement within operating
expenses and $391,000 (2015: $628,000) has been included within
discontinued operations.
Property, plant and equipment with a carrying amount of
$5,311,000 (2015: $2,173,000) have been pledged to secure the
Group's bank overdrafts and loans (note 26). The Group is not
allowed to pledge these assets as security for other borrowings or
sell them to another entity.
At 31 May 2016 and 31 May 2015, the Group had no contractual
commitments for the acquisition of property, plant and
equipment.
20. INTERESTS IN ASSOCIATES
The 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 (2015: $4,000). The Group's initial investment in AMS was
$nil.
21. INVESTMENTS IN QUOTED COMPANIES
'Investments in quoted companies' comprise financial assets at
FVTPL. Changes in market value are recorded in profit and loss
within other gains and losses. As at 31 May 2016 and 31 May 2015,
these investments comprise 8,337,682 ordinary shares in Atlas
African Industries Limited (formerly Atlas Development &
Support Services Limited) ('AAI'), an AIM quoted company. Movements
in the value of the investment in AAI were as follows:
US$000
-------
At 1 June 2014 1,225
Decrease in fair value (note 13) (849)
-------
At 31 May 2015 376
Decrease in fair value (note 13) (360)
-------
At 31 May 2016 16
=======
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.
22. BIOLOGICAL ASSETS
US$000
--------
Fair value
At 1 June 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
Purchase of biological assets 2,815
Sale, slaughter or other disposal of biological assets (4,407)
Change in fair value 1,637
Foreign exchange adjustment (1,316)
--------
At 31 May 2016 1,994
========
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:
2016 2015 2016 2015
Head Head US$000 US$000
------ ------ ------- -------
Non-current asset 3,564 4,395 888 2,246
Current asset 3,216 2,772 1,106 1,019
------ ------ ------- -------
6,780 7,167 1,994 3,265
====== ====== ======= =======
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.
The Group's biological assets have been pledged in full to
secure the Beef division's bank overdraft and loans (see note
26).
Subsequent to the period end and for the reasons described in
note 34.1, the Board made the decision to close the breeding farms.
Accordingly, the breeding herd are being moved to the Vanduzi
feedlot where they are being fattened and will eventually be
slaughtered.
23. INVENTORIES
2016 2015
US$000 US$000
------- -------
Consumables and spares 139 120
Raw materials 1,028 2,452
Work in progress 14 27
Finished goods 176 293
1,357 2,892
======= =======
During the year inventories amounting to $14,267,000 (2015:
$8,191,000) were included in cost of sales and $127,000 (2015:
$nil) were included within discontinued operations.
Inventories with a carrying amount of $1,022,000 (2015:
$2,140,000) have been pledged to secure the grain division's bank
overdraft and inventories with a carrying value of $134,000 (2015:
$nil) have been pledged to secure the Beef division bank overdraft
and loans (see note 26).
24. TRADE AND OTHER RECEIVABLES
2016 2015
US$000 US$000
------- -------
Trade receivables 678 1,018
Other receivables 580 492
Prepayments 32 84
1,290 1,594
======= =======
'Trade receivables' and 'Other receivables' disclosed above are
classified as loans and receivables and measured at amortised
cost.
Included in 'Trade receivables' and 'Other receivables' are
receivables which have been provided against. Movements in the
allowance account against these receivables are as follows:
US$000
--------
At 1 June 2014 1,345
Charged to profit and loss 224
Foreign exchange gain (250)
--------
At 31 May 2015 1,319
Charged to profit and loss 182
Written off in the period (96)
Foreign exchange gain (495)
--------
At 31 May 2016 910
========
$837,000 (2015: $1,319,000) of the allowance account relates to
input IVA recoverable in Mozambique (refer to note 4.4). The
movement in the allowance account against the IVA recoverable
during both periods presented principally reflects the increase in
the underlying input IVA balance recorded by the Group offset by
the effect of the devaluation of the Mozambique Metical against the
United States Dollar.
Other receivables include $361,000 (2015: $350,000) due from
related parties (see note 32).
Trade receivables with a carrying amount of $496,000 (2015:
$nil) have been pledged to secure the grain division's bank
overdraft and trade receivables with a carrying value of $182,000
(2015: $nil) have been pledged to secure the Beef division's bank
overdraft and loans (see note 26).
The Directors consider that the carrying amount of financial
assets approximates their fair value. Included within Other
receivables are $385,000 of receivables which are past due but not
impaired (2015: there are no significant amounts past due which
have not been provided against). The ageing of past due but not
impaired receivables is as follows:
2016
US$000
-------
Greater than 120 days 385
=======
Further details on the Group's financial assets are provided in
note 28.
25. DISPOSAL GROUPS HELD FOR SALE
The major classes of assets and liabilities comprising the
operations classified as held for sale as at 31 May 2016 are as
follows:
Cocoa disposal group Aircraft disposal group Total
US$000 US$000 US$000
--------------------- ------------------------ -------
Assets classified as held for sale:
Property, plant and equipment 436 285 721
Inventories 126 - 126
Trade and other receivables 2 - 2
Cash and cash equivalents 11 - 11
--------------------- ------------------------ -------
Total assets classified as held for sale 575 285 860
--------------------- ------------------------ -------
Liabilities associated with assets classified as held
for sale:
Trade and other payables (142) - (142)
--------------------- ------------------------ -------
Total liabilities associated with assets classified as
held for sale (142) - (142)
--------------------- ------------------------ -------
Net assets of the disposal group 433 285 718
===================== ======================== =======
There were no assets classified as held for sale as at 31 May
2015.
Assets and associated liabilities within the 'Cocoa disposal
group' represent the net assets of the Group's Cocoa division. As
more fully described in note 16.3, all activities in the Cocoa
division were discontinued in the period. This division was sold
subsequent to the period end realising gross proceeds of $750,000
(refer to note 34.2). No impairments were recorded against the
assets in the Cocoa division during the year, or subsequent to the
period end.
Assets classified as held for sale within the 'Aircraft disposal
group' comprise all of the Group's aircraft assets, being one fixed
wing plane and two helicopters, which were identified as being
surplus to requirements. The aircraft were sold subsequent to the
period end, realising gross proceeds of $570,000. No impairments
were recorded against the aircraft assets upon transfer from
property, plant and equipment. Subsequent revisions to the expected
sales proceeds from the disposal of the fixed wing aircraft, offset
by favourable exchange rate movements, resulted in a net write down
in the carrying value of the Aircraft disposal group by $125,000
(refer to note 7). No further adjustments have been made to the
carrying value of the Aircraft disposal group subsequent to the
period end.
26. BORROWINGS
2016 2015
US$000 US$000
------- -------
Non-current liabilities
Bank loans 1,105 -
------- -------
-
Current liabilities
Bank loans 137 -
Overdraft 1,675 3,079
------- -------
1,812 3,079
------- -------
2,917 3,079
======= =======
As at 31 May 2016, the Group has overdraft and bank loan
facilities to finance the Beef division provided by Standard Bank
S.A. ('Standard Bank'), and overdraft facilities to finance the
Grain division provided by ABC Bank MZ ('ABC Bank') and Standard
Bank. Further details are provided below.
Beef division
On 24 June 2015, the Group agreed lending facilities totalling
105,000,000 Metical with Standard Bank to finance the Beef division
in Mozambique. The facilities comprise 75,000,000 Metical
($1,258,000 at the 31 May 2016 US$ to MZN exchange rate) of term
loans for the purchase of cattle, irrigation equipment, butchery
equipment, refrigerated vehicles and general capital purposes, and
a 30,000,000 Metical ($503,000 at the 31 May 2016 US$ to MZN
exchange rate) overdraft. The term loans carry interest at the
bank's prime lending rate plus 0.25% (being a rate of 19.75% as at
31 May 2016), and have a five year term from draw down with a
moratorium on capital repayments of 15 months. Capital repayments
on these loans commence in October 2016. The overdraft renews
annually, with the latest renewal on 29 September 2016, and carries
interest at the bank's prime lending rate (being a rate of 19.5% as
at 31 May 2016). The lending facilities are secured with a fixed
charge against certain of the Group's property, plant and equipment
with a carrying value of $2,137,000 (2015: $nil) (refer to note
19), and with floating charges against all cattle and meat
inventories with a carrying value of respectively $1,994,000 (2015:
$nil) (refer to note 22) and $134,000 (2015: $nil) (refer to note
23), and trade receivables with a carrying value of $182,000 (2015:
$nil) (refer to note 24).
As at 31 May 2016, the Beef division had available, undrawn
borrowing facilities of approximately 4,477,000 Metical ($75,000 at
the 31 May 2016 US$ to MZN exchange rate).
Grain division
At 31 May 2016, the Group had an overdraft facility of
179,000,000 Metical ($3,003,000 at the 31 May 2016 US$ to MZN
exchange rate) (2015: 179,000,000 Metical) provided by ABC Bank for
working capital funding in the Grain division, principally for the
purchase of maize and related operating expenditure. It was secured
by a fixed charge against $1,273,000 (2015: $2,173,000) of the
Group's property, plant and equipment (refer to note 19) and by a
floating charge over all maize inventory and finished maize
products totalling $1,022,000 (2015: $2,140,000) (refer to note
23). Interest was charged at ABC Bank's prime lending rate less 3%
(2015: counterparty bank's prime lending rate less 3%), being a
rate as at 31 May 2016 of 13% (2015: 13%). As at 31 May 2016, this
overdraft facility was in the process of being settled in full,
with a new overdraft facility being provided by Standard Bank. This
process was completed subsequent to the period end.
On 19 May 2016, the Group entered into a separate 300,000,000
Metical ($5,034,000 at the 31 May 2016 US$ to MZN exchange rate)
overdraft facility with Standard Bank (the 'Facility') to provide
working capital funding, principally for the purchase of maize and
related operating expenditure. It is secured by a fixed charge
against $3,174,000 (2015: $nil) of the Group's property, plant and
equipment (refer to note 19), and by floating charges against all
maize inventory and finished maize products totalling $1,022,000
(2015: $nil) (refer to note 23) and trade receivables totalling
$496,000 (2015: $nil) (refer to note 24). Interest is charged at
the counterparty bank's prime lending rate less 1.75%, being a rate
as at 31 May 2016 of 17.75%. Unless it is cancelled by either
party, the facility will renew on 25 March 2017. Fees of
approximately $33,000 were recorded in connection with the Facility
in the year ended 31 May 2016. These fees were paid subsequent to
the period end.
The first drawdowns on the Facility were made in May 2016;
subsequent to the period end, the Facility was in part utilised to
discharge the Group's obligations to ABC Bank on the overdraft
disclosed above at which point the ABC Bank overdraft facility was
extinguished and ceased to be available to the Group. The Group
completed the provision of the new security over its land and
buildings and the discharge of the security to ABC Bank subsequent
to the period end (note 34.3).
As at 31 May 2016, the Grain division had available, undrawn
borrowing facilities of approximately 224,756,000 Metical
($3,771,000 at the 31 May 2016 US$ to MZN exchange rate).
27. TRADE AND OTHER PAYABLES
2016 2015
US$000 US$000
------- -------
Trade payables 266 314
Other payables 125 623
Accrued liabilities 317 440
708 1,377
======= =======
'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.
28. FINANCIAL INSTRUMENTS
28.1. Capital risk management
The Group 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 26 after
deducting cash and bank balances) and equity of the Group as shown
in the Statement of financial position. The Group is 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 places 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 and has secured additional borrowing
facilities in Mozambique for its Beef operations (note 26).
28.2. Categories of financial instruments
The following are the Group financial instruments as at 31
May:
2016 2015
US$000 US$000
------- -------
Financial assets
Cash and bank balances 4,055 6,421
Fair value through profit and loss:
Held for trading 16 376
Other loans and receivables 1,257 1,510
------- -------
5,328 8,307
------- -------
Financial liabilities
Amortised cost 3,560 4,456
------- -------
3,560 4,456
1,768 3,851
======= =======
28.3. Financial risk management objectives
The Group manages the risks arising from its operations, and
financial instruments at ExCom and Board level. The Board has
overall responsibility for the establishment and oversight of the
Group's risk management framework and to ensure that the Group has
adequate policies, procedures and controls to manage successfully
the financial risks that the Group faces.
While the Group does not have a written policy relating to risk
management of the risks arising from any financial instruments
held, the close involvement of the ExCom in the day to day
operations of the Group ensures that risks are monitored and
controlled in an appropriate manner for the size and complexity of
the Group. Financial instruments are not traded, nor are
speculative positions taken. The Group has not entered into any
derivative or other hedging instruments.
The Group's key financial market risks arise from changes in
foreign exchange rates ('currency risk') and changes in interest
rates ('interest risk'). To a lesser extent the Group is exposed to
other price risk in respect of its investments in quoted companies.
The Group is also exposed to credit risk and liquidity risk. The
principal risks that the Group faces as at 31 May 2016 with an
impact on financial instruments are summarised below.
28.4. Market Risk
The Group is exposed to currency risk, interest risk and other
price risk (in respect of its investments in quoted companies).
These are discussed further below.
28.4.1. Currency risk
Certain of the Group companies have functional currencies other
than US$ 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
2016 2015 2016 2015
US$000 US$000 US$000 US$000
------- ------- ------- -------
United States Dollar ('US$') 3,877 6,880 222 786
Mozambique Metical ('MZN') 1,450 1,143 3,336 3,524
Sierra Leone Leones ('SLL') - 284 - 146
Other 1 - 2 -
------- ------- ------- -------
5,328 8,307 3,560 4,456
======= ======= ======= =======
The Group transacts 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$. The Group
does not hedge against this transactional risk. As at 31 May 2015
and 31 May 2016, the Group's outstanding foreign currency
denominated monetary items were principally exposed to changes in
the US$ / GBP and US$ / MZN exchange rate.
The following tables detail the Group's exposure to a 5, 10 and
15 per cent increase in the US$ against GBP and separately to a 10,
20 and 30 per cent increase against MZN. For a 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 of
opposite sign. 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.
2016 2016
US$000 US$000
--------- ---------
GBP Impact
Profit or loss
5% Increase in US$ (4) (10)
10% Increase in US$ (7) (20)
15% Increase in US$ (11) (30)
Other equity
5% Increase in US$ (69) -
10% Increase in US$ (138) -
15% Increase in US$ (208) -
MZN Impact
Profit or loss
10% Increase in US$ 23 -
20% Increase in US$ 46 -
30% Increase in US$ 69 -
Other equity (1)
10% Increase in US$ (6,039) (5,820)
20% Increase in US$ (12,078) (11,640)
30% Increase in US$ (18,117) (17,460)
========= =========
(1) This is mainly due to the exposure arising on
the translation of US$ denominated intra-group
loans provided to MZN functional currency entities
which are included as part of the Group's net
investment in the related entities.
28.4.2. Interest rate risk
The Group is exposed to interest rate risk because entities in
the Group hold cash balances and borrow funds at floating interest
rates. As at 31 May 2015 and 31 May 2016, the Group has no interest
bearing fixed rate instruments.
The Group maintains 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 needs. The weighted average interest rate on deposits
was 0.23% (2015: 0.59%). The weighted average interest on drawings
under the overdraft facilities and bank loans was 16.42% (2015:
14%). The Group does not hedge interest rate risk.
The following table details the Group'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 negative number in profit and loss represents an
increase in finance expense / decrease in interest income. The
sensitivity as at 31 May 2016 is presented assuming interest rates
on cash balances remain constant, with increases of between 20bp
and 1000bp on outstanding overdraft and bank loans. This
sensitivity to interest rate rises is deemed appropriate because
the Group interest bearing liabilities are Metical based. The
current macroeconomic circumstances in Mozambique, particularly due
to the significant weakening of the Metical, have led to a rapid
increase in interest rates following the year end to a prime rate
of 28.0% by the date of this report. This alone is an 850 bp
increase compared to 31 May 2016.
2016(2) 2015(1) (2)
US$000 US$000
-------- ------------
+ 20 bp increase in interest rates (6) (7)
+ 50 bp increase in interest rates (15) (17)
+100 bp increase in interest rates (29) (34)
+200 bp increase in interest rates (58) (68)
+500 bp increase in interest rates (146) (170)
+800 bp increase in interest rates (233) (272)
+1000 bp increase in interest rates (291) (340)
======== ============
(1) The sensitivity as at 31 May 2015 was prepared
on the basis of changes to interest rates affecting
both interest income and expense.
(2) The table above is prepared on the basis of an
increase in rates. A decrease in rates would
have the opposite effect.
28.4.3. Other price risk
The Group is exposed to equity price risk on its investments in
quoted securities which are measured at fair value (refer to note
21). Investments in quoted companies comprise investments in one
company, AAI. If AAI's share price increased / (decreased) by 10%
and the US$ / GBP exchange rate remained unchanged, the Group's net
profit would increase / (decrease) by $2,000 (2015: $38,000).
28.5. 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 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 financial assets disclosed in note 28.2. Details of
provisions against financial assets are provided in note 24.
28.6. Liquidity risk
The Group 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'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 overdrafts to the processing and sale of the Group's
maize and beef products.
At 31 May 2016 the Group held cash deposits of $4,055,000 (2015:
$6,421,000). At 31 May 2016 the Group had overdraft and bank loans
facilities of approximately $6,800,000 (2015: overdraft facility of
approximately $4,850,000) of which $2,950,000 (2015: $3,079,000)
was drawn. 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'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 could be required to settle its obligations. The
table includes both interest and principal cash flows.
2016 2015
US$000 US$000
------- -------
1 month 689 1,410
2 to 3 months 100 67
12 months 2,224 3,379
1 to 2 years 501 -
2 to 5 years 892 -
------- -------
4,406 4,856
28.7. 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 as at 31 May 2016 and 31 May 2015.
29. SHARE CAPITAL
Authorised Allotted and fully paid
Number Number US$000
At 31 May 2015 and 31 May 2016:
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.
30. RESERVES
Movements in the Group reserves are included in the consolidated
statement of changes in equity. A description of each reserve is
provided below.
30.1. 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.
31. SHARE BASED PAYMENTS
31.1. Charge in the period
The Group recorded a charge within Operating expenses for share
based payments of $66,000 (2015: $55,000).
31.2. Outstanding options and warrants
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.
In addition to share options issued under the unapproved share
option schemes, 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 during the period to employees.
The following table provides a reconciliation of share options
and warrants outstanding during the period:
2016 Weighted average exercise 2015 Weighted average exercise
Number price Number price
At 1 June 36,499,998 3.4 42,249,998 4.6p
Granted in the year 22,500,000 0.7 - -
Terminated in the year (5,166,000) 4.5
Lapsed in the year (2,830,000) 4.5 (5,750,000) 3.0p
At 31 May 51,003,998 2.0 36,499,998 3.4p
Exercisable at year end 47,504,006 1.9 27,500,004 3.3p
The fair value of the 22,500,000 Warrants granted during the
year ended 31 May 2016 was determined using the Black-Scholes
option pricing model using the following assumptions:
- Share price at the date of grant was the closing price on that
date, being 0.54p.
- The risk free rate was 0.91% based on the gilt yield over the
expected life of the Warrants at the date of grant.
- The annual dividend yield was expected to be nil based on the
Board's intention to reinvest operating cash flows.
- The annual volatility was 83.82% and was derived from the
historic daily share prices of the Company over the period matching
the expected life of the Warrants at the date of grant.
- The Warrants have a fair value of 0.27p with the total fair
value of the Warrants granted during the year ended 31 May 2016
calculated at $92,000.
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. No further
Incentive Options have been allocated.
At 31 May 2016, the following options and warrants over ordinary
shares of 0.1p each have been granted and remain unexercised:
Date of grant Total Exercisable Exercise price
options options Expiry date
13 July 2011 5,000,000 5,000,000 3.0p 13 July 2017
1 December 2011 10,000,000 10,000,000 2.0p 1 December 2016
29 July 2012 3,501,999 2,502,003 3.5p 29 July 2023
29 July 2012 3,501,999 2,502,003 5.5p 11 January 2020
01 May 2013 2,000,000 2,000,000 2.8p 30 April 2019
01 May 2013 2,000,000 2,000,000 5.5p 11 January 2020
15 May 2014 2,500,000 1,000,000 1.5p 15 May 2024
1 June 2015 22,500,000 22,500,000 0.7p 1 June 2021
51,003,998 47,504,006
32. RELATED PARTY DISCLOSURES
AS Groves and PH Edmonds, current or former directors of the
Company, are also directors of Liberian Cocoa Corporation ('LCC')
and African Management Services Limited ('AMS'). In addition, AS
Groves is, or was during the period, a Director of Consolidated
Growth Holdings Limited (formerly Sable Mining Africa Limited,
'CGH'), Atlas African Industries Limited (formerly Atlas
Development & Support Services Limited, 'AAI'), East Africa
Packaging Limited ('EAPC') and African Property Corporation
('APC'). The Group has 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, office, treasury and
administrative services to the Group for fees of $510,000 (2015:
$388,000). As at 31 May 2016 the Group was owed $116,000 by AMS
(2015: $107,000).
At 31 May 2016 the Group was owed $89,000 from LCC (2015:
$89,000).
During the year the Group and CGH incurred certain expenses on
each other's behalf, which were refunded in full during the year.
At 31 May 2016, the amount due to CGH was $nil (2015: $nil).
During the year the Group and AAI incurred certain expenses on
each other's behalf. In addition, AAI acquired EAPC, and assumed
EAPC's outstanding debt to the Group of $150,000 (2015: $150,000).
At 31 May 2016, the amount due from AAI to the Group was $156,000
(2015: $nil).
During the year ended 31 May 2015, the Group incurred certain
expenses on behalf of, or advanced loan funding to, APC. At 31 May
2015 APC owed the Group $3,000, which was settled in the current
financial year. No amounts are due from APC at 31 May 2016.
PH Edmonds resigned as a Director of the Company on 22 April
2016 and has subsequently been retained as a consultant to the
Group. Consultancy fees charged in the year ended 31 May 2016 were
$9,000 (2015: $nil). No amounts were outstanding at the period
end.
The remuneration of the Directors, who are the key management
personnel of the Group, is set out in note 10.
33. 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:
2016 2015
US$000 US$000
Within one year 152 138
In the second to fifth years inclusive 190 95
342 233
Operating lease rentals recognised as an expense in the
consolidated income statement were as follows:
Land and buildings 187 209
34. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
34.1. Destocking of the cattle ranches
As announced on 21 April 2016, the political and economic
environment in Mozambique has deteriorated during the course of
2016 and militias are entrenched in some rural areas in the Manica
province, where the Group's three farms are located. As announced
on 23 June 2016, due to the well documented political unrest in the
area around its cattle ranching operations in Central Mozambique,
the Group began destocking its cattle in order to safeguard and
crystallise its considerable livestock capital. The decision was
made to destock these farms in order to protect the value of the
herd during a period in which there is an increased possibility of
livestock theft and an increased risk in the movement of people and
goods in the country.
The Group's three farms, at Mavonde, Dombe and Inhazonia, held
approximately 4,200 head of cattle at 31 May 2016. Over the
forthcoming months, the cattle will continue to be delivered to the
Vanduzi feedlot for fattening and subsequent slaughter. The
feedlot, which continues to operate as normal, enables the Group to
produce a well finished, high quality animal for slaughter ensuring
premium grade meat is available to supply its butcheries and
wholesale operations.
Once the farms have been completely destocked, which is
anticipated to be by the end of April 2017, the Vanduzi feedlot
will exclusively process locally reared animals. The Board is
confident that suitable quality animals are available in the local
market for these purposes, having seen a growth in local commercial
cattle farming in recent times, in part as a result of the market
generated by the Company's feedlot and abattoir infrastructure.
The decision to destock the ranches was the outcome of a lengthy
internal deliberation and risk assessment. This process was
completed subsequent to the period end when the final decision was
made, although factors leading to that decision were present at 31
May 2016. The decision to destock the farms has accordingly been
taken into consideration for the purposes of the Group's impairment
review of its tangible assets in the Beef division for the year
ended 31 May 2016. Further details of the impairment review are
included in note 11.1.
34.2. Disposal of the Cocoa division
On 5 October 2016, the Group completed the sale of its Sierra
Leone Cocoa division in a management buy-out transaction (the
'MBO') for cash consideration of $750,000 (the 'Consideration').
The net assets of the Cocoa division had a carrying value as at 31
May 2016 of $433,000 (refer to note 25). The Cocoa division
principally comprised the 3,200 hectare cocoa plantation in the
Kenema district of Sierra Leone, a 2,000 m2 warehouse, and related
support infrastructure and vehicles.
Under the terms of the MBO, the Group disposed of its interests
in Baranca Tide Limited and West Africa Cocoa Services Limited (the
intermediate holdings companies which hold the assets comprising
the Group's cocoa business in Sierra Leone, the 'Target Companies')
with immediate effect; payment of the Consideration is deferred for
a period of 65 business days from completion of the MBO (i.e. until
9 January 2017); in the event that the Consideration is not paid on
the due date, the ownership of the Target Companies will
immediately revert to the Group.
The sale of these assets pursuant to the MBO is part of the
Group's ongoing rationalisation programme. The proceeds of the sale
of these assets will be applied towards the Group's general working
capital requirements.
34.3. Repayment of ABC Bank overdraft, discharge of mortgages
and creation of new mortgages in favour of Standard Bank
As more fully described in note 26, the Group has an overdraft
facility of 300,000,000 Metical with Standard Bank to provide
working capital funding, principally for the purchase of maize and
related operating expenditure. Inter alia, the Facility is secured
against certain of the Group's property, plant and equipment. These
items of property, plant and equipment were previously mortgaged to
ABC Bank. Subsequent to the period end, and following the repayment
in full of the ABC Bank overdraft facility, the deeds discharging
the ABC Bank mortgage and perfecting this security in the name of
Standard Bank were completed. Standard Bank's final mortgage was
registered on 29 June 2016.
34.4. Disposal of the Group's aircraft
Subsequent to the period end and as more fully described in note
25, the Group sold its aircraft assets, realising gross proceeds of
$570,000 and net proceeds after expenses of approximately $526,000.
The sale of these assets is part of the Group's ongoing
rationalisation programme.
**ENDS**
The information contained within this announcement is considered
to be inside information, for the purposes of Article 7 of EU
Regulation 596/2014, prior to its release.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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