TIDMOBT
RNS Number : 4537A
Obtala Resources Limited
29 September 2015
29 September 2015
Obtala Resources Limited
Interim Results for the six months to 30 June 2015
Obtala Resources Limited (AIM:OBT), the African-focused,
vertically integrated agribusiness, timber and retail company,
announces interim results for the six months ended 30 June
2015.
Financial Highlights:
-- Sales revenue increased to GBP2.3m (2014: GBP1.0m)
-- Net profit of GBP3.02m (2014: loss GBP0.2m) including
independent valuation of new land assets
-- Net assets stood at GBP95.8m (2014: GBP93.5m) and cash and
equivalents broadly the same at GBP1.4m
Operational highlights:
Agribusiness
-- Fresh produce lines developed
-- Global GAP certification awarded
-- Work continues on gaining BRC Global Standards
-- Export Processing Zone Certification awarded for 10 years by the Government of Tanzania
Timber
-- A further 35,000 hectares under application
-- Now supplying cut timber
-- Development of higher margin product lines
Retail
-- Six branches now open
-- Continued focus on operational performance improvement, cost control and sourcing
-- Catalogue retail concept developed and being introduced
Corporate
-- Board appointments of Emma Priestly, Kevin Milne and Miles Pelham in 2015
-- Membership of Social Stock Exchange achieved in September 2015
Frank Scolaro, Chairman, commented:
"The Directors are optimistic for the outlook of the group. We
are very clear about our vision, keeping our business model simple,
focusing on execution, micromanaging our costs whilst increasing
our revenues and margins. Cost management is the key business
discipline in the current equity and commodity markets. We expect
our asset base and sales to continue to grow during the second half
of the year as our product range develops and certification is
awarded."
Obtala Resources Limited +44 20 7099 1940
Frank Scolaro, Chairman
Simon Rollason - Managing Director
ZAI Corporate Finance Limited (Nomad) +44 20 7060 2220
Richard Morrison
Irina Lomova
Brandon Hill Capital (Broker) +44 (0)20 3463 5000
Jonathan Evans
Square 1 Consulting (Public Relations) +44 20 7929 5599
David Bick
Mark Longson
Chairman's Statement
I am pleased to present the interim report of Obtala Resources
Limited ("Obtala" or "Company" and its subsidiaries (the "Group"))
for the six months to 30 June 2015.
Obtala during the half year has continued building a debt free,
multi-industry African-focused asset base, which has limited
potential political risk by operating across three countries. The
regions where we are operating all have highly favourable macro
trends and the business fundamentals and growth opportunity are
very attractive. Currently the three main pillars to the business
we are developing are; agriculture and associated processing,
timber and retail.
The Morogoro horticultural and food processing project remains
the focus for the agribusiness. We were awarded Global G.A.P
certification, the internationally recognized standard for farm
production in July 2015 and we continue to invest and work towards
gaining BRC Global Standards; a leading safety and quality
certification programme and now a fundamental requirement of many
retailers.
In Mozambique, the timber operations started slowly as a result
of the exceptional rainfall experienced in the region over the
first 4 months of the year. Additional concessions totalling 35,000
hectares are currently under application. We plan to evaluate and
develop other product opportunities to expand the timber goods
range for the local and regional markets.
In late 2014 the Group acquired a chain of retail outlets in
Lesotho. This provides an additional route to market for our
products and presents an ideal opportunity to roll-out an African
Home Stores concept in other countries in the Southern and East
African region where Obtala has expertise.
We believe that the equity markets have not yet recognised the
value of the Company's assets or growth opportunity, which is true
of many diversified companies. However, the business we are
building is based on medium to long--term investment programmes,
which will provide a platform to deliver sustainable future growth,
generating stronger revenues with a focus on strong margins. Over
the reporting period we have made substantial capital investments
into the projects using our own funds without any dilution to
shareholders.
Financial results
The Group generated revenues of GBP2.26 million ($3.6 million)
(H1 2014: GBP1.16 million) during the six month period, across the
group.
The six month period generated a net profit of GBP3.02 million
($4.7 million) (H1 2014: loss GBP0.2 million), which includes the
independent valuation of new land assets.
Group net assets remained broadly in line with the prior year
end at GBP95.8 million ($149 million) (December 2014 GBP93.5
million) with a net cash and equivalent position of GBP1.41 million
($2.2 million) (December 2014: GBP3.3 million). Proceeds from the
sale of shares in Paragon Diamonds generated GBP2.24 million ($3.5
million) in the period.
With the increase of activity in our main agriculture and
forestry divisions along with our new divisions coming on line we
anticipate revenues will increase for the remainder of 2015.
Montara Continental
Montara continues to make steady progress developing its
sustainable agricultural and timber operations in Tanzania and
Mozambique, respectively. Our vertically integrated "Farm to Fork"
model is focused on food production and processing, supplied by our
own farms and contracted farmers. The asset platform which has been
built is ready to deliver sustainable revenues from high quality
produce with strong margins which will enhance the underlying Group
value. The business model facilitates control of the value chain
and positions the Group to produce value added commodities, branded
under our Mama Jo's label, bringing greater returns with better
margins. To complete the final step for the vertical integration,
the Group acquired a chain of retail outlets in Lesotho to provide
additional routes to market.
Agriculture and Processing
The focus during the first half 2015 has been the continued
development of the Morogoro farm and processing facility in
Tanzania, with the emphasis acquiring internationally recognised
farm and food standards.
Whilst the audit and BRC certification process continues we have
developed a fresh fruit and vegetable business opportunity with
sales of over 20 varieties of fresh produce commencing locally in
Tanzania. The farm is ideally located, being only 180km from the
large local market and export port facilities in Dar es Salaam
ensuring overnight deliveries of quality goods to the market. The
Group is currently supplying three distribution companies, a number
of hotels, restaurants and shops in Dar es Salaam. Our target
objective for the fresh sales, depending on demand, is to supply
c200 tonnes per month into Dar es Salaam.
Global GAP certification, an internationally recognized standard
for farm production, was awarded in late July 2015 with efforts and
significant capital investment now focused on achieving BRC Global
Standards accreditation for the processing unit. BRC is a leading
safety and quality certification program, used by over 20,000
certificated suppliers in 90 countries. The Standards guarantee the
standardisation of quality, safety and operational criteria and
ensure that manufacturers fulfil their legal obligations and
provide protection for the end consumer. This approval will
significantly increase our revenue potential and elevate the whole
company to a stronger platform from which to grow.
The Group continues to seek out the value added opportunities
within the agri-sector and to support this objective an Export
Processing Zone ("EPZ") Certificate has been granted for a 10 year
period by the Government of Tanzania, which provides a range of
fiscal incentives which will ultimately improve margins. Under this
award, 80% of produce from the processing unit needs to be exported
which is linked to gaining BRC certification.
During this period the cannery in Lesotho continued to trial and
produce a sample range of canned products which vary from chopped
tomato blends, pasta & pesto sauces, and mixed fruit. These
products are being marketed whilst the certification upgrade
process funded by Lesotho National Development Corporation is being
completed.
Timber
The timber portfolio has steadily grown over the past few years
with selective concession acquisitions to provide a critical mass
of permitted annual quotas of harvestable timber. The quality of
timber concessions which have been independently audited indicate
our standing stocks can supply high quality hardwood timber for
many years to come.
Timber operations experienced a challenging start to the period.
Exceptionally heavy rainfall in northern Mozambique at the start of
the year resulted in some damage to local infrastructure with a
consequential delay in the 2015 field season. The Company has moved
away from wooden railway sleeper production and is concentrating on
supplying cut timber into the local Mozambican market place
targeting the construction industry. A number of discussion have
been held with an international timber company with a view to
exporting timber to the Middle Eastern market.
The Company is, subject to Government approval, completing the
acquisition of 50 year leases for two new timber concessions
totaling 35,000 hectares in Mozambique to bring the total forestry
area to 314,965 hectares.
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We are currently assessing the opportunity to increase the
operational productivity and improve on-site capability to produce
value-added end products. The supply of these products will provide
additional value uplift to the revenues generated from the
concessions and will provide for additional employment and training
for the local population.
Our timber business is committed to working with high levels of
sustainability within the local legal framework.
Retail - African Home Stores
African Home Stores ("AHS") was acquired to provide an outlet to
the retail market for our products. We assumed control of Lifes'
Comfort Solutions (Pty) Limited ("LCS"), a private Lesotho
registered company, in October 2014 when we acquired a controlling
72.69% shareholding. LCS operated five departmental home solution
retail outlets within Lesotho.
We have since opened a new branch in Semonkong with other outlet
opportunities being evaluated. A catalogue retailing concept is
being introduced to offer the full range of products throughout all
the branches and this is supported by better buying out of Asia. A
strategic plan for the shops has been developed which will see an
improved balance sheet and increased sales densities with improved
margins. LCS has strong brand awareness and recognition in Lesotho
with the additional outlets providing a country wide footprint to
what is already considered a well-known and trusted Basotho
retailer. We have invested to reduce the overdraft of LCS to zero
and bring the business more in line with our cash flow
expectations
During the period sales have been slower than expected. The
national parliamentary elections and substantive renovation works
and remodelling of the shopping complex hosting the main outlet in
Maseru have impacted sales. However the long term forecast remains
positive as a number of mines in the highlands continue with
development plans and the initiation of the Lesotho Highlands Water
Project - Phase 2. The African Growth and Opportunity Act ("AGOA")
which provides trade preference for quota and duty-free entry into
the United States has been renewed, which is key to the local
economy as Lesotho has a strong textile industry which exports to
USA under AGOA.
Corporate Social Responsibility
During the reporting period we have continued to support
Sentebale, a Lesotho children's charity founded in 2006 by His
Royal Highness Prince Harry of Wales and Prince Seeiso Bereng
Seeiso.
A post reporting period event was our successful application for
membership of the Social Stock Exchange ("SSX"). The SSX was
launched in June 2013 by the UK Prime Minster at the first G8
Social Impact Investment Forum in London. In January 2015, the SSX
and ICAP Securities & Derivatives Exchange Limited announced
their collaboration to launch a new market segment for Social
Impact businesses, providing a central venue for impact
opportunities in the UK and beyond. Member companies articulate and
evidence their social and environmental credentials through the
production of an independently assessed Impact Report, which is
then ratified by an admissions panel comprised of finance and
social sector experts.
Outlook
The Directors are optimistic for the outlook of the group. We
are very clear about our vision, keeping our business model simple,
focusing on execution, micromanaging our costs whilst increasing
our revenues. Cost management is the key business discipline in the
current equity and commodity markets. We expect our asset base and
sales to continue to grow during the second half of the year as our
product range develops and certification is awarded.
The GLOBALG.A.P certification is a key milestone in the
development of the agricultural division in Tanzania and once BRC
is achieved the market opportunity grows considerably. We have had
the BRC site audit and anticipate certification approval within the
next month or so. We believe there are strong growth opportunities
with our agriculture and food processing business through own
branded "Mama Jo's" range and also the own label market. The Mama
Jo's branded dried fruit pouches have had strong interest from
buyers and we will be working to secure large scale orders once BRC
is granted. Fresh product sales provide an additional revenue
stream and we are currently evaluating the opportunity to export to
the Middle East and Asia in addition to building up the order book
in Dar es Salaam and the surrounding region. Longer term, we see a
significant export opportunity.
The timber business represents a substantial asset which, we
believe, is not reflected in the company's share price. We have
previously stated our intention to re-organise and divest the
forestry division to recognise its true value and to grow the
business in Mozambique more expeditiously. We are currently
progressing this option, and given market conditions, will be
focussed on maximising value. We have also received a commitment
for seed funding from private international investors. The Board
has also taken the decision not to bring in a strategic timber
partner as previously evaluated to avoid value dilution. On the
ground the plan is to diversify the product range with on-site
processing to capture additional value and are analysing the
feasibility of opening up a timber yard in Maputo.
The group objective for African Home Stores is to manage the
cost structure and improve sales volumes by better buying and
introducing new product lines. An option being evaluated is to
franchise the business in Lesotho. This will reduce the cost base
substantially and lead to improved sales volumes through the
opening of additional outlets in the smaller towns and rural areas
of the country.
We have commenced a realisation of non-core assets within the
group and it is the intention of the Board to reinvest the proceeds
back into the Company.
During the period, Board level appointments have strengthen the
operational and decision making capability of the group. Emma
Priestley joined as Executive Director, and in August, Kevin Milne
and Miles Pelham were appointed Executive Deputy Chairman and
Non-executive director, respectively.
The enlarged senior executive management is focussed on
accelerating operational delivery from the investments that have
been made in each business activity. This will involve improvement
to every aspect of our operations in terms of efficiencies, cost
controls, sales growth, margin management and value
enhancement.
Our objective is on creating value, working closely with market
demand, growing sales whilst maintaining high margins. We shall
continue to report on the group's progress with updates to our
shareholders. The business fundamentals of the group remain highly
attractive in exciting and growing sectors. We live in a
challenging world generally and the first six months have been
positive, productive and, even with all the hurdles, we remain
confident of the success of the company.
I would like to thank our shareholders for their continued
support and also all of our employees across the group for their
hard work and commitment during the period.
Francesco Scolaro
Executive Chairman
29 September 2015
Continuing operations Notes Six months Six months
to 30 to 30
June June
Year
to 31
December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------- ------------- ------------- -----------
Turnover 2,257 1,157 1,690
Cost of Sales (1,585) (855)
------------------------------- ------- ------------- ------------- -----------
Gross profit 672 835
Operating costs (584) (320) (1,191)
Administrative expenses (1,220) (759) (2,616)
Gain/(loss) on investments 3 (1,601) 235 (-)
Gain/(loss)Loss on derivative
financial instruments 45 - (736)
Depreciation (100) (-) (294)
Operating profit/(loss) (2,788) 253 (4,002)
Revaluation of Biological
asset 8,600 - -
Loss on disposal of
associate - - (20,987)
Gain on Fair Value of
Investment - - 749
Finance income/(costs) (44) 30 109
------------------------------- ------- ------------- ------------- -----------
Profit/(loss) before
tax 5,768 283 (24,131)
Taxation 5 (2,752) - 10,198
------------------------------- ------- ------------- ------------- -----------
Profit/(loss) for the
period/year from continuing
operations 3,016 283 (13,933)
------------------------------- ------- ------------- ------------- -----------
Discontinued operations
Loss for the year from
discontinued operations - (502) -
Total profit/loss for
the period/year 3,016 (219) (13,933)
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Attributable to:
Owners of the parent 1,707 (239) (13,392)
Non-controlling interests 1,309 20 (541)
------------------------------- ------- ------------- ------------- -----------
3,016 (219) (13,933)
Other comprehensive
income:
Exchange differences
of re-translation of
foreign operations (513) (1,807) (752)
Total comprehensive
income for the period: 2,503 (2,026) (14,685)
------------------------------- ------- ------------- ------------- -----------
Attributable to:
Owners of the parent 1,194 (1,630) (14,144)
Non-controlling interests 1,309 (396) (541)
------------------------------- ------- ------------- ------------- -----------
2,503 (2,026) (14,685)
------------------------------- ------- ------------- ------------- -----------
Earnings/(loss) per
share
From continuing and
discontinued operations
Basic and diluted (pence) 6 0.65 (0.09) (5.09)
Share Non-controlling
Foreign based Revenue interests
Share Share Merger exchange payment reserve/ Total
capital premium reserve reserve reserve (deficit) Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
At 1 January
2014 2,633 11,528 28,543 439 1,898 35,918 80,959 41,436 122,395
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Profit/(loss)
for the
period - - - - - (239) (239) 19 (219)
Exchange
differences
on
retranslation
of foreign
operations - - - (1,392) - - (1,392) (415) (1,807)
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Total
comprehensive
income for
the
period - - - (1,392) - (239) (1,631) (396) (2,027)
Issue of - - - - - - - -
shares
Share based
payment - - - 77 - 77 - 77
Purchase of - - - - - - - -
own shares
Dilution of
interest in
subsidiary - - - - (1,172) (1,172) 1,995 822
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
At 30 June
2014 2,633 11,528 28,543 (953) 1,975 34,507 78,233 43,035 121,268
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Profit/(loss)
for the
period - - - - - (13,153) (13,153) (560) (13,713)
Exchange
differences
on
retranslation
of foreign
operations - - - 640 - - 640 415 (1,055)
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Total
comprehensive
income for
the
period - - - 640 - (13,153) (12,513) (145) (12,658)
Issue of - - - - - - - - -
shares
Share based
payment - - - - (297) 220 (77) - (77)
Impairment of
foreign
exchange - - - 1,828 - - 1,828 - 1,828
Dilution of
interest in
subsidiary - - - - (664) 9,498 8,834 (25,853) (17,019)
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
At 31 December
2014 2,633 11,528 28,543 1,515 1,014 31,072 76,305 17,037 93,342
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Profit/(loss)
for the
period - - - - - 1,707 1,707 1,309 3,016
Exchange
differences
on
retranslation
of foreign
operations - - - (544) - - (544) 32 (512)
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Total
comprehensive
income for
the
period - - - (544) - 1,707 1,163 1,341 2,504
Issue of - - - - - - - - -
shares
Share based - - - - - - - - -
payment
Purchase of - - - - - - - - -
own shares
Dilution of - - - - - - - - -
interest in
subsidiary
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
At 30 June
2015 2,633 11,528 28,543 971 1,014 32,779 77,468 18,378 95,846
--------------- -------- -------- -------- --------- -------- ---------- --------- ---------------- ---------
Notes 30 June 30 June 31 December
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------- ------ ------------- ------------- ------------
ASSETS
Non-current assets
Available for sale
investments 53 - 90
Intangible exploration
and evaluation assets 7 16,080 54,329 16,080
Biological asset 8 112,432 107,379 103,832
Derivative financial
asset - 611 -
Plant and equipment 2,447 2,674 2,555
----------------------------- ------ ------------- ------------- ------------
Total non-current
assets 131,012 164,993 122,557
Current assets
Trade and other receivables 1,181 1,049 830
Inventory 1,169 334 1,351
Financial investment
assets - 687 3,938
Cash and cash equivalents 1,409 1,431 3,269
----------------------------- ------ ------------- ------------- ------------
Total current assets 3,759 3,501 9,388
TOTAL ASSETS 134,771 168,494 131,945
----------------------------- ------ ------------- ------------- ------------
LIABILITIES
Current liabilities
Trade and other payables (2,245) (1,442) (2,260)
Financial investment
liabilities (700) (2,578) (2,960)
Current tax liabilities (2) (2) (2)
----------------------------- ------ ------------- ------------- ------------
Total current liabilities (2,947) (4,022) (5,222)
----------------------------- ------ ------------- ------------- ------------
Non-current liabilities
Deferred tax 5 (35,978) (43,018) (33,226)
Loans (-) (73) (155)
Site restoration
provision (-) (113) (-)
----------------------------- ------ ------------- ------------- ------------
Total non-current
liabilities (35,978) (43,204) (33,381)
----------------------------- ------ ------------- ------------- ------------
TOTAL LIABILITIES (38,925) (47,226) (38,603)
----------------------------- ------ ------------- ------------- ------------
NET ASSETS 95,846 121,268 93,342
----------------------------- ------ ------------- ------------- ------------
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