Obtala Limited Quarterly update (6096C)
October 02 2018 - 2:00AM
UK Regulatory
TIDMOBT
RNS Number : 6096C
Obtala Limited
02 October 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.
2 October 2018
Obtala Limited
("Obtala", the "Group" or the "Company")
(AIM: OBT)
Quarterly update
Obtala, the African focused agricultural and forestry company,
is pleased to provide a quarterly update on operations for the
quarter ended 30 September 2018 (Q3 of the Group's 2018 financial
year).
-- US$3.2m revenue in Q3 consistent with average quarterly revenue of US$3.2m in H1
-- 3900m3 of sawn timber produced vs average quarterly production of 3700m3 in H1
-- 90 containers of own production sawn timber shipped vs
quarterly average of 62 containers in H1
-- US$2.25m of additional trade financing received in Q3
-- Strategic review of loss-making divisions underway
Q3 provided another solid quarter of progress for the Group.
Although the revenue run rate was slightly slower than the previous
quarter, year to date revenues have now comfortably surpassed that
of the full year in 2017 and revenues for the current financial
year are expected to exceed US$10m for the first time in the
history of the Company. August is typically a slow month in West
Africa with a large number of public holidays but September proved
to be a record month for the number of containers of sawn timber
shipped from Gabon. Revenues for shipments made in late September
will be recognised in Q4.
The principal focus for the Group remained on increasing output
from our profitable assets in West Africa and improving margins by
leveraging our fixed cost base to reduce cost of production.
Forestry
Output of sawn timber totaled 3,900m3 vs 3,800m3 in Q2 and
3,600m3 in Q1. 95% of sawn timber production came from Gabon
despite the August holiday season. Total output at the sawmills
during 2018 has already comfortably exceeded that of 2017. As
Gabon's rainy season commences in October we can expect to see our
overall production decrease slightly in the final quarter of the
year.
Q3 saw the handover of the new veneer factory from the
installation team to the newly hired veneer production team.
Training of the local labour force has been taking place and
work-flow processes developed. Minor modifications have been made
to equipment, all of which is now fully functioning and the factory
is currently operating 8 hour daily shifts. Trial orders have been
completed and are in transit to clients. Our quality controllers
are happy with the specification and quality of output but we
intend to review detailed customer feedback before increasing
production levels.
Our upgraded logistics team in Libreville have had an immediate
impact by shipping a total of 90 containers, almost 30% more than
in the previous quarter. We intend to further de-risk the Group's
supply chain logistics via agreements with additional shipping
lines. Revenues from containers shipped late in September will fall
into Q4 earnings.
With regard to sawn timber from Mozambique, we have little to
add to comments made at the end of Q2. MITADER, Mozambique's
ministry of land, environment and rural development has still not
announced the definition of what would constitute a 'finished
product', so export of any 2018 harvest is not viable. We have
elected therefore to perform a very limited harvest this year,
which will be sold exclusively into the domestic market. Mozambique
accounted for less than 5% of total sawn timber production during
Q3.
Agriculture
The 2018 harvest of 24 hectares of sweet melon is currently
underway and initial containers have been sent to Dubai and the UK.
The percentage of Caribbean King Melons to reach the size demanded
by the Middle Eastern market has been lower than expected, hence
the shipments of smaller sizes to the UK where we are currently
waiting to see what prices will be achieved. There are many
potential reasons for the fruit being smaller than expected,
including spray programme, irrigation settings and fertilizer
applied, but it is most likely that the limited amount of direct
sunlight has been an influence as Morogoro has experienced
unusually overcast weather since July.
Trading
The order book for the trading business remains very healthy at
more than US$10m and we look forward to converting more of this
business as Trade Finance facilities grow. Our internal trading
fund (ITF) attracted additional capital during the quarter and now
stands at US$4m. The vehicle pays 11.5% to lenders and is secured
against receivables, inventory and timber that has been invoiced
and received from third party suppliers. The initial tranche of ITF
deployed in January 2018 has been recycled on average every 80 days
and average margin per trade has been above 10%. We believe the
high levels of proven returns provide compelling evidence for
potential investors as we seek to scale the trading business.
Group
With top-line growth showing an encouraging trajectory,
management focus must now fall squarely on the underperforming,
loss-making legacy areas of the business as we seek to complete the
turnaround by delivering a positive bottom line. The results for
the first half of 2018 laid bare the reality of the improvement
that is required. As announced simultaneously with the results for
H1 2018, a strategic review of these business units is now
underway, with all recommendations to be considered and examined in
detail by the board. As previously stated, the board is unlikely to
accept any proposal that involves material losses from any business
line being sustained in the next financial year.
Our most recent announcement also signaled our intention to sign
up to the principles of the Quoted Companies Alliance Corporate
Governance Code (the "QCA Code") which I am pleased to say that
Obtala has now adopted. The QCA is an independent membership
organisation that champions the interests of small to mid-size
quoted companies. The QCA Code helps put into practice a
worthwhile, effective and flexible governance model for the
Company. It identifies ten principles to be followed in order to
deliver growth in long term shareholder value, encompassing an
efficient, effective and dynamic management framework accompanied
by good communication and positive engagement between the Company
and all of its stakeholders.
With these principles firmly in mind, I look forward to updating
shareholders with the findings from our strategic review ahead of
our next quarterly update.
Paul Dolan
Chief Executive Officer
Obtala Limited
Miles Pelham - Chairman
Paul Dolan - CEO
Martin Collins - Deputy Chairman
www.obtala.com +44 (0)20 7099 1940
Northland Capital Partners Ltd (Nomad and Broker)
Tom Price
Jamie Spotswood +44 (0)20 3861 6625
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END
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