TIDMAGTA
RNS Number : 8304Q
Agriterra Ltd
12 November 2012
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector:
Agriculture
12 November 2012
Agriterra Ltd ('Agriterra' or 'the Group')
Final Results
Agriterra Ltd, the AIM listed pan-African agricultural company,
announces its results for the year ended 31 May 2012.
OVERVIEW
-- Increase in Group revenue to US$13.8 million and creation of
three revenue streams - beef herding, cocoa buying and trading, and
maize buying and processing
-- Investment programme accelerated to create foundation for
sustainable growth and profitability - focussing on expansion of
beef operations in Mozambique and cocoa operations in Sierra
Leone
Beef Operations
-- Beef herd in Mozambique enlarged to over 4,800 head and
increase in capacity of Vanduzi Feedlot to 3,000 head
-- Completion of dam at 1,350 hectare Mavonde Stud Ranch to
enable irrigation of 4,000 hectares and continued growth of
breeding herd
-- Acquisition of additional 1,300 hectare land package
contiguous to Mavonde Stud Ranch under negotiation to support an
enlarged breeding herd of up to 13,000 head
-- Completion of 4,000 head per month capacity Chimoio Abattoir
post period end and imminent opening of two retail units to provide
the full uplift in value for slaughtered and butchered products
Cocoa Operations
-- Rapid expansion of cocoa buying infrastructure in Sierra
Leone - buying points increased from four to 41 satellite stores
and three main hub sites during the period
-- 100% increase in annual cocoa trading volume from
pre-acquisition levels - volumes forecast to double again during
2012/2013 financial year
-- Negotiations underway to acquire a 4,400 acre former cocoa
and coffee plantation for rehabilitation to enable Group to
capitalise on the compelling economics for cocoa farming
Maize Operations
-- Strong harvest in 2011 reduced demand for mealie meal product during the period
-- Encouraging indications for 2012/2013 sales season following
a poor harvest - anticipation of increased demand and a more
favourable pricing environment
Corporate
-- 67% increase in net asset value to US$41.4 million (2011: US$24.8 million)
-- In addition two significant cash injections are awaited which
will further strengthen balance sheet and underpin Group value:
o Sale of 20% legacy interest in Ethiopian oil asset for a cash
consideration of US$40 million on completion and a further US$10
million on "Commercial Discovery"
o Acknowledgment of Agriterra's entitlement to receive a
compensation payment of GBP11,372,682 as partial recompense for
work undertaken and investment on Southern Sudanese oil asset
CHAIRMAN'S STATEMENT
Our focus during the year has been on the consolidation,
expansion and diversification of our businesses in order to create
the platform to become a leading African based agricultural
company. As a result of significant investment, the creation of
three revenue streams, being beef, grain and cocoa and the
implementation of a capital and operational structure suitable for
development, we believe we now have the foundation for future
sustainable growth and profitability.
Africa is a dynamic and rapidly developing continent, with
unique requirements for food production over the coming decades.
With a current population of over 1 billion and forecasts
indicating an increase of more than 20% over the next ten years,
and seven out of the world's ten fastest growing economies, food
volumes and dietary requirements throughout Africa are expected to
continue to change quickly. These rapidly evolving consumer
requirements underline the need for greater agricultural
independence and major improvements in productivity. In line with
this, through our operations, we are helping to facilitate the
commercialisation of small-scale arable and livestock agricultural
practices. Our maize and cocoa out-growers schemes have helped to
improve the lifestyles of thousands of people by raising rural
incomes, boosting local economic growth, and creating business
opportunities. In addition, our beef operations, which capitalise
on traditionally high levels of beef imports into Mozambique from
South Africa, have created a new, high quality source of domestic
beef for which there is extremely strong demand.
This is a defining period in Agriterra's development and we
remain concentrated on further expanding our operations,
particularly our beef ranching and cocoa plantations, in order to
achieve critical mass and sustainable profitability. With this in
mind, our attention during the year has been on the development of
the necessary infrastructure to support continued growth across our
asset portfolio. Significant investment has been made during the
period, including the construction of the abattoir and the 48
billion litre dam at the Mavonde Stud Ranch, the rapid expansion of
our beef breeding herd and the considerable increase in cocoa
buying infrastructure in Sierra Leone.
As a result of these advances and developments in Mozambique,
the Group has established a fully vertically integrated beef
operation. The components of this "field to fork" operation
are:
-- established dry and irrigated ranches supporting a growing breeding herd;
-- an expanding feedlot operation;
-- a recently commissioned state of the art abattoir with an
ultimate capacity of 4,000 head per month; and
-- an embryonic retail operation with two shops opening shortly.
In Sierra Leone, we have expanded our buying infrastructure and
out-growers operations considerably and are now in the process of
concluding the absorption of a former cocoa and coffee plantation
(with appropriate rehabilitation works to re-establish the
plantation) together with adjoining land to enable us to meet the
growing demand for sustainable and traceable cocoa.
Our impressive investment programme has now laid the foundations
to enable accelerated growth for Agriterra. Initial indications for
trading during the first half of the 2012/2013 financial year are
looking extremely encouraging, and I am confident in our ability to
create further value during the year ahead.
The positive expansion objectives for Agriterra will be
underpinned upon receipt of the funds from the sale of its legacy
oil asset in Ethiopia to Marathon Oil Corp. ('Marathon Oil'). Under
the terms of the agreement, the Group's 20% legacy interest in the
South Omo Block will be sold to Marathon Oil for a cash
consideration of US$40 million on completion and a further US$10
million on Marathon Oil's participation in a "Commercial
Discovery". Also in respect of Agriterra's legacy oil interests, as
announced on 25 May 2012, the Ministry of Petroleum and Mining of
the Republic of South Sudan ('MPM') has acknowledged in writing the
Company's entitlement to receive a compensation payment of
GBP11,372,682. This compensation payment is as partial recompense
for the work undertaken and the substantial investment made by the
Company on the Block Ba oil concession area in Southern Sudan,
during its previous incarnation as White Nile Limited. The MPM
acknowledged the compensation should have been paid much earlier
and confirmed that it will be paid to the Company within one year.
The board are seeking to expedite this timeline for payment but
remain cognisant of the challenges faced by the world's newest
country in its early development.
Following these dramatic cash injections, Agriterra will be in a
strong position to accelerate its ambitious development programme,
achieve critical mass and invest in new projects and geographic
areas in order to achieve its objective of becoming a significant
profitable pan-African agricultural company.
Results
Despite a fall in demand in the grain business, initial revenues
from the beef and cocoa operations resulted in turnover for the
Group increasing to US$13.8m (2011: US$13.6m). Investment in
building the beef and cocoa operations resulted in an increase in
the reported loss on continuing activities after tax of US$6.9m
(2011: US$2.3m)
Outlook
Following periods of intensive investment over the past four
years, the Group has built a solid agricultural footprint in both
Mozambique and Sierra Leone, and will benefit from a strong balance
sheet moving forward, ensuring that we have all of the necessary
resources to deliver on our growth objectives of building a
significant pan-African agriculture business.
I would like to take this opportunity to thank my fellow board
members, the members of the Agriterra team based in Mozambique and
Sierra Leone, in addition to our valued shareholders. I look
forward to providing further updates regarding our expansion
strategy and operational achievements over the coming weeks and
months.
Phil Edmonds
Chairman
12 November 2012
OPERATIONS REVIEW
Agriterra currently has four agricultural divisions:
-- Mozbife Limitada ('Mozbife') which conducts cattle ranching, feedlot and abattoir operations
-- Tropical Farms Limited ('TFL') which manages the Group's
cocoa sales, trading and farming activities
-- Desenvolvimento E Comercialização Agricola Limitada ('DECA')
and Compagri Limitada ('Compagri') which operate maize farming and
processing businesses
-- Red Bunch Ventures (SL) Limited which houses Agriterra's palm oil operations
Beef Operations
Following three years of intensive investment and expansion at
the Company's beef operations in Mozambique, Mozbife now boasts a
total herd in excess of 4,800 head across two ranches covering over
16,000 hectares, a 48 billion litre irrigation dam, a 3,000 head
capacity feedlot and a 4,000 head per month capacity abattoir.
Completing the Group's "field to fork" beef business, two retail
units in Chimoio and Tete are due to open in the coming weeks.
Mozbife remains on track to achieve its expansion objectives of
building a total herd of 6,000 head by the end of 2012 and 10,000
by 2015.
The Mavonde Stud Ranch
The primary objectives at the Mavonde Stud Ranch have been to
enlarge the Mozbife breeding herd, and increase capacity to
accommodate future expansion. With this in mind, the pedigree
breeding herd at Mavonde had grown to 978 by the year end, up from
492 in 2011. An additional 350 hectare package of land was acquired
during the period, enlarging the total Mavonde Stud Ranch to over
1,350 hectares. In addition the acquisition of a further and much
larger land package of 1,300 hectares is currently being
negotiated. Once this additional land is acquired, the Mavonde Stud
Ranch would be able to support a breeding herd of 13,000. The
ultimate aim for Mavonde is to expand the ranch to 4,500 hectares,
which, if properly irrigated, would be able to support
approximately 27,000 head of cattle.
A key development during the year was the construction and
completion of a 48 billion litre dam with capacity to irrigate in
excess of 4,000 hectares. The construction of the Group's dam,
which was delivered on budget and on schedule, is a demonstration
of the Company's ability to execute large scale infrastructure
projects to facilitate rapid expansion. In addition, as part of the
Company's Social Responsibility and Uplift Programme, two million
tilapia fingerlings have been released into the reservoir by the
Governor of the Manica Province. A further 1.75 million fingerlings
are planned over the next six months and a fishing co-operative
with the local community will be established. The Group will
provide the local community with a small boat and gill nets to
catch fish for themselves in addition to catching additional fish
for sale back to the Group for inclusion in animal feed.
With full irrigation from the reservoir, the head to hectare
ratio at Mavonde is expected to increase from 1.5 to 6 head per
hectare. In addition to increasing the head to hectare capacity,
irrigation is also of particular importance on the stud ranch, as
with good quality and plentiful grass, pregnancy rates in excess of
80% should be achievable. At present, Mozbife is operating a once a
year bulling season, taking place between December and February,
with calves born nine months later. 2012 breeding has been highly
successful with over 200 calves born to date this calving
season.
The expansion of the herd at Mavonde will continue through the
rearing of Mozbife born cattle, in addition to purchasing premium
quality F1 imported animals, and top quality pedigree Beefmaster
cows from South Africa. The imported animals are prized for their
top weight gaining ability and quality of meat, in addition to
their adaptability to hot climates.
The Dombe Ranch
The focus at the 15,000 hectare Dombe Ranch during the period
has been on investment into central farm infrastructure, including
housing for employees, spray dipping, borehole and kraal
installations. The significant job of fencing the entire ranch was
also completed, with over 96km of fence constructed.
In tandem with the infrastructure improvements, the expansion of
the Dombe herd has also continued at a fast pace, with the ranch
supporting 2,752 head at the end of the period, up from 832 in
2011. This ranch, which does not have irrigation, can support 1
animal for every 5 hectares. To increase the capacity, the Group is
negotiating the acquisition of a further 6,000 adjacent hectares,
which would support a further 1,200 head. In the longer term, the
Company will actively look to substantially increase the total
ranch size through land acquisitions to accommodate a much larger
herd.
The herd, which comprises principally local and F1 commercial
cattle, will be augmented as part of a cross-breeding programme
with Beefmaster cattle to create a bloodline with good meat yields
and high disease resistance.
The Vanduzi Feedlot
As a crucial component in Mozbife's "field to fork" business,
significant investment has been made in the Vanduzi Feedlot, both
to increase the rolling capacity of the feedlot pens, and also
through development of the surrounding land for growing crops for
use in animal feed.
Following the construction of additional pens, the Vanduzi
Feedlot now has an 18 pen line with rolling capacity of
approximately 3,000 head every 90 days. An additional six pen lines
may be constructed in H2 2013 to increase the total capacity to
4,000 head to provide further throughput for the abattoir. In order
to support the increasing number of cattle at the feedlot,
additional investment will be made in a new silo on site to store
animal feed, which will be made, in part, from the bran by-product
from the Group's maize milling operation at DECA. The animal feed
will be augmented with locally grown crops including soy beans and
sunflowers, in addition to roughage, such as grass and hay, which
will be grown on the Group's 1,000 hectare land holding surrounding
Vanduzi.
During the animals' 90 day stay in the feedlot, they are
provided with a high quality diet enabling them to put on around
1.5kg per day. On completion of the period in the feedlot, the
animals will typically weigh up to 500kg with the carcass fetching
in excess of US$1,100. As the Mozbife herds at Mavonde and Dombe
mature and expand, and additional throughput can be sourced from
Mozbife reared animals, margins will be further enhanced; however
the Group is already achieving strong economic benefits through the
purchase of local animals for use in the feedlot.
The Chimoio Abattoir & Retail Units
The construction of the Group's 4,000 head per month capacity
abattoir was completed post period end, with commissioning and
training taking place in October 2012. Commercial production is
anticipated to commence by the end of November 2012, slaughtering
animals from the feedlot (both Mozbife reared and locally sourced),
in addition to animals from third parties. As the largest facility
of its kind in Mozambique, the abattoir will be capable of
servicing the needs of the country, and will dramatically reduce
the current requirement for the country to import meat from South
Africa. As a Halal certified facility, in addition to providing
meat for domestic requirements, the Company would also be able to
export beef to markets in the Middle East.
The abattoir is a key value trigger in the full "field to fork"
value chain, with a standard 450kg steer fetching in the region of
US$1,100. Whilst the highest margins are achieved from Mozbife
reared animals, where margins could be in excess of 50%, followed
by locally sourced animals, where margins would be approximately
25%, the Group will also cover all costs associated through the
slaughter of third party animals from the value of the "5(th)
quarter", i.e. the skin, offal, hooves and head.
To obtain the maximum sale price for the meat sourced from the
abattoir, the Group is currently in the process of establishing a
chain of retail units. The initial two units, located in Chimoio
and Tete, are expected to commence business by the end of November
2012, and a third unit, in Beira, may be opened in H2 2013. The
economics of the butchery business are compelling - the value of
the dressed meat when it leaves the abattoir is approximately
US$4.48/kg, however the retail price in a butcher shop would
average US$8.40/kg, and could be up to US$16/kg for selected
cuts.
Cocoa Sales & Trading
Agriterra's cocoa division has rapidly expanded during the
period. Following TFL's acquisition by Agriterra in July 2011, when
the business operated four buying points, considerable investment
has been made into the business's infrastructure and TFL now has
three main hub stores and 41 satellite stores with a direct buying
register of more than 3,500 farmers across the country. This rapid
ramp up of buying infrastructure has enabled TFL to double its
pre-acquisition annual trading volume during the period. This
increase is expected to continue, with total trading volumes for
the current financial year forecasted to double the volume of the
2011/2012 financial year. TFL continues to develop relationships
with blue chip groups as off takers for its cocoa sales, in
addition to initial coffee sales from its recently established
coffee operation. Although coffee volumes are currently small, the
Company expects sales to increase during the 2012/2013 financial
year as TFL focuses on diversifying its product range and expanding
its trading operations.
Whilst cocoa trading and sales have proved lucrative for the
Company during the period, the longer term goal for TFL is to
develop independent plantations in order to capitalise on the
compelling economics for cocoa growing. Cocoa prices currently
stand at approximately US$2,300/tonne, and with plantation costs
being estimated at around US$800/tonne, the high margin nature of
the business is clearly evident.
In order to establish independent cocoa farms, the Group is
currently in negotiations to acquire a 4,400 acre former cocoa and
coffee plantation for rehabilitation; however the Board will remain
proactive in evaluating and leasing significantly more land in the
longer term. In tandem with this, the Group continues to invest in
supporting infrastructure, including the construction of a
2,000m(2) processing facility in Kenema, which is anticipated to be
completed before the cocoa buying season in August 2013.
Development of a larger collateral management warehousing facility,
located on the 15 acre site acquired by TFL in Freetown, will
commence thereafter, effectively linking up-country cocoa growing
and buying infrastructure at Kenema with the export markets through
the port at Freetown.
Maize Processing & Farming
The Group's maize buying and processing operations are centred
on the 35,000 tonne capacity DECA facility and the 15,000 tonne
capacity Compagri facility, located in Chimoio in central
Mozambique and Tete in north-west Mozambique respectively.
At the larger DECA facility, the Group has built a mature
business based on buying maize from local out-growers through a
network of buying stations, which is transported back using DECA's
100 strong fleet of trucks, before processing and storing the
product and selling it to the retail market. Based on the successes
experienced at DECA, the Group opened the Compagri facility in Tete
to capitalise on the rapid influx of people to the area, driven by
the mining boom experienced in the province in recent years.
The Group's maize operations during the year were affected by a
very strong harvest in 2011, which subsequently reduced demand for
the mealie meal product made by DECA and Compagri. This situation
resulted in both companies selling reduced volumes at reduced
prices. Indications for this year have been much more positive for
the Company - in anticipation of a difficult harvest this season,
the Company began buying early and stockpiles now stand at 25,000
tonnes. Because of the poor harvest, the grain operations should
see a substantial increase in demand this year, combined with a
more favourable pricing environment during its next milling season,
which runs from December until February.
Palm Oil Operations
Building on the Group's growing range of agricultural
commodities, the Group acquired control of a lease of approximately
45,000 hectares of brownfield agricultural land in an area suitable
for palm oil production in Sierra Leone in December 2011.
The land is located in the Pujehun District in the Southern
Province of Sierra Leone. This area, which is close to the Liberian
border, is suitable for palm oil production. The region receives
one of the highest levels of rainfall in Sierra Leone, which in
itself, receives some of the highest rainfall globally. In
addition, the lease area is located on the equatorial belt, which
is the most favourable geographical location for palm oil
production. The Board believes that as the most important and
widely produced edible oil in the world, demand for palm oil is
projected to continue to grow, driven by demand in Africa, India,
China and the US, making it an important new target of for
Agriterra's investment strategy.
For further information please visit www.agriterra-ltd.com or
contact:
Andrew Groves Agriterra Ltd Tel: +44 (0) 20
7408 9200
Jonathan Wright Seymour Pierce Ltd Tel: +44 (0) 20
7107 8000
David Foreman Seymour Pierce Ltd Tel: +44 (0) 20
7107 8000
Andy Cuthill MC Peat & Co LLP Tel: +44 (0) 20
7104 2332
Hugo de Salis St Brides Media & Tel: +44 (0) 20
Finance Ltd 7236 1177
Susie Geliher St Brides Media & Tel: +44 (0) 20
Finance Ltd 7236 1177
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 31 May 2012
Year Year
ended ended
31 May 31 May
2012 2011
Continuing Operations Note $'000 $'000
----- ---------- ----------
Revenue 3 13,826 13,588
Cost of sales (11,913) (10,372)
Gross profit 1,913 3,216
Increase in value of biological
assets 6 400 214
Operating expenses (8,851) (6,109)
Other expenses (318) (233)
Other income 47 582
Share of profit from associate 9 -
Operating loss (6,800) (2,330)
Finance income 48 159
Finance costs (164) -
Loss before taxation (6,916) (2,171)
Income tax expense 4 (26) (168)
Loss after tax (6,942) (2,339)
Discontinued operations
Profit / (loss) for the
year 721 (89)
Loss for the year attributable
to owners of the parent (6,221) (2,428)
========== ==========
Loss per share
- Basic and diluted (cents) 5 (0.7c) (0.4c)
Loss per share from continuing
operations
- Basic and diluted (cents) 5 (0.8c) (0.4c)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2012
Year Year
ended ended
31 May 31 May
2012 2011
$'000 $'000
---------- --------
Loss for the year (6,221) (2,428)
Foreign exchange translation
differences 2,078 3,399
Other comprehensive income
for the year 2,078 3,399
Total comprehensive income
for the year
attributable to owners of
the parent company (4,143) 971
========== ========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 May 2012
2012 2011
Note $'000 $'000
----- ---------- ----------
ASSETS
Non-current assets
Intangible assets 963 271
Property, plant and equipment 26,243 13,264
Investment in associate 9 -
Biological assets 6 1,642 631
Total non-current assets 28,857 14,166
---------- ----------
Current assets
Biological assets 6 1,018 157
Inventories 6,701 2,976
Trade and other receivables 3,628 2,039
Cash and cash equivalents 3,553 8,172
Total current assets 14,900 13,344
---------- ----------
TOTAL ASSETS 43,757 27,510
========== ==========
LIABILITIES
Current liabilities
Trade and other payables (2,361) (2,678)
NET ASSETS 41,396 24,832
========== ==========
EQUITY
Issued capital 1,957 1,387
Share premium 148,530 131,593
Shares to be issued 2,940 -
Share based payment reserve 1,620 1,360
Translation reserve 296 (1,782)
Retained earnings (113,947) (107,726)
TOTAL EQUITY ATTRIBUTABLE
TO
OWNERS OF THE PARENT 41,396 24,832
========== ==========
Attributable to equity holders of the parent
CONSOLIDATED Ordinary Deferred Share Shares Share
STATEMENT share share premium to based Translation Retained Total
OF CHANGES capital capital be payment reserve earnings
IN EQUITY $'000 $'000 $'000 issued reserve $'000 $'000 $'000
$'000 $'000
Balances
at 1 June
2010 923 238 125,184 - 1,360 (5,181) (105,298) 17,226
Loss for
the year - - - - - - (2,428) (2,428)
Other comprehensive
income
Exchange
translation
differences
on foreign
operations - - - - - 3,399 - 3,399
Total comprehensive
income for
the year - - - - - 3,399 (2,428) 971
Transactions
with owners
Share issues 226 - 6,570 - - - - 6,796
Issue costs - - (161) - - - - (161)
Total transactions
with owners 226 - 6,409 - - - - 6,635
Balances
at 1 June
2011 1,149 238 131,593 - 1,360 (1,782) (107,726) 24,832
Loss for
the year - - - - - - (6,221) (6,221)
Other comprehensive
income
Exchange
translation
differences
on foreign
operations - - - - - 2,078 - 2,078
Total comprehensive
income for
the year
Transactions
with owners - - - - - 2,078 (6,221) (4,143)
Share issues 570 - 17,707 - - - - 18,277
Shares to
be issued - - 2,940 2,940
Issue costs - - (770) - 160 - - (610)
Share based
payment
charge - - - 100 - - 100
Total transactions
with owners 629 - 19,818 2,940 260 - - 20,707
Balances
at 31 May
2012 1,719 238 148,530 2,940 1,620 296 (113,947) 41,396
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 May 2012
Year ended Year
31 May ended
31 May
2012 2011
$'000 $'000
----------- --------
Operating activities
Loss before tax (6,916) (2,171)
Adjustments for:
- Depreciation of property,
plant and equipment 1,878 1,228
- Loss on disposal of property,
plant and equipment 12 5
- Share based payment charge 100 -
- Increase in Biological
assets (400) (214)
- Foreign exchange 149 (141)
- Net interest expense /
(income) 116 (159)
Operating cash flow before movements
in working capital (5,061) (1,452)
Working capital adjustments:
- (Increase) / decrease
in inventory (3,505) 1,973
- Increase in receivables (1,545) (547)
- (Decrease) / increase
in payables (690) 261
----------- --------
Cash (used in) / from operations (10,801) 235
Finance charges (164) -
Interest received 48 159
Net cash (used in) / from continuing
operating activities (10,917) 394
Net cash from / (used in)
discontinued activities 721 (198)
----------- --------
Net cash (used in) / from
operating activities (10,196) 196
----------- --------
Taxation
Corporate tax paid (60) (38)
----------- --------
Net cash outflow from taxation (60) (38)
----------- --------
Investing activities
Purchase of intangible asset - (250)
Purchase of subsidiary net (283) -
of debt acquired
Purchase of property, plant
and equipment (7,575) (2,568)
Proceeds on sale of property,
plant and equipment 96 38
Purchase of biological assets (1,428) (255)
Proceeds on sale of investment
in financial assets - 128
----------- --------
Net cash used in investing
activities (9,190) (2,907)
Financing activities
Proceeds from issue of share
capital 15,000 6,883
Share issue costs (610) (161)
Draw down of bank loan 123 -
Net cash from financing
activities 14,513 6,722
----------- --------
Net (decrease) / increase in
cash and cash equivalents (4,933) 3,973
Cash and cash equivalents
at start of the year 8,172 3,442
Exchange rate adjustment 314 757
Cash and cash equivalents
at end of the year 3,553 8,172
=========== ========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
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 and therefore the Group's financial
position and financial performance.
The 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 2012 have
been reported on by the Group's auditors and contain an unmodified
opinion.
The full audit report is contained in the Company's Annual
Report, which will be available on the Company's website by 30
November 2012.
2. Critical accounting estimates and judgments
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.
Going concern
The board has prepared forecasts for the Group's ongoing
businesses covering the period of 12 months from the date of
approval of these financial statements. These forecasts are based
on assumptions that there are no significant disruptions to the
supply of maize or cocoa to meet its projected sales volumes and
take into account the investment in the beef herd, other working
capital and additional property plant and equipment that are
expected to be required.
As outlined in the chairman's statement, agreements have been
reached which will monetise the Group's legacy oil and gas assets.
The agreement to assign the remaining interest in South Omo is
contingent upon the receipt of approval for the transaction from
the Government of Ethiopia. An application has been filed with the
Ministry of Mines and Energy. The directors have met with the
minister and expect approval to be forthcoming; however its timing
remains uncertain. The agreement requires that the Group be
reimbursed for its share of any expenditure on the South Omo block
from 17 August 2012. Notwithstanding this, the directors are
confident that in the event that additional payments fall due under
the joint operating agreement for the block, they will be able to
secure any bridging finance required. Furthermore in reviewing the
working capital requirements of the Group, the directors have
identified planned items of expenditure which can be deferred
without having a detrimental impact on the ongoing operations of
the Group.
The directors believe that, with the receipt of funds from the
disposal of the legacy oil and gas assets, together with existing
resources, the Group and Company is well placed to manage its
business risks successfully despite the current uncertain economic
outlook. The directors have a reasonable expectation that the Group
and Company have adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the annual
financial statements.
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. The directors decided to suspend
exploration activities and reduce expenditure to the minimum
required in order to retain exploration licenses. Consequently the
directors consider that the value of exploration and evaluation and
other related assets of $79,580,000 is fully impaired. As outlined
above, agreements have been reached which will monetise the Group's
legacy oil and gas assets. The provisions for impairment will be
written back as appropriate as gains from discontinued activities
upon receipt of funds.
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. At 31 May 2012 the value of the
breeding herd disclosed as a non-current asset was $1,641,000
(2011: $631,000). The value of the herd held for slaughter
disclosed as a current asset was $1,018,000 (2011:$157,000).
3. Segment reporting
As set out in the operating review, the directors consider that
the Group's continuing activities comprise the segments of grain
processing, beef production and cocoa businesses, and other
unallocated expenditure in one geographical segment, Africa.
Revenue represents sales to external customers in the country of
domicile of the group company making the sale.
Unallocated expenditure relates to central costs and any items
of expenditure that can not be directly attributed to an individual
segment.
Year ending Grain Beef Cocoa Unallocated Total
31 May 2012
$'000 $'000 $'000 $'000 $'000
-------- -------- ------ ------------ --------
Revenue 9,681 895 3,250 - 13,826
-------- -------- ------ ------------ --------
Segment results
- Operating
loss (1,203) (2,310) (578) (2,709) (6,800)
- Interest (expense)
/ income (138) - - 22 (116)
-------- -------- ------ ------------ --------
Loss before
tax (1,341) (2,310) (578) (2,687) (6,916)
-------- -------- ------ ------------ --------
Income tax (26) - - - (26)
-------- -------- ------ ------------ --------
Loss after tax (1,367) (2,310) (578) (2,687) (6,942)
======== ======== ====== ============ ========
Year ending Grain Beef Cocoa Unallocated Total
31 May 2011
$'000 $'000 $'000 $'000 $'000
------- ------ ------ ------------ --------
Revenue 13,533 55 - - 13,588
------- ------ ------ ------------ --------
Segment results
- Operating
profit / (loss) 270 (958) - (1,642) (2,330)
- Interest income 141 0 - 18 159
------- ------ ------ ------------ --------
Profit / (loss)
before tax 411 (958) - (1,624) (2,171)
Income tax (168) - - - (168)
------- ------ ------ ------------ --------
Profit / (loss)
after tax 243 (958) - (1,624) (2,339)
------- ------ ------ ------------ --------
4. Income tax expense
2012 2011
$'000 $'000
-------- --------
Loss before tax from continuing
activities: (6,916) (2,171)
-------- --------
Tax at the Mozambican corporation
tax rate 32% (2011: 32%) (2,214) (695)
Tax effect of expenses that
are not deductible in determining
taxable profit 78 21
Tax effect of utilisation of
losses (57) (90)
Tax effect of losses not allowable 768 341
Tax effect of losses not recognised
in overseas subsidiaries (net
of effect of different rates) 1,533 503
(Credit) / charge in respect
of prior years (82) 88
Tax expense for the year 26 168
======== ========
The tax reconciliation has been prepared using a 32% tax rate,
the corporate income tax rate in Mozambique, as this is where the
Group's principal assets of its continuing operations are
located.
5. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2012 2011
$'000 $'000
------------ ------------
Loss for the purposes of
basic earnings per share
(loss for the year attributable
to equity holders of the
parent) 6,221 2,428
------------ ------------
Loss for the purposes of
basic earnings per share
from continuing activities 6,942 2,339
------------ ------------
Profit / (loss) for the purposes
of basic earnings per share
from discontinued activities 721 (89)
------------ ------------
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic and diluted loss
per share 874,483,042 625,894,111
------------ ------------
Loss per share (0.7c) (0.4c)
------------ ------------
Loss per share from continuing
activities (0.8c) (0.4c)
------------ ------------
Earnings / (loss) per share
from discontinued activities 0.1c (0.0c)
------------ ------------
Due to the loss incurred in both years, there is no dilutive
effect of share options.
6. Biological assets
$'000
------
At 1 June 2010 236
Purchase of biological assets 289
Sale of biological assets (34)
Change in fair value 214
Foreign exchange 83
At 1 June 2011 788
Purchase of biological assets 1,428
Sale of biological assets (5)
Change in fair value 400
Foreign exchange 49
------
At 31 May 2012 2,660
------
Biological assets comprise a breeding herd of cattle. Certain
livestock is held for slaughter and has been classified as a
current asset. The remainder is expected to be held for more than
one year and has been classified as a non-current asset, as
follows:
2012 2011 2012 2011
Head Head $'000 $'000
------ ------ ------ ------
Non-current asset 2,704 1,153 1,642 631
Current asset 1,897 292 1,018 157
------ ------ ------ ------
4,601 1,445 2,660 788
====== ====== ====== ======
7. Events after the reporting period
On 3 October 2012, the Company announced that it had entered
into an agreement to sell its remaining interest in its oil and gas
asset in Ethiopia to Marathon Ethiopia Limited BV (Marathon).
Consideration of $40m is receivable on completion of the sale and
$10m upon Marathon's participation in a commercial discovery.
Completion is contingent upon the receipt of formal approval of the
agreement from the Government of Ethiopia.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BGBDBISBBGDB
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