TIDMAGTA
RNS Number : 2955L
Agriterra Ltd
18 July 2017
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
18 July 2017
Agriterra Ltd ('Agriterra' or 'the Group')
Final Results
Agriterra Limited, the AIM listed African agricultural company,
announces its audited final results for the 10 month period ended
31 March 2017.
Chair's Statement
On 28 February 2017, the Agriterra Limited ('Agriterra', or the
'Company') group (the 'Group') changed its accounting reference
date to 31 March (from 31 May) to more effectively co-ordinate the
Group's annual report and accounts with the business cycle of the
Group's underlying operations. This change was implemented as at 31
March 2017, and I am now pleased to announce the results of the 10
month period ended 31 March 2017 ('FY-2017'), together with the
comparative figures presented for the 12 month period ended 31 May
2016 ('FY-2016').
Outlook
As shareholders will be aware, during FY-2017 we have focussed
our efforts on our Grain and Beef operations in Mozambique,
following the decision to dispose of our interests in the Cocoa
operations in Sierra Leone, which was completed in June 2017 (as
more fully described below).
The Agriterra board has always held the opinion that there is
significant development potential in Mozambique's agricultural
markets, as a result of the natural growth in demand which will
develop as the local population gains spending power, coupled with
the growth uplift that has long been expected from the development
of the liquefied natural gas ('LNG') industry in the north of the
country. I am pleased to report that steps towards the development
of the LNG industry have now been taken by a consortium of
companies, led by ENI S.p.A (and including Galp Energia,
ExxonMobile and others), which in early June 2017 announced a final
investment decision to proceed with a $7bn offshore LNG platform
off the coast of Cabo Delgado, in North East Mozambique.
Significant infrastructure and construction contracts are reported
to have been awarded for the development of this project, which is
expected to produce its first exports, destined for Asian markets,
in 2021/22. This important development has already started to
generate positive economic effects within Mozambique, both on a
macro-economic level in terms of positive sentiment regarding the
country's return to high growth rates as well as at the more
granular level of anticipated demand for our products (in
particular, our beef).
This progress is particularly encouraging for the Group which
has survived a very difficult period in Mozambique over the last
two years. As has been noted in previous reports, the recent
macro-economic conditions in Mozambique have been very challenging,
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 ('Metical' of 'MZN') against
the United States $ (50% devaluation in the 12 months ended 31
December 2016) and the South African Rand (73% devaluation in the
12 months ended 31 December 2016). As a result of these economic
changes, Mozambique has experienced high inflation rates (reaching
c25% for the 12 months ended 31 December 2016, and 21% for the 12
months ended 31 March 2017), accompanied by a rapid rise in
interest rates (prime lending rates are now at 27.75%, having
recently peaked at 28.00% compared to 16.00% at 31 May 2015 and
19.50% at 31 May 2016). In addition to these economic complexities,
Mozambique experienced further political and military tensions
during the period, particularly in the centre of the country.
From January 2017, the macro-economic and political environment
has improved as a result of a number of factors, including a
cease-fire agreement between FRELIMO and RENAMO, combined with the
relative strengthening (and stability) of the Metical to c60
Metical per United States $ as at the date of this report.
Furthermore, the prevailing sentiment now is that the donor
community and the IMF may soon resume much needed support to the
Mozambique government, which is a significant positive change. In
addition, two years of drought have now come to an end, with a
return to normal or higher than normal rainfall in Central to
Northern Mozambique, and Sub-Saharan Africa in general. The risk of
damage to the maize harvest in Mozambique from armyworm infestation
has also been alleviated and the crop is now being harvested with
no evidence of any significant effect; the result is a sizeable
harvest in many of the key staple agricultural products, including
maize, in Mozambique and the wider region, which can only be
beneficial to the poorer households who have been facing ever
rising prices.
While these circumstantial improvements since January 2017 are
expected to lead to an improvement in trading conditions going
forwards, FY-2017 as a whole has been significantly and negatively
impacted by the difficult trading conditions.
Grain division
In respect of our Grain operations, the drought conditions in
the region have been a major factor in the results for the period.
In particular there was a significant increase in the cost of raw
maize, with a knock on effect on the price of maize meal, the
primary product of our Grain division. Consistent with the normal
price pattern, maize flour prices rose steadily throughout the
year; price rises far outstripped inflation though and by December
2016 were 70% higher than December 2015. Despite the significantly
higher price, demand was sustained over this period - maize flour
is a key staple foodstuff and prices of competing products which
are mainly imported (such as rice) were rising in Metical terms due
to the weakening of the currency.
From January 2017, short term trading conditions worsened, with
a sizeable drop in demand (to c 4,000 tonnes of maize flour in the
period January to March compared to c 6,700 tonnes in the same
period of FY-2016) and simultaneous lower prices (when compared to
December 2016) - this is anomalous to a normal year when prices and
demand rise in the period immediately preceding the new harvest,
which started in May 2017.
A number of factors led to this abnormal reduction in demand and
price, including a lack of cash resources for a sizeable proportion
of the population, significant rainfall which made access to key
selling points difficult, and the flooding of some markets with
surplus maize inventory (either held on a speculative basis by
traders or held at Beira port for delivery to neighbouring
countries that were then unable to complete on their
purchases).
This latter part of the yearly cycle is when the Grain division
typically makes most of its profit and therefore these adverse
trading conditions have inevitably impacted performance. As a
result, the Grain division returned a small EBITDA loss of $81,000
(FY-2016: EBITDA profit of $1,050,000) on sales of $8,468,000
(FY-2016: $12,246,000) being 18,900 tonnes of maize flour (FY-2016:
27,900 tonnes) and 24,900 tonnes of all maize products (FY-2016:
39,400). Included within the results of the division is a provision
of $769,000 (FY-2016: $nil) against the carrying value of maize
inventory. The provision is required under IFRS to write the
carrying value of this inventory down to net realisable value at
the period end. Adjusted EBITDA for the Grain division, excluding
this provision, is a profit of $688,000 (FY-2016: $1,050,000).
In common with many agricultural products, the working capital
requirements in the Grain division are significant, principally due
to the natural cycle of maize purchases peaking between April and
August, while peak maize flour sales are normally between December
and March. During FY-2017 we purchased c 27,200 tonnes of maize
(FY-2016: c 33,100 tonnes). The Grain division's working capital is
financed by bank facilities provided by Standard Bank which, with a
current interest rate of 26.25%, continues to impact the
profitability of the division. After an interest charge of $686,000
in FY-2017 (FY-2016: $473,000), loss before tax for the Grain
division was $890,000 compared to a profit of $338,000 in
FY-2016.
While the loss in the Grain division, resulting from a
combination of factors including the high interest rate and
abnormal fall in demand in January to March 2017, resulting in the
provision against maize inventory, is disappointing, it should be
noted that the cost savings generated in this division in early
2016, and during the current financial period, have been critical
in mitigating the adverse effect of these factors. The cost base of
the Grain division is now at a more appropriate level for the
business and, in the Board's opinion, still provides a platform for
future growth.
Grain division strategy and outlook
As the economic situation in Mozambique improves, interest rates
return to more normal levels and maize prices (and consequently
maize flour prices) return to levels that are more sustainable for
the population, we expect to see improvements in net profit
generated by this division.
The development of appropriate animal feed products (primarily
for poultry and beef) which are produced by our animal feed
pelletizer (using maize bran, a by-product of the maize milling
process) has now finished and we expect to start commercial
supplies of animal feed in August 2017. In addition to this new
product line, we believe that the development of further product
lines is critical to the maize division. We are currently assessing
the viability of additional "value add" products, including
porridge, maize based drinks and maize based snacks and hope to be
able to introduce additional products in the near future.
Beef division
In respect of our Beef division, the reduced price
competitiveness of imported products (arising from the devaluation
of the Metical) has provided certain opportunities for us to grow
our markets. Given these favourable conditions, we commenced
supplying into the Maputo market (the largest and most affluent
market in Mozambique), which was previously dominated by South
African imports. Accessing this market has helped to increase our
volumes of beef products sold and Metical revenues, which have
averaged 227 tonnes and 30,400,000 Metical per month compared to
186 tonnes and 22,100,000 Metical in FY-2016. Despite a strong
revenue performance in Metical terms, this translates to a fall in
average monthly dollar denominated revenues to $434,000 from
$522,000 in FY-2016, due to the substantial depreciation in the
Metical during the period. The first three months of 2017 have also
seen a temporary fall in sales volumes in our Beef division to c
173 tonnes a month of beef products, principally due to our efforts
to improve the productivity in our feedlot where we are focussing
on increasing the average stay of our animals to increase their
weight. These efforts to improve feedlot productivity are in
response to the reduction in internal animal stocks and the fact
that traditional sources of supply from the rural community are
only now beginning to return following the cessation of military
activity in the country. Once the average stay of animals in the
feedlot is increased, we expect to return to supplying
approximately 230 tonnes a month of beef products from our existing
operations.
In line with our overall Group strategy, we have continued to
implement significant cost savings in the Beef division during the
period. Despite the positive effect of cost savings, the Beef
division returned a loss before tax during FY-2017 of $1,587,000
(FY-2016: loss of $6,186,000) and an EBITDA loss of $1,024,000
(FY-2016: $2,023,000). In part this loss reflects the ongoing
farming costs incurred during the de-stocking process of the cattle
farms; as previously announced, and in light of the military
tension in country and the need to protect the value of the herd
and security of our employees, the Board took the decision in June
2016 to de-stock the cattle farms and place them in "care and
maintenance". This de-stocking programme is well under way, and the
Inhazonia and Mavonde ranches are now de-stocked, with c 1,000
animals remaining on our Dombe ranch at the date of this report.
Due to the de-stocking of the cattle farms, we expect to exhaust
our current cattle asset inventory within 12 months. Accordingly
all cattle inventory is presented as a current asset in the
statement of financial position as at 31 March 2017.
Although placing the farms into "care and maintenance" is a
significant shift in our strategy for the Beef division, it has the
positive effect of reducing the cash requirements of the ongoing
development of these assets and providing cash inflow through the
slaughter and sale of our remaining own herd. This cash inflow,
along with income from the disposal of surplus, non-revenue
generating assets is permitting the reduction of the Beef
division's existing bank finance (taken during the Group's
expansion period, prior to the development of the current economic
and political situation in country). The Beef division's bank
borrowings stood at 66,400,000 Metical as at 31 March 2017
($998,000 at the 31 March 2017 Metical to US$ exchange rate) and
have now been reduced to c 17,800,000 Metical as at the date of
this report ($297,000 at the current Metical to US$ exchange rate).
This compares to 100,500,000 Metical as at 31 May 2016 ($1,687,000
at the 31 May 2016 Metical to US$ exchange rate).
Beef division strategy and outlook
Looking forwards, we see good growth potential in North
Mozambique, both from the development of the camps to service the
construction of the LNG facilities as well as the general
spill-over effects of greater prosperity into and within the local
community. We are therefore assessing the potential for a small
feedlot and abattoir facility close to our Nampula distribution
centre which, if implemented, would increase our overall supply
capacity in Mozambique as a whole.
In accordance with our previous strategy, we will continue to
assess new retail units in strategic locations to take advantage of
regional development opportunities. While the initial focus is
likely to be in North Mozambique, we remain open to opportunities
countrywide.
We will also continue to assess our farming estate which, in the
longer run, remains 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.
Cocoa division
Turning to our Cocoa division, as previously announced, on 5
October 2016 the Group agreed the sale of its Sierra Leone Cocoa
division in a management buy-out transaction (the 'MBO'), which was
ultimately unsuccessful. The Cocoa division principally comprised a
3,200 hectare cocoa plantation in the Kenema district of Sierra
Leone, a 2,000 m(2) warehouse, and related support infrastructure
and vehicles. The MBO team failed to secure the necessary finance
and on 16 January 2017, the Group took back the ownership of the
relevant local operating subsidiaries. Following this
disappointment, we immediately initiated actions to market the
Cocoa division's assets to interested parties, culminating in the
disposal of the Group's operating subsidiaries in Sierra Leone on 1
June 2017 for $500,000. The purchasers were local Sierra Leone
businessmen who have existing cocoa production, purchasing and
distribution operations in country. The disposal proceeds have been
applied subsequent to the period end to reduce the Group's Beef
division borrowing facilities in Mozambique and for general working
capital purposes.
Conclusion
Having rationalised our cost base and improved efficiencies,
while reducing our outstanding debt obligations and related
interest payments, we have been able to improve the underlying
profitability of our businesses, and working capital position such
that we have a sustainable business that can now capitalise on the
growth that will inevitably come from the development of the LNG
industry.
The past three years have been a particularly difficult period
and I must thank our management and staff for their strong
commitment to the business which has allowed it to push through the
challenging business environment in which we have been
operating.
CSO Havers
Chair
17 July 2017
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION
IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
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) 20 7894
Europe 7684
Michael Reynolds Cantor Fitzgerald Tel: +44 (0) 20 7894
Europe 7684
Consolidated income statement
Consolidated income statement
For the 10 month period ended 31 March 2017
10 months ended 12 months ended
31 March 2017 31 May 2016
Note US$000 US$000
---------------- ----------------
Continuing operations
Revenue 5 12,807 18,511
Cost of sales (11,915) (16,779)
---------------- ----------------
Gross profit 892 1,732
Increase in value of biological assets 21 487 1,637
Operating expenses (4,532) (6,863)
Impairment of current and non-current assets 11 - (3,069)
Other income 29 57
Profit / (loss) on disposal of property, plant and equipment and
adjustments to the carrying
value of assets classified as held for sale 439 (110)
Operating loss 7 (2,685) (6,616)
Investment revenues 12 12 11
Other gains and losses 13 (16) (360)
Finance costs 14 (927) (678)
Loss before taxation (3,616) (7,643)
Taxation 15 (22) (34)
---------------- ----------------
Loss for the period from continuing operations (3,638) (7,677)
Discontinued operations
Loss for the period from discontinued operations 16 (136) (778)
Loss for the period attributable to owners of the Company (3,774) (8,455)
US cents US cents
---------------- ----------------
LOSS PER SHARE
Basic and diluted loss per share from continuing operations 17 (0.35) (0.72)
================ ================
Basic and diluted loss per share from continuing and discontinued
operations 17 (0.36) (0.80)
================ ================
Consolidated statement of comprehensive income
For the 10 month period ended 31 March 2017
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Loss for the period (3,774) (8,455)
---------------- ----------------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (1,119) (8,139)
---------------- ----------------
Other comprehensive income for the period (1,119) (8,139)
---------------- ----------------
Total comprehensive income for the period attributable to owners of the
Company (4,893) (16,594)
================ ================
Consolidated stat
ement of financial position
Consolidated statement of financial position
As at 31 March 2017
31 March 31 May
2017 2016
Note US$000 US$000
---------- -----------
Non-current assets
Property, plant and equipment 18 6,094 7,505
Interests in associates 19 4 4
Investments 20 - 16
Biological assets 21 - 888
---------- -----------
6,098 8,413
---------- -----------
Current assets
Biological assets 21 746 1,106
Inventories 22 1,253 1,357
Trade and other receivables 23 1,557 1,290
Assets classified as held for sale 24 573 860
Cash and cash equivalents 2,425 4,055
---------- -----------
6,554 8,668
---------- -----------
Total assets 12,652 17,081
---------- -----------
Current liabilities
Borrowings 25 2,730 1,812
Trade and other payables 26 634 708
Liabilities directly associated with assets classified as held for sale 24 128 142
---------- -----------
3,492 2,662
---------- -----------
Net current assets 3,062 6,006
---------- -----------
Non-current liabilities
Borrowings 25 734 1,105
----------
734 1,105
---------- -----------
Total liabilities 4,226 3,767
---------- -----------
Net assets 8,426 13,314
========== ===========
Share capital 28 1,960 1,960
Share premium 148,622 148,622
Share based payment reserve 1,985 1,980
Translation reserve 29.1 (17,501) (16,382)
Accumulated losses (126,640) (122,866)
Equity attributable to equity holders of the parent 8,426 13,314
========== ===========
The financial statements of Agriterra Limited were approved and
authorised for issue by the Board of Directors on 17 July 2017.
Signed on behalf of the Board of Directors by:
CSO Havers
Chair
17 July 2017
Consolidated statement of changes in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 10 month period ended 31 March 2017
Share based
Share payment Translation Accumulated Total
capital Share premium reserve reserve losses equity
Note US$000 US$000 US$000 US$000 US$000 US$000
--------- -------------- ------------- ------------- ------------ ---------
Balance at 1
June 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 30 - - 66 - - 66
Balance at 31
May 2016 1,960 148,622 1,980 (16,382) (122,866) 13,314
Loss for the
period - - - - (3,774) (3,774)
Other
comprehensive
income:
Exchange
translation
loss on
foreign
operations - - - (1,119) - (1,119)
--------- -------------- ------------- ------------- ------------ ---------
Total
comprehensive
income for
the period - - - (1,119) (3,774) (4,893)
Share-based
payments 30 - - 5 - - 5
Balance at 31
March 2017 1,960 148,622 1,985 (17,501) (126,640) 8,426
========= ============== ============= ============= ============ =========
Consolidated cash flow statement
For the 10 month period ended 31 March 2017
10 months ended 12 months ended
31 March 2017 31 May 2016
Note US$000 US$000
---------------- ----------------
Cash flows from operating activities
Loss before tax from continuing operations (3,616) (7,643)
Adjustments for:
Depreciation 18 445 1,160
Profit on disposal of property, plant and equipment (460) (15)
Adjustments to the carrying value of assets classified as held for
sale 21 125
Share based payment expense 30.1 5 66
Foreign exchange loss / (gain) 104 (37)
Increase in value of biological assets 21 (487) (1,637)
Finance costs 14 927 678
Investment revenues 12 (12) (11)
Decrease in fair value of investments 20 16 360
Impairment of current and non-current assets 11 - 3,069
Operating cash flows before movements in working capital (3,057) (3,885)
(Increase) / decrease in inventories (151) 122
Increase in trade and other receivables (729) (291)
Decrease in trade and other payables (13) (325)
Net decrease in biological assets 21 1,454 1,592
---------------- ----------------
Cash used in operating activities by continuing operations (2,496) (2,787)
Corporation tax paid (22) (34)
Finance costs (927) (678)
Interest received 12 11
Net cash used in operating activities by continuing operations (3,433) (3,488)
---------------- ----------------
Net cash used in operating activities by discontinued operations (48) (133)
---------------- ----------------
Net cash used in operating activities (3,481) (3,621)
---------------- ----------------
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment net of
expenses incurred 927 105
Acquisition of property, plant and equipment 18 (204) (465)
Net cash from / (used in) investing activities by continuing
operations 723 (360)
---------------- ----------------
Net cash from investing activities by discontinued operations 33 106
---------------- ----------------
Net cash from / (used in) investing activities 756 (254)
---------------- ----------------
Cash flows from financing activities
Net draw down of overdrafts 1,145 53
Net (repayment) / draw down of loans (110) 1,721
Net cash from financing activities from continuing operations 1,035 1,774
---------------- ----------------
Net cash used in financing activities by discontinued operations - -
---------------- ----------------
Net cash from financing activities 1,035 1,774
---------------- ----------------
Net decrease in cash and cash equivalents (1,690) (2,101)
Effect of exchange rates on cash and cash equivalents 60 (265)
---------------- ----------------
Cash and cash equivalents at beginning of the period 4,055 6,421
---------------- ----------------
Cash and cash equivalents at end of the period 2,425 4,055
================ ================
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 42. 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.
The Company changed its accounting reference date to 31 March
from 31 May, effective from 31 March 2017 in order to more
effectively co-ordinate the Group's annual report and accounts with
the business cycle of the Group's underlying business operations.
Accordingly these financial statements present the results and cash
flows of the Group for the 10 month period ended 31 March 2017,
with the comparative period being the 12 months ended 31 May
2016.
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 Amendments 2014 Amendments regarding the application of the
consolidation exception (effective for annual
periods beginning on or after 1 January 2016)
IFRS 11 Amendments 2014 Amendments regarding the accounting for acquisitions
of an interest in a joint operation (effective
for annual periods beginning on or after 1 January
2016)
IFRS 12 Amendments 2014 Amendments regarding the application of the
consolidation exception (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)
IAS 27 Amendments 2014 Amendments reinstating the equity method as an
accounting option for investments in in subsidiaries,
joint ventures and associates in an entity's separate
financial statements (effective for
annual periods beginning on or after 1 January 2016)
IAS 28 Amendments 2014 Amendments regarding the application of the
consolidation exception (effective for annual
periods beginning on or after 1 January 2016)
IAS 38 Amendments 2014 Amendments regarding the clarification of acceptable
methods of depreciation and amortisation
(effective for annual periods beginning on or after 1
January 2016)
IAS 41 Amendments 2014 Amendments bringing bearer plants into the scope of
IAS 16 (effective for annual periods beginning
on or after 1 January 2016)
September 2014 Annual Improvements to IFRSs Amendments 2014 Effective for annual periods beginning on or after 1
January 2016
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 Amendments 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 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 4 & IFRS 9 Amendments 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 10 Amendments 2014 Amendments regarding the sale or
contribution of assets between an
investor and its associate
or joint venture (effective date
deferred indefinitely)
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 28 Amendments 2014 Amendments regarding the sale or
contribution of assets between an
investor and its associate
or joint venture (effective date
deferred indefinitely)
IAS 40 Amendments 2016 Amendments to clarify transfers or
property to, or from, investment
property (effective for
annual periods beginning on or after
1 January 2018)
December 2016 Annual Improvements to Amendments 2016 Effective for annual periods
IFRSs beginning on or after 1 January 2018
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 March 2017 (or 31 May for periods
up to and including the year ended 31 May 2016). 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 March 2017, the Company held equity interests in the
following undertakings:
Direct investments
Proportion held of equity
instruments 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 of equity
instruments Country of incorporation Nature of business
Subsidiary undertakings
DECA - Desenvolvimento E
Comercialização
AgrÃcola 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 of equity
instruments 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 of equity
instruments 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 of equity
instruments Country of incorporation Nature of business
------------------------------------ ------------------------- -------------------
Subsidiary undertakings
Red Bunch Ventures (SL) Limited 100% Sierra Leone Non-trading
(1) The assets and liabilities of these companies form
part of the Cocoa disposal group. These companies
were either disposed or liquidated subsequent to the
end of the financial period. Refer to note 24 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 period in which the
operation or branch is disposed of.
The following are the material exchange rates applied by the
Group:
Average Rate Closing Rate
2017 2016 2017 2016
------- ------ ------- ------
Mozambican Meticais: US$ 71.36 43.61 66.51 59.61
Sierra Leone Leones: US$ 7,025 5,067 7,400 6,200
======= ====== ======= ======
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,
or the rental of land and buildings, is stated on an accruals basis
at the amount due for rental until the relevant financial period
end.
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 any period presented.
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 rewards of
ownership are classified as finance leases. All other leases are
classified as operating leases. As at 31 May 2016 and 31 March 2017
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 period. 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 periods. 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. 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.
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%
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.
3.13. 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.
3.14. 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 comprised breeding
and non-breeding cattle. The breeding cattle comprised bulls, cows
and heifers. As these were expected to be held for more than one
year, breeding cattle were classified as non-current assets. The
non-breeding cattle comprise animals that will be grown and sold
for slaughter and are classified as current assets. Subsequent to
the decision to close the cattle farms during the period, all
cattle are classified as non-breeding animals and disclosed as a
current asset.
Cattle are recorded as assets at the period 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 profit or loss over the period
it is consumed.
3.15. 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.
3.16. 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.
3.17. 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.
3.17.1. 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.
3.17.1.1. 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.
3.17.1.2. 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
companies which were previously quoted on AIM and were 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 20.
3.17.1.3. 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 difference 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.
3.17.1.4. 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.
3.17.2. 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.
3.17.2.1. 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.
3.17.2.2. 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.
3.17.2.2.1. 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.
3.17.2.2.2. 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.
3.18. 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 forecast selling prices and volume, budgeted cost reductions,
and projected weight gains of cattle in the feedlot. They further
take into account the expected meat to be obtained by de-stocking
the remaining beef herd from the beef ranches (being approximately
1,500 animals at 31 March 2017), 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.
No impairments were recorded in the 10 month period ended 31
March 2017. Details of impairments recorded in the 12 month period
ended 31 May 2016 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.
In prior periods, the herd was further categorised as either the
breeding herd of slaughter herd, depending on whether it was
principally held for reproduction or slaughter. During the period
the Group has started to de-stock its cattle farms (where the
breeding herd was held) into the feedlot, where the animals were,
or are, being fattened for slaughter. The herd on the farms has
decreased in the period from approximately 4,200 animals as at 31
May 2016, to approximately 1,500 animals as at 31 March 2017. The
de-stocking is expected to be complete before 31 March 2018 and
accordingly, the value of the breeding herd will be realised within
12 months of the balance sheet date; the herd is therefore
disclosed as a current asset. At 31 March 2017 the value of the
breeding herd disclosed as a non-current asset was $nil (31 May
2016: $888,000). The value of the herd held for slaughter disclosed
as a current asset was $746,000 (31 May 2016: $1,106,000).
4.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax ('IVA') operates in a similar manner
to UK Value Added Tax ('VAT'). The Group is exempt from IVA on its
sales of maize 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 2016 and 31 March
2017. As at 31 March 2017, the gross and net IVA recoverable assets
are respectively $857,000 (31 May 2016: $837,000) and $nil (31 May
2016: $nil) at the US$ to Metical exchange rate of 66.51 (31 May
2016: 59.61) at that date.
4.5. Presentation of 'Cocoa activities' as discontinued
operations and classification of related assets and liabilities as
held for sale
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 notes 16 and 24). This classification was initially adopted as
at 31 May 2016 for the reasons described below. 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.
On 5 October 2016, the Group agreed the sale of its Sierra Leone
Cocoa division in a management buy-out transaction (the 'MBO').The
Cocoa division principally comprised the 3,200 hectare cocoa
plantation in the Kenema district of Sierra Leone, a 2,000 m(2)
warehouse, and related support infrastructure and vehicles.
Under the terms of the MBO, the Group would dispose of its
interests in Baranca Tide Limited and West Africa Cocoa Services
Limited (the intermediate holdings companies which held the assets
comprising the Group's cocoa business in Sierra Leone, the 'Target
Companies') with immediate effect; payment by the MBO team was
deferred for a period of 65 business days from completion of the
MBO (i.e. until 9 January 2017). The MBO team failed to secure the
necessary finance and, following an extension to 16 January 2017,
the Group took back the ownership of the Target Companies.
The Group immediately initiated actions to market the Cocoa
division's assets to interested parties. Advanced discussions with
interested parties, including on site due diligence, were underway
at the period end, culminating in the disposal of the Group's
operating subsidiaries in Sierra Leone (being Tropical Farms
Limited and Tropical Farms Plantation (SL) Limited) on 1 June 2017
for $500,000. The purchasers were local Sierra Leone businessmen
who have existing cocoa production, purchasing and distribution
operations. The Group has now initiated the solvent liquidation of
the Target Companies, which is expected to be completed during the
financial year ended 31 March 2018.
The Directors are of the opinion that the conditions for
classification as held for sale were met as at 31 March 2017 and
accordingly continued to adopt that classification. The sale of
these assets is part of the Group's ongoing rationalisation
programme; $400,000 of the proceeds from the sale of these assets
have been applied to reduce the Group's borrowing facilities in the
Beef division, with $100,000 applied for general working capital
purposes.
5. Revenue
An analysis of the Group's revenue is as follows:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
--------------- ---------------
Continuing operations
Sale of goods 12,759 18,334
Hire of equipment and machinery 48 177
--------------- ---------------
12,807 18,511
Investment revenues (note 12) 12 11
--------------- ---------------
12,819 18,522
Discontinued operations
Sales of goods (note 16) - 161
Hire of equipment and machinery (note 16) 25 228
--------------- ---------------
25 389
12,844 18,911
=============== ===============
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:
10 month period Grain Beef Cocoa(3) Unallo-cated Discon- Elimina-tions Total
ending 31 March 2017 tinued(4)
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- -------- --------- ------------- ----------- -------------- --------
Revenue
External sales(2) 8,468 4,339 25 - (25) - 12,807
Inter-segment
sales(1) 446 - - - - (446) -
------- -------- --------- ------------- ----------- -------------- --------
8,914 4,339 25 - (25) (446) 12,807
------- -------- --------- ------------- ----------- -------------- --------
Segment results
- Operating (loss) /
profit (204) (1,346) (136) (1,135) 136 - (2,685)
- Interest (expense)
/ income (686) (241) - 12 - - (915)
- Other gains and
losses - - - (16) - - (16)
------- -------- --------- ------------- ----------- -------------- --------
(Loss) / profit
before tax (890) (1,587) (136) (1,139) 136 - (3,616)
------- -------- --------- ------------- ----------- -------------- --------
Income tax (6) (1) - (15) - - (22)
------- -------- --------- ------------- ----------- -------------- --------
(Loss) / profit for
the period from
continuing
operations (896) (1,588) (136) (1,154) 136 - (3,638)
======= ======== ========= ============= =========== ============== ========
Year ending 31 Grain Beef Cocoa(3) Unallo-cated Discon-tinued(4) Elimina-tions Total
May 2016
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)
======= ======== ========= ============= ================= ============== ========
(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. Sales from the Cocoa division for the 10 month
period ending 31 March 2017 were supplied within Sierra
Leone (12 month period ending 31 May 2016: $161,000
of sales from the Cocoa division were supplied to the
world market, with the remainder supplied within Sierra
Leone).
(3) $25,000 (12 month period ended 31 May 2016: $228,000)
of revenue reported in the Cocoa segment for the 10
month period ended 31 March 2017 arises on the rental
of certain of the Cocoa division's assets.
(4) Amounts reclassified to discontinued operations in
both periods presented relate to the Cocoa segment
- refer to note 16.
The segment items included in the consolidated income statement
for the period are as follows:
10 month period ending Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
31 March 2017
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- -------------- -------------- -------
Depreciation 123 322 - - - - 445
======= ======= ======= ============= ============== ============== =======
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) - 3,069 - - - - 3,069
======= ======= ======= ============= ================= ============== =======
(1) Amounts reclassified to discontinued operations in
12 months ended 31 May the 2016 relate to the Cocoa
segment - refer to note 16.
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.
The segment assets and liabilities at 31 March 2017 and capital
expenditure for the period then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
-------- -------- ------- ------------ --------
Assets 5,456 4,713 - 2,483 12,652
Liabilities (2,806) (1,178) - (242) (4,226)
Capital expenditure (130) (74) - - (204)
======== ======== ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 10,169 3,984
Unallocated:
Interests in associates 4 -
Other receivables 13 -
Assets classified as held for sale 453 -
Cash and cash equivalents 2,013 -
Liabilities directly associated with assets classified as held for sale - 128
Trade payables - 11
Accrued liabilities - 103
12,652 4,226
======= ============
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 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
17,081 3,767
======= ============
6.3. Significant customers
In the 10 month period ended 31 March 2017, one customer of the
Grain division generated revenue of $2,484,000 amounting to 19.4%
of Group revenue (12 month period ended 31 May 2016: no single
customer contributed more than 10% of the Group's revenue).
7. Operating loss
Operating loss has been arrived at after charging /
(crediting):
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Depreciation of property, plant and equipment 445 1,160
Profit on disposal of property, plant and equipment (460) (15)
Loss on re-measurement of assets classified as held for sale 21 125
Net foreign exchange loss / (gain) 104 (37)
Impairment of assets (see note 11) - 3,069
Staff costs (see note 9) 1,838 3,360
================ ================
8. Auditors Remuneration
Amounts payable to RSM UK Audit LLP and their associates in
respect of audit services are as follows:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
--------------- ---------------
Fees payable to the Company's auditor for the audit of the Company's accounts 94 121
Fees payable to the Company's auditor and their associates for other services
to the Group:
The audit of the Company's subsidiaries 31 -
--------------- ---------------
Total audit fees 125 121
=============== ===============
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 period was as follows:
10 months ended 12 months ended
31 March 2017 31 May 2016
Number Number
---------------- ----------------
Office and Management 50 47
Operational 492 746
---------------- ----------------
542 793
================ ================
Of which relating to:
Continuing operations 519 730
Discontinued operations 23 63
--- ---
542 793
=== ===
Their aggregate remuneration comprised:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Wages and salaries 1,828 3,615
Social security costs 40 78
Share based payment charge 5 66
---------------- ----------------
1,873 3,759
================ ================
Of which relating to:
Continuing operations 1,838 3,360
Discontinued operations 35 399
----- -----
1,873 3,759
===== =====
10. REMUNERATION OF DIRECTORS
10 months ended 31 March 2017 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
--------- -------- -------------------- --------
CS Havers 32 - - 32
AS Groves 106 - - 106
DL Cassiano-Silva 145 - 5 150
283 - 5 288
========= ======== ==================== ========
12 months 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
========= ======== ==================== ========
11. IMPAIRMENT OF CURRENT AND NON-CURRENT ASSETS
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
----------------- ----------------
Beef division - 3,069
------------------ ----------------
- 3,069
================== ================
In accordance with IAS 36, Impairment of assets, the Group
conducted an impairment review of its tangible assets as at 31
March 2017; no impairment charges were recorded as a result of this
review. The equivalent impairment review conducted as at 31 May
2016 resulted in an impairment against the Beef division assets
held in Mozambique. 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 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. As a
result of these factors and in accordance with IAS 36, Impairment
of assets, the Company conducted an impairment review of its
tangible assets as at 31 May 2016, resulting in an impairment
against its property, plant and equipment of $3,069,000.
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 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 related 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). $197,000 of the impairment charge
related to vehicles, heavy plant and machinery and agricultural
equipment (including irrigation pivots). The remaining charge of
$464,000 was recorded against the Vanduzi feedlot assets. No
impairments were recorded against the retail and abattoir
assets.
12. Investment revenues
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Interest income on bank deposits 12 11
================ ================
All investment revenues are earned on cash and bank balances
which are financial assets classified as loans and receivables.
13. Other gains and losses
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Decrease in fair value of quoted investments (note 20) 16 360
================ ================
14. Finance costs
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Interest expense on bank borrowings 927 678
================ ================
15. Taxation
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Loss before tax from continuing activities (3,616) (7,643)
---------------- ----------------
Tax credit at the Mozambican corporation tax rate of 32% (2016: 32%) (1,157) (2,446)
Tax effect of expenses that are not deductible in determining taxable profit 39 55
Tax effect of losses not allowable 499 463
Tax effect of net losses not recognised in overseas subsidiaries (net of effect
of different
rates) 634 1,928
Statutory taxation payments irrespective of income 7 14
Adjustment in respect of prior periods - 20
Tax expense 22 34
================ ================
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 not recognised any tax credits for the 10 month
period ended 31 March 2017 (12 month period ended 31 May 2016:
$187,000 tax credit 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
$9,324,000 (31 May 2016: $9,652,000). In addition, the Group has
further deductible timing differences relating to property, plant
and equipment, and foreign exchange gains and losses on
intercompany loans, amounting to approximately $33,926,000 (31 May
2016: $31,285,000). 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 (2016: zero percent. per annum). No tax
is payable for the period 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:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Oil and gas activities - 187
Cocoa activities (136) (965)
Net loss after tax attributable to discontinued operations
(attributable to owners of the Company) (136) (778)
================ ================
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 financial year ended 31 May 2016, the Group was
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.
16.2. Cocoa activities
Since September 2014, the group's Cocoa division in Sierra Leone
focussed its efforts on maintaining its cocoa plantation assets,
while undertaking revenue generating logistics activities,
principally providing assistance in the Ebola relief efforts.
Sierra Leone was declared Ebola free in the year ended 31 May 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.
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 Cocoa activities represented a business segment of the Group
and accordingly the results of the Cocoa activities are presented
as discontinued operations within the consolidated income
statement. This presentation was already adopted by the Group in
the financial year ended 31 May 2016. The amounts recorded in the
consolidated income statement related to the other cocoa activities
were as follows:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Revenue 25 389
Cost of sales (3) (277)
---------------- ----------------
Gross profit 22 112
Operating expenses (188) (1,126)
Profit on disposal of property, plant and equipment 30 49
Loss before taxation (136) (965)
Taxation - -
---------------- ----------------
Loss after tax and net loss attributable to the discontinued Cocoa activities
in the period
(attributable to owners of the Company) (136) (965)
================ ================
Cash flows pertaining to the 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 Cocoa activities, are classified as held for sale as at 31
March 2017 and 31 May 2016. Further details are provided in notes
4.5 and 24.
The operating companies that comprised the Cocoa division were
sold subsequent to the period end for cash consideration of
$500,000. Further details are provided in notes 24 and 33.2.
17. LOSS per share
The calculation of the basic and diluted loss per share is based
on the following data:
10 months ended 12 months ended
31 March 2017 31 May 2016
US$000 US$000
---------------- ----------------
Loss for the purposes of basic and diluted earnings per share from continuing
activities (3,638) (7,677)
Loss for the purposes of basic and diluted earnings per share from discontinued
activities (136) (778)
Loss for the purposes of basic and diluted earnings per share (loss for the
period attributable
to equity holders of the Company) (3,774) (8,455)
================ ================
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 - US cents (0.36) (0.80)
---------------- ----------------
Basic and diluted loss per share from continuing activities - US cents (0.35) (0.72)
---------------- ----------------
Basic and diluted loss per share from discontinued activities - US cents (0.01) (0.08)
---------------- ----------------
18. Property, plant and equipment
Land and Plant and Other
buildings machinery Motor vehicles Aviation Assets Total
US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 June 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
Additions 23 149 9 - 23 204
Disposals (170) (201) (168) - (12) (551)
Transfer to assets
classified as
held for sale - (378) (74) - (1) (453)
Exchange rate
adjustment (837) (513) (240) - (33) (1,623)
At 31 March 2017 12,952 3,944 1,779 - 306 18,981
------------------ ------------------ --------------- --------- -------- ---------
Accumulated
depreciation and
impairment
At 1 June 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
Charge for the
period 101 235 85 - 24 445
Disposals (15) (144) (167) - (9) (335)
Transfer to assets
classified as
held for sale - (238) (74) - - (312)
Exchange rate
adjustment (335) (241) (216) - (18) (810)
At 31 March 2017 8,995 1,999 1,706 - 187 12,887
------------------ ------------------ --------------- --------- -------- ---------
Net book value
31 March 2017 3,957 1,945 73 - 119 6,094
================== ================== =============== ========= ======== =========
31 May 2016 4,692 2,500 174 - 139 7,505
================== ================== =============== ========= ======== =========
For the 10 month period ended 31 March 2017, a depreciation
charge of $445,000 (12 month period ending 31 May 2016: $1,160,000)
has been included in the consolidated income statement within
operating expenses and $nil (12 month period ending 31 May 2016:
$391,000) has been included within discontinued operations.
Property, plant and equipment with a carrying amount of
$4,479,000 (31 May 2016: $5,311,000) have been pledged to secure
the Group's bank overdrafts and loans (note 25). The Group is not
allowed to pledge these assets as security for other borrowings or
sell them to another entity.
At 31 March 2017 and 31 May 2016, the Group had no contractual
commitments for the acquisition of property, plant and
equipment.
19. 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 (31 May 2016: $4,000). The Group's initial investment in AMS
was $nil.
20. Investments
'Investments' comprise financial assets at FVTPL. Changes in
market value are recorded in profit and loss within other gains and
losses. As at 31 March 2017 and 31 May 2016, these investments
comprise 8,337,682 ordinary shares in Atlas African Industries
Limited ('AAI'), a company quoted on AIM until 18 November 2016,
when its listing was cancelled. Movements in the value of the
investment in AAI were as follows:
US$000
-------
At 1 June 2015 376
Decrease in fair value (note 13) (360)
-------
At 31 May 2016 16
Decrease in fair value (note 13) (16)
-------
At 31 March 2017 -
=======
The fair value as at 31 May 2016 was determined based on quoted
market prices in an active market and comprised a level 1 fair
value in the IFRS 13 fair value hierarchy. As at 31 March 2017, AAI
is no longer quoted and the fair value has been determined at the
Directors best estimate and comprised a level 3 fair value in the
IFRS 13 fair value hierarchy.
21. Biological assets
US$000
--------
Fair value
At 1 June 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
Purchase of biological assets 1,667
Sale, slaughter or other disposal of biological assets (3,121)
Change in fair value 487
Foreign exchange adjustment (281)
--------
At 31 March 2017 746
========
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:
31 March 2017 31 May 31 March 2017 31 May
2016 2016
Head Head US$000 US$000
-------------- ------- -------------- -------
Non-current asset - 3,564 - 888
Current asset 3,475 3,216 746 1,106
-------------- ------- -------------- -------
3,475 6,780 746 1,994
============== ======= ============== =======
For valuation purposes, cattle are grouped into classes of
animal (e.g. bulls, cows, steers etc). Up to and including 31 May
2016, a standard animal weight per breed and class was then
multiplied by the number of animals in each class to determine the
estimated total live weight of all animals in the herd. This
approach has continued to be applied for animals that are not in
the feedlot. For animals in the feedlot, for the period ended 31
March 2017, the animal's weight has been estimated based on their
individual weigh in data at the closest weigh in date to the period
end. This change in approach to estimating the live weight of
animals in the feedlot has not resulted in a material change in the
estimated weight of the feedlot animals.
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
25).
During the period and for the reasons described in the Chair's
statement, the Board made the decision to close the breeding farms.
Accordingly, all cattle are disclosed as current assets as at 31
March 2017.
22. Inventories
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
Consumables and spares 156 139
Raw materials 907 1,028
Work in progress 12 14
Finished goods 178 176
1,253 1,357
============== =======
During the period inventories amounting to $10,925,000 (31 May
2016: $14,267,000) were included in cost of sales and $nil (31 May
2016: $127,000) were included within discontinued operations.
Raw materials include a provision against the carrying value of
maize inventories amounting to $769,000 (31 May 2016: nil) which
was recorded during the period to adjust the carrying value of this
class of inventory to its expected recoverable amount, being the
higher of net realisable value and resale value.
Inventories with a carrying amount of $917,000 (31 May 2016:
$1,022,000) have been pledged to secure the Grain division's bank
overdraft and inventories with a carrying value of $126,000 (31 May
2016: $134,000) have been pledged to secure the Beef division bank
overdraft and loans (see note 25).
23. Trade and other receivables
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
Trade receivables 1,459 678
Other receivables 72 580
Prepayments 26 32
1,557 1,290
============== =======
'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 2015 1,319
Charged to profit and loss 182
Written off in the period (96)
Foreign exchange gain (495)
--------
At 31 May 2016 910
Credited to profit and loss (1)
Written off in the period (6)
Foreign exchange loss 9
--------
At 31 March 2017 912
========
As at 31 March 2017, $857,000 (31 May 2016: $837,000) 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 $nil (31 May 2016: $361,000) due from
related parties (see note 31).
Trade receivables with a carrying amount of $1,078,000 (31 May
2016: $496,000) have been pledged to secure the Grain division's
bank overdraft and trade receivables with a carrying value of
$381,000 (31 May 2016: $182,000) have been pledged to secure the
Beef division's bank overdraft and loans (see note 25).
The Directors consider that the carrying amount of financial
assets approximates their fair value. Included within 'Trade
receivables' and 'Other receivables' are receivables which are past
due but not impaired as follows:
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
60-90 days 101 -
90-120 days 57 -
Greater than 120 days 38 385
-------------- -------
196 385
============== =======
Further details on the Group's financial assets are provided in
note 27.
24. disposal groups held for sale
The major classes of assets and liabilities comprising the
operations classified as held for sale as at 31 March 2017 are as
follows:
Cocoa disposal group Other assets disposal group Total
US$000 US$000 US$000
--------------------- ---------------------------- -------
Assets classified as held for sale:
Property, plant and equipment 363 120 483
Trade and other receivables 88 - 88
Cash and cash equivalents 2 - 2
--------------------- ---------------------------- -------
Total assets classified as held for sale 453 120 573
--------------------- ---------------------------- -------
Liabilities associated with assets classified as
held for sale:
Trade and other payables (128) - (128)
--------------------- ---------------------------- -------
Total liabilities associated with assets classified
as held for sale (128) - (128)
--------------------- ---------------------------- -------
Net assets of the disposal group 325 120 445
===================== ============================ =======
Losses recognised on assets classified as held for
sale - (21) (21)
===================== ============================ =======
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
===================== ======================== =======
Assets and associated liabilities within the 'Cocoa disposal
group' represent the net assets of the Group's Cocoa division. This
division was sold subsequent to the period end realising gross
proceeds of $500,000 (refer to notes 4.5 and 33.2). 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 'Other assets
disposal group' comprise various assets identified for disposal as
part of the Group's rationalisation programme, being primarily
vehicles, heavy plant and machinery, and butchery equipment and
fixtures and fittings. Subsequent to the period end, $81,000 of the
carrying value of these has been sold for proceeds of $112,000.
During the 12 month period ended 31 May 2016, assets classified
as held for sale within the 'Aircraft disposal group' comprised all
of the Group's aircraft assets which were identified as being
surplus to requirements. The aircraft were sold during the period,
realising gross proceeds of $570,000. No adjustments were made to
the carrying value of the Aircraft disposal group during the
current reporting period.
25. Borrowings
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
Non-current liabilities
Bank loans 734 1,105
-------------- -------
Current liabilities
Bank loans 264 137
Overdraft 2,466 1,675
-------------- -------
2,730 1,812
-------------- -------
3,464 2,917
============== =======
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 comprised 75,000,000 Metical
($1,128,000 at the 31 March 2017 US$ to Metical 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 ($451,000 at the 31 March 2017
US$ to Metical exchange rate) overdraft. The term loans carry
interest at the bank's prime lending rate plus 0.25% (being a rate
of 28.25% as at 31 March 2017), and have a five year term from draw
down with a moratorium on capital repayments of 15 months. Capital
repayments on these loans commenced in October 2016. The overdraft
renewed annually on 29 September, and carried interest at the
bank's prime lending rate. By mutual agreement between the Company
and Standard Bank, the overdraft was not renewed during the period.
The lending facilities are secured with a fixed charge against
certain of the Group's property, plant and equipment with a
carrying value of $1,848,000 (31 May 2016: $2,137,000) (refer to
note 18), and with floating charges against all cattle and meat
inventories with a carrying value of respectively $746,000 (31 May
2016: $1,994,000) (refer to note 21) and $126,000 (31 May 2016:
$134,000) (refer to note 22), and trade receivables with a carrying
value of $381,000 (31 May 2016: $182,000) (refer to note 23).
As at 31 March 2017, $998,000 (31 May 2016: $1,242,000) was
drawn against the term loans and $nil (31 May 2016: $445,000) was
drawn against the overdraft. As at 31 March 2017, the Beef division
had no undrawn borrowing facilities (31 May 2016: had undrawn and
available borrowing facilities of 4,477,000 Metical).
Subsequent to the period end the Company restructured its
lending facilities with Standard Bank as more fully described in
note 33.1.
Grain division
On 19 May 2016, the Group entered into a 300,000,000 Metical
($4,511,000 at the 31 March 2017 US$ to Metical exchange rate)
overdraft facility with Standard Bank S.A (the 'Facility') to
provide working capital funding, principally for the purchase of
maize and related operating expenditure. The balance outstanding on
the Grain division's overdraft as at 31 March 2017 was $2,466,000
(31 May 2016: $1,263,000 before overdraft arrangement fees and
$1,230,000 net of arrangement fees). It is secured by a fixed
charge against $2,631,000 (31 May 2016: $3,174,000) of the Group's
property, plant and equipment (refer to note 18) and by a floating
charge over all maize inventory and finished maize products
totalling $917,000 (31 May 2016: $1,022,000) (refer to note 22) and
trade receivables totalling $1,078,000 (31 May 2016: $496,000)
(refer to note 23). Interest is charged at the counterparty bank's
prime lending rate less 1.75%, being a rate as at 31 March 2017 of
26.25% (31 May 2016 of 17.75%). Unless it is cancelled by either
party, the Facility renews annually on 25 March. On 30 March 2017,
the Facility was renewed on a short term basis until 5 May 2017 in
order for the formal renewal process to be completed. This process
was completed on 27 April 2017 and the Facility was renewed on
substantially the same terms as described above (refer to note
33.1).
As at 31 March 2017, the Grain division had available, undrawn
borrowing facilities of approximately 136,006,000 Metical (31 May
2016: 224,756,000 Metical) ($2,045,000 at the 31 March 2017 US$ to
Metical exchange rate).
26. Trade and other payables
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
Trade payables 156 266
Other payables 189 125
Accrued liabilities 289 317
634 708
============== =======
'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.
27. FINANCIAL INSTRUMENTS
27.1. 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 25 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.
Current interest rates on borrowings in Mozambique are very
high, with the prime lending rate at 28%. In light of this, the
Group has been rationalising its operations, with particular focus
on disposing of surplus assets to reduce external debt levels in
the Beef division. This has culminated in the revision to the terms
of the Beef divisions borrowing facilities (refer to note 33.1).
The Group has continued to maintain its overdraft facility in
Mozambique to finance its Grain operations (note 25 and 33.1).
27.2. Categories of financial instruments
The following are the Group financial instruments as at the
period end:
31 March 2017 31 May
2016
US$000 US$000
-------------- -------
Financial assets
Cash and bank balances 2,425 4,055
Fair value through profit and loss:
Held for trading - 16
Other loans and receivables 1,531 1,257
-------------- -------
3,956 5,328
-------------- -------
Financial liabilities
Amortised cost 4,033 3,560
-------------- -------
4,033 3,560
(77) 1,768
============== =======
27.3. Financial risk management objectives
The Group manages the risks arising from its operations, and
financial instruments at ExCom and Board level. The Board has
overall responsibility for the establishment and oversight of the
Group's risk management framework and to ensure that the Group has
adequate policies, procedures and controls to manage successfully
the financial risks that the Group faces.
While the Group does not have a written policy relating to risk
management of the risks arising from any financial instruments
held, the close involvement of the ExCom in the day to day
operations of the Group ensures that risks are monitored and
controlled in an appropriate manner for the size and complexity of
the Group. Financial instruments are not traded, nor are
speculative positions taken. The Group has not entered into any
derivative or other hedging instruments.
The Group's key financial market risks arise from changes in
foreign exchange rates ('currency risk') and changes in interest
rates ('interest risk'). The Group is also exposed to credit risk
and liquidity risk. The principal risks that the Group faces as at
31 March 2017 with an impact on financial instruments are
summarised below.
27.4. Market Risk
The Group is exposed to currency risk and interest risk. These
are discussed further below.
27.4.1. Currency risk
Certain of the Group companies have functional currencies other
than US$ and the Group is therefore subject to fluctuations in
exchange rates in translation of their results and financial
position into US$ for the purposes of presenting consolidated
accounts. The Group does not hedge against this translation risk.
The Group's financial assets and liabilities by functional currency
of the relevant Group company are as follows:
Assets Liabilities
31 March 31 May 31 March 31 May
2017 2016 2017 2016
US$000 US$000 US$000 US$000
--------- ------- --------- -------
United States Dollar ('US$') 2,013 3,877 103 222
Mozambique Metical ('MZN') 1,942 1,450 3,930 3,336
Other 1 1 - 2
--------- ------- --------- -------
3,956 5,328 4,033 3,560
========= ======= ========= =======
The Group transacts with suppliers and / or customers in
currencies other than the functional currency of the relevant group
company (foreign currencies). The Group does not hedge against this
transactional risk. As at 31 March 2017 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 the Metical. 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.
31 March 31 May
2017 2016
US$000 US$000
--------- ---------
GBP Impact
Profit or loss
5% Increase in US$ 6 (4)
10% Increase in US$ 12 (7)
15% Increase in US$ 18 (11)
Other equity
5% Increase in US$ (59) (69)
10% Increase in US$ (118) (138)
15% Increase in US$ (177) (208)
MZN Impact
Profit or loss
10% Increase in US$ 39 23
20% Increase in US$ 77 46
30% Increase in US$ 116 69
Other equity (1)
10% Increase in US$ (3,069) (6,039)
20% Increase in US$ (6,138) (12,078)
30% Increase in US$ (9,207) (18,117)
========= =========
(1) This is mainly due to the exposure arising on the translation
of US$ denominated intra-group loans provided to Metical
functional currency entities which are included as
part of the Group's net investment in the related entities.
27.4.2. 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 March 2017 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 and Beef operations in Mozambique are also
financed through bank facilities. 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 0.50% (12 month period ending 31 May 2016: 0.23%). The
weighted average interest on drawings under the overdraft
facilities and bank loans was 25.23% (12 month period ending 31 May
2016: 16.42%). 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 period. 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 March 2017 and 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 recent macroeconomic circumstances in
Mozambique, particularly due to the significant weakening of the
Metical, led to a rapid increase in interest rates a prime rate of
28.0% which was 850 bp increase compared to 31 May 2016. The
macroeconomic scenario in Mozambique is now improving and it is
expected that interest rates will start to reduce and in all
likelihood will, in the medium term, reverse the recent
increases.
31 March 31 May
2017(1) 2016(1)
US$000 US$000
--------- ---------
+ 20 bp increase in interest rates (7) (6)
+ 50 bp increase in interest rates (17) (15)
+100 bp increase in interest rates (35) (29)
+200 bp increase in interest rates (69) (58)
+500 bp increase in interest rates (173) (146)
+800 bp increase in interest rates (277) (233)
+1000 bp increase in interest rates (346) (291)
========= =========
(1) The table above is prepared on the basis of an increase
in rates. A decrease in rates would have the opposite
effect.
27.5. Credit risk
Credit risk arises from cash and cash equivalents, and deposits
with banks and financial institutions, as well as outstanding
receivables. The Group's 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 27.2. Details of
provisions against financial assets are provided in note 23.
27.6. Liquidity risk
The Group policy throughout the period 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 March 2017 the Group held cash deposits of $2,425,000 (31
May 2016: $4,055,000). At 31 March 2017 the Group had overdraft and
bank loans facilities of approximately $5,638,000 (31 May 2016:
$6,800,000) of which $3,464,000 (31 May 2016: $2,950,000) was
drawn. Certain of these facilities have been restructured
subsequent to the period end as more fully described in note 33.1.
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.
31 March 31 May
2017 2016
US$000 US$000
--------- -------
1 month 653 689
2 to 3 months 193 100
4 to 12 months 3,215 2,224
1 to 2 years 433 501
3 to 5 years 485 892
--------- -------
4,979 4,406
========= =======
27.7. Fair values
The Directors have reviewed the financial statements and have
concluded that there is no significant difference between the
carrying values and the fair values of the financial assets and
liabilities of the Group as at 31 March 2017 and 31 May 2016.
28. Share capital
Authorised Allotted and fully paid
Number Number US$000
-------------- ------------------------ -------
At 31 March 2017 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.
29. RESERVES
Movements in the Group reserves are included in the consolidated
statement of changes in equity. A description of each reserve is
provided below.
29.1. 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.
30. Share based payments
30.1. Charge in the period
The Group recorded a charge within Operating expenses for share
based payments of $5,000 (12 months ended 31 May 2016:
$66,000).
30.2. 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 are
in issue.
The following table provides a reconciliation of share options
and warrants outstanding during the period:
10 months ended 12 months ended
31 March 2017 Weighted average 31 May 2016 Weighted average
Number exercise price Number exercise price
At beginning of period 51,003,998 2.0 36,499,998 3.4
Granted in the period - - 22,500,000 0.7
Terminated in the period (5,166,000) 3.1 (5,166,000) 4.5
Lapsed in the period (12,253,000) 2.5 (2,830,000) 4.5
At end of period 33,584,998 1.6 51,003,998 2.0
================ ====================== ================ =======================
Exercisable at period
end 30,251,006 1.5 47,504,006 1.9
================ ====================== ================ =======================
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 had 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 March 2017, 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
--------------- ----------- ------------ --------------- ----------------
29 July 2012 2,499,999 1,500,003 3.5p 29 July 2023
29 July 2012 2,084,999 1,251,003 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
----------- ------------
33,584,998 30,251,006
=========== ============
31. Related party disclosures
AS Groves, a director of the Company, is also a director of
Liberian Cocoa Corporation ('LCC'), African Management Services
Limited ('AMS'), Consolidated Growth Holdings Limited (formerly
Sable Mining Africa Limited, 'CGH'), Atlas African Industries
Limited ('AAI') and East Africa Packaging Limited ('EAPC'). The
Group has transacted with these companies during the period.
Related party transactions are entered into on an arm's length
basis.
During the 10 month period ending 31 March 2017, AMS provided
accounting, office, treasury and administrative services to the
Group for fees of $305,000 (12 month period ending 31 May 2016:
$510,000). As at 31 March 2017 the Group owed $8,000 to AMS (31 May
2016: $116,000 owed to Agriterra). During the period ending 31
March 2017 the Group provided against $129,000 of amounts due from
AMS which are no longer deemed recoverable.
As at 31 March 2017 the Group was owed $89,000 from LCC (31 May
2016: $89,000), which is included within the Cocoa disposal group
(note 24) (31 May 2016: included within 'Other receivables').
During the period the Group and CGH incurred certain expenses on
each other's behalf, which were refunded in full during the period.
At 31 March 2017, the amount due to CGH was $nil (31 May 2016:
$nil).
During the year ended 31 May 2016, 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.
During the 10 month period ended 31 March 2017, the Group provided
against $150,000 of the amounts receivable from AAI, reducing the
carrying value of the amounts due from AAI to $nil (31 May 2016:
$156,000).
The remuneration of the Directors, who are the key management
personnel of the Group, is set out in note 10.
32. Operating Leases
At 31 March 2017 the Group had commitments for future minimum
lease payments under non-cancellable operating leases for land and
buildings, which fall due as follows:
31 May
31 March 2017 2016
US$000 US$000
-------------- -------
Within one year 89 152
In the second to fifth years inclusive - 190
-------------- -------
89 342
============== =======
Operating lease rentals recognised as an expense in the
consolidated income statement were as follows:
Land and buildings 140 187
==== ====
33. Events subsequent to the balance sheet date
33.1. Re-structuring of the Company's borrowing facilities with Standard Bank
On 27 April 2017, the Group and Standard Bank agreed to modify
the terms of the Group's borrowing facilities for the Beef division
as follows:
1. a new overdraft facility was provided on the same terms as
the previous overdraft facility (described more fully in note 25),
other than for its renewal date, which was revised to 25 March
2018; and
2. the term loans disclosed in note 25 were replaced by a single
loan, with a twelve month term, repayable in equal monthly
instalments commencing in May 2017. The balance outstanding on the
term loans at that date was 39,133,000 Metical.
All other terms remained unchanged. The restructuring was
required due to the change in the nature of the Company's business
following the decision to close and de-stock the cattle farms.
In addition and on 27 April 2017, Standard Bank and the Group
formally completed the renewal of the Grain division's 300,000,000
Metical overdraft facility (refer to note 25); the overdraft had
been extended on a temporary basis until that date to complete
certain procedural matters relating to the renewal.
33.2. Disposal of the Cocoa division
On 1 June 2017, the Group completed the sale of its Sierra Leone
cocoa assets for a cash consideration of $500,000 (the
'Disposal').
Under the terms of the Disposal, the Group disposed of its
interests in Tropical Farms Limited and Tropical Farms Plantations
(SL) Limited (the local companies which hold the assets comprising
the Group's cocoa business in Sierra Leone) with immediate effect
against payment in full. These assets have been sold in excess of
their collective book value at 31 March 2017 of $325,000. Further
details are included in notes 4.5 and 24.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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