TIDMAGTA
RNS Number : 7849B
Agriterra Ltd
25 September 2018
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
25 September 2018
Agriterra Ltd ('Agriterra' or the 'Group')
Final Results
Agriterra Limited, the AIM listed African agricultural company,
announces its audited final results for the year ended 31 March
2018.
Chair's statement
I am pleased to present the annual report of the Group for the
year ending 31 March 2018 ('FY-2018'). During the year, the Group
has focussed on the restructuring of the business to concentrate on
the core revenue generative branches of the business, being the
Grain and Beef divisions based in Mozambique, and disposal of
non-core assets, namely the Sierra Leonean cocoa activities. This,
coupled with the strategic investment from Magister Investments
Limited ('Magister') in September 2017, is intended to provide a
solid platform for future growth and profitability.
As shareholders are aware, the Company changed its accounting
reference date to 31 March (from 31 May, with effect from 31 March
2017), to more effectively co-ordinate the Group's annual report
and accounts with the business cycle of the Group's underlying
operations. Accordingly, the comparative periods presented in this
report are for the 10 month period ended 31 March 2017
('FY-2017').
Mozambique overview
The board believe that, following several years of political and
economic instability, the outlook for the Mozambique economy in the
short to medium term is encouraging. The continued development of
the liquefied natural gas ('LNG') industry in the north of the
country will underpin this economic growth and is expected in the
future to generate additional demand for the Group's products (in
particular our beef).
During FY-2018, there was a strengthening of the Metical against
both the US$ and South African Rand experienced early in the
period, followed by a period of relative stability in the exchange
rate at c.60 Metical / US$ and c.4.5 Metical / ZAR. Being a net
importer of most goods, the effect of this has been to continue to
put downward pressure on inflation in Mozambique - the annualised
rate to 31 December 2017 was c.11% which compares to c.25% for the
12 months ended 31 December 2016. Despite the fall in inflation to
current annualised rates of c. 5%, interest rates remain high, with
Standard Bank's prime Metical lending rate remaining at 24% at 31
March 2018 (31 March 2017: 28%). This persistently high lending
rate has led the board to take actions to decrease our outstanding
loan and overdraft balances in the period as more fully described
below.
New investment and use of funds
During the year the Group secured new investment of c.US$4.3m
from Magister Investments Limited in exchange for a 50.01%
shareholding in the Company. Full details regarding Magister were
provided to shareholders in the Circular to Shareholders and Notice
of General Meeting dated 14 August 2017. As a result, Magister is
the ultimate controlling party of the Company.
This new funding is being deployed to strengthen the Group's
position in Mozambique, with an initial investment of US$0.75m and
US$0.25m into the Grain and Beef divisions respectively to reduce
their outstanding bank financing. This repayment is in addition to
an earlier repayment of US$0.4m in the Beef division following the
Group's disposal of its cocoa assets in Sierra Leone. The related
saving in interest costs is expected to amount to approximately
US$0.3m per annum, assuming interest rates remain at the current
levels.
Review
Grain
Agriterra operates an established Maize buying and processing
business with its Desenvolvimento E Comercialização Agrícola
Limitada ("DECA") facility in Chimoio, which has a 35,000 tonne
storage capacity and its 15,000 tonne capacity Compagri Limitada
("Compagri") facility in Tete, north west Mozambique. Maize is
purchased from local out-growers through a network of buying
stations, which is then stored and processed before being sold to
the wholesale market.
FY-2018 saw a bumper harvest season in Mozambique which resulted
in subdued demand for our maize flour. The relative weakness in
demand has resulted in a fall in sales volume to 16,472 tonnes of
maize flour in FY-2018 (10 months to 31 March 2017: c.18,944
tonnes) and c.23,135 tonnes of all maize products (10 months to 31
March 2017: c.24,705), with revenue decreasing in Metical terms
from Metical 636.1m to Metical 323.1m and US$ terms from US$8.9m to
US$5.1m. Cost reduction measures restricted the fall in EBITDA to a
loss of US$0.67m (10 months to 31 March 2017: loss of US$0.20m).
The cost base is now more aligned to the level of business and the
division is looking to expand its product range and consequently
improve margins.
The natural cycle of maize purchases following the harvest leads
to a significant working capital requirement for the Grain division
in the first half of the year which unwinds in the second half.
During the year c.21,800 tonnes of maize were purchased (10 months
to 31 March 2017: 27,000 tonnes). Inventory levels at the year end
were reduced to 1,686 tonnes (31 March 2017: 4,954 tonnes). The
Grain division's working capital is financed by bank facilities
provided by Standard Bank. The high interest rates continue to
erode the overall profitability of the division. After an interest
charge of US$0.95m (10 months to 31 March-2017: US$0.69m), loss
before tax for the Grain division was US$1.6m (10 months to 31
March 2017: US$0.89m). In order to mitigate against this high
interest cost, the Group has invested US$0.75m during the period in
the working capital requirements of the Grain division to reduce
its reliance on overdraft financing. With inflation now stable at
around 5% per annum, interest rates are expected to fall further.
In addition, the division is reviewing its purchasing practices and
sales channels in order to smooth out the peak in the working
capital cycle.
Beef
Agriterra operates its Beef division through Mozbife Limitada
("Mozbife"). The Group has a feedlot facility, abattoir and its own
branded retail units.
In respect of the Beef division, demand remains strong. However,
a limiting factor to the ability to expand throughput was an
outbreak of foot and mouth in February 2018. Although the slaughter
herd at the Dombe ranch and feedlot remained disease free, the
country-wide disease outbreak severely curtailed the movement of
cattle which limited the division's ability to increase the
pipeline of cattle in the feedlot, and throughput to the abattoir.
Strict Bio security measures are in force at the feedlot and in
addition, all cattle movements are currently cleared by Government
vets.
Notwithstanding this setback, revenue for the year was US$4.7m
(10 months to 31 March 2017: US$4.3m). The operating loss however
increased to US$1.59m (10 months to 31 March 2017: US$1.35m). After
a fall in finance costs to US$0.14m (10 months to 31 March 2017:
US$0.24m), the loss before tax increased slightly to US$1.73m (10
months to 31 March 2017: US$1.59m).
Restrictions on the movement of cattle continue, limiting the
division's ability to increase throughput. However new sources of
quality cattle have been identified and will be brought into the
feedlot as soon as conditions allow. Significant improvements have
been made to feed cropping at the Vanduzi farm and feedlot during
the year, which together with the pelletised animal feed sourced
from the Grain division, has been reflected in improved feedlot
performance. This is expected to be reflected in improved margins
once volumes increase.
Cocoa
On 1 June 2017 the Group completed the disposal of its Cocoa
division operating subsidiaries in Sierra Leone for US$0.5m. The
disposal proceeds were applied to reduce the Group's Beef division
borrowing facilities in Mozambique and for general working capital
purposes. The Group recorded a profit on the disposal of the Cocoa
division of US$0.15m, which was reduced by US$0.13m to US$0.02m
following the recycling of translation differences previously
reflected in the translation reserve.
Board and senior management changes
As a result of the investment by Magister on 14 September 2017,
the Group re-structured the Board with the appointments of Mr. H
Rudland, Mr. G Smith and Mr. B Scott. Mr. A Groves stepped down
from the Board to focus on his other business interests. On 31
December 2017 Mr. D Cassiano-Silva stepped down from his executive
role as Finance Director but remained a Non-Executive director. Mr
B Scott stepped down on 28 February 2018 and Ms C Havers took on
the role of Executive Chair.
Following the disposal of the Group's cocoa activities, the
London office has been closed. On 15 January 2018 Mr A Fernandes
was appointed Group Finance Director (Mozambique) and is based in
Chimoio, Mozambique, the Company's main operational centre.
I would like to once again take this opportunity to thank Dan
and Andrew for their considerable input into the development of the
Company and wish Brendan the best in his new role.
Results
Revenue for the year ended 31 March 2018 fell to US$9.2m (10
months to 31 March 2017: US$12.8m). The operating loss for the year
increased to US$4.0m (10 months to 31 March 2017: US$2.7m). After
finance charges of US$1.1m (10 months to 31 March 2017: US$0.9m)
the loss for the year from continuing activities increased to
US$5.1m (10 months to 31 March 2017: US$3.6m). The loss from
discontinued activities for the year fell to US$ 0.03m (10 months
to 31 March 2017: US$0.1m). The loss for the year attributable to
owners of the company was US$5.1m (10 months to 31 March 2017:
US$3.8m). At 31 March 2018, net cash balances were US$3.5m (2017:
US$2.4m) and bank borrowings were US$4.2m (2017: US$3.5m). The
banking facilities were renewed on 25 May 2018. At the date these
facilities were agreed, the Group was in breach of the interest
covenant and remains in breach of the covenant. To date the Group
has continued to make all repayments of interest and principal and
has received no correspondence from the Bank suggesting that the
loan might go into default.
Outlook
The recent investment from Magister marks a new period for the
Group and we are already benefitting from the experience and
connections of our new Board members. With senior executive
management now based in Mozambique, supported by regular board
meetings in Chimoio, the Group is focussing on addressing the
operational issues to move towards profitability and to capitalise
on the expected growth from the development of the LNG industry in
Mozambique.
CSO Havers
Chair
Independent auditor's report to the members of Agriterra
Limited
Opinion
We have audited the financial statements of Agriterra Limited
and its subsidiaries (the 'group') for the year ended 31 March 2018
which comprise the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in
equity, the consolidated cash flow statement and notes to the
financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied
in the preparation of the financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's affairs as at 31 March 2018 and of the group's
loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to Note 2.1 concerning the group's ability to
continue as a going concern which shows that the group will need to
meet its cash flow forecasts, renew its overdraft facility and
maintain its current borrowings or raise further finance in order
to continue as a going concern. As disclosed in note 7, the Group's
overdraft facilities require renewal in May 2019 and its loan is
currently in breach of its covenants.
The matters explained in note 2.1 indicate that a material
uncertainty exists that may cast significant doubt on the group's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the group was
unable to continue as a going concern. Our opinion is not modified
in respect of this matter.
Given the conditions and uncertainties noted above, we
considered going concern to be a Key audit matter. We critically
assessed management's financial forecast over their period of going
concern assessment to December 2019. This included consideration of
the key underlying assumptions and involved reviewing actual
performance against budget. We noted that the forecast is dependent
upon the successful execution of the new business plans in both the
beef and grain divisions, and the forecasts show a significant
increase in revenues and a reduction in costs, as disclosed in note
2.1. We reviewed the recent renewal of the overdraft facility and
obtained representations from the Board that there has been no
correspondence from the bank in respect of the breach of covenants.
We reviewed the letter of support provided by the parent company to
the Mozambique subsidiaries of the Group. We discussed these
matters with management and the Audit Committee and obtained
representations from the Board in respect of the future plans of
the group. We evaluated the adequacy of disclosures made in the
financial statements. We found that the disclosure of this matter
was adequately described.
Key Audit Matter
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Impairment assessment of the beef and grain divisions
As detailed in note 3.1, the Group's principal non-current
assets relate to the beef and grain divisions. Management must
assess at each reporting date whether there is any objective
evidence of impairment of the Group's assets. Management noted that
indicators of impairment exist, such as the losses incurred during
the year. Management undertook impairment tests using the value in
use (VIU) method to determine if as at 31 March 2018 the
recoverable amount of each of the divisions was greater than its
carrying value. This assessment involved significant Management
judgement and estimates, as detailed in note 3. We therefore
considered the impairment assessment and the appropriateness of the
estimates and disclosures to be a key audit matter.
Our Response Impairment assessment of the beef and grain
divisions
We evaluated management's value in use impairment models for the
grain and beef divisions and critically challenged the key
estimates and assumptions used by management. In doing so, we
confirmed that the forecasts were formally reviewed and approved by
the Board and were consistent with operational budgets. We reviewed
the discount rate used and involved our specialist valuations
department. We reviewed the sensitivity analysis over individual
key inputs, together with a combination of sensitivities over such
inputs. We reviewed the disclosures in the financial statements,
particularly the disclosures of key estimates and assumptions which
impact the fair values, and the sensitivity analysis thereon.
Our application of materiality
Group materiality $200,000 (2017 - $200,000). Basis for
determining materiality 1.5% of total assets.
Group performance materiality $100,000 (2017 - $100,000). Basis
for performance materiality 50% of group materiality.
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole. We have determined
an assets based measure is appropriate as the group is currently
loss making and has recently raised significant equity financing.
Whilst materiality for the financial statements as a whole was
$200,000, each significant component of the group was audited to a
lower level of materiality of $120,000. Performance materiality has
been set at 50% of materiality, which is used to determine the
financial statement areas that are included within the scope of our
audit and the extent of sample sizes during the audit. We agreed
with the Audit Committee that we would report to the Committee all
individual audit differences identified during the course of our
audit in excess of $4,000. We also agreed to report differences
below these thresholds that, in our view warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the
group and its environment, including the group's system of internal
control, and assessing the risks of material misstatement in the
financial statements at the group level. Our group audit scope
focused on the group's principal operating businesses being the
grain and beef divisions, which were subject to a full scope audit.
Together with the parent company and its group consolidation, which
was also subject to a full scope audit, these represent the
significant components of the group. The remaining components of
the group were considered non-significant and these components were
principally subject to analytical review procedures. 100% of the
group's revenue and 100% of the group's total assets were subject
to full audit procedures. The audits of each of the components were
principally performed in the United Kingdom and Mozambique. All of
the audits were conducted by BDO LLP and BDO Mozambique. As part of
our audit strategy, the senior members of the BDO LLP audit team
visited each of the principal operating locations in the year.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. In connection with our audit of the
financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement int he
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in
relation to which the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
-- proper accounting records have not been kept by the Company;
or
-- the financial statements are not in agreement with the
accounting records; or
-- we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for
the purposes of our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, within the Directors' report, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error. In preparing the
financial statements, the directors are responsible for assessing
the group's and the parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements. A further description of our responsibilities for the
audit of the financial statements is located on the Financial
Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report. The engagement director on the audit
resulting in this independent auditor's report is Jack
Draycott.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
21 September 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).Consolidated income
statement
Consolidated income statement
For the year ended 31 March 2018
Year 10 months ended
ended
31 March 2018 31 March 2017
Note US$000 US$000
-------------- ----------------
Continuing operations
Revenue 4 9,222 12,807
Cost of sales (8,184) (11,915)
-------------- ----------------
Gross profit 1,038 892
Increase in value of biological assets 6 510 487
Operating expenses (5,619) (4,532)
Other income 25 29
Profit on disposal of property, plant and equipment and adjustments to
the carrying value
of assets classified as held for sale 88 439
Operating loss (3,958) (2,685)
Investment revenues 13 12
Other gains and losses - (16)
Finance costs (1,097) (927)
Loss before taxation (5,042) (3,616)
Taxation (4) (22)
-------------- ----------------
Loss for the year / period from continuing operations (5,046) (3,638)
Discontinued operations
Loss for the year / period from discontinued operations (38) (136)
Loss for the year / period attributable to owners of the Company (5,084) (3,774)
US cents US cents
-------------- ----------------
LOSS PER SHARE
Basic and diluted loss per share from continuing operations 5 (30.9) (34.2)
============== ================
Basic and diluted loss per share from continuing and discontinued
operations 5 (31.1) (35.5)
============== ================
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
For the year ended 31 March 2018
Year 10 months ended
ended
31 March 2018 31 March 2017
US$000 US$000
-------------- ----------------
Loss for the year / period (5,084) (3,774)
-------------- ----------------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences 764 (1,119)
-------------- ----------------
Other comprehensive income for the year / period 764 (1,119)
-------------- ----------------
Total comprehensive income for the year / period attributable to owners of
the Company (4,320) (4,893)
============== ================
Consolidated statement of financial position
Consolidated statement of financial position
As at 31 March 2018
31 March 31 March
2018 2017
Note US$000 US$000
---------- ----------
Non-current assets
Property, plant and equipment 6,315 6,094
Interests in associates - 4
6,315 6,098
---------- ----------
Current assets
Biological assets 6 1,137 746
Inventories 938 1,253
Trade and other receivables 1,096 1,557
Assets classified as held for sale 19 573
Cash and cash equivalents 3,541 2,425
---------- ----------
6,731 6,554
---------- ----------
Total assets 13,046 12,652
---------- ----------
Current liabilities
Borrowings 7 4,235 2,730
Trade and other payables 469 634
Liabilities directly associated with assets classified as held for sale - 128
---------- ----------
4,704 3,492
---------- ----------
Net current assets 2,027 3,062
---------- ----------
Non-current liabilities
Borrowings 7 - 734
----------
- 734
---------- ----------
Total liabilities 4,704 4,226
---------- ----------
Net assets 8,342 8,426
========== ==========
Share capital 8 3,373 1,960
Share premium 151,442 148,622
Share based payment reserve 1,988 1,985
Translation reserve (16,737) (17,501)
Accumulated losses (131,724) (126,640)
Equity attributable to equity holders of the parent 8,342 8,426
========== ==========
Consolidated statement of changes in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2018
Share based
Share payment Translation Accumulated Total
capital Share premium reserve reserve losses Equity
US$000 US$000 US$000 US$000 US$000 US$000
--------- -------------- --------------- --------------- ------------ --------
Balance at 1
June 2016 1,960 148,622 1,980 (16,382) (122,866) 13,314
Loss for the
period - - - - (3,774) (3,774)
Other
comprehensive
income:
Exchange
translation
loss on foreign
operations - - - (1,119) - (1,119)
--------- -------------- --------------- --------------- ------------ --------
Total
comprehensive
income for the
period - - - (1,119) (3,774) (4,893)
Transactions
with owners
Share-based
payments - - 5 - - 5
Total
transactions
with owners for
the period - - 5 - - 5
Balance at 31
March 2017 1,960 148,622 1,985 (17,501) (126,640) 8,426
Loss for the
year - - - - (5,084) (5,084)
Other
comprehensive
income:
Exchange
translation
gain on
foreign
operations - - - 764 - 764
--------- -------------- --------------- --------------- ------------ --------
Total
comprehensive
income for the
year - - - 764 (5,084) (4,320)
Transactions
with owners
Issue of shares
net of expenses 1,413 2,820 - - - 4,233
Share-based
payments - - 3 - - 3
--------- -------------- --------------- --------------- ------------ --------
Total
transactions
with owners for
the year 1,413 2,820 3 - - 4,236
Balance at 31
March 2018 3,373 151,442 1,988 (16,737) (131,724) 8,342
========= ============== =============== =============== ============ ========
Consolidated cash flow statement
Consolidated cash flow statement
For the year ended 31 March 2018
Year ended 10 months ended
31 March 2018 31 March 2017
US$000 US$000
-------------- ----------------
Cash flows from operating activities
Loss before tax from continuing operations (5,042) (3,616)
Adjustments for:
Depreciation 490 445
Profit on disposal of property, plant and equipment (87) (460)
Adjustments to the carrying value of assets classified as held for sale - 21
Share based payment expense 3 5
Foreign exchange (gain) / loss (181) 104
Net decrease in biological assets 194 1,454
Increase in value of biological assets (510) (487)
Finance costs 1,097 927
Investment revenues (13) (12)
Decrease in fair value of investments - 16
Impairment of current and non-current assets 4 -
Operating cash flows before movements in working capital (4,045) (1,603)
Decrease / (increase) in inventories 481 (151)
Decrease / (increase) in trade and other receivables 772 (729)
Decrease in trade and other payables (297) (13)
Cash used in operating activities by continuing operations (3,089) (2,496)
Corporation tax paid (4) (22)
Interest received 13 12
Net cash used in operating activities by continuing operations (3,080) (2,506)
-------------- ----------------
Net cash used in operating activities by discontinued operations (38) (48)
-------------- ----------------
Net cash used in operating activities (3,118) (2,554)
-------------- ----------------
Cash flows from investing activities
Proceeds from disposal of subsidiary net of costs and cash balances
disposed of 476 -
Proceeds from disposal of property, plant and equipment net of expenses
incurred 232 927
Acquisition of property, plant and equipment (116) (204)
Net cash from investing activities by continuing operations 592 723
-------------- ----------------
Net cash from investing activities by discontinued operations - 33
-------------- ----------------
Net cash from investing activities 592 756
-------------- ----------------
Cash flows from financing activities
Issue of shares (net of expenses) 4,233 -
Net draw down of overdrafts 1,506 1,145
Net repayment of loans (1,035) (110)
Finance costs (1,097) (927)
Net cash from financing activities from continuing operations 3,607 108
-------------- ----------------
Net increase / (decrease) in cash and cash equivalents 1,081 (1,690)
Effect of exchange rates on cash and cash equivalents 35 60
-------------- ----------------
Cash and cash equivalents at beginning of the year / period 2,425 4,055
-------------- ----------------
Cash and cash equivalents at end of the year / period 3,541 2,425
============== ================
otes to the consolidated financial statements
Notes to the consolidated financial statements
1. GeNERAL INFORMATION
Agriterra is incorporated and domiciled in Guernsey, the Channel
Islands, with registered number 42643. The reporting currency for
the Group is the US Dollar ('$' or 'US$') as it most appropriately
reflects the Group's business activities in the agricultural sector
in Africa and therefore the Group's financial position and
financial performance. The financial statements have been prepared
in accordance with IFRSs as adopted by the EU.
The Company changed its accounting reference date to 31 March
from 31 May, effective from 31 March 2017 in order to more
effectively co-ordinate the Group's annual report and accounts with
the business cycle of the Group's underlying business operations.
Accordingly, these financial statements present the results and
cash flows of the Group for the year ended 31 March 2018, with the
comparative period being the 10 months ended 31 March 2017.
The financial statements for the year ended 31 March 2018 and
the 10 month period ended 31 March 2017 are audited and do not
constitute full statutory accounts. The full accounts will be sent
to shareholders and posted on the Company's website
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared on a historical cost
basis, except for certain financial instruments, biological assets
and share based payments. Historical cost is generally based on the
fair value of the consideration given in exchange for the assets
acquired. The principal accounting policies adopted are set out
below in this note.
2.1. Going concern
The Group has prepared forecasts for the Group's ongoing
businesses covering the period of at least 12 months from the date
of approval of these financial statements. These forecasts are
based on assumptions including, inter alia, that there are no
significant disruptions to the supply of maize or cattle to meet
its projected sales volumes and that key inputs are achieved, such
as forecast selling prices and volume, budgeted cost reductions,
and projected weight gains of cattle in the feedlot. They further
take into account planned disposals of property plant and
equipment, general working capital requirements and available
borrowing facilities.
With senior executive management now based in Mozambique, the
Group's focus is on improving operational performance of the Grain
and Beef divisions.
Grain division: Plans show volumes increasing to 24,000 tonnes
in the year ending 31 March 2019 ("FY19"), (Year ended 31 March
2018: 16,500 tonnes) supported by a new commercial strategy
introducing new product lines and distribution channels. Steps to
improve quality have already been well received in the market. In
addition, cost savings are budgeted to be realised from
reorganising the logistics function in the second half of FY19.
Beef division: The rationalisation of the farms over the last
couple of years has already realised significant cost reductions,
which together with improved performance in the feedlot are
budgeted to show lower costs of production. As well as increasing
throughput in our existing retail network, focus will be on
expanding our direct sales to larger clients. Margins are expected
to improve as demand for our beef continues to be strong, with
annualised volumes expected to increase to 2,000 tonnes in FY19
(Year ended 31 March 2018: 1,538 tonnes).
The foot and mouth outbreak in the region, has unfortunately
restricted the movement of cattle. This has impacted the ability to
secure a reliable and consistent supply into the feedlot. Should
these restrictions remain in place throughout the forecast period,
these volumes may not be achieved.
These forecasts show a significant improvement in operating
performance as compared to that reported for the year ended 31
March 2018. However, there can be no certainty that the turnaround
plans will be successful.
As set out in note 9, the Group has reorganised its banking
facilities with Standard Bank. The Grain division's Metical 300m
(UD$ 4.9m) overdraft has been replaced by an amortising term loan
of Metical 240m (US$3,9m) repayable over 5 years and a Metical 60m
(US$1m) revolving overdraft facility. The Beef division has a
Metical 30m (US$0.5m) revolving overdraft facility. At the date of
this report approximately Metical 5m (US$0.08) and Metical 10m
(US$0.16m) respectively remain undrawn.
These facilities have an interest covenant in place. As
disclosed in note 9, at the date these facilities were agreed, the
Group was in breach of the interest covenant and remains in breach
of the covenant. As a result of the breach of covenant, the bank
could make the loans immediately repayable. To date the Group has
continued to make all repayments of interest and principal and has
received no correspondence from the Bank suggesting that the loan
might go into default. Consequently the forecasts assume that both
the term loan and overdraft facilities will continue to be
available and will be renewed for a further year when they are
reviewed in May 2019. Negotiations with other banks in Mozambique
are well advanced but have not yet been finalised.
Based on the above, whilst there are no contractual guarantees,
the directors are confident that the existing financing will remain
available to the Group. The directors, with the operating
initiatives already in place, are also confident that the Group
will achieve its cash flow forecasts.
Notwithstanding the confidence that the board has, the
directors, in accordance with financial reporting council guidance
in this area, agree that at this time there is a material
uncertainty that both the current debt and overdraft facilities
will remain in place and the Group's losses will reduce such that
the Group has sufficient finances to be able to discharge its
liabilities in the normal course of business. Failure to achieve
these might cast significant doubt upon the Group's ability to
continue as a going concern and that the Group may therefore be
unable to realise their assets and discharge their liabilities in
the normal course of business. These Financial Statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern.
3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, the
Directors are required to make judgments, 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.
3.1. Impairment
Impairment reviews for non-current assets are carried out at
each balance sheet date in accordance with IAS 36, Impairment of
Assets. Continued losses in both the Beef and Grain divisions were
considered to be indications of impairment and formal impairment
reviews were undertaken.
The impairment reviews are sensitive to various assumptions,
including the expected sales forecasts, cost assumptions, capital
requirements, and discount rates among others. The forecasts of
future cash flows were derived from the operational plans in place
to address the requirement to increase both volumes and margins
across the two divisions. Real commodity prices were assumed to
remain constant at current levels.
Discount rate: Current central bank prime MIMO benchmark rate is
15% and with inflation at around 5%, the benchmark real interest
rate is around 10%. The real rate assumed in in these forecasts is
12.5%, consistent with prior years. A 5% risk premium has been
added to give a discount real rate of interest of 17.5%. Current
nominal bank borrowing rates are 22.5%, but these are expected to
fall further as the economy returns to growth and inflation remains
stable. Neither the Grain nor Beef divisions are sensitive to an
increase in the discount rate to 30%.
Grain division: The forecasts for the Grain division show a
return to the 10 year moving average with meal sales increasing to
24,000 tonnes in FY19 (Year ending 31 March 2018: 16,500). A
shortfall in the projected volumes of 50% or a reduction in the
gross margin of more than 11% would lead to an indication of
impairment.
Beef division: The forecasts for the Beef division show volumes
improving to 2,000 tonnes (Year ending 31 March 2018:1,538 tonnes)
in FY-19 and to 2,100 tonnes in FY-20. A fall in forecasted sales
volumes of 10% or a reduction in the average daily weight gains in
the feedlot of 9% would be required to trigger the need for a
further impairment. The assets of the Beef division were impaired
by $3.1m in the year ended May 2016 following the decision to
destock the ranches. The board continues to evaluate the
development of these assets, however it is too early to consider
whether or not the previous impairment charge should be
reversed.
No impairments were recorded in the year ended 31 March 2018 or
the 10 month period ended 31 March 2017.
3.2. Biological assets
Cattle are accounted for as biological assets and measured at
their fair value at each balance sheet date. Fair value is based on
the estimated market value for cattle in Mozambique of a similar
age and breed, less the estimated costs to bring them to market,
converted to US$ at the exchange rate prevailing at the period end.
Changes in any estimates could lead to the recognition of
significant fair value changes in the consolidated income
statement, or significant changes in the foreign currency
translation reserve for changes in the Metical to US$ exchange
rate.
The herd may be categorised as either the breeding herd of
slaughter herd, depending on whether it was principally held for
reproduction or slaughter. At 31 March 2018 the value of the
breeding herd disclosed as a non-current asset was $nil (31 March
2017: $nil). The value of the herd held for slaughter disclosed as
a current asset was $1.1m (31 March 2017: $0.75m).
During the year, the Group has increased its capacity to produce
sufficient forage to meet its requirements in the feedlot.
Accordingly forage crops have been valued at 31 March 2018 at
$28,000 (31 March 2017 $nil), bringing the total biological assets
to $1.14m (31 March 2017: $0.75m).
4. Segment reporting
The ExCom consider that the Group's operating activities
comprise the segments of Grain, Beef and Cocoa, all undertaken in
Africa. In addition, the Group has certain other unallocated
expenditure, assets and liabilities, either located in Africa or
held as support for the Africa operations.
4.1. Segment revenue and results
The following is an analysis of the Group's revenue and results
by operating segment:
Year ending 31 March 2018 Grain Beef Cocoa Unallo-cated Discon- Elimina-tions Total
tinued
US$000 US$000 US$000 US$000 US$000 US$000 US$000
-------- -------- ------- ------------- -------- -------------- --------
Revenue
External sales(2) 4,519 4,703 - - - - 9,222
Inter-segment sales(1) 680 - - - - (680) -
-------- -------- ------- ------------- -------- -------------- --------
5,199 4,703 - - - (680) 9,222
-------- -------- ------- ------------- -------- -------------- --------
Segment results
- Operating (loss) /
profit (747) (1,588) (31) (1,630) 38 - (3,958)
- Interest (expense) /
income (951) (140) - 7 - - (1,084)
(Loss) / profit before
tax (1,698) (1,728) (31) (1623) 38 - (5,042)
-------- -------- ------- ------------- -------- -------------- --------
Income tax (2) (2) - - - - (4)
-------- -------- ------- ------------- -------- -------------- --------
(Loss) / profit for the
year from continuing
operations (1,700) (1,730) (31) (1,623) 38 - (5,046)
======== ======== ======= ============= ======== ============== ========
10 month period ending Grain Beef Cocoa(3) Unallo-cated Discon- Elimina-tions Total
31 March 2017 tinued
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- -------- --------- ------------- -------- -------------- --------
Revenue
External sales(2) 8,468 4,339 25 - (25) - 12,807
Inter-segment sales(1) 446 - - - - (446) -
------- -------- --------- ------------- -------- -------------- --------
8,914 4,339 25 - (25) (446) 12,807
------- -------- --------- ------------- -------- -------------- --------
Segment results
- Operating (loss) /
profit (204) (1,346) (136) (1,135) 136 - (2,685)
- Interest (expense) /
income (686) (241) - 12 - - (915)
- Other gains and losses - - - (16) - - (16)
------- -------- --------- ------------- -------- -------------- --------
(Loss) / profit before
tax (890) (1,587) (136) (1,139) 136 - (3,616)
------- -------- --------- ------------- -------- -------------- --------
Income tax (6) (1) - (15) - - (22)
------- -------- --------- ------------- -------- -------------- --------
(Loss) / profit for the
period from continuing
operations (896) (1,588) (136) (1,154) 136 - (3,638)
======= ======== ========= ============= ======== ============== ========
(1) Inter-segment sales are charged at prevailing market prices.
(2) Revenue represents sales to external customers and is recorded in the
country of domicile of the group company making the sale. Sales from
the Grain and Beef divisions are principally for supply to the Mozambique
market.
(3) $25,000 revenue reported in the Cocoa segment for the period ended 31
March 2017 arises on the rental of certain of the Cocoa division's assets.
The segment items included in the consolidated income statement
for the year are as follows:
Year ending 31 March Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
2018
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- -------------- -------------- -------
Depreciation 152 338 - - - - 490
======= ======= ======= ============= ============== ============== =======
Period ending 31 March Grain Beef Cocoa Unallo-cated Discon-tinued Elimina-tions Total
2017
US$000 US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ------- ------------- -------------- -------------- -------
Depreciation 123 322 - - - - 445
======= ======= ======= ============= ============== ============== =======
4.2. Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and
equipment, biological assets, inventories, trade and other
receivables and cash and cash equivalents. Segment liabilities
comprise operating liabilities, including an overdraft financing
facility in the Grain segment, and bank loans and overdraft
financing facilities in the Beef segment.
Capital expenditure comprises additions to property, plant and
equipment.
The segment assets and liabilities at 31 March 2018 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 4,984 4,918 - 3,144 13,046
Liabilities (3,981) (528) - (195) (4,704)
Capital expenditure (9) (107) - - (116)
======== ======= ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 9,902 4,509
Unallocated:
Other receivables 22 -
Cash and cash equivalents 3,122 -
Trade payables - 72
Accrued liabilities - 123
13,046 4,704
======= ============
The segment assets and liabilities at 31 March 2017 and capital
expenditure for the period then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
-------- -------- ------- ------------ --------
Assets 5,456 4,713 - 2,483 12,652
Liabilities (2,806) (1,178) - (242) (4,226)
Capital expenditure (130) (74) - - (204)
======== ======== ======= ============ ========
Segment assets and liabilities are reconciled to Group assets
and liabilities as follows:
Assets Liabilities
US$000 US$000
------- ------------
Segment assets and liabilities 10,169 3,984
Unallocated:
Investments and interests in associates 4 -
Other receivables 13 -
Assets classified as held for sale 453 -
Cash and cash equivalents 2,013 -
Liabilities directly associated with assets classified as held for sale - 128
Trade payables - 11
Accrued liabilities - 103
12,652 4,226
======= ============
5. LOSS per share
The calculation of the basic and diluted loss per share is based on the following Year ended 10 months ended
data:
31 March 2018 31 March 2017
US$000 US$000
-------------- ----------------
Loss for the year / period for the purposes of basic and diluted earnings per
share from continuing
activities (5,046) (3,638)
Loss for the year / period for the purposes of basic and diluted earnings per
share from discontinued
activities (38) (136)
-------------- ----------------
Loss for the year / period for the purposes of basic and diluted earnings per
share attributable
to equity holders of the Company (5,084) (3,774)
============== ================
Weighted average number of Ordinary Shares for the purposes of basic and diluted
loss per
share 16,351,388 10,618,185
============== ================
Basic and diluted loss per share - US cents (31.1) (35.5)
-------------- ----------------
Basic and diluted loss per share from continuing activities - US cents (30.9) (34.2)
-------------- ----------------
Basic and diluted loss per share from discontinued activities - US cents (0.2) (1.3)
-------------- ----------------
At the Annual General Meeting held on 30 November 2017, the
shareholders approved a resolution to consolidate 100 existing
ordinary shares of 0.1p each ("Existing Ordinary Share") into one
new ordinary share of 10p each ("New Ordinary Share"). The weighted
average number of ordinary shares used for the purposes of
calculating loss per share for the year ending 31 March 2018 and
period ending 31 March 2017 refer to New Ordinary Shares.
The company has issued options over ordinary shares which could
potentially dilute basic loss per share in the future. There is no
difference between basic loss per share and diluted loss per share
as the potential ordinary shares are anti-dilutive.
6. Biological assets
US$000
--------
Fair value
At 1 June 2016 1,994
Purchase of biological assets 1,667
Sale, slaughter or other disposal of biological assets (3,121)
Change in fair value of the herd 487
Foreign exchange adjustment (281)
At 31 March 2017 746
Purchase of biological assets 2,913
Sale, slaughter or other disposal of biological assets (3,107)
Change in fair value of the herd 510
Foreign exchange adjustment 75
--------
At 31 March 2018 1,137
========
Biological assets comprise cattle in Mozambique held for
breeding purposes (the 'Breeding herd') or for slaughter (the
'Slaughter herd'). At 31 March 2018 and 2017, all cattle are held
for slaughter. The Slaughter herd has been classified as a current
asset. The Breeding herd is classified as a non-current asset.
Forage crops included in current assets are US$ 28,000 (31 March
2017 US$ nil). Biological assets are accordingly classified as
current or non-current assets as follows:
31 March 2018 31 March 31 March 2018 31 March
2017 2017
Head Head US$000 US$000
-------------- --------- -------------- ---------
Non-current asset - - - -
Current asset 4,190 3,475 1,137 746
-------------- --------- -------------- ---------
4,190 3,475 1,137 746
============== ========= ============== =========
For valuation purposes, cattle that are not in the feedlot are
grouped into classes of animal (e.g. bulls, cows, steers etc) and a
standard animal weight per breed and class was then multiplied by
the number of animals in each class to determine the estimated
total live weight of all animals in the herd. For animals in the
feedlot, their weight has been estimated based on their individual
weigh in data at the closest weigh in date to the period end.
The herd is then valued by reference to market prices for meat
in Mozambique, less estimated costs to sell. The valuation is
accordingly a level 2 valuation in the IFRS 13 hierarchy whereby
inputs other than quoted prices that are observable for the asset
are used.
The Group's slaughter herd have been pledged in full to secure
the Beef division's bank overdraft and loans (see note 7).
7. Borrowings
31 March 2018 31 March
2017
US$000 US$000
-------------- ---------
Non-current liabilities
Bank loans - 734
-------------- ---------
Current liabilities
Bank loans 50 264
Overdraft 4,185 2,466
-------------- ---------
4,235 2,730
-------------- ---------
4,235 3,464
============== =========
Beef division
On 27 April 2017, the Group agreed revised lending facilities
with Standard Bank to finance the Beef division in Mozambique. The
existing term loans were consolidated into one loan repayable in
twelve monthly instalments commencing May 2017. At 31 March 2018,
the remaining balance was $0.05m (2017: $1.0m). The renewal date of
the overdraft facility of 30 million Metical ($0.49m) was extended
to 25 March 2018 and further extended to 25 May 2018. The amount
drawn down at 31 March 2018 was $0.34m (2017: $nil).
On 25 May 2018, the overdraft facility has been renewed for a
further 12 months and carries an interest rate at the Bank's prime
lending rate (24%) at 31 March 2018.
The facilities are secured as follows: 31 March 2018 31 March
2017
US$000 US$000
-------------- ---------
Fixed Charge
Property, plant and equipment 1,913 1,848
Floating Charge
Cattle 1,109 746
Meat Inventories 166 126
Trade receivables 249 381
-------------- ---------
3,437 3,101
============== =========
Grain division
On 27 April 2017, the Group formally completed the renewal of
the Grain division's 300 million Metical overdraft facility to
provide working capital funding, principally for the purchase of
maize and related operating expenditure. The amount drawn down at
31 March 2018 was $3.84m (2017: $2.47m).
On 25 May 2018 the facility was restructured into a 240 million
Metical ($3.91m) 5 year term loan with an interest rate of the
Bank's prime lending rate +0.25% and a 12 month 60 million Metical
($0.98m) overdraft facility at the Bank's prime lending rate less
1.75%.
The facilities are secured as follows:
31 March 2018 31 March
2017
US$000 US$000
-------------- ---------
Fixed Charge
Property, plant and equipment 2,761 2,631
Floating Charge
Maize and Maize product inventories 452 917
Trade receivables 799 1,078
-------------- ---------
4,012 4,626
============== =========
As further security to these borrowings, Agriterra Limited has
issued a Corporate guarantee in favour of the bank. Under the terms
of the guarantee, it may only be called upon once the bank has
exhausted all possible means of recovering the debt in
Mozambique.
8. Share capital
Authorised Allotted and fully paid
Number Number US$000
---------------- ------------------------ -------
At 31 March 2017 and 31 May 2016
Ordinary shares of 0.1p each 2,345,000,000 1,061,818,478 1,722
Issue of shares - 1,062,243,291 1,413
---------------- ------------------------ -------
At 30 November 2017 2,345,000,000 2,124,061,769 3,135
Consolidation 1 new ordinary share of 10p each for 100
ordinary shares of 0.1p each (2,321,550,000) (2,102,821,151) -
---------------- ------------------------ -------
At 31 March 2018 23,450,000 21,240,618 3,135
At 31 March 2018 and 31 March 2017
Deferred shares of 0.1p each 155,000,000 155,000,000 238
Total share capital 178,450,000 176,240,618 3,373
================ ======================== =======
The Company has one class of ordinary share which carries no
right to fixed income.
On 30 November 2017, the shareholders approved a resolution to
consolidate 100 existing ordinary shares of 0.1p each ("Existing
Ordinary Share") into one new ordinary share of 10p each ("New
Ordinary Share"). All references to the number of shares in issue
at 31 March 2018 and in the comparative period relate to New
Ordinary Shares.
The deferred shares carry no right to any dividend; no right to
receive notice, attend, speak or vote at any general meeting of the
Company; and on a return of capital on liquidation or otherwise,
the holders of the deferred shares are entitled to receive the
nominal amount paid up after the repayment of GBP1,000,000 per
ordinary share. The deferred shares may be converted into ordinary
shares by resolution of the Board.
9. Events subsequent to the balance sheet date
9.1. Re-structuring of the Company's borrowing facilities with Standard Bank
On 25 May 2018, the Group and Standard Bank agreed to modify the
terms of the Group's borrowing facilities as follows:
Beef Division: On 25 May 2018, the overdraft facility has been
renewed for a further 12 months and carries an interest rate at the
Bank's prime lending rate (24%) at 31 March 2018.
Grain Division: On 25 May 2018, the 300 million Metical
overdraft facility was restructured into a 240 million Metical 5
year term loan with an interest rate of the Bank's prime lending
rate +0.25% and a 12 month 60 million Metical overdraft facility at
the Bank's prime lending rate less 1.75%.
The Term loan and overdraft facilities have an interest covenant
in place. At the date these facilities were agreed, the Group was
in breach of the interest covenant. To date the Group has continued
to make all repayments of interest and principal and has received
no correspondence from the Bank suggesting that the loan might go
into default.
For further information please visit www.agriterra-ltd.com or
contact:
Caroline Havers Agriterra Ltd Tel: +44 (0) 20 7408
9200
David Foreman Cantor Fitzgerald Tel: +44 (0) 20 7894
Europe 7000
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DBGDCRBDBGIS
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