DECA

Final Results

RNS Number : 4171V
Agriterra Ltd
28 October 2014
 

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

28 October 2014

Agriterra Ltd ('Agriterra' or 'the Group')

Final Results

 

Agriterra Limited, the AIM listed pan-African agricultural company, announces its audited final results for the year ended 31 May 2014.  A full version of the results can be found below.

 

 

For further information please visit www.agriterra-ltd.com or contact:

Andrew Groves

Agriterra Ltd

Tel: +44 (0) 20 7408 9200

David Foreman

Cantor Fitzgerald Europe

Tel: +44 (0) 20 7894 7684

Rick Thompson

Cantor Fitzgerald Europe

Tel: +44 (0) 20 7894 7684

Andy Cuthill

Peat & Co.

Tel: +44 (0) 20 3540 1722

John Beaumont

Peat & Co.

Tel: +44 (0) 20 3540 1723

Susie Geliher

St Brides Media & Finance Ltd

Tel: +44 (0) 20 7236 1177

 

 

Chairman's statement

 

In line with our previously stated growth strategy, Agriterra continues to invest in building operational platforms that will provide a basis for sustainable long-term cash generation and profitability across our multi-divisional business.

 

Successful agricultural businesses are based on long term investment programmes that provide a foundation for profitability and which accommodate the realisation of a growth strategy. Our focus therefore remains on establishing strong foundations - primarily within our beef and maize operations in Mozambique - building our asset base towards "critical mass" and vertically integrating operations wherever possible. The rationale behind our growth strategy is to generate revenues from our own produce whilst improving efficiencies, maximising margins and thereby driving up shareholder value.

 

In Sierra Leone our early-stage cocoa plantation project, which was conceived with a view to tapping into the predicted supply deficit in the world cocoa market, must now be considered and viewed in the light of the ongoing Ebola crisis in West Africa; the Board will continually review the position in respect of this project over future months.

 

During the period under review we assigned capital to implement our growth strategy and whilst we are still in the growth and development phase of our beef and cocoa operations. As a result of these and previous investments made, we are now beginning to see the benefits of our structured development plan being realised in financial terms, with a reduction in losses and a trend towards profitability. 

 

Beef operations - Mozambique

 

Momentum continues to build throughout the beef division, with significantly increased cattle throughput at our feedlot and abattoir, which, in tandem with the expansion of our retail offering, has resulted in increased revenues of $4,081,000 (2013: $2,230,000) in this division. 

 

To fuel future growth within the beef division, we remain committed to expanding our range of retail units and pursuing longer term supply contracts to maximise our sales of final beef products. Unfortunately our planned retail unit expansion scheme was curtailed somewhat during the period as a result of political unrest in Mozambique. This political unrest resulted in the imposition of significant logistical restrictions and it was, for a considerable time, not possible to travel safely to the North, North East or South of the country from our base of operations in the Manica province. As a result of these restrictions, it became necessary to close our retail butchery in Matola and to place on-hold the implementation of our expansion plans for new retail units in the North and North Eastern areas of the country. As political stability has returned we are now in position to reignite our retail expansion plans, primarily to service the growth engendered by the significant natural resource investment into North and North East Mozambique.

 

Notwithstanding the constraints faced during the year we nevertheless opened new retail sites at Beira (a full butchery) and Manica (a satellite unit) and subsequent to the year end, we have opened a further satellite retail site at Moatize in Tete which we hope will show good growth. We now have three full butcheries in Chimoio, Tete and Beira, and two satellite sites in Manica and Moatize. We are now looking at further sites for potential butcheries in the North and North East of Mozambique and hope to be able to announce the opening of new sites in the near future.

 

I am pleased to note that the key revenue generating elements of our vertically integrated beef operations (namely the retail units, abattoir and feedlot) are now generating positive cash flows, and these are expected to further improve in the current financial year, as the benefits of the new retail units and the expansion in our supply contracts impact the bottom line.

 

Our cattle herd expansion programme is also on track to reach 10,000 head (excluding feedlot animals) during 2015 and, importantly, a successful breeding season has delivered a 28% year-on-year increase in births.  The key to our future success from ranching operations is critical mass; to this end, work to increase the carrying capacity of our ranches, through further land clearance and a phased irrigation programme, has been undertaken during the year. Once the newly irrigated land is able to support cattle, we hope to accelerate our herd growth through the acquisition of further cattle from South Africa.  This accelerated growth will enable us to reach cash break-even on our ranching operations more quickly than previously anticipated by increasing the total number of births each year (thereby increasing the number of animals available for slaughter, 15 to 18 months thereafter). 

 

With a positive outlook predicted for Mozambique, due to continued strong economic development and the growth of foreign direct investment into the country our vertically integrated operations leave the Group well positioned to maximise financial returns across the entire 'field to fork' value chain. We are therefore optimistic about the future prospects of the beef division in supplying the Mozambique market.  In addition to the domestic market we are actively investigating potential export markets and opportunities, particularly in the Middle East. 

 

With the necessary critical pillars to support growth in place and a defined investment programme in progress, the Board believe that our Mozambique beef operations are set to become self-sustaining and profitable, which should in turn have a favourable impact on the Group's performance in the years ahead. 

 

Cocoa plantation - Sierra Leone

 

In Sierra Leone during the period we continued to invest in our cocoa plantation, an exciting project which, once mature, has the potential to generate significant cash flow. We completed the initial phase of planting during the financial year with 250,000 seedlings planted on 200 hectares. A further 300,000 seedlings are currently growing in our nursery; these seedlings were cultivated in anticipation of the next planned phase in our planting schedule (250 hectares), which we initially expected to complete in the first half of the 2015 financial year, but as a result of external events has now been put on hold and is under review.

 

Due to the well-publicised Ebola outbreak, the Group has re-aligned its short term strategy regarding the cocoa plantation.  In accordance with best practices and in an effort to protect local staff during the outbreak, our 3,200 hectare plantation and nursery, including all plant, machinery, equipment, housing, office and other infrastructure are being stewarded by on-site workers who are ensuring that the existing cocoa plants are being maintained and that our assets remain secure.  We are closely monitoring the Ebola outbreak to ensure we protect the health of our employees and our assets in country, with a view to resuming operations once the situation improves to an acceptable level of risk. In the meantime, we are also rigidly enforcing general hygiene protocols to ensure that staff and visitors are not placed at unnecessary risk.

 

Despite the current difficult conditions in Sierra Leone arising from the Ebola outbreak, we believe our cocoa plantation remains a valuable asset in the medium to long term. The scalability of the operation, the attainable production targets and the dynamics of the cocoa market were all crucial factors in our decision to invest in this business and these factors have not changed when viewed with a longer term outlook. We have excellent infrastructure in place and a strong in-country foundation; we believe that the strong demand fundamentals for cocoa will repay our investment when the on-ground situation improves and we can continue our planting schedule and plantation growth.  In particular, the supply/demand dynamic for cocoa, driven by significant growth in demand in Asia and a supply deficit as West African small scale farmers struggle with under-achieving farms or switch to other cash crops such as rubber, is expected to continue to cause cocoa prices to increase. Notwithstanding its compelling investment rationale, the Board recognise - particularly in light of the ongoing Ebola crisis - that completion of the plantation development plans will require considerable capital investment and accordingly are regularly investigating financing and strategic options that will support the plantation's growth and development targets.

 

Other operations - Sierra Leone and Mozambique

 

Due to the Ebola outbreak and the associated precautionary restrictions on travelling in Sierra Leone, coupled with the poor performance of the cocoa trading operation in the year, the Board has suspended the cocoa trading operations.  We are confident that ceasing trading will not have a material effect on the Group's financial performance.  This division was focussed primarily on building a presence in-country and providing a market entry point for buyers as a precursor to the establishment of our own plantation, and the implementation of programmes involving the upgrading of local growers plant quality through plant distribution.  In this regard the operation fulfilled its objective.

 

The Group is currently assisting the Ebola relief effort in Sierra Leone through the provision of vehicles, warehouse facilities and other assets previously used by the Group's trading division to various international aid and health organisations. 

 

The Group's maize milling and trading operation in Mozambique continues to be an important aspect of our vertically integrated business model, generating a considerable revenue stream and producing an important component of feed for the beef feedlot as a by-product of the maize milling process.  Although mealie meal volumes declined (mainly due to political instability referred to above which led to difficulties transporting maize product), purchases for the 2014/2015 season have been strong. Due to a strong focus and major emphasis on price and margin control, gross profit is improving, and the Board believe this is a good sign for the future. The political environment in Mozambique has improved considerably since the Group's year end, and subsequently, despite a slow start to mealie meal sales, the Board is optimistic that sales and revenues will improve during the latter part of the 2015 financial year.

 

We are also assessing additional 'value add' products that can complement our mealie meal offering and generate additional revenues from our existing assets with minimal additional investment. These include maize based snacks and other agricultural products.

 

Legacy oil interests

 

In addition to our current operations, the Board has continued to actively pursue the realisation of value from its legacy oil and gas operations. In light of the continuing civil war in South Sudan, the Board took the view that it would be prudent to expedite settlement in respect of the claims arising from the Group's legacy oil interests in South Sudan and accordingly, as announced on 17 September 2014, a successful settlement was reached in respect of such interests. Following the settlement, the Company and Group has no further current economic interest in South Sudan.

 

Financial results

 

In order to achieve critical mass and a foundation for growth and profitability in the future, our focus remains on expanding our growth divisions - primarily our beef operations - and optimising returns across all divisions. As shareholders will appreciate, it is incumbent on the Board to maintain a continuous review of the position regarding the cocoa operations, particularly in light of the Ebola outbreak.

 

Even though we remain in the investment phases of both our beef and cocoa operations, our investment strategy is beginning to be reflected in our results. While revenue during the period decreased to $13,797,000 (2013: $18,073,000) reflecting lower maize volumes offset by increasing beef sales, the pre-tax loss on continuing operations decreased by 13.9% to $5,627,000 (2013: $6,533,000).  The progress made in improving cost efficiency across all divisions, the focus on margin improvement in our grain business and the positive impact in our beef business from both the establishment of retail units and the organic growth in our herd mitigated the loss of margin arising from the lower sales in our grain division.    

 

The net assets of the Group were $50,549,000 at the period end and cash balances were US$6,994,000 (2013: $18,748,000) against a current market cap of approximately $16,100,000. Subsequent to the period end, we have received a cash injection of approximately $5,600,000 through the settlement of certain claims relating to our legacy oil and gas assets which, in combination with the platform we now have in place, will allow us to continue with our development plan.

 

Corporate review

 

The period under review saw the appointment of several key new personnel to support the Group's growth.  These hires included the appointments of Mr Daniel Cassiano-Silva, a highly experienced financial professional with a background in African focussed publicly listed companies, as Finance Director and Mr Gert (George) Naude, a highly experienced agricultural manager with a proven background in large scale commercial agri-operations in Mozambique, as Chief Operating Officer (Mozambique).  Mr Naude replaced Mr Euan Kay, who retired from day-to-day management but remains a consultant to the Group in addition to providing senior level guidance and support through his non-executive position on the Board.

 

Outlook

 

The African agriculture market remains an area of exceptional growth potential. While we are still in the development phase, the Board is confident that the progress we have made to date has created a strong and sustainable platform for our transition into profitability. 

 

I would like to conclude by thanking our team who have worked tirelessly in delivering on our vision and assisting us in the development of the business.

 

 


PH Edmonds

Chairman

27 October 2014

 

 

Operations review

 

Agriterra currently has three operational agricultural divisions:

 

·     Beef, which conducts cattle ranching, feedlot, abattoir operations and retail units through Mozbife Limitada ('Mozbife')

·     Cocoa, which manages the Group's cocoa farming activities and, during the year under review, also managed the cocoa trading, through the Tropical Farms group of companies ('TFL')

·     Grain, which operates maize purchasing and processing businesses through Desenvolvimento E Comercialização Agricola Limitada ('DECA') and Compagri Limitada ('Compagri')

 

Beef Operations (Mozambique)

 

Agriterra remains focussed on expanding its vertically integrated "field to fork" beef operations which comprise three ranches totalling 19,850 hectares, a feedlot facility with capacity for up to 3,000 animals with an additional 1,050 hectares of land available for cropping activities, a 4,000 head per month abattoir and five retail units in Mozambique. 

 

The Group's strategy is to increase value by virtue of being a vertically integrated producer, supplementing our herd by local cattle purchases, where necessary.  Agriterra rear and breed beef cattle at the Mavonde, Inhazonia and Dombe ranches, fatten at the Vanduzi feedlot, and slaughter and butcher at the Chimoio abattoir, which in turn supplies the retail units in Chimoio, Tete, Beira, Manica and Moatize.  Once fully established, this integrated business approach will enable the Group to maximise revenues and margins from the entire value chain.

 

We are well advanced in implementing our strategy for the Beef division. Our feedlot, abattoir and butcheries are now generating net positive cash flows and, with the irrigation programme underway at our Mavonde and Inhazonia ranches, we expect our farms to start contributing in the short to medium term. With our extensive infrastructure and the capacity to scale up our operations in all aspects of this division, we are now poised to capitalise on the ever increasing demand for beef products, both domestically (in Mozambique) and overseas.

 

The Ranches

 

The beef division has three ranches, being the 2,350 hectare Mavonde ranch, the 2,500 hectare Inhazonia ranch and the 15,000 hectare Dombe ranch, all located in Central Mozambique. The total herd across the ranches stood at approximately 6,400 head as at 31 May 2014, being a 30% increase over the 4,900 head on the ranches as at 31 May 2013. The increase reflects the successful calving during the year with 1,635 (2013: 1,281) animals born.

 

The ongoing expansion of the herd remains a key focus for the Group in order to maximise the number of animals on our ranches and yield a cash generative number of animals for slaughter each year. Our ranches also provide a very high quality animal from which the very best cuts can be obtained. Our animals are either pure Beefmaster, premium quality imported animals, or local breeds which we are cross breeding with our pedigree animals to rear larger animals which are naturally acclimatised to conditions in Mozambique.

 

To support the growth in the herd size, additional pivot irrigation has been implemented at Mavonde to increase the irrigated land by 195 hectares to 368 hectares, and at Inhazonia, to increase the irrigated land by 88 hectares to 118 hectares. As at the date of this report, all land clearing, pivot installation and irrigation commissioning has been completed, with current activities focussed on the final grass planting. In order to provide greater flexibility in our feeding regimes throughout the year, we are varying the grass types under the new pivots between grass suitable for grazing and grass suitable for hay bailing. Our experience with the different grass types will inform our future use of the irrigated land to maximise the animal feed we produce and therefore maximise the animals that each ranch can support. Water for the irrigation systems is provided by our 48 billion litre dam on the Mavonde ranch and the Nyadzonya river which runs through the Inhazonia ranch.

 

We anticipate minimum stocking ratios of seven cows and seven calves per hectare of irrigated land, although we hope this will increase as the irrigated pastures mature. In accordance with our plan, we expect to introduce animals onto the newly irrigated land from December 2014, in anticipation of the early 2015 calving season.

 

Once the newly irrigated pastures are established and the farms are appropriately stocked, we expect to be able to carry a sufficient number of animals on our ranches to generate a positive cash return from the ranching operations measured on a standalone basis. Once this platform is established, we can further expand our irrigation programme on a scalable basis to support a ranch herd well in excess of 10,000 head.

 

The Vanduzi Feedlot

 

The Vanduzi Feedlot has a 20 pen line with a potential rolling capacity of approximately 3,000 head every 90 days.  The feedlot sources animals from our own ranches and from cattle purchased from the surrounding areas. The feedlot is critical to our operation as it allows us to produce a well finished, high quality animal for slaughter ensuring premium grade meat is available to supply our butcheries and wholesale operations.

 

By carefully regulating the quantity and mix of feed, we maximise the weight gains attainable from our animals on a profitable basis per animal. We now provide approximately 500 animals a month to the abattoir which makes the feedlot a net cash generating operation. 

 

In conjunction with the feeding pens, Vanduzi also has 1,050 hectares of land for pasture and production of feed.  This helps to keep feed costs down, provides certainty of feed supply and maintains an integrated operation.  Furthermore, the feedlot works strategically with other companies in the Group, for example by using bran, the by-product from the grain processing facilities, as a feed supplement for the cattle.

 

The Chimoio Abattoir and Retail Units

 

The abattoir and retail units are important components in the Group's vertically integrated business model, and enable the Group to benefit from the full uplift in value from grass reared animals on the ranches, to premium butchered beef products. 

 

Since commencing operations in December 2012 slaughter rates at the abattoir have consistently increased; 4,285 animals were slaughtered in FY2014, nearly doubling the 2,145 animals slaughtered (or sold live) during FY2013.  Our current monthly run rate is now approximately 450 animals. At this level of animals slaughtered per month, the abattoir recovers its operating costs in full from the sales of skin, offal, hooves and heads (the '5th quarter') and is now making a net contribution to the cash generation of the beef operations.   

 

The abattoir has a monthly slaughter capacity of approximately 4,000 head. This spare capacity provides the Group with significant flexibility to increase slaughter rates as the beef operations expand.

 

To capitalise on the value uplift arising on the selling price of butchered meat (when compared to carcasses), and to increase the distribution channels for its products, the Group has established a network of retail units in Chimoio, Tete, Manica and Beira which opened in December 2012, February 2013, December 2013 and February 2014 respectively. In addition to these larger retail units, the Group a further satellite unit at Moatize in Tete. The retail units have performed well for the Group, underpinned by the strong internal market demand for meat, and are already contributing a net positive cash flow to the beef division. Whilst the implementation of the planned retail expansion programme was delayed during the period as a result of travel restrictions resulting from political unrest in the region, as political stability has returned we are now in position to recommence our retail expansion plans, primarily to service the growth engendered by the significant natural resource investment into North and North East Mozambique.

 

Revenue from the Group's abattoir and retail units during the year was $4,081,000, an 83% increase on sales of $2,230,000 in the year ended 31 May 2013. The Group's average monthly turnover from all units, including the abattoir, is now approximately $500,000. In order to continue our expansion, the Group's roll out of its retail units is expected to continue in 2015, with sales growth opportunities identified in the north, north-east and centre of the country.  In addition, the Group is focussed on advancing several wholesale contracts directly through the abattoir, with large international blue-chip clients which operate in the region.  In line with this, several significant tenders are underway which have the ability to materially enhance turnover in the coming year.

 

Cocoa Plantation & Trading (Sierra Leone)

 

The Cocoa division's primary focus during the year was the development and expansion of its existing 3,200 hectare cocoa plantation, located 40km from Kenema in south-east Sierra Leone. Subject to the acquisition of an additional block of approximately 1,600 hectares of land adjacent to the plantation, the Group's long term plan for the cocoa plantation is to plant a total of 4,000 hectares, with the ultimate aim of producing a minimum of 8,000 tonnes of cocoa per annum, initially anticipated by 2020/2021. As more fully explained below, the implementation of this plan has been curtailed due to the well-publicised Ebola outbreak affecting Western Africa, including Sierra Leone. Despite the recent reduction in scale of operations in response to the Ebola outbreak, the Group remains optimistic about the future development of the cocoa division. With a projected cocoa bean deficit of up to one million metric tonnes by 2020 driving prices upwards, the fundamentals of the cocoa market remain strong. Subject to an effective international response to the Ebola outbreak, the Group is well positioned to obtain the necessary financing to bring the cocoa assets into production in time to capitalise on this supply shortage.

 

The planting season for cocoa in Sierra Leone runs between July and October, with preparatory activities such as land clearing and preparation, and seedling establishment in the nursery, undertaken between November and June. In accordance with this schedule, 250,000 seedlings were planted on 200 hectares of cleared land during the early part of the financial year. A further 300,000 plants were established in the nursery in anticipation of planting a further 250 hectares during the early part of financial year 2015. Land clearing and preparation activities were also initiated for this next phase of planting, including the purchase and delivery of all necessary fertiliser.

 

Despite all reasonable efforts to continue with the implementation of the planned planting schedule subsequent to the period end, the Group's activities have been significantly impacted by the Ebola outbreak. In addition to the significant restrictions in movement in country causing a shortage of labour, the Board has assessed that it is unsafe to pursue an expansion of the plantation at this stage which could increase the risk of Ebola developing on the plantation site and place staff at risk.

 

Accordingly, activities at the plantation have been curtailed to a level sufficient to protect staff while maintaining the Group's assets in country. In accordance with this plan, the Group is operating with a reduced labour force to ensure that the hectares planted to date are maintained, as is the plantation infrastructure including warehousing, accommodation and equipment. The Group is also rigidly enforcing general hygiene protocols to ensure staff and visitors are not placed at unnecessary risk.

 

The nursery continues to house approximately 300,000 plants which will now be used, if circumstances permit, to accelerate the Group's local initiatives to increase the quality of the local growers' stock.  It is envisaged that this distribution programme will be run in tandem with international agencies and companies looking to expand the productivity of cocoa farmers in West Africa.  In addition, the Company continues to support the local communities and Government representatives, providing assistance where practicable as detailed in below.

 

This gradual phasing of the planting schedule, in conjunction with appropriate agronomical technical expertise, remains critical to the future development of the plantation. The modular planting system allows the Group to perfect its planting activities under controlled conditions, with each successive year of planting building on the practical and technical lessons learnt. An area of significant interest identified during the year is likely to be the final assessment of whether part, or all, of the future planting may now use hybrid plants from the Ivory Coast.  These plants are under technical review but early signs show they could both increase the average yields to be obtained per hectare and also accelerate the period to full yield.   

 

In addition to the planting completed during the year and prior to the Ebola outbreak, the Group further continued to develop the plantation infrastructure through the construction of management accommodation on site and an administration block, road development, and expansion of the state of the art nursery from 1.7 to 2.2 hectares. Once the expansion of the nursery is completed, it will be capable of housing 1,100,000 seedlings which is sufficient to plant up to 1,000 hectares in any given year. In the longer term, the nursery is also expected to support outgrower programmes and facilitate the development of the cocoa plantation into a centre of excellence for cocoa growing in Sierra Leone, an asset which will be much needed when the country rebuilds following the Ebola outbreak.

 

Further infrastructure development was completed at the Group's 2,000 square metre warehouse and processing-to-export facility on the outskirts of Kenema which is now complete. This facility will provide the Group with a key asset in the cocoa logistics chain, connecting the up-country cocoa growing and buying infrastructure with export markets. The warehouse is currently being utilised by international aid agencies for food and aid storage in connection with the relief efforts for the Ebola outbreak.

 

Turning to the cocoa trading business, the cocoa harvest for the period under review was impacted by a poor harvest. Lower available purchase volumes resulted in sales of 736 tonnes (2013: 1,200) of cocoa beans. To address the losses arising in the previous financial year, the Group completed a significant restructuring of the operation, to concentrate on three main buying hubs in Kenema, Kono and Kailahun, with outpost spokes (compared to prior year with over 50 buying points).  This streamlining delivered cost reductions and a reduced loss of $1,029,000 compared to $1,569,000 in the previous period.  Despite the reduction in loss, the disappointing financial performance and the significant impact of the Ebola outbreak, led the Board to cease operations within the cocoa trading business. The results of the cocoa trading operations are presented as discontinued within the consolidated financial statements.

 

Grain Processing (Mozambique)

 

The Group's maize operations are focussed on its 35,000 tonne capacity facility in Chimoio in central Mozambique, and its 15,000 tonne capacity facility in Tete, in north-west Mozambique. The established maize buying and processing business is focussed on purchasing maize from local out-growers through a network of buying stations, which is then processed and stored before being sold to the retail market as maize meal, a key staple food in the region and country.

 

The Group purchases maize directly from in excess of 250,000 local smallholder farmers at specific buying points, thereby supporting economic activity in the relevant rural areas. Having purchased the grain, it is transported back to purpose-built storage and processing facilities where it is dried, fumigated, prepared and processed into maize meal.

 

Maize purchases during the season were strong with approximately 32,000 tonnes of maize purchased (2012-2013 season: approximately 40,000).  Maize milled however showed a reduction on prior year to 24,500 tonnes (2013: 46,600 tonnes) with maize meal sales at approximately 18,700 tonnes (2013: 34,500 tonnes), resulting in revenues decreasing year on year by $6,127,000 to $9,716,000 (2013: $15,843,000).

 

In order to maximise returns and profitability in the grain division, the Group's primary focus this period has been on maximising the price and margins generated from our maize products.  As a result, the grain division's gross profit margin has increased to 18.6% in 2014 from 13.6% in 2013. The improved margin and other margin, cost and efficiency improvement measures, have however been outweighed by the decrease in volumes resulting in in the Group reporting a small increase in loss for the period from $456,000 in 2013 to $630,000 in 2014.

 

The decrease in volumes sold reflects in significant part the recent political difficulties in Mozambique which created delays in transporting maize products to certain parts of the country. The political environment in Mozambique has improved considerably since the Group's year end, and subsequently, the Board is optimistic that sales and revenues will improve during the current year. Additionally, the current buying season has been favourable, with approximately 28,600 tonnes bought to date, at approximately $75 less per tonne than the previous period. 

 

The Group is now focussing its efforts on developing additional revenue streams within the Grain division in order to leverage its infrastructure. Areas under review include additional maize based products such as maize crisps, and additional agricultural products.

 

Palm Oil Operations (Sierra Leone)

 

The Group controls a lease of approximately 45,000 hectares of brownfield agricultural land suitable for palm oil production in the Pujehun District in the Southern Province in Sierra Leone.  The Board continues to evaluate this property and its potential for commercialisation.  Further updates will be provided when appropriate.

 

Consolidated income statement

For the year ended 31 May 2014

 




2014


2013






(represented - note 15


Note


US$000


US$000

CONTINUING OPERATIONS






Revenue

5


13,797


18,073

Cost of sales



(12,475)


(15,151)

Gross profit



1,322


2,922

Increase in value of biological assets

21


290


770

Operating expenses



(8,338)


(9,703)

Other income



226


124

Share of result of associates

19


-


(5)

Operating loss

7


(6,500)


(5,892)







Investment revenues

11


146


43

Other gains and losses

12


936


-

Finance costs

13


(209)


(684)







Loss before taxation



(5,627)


(6,533)







Taxation

14


(25)


(13)

Loss for the year from continuing operations



(5,652)


(6,546)







DISCONTINUED OPERATIONS






(Loss) / profit for the year from discontinued operations

15


(2,364)


27,485







(Loss) / profit for the year attributable to owners of the Company



(8,016)


20,939










US cents


US cents

(LOSS) / EARNINGS PER SHARE






Basic and diluted loss per share from continuing operations

16


(0.53)


(0.62)

Basic (loss) / earnings per share from continuing and discontinued operations

16


(0.76)


1.98

Diluted (loss) / earnings per share from continuing and discontinued operations

16


(0.76)


1.90







 

Consolidated statement of comprehensive income

Consolidated statement of comprehensive income

For the year ended 31 May 2014




2014


2013




US$000


US$000







(Loss) / profit for the year



(8,016)


20,939

Items that may be reclassified subsequently to profit or loss:






Foreign exchange translation differences



(1,612)


(2,492)

Other comprehensive income for the year



(1,612)


(2,492)

Total comprehensive income for the year attributable to owners of the Company



(9,628)


18,447

 

 

Consolidated statement of financial position

As at 31 May 2014




2014


2013


Note


US$000


US$000

Non-current assets






Goodwill and other intangible assets

17


576


697

Property, plant and equipment

18


36,268


33,241

Interests in associates

19


4


4

Investments in quoted companies

20


1,225


4

Biological assets

21


3,071


2,060




41,144


36,006

Current assets






Biological assets

21


1,201


1,947

Inventories

22


4,900


5,456

Trade and other receivables

23


1,148


3,378

Cash and cash equivalents

24


6,994


18,748




14,243


29,529

Total assets



55,387


65,535

Current liabilities






Borrowings

25


(2,668)


(3,091)

Trade and other payables

26


(2,170)


(2,416)




(4,838)


(5,507)

Net current assets



9,405


24,022

Net assets



50,549


60,028







Share capital

28


1,960


1,960

Share premium



148,622


148,622

Shares to be issued

29.1


2,940


2,940

Share based payment reserve



1,859


1,710

Translation reserve

29.2


(3,808)


(2,196)

Accumulated losses



(101,024)


(93,008)

Equity attributable to equity holders of the parent



50,549


60,028

 

The financial statements of Agriterra Limited were approved and authorised for issue by the Board of Directors on 27 October 2014. Signed on behalf of the Board of Directors by:

 

 





 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY           

For the year ended 31 May 2014
















 



















 

 

 


Share

capital


Share premium


Shares to be issued


Share based payment reserve


Translation reserve


Accumulated
losses



Total

equity


Note


US$000


US$000


US$000


US$000


US$000


US$000



US$000


















Balance at 1 June 2012



1,957


148,530


2,940


1,620


296


(113,947)



41,396

Profit for the year



-


-


-


-


-


20,939



20,939

Other comprehensive income:

















Exchange translation loss on foreign operations



-


-


-


-


(2,492)


-



(2,492)

Total comprehensive income for the year



-


-


-


-


(2,492)


20,939



18,447

Share-based payments

30


-


-


-


90


-


-



90

Issue of share capital

28


3


92


-


-


-


-



95

Balance at 31 May 2013



1,960


148,622


2,940


1,710


(2,196)


(93,008)



60,028

Loss for the year



-


-


-


-


-


(8,016)



(8,016)

Other comprehensive income:

















Exchange translation loss on foreign operations



-


-


-


-


(1,612)


-



(1,612)

Total comprehensive income for the year



-


-


-


-


(1,612)


(8,016)



(9,628)

Share-based payments

30


-


-


-


149


-


-



149

Balance at 31 May 2014



1,960


148,622


2,940


1,859


(3,808)


(101,024)



50,549


Consolidated cash flow statement

For the year ended 31 May 2014










2014


2013






(represented - note 15


Note


US$000


US$000







Cash flows from operating activities






Loss before tax from continuing operations

6.1


(5,627)


(6,533)

Adjustments for:






Depreciation

18


1,766


1,840

(Profit) / loss on disposal of property, plant and equipment



(149)


1

Share based payment expense



149


90

Foreign exchange (gain) / loss



(52)


529

Increase in value of biological assets

21


(290)


(770)

Finance costs

13


209


684

Investment revenues

11


(146)


(43)

Increase in fair value of quoted investments

20


(936)


-

Operating cash flows before movements in working capital



(5,076)


(4,202)

Decrease in inventories



197


895

Decrease in trade and other receivables



971


1,032

(Decrease) / increase in trade and other payables



(173)


315

Cash used in operating activities by continuing operations



(4,081)


(1,960)

Corporation tax paid



(25)


(125)

Finance costs



(209)


(684)

Interest received



146


43

Net cash used in operating activities by continuing operations



(4,169)


(2,726)

Net cash used in operating activities by discontinued operations



(879)


(907)

Net cash used in operating activities



(5,048)


(3,633)







Cash flows from investing activities






Proceeds from disposal of property, plant and equipment



202


14

Acquisition of property, plant and equipment

18


(5,935)


(10,505)

Purchase of investment in quoted companies

20


(285)


(4)

Increase in biological assets

21


(219)


(773)

Net cash used in investing activities by continuing operations



(6,237)


(11,268)

Net cash from investing activities by discontinued operations



-


27,110

Net cash (used in) / from investing activities



(6,237)


15,842







Cash flow from financing activities






Net draw down of overdraft



1,129


1,468

Draw down of loans



-


6,000

Repayment of loans

25


(1,500)


(4,500)

Net cash (used in) /  from financing activities from continuing operations



(371)


2,968

Net cash used in financing activities by discontinued operations



-


-

Net cash (used in) / from financing activities



(371)


2,968

Net (decrease) / increase in cash and cash equivalents



(11,656)


15,177

Effect of exchange rates on cash and cash equivalents



(98)


18

Cash and cash equivalents at beginning of the year



18,748


3,553

Cash and cash equivalents at end of the year



6,994


18,748

 

 

Notes to the consolidated financial statements

 

1.         GeNERAL INFORMATION

 

Agriterra is incorporated and domiciled in Guernsey, the Channel Islands, with registered number 42643.  A list of the significant investments in subsidiaries and associate companies held directly and indirectly by the Company during the period and at the period end, including the name, country of incorporation, operation and ownership interest is given in note 31.

 

The reporting currency for the Company and Group is the US Dollar ('$' or 'US$') as it most appropriately reflects the Group's business activities in the agricultural sector in Africa and therefore the Group's financial position and financial performance.

 

The financial statements have been prepared in accordance with IFRSs as adopted by the EU. 

 

2.         ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

 

1. 

2.1.      New Standards and Interpretations adopted with no significant effect on the financial statements

 

The following new and revised Standards and Interpretations have been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements, but may impact the accounting for future transactions and arrangements.

 

IFRS 7 (amended)

Financial Instruments: Disclosures - Amendments; Disclosures - Transfers of Financial Assets (effective 1 January 2013)



IFRS 13

Fair value measurement (effective 1 January 2013)



IAS 19 (revised)

Employee Benefits (effective 1 January 2013)

 

2.2.      New Standards and Interpretations in issue but not yet effective

 

At the date of authorisation of these financial statements, the following Standards and Interpretations are in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 



IFRS 9

Financial Instruments: Classification (effective for annual periods beginning on or after 1 January 2018)

IFRS 10

Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2014)

IFRS 11

Joint Arrangements (effective for annual periods beginning on or after 1 January 2014)

IFRS 12

Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2014)

IFRS 14

Regulatory deferral accounts (effective for annual periods beginning on or after 1 January 2016)

IFRS 15

Revenue from contracts with customers (effective for annual periods beginning on or after 1 January 2017)



IAS 16

Amendments bringing bearer plants into the scope of IAS 16 (effective for annual periods beginning on or after 1 January 2016)

IAS 27

Separate Financial Statements (as amended 2011) (effective for annual periods beginning on or after 1 January 2014)

IAS 28

Investments in Associates and Joint Ventures (as amended 2011) (effective for annual periods beginning on or after 1 January 2014)

IAS 32

Financial Instruments: Presentation - Amendment; Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2014).

IAS 41

Amendments bringing bearer plants into the scope of IAS 16 (effective for annual periods beginning on or after 1 January 2016)



IFRIC 21

Levies (effective for annual periods beginning on or after 1 January 2014)



September 2014 Annual Improvements to IFRSs

Effective for annual periods beginning on or after 1 January 2016

 

The Directors do not anticipate that the adoption of these Standards and Interpretations will have a material impact on the Group's financial statements in the period of initial application.

 

3.         SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements have been prepared on a historical cost basis, except for certain financial instruments and share based payments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets acquired. The principal accounting policies adopted are set out below in this note.

 

3.1.      Going concern

 

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.  Further detail is provided in note 4.1 to the consolidated financial statements.

 

3.2.      Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 May.  Control is achieved when the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

 

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

 

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.  The consolidated financial statements include the Group's share of the total recognised income and expenses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has a binding obligation to make payments on behalf of an associate.

 

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated.  Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

3.3.      Foreign currency

 

The individual financial statements of each company in the Group are prepared in the currency of the primary economic environment in which it operates (its 'functional currency'). The consolidated financial statements are presented in US Dollars which is also the functional currency of the Company.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case exchange rates at the date of transactions are used.  Exchange differences arising from the translation of the net investment in foreign operations and overseas branches are recognised in other comprehensive income and accumulated in equity in the translation reserve. Such translation differences are recognised as income or expense in the year in which the operation or branch is disposed of.

 

The following are the material exchange rates applied by the Group:

 


Average Rate


Closing Rate


2014

2013


2014

2013







Mozambican Meticais: US$

30.23

29.20


31.00

29.17

Sierra Leone Leones: US$

4,284

4,324


4,290

4,278

 

 

3.4.      Operating segments

 

The Chief Operating Decision Maker is the Group Executive Committee (the 'ExCom'), comprising the Chairman, the Chief Executive and the Finance Director. The ExCom reviews the Group's internal reporting in order to assess performance of the business. Management has determined the operating segments based on the reports reviewed by the ExCom which consider the activities by nature of business.

 

3.5.      Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, value added taxes and other sales related taxes.

Sales of goods are recognised when goods are delivered and title has passed.  Delivery occurs when the products have arrived at the specified location, and the risks and rewards of ownership have been transferred to the customer.

 

3.6.      Operating loss

 

Operating loss is stated before investment revenues, other gains and losses, finance costs and taxation.

 

3.7.      Borrowing costs

 

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The Group did not incur any borrowing costs in respect of qualifying assets in the period.

 

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

 

3.8.      Share based payments

 

The Company issues equity-settled share-based payments to certain employees of the Group. These payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant and the value is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for non-market based vesting conditions. 

 

Fair value is measured by use of the Black Scholes model.  The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

3.9.      Employee benefits

 

3.9.1.  Short term employee benefits

 

Short-term employee benefits include salaries and wages, short-term compensated absences and bonus payments. The Group recognises a liability and corresponding expense for short-term employee benefits when an employee has rendered services that entitle him / her to the benefit.

 

3.9.2.  Post-employment benefits

 

The Group does not contribute to any defined retirement plan for its employees, either defined contribution or defined benefit. Social security payments to state schemes are charged to profit and loss as the employee has rendered services.

 

3.10.   Leases

 

Leases that transfer substantially all the risks and reward of ownership are classified as finance leases. All other leases are classified as operating leases. As at 31 May 2014 the Group does not have any finance leases. During the periods presented in these financial statements, the Group was counterparty to certain operating lease contracts. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

 

3.11.   Taxation

 

The Company is resident for taxation purposes in Guernsey and its income is subject to income tax, presently at a rate of zero per cent per annum.  The income of overseas subsidiaries is subject to tax at the prevailing rate in each jurisdiction.

 

The income tax expense for the period comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, when tax is recognised in other comprehensive income or directly in equity as appropriate.  Taxable profit differs from accounting profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

 

Current tax expense is the expected tax payable on the taxable income for the year. It is calculated on the basis of the tax laws and rates enacted or substantively enacted at the balance sheet date, and includes any adjustment to tax payable in respect of previous years. Deferred tax is calculated using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the asset can be utilised. This requires judgements to be made in respect of the availability of future taxable income.

The Group's deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in subsidiaries, branches and joint ventures where the Group is able to control the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

 

3.12.   Business combinations

 

The acquisition of subsidiaries is accounted for using the acquisition method.  The cost of acquisition is measured at the aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquire. Acquisition related costs are recognised in profit and loss as incurred.

 

The assets, liabilities and contingent liabilities of the acquiree are measured at their fair value at the date of acquisition.  Any excess of the fair value of the consideration paid over the fair value of the identifiable net assets acquired is recognised as goodwill.  If the fair value of the consideration is less than the fair value of the identifiable net assets acquired, the difference is recognised directly in the income statement.

 

3.13.   Goodwill

 

Goodwill arising on the acquisition of subsidiaries is recognised as an asset.

 

Goodwill is reviewed for impairment at least annually.  Any impairment is recognised immediately in profit or loss and is not subsequently reversed.  For the purpose of impairment testing, goodwill is allocated to cash generating units of the acquirer which represent the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.  On disposal of a subsidiary, associate or joint venture, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

3.14.   Other intangible assets - concessions   

 

All costs incurred prior to obtaining the legal right to a concession are written off as incurred. Costs arising following the acquisition of a concession are carried at historical costs less impairment losses recognised on a project-by-project basis, pending determination of the technical feasibility commercial viability of the project. Costs incurred include technical expenses and allocated administrative overheads. Intangible assets arising on consolidation are stated at fair value less any impairment losses recognised.

 

3.15.   Property, plant and equipment

 

All items of property, plant and equipment are stated at historical cost less accumulated depreciation (see below) and impairment.  Historical cost includes expenditure that is directly attributable to the acquisition.  Subsequent costs are included in the asset's carrying value when it is considered probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

 

Assets in the course of construction for production, rental or administrative purposes are carried at cost, less any identified impairment loss.  Cost includes professional fees and associated administrative expenses.

 

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each item, as follows:

 

Land and buildings:



Land

Nil


Buildings and leasehold improvements

5%

-   25%

Plant and machinery

7%

-   25%

Motor vehicles

20%

-   25%

Aviation

20%


Other assets

10%

-   33%

Assets under construction

Nil


 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are determined by comparing proceeds received with the carrying amount of the asset immediately prior to disposal and are included in profit and loss.

 

3.16.   Impairment of property, plant and equipment and intangible assets excluding goodwill.

           

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets (other than goodwill which is assessed in accordance with the policy described above) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss because the Group does not record any assets at a revalued amount.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

 

3.17.   Biological assets

 

Consumer biological assets, being the beef cattle herd, are measured in accordance with IAS 41, 'Agriculture' at fair value less costs to sell, with gains and losses in the measurement to fair value recorded in profit and loss.  The herd comprises breeding and non-breeding cattle.  The breeding cattle comprise bulls, cows and heifers.  As these are expected to be held for more than one year, breeding cattle are classified as non-current assets.  The non-breeding cattle comprise animals (principally steers) that will be grown and sold for slaughter and are classified as current assets.

 

Cattle are recorded as assets at the year end and the fair valueis determined by the size of the herd and market prices at the reporting date.

 

The cost of forage is charged to the income statement over the period it is consumed.

 

3.18.   Inventories

 

Inventories are stated at the lower of cost and net realisable value.  Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.  The cost of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

 

3.19.   Provisions

 

The Group recognises a provision when it has a present legal or constructive obligation as a result of a past event, and it is probable that the Group will be required to settle the obligation and the amount concerned can be estimated reliably. Provisions are measured based on the best estimate of the expenditure required to settle the present obligation at the reporting date. Where the effect of the time value of money is material, the amount of the provision is discounted to present value using a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the amount of the provision as a result of the passage of time is recorded in profit or loss for the year.

 

3.20.   Financial instruments

 

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

3.20.1.  Financial assets

 

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit and loss ('FVTPL'), which are initially measured at fair value.

 

Financial assets are classified into the following specified categories: financial assets at 'FVTPL', 'held-to-maturity' investments, 'available-for-sale' financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial asset and is determined at the time of initial recognition. The Company and Group currently have financial assets in the category of 'loans and receivables' and FVTPL.

 

3.20.1.1.         Loans and receivables

 

Trade receivables, loans receivable, bank balances, cash in hand and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

3.20.1.2.         Financial assets at FVTPL

 

Financial assets are classified as at FVTPL when the financial asset is either held for trading or is designated as at FVTPL upon initial recognition. The Group holds certain investments in quoted companies which are designated as held for trading. Financial assets at FVTPL are stated at fair value, with any gains and losses arising on re-measurement recognised in profit or loss. The net gain or loss incorporates any dividends, interest earned, or foreign exchange gains and losses on the financial asset and is included in the 'Other gains and losses' line item in the income statement. Fair value is determined in the manner described in note 20.

 

3.20.1.3.         Impairment of financial assets

 

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

 

For loans and receivables carried at amortised cost, the amount of the impairment is the differences between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

 

The carrying amount of the financial asset is reduced through the use of an allowance account. When a financial asset is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

 

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit and loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

3.20.1.4.         Derecognition of financial assets

 

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

 

3.20.2.  Financial liabilities and equity

 

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

3.20.2.1.         Equity instruments

 

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

 

3.20.2.2.         Financial liabilities

 

Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'. The Group only has financial liabilities in the category of other financial liabilities.

 

3.20.2.2.1.      Other financial liabilities

 

Other financial liabilities are initially measured at fair value, net of transaction costs.

 

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

 

3.20.2.2.2.      Derecognition of financial liabilities

 

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

 

3.20.3.  Derivative financial instruments

 

Derivative financial instruments are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resultant gain or loss is recognised in profit or loss. The Group did not have any derivative instruments in any period presented.

 

4.         CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

 

In the application of the Group's accounting policies which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The effect on the financial statements of changes in estimates in future periods could be material.

 

4.1.      Going concern

 

The Group has prepared forecasts for the Group's ongoing businesses covering the period of at least 12 months from the date of approval of these financial statements.  These forecasts are based on assumptions including, inter alia, that there are no significant disruptions to the supply of maize or cattle to meet its projected sales volumes and take into account the investment in the beef herd, cocoa plantation, other working capital and additional property plant and equipment that are expected to be required. 

 

The Directors believe that with existing resources, the Group and Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these financial statements.

 

4.2.      Impairments

 

Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment of Assets.  Where there are indicators of impairment, the net book value of the cash generating unit is compared with the associated fair value. The impairment review is sensitive to various assumptions, including the expected sales forecasts, cost assumptions, capital requirements, and discount rates among others.

 

On 6 January 2009, the shareholders approved the adoption of the investing strategy to acquire or invest in businesses or projects operating in the agricultural and associated civil engineering industries in Southern Africa. Concurrently, the Directors suspended exploration activities in the Group's oil and gas operations and reduced expenditure to the minimum required in order to retain exploration licenses.  Consequently the exploration and evaluation and other related intangible assets were fully impaired. The provision for impairment is written back to profit and loss within 'Discontinued operations' upon receipt of funds. Subsequent to the period end and as more fully described in note 33, the Company and Group reached full and final settlement with respect to ongoing claims arising from its legacy oil interests in the Republic of South Sudan realising £3,412,000 (approximately $5,600,000) in cash which has been recognised in the financial year ended 31 May 2015.

 

4.3.      Biological assets

 

Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair value is based on the estimated market value for cattle of a similar age and breed, less the estimated costs to bring them to market.  Changes in any estimates could lead to recognition of significant fair value changes in the consolidated income statement. At 31 May 2014 the value of the breeding herd disclosed as a non-current asset was $3,071,000 (2013: $2,060,000). The value of the herd held for slaughter disclosed as a current asset was $1,201,000 (2013: $1,947,000).

 

4.4.      Recoverability of input Value Added Tax

 

Mozambique Value Added Tax ('IVA') operates in a similar manner to UK Value Added Tax ('VAT'). The Group is exempt from IVA on its sales of Maize under the terms of Mozambique tax law. The Group is able to recover input sales tax on substantially all of the purchases of the Grain division. The Group is always therefore in a net recovery position of IVA in respect of its Grain operations. To date the Group has not succeeded in recovering IVA from the Mozambique Government. Due to the significant uncertainty over the recoverability of these IVA balances, the Group has provided in full against the assets as at 31 May 2013 and 31 May 2014.

 

As at 31 May 2014, the gross and net IVA recoverable assets are respectively $1,345,000 (2013: $1,310,000) and $nil (2013: $nil) at the US$ to Metical exchange rate of 31.00 (2013: 29.17) at that date. The Group is now preparing all necessary documentation to submit its IVA re-imbursement claims and, while the Group is optimistic that substantially all of the gross IVA asset will be recovered, the timing of recovery remains uncertain due to factors outside of the control of the Group, including (1) the procedures in process / to be undertaken by the Mozambique Tax Authority to validate the Group's IVA claims and the timing of those procedures; and (2) the Mozambique Government's budgeted amounts for annual repayment of IVA and the inclusion of the Group's repayments in those budgeted amounts. Due to the above uncertainties, the IVA recoverable asset is fully provided against (refer to note 23).

 

5.         Revenue

 

An analysis of the Group's revenue is as follows:



2014


2013





(represented - note 15



US$000


US$000

Continuing operations





Sales of goods


13,797


18,073

Investment revenues (note 11)


146


43



13,943


18,116

Discontinued operations





Sales of goods (note 15)


1,907


3,140



15,850


21,256

 

6.          Segment reporting

 

As set out in the operating review, the Directors consider that the Group's operating activities comprise the segments of Grain, Beef and Cocoa, all undertaken in Africa. In addition, the Group has certain other unallocated expenditure, assets and liabilities, either located in Africa or held as support for the Africa operations.

 

6.1.      Segment revenue and results

 

The following is an analysis of the Group's revenue and results by operating segment:

 

Year ending 31 May 2014

Grain


Beef


Cocoa


Unallo-cated


Discon-tinued


Elimina-tions


Total


US$000


US$000


US$000


US$000


US$000


US$000


US$000















Revenue














External sales(2)

9,716


4,081


1,907


-


(1,907)


-


13,797

Inter-segment sales(1)

412


-


-


-


-


(412)


-


10,128


4,081


1,907


-


(1,907)


(412)


13,797















Segment results














- Operating loss

(421)


(3,436)


(1,028)


(2,456)


841


-


(6,500)

- Interest (expense) / income

(193)


2


(1)


128


1


-


(63)

- Other gains and losses

-


-


-


936


-


-


936

Loss before tax

(614)


(3,434)


(1,029)


(1,392)


842


-


(5,627)















Income tax

(16)


(9)


-


-


-


-


(25)

Loss for the period from continuing operations

(630)


(3,443)


(1,029)


(1,392)


842


-


(5,652)

 

 

Year ending 31 May 2013 (represented - note 15)

Grain


Beef


Cocoa


Unallo-cated


Discon-tinued


Elimina-tions


Total


US$000


US$000


US$000


US$000


US$000


US$000


US$000















Revenue














External sales(2)

15,843


2,230


3,140


-


(3,140)


-


18,073

Inter-segment sales(1)

470


-


-


-


-


(470)


-


16,313


2,230


3,140


-


(3,140)


(470)


18,073















Segment results














- Operating loss

(108)


(2,639)


(1,564)


(2,961)


1,380


-


(5,892)

- Interest (expense) / income

(335)


2


(5)


(308)


5


-


(641)

Loss before tax

(443)


(2,637)


(1,569)


(3,269)


1,385


-


(6,533)















Income tax

(13)


-


-


-


-


-


(13)

Loss for the period from continuing operations

(456)


(2,637)


(1,569)


(3,269)


1,385


-


(6,546)

 

(1)

Inter-segment sales are charged at prevailing market prices.

(2)

Revenue represents sales to external customers and is recorded in the country of domicile of the group company making the sale. Sales from the Grain and Beef divisions are principally for supply to the Mozambican market. Sales from the Cocoa division are supplied to the world market.

 

 

The segment items included in the consolidated income statement for the year are as follows:

 

Year ending 31 May 2014

Grain


Beef


Cocoa


Unallo-cated


Discon-tinued


Elimina-tions


Total


US$000


US$000


US$000


US$000


US$000


US$000


US$000















Depreciation

504


1,124


133


138


(133)


-


1,766

                                                                       

Year ending 31 May 2013  (represented - note 15)

Grain


Beef


Cocoa


Unallo-cated


Discon-tinued


Elimina-tions


Total


US$000


US$000


US$000


US$000


US$000


US$000


US$000















Depreciation

767


932


369


141


(369)


-


1,840

 

 

6.2.      Segment assets, liabilities and capital expenditure

 

Segment assets consist primarily of property, plant and equipment, inventories and trade and other receivables and cash and cash equivalents.  Segment liabilities comprise operating liabilities, including overdraft financing facilities in the Grain segment.

 

Capital expenditure comprises of additions to property, plant and equipment and intangibles.

 

The segment assets and liabilities at 31 May 2014 and capital expenditure for the year then ended are as follows:

 


Grain


Beef


Cocoa


Unallocated


Total


US$000


US$000


US$000


US$000


US$000











Assets

13,440


19,269


8,728


13,950


55,387

Liabilities

(2,775)


(442)


(334)


(1,287)


(4,838)

Capital expenditure

409


1,203


4,048


746


6,406

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 


Assets


Liabilities


US$000


US$000

Segment assets and liabilities

41,437


3,551

Unallocated:




Property, plant and equipment

6,716


-

Investments

1,229


-

Other receivables

161


-

Cash

5,844


-

Trade payables

-


540

Accruals and deferred income

-


747

Total

55,387


4,838

 

The segment assets and liabilities at 31 May 2013 and capital expenditure for the year then ended are as follows:

 


Grain


Beef


Cocoa


Unallocated


Total


US$000


US$000


US$000


US$000


US$000











Assets

14,935


18,434


5,750


26,416


65,535

Liabilities

(1,928)


(407)


(15)


(3,157)


(5,507)

Capital expenditure

466


6,174


4,162


45


10,847

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 


Assets


Liabilities


US$000


US$000

Segment assets and liabilities

39,119


2,350

Discontinued activities

226


606

Unallocated:




Property, plant and equipment

6,232


-

Investments

8


-

Other receivables

2,175


-

Cash

17,775


-

Trade payables

-


709

Accruals and deferred income

-


342

Loan note

-


1,500

Total

65,535


5,507

 

Unallocated property, plant and equipment includes $5,880,000 (2013: $5,880,000) in respect of the lease over 45,000 hectares of brownfield land suitable for Palm oil production and $837,000 (2013: $317,000) of Aviation assets.

 

6.3.      Significant customers

 

In the year ended 31 May 2014 one of the Cocoa division's customers generated $1,884,000 of revenue being 12% of Group revenue (2013: $2,911,000 being 14% of Group revenue). The customer related to the Cocoa trading operations which have been discontinued in the period (refer to note 15.2).

 

7.         Operating loss

 

Operating loss has been arrived at after charging / (crediting):


2014


2013




(represented - note 15)


US000


US$000





Depreciation of property, plant and equipment

1,766


1,840

(Profit) / loss on disposal of property, plant and equipment

(149)


1

Net foreign exchange loss

(52)


3

Staff costs (see note 9)

4,581


4,219

 

8.         Auditors Remuneration

 

Amounts payable to Baker Tilly UK Audit LLP and their associates in respect of audit services are as follows:

 



2014


2013



US$000


US$000






Fees payable to the Company's auditor for the audit of the Company's accounts


132


149

Fees payable to the Company's auditor and their associates for other services to the Group:





The audit of the Company's subsidiaries


           58


75

Total audit fees


190


224

 

Other than as disclosed above, the Company's auditor and their associates have not provided additional services to the Group.

 

9.         Staff costs

 

The average monthly number of employees (including executive Directors) employed by the Group for the year was as follows:


2014


2013


Number


Number





Office and Management

61


52

Operational

910


980


971


1,032

 

Of which relating to:





Continuing operations


900


942

Discontinued operations


71


90



971


1,032

 

Their aggregate remuneration comprised:


2014


2013


US$000


US$000





Wages and salaries

5,429


5,212

Social security costs

94


84

Share based payment charge

149


90


5,672


5,386

Less:  capitalised and included in assets under construction

(685)


(881)

Amount charged to profit and loss

4,987


4,505

 

Of which relating to:





Continuing operations


4,581


4,219

Discontinued operations


406


286



4,987


4,505

 

 

10.       REMUNERATION OF DIRECTORS

 

Year ended 31 May 2014

 

Salary


 

Bonus


Share based payment


 

Total


US$000


US$000


US$000


US$000









PH Edmonds

165


-


-


165

AS Groves

162


-


-


162

DL Cassiano-Silva

134


42


-


176

EA Kay

154


-


24


178

MN Pelham

-


-


-


-


615


42


24


681

 

Year ended 31 May 2013

 

Salary


 

Bonus


Share based payment


 

Total


US$000


US$000


US$000


US$000









PH Edmonds

78


250


-


328

AS Groves

156


250


-


406

EA Kay

174


78


24


276

MN Pelham

-


280


-


280


408


858


24


1,290

 

 

11.       Investment revenues

 


2014


2013


US$000


US$000

Interest revenues:




Bank deposits

58


43

Other loans and receivables

88


-

Total interest revenues

146


43

 

All investment revenues are earned on financial assets classified as loans and receivables (including cash and bank balances).

 

 

12.       Other gains and losses

 


2014


2013


US$000


US$000





Change in fair value of quoted investments designated as at FVTPL at initial recognition (note 20)

936


-

 

 

13.       Finance costs


2014


2013




(represented - note 15)


US$000


US$000

Interest expense:




Bank borrowings

(197)


(324)

Loan notes

(12)


(160)

Facility fees

-


(200)

Total finance expense

(209)


(684)

 

 

14.       Taxation


2014


2013




(represented - note 15)


US$000


US$000





Loss before tax from continuing activities:

(5,627)


(6,533)





Tax at the Mozambican corporation tax rate of 32% (2012:32%)

(1,801)


(2,091)

Tax effect of expenses that are not deductible in determining taxable profit

73


75

Tax effect of losses not allowable

432


1,308

Tax effect of losses not recognised in overseas subsidiaries (net of effect of different rates)

1,296


721

Statutory taxation payments irrespective of income

25


-

Tax expense

25


13

 

The tax reconciliation has been prepared using a 32% tax rate, the corporate income tax rate in Mozambique, as this is where the Group's principal assets of its continuing operations are located. 

 

The Group has recognised a tax charge of $1,000,000 (2013: credit of $1,000,000) in respect of disposal of its Ethiopian oil and gas interests, reported within discontinued operations. 

 

The Group has operations in a number of overseas jurisdictions where it has incurred taxable losses which may be available for offset against future taxable profits amounting to approximately $14,570,000 (31 May 2013: $13,611,000). In addition, the Group has further deductible timing differences amounting to approximately $6,513,000 (31 May 2013: $2,964,000). No deferred tax asset has been recognised for these tax losses and other deductible timing differences as the requirements of IAS 12, 'Income taxes', have not been met. 

 

The Company is resident for taxation purposes in Guernsey and its income is subject to Guernsey income tax, presently at a rate of zero percent. per annum (2013: zero percent. per annum).  No tax is payable for the year due to losses incurred.  Deferred tax has not been provided for, as brought forward tax losses are not recoverable under the Income Tax (Zero 10) (Guernsey) Law, 2007 (as amended).

 

 

15.       Discontinued operations

 

The (loss) / profit after tax arising on discontinued operations during the period is analysed by business operation as follows:

 


2014


2013




(represented - note 15)


US$000


US$000





Oil and gas activities

(1,378)


29,380

Cocoa trading activities

(986)


(1,385)

Other

-


(510)

Net (loss) / profit after tax attributable to discontinued operations

(attributable to owners of the Company)

(2,364)


27,485

 

 

15.1.   Oil and gas

 

On 6 January 2009, the Shareholders approved the adoption of the investing strategy to acquire or invest in businesses or projects operating in the agricultural and associated civil engineering industries in Southern Africa. At the same time the Group suspended all exploration activities and reduced expenditure to the minimum required in order to retain exploration licenses and extract potential value for Shareholders. Consequently the oil and gas activities were reclassified as a discontinued operation.

 

In the financial year ended 31 May 2013, on 17 January 2013, the Group completed the disposal of its oil and gas interests in Ethiopia, realising a gain before tax of $40,380,000. After deduction of tax due on this gain of $12,000,000 net of an expected tax rebate of $1,000,000, the after tax profit realised was $29,380,000. This gain was written back against the impairment provision made in prior years. During the year ended 31 May 2014 and due to uncertainties on the timing and amount of the tax rebate to be recovered, the Group has provided against the $1,000,000 expected tax rebate.

 

During the year ended 31 May 2014 the Group incurred expenditure on formal arbitration proceedings to recover the compensation assessed by the National Petroleum Commission as being due to the Company for works undertaken by the Company in the Republic of South Sudan and acknowledged as being due by the Ministry of Petroleum and Mining of the Republic of South Sudan in April 2012. Expenditure of $378,000 has been incurred in this matter during the year ended 31 May 2014. This matter was resolved subsequent to the period end through the payment to the Company of £3,412,000 (approximately $5,600,000) in cash which has been recognised in the financial year ended 31 May 2015.

 

15.2.   Cocoa trading

 

Due to the serious and well-publicised Ebola outbreak and the associated precautionary restrictions on travelling in Sierra Leone, accompanied by the ongoing losses suffered by the Cocoa trading operations, the Group has ceased its Cocoa trading operations in Sierra Leone. The Cocoa trading operation was focussed primarily on building a presence in-country and providing a market entry point for buyers as a precursor to the establishment of the Group's own plantation, and the implementation of programmes involving the upgrading of local growers plant quality through plant distribution.  The Group anticipates that the cessation of the Cocoa trading operations will allow it to realise the value of certain assets previously utilised by that operation, and to focus all of the Cocoa division's efforts on the development of the Group's cocoa plantation. The Company is confident that ceasing trading will not have a materially adverse effect on its financial performance.  

 

The Cocoa trading operations represented a business segment of the Group and accordingly, as required by IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations', the results of the Cocoa trading operations are presented as discontinued operations within the consolidated income statement. Cash flows pertaining to the Cocoa trading operations are presented in the consolidated cash flow statement along with all cash flows relating to discontinued operations. The results of operations and cash flows reported for the period ended 31 May 2013 have been re-presented for these discontinued operations as required by IFRS 5.

 

The results of the discontinued Cocoa trading operations, which have been included in the consolidated income statement, were as follows:

 




2014


2013






(represented - note 15)




US$000


US$000

Loss in the year from the Cocoa trading operations:






Revenue



1,907


3,140

Expenses



(2,748)


(4,520)

Finance expense



(1)


(5)

Loss before taxation



(842)


(1,385)

Taxation



-


-

Loss after tax from discontinued Cocoa trading operations in the period



(842)


(1,385)

Loss on cessation of the Cocoa trading operations:






Loss on impairment of goodwill (note 17)



(144)


-

Net loss attributable to discontinued Cocoa trading operations (attributable to owners of the Company)



(986)


(1,385)

 

15.3.   Other

 

In the financial year ended 31 May 2013 the Group closed its maize meal importation business in Zimbabwe and its port development concession in Conakry realising a pre and post-tax loss of $510,000. No amounts have been recognised in respect of these discontinued operations for the year ended 31 May 2014.

 

16.       (LOSS) / Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 


2014


2013




(represented - note 15)


US$000


US$000





Loss for the purposes of basic and diluted earnings per share from continuing activities

(5,652)


(6,546)

(Loss) / profit for the purposes of basic and diluted earnings per share from discontinued activities

(2,364)


27,485

(Loss) / profit for the purposes of basic and diluted earnings per share (loss for the year attributable to equity holders of the parent)

(8,016)


20,939





Weighted average number of Ordinary Shares for the purposes of basic (loss) / earnings per share

1,061,818,478


1,059,963,899

Potential Ordinary Shares

-


43,447,117

Weighted average number of Ordinary Shares for the purposes of diluted (loss) / earnings per share

1,061,818,478


1,103,411,016





Basic (loss) / earnings per share

(0.76)


1.98

Basic (loss) / earnings per share - diluted

(0.76)


1.90

Loss per share from continuing activities

(0.53)


(0.62)

{Loss) / earnings per share from discontinued activities

(0.22)


2.59

{Loss) / earnings per share from discontinued

activities - diluted

(0.22)


2.49

 

There is no dilutive effect from potential Ordinary Shares on the loss per share on continuing activities because the Group's result from continuing operations for each period presented is a loss.

 

 

17.       Goodwill AND OTHER Intangible Assets

 

 

 

Goodwill


Concession

 Agreement


 

Total


US$000


US$000


US$000

Cost






At 1 June 2012

697


266


963

Disposal

-


(269)


(269)

Exchange rate adjustment

-


3


3

At 31 May 2013

697


-


697

Eliminated in period

(144)


-


(144)

Exchange rate adjustment

23


-


23

At 31 May 2014

576


-


576







Net book value






31 May 2014

576


-


576

31 May 2013

697


-


697

 

The Group's goodwill balance arose on the acquisition of the Cocoa operations, comprising the cocoa plantation and cocoa trading business in Sierra Leone. Due to the cessation of the Cocoa trading operations in the period (refer to note 15.2), the proportion of the goodwill attributed to that business has been eliminated during the period and is included in the computation of the net loss from discontinued operations. The remaining balance of $576,000 attributed to cocoa plantation has been reviewed for impairment in accordance with the Group's accounting policy. The review includes an assessment of the present value of potential returns from the asset, being the cocoa plantation, over a period of 25 years, being the expected life cycle of the cocoa trees planted in the initial planting phase. The recoverable amount of the cash generating unit to which the goodwill has been allocated is determined on value in use calculations. The discount rate used in the Group's estimated average cost of capital is 15%. The review performed at the reporting date did not result in the impairment of goodwill as the estimated recoverable amount exceeds its carrying value.

 

18.       Property, plant and equipment

 


Land and buildings


Plant and machinery


Motor vehicles


Aviation


Other

assets


Assets under construction


Total


US$000


US$000


US$000


US$000


US$000


US$000


US$000

Cost














At 1 June 2012

18,083


8,055


6,190


643


662


-


33,633

Additions

5,754


3,976


1,025


-


92


-


10,847

Disposals

(292)


(445)


(1,698)


-


(181)


-


(2,616)

Exchange rate adjustment

(798)


(469)


(306)


(70)


(27)


 

-


(1,670)

At 31 May 2013

22,747


11,117


5,211


573


546


-


40,194

Additions

1,880


1,039


285


739


68


2,395


6,406

Disposals

-


(20)


(195)


(62)


(4)


-


(281)

Transfers

307


(409)


93


-


9


-


-

Exchange rate adjustment

(557)


(1,158)


476


(72)


(24)


 

-


(1,335)

At 31 May 2014

24,377


10,569


5,870


1,178


595


2,395


44,984















Accumulated Depreciation














At 1 June 2012

271


2,655


4,010


142


312


-


7,390

Charge for the year

3


1,389


957


129


75


-


2,553

Disposals

(269)


(445)


(1,679)


-


(181)


-


(2,574)

Exchange rate adjustment

-


(208)


(180)


(15)


(13)


 

-


(416)

At 31 May 2013

5


3,391


3,108


256


193


-


6,953

Charge for the year

312


1,067


775


142


74


-


2,370

Disposals

-


(8)


(160)


(37)


(1)


-


(206)

Transfers

-


-


-


-


-


-


-

Exchange rate adjustment

547


(1,383)


464


(20)


(9)


 

-


(401)

At 31 May 2014

864


3,067


4,187


341


257


-


8,716

 

Net book value














31 May 2014

23,513


7,502


1,683


837


338


2,395


36,268

31 May 2013

22,742


7,726


2,103


317


353


-


33,241

 

Additions to land and buildings include $1,897,000 (2013: $1,280,000) of acquisition and development costs of the Group's cocoa plantation in Sierra Leone.  Included in this sum is $471,000 (2012: $344,000) of depreciation in respect of plant and equipment and $558,808 (2013: $445,138) of wages and salaries. 

 

A depreciation charge of $1,766,000 (2013: $1,840,000) has been included in the consolidated income statement within operating expenses and $133,000 (2013: $369,000) has been included with discontinued operations.

 

Land and buildings with a carrying amount of $2,694,000 (2013: $nil) have been pledged to secure the Group's bank overdraft (note 25). The Group is not allowed to pledge these assets as security for other borrowings or sell them to another entity.

 

At 31 May 2014, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to $49,000 (2013: $nil).

 

19.       Interests in Associates

 

The Company and Group's interest in associates represents a 40% equity investment in African Management Services Limited ('AMS'). The Group's share of the result of AMS for the period ended 31 May 2014 was $nil (2013: loss $5,000).  The share of the cumulative results and net assets of AMS is $4,000 (2013: $4,000). The Company's investment in AMS was $nil.    

 

20.       Investments in quoted companies

 

'Investments in quoted companies' held by the Company and Group comprise financial assets at FVTPL. Changes in market value are recorded in profit and loss within other gains and losses. As at 31 May 2014, these investments comprise 8,337,682 (31 May 2013: 2,500,000) ordinary shares in African Oilfield Logistics Limited ('AOL'), an AIM quoted company focussed on the logistics support industry in respect of oil and gas exploration and other development projects in sub-Saharan Africa. The investment presents the Group with opportunity for return through dividend income and trading gains, providing exposure to the expanding infrastructure support market in sub-Saharan Africa. Movements in the value of the investment in AOL were as follows:

 





US$000

At 1 June 2012




-

Purchase of investments at cost




4

At 31 May 2013




4

Purchase of investments at cost




285

Increase in fair value (note 12)




936

At 31 May 2014




1,225

 

The fair value has been determined based on quoted market prices in an active market and comprises a level 1 fair value in the IFRS 13 fair value hierarchy.

 

21.       Biological assets

 




US$000

Fair value




At 1 June 2012



2,660

Purchase of biological assets



1,623

Sale of biological assets



(906)

Change in fair value



770

Foreign exchange



(140)

At 31 May 2013



4,007

Purchase of biological assets



2,195

Sale of biological assets



(1,976)

Change in fair value



290

Foreign exchange



(244)

At 31 May 2014



4,272

 

Biological assets comprise cattle in Mozambique held for breeding purposes (the 'Breeding herd') or for slaughter (the 'Slaughter herd'). The Slaughter herd has been classified as a current asset. The Breeding herd is classified as a non-current asset. Biological assets are accordingly classified as current or non-current assets as follows:


2014


2013


2014


2013


Head


Head


US$000


US$000









Non-current asset

5,481


4,091


3,071


2,060

Current asset

2,749


2,788


1,201


1,947


8,230


6,879


4,272


4,007

 

For valuation purposes, cattle are grouped into classes of animal (e.g. bulls, cows, steers etc). A standard animal weight per breed and class is then multiplied by the number of animals in each class to determine the estimated total live weight of all animals in the herd. The herd is then valued by reference to market prices for meat in Mozambique, less estimated costs to sell. The valuation is accordingly a level 2 valuation in the IFRS 13 hierarchy whereby inputs other than quoted prices that are observable for the asset are used.

 

 

22.       Inventories

 


2014


2013


US$000


US$000





Consumables and spares         

127


305

Raw materials

4,438


4,955

Work in progress

            34


27

Finished goods

301


169


4,900


5,456

 

During the year inventories amounting to $8,084,000 (2013: $12,137,000) were included in cost of sales and $2,179,000 (2013: $2,827,000) were included within discontinued operations.

 

Inventories with a carrying amount of $4,237,000 (2013: $nil) have been pledged to secure the Group's bank overdraft (note 25).

 

23.        Trade and other receivables

           

 


2014


2013


US$000


US$000





Trade receivables                     

459


796

Other receivables

393


1,297

Corporation tax recoverable

-


1,088

Prepayments

296


197


1,148


3,378

 

'Trade receivables' and 'Other receivables' disclosed above are classified as loans and receivables and measured at amortised cost.

 

Included in 'Other receivables' are receivables which have been provided against. Movements in the allowance account against 'Other receivables', which principally relate to input IVA recoverable in Mozambique (refer to note 4.4) is as follows:



 US$000




At 1 June 2012


1,237

Charged to profit and loss


144

Foreign exchange gain


(71)

At 31 May 2013


1,310

Charged to profit and loss


118

Foreign exchange gain


(83)

At 31 May 2014


1,345

 

The increase in the allowance account during both period presented reflects the increase in the underlying input IVA balance recorded by the Group and the effect of the devaluation of the Mozambique Metical against the United States Dollar.

 

Other receivables include $122,000 (2013: $1,088,000) due from related parties (see note 31).

 

The Directors consider that the carrying amount of financial assets approximates their fair value.  There are no significant amounts past due which have not been provided against (2013: $nil). Further details on the Group's financial assets are provided in note 27.

 

24.       Cash and cash equivalents

 

Included within the Company and Group's cash and cash equivalents is $107,000 (2013: $107,000) of restricted cash held on deposit as security for certain supplier guarantees.

 

25.       Borrowings

 


2014


2013


US$000


US$000





Bank overdraft

2,468


1,591

Loan note

-


1,500

Other

200


-


2,668


3,091

 

The Group has an overdraft facility of 189,000,000 Mozambique Metical (approximately $6,000,000) (2013: 62,000,000 Metical (approximately $2,000,000) to provide funding for its Grain operations in Mozambique. It is secured against certain of the Group's property, plant and equipment (note 18) and all maize inventory and finished maize products (note 22). Interest is charged at the Mozambique prime rate less 3%, being a current rate of 13% (2013: Mozambique prime rate less 0.5%, being a rate of 22%). The facility is renewable annually on 31 May upon agreement of the parties.

 

Other borrowings represent customer pre-financing for the Group's Cocoa trading operations, is unsecured, bears no interest and was repaid subsequent to the period end.

 

The loan note outstanding as at 31 May 2013 was unsecured, due within one year and carried a coupon of 10%. The loan note was repaid during the year in accordance with its terms.

 

26.       Trade and other payables

 


2014


2013


US$000


US$000





Trade payables

77


159

Other payables

666


1,093

Accrued liabilities

1,413


1,164

Corporation tax

14


-


2,170


2,416

 

'Trade payables', 'Other payables' and 'Accrued liabilities' principally comprise amounts outstanding for trade purchases and ongoing costs. No interest is charged on any balances.

 

Other payables includes $nil (2013: $165,000) payable to related parties (see note 31).

 

The Directors consider that the carrying amount of financial liabilities approximates their fair value. 

 

27.       FINANCIAL INSTRUMENTS

 

27.1.   Capital risk management

 

The Group and Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders. The capital structure of the Group comprises its net debt (the borrowings disclosed in note 25 after deducting cash and bank balances) and equity of the Group as shown in the balance sheet. The Company and Group are not subject to any externally imposed capital requirements.

 

The ExCom reviews the capital structure on a regular basis and seeks to match new capital requirements of subsidiary companies to new sources of external debt funding denominated in the currency of operations of the relevant subsidiary. Where such additional funding is not available, the Group funds the subsidiary companies by way of loans from the Company. The Group and Company place funds which are not required in the short term on deposit at the best interest rates it is able to secure from its bankers. In accordance with this policy, the Group has increased its overdraft facility in Mozambique to finance its Grain operations from approximately $2,000,000 as at 31 May 2013 to approximately $6,000,000 (note 25).

 

27.2.   Categories of financial instruments

 

The following are the Group and Company financial instruments as at 31 May:

 


Group


Company


2014


2013


2014


2013


US$000


US$000


US$000


US$000

Financial assets








Cash and bank balances

6,994


18,748


5,747


17,770

Fair value through profit and loss:








Held for trading

1,225


4


1,225


4

Loans and receivables

852


2,093


41,752


34,225


9,071


20,845


48,724


51,999









Financial liabilities








Amortised cost

4,824


5,507


1,040


2,693


4,824


5,507


1,040


2,693


4,247


15,338


47,684


49,306

 

27.3.   Financial risk management objectives

 

The Group manages the risks arising from its operations, and financial instruments at ExCom and Board level. The Board has overall responsibility for the establishment and oversight of the Group's risk management framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully the financial risks that the Group faces.

 

While the Group does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close involvement of the ExCom in the day to day operations of the Group ensures that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group. Financial instruments are not traded, nor are speculative positions taken. The Group and Company have not entered into any derivative or other hedging instruments.

 

The Group's key financial market risks arise from changes in foreign exchange rates ('currency risk'). To a lesser extent the Group is exposed to interest rate risk and other price risk (in respect of its investments in quoted companies). The Group is also exposed to credit risk and liquidity risk. The principal risks that the Group faces as at 31 May 2014 with an impact on financial instruments are summarised below.

 

27.4.   Market Risk

 

The Group and Company are exposed to currency risk, interest risk and other price risk (in respect of its investments in quoted companies).  These are discussed further below:

 

27.4.1.            Currency risk

 

Certain of the Group companies have functional currencies other than US$ and the Group is therefore subject to fluctuations in exchange rates in translation of their results and financial position into US$ for the purposes of presenting consolidated accounts. The Group does not hedge against this translation risk.

 

The Group's financial assets and liabilities by currency are as follows:

 


Assets


Liabilities


2014


2013


2014


2013


US$000


US$000


US$000


US$000









United States Dollar ('US$')

5,977


18,910


1,510


3,153

Sterling ('GBP')

1,225


4


-


-

Mozambique Metical ('MZN')

1,588


1,553


3,209


2,337

Sierra Leone Leones ('SLL')

169


257


95


15

Other

112


121


10


2


9,071


20,845


4,824


5,507

 

The Company's financial assets and liabilities to transactional currency risk are as follows:

 


Assets


Liabilities


2014


2013


2014


2013


US$000


US$000


US$000


US$000









US$

47,360


51,817


963


2,553

GBP

1,243


40


77


140

Other

121


142


-


-


48,724


51,999


1,040


2,693

 

The Group and Company transact with suppliers and / or customers in currencies other than the functional currency of the relevant group company (foreign currencies), and hold investments in quoted companies which are traded in currencies other than US$. The Group does not hedge against this transactional risk. As at 31 May 2013 and 31 May 2014, the Group and Company's outstanding foreign currency denominated monetary items were principally exposed to changes in the US$ / GBP and US$ / MZN exchange rate. The following table details the Group and Company's exposure to a 5 per cent increase and decrease in the US$ against GBP and separately against MZN. The sensitivity analysis includes only outstanding foreign currency denominated items and excludes the translation of foreign subsidiaries and operations into the Group's presentation currency. The sensitivity also includes intra-group loans where the loan is in a currency other than the functional currency of the lender or borrower. A positive number indicates an increase in profit and other equity when the US$ strengthens against the relevant currency by 5 per cent. For a 5 per weakening of the US$ against the relevant currency, there would be a comparable impact on the profit and other equity, and the balances would be negative.

 

Group

GBP Impact


MZN Impact


2014


2013


2014


2013


US$000


US$000


US$000


US$000









Profit or loss (1)

61


-


-


-

Other equity (2)

(12)


(15)


2,755


2,419

 

Company

GBP Impact


MZN Impact


2014


2013


2014


2013


US$000


US$000


US$000


US$000









Profit or loss (1)

61


-


-


-

Other equity

(3)


(5)


-


-

 

 

(1)

This is mainly due to the exposure arising from investments in quoted companies where the related company's equity securities are quoted in GBP.

(2)

This is mainly due to the exposure arising on the translation of US$ denominated intra-group loans provided to MZN functional currency entities which are included as part of the Company and Group's net investment in the related entities.

 

27.4.2.            Interest rate risk

 

The Group and Company are exposed to interest rate risk because entities in the Group hold cash balances and borrow funds at floating interest rates. As at 31 May 2014, the Group and Company have no interest bearing fixed rate instruments. The Group and Company maintain cash deposits at variable rates of interest for a variety of short term periods, depending on cash requirements. The Grain operations in Mozambique are also partially financed through the overdraft facility and the Group's Cocoa operations were partially financed by customer advances (refer to note 25). The rates obtained on cash deposits are reviewed regularly and the best rate obtained in the context of the Group's and Company's needs.  The weighted average interest rate on deposits was 1.05% (2013: 0.85%).  The weighted average interest on drawings under the overdraft facility was 16% (2013: 22%), on the customer advances was nil% (2013: nil%) and on the short term loan note was 10% (2013: 10%).

 

The Group and Company exposure to interest rates on financial assets and liabilities is detailed below. The Group does not hedge interest rate risk.

 


2014


2013


US$000


US000

Group




Financial assets at floating rates

6,994


18,748

Financial liabilities at floating rates

(2,468)


(1,591)


4,526


17,157

Financial liabilities at fixed rates

(200)


(1,500)


4,326


15,657





Company




Financial assets at floating rates

5,747


17,770

Financial liabilities at fixed rates

-


(1,500)


5,747


16,270

 

 

The following table details the Group and Company's exposure to interest rate changes, all of which affect profit and loss only with a corresponding effect on accumulated losses. The sensitivity has been prepared assuming the liability outstanding at the balance sheet date was outstanding for the whole year. In all cases presented, a positive number in profit and loss represents an increase in interest income / decrease in finance expense. The sensitivity is presented assuming interest rates increase by either 20bp or 50bp. A 20bp or 50bp decrease in interest rates would have the opposite effect.

 


Group


Company


2014


2013


2014


2013


US$000


US$000


US$000


US$000

+ 20 bp increase in interest rates

9


34


11


35

+ 50 bp increase in interest rates

23


86


29


88

 

27.4.3.            Other price risk

 

The Group and Company is exposed to equity price risk on its investments in quoted securities which are measured at fair value (refer to note 20). Investments in quoted companies comprise investments in one company, AOL. If AOL's share price increased / (decreased) by 10% and the US$ / GBP exchange rate remained unchanged, the Group and Company net profit would increase / (decrease) by $123,000.

 

27.5.   Credit risk

 

Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as outstanding receivables. The Group's and Company's principal deposits were held with various banks with a high credit rating to diversify from a concentration of credit risk. Receivables are regularly monitored and assessed for recoverability. 

 

The maximum exposure to credit risk is the carrying value of the Group and Company financial assets disclosed in notes 23 and 27.2.

 

27.6.   Liquidity risk

 

The Group and Company's policy throughout the year has been to ensure that it has adequate liquidity by careful management of its working capital. The ExCom continually monitors the Group and Company's actual and forecast cash flows and cash positions. The ExCom pays particular attention to ongoing expenditure, both for operating requirements and development activities, and matching of the maturity profile of the Group's overdraft to the processing and sale of the Group's maize products.

 

At 31 May 2014 the Group held cash deposits of $6,994,000 (2013: $18,748,000).  At 31 May 2014 the Company held cash deposits of $5,747,000 (2013: $17,770,000m).  At 31 May 2014 the Group had an overdraft facility of approximately $6,000,000 (2013: approximately $2,000,000) of which $2,468,000 (2013: $1,591,000) was drawn. The Group had other borrowings / short term loan note outstanding of $200,000 (2013: $1,500,000) (see note 25). Subsequent to the period end, the Group realised an exceptional cash inflow of approximately $5,600,000 from the settlement of certain claims regarding oil exploration blocks in the Republic of South Sudan (refer to note 33). As at the date of this report the Group has adequate liquidity to meet its obligations as they fall due.

 

The following table details the Group and Company's remaining contractual maturity of its financial liabilities. The table is drawn up utilising undiscounted cash flows and based on the earliest date on which the Group and Company could be required to settle its obligations. The table includes both interest and principal cash flows. To the extent that interest cash flows are floating rate, the undiscounted amount is derived using the current interest rate, which is not expected to change significantly during the period to maturity.

 


Group


Company


2014


2013


2014


2013


US$000


US$000


US$000


US$000









1 month

2,389


3,937


1,040


2,693

2 to 3 months

65


42


              -


-

12 months

2,764


1,782


-


-


5,218


5,761


1,040


2,693

 

27.7.   Fair values

 

The Directors have reviewed the financial statements and have concluded that there is no significant difference between the carrying values and the fair values of the financial assets and liabilities of the Group and of the Company as at 31 May 2014 and 31 May 2013.

 

28.        Share capital 








Group and company









Authorised


Allotted and fully paid



Ordinary shares of 0.1p each


Number


Number


US$000








At 31 May 2012


2,345,000,000


1,059,716,238


1,719

Issue of shares


-


2,102,240


3

At 31 May 2013 and 31 May 2014


2,345,000,000


1,061,818,478


1,722

 








Deferred shares of 0.1p each







At 1 June 2012, 31 May 2013 and 31 May 2014


155,000,000


155,000,000


238








Total share capital







At 31 May 2013 and 31 May 2014


2,500,000,000


1,216,818,478


1,960















The Company has one class of ordinary share which carries no right to fixed income.

 

The deferred shares carry no right to any dividend; no right to receive notice, attend, speak or vote at any general meeting of the Company; and on a return of capital on liquidation or otherwise, the holders of the deferred shares are entitled to receive the nominal amount paid up after the repayment of £1,000,000 per ordinary share.  In the event that disputes over certain oil and gas assets are satisfactorily resolved, the deferred shares may be converted into ordinary shares by resolution of the Board.

 

On 18 April 2013 the Company issued 2,102,240 ordinary shares of 0.1p each at 3p per shareas part of the consideration paid to acquire beef ranching assets in Mozambique.

 

29.       RESERVES

 

Movements in the Group and Company reserves are included in the consolidated statement of changes in equity and the Company statement of changes in equity respectively. A description of each reserve is provided below.

 

29.1.   Shares to be issued reserve

 

In the financial year ended 31 May 2012 the Group acquired Red Bunch Ventures (SL) Limited ('Red Bunch') which holds a lease over approximately 45,000 hectares of agricultural land suitable for palm oil production in Sierra Leone. Deferred consideration is due of 37,800,000 Ordinary Shares upon the development of 1,000 hectares of the leasehold land. The 'Shares to be issued' reserve records the Group's potential obligation to issue such Ordinary Shares. As at 31 May 2014 and 31 May 2013, the obligation to issue the Ordinary Shares had not crystallised.

 

29.2.   Translation reserve

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the Balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are taken to the translation reserve.

 

30.       Share based payments

 

30.1.   Charge in the period

 

The Group recorded a charge within other operating expenses for share based payments of $149,000 (2013: $90,000). The Company recorded a charge of $55,000 (2013: $90,000) and recorded an increase in its investments in subsidiary undertakings of $94,000 (2013: $nil).

 

30.2.   Equity - settled share option plan

 

The Group, through the Company, has two unapproved share option schemes which were established to provide equity incentives to the Directors of, employees of and consultants to the Group. The schemes' rules provide that the Board shall determine the exercise price for each grant which shall be at least the average mid-market closing price for the three days immediately prior to the grant of the options. The minimum vesting period is generally one year. If options remain unexercised after a period of 4 or 5 years from the date of grant, or vesting, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

 

The following table provides a reconciliation of share options outstanding during the period:

 



2014

Options

Number


Weighted average exercise price



2013

Options Number


Weighted average exercise price











At 1 June


44,750,000


3.7p



20,750,000


2.5p

Granted in the year


2,500,000


1.5P



24,000,000


4.6p

Lapsed in the year


(5,000,002)


5.5P



-


-

At 31 May


42,249,998


4.6p



44,750,000


3.7p











Exercisable at year end


27,750,002


3.0p



20,750,000


2.5p

 

The fair value of the options granted during the period was determined using the Black-Scholes option pricing model using the following assumptions:

 

- Share price at the date of grant was the average mid-market closing price for the three days immediately prior to grant, being 1.47p.

- The risk free rate ranged from 0.53% to 1.87% based on the gilt yield over the expected life of the options at the date of grant.

- The annual dividend yield is expected to be nil based on the Board's immediate intention to reinvest operating cash flows.

- The annual volatility ranged from 60% to 89% and is derived from the historic daily share prices of the Company over periods matching the expected life of the options at the date of grant.

- The options were granted on 15 May 2014 and vest at 20% per annum from the date of grant.  The options can be exercised within a five year period from the date they vest.

- The options have a fair value ranging between 0.4p and 1.0p with the total fair value of options granted during the year calculated at $30,000.

 

On 12 January 2010, options over 50,000,000 ordinary shares with an exercise price of 5.5p were issued to Ely Place Nominees Limited ('EPN') to be held on trust to be issued at the discretion of the Board as incentives to Directors, employees or consultants (the 'Incentive Options').  Between January 2010 and 15 May 2014, 14,999,999 Incentive Options were allocated. On 15 May 2014 and in light of the share price at that date, the Directors concluded that these Incentive Options would not provide an appropriate mechanism for incentivising Directors, employees and consultants. As such, and with the agreement of EPN, EPN waived their rights to the Incentive Options, which were cancelled and replaced by 35,000,001 new incentive options granted at the prevailing price on 15 May 2014 (rounded up to the nearest half penny) of 1.5p, otherwise to be held on the same terms as Incentive Options.

 

30.3.   Share Options

 

At 31 May 2014, the following options over ordinary shares of 0.1p each have been granted and remain unexercised:

 

Date of grant

Number of shares


Exercise price


Exercise period







9 January 2009

5,750,000


3.0p


9 January 2010 to 9 January 2019

13 July 2011

5,000,000


3.0p


13 July 2012 to 13 July 2017

1 December 2011

10,000,000


2.0p


1 December 2011 to 1 December 2016

29 July 2012

7,499,999


3.5p


29 July 2013 to 29 July 2023

29 July 2012

7,499,999


5.5p


29 July 2013 to 11 January 2020

01 May 2013

2,000,000


2.8p


01 May 2014 to 30 April 2019

01 May 2013

2,000,000


5.5p


01 May 2014 to 11 January 2020

15 May 2014

2,500,000


1.47p


15 May 2015 to 15 May 2024

 

31.       Related party disclosures

 

PH Edmonds and AS Groves, directors of the Company, are also directors of Sable Mining Africa Limited ('Sable'), Liberian Cocoa Corporation ('LCC'), African Potash Limited ('African Potash'), African Oilfield Logistics Limited ('AOL') and African Management Services Limited ('AMS'), companies with which the Company and Group have transacted during the year.  Related party transactions are entered into on an arm's length basis.  No provisions have been made in respect of amounts owed by or to related parties.

 

During the year AMS provided accounting, treasury and administrative services to the Group for a management fee of $587,000 (2013: $587,000).  The Group also incurred certain expenditures on behalf of AMS.  As at 31 May 2014 the Group was owed $33,000 by AMS (2013: owed to AMS $77,000).

 

At 31 May 2014 the Group was due $89,000 from LCC (2013: $89,000). 

 

During the year the Group and Sable incurred certain expenses on each other's behalf.  At 31 May 2014, the amount due to Sable was $nil (2013: $32,000).

 

During the year the Group incurred certain expenses on behalf of African Potash. At 31 May 2014, the amount due to African Potash was $nil (2013: $56,000).  

 

During the year the Group advanced $500,000 (2013: $1,000,000) to Ardan Risk and Support Services Limited ('Ardan'), a company controlled by MN Pelham. The total amount due by Arden of $1,563,000 including interest of $63,000 was repaid in the financial year.

 

During the year the Group invested $285,000 (2013: $4,000) in the purchase of ordinary shares of AOL. 

 

The remuneration of the Directors, who are the key management personnel of the Group, is set out in note 10.

 

32.       Operating Leases

 

At 31 May the Group had commitments for future minimum lease payments under non-cancellable operating leases for land and buildings, which fall due as follows:

 

 

 


2014


2013



US$000


US$000











Within one year


79


74

           

Operating lease rentals recognised as an expense in the income statement were as follows:

Land and buildings


125


38

 

33.       Events subsequent to the balance sheet date

 

33.1.   Sierra Leone

 

As a result of the serious and well-publicised Ebola outbreak and the associated precautionary restrictions on travelling in Sierra Leone, the Company has curtailed its activities in the region. The on-going development of the Group's Sierra Leone Cocoa plantation has, until September 2014, continued during the Ebola outbreak, however, due to the current circumstances and the resultant restrictions in movement causing a shortage of labour, the original planting and clearance schedule has been restricted. The hectares planted to date are being maintained, as is the plantation infrastructure including warehousing, accommodation and equipment. The state-of-the-art nursery continues to house plants which will now be used, if circumstances allow, to accelerate the Company's local initiatives to increase the quality of the local growers' stock. It is envisaged that this distribution programme will be run in tandem with international agencies and companies looking to expand the productivity of cocoa farmers in West Africa. 

 

Until the Group has further clarity on the development of the Ebola outbreak, investment in the Cocoa plantation will be maintained at a minimum level and no further planting will be undertaken. Where appropriate, the labour force and operating costs have been reduced commensurate with the reduced level of activity.

 

The demand/supply model remains highly attractive for cocoa producers and West Africa remains a region suitable for mass production operations. The Group remains optimistic about the future prospects for the Cocoa plantation.

 

As discussed more fully in note 15.2, the Group has ceased its Cocoa trading operations. Vehicles, warehouse facilities and other assets of this business are now being utilised in country in the Ebola relief efforts.  

 

33.2.   Settlement of claims with respect to legacy oil interests in the South Sudan

 

In September 2014, the Company and Group reached a successful settlement (receiving approximately US$5.6m in cash) with the Republic of South Sudan and Nile Petroleum Corporation Limited in respect of the Company's claims arising from its legacy oil interests in South Sudan. Following the settlement the Company and Group has no further current economic interest in that country.

 

Company statement of financial position

As at 31 May 2014

 




2014


2013


Note


US$000


US$000

Non-current assets






Property, plant and equipment

36


1


35

Investments in subsidiaries

37


47,591


39,040

Interests in associates

19


-


-

Investments in quoted companies

20


1,225


4




48,817


39,079

Current assets






Trade and other receivables

38


166


2,098

Cash and cash equivalents



5,747


17,770




5,913


19,868

Total assets



54,730


58,947

Current liabilities






Borrowings

39


-


(1,500)

Trade and other payables

39


(1,040)


(1,193)




(1,040)


(2,693)

Net current assets



4,873


17,175

Net assets



53,690


56,254







Share capital

28


1,960


1,960

Share premium



148,622


148,622

Shares to be issued

29.1


2,940


2,940

Share based payment reserve



1,859


1,710

Translation reserve

29.2


2,621


2,621

Accumulated losses



(104,312)


(101,599)

Total equity



53,690


56,254

 

The financial statements of Agriterra Limited were approved and authorised for issue by the Board of Directors on 27 October 2014. Signed on behalf of the Board of Directors by:

 

 


Company statement of changes in equity

For the year ended 31 May 2014
















 



















 

 

 


Share

capital


Share premium


Shares to be issued


Share based payment reserve


Translation reserve


Accumulated
losses



Total
equity


Note


US$000


US$000


US$000


US$000


US$000


US$000




















Balance at 1 June 2012



1,957


148,530


2,940


1,620


3,515


(114,245)



44,317

Profit for the year



-


-


-


-


-


12,646



12,646

Other comprehensive income:

















Exchange translation loss



-


-


-


-


(894)


-



(894)

Total comprehensive income for the year



-


-


-


-


(894)


12,646



11,752

Share-based payments

30


-


-


-


90


-


-



90

Issue of share capital

28


3


92


-


-


-


-



95

Balance at 31 May 2013



1,960


148,622


2,940


1,710


2,621


(101,599)



56,254

Loss and total comprehensive income for the year



-


-


-


-


-


(2,713)



(2,713)

Share-based payments

30


-


-


-


149


-


-



149

Balance at 31 May 2014



1,960


148,622


2,940


1,859


2,621


(104,312)



53,690

 

 


Company cash flow statement










2014


2013


Note


US$000


US$000







Cash flows from operating activities






Loss before tax from continuing operations



(1,336)


(16,093)

Adjustments for:






Depreciation

36


-


12

Profit on disposal of property, plant and equipment



(8)


-

Share based payment expense

30


55


90

Impairment of loans to subsidiary undertakings



1,038


13,423

Foreign exchange loss



37


-

Finance costs



12


-

Investment revenues



(1,186)


(571)

Increase in fair value of quoted investments

12


(936)


-

Operating cash flows before movements in working capital



(2,324)


(3,139)

Decrease in trade and other receivables



1,026


662

Decrease in trade and other payables



(252)


(50)

Net cash used in operating activities by continuing operations



(1,550)


(2,527)

Finance costs



(12)


(339)

Interest received



140


31

Net cash used in operating activities by continuing operations



(1,422)


(2,835)

Net cash used in operating activities by discontinued operations



(378)


-

Net cash used in operating activities



(1,800)


(2,835)







Cash flows from investing activities






Acquisition of property, plant and equipment



-


(43)

Proceeds from disposal of property, plant and equipment



42


-

Purchase of investments in quoted companies

20


(285)


(4)

Loans to subsidiary undertakings

37


(8,449)


(10,453)

Net cash used in investing activities by continuing operations



(8,692)


(10,500)

Net cash from investing activities in discontinued operations



-


27,171

Net cash (used in) / from investing activities



(8,692)


16,671







Cash flow from financing activities






New borrowings



-


6,000

Repayment of borrowings

39


(1,500)


(4,500)

Net cash (outflow) /  inflow from financing activities from continuing operations



(1,500)


1,500

Net (decrease) / increase in cash and cash equivalents



(11,992)


15,336

Effect of exchange rates on cash and cash equivalents



(31)


-

Cash and cash equivalents at beginning of period



17,770


2,434

Cash and cash equivalents at end of period



5,747


17,770

 

 

Notes to the Company financial statements

 

34.       Company ACCOUNTING POLICIES

 

The financial statements have being prepared in accordance with IFRS as adopted by the EU.

 

The financial statements have been prepared on the historical cost basis except for the measurement of certain financial instruments, and share based payments. The principal accounting policies adopted are the same as those set out in note 3 to the consolidated financial statements, other than as noted below.

 

34.1.   Investments in subsidiary undertakings

 

Investments are recorded at cost, less provision for impairment. The Company includes within the carrying value of investments in subsidiary undertakings the fair value of the consideration paid for the subsidiary. Additional investment in the subsidiary undertakings, in the form of capital subscriptions, capital contributions or share based payment obligations assumed on behalf of the subsidiary is added to the cost of the investment in the period in which it arises.

 

35.       RESULT FOR THE YEAR

 

As permitted by Guernsey law, the Company has elected not to present its own income statement. The Company reported a loss for the year of $2,713,000 (2013: profit of $12,646,000).

 

36.       PROPERTY, PLANT AND EQUIPMENT

 



Motor

Vehicles


Other

assets


Total



US$000


US$000


US$000

Cost







At 1 June 2012


-


15


15

Additions


42


1


43

At 31 May 2013


42


16


58

Disposals


(42)


-


(42)

At 31 May 2014


-


16


16








Accumulated depreciation







At 1 June 2012


-


11


11

Charge for the year


8


4


12

At 31 May 2013


8


15


23

Eliminated on disposals


(8)


-


(8)

31 May 2014


-


15


15

 

Net book value







31 May 2014


-


1


1

31 May 2013


34


1


35

 

 

37.       INVESTMENT IN SUBSIDIARIES

 



Investment


Loans


Total



US$000


US$000


US$000

Cost







At 1 June 2012


9,680


47,245


56,925

Loans advanced in the year


-


10,453


10,453

Interest accrued


-


463


463

At 31 May 2013


9,680


58,161


67,841

Loans advanced in the year


-


8,449


8,449

Interest accrued


-


1,046


1,046

Capital contribution


94


-


94

Foreign exchange gain


-


1,312


1,312

At 31 May 2014


9,774


68,968


78,742








Provision for irrecoverable amounts







At 1 June 2012


3,801


11,577


15,378

Charge for the year


-


13,423


13,423

At 31 May 2013


3,801


25,000


28,801

Charge for the year


-


1,038


1,038

Foreign exchange loss


-


1,312


1,312

31 May 2014


3,801


27,350


31,151

 

Net book value







31 May 2014


5,973


41,618


47,591

31 May 2013


5,879


33,161


39,040

 

Capital contributions represent increases or decreases in investment arising from the grant, lapse or termination of share options or Ordinary Shares to employees of subsidiary undertakings.

 

Loans to subsidiaries fall due after more than one year. The provision against loans to subsidiaries in the year reflects the cessation of the Group's cocoa trading activities and reductions in the value of the underlying businesses as a result of movements in exchanges rates (2013: reductions in the value of the underlying businesses as a result of movements in exchanges rates).

 

As set out in note 27, the Company and Group have suspended further expenditure on all oil and gas exploration and evaluation projects.  Accordingly the Company's investment and loans provided to subsidiary undertakings conducting such operations were fully provided against in prior periods.

 

As at 31 May 2014, the Company held equity interests in the following principal undertakings:

 

Direct investments

 

Subsidiary undertakings

Proportion held

Country of incorporation

Nature of business





Agriterra (Mozambique) Limited

100%

Guernsey

Holding Company

P A Energy Africa Limited

100%

British Virgin Islands

Inactive

Agriterra Aviation (Pty) Limited

100%

South Africa

Aviation services

Agriterra East Africa Limited

100%

Mauritius

Trading

Agriterra Guinea SA

100%

Guinea

Infrastructure

West Africa Cocoa Services Limited

100%

British Virgin Islands

Holding Company

Shawford Investments Inc

100%

British Virgin Islands

Holding Company

Branca Tide Limited

100%

British Virgin Islands

Holding Company

 

Indirect investments of Agriterra Mozambique Limited

 

Subsidiary undertakings

Proportion held

Country of incorporation

Nature of business





Desenvolvimento E Comercialização Agricola Limitada

100%

Mozambique

Grain

Compagri Limitada

100%

Mozambique

Grain

Mozbife Limitada

100%

Mozambique

Beef

Carnes de Manica Limitada

100%

Mozambique

Beef

Agriterra Aviação Limitada

100%

Mozambique

Aviation services





 

Indirect investments of West Africa Cocoa Services Limited

 

Subsidiary undertakings

Proportion held

Country of incorporation

Nature of business





Tropical Farms (SL) Limited

100%

Sierra Leone

Cocoa & Coffee

 

Indirect investments of Branca Tide Limited

 

Subsidiary undertakings

Proportion held

Country of incorporation

Nature of business





Tropical Farms Plantation (SL) Limited

100%

Sierra Leone

Cocoa Plantation

 

37.1.   Indirect investments of Shawford Investments Inc.:

 

Subsidiary undertakings

Proportion held

Country of incorporation

Nature of business





Red Bunch Ventures (SL) Limited

100%

Sierra Leone

Palm Oil





38.       Trade and other receivables

           

 


2014


2013


US$000


US$000





Other receivables

134


1,064

Corporation tax recoverable

-


1,000

Prepayments

32


34


166


2,098

 

'Trade receivables' and 'Other receivables disclosed' above are classified as loans and receivables and measured at amortised cost. The Directors consider that the carrying amount of these financial assets approximates their fair value.  There are no significant amounts past due which have not been provided against (2013: $nil). Further details on the Company's financial assets are provided in note 27.

 

Other receivables include $122,000 (2013: $1,088,000) due from related parties (see note 31).

 

39.       FINANCIAL liabilities


2014


2013


US$000


US$000

Borrowings




Loan note

-


1,500


-


1,500





Trade and other payables




Trade payables

78


140

Other payables

573


679

Accrued liabilities

389


374


1,040


1,193

 

Other payables includes $nil (2013: $165,000) payable to related parties (see note 31).

 

The loan note outstanding as at 31 May 2013 was unsecured, due within one year and carried a coupon of 10%. The loan note was repaid during the year in accordance with its terms.

 

The Directors consider that the carrying amount of financial liabilities approximates their fair value. Further details on the Company's financial liabilities are provided in note 27

 

40.       RELATED PARTIES

 

Transactions and balances due at the period end with related parties, other than with subsidiary undertakings, are disclosed in note 31.

 

Related party transactions are entered into on an arm's length basis. No provisions have been made in respect of amounts owed by or to related parties except where disclosed.

 

Subsidiary companies are financed by means of parent company loans which bare market rates of interest. The Company provided funding to its subsidiaries of $8,449,000 (2013: $10,453,000) during the year and at 31 May 2014 had outstanding amounts receivable of $68,968,000 (2013: $58,161,000). Interest due on the loans in the period was $1,046,000 (2013: $463,000) which was accrued but unpaid in the year. With the continued depreciation of the Mozambican Metical and the cessation of the Group's cocoa trading operations, the Company has made a provision against amounts receivable from subsidiary undertakings of $1,038,000 (2013: $13,423,000) during the year. Further details on the Company's receivables from subsidiary undertakings are provided in note 37.

 

41.       Ultimate controlling party

 

The Directors are of the opinion that there is no controlling party of the Company.

 

42.       EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

 

Details of events subsequent to the balance sheet date, all of which relate to the Company, are included in note 33.

 

**ENDS**


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