TIDMAGTA
RNS Number : 9171W
Agriterra Ltd
29 November 2010
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
29 November 2010
Agriterra Ltd ('Agriterra' or 'the Group')
Final Results
Agriterra Ltd, the AIM listed company focussed on the
agricultural sector in central and southern Africa, announces its
results for the year ended 31 May 2010.
CHAIRMAN'S STATEMENT
We have continued our strategy during the year of building an
African focused agricultural group, with the initial focus being on
our grain processing and milling activities and the development of
our cattle ranching operations in Mozambique.
The year to 31 May 2010 was a period of consolidation as we
looked to capitalise on our strong position in Mozambique,
particularly in the milling business and to expand our cattle
ranching activities. Accordingly we continued the development of
our grain buying infrastructure centred at our main Desenvolvimento
E Comercializacao Agricola Limitada ('DECA') facility at Chimoio,
which now has a storage capacity of 40,000 tonnes. In addition, at
the Compagri Limitada ('Compagri') facility in the Tete Province,
following completion of the first phase of development, including
the installation of milling equipment and a storage capacity of
12,600 tonnes, we established the buying operation with the
requisite infrastructure.
At Mozbife Limitada ('Mozbife'), the cattle ranching business,
we secured further land, including the 350 hectare Vanduzi farm for
our feedlot and abattoir project, expanded the irrigated pasture
land at the 1,000 hectare Mavonde Ranch and initiated an extensive
planning and preparation programme at the 15,000 hectare Dombe
Ranch, pending the award of a Use and Development of Land Licence
('DUAT') from the Government of Mozambique. The Board expects that
this will be granted shortly, following which we can commence the
implementation stage which will be funded from the US$7 million
placing (before expenses) at 3p per share, as announced on 16
November 2010.
During the year, facilitated by our expanded infrastructure,
including additional purchasing points and an enlarged vehicle
fleet, the Group has had a record buying season with Chimoio
accounting for 34,000 tonnes of corn (2008/9: 23,000 tonnes) and
Compagri 8,000 tonnes. However, the results were adversely affected
by a number of factors including management difficulties at
Compagri which delayed the start of milling operations and
contributed to this facility incurring an operating loss of US$1.2m
during the year. An operating loss of U$0.4m pertaining to Mozbife
was also incurred as the necessary infrastructure was implemented
and developed, and the Group expensed US$0.9m fulfilling its
obligations at our discontinued oil and gas operations in order to
maintain our exploration rights whilst arranging an exit.
In addition, a strong harvest in Mozambique resulted in lower
demand for meal product and consequently sales at Chimoio were down
27% in local currency terms and 36% in US$ terms. These lower
volumes also adversely affected gross margins.
However, since the year end, the situation has greatly improved
particularly with regards to pricing and we have made substantial
progress in all areas of the business. As explained above, the DUAT
for the Dombe Ranch is expected imminently following formal
approval from the Centro de Promocao de Investimentos (Major
Investment Project Approval). As a result, investment in
infrastructure at the Dombe Ranch and feedlots at the Vanduzi farm
has accelerated, together with investment in the local herd at
Dombe. Planning has been completed for the construction of a 42
billion litre reservoir to sustain a further 400 hectares of
irrigated pasture at Mavonde in Mozambique which will support eight
head of cattle per hectare when established.
The current year commenced with 22,000 tonnes of maize in stock,
which we strategically held back for an improved price environment,
which has now materialised. Produce sourced locally has been
supplemented by competitively priced imports and we are now
processing 4,000 tonnes per month. We currently have more than
30,000 tonnes of maize in stock, which we are processing on a 24
hour shift pattern at Chimoio. Milling operations have now
commenced at Compagri, further enhancing the current strong
performance of sales from DECA with volumes and prices well ahead
of the year ended 31 May 2010. We continue to expand our market
penetration in Mozambique and are expecting to commence both meal
and bran sales into Zimbabwe. In the second half of this year we
are also looking to expand storage capacity at Compagri to enable
us to bring additional products into our range.
Additionally we have concluded a farm out agreement with Africa
Oil Corp to assign 80% of the Group's interest in the South Omo
Block in Ethiopia whilst allowing participation in any value uplift
generated by the exploration work undertaken by them.
In spite of the challenges that we faced during the reporting
period, we now have what I believe to be a very firm foundation for
growth. The recent trading update emphasised the strong performance
of the milling operations at DECA with sales well above the
Directors' expectations, the commencement of operations at Compagri
as well as the progress being made at Mozbife. Demand for beef
remains extremely strong and we believe that we have the ability to
capitalise on this. In tandem with developing our ranching
operations we are also actively looking for additional
opportunities within the agricultural sector to supplement our
strong organic growth.
Finally I'd like to thank all those involved in the business for
the fantastic job they have done, in particular Euan, in securing
our position as a leading agricultural company with a focus on
Mozambique.
Phil Edmonds
Chairman
OPERATIONS OVERVIEW
The key wholly owned subsidiaries of Agriterra are the
agricultural trading and processing companies DECA and Compagri, as
well as the rapidly expanding cattle ranching and feedlot
production entity, Mozbife all of which are located in
Mozambique.
DECA, Chimoio
Our flagship agricultural trading facility in Chimoio is focused
on the treatment and processing of grain purchased from out-growers
through specialised buying systems, delivering cash directly to the
smallholder farmers and supporting approximately 350,000 people
from the local population. The purchased grain is transported back
to DECA's purpose-built storage and processing facility in Chimoio
where it is dried, fumigated, prepared and processed into maize
meal to supply to domestic markets.
Over the course of the year, the Directors have focused on
increasing the storage capacity at Chimoio, and the facility now
has a 40,000 tonne capacity comprising of seventeen 1,000 tonne
silos, seven large warehouses as well as two milling plants, one
workshop and a fleet of over 100 vehicles. This increase in storage
capacity, coupled with expanded infrastructure, additional
purchasing points and an enlarged vehicle fleet, enabled DECA to
achieve a record buying season, with over 34,000 tonnes purchased
in total.
Our branded DECA product is also gaining increased market share,
particularly in the Beira area which is DECA's biggest market.
Despite a reduction in sales during the period caused by a strong
harvest in Mozambique, sales since the year end have been very
encouraging and are significantly ahead of last year. Our objective
with DECA is to now ramp-up our milling operation with the aim of
increasing production by 30% from current levels. To achieve this,
the milling operation has been running 24 hours a day, 6 days a
week since the beginning of October.
Compagri, Tete
Our second grain processing operation, Compagri, based in the
Tete Province of Mozambique, commenced operations in May 2009,
replicating the operations of the DECA facility in Chimoio.
During the year, we completed the initial phase of development,
which included the construction of four 1,500 tonne silos and one
600 tonne silo, as well as two further large warehouses with
capacity of 3,000 tonnes each, providing the facility with a total
storage capacity of 12 600 tonnes. We also established extensive
buying operation infrastructure including the implementation of
buying points in rural parts of the Tete region.
The Compagri facility has performed well since operations began,
despite a management dispute earlier in 2010 which necessitated a
temporary suspension of operations. The Board installed a new
management team following these labour issues, led by Jean Bernard
Guimbeau, who has extensive agricultural management experience in
southern Africa and Miguel Cruz, a Mozambican national, who has
been the southern area buying manager at the DECA facility in
Chimoio for four years.
Since recommencing operations in July 2010, the Compagri
facility has received higher than anticipated inflows of grain,
with over 10,000 tonnes of grain now in stock. Milling operations
have also commenced, with target milling production of 40 tonnes
per day, which could be raised to a maximum of 120 tonnes per day
when a 24 hour rotational shift is implemented.
We remain optimistic about the future for the Compagri facility,
particularly as our brand is increasingly gaining local
recognition. The Tete region itself is also an area with
significant scope for expansion due to the vast developments in the
coal mining projects in the area which will bring substantial
inflows of workers to the province. In order to capitalise on this
expected increase in demand, we are evaluating options to increase
the current storage capacity to accommodate larger volumes of maize
and potentially additional agricultural products.
Mozbife Cattle Ranching
We continue to focus on rapidly growing our cattle ranching
business, Mozbife, and currently have two ranches covering 16,000
hectares and a current stock of circa 1,060 head of cattle.
The calving season is currently underway at both our 1,000
hectare Mavonde and 15,000 hectare Dombe ranches, and regular
veterinary checks are reporting that all of our cattle are in good
condition. We experienced a high rate of 82% pregnancies in our
cows and heifers, and expect that this current calving season will
significantly increase our herd, ensuring we are well positioned to
deliver on our objective of expanding our herd to over 5,000 head
by 2012.
In order to accommodate this increase in cattle, we have focused
on the development and irrigation of additional land within our
Mavonde and Dombe ranches following Centro de Promocao de
Investimentos approval (Major Project Investment Approval) from the
Mozambican Government, allowing us to aggressively move forward
with our expansion plans pending the award of a DUAT. At Mavonde,
the irrigated pasture area has been extended to almost 300 hectares
in anticipation of large number of calves and final planning for a
42 billion litre irrigation dam has been completed. The Directors
anticipate that when completed, this dam, which will be situated on
the Mavusi River, will provide water for an additional 400 hectares
of irrigated pasture.
The Vanduzi abattoir/feedlot project is also progressing well
with the first feed pens completed and boundary fencing progressing
well. Our first cattle have recently arrived at the feedlot ahead
of fattening and subsequent transferral to an abattoir. In tandem,
an extensive land clearing and preparation programme is currently
underway, ahead of the planting of 200 hectares of maize crop to
ensure security of feedlot which will be followed by the planting
of 300 hectares of soya beans also for feedlot purposes.
Euan Kay
Executive Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 May 2010
Year 11 Months
ended ended
31 May 31 May
2010 2009
Continuing Operations Notes $'000 $'000
------ -------- ----------
Revenue 8,791 4,855
Increase in value of biological
assets 22 -
Cost of sales (7,371) (3,483)
Gross profit 1,442 1,372
Operating expenses (5,686) (2,222)
Other income 386 347
Operating loss (3,858) (503)
Finance income 106 338
Finance expense (152) (6)
Loss before taxation (3,904) (171)
Income tax expense - -
-------- ----------
Loss for the year from continuing
operations (3,904) (171)
Discontinued operations
Loss for the year 3 (920) (3,519)
Loss for the year attributable
to owners of the parent (4,824) (3,690)
-------- ----------
Loss per share
- Basic and diluted (cents) 4 (0.9c) (1.1c)
Loss per share from continuing
operations
- Basic and diluted (cents) 4 (0.8c) (0.1c)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2010
Year 11 Months
ended ended
31 May 31 May
2010 2009
$'000 $'000
--------- ----------
Loss for the year (4,824) (3,690)
Foreign exchange translation differences (6,005) (3,999)
Other comprehensive income for the
year (6,005) (3,999)
Total comprehensive income for the
year
attributable to owners of the parent
company (10,829) (7,689)
--------- ----------
CONSOLIDATED BALANCE SHEET
As at 31 May
2010 2009
Note $'000 $'000
----- ---------- ---------
ASSETS
Non-current assets
Exploration and evaluation costs - -
Property, plant and equipment 9,986 13,397
Investments 114 -
Biological assets 236 207
Total non-current assets 10,336 13,604
---------- ---------
Current assets
Inventories 4,605 2,376
Trade and other receivables 1,019 1,492
Cash and cash equivalents 3,442 8,517
Total current assets 9,066 12,385
---------- ---------
TOTAL ASSETS 19,402 25,989
---------- ---------
LIABILITIES
Current liabilities
Trade and other payables 2,176 3,009
NET ASSETS 17,226 22,980
---------- ---------
EQUITY
Issued capital 5 1,161 1,039
Share premium 125,184 119,349
Share based payment reserve 1,360 1,281
Translation reserve (5,181) 824
Retained earnings (105,298) (99,513)
TOTAL EQUITY attributable to owners of
the parent 17,226 22,980
---------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Ordinary Deferred based
share share Share payment Translation Retained
capital capital premium reserve reserve earnings Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
--------- --------- -------- -------- ------------ ---------- ---------
Balances at 1
July 2008 641 - 101,584 1,231 4,823 (95,823) 12,456
Loss for the
period - - - - - (3,690) (3,690)
Other
comprehensive
income
Exchange
translation
differences
on foreign
operations - - - - (3,999) - (3,999)
--------- --------- -------- -------- ------------ ---------- ---------
Total
comprehensive
income for
the period - - - - (3,999) (3,690) (7,689)
Transactions
with owners
Division of
share
capital (238) 238 - - - - -
Share based
payment
charge - - - 50 - - 50
Share issues 398 - 17,796 - - - 18,194
Issue costs - - (31) - - - (31)
--------- --------- -------- -------- ------------ ---------- ---------
Total
transactions
with owners 160 238 17,765 50 - - 18,213
Balances at 31
May 2009 801 238 119,349 1,281 824 (99,513) 22,980
Loss for the
year - - - - - (4,824) (4,824)
Other
comprehensive
income
Exchange
translation
differences
on foreign
operations - - - - (6,005) - (6,005)
--------- --------- -------- -------- ------------ ---------- ---------
Total
comprehensive
income for
the year
Transactions
with owners - - - - (6,005) (4,824) (10,829)
Share based
payment
charge - - - 79 - - 79
Acquisition of
minority - - - - - (961) (961)
Share issues 122 - 6,107 - - - 6,229
Issue costs - - (272) - - - (272)
--------- --------- -------- -------- ------------ ---------- ---------
Total
transactions
with owners 122 - 5,835 79 - (961) 5,075
Balances at 31
May 2010 923 238 125,184 1,360 (5,181) (105,298) 17,226
--------- --------- -------- -------- ------------ ---------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 May 2010
11 Months
Year ended ended
31 May 31 May
2010 2009
$'000 $'000
------------ ----------
Operating activities
Loss before tax (3,904) (171)
Adjustments for:
- Depreciation of property, plant
and equipment 1,359 164
- Profit on disposal of property,
plant and equipment (20) -
- Share based payment charge 79 50
- Foreign exchange (42) -
- Net interest expense / (income) 46 (332)
Operating cash flow before movements in
working capital (2,482) (289)
Working capital adjustments:
- Increase in inventory (3,182) (1,153)
- Increase in receivables (523) (137)
-(Decrease) / increase in payables (506) 1,516
------------ ----------
Cash used in operations (6,693) (63)
Finance charges (152) (6)
Interest received 106 338
Net cash (used in) / from continuing operating
activities (6,739) 269
Net cash outflow from discontinued
activities (783) (1,255)
------------ ----------
Net cash used in operating activities (7,522) (986)
------------ ----------
Investing activities
Purchase of property, plant and
equipment (1,346) (4,692)
Proceeds on sale of property, plant
and equipment 135 -
Purchase of subsidiaries net of
cash acquired - 2,162
Purchase of biological assets (64) (169)
Investment in financial assets (125) (2,826)
------------ ----------
Net cash used in investing in continuing
activities (1,400) (2,699)
Net cash from / (used in) investing in discontinued
activities 3 (1,918)
------------ ----------
Net cash used in investing activities (1,397) (4,617)
------------ ----------
Financing activities
Proceeds from issue of share capital 5,082 3,718
Share issue costs (272) -
Draw down of related party loan 225 127
Repayment of related party loan (225) -
Net cash from financing activities 4,810 3,845
------------ ----------
Net decrease in cash and cash equivalents (4,109) (1,758)
Cash and cash equivalents at start
of the year 8,517 13,047
Exchange rate adjustment (966) (2,772)
Cash and cash equivalents at end
of the year 3,442 8,517
------------ ----------
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2010
1. General Information
Agriterra Limited is incorporated and domiciled in Guernsey. The
nature of the Group's operations and its principal activities are
set out in the Chairman's Statement and Operations Overview
above.
The reporting currency for the Group is the U.S. Dollar (USD) as
it better reflects the Group's business activities in the
agricultural sector in Africa. Full statutory financial statements
have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union.
The financial statements for the year ended 31 May 2010 have
been reported on by the Group's auditors and contain an unqualified
opinion.
The full audit report is contained in the Company's Annual
Report, which will be available on the Company's web site by 30
November 2010.
2. Critical accounting estimates and judgements
The preparation of financial statements in conformity with EU
adopted IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in
the process of applying the group's accounting policies. The
estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Impairments
Impairment reviews on non-current assets are carried out on each
cash-generating unit identified in accordance with IAS 36
"Impairment of Assets". At each reporting date, where there are
indicators of impairment, the net book value of the cash generating
unit is compared with the associated fair value.
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.
Capitalised exploration and evaluation expenditure
The directors decided to suspend exploration activities and
reduce expenditure to the minimum required in order to retain
exploration licences. Until the Company successfully resolves these
and the uncertainties concerning its exploration rights in Southern
Sudan, the directors consider that the value of exploration and
evaluation and other related assets is impaired. The impairment
charge in the prior period comprises:
2010 2009
$'000 $'000
------ ------
Impairment of exploration and evaluation
assets - 1,746
Impairment of property, plant and equipment - 130
Impairment of investment - 1,047
Disposal of inventory impaired in prior
year - (135)
Impairment of other assets - 47
------ ------
- 2,835
------ ------
Biological assets
Biological assets (cattle) are measured at their fair value at
each balance sheet date. The fair value of cattle 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 income statement.
3. Discontinued operations
As set out in note 2, 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.
Consequently the oil and gas activities have been reclassified as a
discontinued operation and this segment's trading results are
included in the income statement as a single line below the loss
after taxation from continuing operations with comparatives
restated accordingly. The Group has suspended all exploration
activities and reduced expenditure to the minimum required in order
to retain exploration licenses and extract potential value for
shareholders.
The results for the discontinued operations are as follows:
2010 2009
$'000 $'000
-------- --------
Operating expenses (1,227) (1,463)
Other income 307 778
-------- --------
Operating loss (920) (685)
Finance income - 1
Impairment of oil and gas interests - (2,835)
Loss before taxation (920) (3,519)
Taxation - -
-------- --------
Loss after taxation (920) (3,519)
-------- --------
Cash flows from discontinued operations included in the
consolidated statement of cash flows are as follows:
2010 2009
$'000 $'000
------ --------
Net cash flows from operating activities (783) (1,255)
Net cash flows from investing activities 3 (1,918)
------ --------
4. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2010 2009
$'000 $'000
------------ ------------
Loss for the purposes of basic earnings
per share (loss for the year attributable
to equity holders of the parent) 4,824 3,690
------------ ------------
Loss for the purposes of basic earnings
per share from continuing activities 3,904 171
------------ ------------
Loss for the purposes of basic earnings
per share from discontinued activities 920 3,519
------------ ------------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic and
diluted loss per share 515,129,499 352,921,478
------------ ------------
Loss per share 0.9c 1.1c
------------ ------------
Loss per share from continuing activities 0.8c 0.1c
------------ ------------
Loss per share from discontinued activities 0.1c 1.0c
------------ ------------
Due to the loss incurred in the year, there is no dilutive
effect of share options.
5. Share capital
Group and company
Allotted and fully
Authorised paid
Ordinary shares of 0.1p each Number Number $'000
-------------- -------------- ------
At 1 July 2008 1,000,000,000 350,132,688 641
Division of share capital (155,000,000) (155,000,000) (238)
Increase in authorized share
capital 1,500,000,000
Issue of shares - 278,688,866 398
-------------- -------------- ------
At 1 June 2009 2,345,000,000 473,821,554 801
Issue of shares - 73,950,000 122
-------------- -------------- ------
At 31 May 2010 2,345,000,000 547,771,554 923
-------------- -------------- ------
Deferred shares of 0.1p each
At 1 July 2008 - - -
Division of share capital 155,000,000 155,000,000 238
------------
At 1 June 2009 and 31 May
2010 155,000,000 155,000,000 238
------------ ------------ ----
Total share capital
At 31 May 2010 2,500,000,000 702,771,554 1,161
-------------- ------------ ------
At 31 May 2009 2,500,000,000 628,821,554 1,039
-------------- ------------ ------
At the Extraordinary General Meeting held on 11 November 2008,
resolutions were passed to amend Article 4 of the Company's
Articles of Incorporation to divide the authorised share capital of
GBP1,000,000 into 845,000,000 ordinary shares of 0.1p each and
155,000,000 deferred shares of 0.1p each. 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 155,000,000
ordinary shares of 0.1p each held by Nile Petroleum Corporation
Limited were converted into 155,000,000 deferred shares of 0.1p
each. The Deferred shares may be converted back to ordinary shares
by resolution of the board once complete clarity of title can be
given as to the Company's position within Block Ba or an acceptable
position within a consortium to develop the enlarged Block B is
granted.
The Company has one class of ordinary share which carries no
right to fixed income.
At the Extraordinary General Meeting held on 21 January 2009,
the authorised share capital was increased by 1,500,000,000 new
ordinary shares of 0.1p each.
On 5 February 2009 the Company issued 200,000,000 ordinary
shares of 0.1p each as consideration shares for the acquisition of
DECA, Compagri, Mozbife and the associated debt from CAMEC plc.
On 5 February 2009 the Company issued 78,688,866 ordinary shares
of 0.1p each for cash at 3p per share raising gross cash proceeds
of $3.75million.
On 31 October 2009, the Company issued 63,950,000 ordinary
shares of 0.1p each for cash at 5p per share raising gross cash
proceeds of $5million to provide funding for the development of its
agricultural activities.
On 23 December 2009 the Company issued 10,000,000 ordinary
shares of 0.1p each as consideration shares for the acquisition of
the 25% minority interest of the issued share capital of DECA,
Compagri and Mozbife.
6. Post balance sheet
events
On 17 June the Company announced that it had entered into a
farmout agreement with Africa Oil Ethiopia BV ("Africa Oil")
relating to the Company's legacy interest in the South Omo Block
oil concession in the Federal Democratic Republic of Ethiopia. In
consideration for assigning an 80% interest in the concession to
Africa Oil, Africa Oil will fund a seismic work program (total cost
of approximately $6.5m) and give Agriterra credit of $2.5m, to be
set against future costs relating to the South Omo Block (excluding
the seismic work program).
On 16 November 2010, the Company announced that it had placed
145,483 334 Ordinary shares of 0.1p each at a price of 3p per share
raising gross cash proceeds of approximately $7 million to provide
funding for the continued development of its agricultural, cattle
ranching and feedlot activities.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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