TIDMAGTA
RNS Number : 1251X
Agriterra Ltd
17 February 2017
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
17 February 2017
Agriterra Ltd ('Agriterra' or 'the Group')
Interim Results
Agriterra Limited, the AIM listed African agricultural company,
announces its results for the six months ended 30 November
2016.
Chair's Statement
Following my report on the Group's progress and plans for the
future, as outlined in my statement in the financial statements for
the 2016 financial year ('FY-2016'), issued in November 2016, I am
pleased to provide an update on our performance in the first half
of the 2017 financial year ('FY-2017').
Overview
The African agriculture market remains an area of growth
potential, with Mozambique having particularly strong prospects
because of the eagerly anticipated establishment of a liquefied
natural gas industry in the north of the country. As and when this
industry gains sufficient development and production traction in
Mozambique, it is expected to significantly change the economy of
the entire country, which we believe will translate into
consequential growth in our revenue potential.
In the shorter term however, it must be acknowledged that the
first six months of FY-2017 ('H1-FY2017') have been very
challenging in our primary grain and beef markets in Mozambique. In
the immediate future there is also a potentially significant
agricultural risk arising from an outbreak of fall armyworm (in
combination with the African armyworm) in the Sub-Saharan Africa
region, which poses a risk to various staple food crops, including
maize. The outbreak is moving in a general North to South
trajectory, and to date the most affected countries have been
Zimbabwe and Zambia; there have been no confirmed outbreaks in
Mozambique. Regional Governments are implementing measures to
control the infestation, and the UN Food and Agriculture
Organisation is assisting in a region wide response to this risk.
We are therefore optimistic that the effect of this outbreak will
be mitigated to the maximum extent possible.
As we confront market, economic and security issues, we continue
to focus on identifying further cost savings wherever possible,
improving the efficiency of our operations, implementing new
products such as pelletized animal feed, and reducing the effect of
the high interest rates by the early repayment of debt facilities
in our Beef division through the disposal of non-core assets.
Taking account of the inherent operational, economic and
political risks which our business has to address on an ongoing
basis, we remain committed to developing our business so as to
increase value for all stakeholders.
Review
As noted above, the period under review has seen us face
significant challenges, which is a reflection of the recent
macro-economic conditions in Mozambique. The local economic
environment altered substantially during the 2016 calendar year,
most notably due to the combination of a decline in commodity
prices, a prolonged and severe drought and the significant
weakening of the Mozambique Metical against the United States $
(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 25.3% for the 12
months ended 31 December 2016), accompanied by a rapid increase in
interest rates (prime lending rates are now at 28.0% compared to
16.0% at 31 May 2015 and 19.5% at 31 May 2016). In addition to
these economic complexities, Mozambique experienced military
tension during the period, particularly in the centre of the
country.
Subsequent to the period end, the economic and political
environment has improved as a result of a cease-fire agreement
having been reached (provisionally in place until the end of March
2017), combined with relative stability in the Metical (the
exchange rate for the 2017 calendar year to date has remained
stable at approximately 70 Metical per US$). 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. While there is some risk of
excessive rainfall waterlogging early plantings, on balance the
climatic conditions bode well for a more stable agricultural
business environment in Mozambique and the wider region.
In this context, our Grain division has shown an encouraging
improvement in Metical EBITDA, demonstrating the effect of the
efficiency and cost reduction programmes that we implemented during
FY-2016. This continued positive performance is reflected in an
EBITDA of $495,000 (H1-FY2016: $676,000) on sales (before
elimination of sales to our Beef division) of $5,757,000
(H1-FY2016: $6,365,000), representing c. 12,600 tonnes of maize
flour (H1-FY2016: c. 14,800) and c 16,500 tonnes of all maize
products (H1-FY2016: c. 21,300). The fall in the US$ value of sales
and EBITDA reflects the devaluation in the Metical, which
depreciated by over 78% from an average rate of 41 Metical / US$ in
H1-FY2016 to 73 Metical / US$ in H1-FY2017. In Metical terms, sales
increased by 60% from Metical 262,833,000 in H1-FY2016 to Metical
421,415,000 in H1-FY2017 and EBITDA increased by 38% from Metical
28,549,000 to Metical 37,807,000 over the same period.
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 between December and
March. During H1-FY2017 we purchased c 24,700 tonnes of maize
(H1-FY2016: c 25,500 tonnes), with a further 2,300 tonnes purchased
subsequent to the period end (H1-FY2016: c 1,900 tonnes)
substantially completing our maize purchasing requirements for the
season. 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 erode the overall profitability of the
division. After an interest charge of $409,000 in H1-FY2017
(H1-FY2016: $303,000), profit before tax for the Grain division was
$85,000 compared to $302,000 in H1-FY2016. Despite this high
interest rate, the fact that the Grain division continues to
deliver a net profit is testament to the underlying sustainability
of the division following the cost reduction programme implemented.
As the economic situation improves in Mozambique and interest rates
return to more normal levels, we hope to see improvements in the
overall net profit generated by this division. Further improvements
to the profitability of this division may follow when we commence
commercial sales of animal feed products produced by our animal
feed pelletizer (using maize bran, a by-product of the maize
milling process). We are currently developing appropriate feed
products and undertaking market research and hope to start
commercial supplies of animal feed later this year.
The reduced price competitiveness of imported products arising
from the devaluation of the Metical provides certain opportunities
for us to grow our markets. This is particularly the case within
our Beef division where we now supply 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 meat sold and Metical
revenues, which have both grown by 38% compared to H1-FY2016.
Despite this strong underlying performance, this translates to a
fall in dollar denominated revenues to $2,636,000 from $3,345,000
in H1-FY2016, due to the depreciation in the Metical.
In line with our overall Group strategy, we have continued to
implement significant cost savings in the Beef division. Despite
the positive effect of cost savings, the Beef division returned a
loss before tax during H1-FY2017 of $923,000 (H1-FY2016: loss of
$1,490,000) and an EBITDA loss of $584,000 (H1-FY2016: $808,000).
In part this loss reflects the ongoing farming costs incurred
during the de-stocking process of the cattle farms - as previously
announced, and in 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 H1-FY2017 to de-stock the
cattle farms and place them in "care and maintenance". This
programme is well under way, and the Inhazonia and Mavonde ranches
are now de-stocked, with c 1,500 animals remaining on our Dombe
ranch. Due to the de-stocking of the cattle farms, we expect to
realise our cattle assets within less than 12 months, and
accordingly all cattle are presented as current assets in the
statement of financial position as at 30 November 2016.
Although placing the farms into "care and maintenance" is a
significant shift in our strategy for the Beef division, it will
reduce the cash requirements of continuing the ongoing development
of these assets and provides cash inflow through the increased
slaughter and sale of our own herd. This cash inflow, along with
the income from the disposal of surplus, non-revenue generating
assets is being applied to reducing 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).
With regards to our cocoa operations in Sierra Leone and as
previously reported, the Board decided during H1-FY2017 that it was
in the best interests of the Group to dispose of the Cocoa division
to bolster the Group's cash reserves, and a sale of the division to
the existing management team was agreed via a Management Buy-Out
('MBO'). Unfortunately, the MBO team was unable to secure the
finance required to complete the MBO and accordingly the
transaction has not completed subsequent to the period end. The
Group is now working towards achieving maximum shareholder value
from the Cocoa division and will consider all avenues to achieve
this, including (without limitation) disposal and further
development. The results of the Cocoa division continue to be
presented within discontinued operations in the consolidated income
statement and no profit or loss has been recorded on the MBO.
Conclusion
As we move forwards towards achieving our objectives for the
Group during these testing times I wish to thank our entire team
for their continued commitment and thank our shareholders for their
ongoing support and engagement.
CSO Havers
Chair
17 February 2017
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 Europe Tel: +44 (0) 20 7894 7000
Michael Reynolds Cantor Fitzgerald Europe Tel: +44 (0) 20 7894 7000
Consolidated income statement
6 months 6 months 12 months
ended ended ended
30 30 31
November November May
2016 2015 ` 2016
Unaudited Unaudited Audited
(re-presented
- note
6.2)
Note $000 $000 $000
CONTINUING OPERATIONS
Revenue 8,106 9,377 18,511
Cost of sales (7,290) (7,908) (16,779)
---------- -------------- ----------
Gross profit 816 1,469 1,732
Increase in value of biological
assets 417 624 1,637
Operating expenses (2,315) (3,743) (6,863)
Impairment of current and
non-current assets - - (3,069)
Other income 26 83 57
Profit / (loss) on disposal
of property, plant and equipment
and adjustments to the carrying
value of assets classified
as held for sale 288 17 (110)
Operating loss (768) (1,550) (6,616)
Investment revenues 7 6 11
Other gains and losses 4 (16) (311) (360)
Finance costs 5 (548) (366) (678)
Loss before taxation (1,325) (2,221) (7,643)
Taxation (22) (23) (34)
---------- -------------- ----------
Loss for the period from continuing
operations 3 (1,347) (2,244) (7,677)
DISCONTINUED OPERATIONS
Loss for the period from discontinued
operations 6 (20) (558) (778)
Loss the period attributable
to owners of the Company (1,367) (2,802) (8,455)
========== ============== ==========
LOSS PER SHARE
Basic and diluted loss per
share from continuing operations (0.13) (0.21) (0.72)
============== ============== ==============
Basic and diluted loss per
share from continuing and
discontinued operations (0.00) (0.26) (0.80)
============== ============== ==============
No. No. No.
Weighted average number of
shares outstanding for the
purposes of calculating basic
and diluted loss per share
from continuing operations,
and basic and diluted loss
from continuing and discontinued
operations 1,061,818,478 1,061,818,478 1,061,818,478
============== ============== ==============
Consolidated Statement of comprehensive income
6 months 6 months 12 months
ended ended ended
30 30 31
November November May
2016 2015 2016
Unaudited Unaudited Audited
$000 $000 $000
Loss for the period (1,367) (2,802) (8,455)
Items that may be reclassified
subsequently to profit or
loss:
Foreign exchange translation
differences (1,778) (5,967) (8,139)
----------- ----------- ----------
Other comprehensive income
for the period (1,778) (5,967) (8,139)
----------- ----------- ----------
Total comprehensive income
for the period attributable
to owners of the Company (3,145) (8,769) (16,594)
=========== =========== ==========
Consolidated statement of financial position
30 November 30 November 31 May
2016 2015 2016
Unaudited Unaudited Audited
Note $000 $000 $000
Non-current assets
Property, plant and equipment 6,009 13,854 7,505
Interests in associates 4 4 4
Investments in quoted companies - 65 16
Biological assets - 1,724 888
------------
6,013 15,647 8,413
------------ ------------ ----------
Current assets
Biological assets 1,066 1,106 1,106
Inventories 3,381 3,836 1,357
Trade and other receivables 1,319 1,392 1,290
Assets classified as held for sale 477 - 860
Cash and cash equivalents 3,371 5,387 4,055
9,614 11,721 8,668
------------ ------------ ----------
Total assets 15,627 27,368 17,081
------------ ------------ ----------
Current liabilities
Borrowings 7 3,754 4,228 1,812
Trade and other payables 774 1,018 708
Liabilities directly associated with assets classified as held
for sale 127 - 142
4,655 5,246 2,662
------------ ------------ ----------
Net current assets 4,959 6,475 6,006
------------ ------------ ----------
Non-current liabilities
Borrowings 7 798 1,091 1,105
------------ ------------ ----------
Total liabilities 5,453 6,337 3,767
------------ ------------ ----------
Net assets 10,174 21,031 13,314
============ ============ ==========
Share capital 8 1,960 1,960 1,960
Share premium 148,622 148,622 148,622
Share based payments reserve 1,985 1,872 1,980
Translation reserve (18,160) (14,210) (16,382)
Accumulated losses (124,233) (117,213) (122,866)
------------ ------------ ----------
Equity attributable to equity holders of the parent 10,174 21,031 13,314
============ ============ ==========
The unaudited condensed consolidated financial statements of
Agriterra Limited for the 6 months ended 30 November 2016 were
approved by the Board of Directors and authorised for issue on 17
February 2017. Signed on behalf of the Board of Directors:
CSO Havers
Chair
Consolidated cash flow statement
6 months
6 months ended 30 ended 30 12 months ended
November November 31 May
2016 2015 2016
Unaudited Unaudited Audited
(re-presented - note 6.2)
$000 $000 $000
Loss before tax for the period from
continuing operations (1,325) (2,221) (7,643)
Adjustments for:
Depreciation 265 642 1,160
Profit on disposal of property, plant and
equipment (288) (17) (15)
Adjustments to the carrying value of
assets classified as held for sale - - 125
Share based payment expense / (credit) 5 (42) 66
Foreign exchange loss / (gain) 54 (8) (37)
Increase in value of biological assets (417) (624) (1,637)
Finance costs 548 366 678
Investment revenues (7) (6) (11)
Decrease in fair value of quoted
investments 16 311 360
Impairment of current and non-current
assets - - 3,069
Operating cash flows before movements in
working capital (1,149) (1,599) (3,885)
(Increase) / decrease in inventories (2,526) (2,187) 122
Increase in trade and other receivables (175) (259) (291)
Increase / (decrease) in trade and other
payables 143 (164) (325)
Net decrease in biological assets held for
slaughter purposes 982 55 1,592
------------------ -------------------------- ----------------
Net cash used in operating activities by
continuing operations (2,725) (4,154) (2,787)
Corporation tax paid (22) (23) (34)
Finance costs (548) (366) (678)
Interest received 7 6 11
Net cash used in operating activities by
continuing operations (3,288) (4,537) (3,488)
------------------ -------------------------- ----------------
Net cash used in operating activities by
discontinued operations - (154) (133)
------------------ -------------------------- ----------------
Net cash used by operating activities (3,288) (4,691) (3,621)
------------------ -------------------------- ----------------
Cash flows from investing activities
Proceeds from disposal of property, plant and
equipment, net of expenses incurred 538 164 105
Acquisition of property, plant and equipment (182) (312) (465)
Net cash from / (used in) investing
activities by continuing operations 356 (148) (360)
------------------ -------------------------- ----------------
Net cash from investing activities in
discontinued operations - 84 106
------------------ -------------------------- ----------------
Net cash from / (used in) investing
activities 356 (64) (254)
------------------ -------------------------- ----------------
Cash flow from financing activities
Net draw down of overdraft 2,513 2,463 53
Net (repayment) / drawdown of loans (1) 1,335 1,721
Net cash from financing activities from
continuing operations 2,512 3,798 1,774
------------------ -------------------------- ----------------
Net cash from financing activities from
discontinued operations - 145 -
------------------ -------------------------- ----------------
Net cash from financing activities 2,512 3,943 1,774
------------------ -------------------------- ----------------
Net decrease in cash and cash equivalents (420) (812) (2,101)
Effect of exchange rates on cash and cash
equivalents including discontinued
operations (264) (222) (265)
------------------ -------------------------- ----------------
Cash and cash equivalents at beginning of
period 4,055 6,421 6,421
------------------ -------------------------- ----------------
Cash and cash equivalents at end of period 3,371 5,387 4,055
================== ========================== ================
1. General information
Agriterra Limited ('Agriterra' or the 'Company') and its
subsidiaries (together the 'Group') is focussed on the agricultural
sector in Africa. Agriterra is a non-cellular company limited by
shares incorporated and domiciled in Guernsey, Channel Islands. The
address of its registered office is Richmond House, St Julians
Avenue, St Peter Port, Guernsey GY1 1GZ.
The Company's Ordinary Shares are quoted on the AIM Market of
the London Stock Exchange ('AIM').
The unaudited condensed consolidated financial statements have
been prepared in US Dollars ('US$' or '$') as this is the currency
of the primary economic environment in which the Group
operates.
2. Basis of preparation
The condensed consolidated financial statements of the Group for
the 6 months ended 30 November 2016 (the 'H1-FY2017 financial
statements'), which are unaudited and have not been reviewed by the
Company's auditor, have been prepared in accordance with the
International Financial Reporting Standards ('IFRS'), as adopted by
the European Union, accounting policies adopted by the Group and
set out in the annual report for the year ended 31 May 2016
(available at www.agriterra-ltd.com). The Group does not anticipate
any significant change in these accounting policies for the year
ended 31 May 2017. References to 'IFRS' hereafter should be
construed as references to IFRSs as adopted by the EU.
This interim report has been prepared to comply with the
requirements of the AIM Rules of the London Stock Exchange (the
'AIM Rules'). In preparing this report, the Group has adopted the
guidance in the AIM Rules for interim accounts which do not require
that the interim condensed consolidated financial statements are
prepared in accordance with IAS 34, 'Interim financial reporting'.
While the financial figures included in this report have been
computed in accordance with IFRSs applicable to interim periods,
this report does not contain sufficient information to constitute
an interim financial report as that term is defined in IFRSs.
The financial information contained in this report also does not
constitute statutory accounts under the Companies (Guernsey) Law
2008, as amended. The financial information for the year ended 31
May 2016 is based on the statutory accounts for the period then
ended. The auditors reported on those accounts. Their report was
unqualified and did not include any statements of emphasis of
matter.
The H1-FY2017 financial statements have been prepared in
accordance with the IFRS principles applicable to a going concern,
which contemplate the realisation of assets and liquidation of
liabilities during the normal course of operations. Having carried
out a going concern review in preparing the H1-FY2017 financial
statements, the Directors have concluded that there is a reasonable
basis to adopt the going concern principle.
3. Segment information
The Executive Committee of the Group 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.
The following is an analysis of the Group's revenue and results
by operating segment:
6 months ended 30 Grain Beef Cocoa Unallo-cated Discon-tinued(3) Elimina-tions Total
November 2016 -
Unaudited
$000 $000 $000 $000 $000 $000 $000
------ ------ ------ ------------- ----------------- -------------- --------
Revenue
External sales(2) 5,470 2,636 21 - (21) - 8,106
Inter-segment
sales(1) 287 - - - - (287) -
------ ------ ------ ------------- ----------------- -------------- --------
5,757 2,636 21 - (21) (287) 8,106
------ ------ ------ ------------- ----------------- -------------- --------
Segment results
- Operating profit /
(loss) 494 (784) (20) (478) 20 - (768)
- Interest (expense)
/ income (409) (139) - 7 - - (541)
- Other gains and
losses - - - (16) - - (16)
------ ------ ------ ------------- ----------------- -------------- --------
Profit / (loss)
before tax 85 (923) (20) (487) 20 - (1,325)
Income tax (6) (1) - (15) - - (22)
------ ------ ------ ------------- ----------------- -------------- --------
Profit / (loss) for
the period from
continuing
operations 79 (924) (20) (502) 20 - (1,347)
====== ====== ====== ============= ================= ============== ========
6 months ended 30 Grain Beef Cocoa Unallo-cated Discon-tinued(3) Elimina-tions Total
November 2015 -
Unaudited
(re-presented -
note 6.2)
$000 $000 $000 $000 $000 $000 $000
------ -------- ------ ------------- ----------------- -------------- --------
Revenue
External sales(2) 6,032 3,345 171 - (171) - 9,377
Inter-segment
sales(1) 333 - - - - (333) -
------ -------- ------ ------------- ----------------- -------------- --------
6,365 3,345 171 - (171) (333) 9,377
------ -------- ------ ------------- ----------------- -------------- --------
Segment results
- Operating profit
/ (loss) 605 (1,427) (558) (728) 558 - (1,550)
- Interest
(expense) / income (303) (63) - 6 - - (360)
- Other gains and
losses - - - (311) - - (311)
------ -------- ------ ------------- ----------------- -------------- --------
Profit / (loss)
before tax 302 (1,490) (558) (1,033) 558 - (2,221)
Income tax (4) (19) - - - - (23)
------ -------- ------ ------------- ----------------- -------------- --------
Profit / (loss) for
the period from
continuing
operations 298 (1,509) (558) (1,033) 558 - (2,244)
====== ======== ====== ============= ================= ============== ========
12 months ended 31 Grain Beef Cocoa Unallo-cated Discon-tinued(3) Elimina-tions Total
May 2016 - Audited
$000 $000 $000 $000 $000 $000 $000
------- -------- ------ ------------- ----------------- -------------- --------
Revenue
External sales(2) 12,246 6,265 389 - (389) - 18,511
Inter-segment
sales(1) 660 - - - - (660) -
------- -------- ------ ------------- ----------------- -------------- --------
12,906 6,265 389 - (389) (660) 18,511
------- -------- ------ ------------- ----------------- -------------- --------
Segment results
- Operating profit
/ (loss) 811 (5,981) (965) (1,446) 965 - (6,616)
- Interest
(expense) /
income (473) (205) - 11 - - (667)
- Other gains and
losses - - - (360) - - (360)
Profit / (loss)
before tax 338 (6,186) (965) (1,795) 965 - (7,643)
Income tax (16) (18) - - - - (34)
------- -------- ------ ------------- ----------------- -------------- --------
Profit / (loss)for
the period from
continuing
operations 322 (6,204) (965) (1,795) 965 - (7,677)
======= ======== ====== ============= ================= ============== ========
(1) Inter-segment sales are charged at prevailing market
prices.
(2) Revenue represents sales to external customers and is
recorded in the country of domicile of the group company
making the sale. Sales from the Grain and Beef divisions
are principally for supply to the Mozambican market.
US$ nil (12 months ended 31 May 2016: $161,000; 6 months
ended 30 November 2015: $nil) of sales from the Cocoa
division were supplied to the world market, with the
remainder supplied within Sierra Leone (12 months ended
31 May 2016 and 6 months ended 30 November 2015: supplied
in full within Sierra Leone).
(3) Amounts reclassified to discontinued operations in all
periods presented relate to the 'Other Cocoa activities'
- refer to note 6.2.
The segment items included within continuing operations in the
consolidated income statement for the year are as follows:
6 months ended 30 November Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
2016 - Unaudited
$000 $000 $000 $000 $000 $000 $000
------ ----- ------ ------------- -------------- -------------- ------
Depreciation 70 195 - - - - 265
====== ===== ====== ============= ============== ============== ======
6 months ended 30 November Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
2015 - Unaudited
(re-presented - note 6.2)
$000 $000 $000 $000 $000 $000 $000
------ ----- ------ ------------- -------------- -------------- ------
Depreciation 128 491 229 23 (229) - 642
====== ===== ====== ============= ============== ============== ======
12 months ended 31 May Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
2016 - Audited
$000 $000 $000 $000 $000 $000 $000
------ ------ ------ ------------- -------------- -------------- ------
Depreciation 239 889 391 32 (391) - 1,160
Impairment of assets - 3,069 - - - - 3,069
====== ====== ====== ============= ============== ============== ======
4. Other gains and losses
6 months ended 30 6 months 12 months ended 31 May
November ended 30 2016
2016 November Audited
Unaudited 2015
Unaudited
$000 $000 $000
Decrease in fair value of quoted investments 16 311 360
================== =========== =======================
5. Finance Costs
6 months ended 30 6 months 12 months ended 31 May
November ended 30 2016
2016 November Audited
Unaudited 2015
Unaudited
$000 $000 $000
Interest expense:
Bank borrowings 548 366 678
================== =========== =======================
6. Discontinued operations
The profit after tax arising on discontinued operations during
the period is analysed by business operation as follows:
6 months ended 30 November 6 months 12 months ended 31
2016 ended 30 May
November 2016
2015
Unaudited Unaudited Audited
(re-presented - note 6.2)
$000 $000 $000
Oil and gas activities - - 187
Other Cocoa activities (20) (558) (965)
Net loss after tax attributable
to discontinued operations (20) (558) (778)
=========================== ========================== ===================
(1) The corresponding amounts for 'Other Cocoa activities'
for the 6 months ended 30 November 2015 were previously
reported within continuing operations for the period
then ended. For the reasons described in note 6.2, these
activities are were classified as discontinued operations
in the year ended 31 May 2016 and continue to be classified
as such in the 6 month period ended 30 November 2016.
As required by IFRS 5, 'Non-current Assets Held for
Sale and Discontinued Operations', the comparative amounts
have been reclassified.
6.1. 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 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. No amounts were recorded in respect of the
discontinued Oil and gas operations in the current period.
6.2. Other Cocoa activities
From 1 September 2014 and following the cessation of all cocoa
trading related activities, the Cocoa division focussed its efforts
on maintaining the cocoa plantation assets, while undertaking
revenue generating logistics activities, principally providing
assistance in the Ebola relief efforts (collectively the 'Other
cocoa activities'). Due to the significant efforts undertaken to
control the Ebola epidemic by international aid and health
organisations, Sierra Leone was declared Ebola free initially in
November 2015 and subsequently in March 2016. Consequently, the
logistics activities which were being undertaken to provide cash
support for the Cocoa division reduced in scale such that the
available income from these activities no longer substantially
covered the costs of the Cocoa division.
While the Group has successfully established and maintained the
necessary infrastructure from which a large scale commercial cocoa
plantation and trading business can be developed in Sierra Leone,
the next stage in the development of these assets requires
significant capital investment. Given the impact of Ebola on the
West African region as a whole and the lack of investment appetite
from traditional finance sources, the Board formed the view, after
due investigations and careful consideration that the Group would
be unlikely to be able to raise the finance to continue with the
development of the cocoa plantation in the foreseeable future. In
this context, the Board therefore believed that it was in the best
interests of the Group to sell the Cocoa division to bolster the
Group's cash reserves and to enable the Cocoa division to access
other finance sources, such as dedicated development and
sustainability funds.
The Other Cocoa activities represented a business segment of the
Group and accordingly the results of the Other Cocoa activities are
presented as discontinued operations within the consolidated income
statement. Comparative amounts have been represented as required by
IFRS 5. Cash flows pertaining to the Other Cocoa activities are
presented in the consolidated cash flow statement along with all
cash flows relating to discontinued operations.
On 5 October 2016, the Group completed the sale of the Cocoa
division in a Management Buy-Out transaction (the 'MBO') for cash
consideration of $750,000 (the 'Consideration'). Under the terms of
the MBO, the Group disposed of its interests in Baranca Tide
Limited and West Africa Cocoa Services Limited (the intermediate
holdings companies which hold the assets comprising the Group's
cocoa business in Sierra Leone, the 'Target Companies') with
immediate effect; payment of the Consideration was deferred for a
period of 65 business days from completion of the MBO (i.e. until 9
January 2017); in the event that the Consideration was not paid on
the due date, the ownership of the Target Companies would revert
immediately to the Group. Due to factors outside of their control,
the MBO team was unable to secure the finance required to complete
the MBO and accordingly the transaction has not completed
subsequent to the period end. Ownership in the Target Companies has
reverted to the Group. The Group is now working towards achieving
maximum shareholder value from the Cocoa division and will consider
all avenues to achieve this, including (without limitation)
disposal and further development.
The net assets of the Cocoa division, all of which related to
the Other cocoa activities, are classified as held for sale as at
30 November 2016 and 31 May 2016.
7. Borrowings
30 November 2016 30 November 2015 31 May
2016
Unaudited Unaudited Audited
$000 $000 $000
Non-current
Bank loans 798 1,091 1,105
----------------- ----------------- --------
Current
Bank loans 210 - 137
Bank overdraft 3,544 4,086 1,675
Other - 142 -
----------------- ----------------- --------
3,754 4,228 1,812
----------------- ----------------- --------
4,552 5,319 2,917
================= ================= ========
Grain division
The Group has an overdraft facility of 300,000,000 Metical (30
November 2015: 220,000,000 Metical; 31 May 2016: 300,000,000
Metical) (being approximately $4,100,000 at the 30 November 2016
Metical to US$ exchange rate) to provide working capital funding
for its grain operations in Mozambique, principally for the
purchase of maize and related operating expenditure. It is secured
by a fixed charge against certain of the Group's property, plant
and equipment, and a floating charge against all of the maize
inventory and finished maize products, and trade receivables.
Interest is charged at the counterparty bank's Mozambique prime
rate less 1.75% (30 November 2015: less 3%; 31 May 2016: less
1.75%). As at the date of this report, the interest rate on these
borrowings is 26.25%. Unless it is cancelled by either party, the
facility renews annually on 25 March. As at the period end the
Group had undrawn overdraft borrowing facilities for the Grain
division of $606,000 at the 30 November 2016 Metical to US$
exchange rate.
Beef division
At the end of all periods presented, the Group has lending
facilities totalling 105,000,000 Metical ($1,430,000 at the 30
November 2016 Metical to US$ exchange rate) to continue financing
its beef operations in Mozambique. The facilities comprise
75,000,000 Metical of term loans and a 30,000,000 Metical
overdraft. The term loans, which have been fully drawn as at 30
November 2016, carry interest at the bank's prime lending rate plus
0.25% (currently 28.25%). Capital repayments on these loans
commenced during the period in accordance with their terms. The
overdraft renews annually and carries interest at the bank's prime
lending rate (currently 28.00%); the renewal of the overdraft is in
progress at the date of this report. The lending facilities are
secured by a fixed charge against the Group's abattoir in Chimoio
and, by a floating change over all cattle and meat inventories, and
trade receivables. As at the period end the Group had undrawn
overdraft borrowing facilities for the Beef division of $350,000 at
the 30 November 2016 Metical to US$ exchange rate.
Other borrowings
Other borrowings at 30 November 2015 represent pre-financing by
a leading global company focussed on natural, organic and
speciality foods for the Group's Cocoa trading operations to source
up to 500 tonnes of cocoa on their behalf. It was unsecured, bore
no interest and was repaid through the delivery of cocoa beans
during H2-FY2016.
8. Share capital
Authorised Allotted and fully paid
Number Number US$000
Ordinary shares of 0.1p each
At 30 November 2015, 31 May 2016 and 30 November 2016 2,345,000,000 1,061,818,478 1,722
Deferred shares of 0.1p each
At 30 November 2015, 31 May 2016 and 30 November 2016 155,000,000 155,000,000 238
-------------- ---------------- --------
Total share capital
-------------- ---------------- --------
At 30 November 2015, 31 May 2016 and 30 November 2016 2,500,000,000 1,216,818,478 1,960
============== ================ ========
9. Events subsequent to the balance sheet date
9.1. Failure to complete the MBO of the Cocoa division
As more fully described in note 6.2, during H1-FY2017, the Group
agreed the sale of the Cocoa division to the existing management
team via a MBO. Consideration was payable under this agreement by 9
January 2017. For reasons outside of their control, the MBO team
was unable to secure the finance required to complete the MBO and
accordingly the transaction has not completed subsequent to the
period end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUCAPUPMGQQ
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