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Agriterra Report and Financial Statements 2011 – 2012
Agriterra Report and Financial Statements 2011–12
1
2
Agriterra Report and Financial Statements 2011–2012
Contents
Directors & Advisers
Overview
Chairman’s Statement
Operations Review
Beef Operations
Cocoa Sales & Trading
Maize Processing & Farming
Financial Statements
4
6
7 – 12
13 – 22
15 – 19
20 – 21
22
23 – 77
Agriterra Report and Financial Statements 2011–12
3
Agriterra Directors and Advisers
Directors
Auditor
Philippe Edmonds MA (Cantab)
Baker Tilly UK Audit LLP
Chairman
Andrew Groves
Chief Executive
Euan Kay
Executive Director
Michael Pelham
Non-executive Director
Company Secretary
Philip Enoch MA (Oxon)
Registered Office
Richmond House
St Julians Avenue
St Peter Port
Guernsey GY1 1GZ
Registered Auditor
25 Farringdon Street
London EC4A 4AB
Solicitors
As to English Law
Salans LLP
Millennium Bridge House
2 Lambeth Hill
London EC4V 4AJ
As to Guernsey Law
Carey Olsen
8-10 Throgmorton Avenue
London EC2N 2DL
Bankers
HSBC plc
PO Box 31
HSBC House
Lefebvre Street
Guernsey GY1 3AT
Nominated Adviser and Joint Broker
Seymour Pierce Limited
Registrars
20 Old Bailey
London EC4M 7EN
Joint Broker
M C Peat & Co
11-12 St. James’s Square
London SW1Y 4LB
Capita Registrars (Guernsey) Limited
Longue House
Longue House Lane
St Sampsons
Guernsey GY2 4JN
4
Agriterra Report and Financial Statements 2011–2012
Shareholder enquiries:
If you have any further enquiries
as a shareholder please go to
www.agriterra-ltd.com or contact:
Andrew Groves
Agriterra
Tel: +44 (0) 20 7408 9200
Jonathan Wright
Seymour Pierce Ltd
Tel: +44 (0) 20 7107 8000
Hugo de Salis
St Brides Media & Finance Ltd
Tel: +44 (0) 20 7236 1177
Susie Geliher
St Brides Media & Finance Ltd
Tel: +44 (0) 20 7236 1177
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.
Agriterra Report and Financial Statements 2011–12
5
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:
•
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”
•
Acknowledgment of Agriterra’s entitlement to receive a compensation payment of £11,372,682 as
partial recompense for work undertaken and investment on Southern Sudanese oil asset
6
Agriterra Report and Financial Statements 2011–2012
Chairman’s Statement
Agriterra Report and Financial Statements 2011–12
7
“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.
8
Agriterra Report and Financial Statements 2011–2012
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
Agriterra Report and Financial Statements 2011–12
9
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.
10 Agriterra Report and Financial Statements 2011–2012
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 £11,372,682. 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.
Agriterra Report and Financial Statements 2011–12
11
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
12 Agriterra Report and Financial Statements 2011–2012
Operations Review
Agriterra Report and Financial Statements 2011–12
13
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
14 Agriterra Report and Financial Statements 2011–2012
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.
Agriterra Report and Financial Statements 2011–12
15
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.
16 Agriterra Report and Financial Statements 2011–2012
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.
Agriterra Report and Financial Statements 2011–12
17
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.
“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.
18 Agriterra Report and Financial Statements 2011–2012
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 “5th 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.
Agriterra Report and Financial Statements 2011–12
19
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.
20 Agriterra Report and Financial Statements 2011–2012
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 2,000m2
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.
“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.
Agriterra Report and Financial Statements 2011–12
21
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.
22 Agriterra Report and Financial Statements 2011–2012
Financial Statements
Agriterra Report and Financial Statements 2011–12
23
DIRECTORS’ REPORT
The directors of Agriterra Limited (“Agriterra” or the “Company”) hereby present their report together with the
audited financial statements for the year ended 31 May 2012 for the Company and its subsidiaries (altogether the
“Group”).
Principal activities, business review and future developments
The principal activity of the Group is investing in agricultural and associated civil engineering industries in Africa. A
review of the Group’s performance, key performance indicators and prospects is given in the Chairman’s Statement
and Operations Overview on pages 7 to 22. A review of the risks and uncertainties impacting on the Group’s
long term performance is included in the Corporate Governance report on pages 27 to 29. Details of the Group’s
exposure to foreign exchange and other financial risks are included in note 3.
Results and dividend
The Group results show a loss after taxation and discontinued operations attributable to the equity holders of the
Company of $6.2m (2011: loss $2.4m). The directors are unable to recommend a dividend.
Directors
The directors who served since 1 June 2011:
PH Edmonds
AS Groves
EA Kay
MN Pelham
Chairman
Chief Executive Officer
Executive Director
Non-Executive Director
Directors’ interests
The directors serving during the year had the following beneficial interests in the shares of the Company:
PH Edmonds
AS Groves
EA Kay
MN Pelham
Ordinary shares of 0.1p each
31 May 2012
31 May 2011
15,000,000
15,040,000
4,635,520
1,067,760
15,000,000
15,040,000
2,500,000
–
The directors’ interests in share options of the Company as at 31 May 2012 were as follows:
EA Kay
Date of grant
9 January 2009
Exercise price
3p
Number of ordinary
shares of 0.1p each
2,500,000
No share options were granted to or exercised by directors during the year. All options have vested and are
exercisable until 9 January 2019.
24 Agriterra Report and Financial Statements 2011–2012
On 29 July 2012, share options were granted as follows:
EA Kay
EA Kay
Date of grant
29 July 2012 1
29 July 2012 2
Exercise price
3.5p
5.5p
Number of ordinary
shares of 0.1p each
2,500,000
2,500,000
20% of these options vest on each of the first to fifth anniversaries of the date of grant.
1 These options are exercisable until 28 July 2022.
2 These options are exercisable until 11 January 2020.
There have been no other changes in directors’ interests in shares or options between 1 June 2012 and 31 October
2012.
Directors’ indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its directors which were made
during the year and remain in force at the date of this report.
Employee involvement policies
The Group places considerable value on the awareness and involvement of its employees in the Group’s performance.
Within bounds of commercial confidentiality, information is disseminated to all levels of staff about matters that
affect the progress of the Group and that are of interest and concern to them as employees.
Creditors payment policy and practice
The Group’s policy is to ensure that, in the absence of dispute, all suppliers are dealt with in accordance with its
standard payment policy to abide by the terms of payment agreed with suppliers when agreeing the terms of each
transaction. Suppliers are made aware of the terms of payment. The number of days of average daily purchases
included in trade payables at 31 May 2012 was 6 days (2011: 11 days).
Political and charitable donations
During the year no political and charitable donations were made (2011: $nil).
Social and community issues
The Group recognises the value of employment and training to the continued economic growth in the countries
in which it operates. The Group is developing policies to ensure its expertise and specialist skills and facilities are
made available to the broader community.
Post balance sheet events
Post balance sheet events are detailed in note 21 to the financial statements.
Statement as to disclosure of information to auditor
The directors who were in office on the date of approval of these financial statements have confirmed that, as far
as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors have
confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves
aware of any relevant audit information and to establish that it has been communicated to the auditor.
Agriterra Report and Financial Statements 2011–2012
25
DIRECTORS’ REPORT (continued)
Auditor
The Company’s auditor, Baker Tilly UK Audit LLP, has indicated its willingness to continue in office.
Electronic communications
The maintenance and integrity of the Company’s website is the responsibility of the directors; the work carried out
by the auditor does not involve consideration of these matters and accordingly, the auditor accepts no responsibility
for any changes that may have occurred to the financial statements since they were initially presented on the
website.
The Company’s website is maintained in compliance with AIM Rule 26.
By order of the Board
P H Edmonds
Chairman
12 November 2012
26 Agriterra Report and Financial Statements 2011–2012
CORPORATE GOVERNANCE
The board of directors is accountable to the Company’s shareholders for good corporate governance and the
directors support the UK Corporate Governance Code as far as it is appropriate to the Group’s size and its stage
of development. Set out below is a summary of how, at 31 May 2012, the Group was dealing with corporate
governance issues.
The Board of Directors
The Group is led and controlled by a board comprising the chairman, the chief executive, an executive director and
one non-executive director. The board is responsible for formulating, reviewing and approving the Group’s strategy,
budgets and corporate actions.
There are no matters specifically reserved to the board for its decision, but no decision of any consequence is made
other than by the directors. There is no separate Nomination Committee due to the current size of the board and
any new directors are appointed by the whole Board.
There is no agreed formal procedure for the directors to take independent professional advice at the Group’s
expense.
The Group has adopted a share dealing code for directors’ dealings which is appropriate for an AIM quoted company.
The Directors comply with Rule 21 of the AIM Rules relating to directors’ dealings and take all reasonable steps to
ensure compliance by the Group’s employees.
The Company’s directors submit themselves for re-election at the Annual General Meeting at regular intervals in
accordance with the Company’s Articles of Incorporation.
The company has Remuneration and Audit Committees comprising PH Edmonds and MN Pelham.
Directors’ Remuneration
The remuneration committee reviews the performance of the directors and makes recommendations to the
board on matters relating to the directors’ remuneration and other terms of employment. The committee makes
recommendations to the board on the granting of share options and other equity incentives and will administer
any equity incentive schemes. The committee is chaired by PH Edmonds.
Details of the remuneration of each director are set out in note 7 to the financial statements.
Accountability and Audit
The audit committee is responsible for ensuring that the Group’s financial performance and position is properly
monitored, controlled and reported. The committee has unrestricted access to the auditor. It has met once during
the year and has reviewed the report from the auditors relating to the accounts and internal controls. The committee
is also responsible for reviewing the scope and results of the audit, its cost effectiveness and the independence and
objectivity of the auditor. A formal statement of independence has been received from the external auditor for the
year. The committee is chaired by P H Edmonds.
Relations with Shareholders
The chief executive is the company’s principal spokesperson with investors, fund managers, the press and other
interested parties. At the Annual General Meeting, investors are given the opportunity to question the board.
Agriterra Report and Financial Statements 2011–2012
27
CORPORATE GOVERNANCE (continued)
Internal Control
The board acknowledges its responsibility for establishing and monitoring the Group’s systems of internal control.
Although no system of internal control can provide absolute assurance against material misstatement or loss, the
Group’s systems are designed to provide the directors with reasonable assurance that problems are identified on a
timely basis and dealt with appropriately.
The board reviews the effectiveness of the systems of internal control and considers the major business risks and
the control environment. No significant control deficiencies have come to light during the year and no weakness
in internal financial control has resulted in material losses, contingencies or uncertainties which would require
disclosure as recommended by the guidance for directors on reporting on internal financial control.
In light of this control environment the Board considers that there is no current requirement for a separate internal
audit function.
Compliance with relevant legislation
All directors are kept informed of changes in relevant legislation and changing commercial risks with the assistance
of the Company’s legal advisers and auditors where appropriate. The directors have taken appropriate legal
advice and implemented internal training and reporting procedures to ensure compliance with the UK Bribery
Act 2010 (the “Bribery Act”) and the Corruption (Bailiwick of Guernsey) Law, 2003 which contains broadly similar
restrictions. Notwithstanding the fact that the Company is not UK–resident, the directors have formed a view that
it is appropriate for the Company to maintain compliance with the Bribery Act.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the Chairman’s Statement and Operations Overview on pages 7 to 22 and the risks facing
Agricultural businesses are outlined below. Note 3 to the financial statements include the Group’s objectives,
policies and processes for managing its capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The board has detailed its considerations relating to Going Concern in note 4 of the financial statements.
Risks and uncertainties
There are a number of risks and uncertainties facing the Group, principally the following:
Foreign exchange
The Group conducts its operations in jurisdictions with currencies other than its reporting currency and therefore
is subject to fluctuations in exchange rates. Some of the countries in which the Group operates maintain strict
controls on access to foreign currency and the repatriation of funds.
Risks associated with operating in Africa
Changes in government, monetary policies, taxation, exchange control and other laws can have a significant impact
on the Group’s assets and operations. Several countries in Africa have experienced periods of political instability, and
there can be no guarantees as to the level of future political stability. Changes to government policies and applicable
laws could adversely affect the operations and/or financial condition of the Group. The jurisdictions in which the
Group might operate in the future may have less developed legal systems than more established economies, which
could result in risks such as (i) effective legal redress in the courts being more difficult to obtain; (ii) a higher degree of
discretion on the part of governmental authorities; (iii) the lack of judicial or administrative guidance on interpreting
28 Agriterra Report and Financial Statements 2011–2012
applicable rules and regulations. In certain jurisdictions, the commitment of local business people, government
officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be
more uncertain, creating particular concerns with respect to the Group’s licenses and agreements for business.
These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed.
Regulatory risk
While the Group believes that its operations are currently in substantial compliance with all relevant material
environmental and health and safety laws and regulations, there can be no assurance that new laws and regulations,
or amendments to or stringent enforcement of, existing laws and regulations will not be introduced, which could
have a material adverse impact on the Group.
Land ownership in Mozambique
Under the laws of Mozambique, proprietary rights in land are exclusive to the state. The Mozambique constitution
proscribes the state’s rights of ownership and the power and ability to determine the conditions for the use and
development of land by individual or corporate persons. The land can not be sold, mortgaged or encumbered in
any way or by any means. The state grants the right to use and develop the land which is evidenced by a Use and
Development of Land License (“DUAT”) which allows for the title holder to build and register any infrastructure under
its name on such land. DECA, Compagri and Mozbife’s operations are dependent on obtaining and maintaining
the relevant DUATs, and whilst there is currently no indication that the relevant DUATs are invalid, there can be no
guarantees that this will not change in future.
Growing season
The Group anticipates a six month buying/growing season for maize and a similar profile for cocoa. However
matters outside the control of the Group, such as adverse weather conditions, could impact upon the amount of
production achieved by local farmers in any year, which could consequently have adverse effects on the Group’s
business and profit margins.
Agriterra Report and Financial Statements 2011–2012
29
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Companies (Guernsey) Law 2008, as amended (the “2008 Law”) requires the directors to ensure that the financial
statements are prepared properly and in accordance with any relevant enactment for the time being in force. The
directors are required to prepare financial statements for each financial period which give a true and fair view of the
state of affairs of the Company and Group and of the profit and loss for that period.
The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in
accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and
have elected under Guernsey Company Law to prepare the company financial statements in accordance with IFRS
as adopted by the EU.
The financial statements are required by IFRS as adopted by the EU to present fairly the financial position of the
Group and the financial performance of the Group. Applicable law provides in relation to such financial statements
that references to financial statements giving a true and fair view are references to their achieving a fair presentation.
The directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and of the profit or loss of the Group for that period.
In preparing the Group financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time the financial position of the group and
enable them to ensure that the financial statements comply with applicable law. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Group’s website. Legislation in Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The directors confirm they have discharged their responsibilities as noted above.
30 Agriterra Report and Financial Statements 2011–2012
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
AGRITERRA LIMITED
We have audited the Group and Company financial statements of Agriterra Limited for the year ended 31 May 2012
on pages 32 to 77. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with section 262 of the Companies
(Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As more fully explained in the Statement of Directors’ Responsibilities set out on page 30, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
We read other information contained in the annual report and consider the implications for our report if we become
aware of any apparent misstatements within them.
Scope of the audit
A description of the scope of an audit of financial statements arising from the requirements of International
Standards on Auditing (UK and Ireland) is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm .
Opinion on the financial statements
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the Group’s and the Company’s affairs as at 31 May 2012 and of the
Group’s loss for the year then ended;
the Group and Company financial statements have been properly prepared in accordance with IFRS as adopted
by the European Union; and
the Group and Company financial statements have been prepared in accordance with the requirements of the
Companies (Guernsey) Law 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law 2008 requires
us to report to you if, in our opinion:
• proper accounting records have not been kept by the company; or
•
• we have not received all the information and explanations we require for our audit.
the Company individual financial statements are not in agreement with the accounting records; or
Baker Tilly UK Audit LLP, Auditor
Chartered Accountants and Registered Auditors
25 Farringdon Street
London EC4A 4AB
12 November 2012
Agriterra Report and Financial Statements 2011–2012
31
CONSOLIDATED INCOME STATEMENT
For the year ended 31 May 2012
Continuing Operations
Revenue
Cost of sales
Gross profit
Increase in value of biological assets
Operating expenses
Other expenses
Other income
Share of profit from associate
Operating loss
Finance income
Finance costs
Loss before taxation
Income tax expense
Loss after tax
Discontinued operations
Profit / (loss) for the year
Note
5
Year ended
31 May 2012
$’000
Year ended
31 May 2011
$’000
13,826
(11,913)
13,588
(10,372)
14
16
6
8
8
9
1,913
400
(8,851)
(318)
47
9
3,216
214
(6,109)
(233)
582
-
(6,800)
(2,330)
48
(164)
159
-
(6,916)
(2,171)
(26)
(168)
(6,942)
(2,339)
10
721
(89)
Loss for the year attributable to owners of the parent
(6,221)
(2,428)
Loss per share
– Basic and diluted (cents)
Loss per share from continuing operations
– Basic and diluted (cents)
11
11
(0.7c)
(0.4c)
(0.8c)
(0.4c)
The notes on pages 37 to 67 form part of the financial statements.
32 Agriterra Report and Financial Statements 2011–2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2012
Loss for the year
Foreign exchange translation differences
Other comprehensive income for the year
Total comprehensive income for the year
attributable to owners of the parent company
The notes on pages 37 to 67 form part of the financial statements.
Year ended
31 May 2012
$’000
Year ended
31 May 2011
$’000
(6,221)
(2,428)
2,078
2,078
3,399
3,399
(4,143)
971
Agriterra Report and Financial Statements 2011–2012
33
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 May 2012
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investment in associate
Biological assets
Total non-current assets
Current assets
Biological assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
NET ASSETS
EQUITY
Issued capital
Share premium
Shares to be issued
Share based payment reserve
Translation reserve
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT
Note
12
13
16
14
14
15
16
16
2012
$’000
963
26,243
9
1,642
28,857
1,018
6,701
3,628
3,553
14,900
2011
$’000
271
13,264
-
631
14,166
157
2,976
2,039
8,172
13,344
43,757
27,510
17
(2,361)
(2,678)
41,396
24,832
18
1,957
148,530
2,940
1,620
296
1,387
131,593
-
1,360
(1,782)
(113,947)
(107,726)
41,396
24,832
The notes on pages 37 to 67 form part of the financial statements.
The financial statements on pages 32 to 67 were approved and authorised for issue by the Board of Directors on
12 November 2012 and were signed on its behalf.
PH Edmonds
Chairman
34 Agriterra Report and Financial Statements 2011–2012
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Ordinary
share
capital
$’000
Deferred
share
capital
$’000
Share
premium
$’000
Shares
to be
issued
$’000
Share
based
payment
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Balances at 1 June 2010
923
238
125,184
Loss for the year
Other comprehensive
income
Exchange translation
differences on foreign
operations
Total comprehensive
income for the year
Transactions with
owners
Share issues
Issue costs
Total transactions with
owners
-
-
-
226
-
226
-
-
-
-
-
-
-
-
-
6,570
(161)
6,409
Balances at 1 June 2011
1,149
238
131,593
Loss for the year
Other comprehensive
income
Exchange translation
differences on foreign
operations
Total comprehensive
income for the year
Transactions with owners
Share issues
Shares to be issued
Issue costs
Share based payment
charge
Total transactions with
owners
Balances at 31 May 2012
-
-
-
570
-
-
-
570
1,719
-
-
-
-
-
-
-
-
-
-
-
17,707
(770)
-
16,937
238
148,530
-
-
-
-
-
-
-
-
-
-
-
-
1,360
(5,181)
(105,298)
17,226
-
-
-
-
-
-
-
(2,428)
(2,428)
3,399
3,399
-
(2,428)
3,399
971
-
-
-
-
-
-
6,796
(161)
6,635
1,360
(1,782)
(107,726)
24,832
-
-
-
-
-
-
(6,221)
(6,221)
2,078
-
2,078
2,078
(6,221)
(4,143)
-
-
-
-
-
-
-
-
-
-
18,277
2,940
(610)
100
20,707
296
(113,947)
41,396
-
2,940
-
-
160
100
2,940
2,940
260
1,620
The notes on pages 37 to 67 form part of the financial statements.
Agriterra Report and Financial Statements 2011–2012
35
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 May 2012
Operating activities
Loss before tax
Adjustments for:
– Depreciation of property, plant and equipment
– Loss on disposal of property, plant and equipment
– Share based payment charge
– Increase in Biological assets
– Foreign exchange
– Net interest expense / (income)
Operating cash flow before movements in working capital
Working capital adjustments:
– (Increase) / decrease in inventory
– Increase in receivables
– (Decrease) / increase in payables
Cash (used in) / from operations
Finance charges
Interest received
Net cash (used in) / from continuing operating activities
Net cash from / (used in) discontinued activities
Net cash (used in) / from operating activities
Taxation
Corporate tax paid
Net cash outflow from taxation
Investing activities
Purchase of intangible asset
Purchase of subsidiary net of debt acquired
Purchase of property, plant and equipment
Proceeds on sale of property, plant and equipment
Purchase of biological assets
Proceeds on sale of investment in financial assets
Net cash used in investing activities
Financing activities
Proceeds from issue of share capital
Share issue costs
Draw down of bank loan
Net cash from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Exchange rate adjustment
Cash and cash equivalents at end of the year
The notes on pages 37 to 67 form part of the financial statements.
36 Agriterra Report and Financial Statements 2011–2012
Year ended
31 May 2012
$’000
Year ended
31 May 2011
$’000
(6,916)
1,878
12
100
(400)
149
116
(5,061)
(3,505)
(1,545)
(690)
(10,801)
(164)
48
(10,917)
721
(10,196)
(60)
(60)
-
(283)
(7,575)
96
(1,428)
-
(9,190)
15,000
(610)
123
14,513
(4,933)
8,172
314
3,553
(2,171)
1,228
5
-
(214)
(141)
(159)
(1,452)
1,973
(547)
261
235
-
159
394
(198)
196
(38)
(38)
(250)
-
(2,568)
38
(255)
128
(2,907)
6,883
(161)
-
6,722
3,973
3,442
757
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 address of the registered office is given on
page 4. The nature of the Group’s operations and its principal activities are set out in the Chairman’s Statement and
Operations Overview on pages 7 to 22.
The functional currency of the Company is Pounds Sterling (GBP). The reporting currency for the Company and
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.
During the year the following standards have been adopted in these financial statements:
IAS 24 (revised)
IFRIC 14 (amended)
Related Party Disclosures
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
The adoption of these standards has had no material effect other than some minor disclosure items.
Agriterra Report and Financial Statements 2011–2012
37
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
1. GENERAL INFORMATION (continued)
At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to
the Group’s operations that have not been applied in these financial statements were in issue but not yet effective
or endorsed (unless otherwise stated):
IFRS 7 (amended)
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IAS 1
IAS 19 (revised)
IAS 32
IFRIC 20
Financial Instruments: Disclosures (effective for annual periods beginning on or
after 1 January 2013)
Financial Instruments: Classification (effective for annual periods beginning on
or after 1 January 2015)
Consolidated Financial Statements (effective for annual periods beginning on or
after 1 January 2013)
Joint Arrangements (effective for annual periods beginning on or after
1 January 2013).
Disclosure of Interests in Other Entities (effective for annual periods beginning
on or after 1 January 2013)
Fair Value Measurement (effective for annual periods beginning on or after
1 January 2013).
Separate Financial Statements (as amended 2011) (effective for annual periods
beginning on or after 1 January 2013).
Investments in Associates and Joint Ventures (as amended 2011) (effective for
annual periods beginning on or after 1 January 2013).
Presentation of Financial Statements - Amendment; Presentation of items of
other comprehensive income (effective for annual periods beginning on or
after 1 July 2012). Endorsed June 2012
Employee Benefits - (effective for annual periods beginning on or after
1 January 2013). Endorsed June 2012
Financial Instruments - Presentation - Amendment; Offsetting Financial Assets
and Financial Liabilities (effective for annual periods beginning on or after
1 January 2014).
Accounting for stripping costs in the production phase of a surface mine
(effective for annual periods beginning on or after 1 January 2013).
Unless indicated to the contrary, these amendments have not yet been endorsed by the EU.
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no
material impact on the financial statements of the Group.
38 Agriterra Report and Financial Statements 2011–2012
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The Group and Company financial statements have been prepared on the historical cost basis except for financial
instruments measured at fair value and biological assets measured at fair value less point of sale costs. The principal
accounting policies adopted are set out below.
Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiaries) made up to 31 May. Control is recognised where the Company has the power to
govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
(ii) Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. The consolidated financial statements include the Group’s share of the total recognised income
and expenses of associates on an equity accounted basis, from the date that significant influence commences until
the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the
Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that
the Group has a binding obligation to make payments on behalf of an associate.
(iii) Transactions eliminated on consolidation
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured
at the aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed and
equity instruments issued by the Group in exchange for control of the acquiree. Costs directly attributable to the
acquisitions are expensed as incurred.
The assets, liabilities and contingent liabilities of the acquiree are measured at their fair value at the date of
acquisition. Any excess of the fair value of the consideration paid over the fair value of the identifiable net assets
acquired is recognised as goodwill. If the fair value of the consideration is less than the fair value of the identifiable
net assets acquired, the difference is recognised directly in the income statement.
A transaction with a minority is not a business combination. The excess of consideration over the minority share of
the net assets of the Group is taken to reserves.
Agriterra Report and Financial Statements 2011–2012
39
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill
Goodwill arising on the acquisition of subsidiaries is recognised as an asset and is separately disclosed.
Goodwill is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss
and is not subsequently reversed. For the purpose of impairment testing goodwill is allocated to cash generating
units of the acquirer which represent the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or groups of assets. On disposal of a subsidiary,
associate or joint venture, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
Going concern
The board has detailed its considerations relating to Going Concern in note 4 of the financial statements.
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and Group 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 financial statements.
Foreign currency translation
(i) Functional and presentation currency
The individual financial statements of each subsidiary company are presented in the currency of the primary
economic environment in which it operates (“the functional currency”). The consolidated financial statements are
presented in US Dollars. The functional currency of the Company is pounds sterling and its financial statements are
presented in US Dollars.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency of the entity using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year
end exchange rates are recognised in the income statement.
(iii) Consolidation
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s operations
are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at
the average exchange rates for the year, unless exchange rates fluctuate significantly during the year, in which case
exchange rates at the date of transactions are used. Exchange differences arising from the translation of the net
investment in foreign operations and overseas branches are recognised in the Group’s and Company’s translation
reserve respectively, a separate component of equity. Such translation differences are recognised as income or
expense in the year in which the operation or branch is disposed of.
The
following exchange rates have been used
in preparing the consolidated financial statements:
Average Rate
Closing Rate
2012
2011
2012
2011
USD : GBP
Mozambican Meticais: USD
1.5609
27.30
1.5770
33.78
1.5477
27.59
1.6540
29.78
40 Agriterra Report and Financial Statements 2011–2012
Revenue recognition
Revenue is recognised when revenue and associated costs can be measured reliably and future economic benefits
are probable. Revenue is measured at the fair value of the consideration received or receivable for goods and
services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed. Delivery occurs when the products
have arrived at the specified location, and the risks and rewards of ownership have been transferred to the customer.
Operating loss
Operating loss consists of operating expenses and excludes interest income net of finance costs.
Interest income
Interest income is accrued on an amortised cost basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset to that asset’s net carrying amount.
Leasing
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant
lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight
line basis over the lease term.
Taxation
The Company is resident for taxation purposes in Guernsey and its income is subject to income tax, presently at a
rate of zero. The income of overseas subsidiaries is subject to tax at the prevailing rate in each jurisdiction.
The income tax expense for the period comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised in other comprehensive income or directly in
equity, when tax is recognised in other comprehensive income or directly in equity as appropriate. Taxable profit
differs from accounting profit as reported in the income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Current tax expense is the expected tax payable on the taxable income for the year. It is calculated on the basis of
the tax laws and rates enacted or substantively enacted at the balance sheet date, and includes any adjustment
to tax payable in respect of previous years. Deferred tax is calculated using the balance sheet liability method,
providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which the asset can be utilised. This requires judgements to be
made in respect of the availability of future taxable income.
The Group’s deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the period
when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted
by the reporting date.
Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
Agriterra Report and Financial Statements 2011–2012
41
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in
subsidiaries, branches and joint ventures where the Group is able to control the timing of reversal of the temporary
differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Operating segments
The Chief Operating Decision Maker is the Board of Directors. The board reviews the Group’s internal reporting in
order to assess performance of the business. Management has determined the operating segment based on the
reports reviewed by the board. The board considers the activities from a business viewpoint.
Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less depreciation (see below) and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition. Subsequent costs are included
in the asset’s carrying value when it is considered probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably.
Assets in course of construction for production, rental or administrative purposes not yet determined are carried at
cost, less any identified impairment loss. Cost includes professional fees and associated administrative expenses.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each
item, as follows:
Land
Buildings and leasehold improvements
Assets in course of construction
Plant and equipment
Aviation assets
Motor vehicles
Office furniture and equipment
Nil
5% – 25%
Nil
7% – 25%
20%
20% – 25%
10% – 33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in
the income statement.
Intangible assets
All costs incurred prior to obtaining the legal right to a concession are written-off as incurred. Costs arising
following the acquisition of a concession or an exploration licence are carried at historical cost less impairment
losses recognised on a project-by-project basis, pending determination of the technical feasibility and commercial
viability of the project. Costs incurred include technical expenses and allocated administrative overheads. Intangible
assets arising on consolidation are stated at fair value less any impairment losses recognised.
Intangible assets are amortised from completion over the remaining life of the concession.
Impairment of property, plant and equipment and intangible assets excluding goodwill
Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable
an asset is reviewed for impairment. An asset’s carrying value is written down to its estimated recoverable amount
(being the higher of the fair value less costs to sell and value in use) if that is less than the asset’s carrying amount.
42 Agriterra Report and Financial Statements 2011–2012
Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis,
with each project representing a potential single cash generating unit. An impairment review is undertaken when
indicators of impairment arise but typically when one of the following circumstances apply:
• unexpected geological occurrences that render the resource uneconomic;
• title to the asset is compromised;
• variations in oil and gas prices that render the project uneconomic;
• variations in the currency of operation; or
• the Group determines that it no longer wishes to continue to evaluate or develop the asset.
Biological assets
A gain or loss in the value of a biological asset is measured in accordance with IAS 41 ‘Agriculture’ on consumer
biological assets (beef cattle). The herd comprises breeding and non-breeding cattle. The breeding cattle comprise
bulls, cows and heifers. As these are expected to be held for more than one year, breeding cattle are classified as
non-current assets. The non breeding cattle comprise steers that will be grown and sold for slaughter and are
classified as current assets.
Cattle are recorded as assets at the year end and the fair value is determined by the size of the herd and market
prices at the reporting date.
The cost of forage is released to the income statement over the period it is consumed.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost
of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition.
Financial assets
Financial assets are classified into the following specific categories: financial assets ‘at fair value through profit or
loss’ (FVTPL), ‘held-to-maturity’ investments, available-for-sale (AFS) financial assets and ‘loans and receivables’. The
classification depends upon the nature and purpose of the financial asset and is determined at the time of initial
recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts the estimated
future cash receipts (including all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Loans and receivables
Trade and other receivables are not interest bearing and are initially recognised at their fair value and are subsequently
stated at amortised cost using the effective interest method as reduced by appropriate allowances for estimated
irrecoverable amounts.
Agriterra Report and Financial Statements 2011–2012
43
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly
liquid investments with original maturities of three months or less which are subject to an insignificant risk of
changes in value.
Financial liabilities
Trade and other payables
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost,
using the effective interest rate method.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, it is
probable that an outflow of the resources will be required to settle the obligation and the amount can be reliably
estimated.
Equity instruments
Equity instruments issued by the Company are recorded at fair value on initial recognition, net of transaction costs.
Share based payments
The Company issues equity-settled share-based payments to certain employees. These payments are measured
at fair value (excluding the effect of non market based vesting conditions) at the date of grant and the value is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will
eventually vest and adjusted for non market based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life used in the model is adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
3. FINANCIAL RISK FACTORS
The Group’s and Company’s principal financial instruments comprise cash, and short-term deposits. Together with
the issue of equity share capital, the main purpose of these is to finance the Group and Company operations and
expansion. The Group and Company have other financial instruments such as trade receivables and trade payables
which arise directly from normal trading.
The Group and Company have not entered into any derivative or other hedging instruments.
The main risks arising from the Group’s and Company’s financial instruments are credit risk, liquidity risk and market
risk (including interest rate risk and currency risk). The Board reviews and agrees policies for managing each of these
risks and these are summarised below. The interest receivable relates to interest earned on bank deposits. Interest
payable relates to bank overdraft interest and interest paid on related party loans.
44 Agriterra Report and Financial Statements 2011–2012
Credit risk
Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as
outstanding receivables. The Group’s and Company’s principal deposits were held with various Banks with a high
credit rating to diversify from a concentration of credit risk. Receivables are regularly monitored and assessed for
recoverability.
The fair value of financial assets and liabilities is not materially different to the carrying values presented.
Maximum exposure to credit risk is as follows:
Group
Trade and other receivables
Cash
Company
Trade and other receivables
Cash
2012
$’000
3,628
3,553
7,181
1,760
2,434
4,194
2011
$’000
2,039
8,172
10,211
975
2,922
3,897
Liquidity risk
The Group’s and Company’s policy throughout the year has been to ensure that it has adequate liquidity by careful
management of its working capital. At 31 May 2012 the Group held cash deposits of $3.6m (2011: $8.2m). At 31
May 2012 the Company held cash deposits of $2.4m (2011: $2.9m). At 31 May 2012 the Group had an overdraft
facility of $2m (2011: $nil) of which $123,000 was utilised (2011: $nil) (see note 17).
Market risk
The significant market risk exposures to which the Group and Company are exposed are currency risk, and interest
rate risk. These are discussed further below:
• Interest rate risk
The Group and Company finance operations through the use of cash deposits at variable rates of interest for a
variety of short term periods, depending on cash requirements and an overdraft facility. The rates are reviewed
regularly and the best rate obtained in the context of the Group’s and Company’s needs. The weighted average
interest rate on deposits was 1.1% (2011: 3.1%). The weighted average interest on drawings under the overdraft
facility was 22% (2011: not utilised ).
The exposure of the financial assets to interest rate risk is as follows:
Group
Financial assets at floating rates
Financial liabilities at floating rates
Company
Financial assets at floating rates
2012
$’000
3,553
(123)
3,430
2,434
2011
$’000
8,172
-
8,172
2,922
Agriterra Report and Financial Statements 2011–2012
45
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
3. FINANCIAL RISK FACTORS (continued)
• Currency risk
The Group and Company conduct operations in other jurisdictions than their reporting currency and therefore are
subject to fluctuations in exchange rates. These risks are monitored by the board on a regular basis. The Group and
Company do not hedge against the effects of exchange rates.
The exposure of the Group’s financial assets and liabilities to currency risk is as follows:
Cash and cash equivalents
Trade and other receivables
Total financial assets at 31 May 2012
Cash and cash equivalents
Trade and other receivables
Total financial assets at 31 May 2011
Bank loans
Trade payables
Other payables
Total financial liabilities at 31 May 2012
Trade payables
Other payables
Total financial liabilities at 31 May 2011
Sterling
$’000
2,433
1,489
3,922
2,917
755
3,672
-
148
565
713
177
822
999
US$
$’000
53
592
645
169
653
822
-
52
882
934
53
961
1,014
MTN
$’000
823
1,282
2,105
5,065
520
5,585
123
9
422
554
138
439
577
Other
$’000
244
265
509
21
111
132
-
-
160
160
-
88
88
Total
$’000
3,553
3,628
7,181
8,172
2,039
10,211
123
209
2,029
2,361
368
2,310
2,678
46 Agriterra Report and Financial Statements 2011–2012
The exposure of the Company’s financial assets and liabilities to currency risk is as follows:
Cash and cash equivalents
Trade and other receivables
Total financial assets at 31 May 2012
Cash and cash equivalents
Trade and other receivables
Total financial assets at 31 May 2011
Trade payables
Other payables
Total financial liabilities at 31 May 2012
Trade payables
Other payables
Total financial liabilities at 31 May 2011
Sterling
$’000
2,433
1,540
3,973
1,207
755
1,962
148
924
1,072
176
303
479
US$
$’000
1
220
221
1,646
220
1,866
52
304
356
53
822
875
Other
$’000
-
-
-
69
-
69
-
-
-
-
-
-
Total
$’000
2,434
1,760
4,194
2,922
975
3,897
200
1,228
1,428
229
1,125
1,354
Fair values
The directors have reviewed the financial statements and have concluded that there is no significant difference
between the carrying values and the fair values of the assets and liabilities of the Group and of the Company as at
31 May 2012 and 31 May 2011.
Commodity price risk
The Group is exposed to fluctuations in maize prices. Whilst both input and sales prices will correlate to market
prices, timing differences between purchase and sale mean margins could be affected. At 31 May 2012 a 5%
decrease in the price of maize would reduce future margins by $670,000 (2011: $300,000).
The Group is also exposed to fluctuations in cocoa prices, however cocoa stocks at 31 May 2012 are not significant.
Biological asset risk
The Group’s cattle business is exposed to risks from disease and the effect of the weather on pasture land. These
risks are mitigated by continuous veterinary monitoring and access to irrigated pasture land.
Capital risk management
The Group and Company plan capital requirements regularly. The requirement for capital is satisfied by the issue
of shares. Subsidiary companies are financed though equity investment and long term loans from the Company.
The Group’s and Company’s objectives when managing capital is to safeguard the Group’s and Company’s ability
to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The
Group and Company place funds which are not required in the short term on deposit at the best interest rates it is
able to secure from its bankers.
Agriterra Report and Financial Statements 2011–2012
47
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
3. FINANCIAL RISK FACTORS (continued)
At 31 May 2012 the Group had an overdraft facility of $2m secured upon its grain inventories in Mozambique (2011:
$nil). The Company had no short term borrowings or borrowing facilities at 31 May 2012 (2011: $nil). The Group or
Company are under no obligation to meet any externally imposed capital requirements.
Sensitivity analysis
Financial instruments affected by market risk include cash and cash equivalents, trade and other receivables and
payables. The following analysis, required by IFRS 7, is intended to illustrate the sensitivity of the Group’s and Company’s
financial instruments (at year end) to changes in market variables, being exchange rates and interest rates.
Exchange rates:
Group
2012
+ 5% US$ Sterling
- 5% US$ Sterling
+ 5% US$ Metical
- 5% US$ Metical
2011
+ 5% US$ Sterling
- 5% US$ Sterling
+ 5% US$ Metical
- 5% US$ Metical
Company
2012
+ 5% US$ Sterling
- 5% US$ Sterling
2011
+ 5% US$ Sterling
- 5% US$ Sterling
Income Statement
$’000
117
(117)
14
(14)
82
(82)
73
(73)
Income Statement
$’000
116
(116)
82
(82)
Equity
$’000
117
(117)
14
(14)
82
(82)
73
(73)
Equity
$’000
116
(116)
82
(82)
The following assumptions were made in calculating the sensitivity analysis:
• all income statement sensitivities also impact equity
• translation of foreign subsidiaries and operations into the Group’s presentation currency have been excluded
from this sensitivity.
48 Agriterra Report and Financial Statements 2011–2012
Interest Rates: The Group and Company do not hold any financial derivatives other than cash whose value is
affected by changes in interest rates.
Group
2012
+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
- 20 bp increase in interest rates
- 50 bp increase in interest rates
2011
+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
- 20 bp increase in interest rates
- 50 bp increase in interest rates
Company
2012
+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
- 20 bp increase in interest rates
- 50 bp increase in interest rates
2011
+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
- 20 bp increase in interest rates
- 50 bp increase in interest rates
Income Statement
$’000
Equity
$’000
14
35
(14)
(35)
16
41
(16)
(41)
14
35
(14)
(35)
16
41
(16)
(41)
Income Statement
$’000
Equity
$’000
5
12
(5)
(12)
6
14
(6)
(14)
5
12
(5)
(12)
6
14
(6)
(14)
The above sensitivities are calculated with reference to a single moment in time and will change due to a number
of factors including:
• fluctuating trade receivable and trade payable balances
• fluctuating cash balances
• changes in currency mix
Agriterra Report and Financial Statements 2011–2012
49
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
4. 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 on pages 7 to 12, 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.
50 Agriterra Report and Financial Statements 2011–2012
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).
5. 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 31 May 2012
Revenue
Segment results
- Operating loss
- Interest (expense) / income
Loss before tax
Income tax
Loss after tax
Grain
$’000
9,681
(1,203)
(138)
(1,341)
(26)
(1,367)
Beef
$’000
895
(2,310)
-
(2,310)
-
(2,310)
Cocoa
$’000
3,250
Unallocated
$’000
-
(578)
-
(578)
-
(578)
(2,709)
22
(2,687)
-
(2,687)
The segment items included in the income statement for the year are as follows:
Depreciation
Year ending 31 May 2011
Revenue
Segment results
- Operating profit / (loss)
- Interest income
Profit / (loss) before tax
Income tax
Profit / (loss) after tax
Grain
$’000
980
Grain
$’000
13,533
270
141
411
(168)
243
Beef
$’000
703
Beef
$’000
55
(958)
-
(958)
-
(958)
Cocoa
$’000
105
Unallocated
$’000
90
Cocoa
$’000
Unallocated
$’000
-
-
-
-
-
-
-
(1,642)
18
(1,624)
-
(1,624)
The segment items included in the income statement for the year are as follows:
Depreciation
Grain
$’000
870
Beef
$’000
276
Cocoa
$’000
Unallocated
$’000
-
82
Total
$’000
13,826
(6,800)
(116)
(6,916)
(26)
(6,942)
Total
$’000
1,878
Total
$’000
13,588
(2,330)
159
(2,171)
(168)
(2,339)
Total
$’000
1,228
Agriterra Report and Financial Statements 2011–2012
51
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
5. SEGMENT REPORTING (continued)
Segment assets consist primarily of property, plant and equipment, inventories and trade and other receivables and
cash and cash equivalents. Segment liabilities comprise operating liabilities.
Capital expenditure comprises of additions to property, plant and equipment and intangibles.
The segment assets and liabilities at 31 May 2012 and capital expenditure for the year then ended are as follows:
Assets
Liabilities
Capital expenditure
Grain
$’000
17,934
595
546
Beef
$’000
12,410
35
5,485
Cocoa
$’000
2,633
154
1,186
Unallocated
$’000
10,780
1,577
357
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
At 31 May 2012
Segment assets and liabilities
Discontinued activities
Unallocated:
Intangible assets
Property, plant and equipment
Other receivables
Cash
Trade payables
Accruals and deferred income
Total
Assets
$’000
32,978
226
266
6,385
1,437
2,465
-
-
43,757
Total
$’000
43,757
2,361
7,574
Liabilities
$’000
784
606
-
-
-
-
593
378
2,361
The segment assets and liabilities at 31 May 2011 and capital expenditure for the year then ended are as follows:
Assets
Liabilities
Capital expenditure
Grain
$’000
17,648
532
265
Beef
$’000
5,112
124
2,304
Cocoa
$’000
Unallocated
$’000
-
-
-
4,750
2,022
-
Total
$’000
27,510
2,678
2,569
52 Agriterra Report and Financial Statements 2011–2012
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
At 31 May 2011
Segment assets and liabilities
Discontinued activities
Unallocated:
Intangible assets
Property, plant and equipment
Other receivables
Cash
Amounts due to related parties
Accruals and deferred income
Total
Significant customers
Assets
$’000
22,760
231
271
295
946
3,007
-
-
27,510
Liabilities
$’000
655
606
-
-
-
-
177
1,240
2,678
In the year ended 31 May 2012, two customers generated $4,811,000 of revenue being 34.8% of group revenue
(2011: two customers generated $4,174,000 being 30.7% of group revenue).
6. OPERATING LOSS
Operating loss has been arrived at after charging / (crediting):
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Net foreign exchange loss / (gain)
Operating lease rentals: land & buildings
Staff costs (see note 7)
2012
$’000
1,878
12
584
31
3,198
Amounts payable to Baker Tilly UK Audit LLP and their associates in respect of audit services as follows:
Audit services
– UK statutory audit of parent and consolidated accounts-Baker Tilly UK
Audit LLP
– Audit of overseas subsidiaries - Charles Orbach
Operating lease rentals are for periods of less than twelve months.
2012
$’000
135
60
195
2011
$’000
1,228
5
(251)
18
2,317
2011
$’000
133
66
199
Agriterra Report and Financial Statements 2011–2012
53
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
7. STAFF COSTS
The average monthly number of employees (including executive directors) employed by the Group for the year
was as follows:
Office and Management
Operational
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Share based payment charge
Less: capitalised and included in assets under construction
Directors’ remuneration:
P H Edmonds
A S Groves
E A Kay
M N Pelham
8. FINANCE INCOME AND ExPENSES
Directors’ remuneration:
Finance income:
– Interest income on short-term bank deposits
Finance income
Interest expense:
– Bank borrowings
Finance expenses
Net finance (charge) / income
54 Agriterra Report and Financial Statements 2011–2012
2012
Number
34
666
700
2011
Number
32
318
350
2012
$’000
3,402
45
100
3,547
(349)
3,198
2012
$’000
78
156
174
50
458
2012
$’000
48
48
(164)
(164)
(116)
2011
$’000
2,407
25
-
2,432
(115)
2,317
2011
$’000
80
160
168
84
492
2011
$’000
159
159
-
-
-
159
9. INCOME TAx ExPENSE
Loss before tax from continuing activities:
Tax at the Mozambican corporation tax rate 32% (2011: 32%)
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of utilisation of losses
Tax effect of losses not allowable
Tax effect of losses not recognised in overseas subsidiaries (net of effect of
different rates)
(Credit) / charge in respect of prior years
Tax expense for the year
2012
$’000
(6,916)
(2,214)
78
(57)
768
1,533
(82)
26
2011
$’000
(2,171)
(695)
21
(90)
341
503
88
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.
The Group has operations in a number of overseas jurisdictions where it has incurred taxable losses for the year
of $4,500,000 (2011: $2,580,000). To date no deferred tax asset has been recognised as the requirements of IAS 12
‘Income taxes’ have not been met.
The Company is resident for taxation purposes in Guernsey and its income is subject to Guernsey income tax,
presently at a rate of zero (2011: zero). No tax is payable for the year due to losses incurred. Deferred tax has not
been provided for, as brought forward tax losses are not recoverable under the Income Tax (Zero 10) (Guernsey)
Law, 2007 (as amended).
Agriterra Report and Financial Statements 2011–2012
55
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
10. DISCONTINUED OPERATIONS
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 the discontinued
operations’ trading results are included in the income statement as a single line below the loss after taxation
from continuing operations. 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.
Consequently exploration and evaluation costs of $79,580,000 were fully impaired in prior years.
The results for the discontinued operations are as follows:
Operating expenses
Other income
Profit / (loss) before taxation
Taxation
Profit / (loss) after taxation
2012
$’000
(5)
726
721
-
721
2011
$’000
(558)
469
(89)
-
(89)
Other income for the year ending 31 May 2012 comprises funds returned following the release of a bank guarantee.
Cash flows from discontinued operations included in the consolidated statement of cash flows are as follows:
Net cash flows from operating activities
2012
$’000
721
2011
$’000
(198)
56 Agriterra Report and Financial Statements 2011–2012
11. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Loss for the purposes of basic earnings per share (loss for the year
attributable to equity holders of the parent)
Loss for the purposes of basic earnings per share from continuing
activities
Profit / (loss) for the purposes of basic earnings per share from
discontinued activities
2012
$’000
6,221
6,942
721
2011
$’000
2,428
2,339
(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
Loss per share from continuing activities
Earnings / (loss) per share from discontinued activities
(0.7c)
(0.8c)
0.1c
Due to the loss incurred in both years, there is no dilutive effect of share options.
12. INTANGIBLE ASSETS
COST
1 June 2010
Additions
Exchange rate adjustment
1 June 2011
Additions
Exchange rate adjustment
31 May 2012
Goodwill
$’000
Concession
agreement
$’000
-
-
-
-
697
-
697
-
250
21
271
-
(5)
266
(0.4c)
(0.4c)
(0.0c)
Total
$’000
-
250
21
271
697
(5)
963
The Group holds a Concession Agreement with the Port of Conakry (Guinea) for the construction and operation
of an industrial and commercial terminal in the East Zone of the port. An external feasibility study to explore the
options to develop the concession has been prepared and the Group is seeking partners to exploit the concession.
The concession fee will be amortised over the operational life of the project which has yet to be determined.
The addition in the year comprises the goodwill arising on the acquisition of Tropical Farms Limited (see note 22).
Agriterra Report and Financial Statements 2011–2012
57
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
13. PROPERTY, PLANT AND EQUIPMENT
Land and
Buildings
$’000
Plant and
machinery
$’000
Motor
Vehicles
$’000
Aviation
$’000
Other
assets
$’000
4,957
946
5,178
1,293
-
(1,199)
1,255
7,158
10,107
-
818
18,083
269
-
-
-
269
2
-
-
271
897
6,169
1,290
-
596
8,055
1,897
509
(1,199)
294
1,501
951
-
203
2,655
3,657
316
(189)
478
4,262
1,661
(44)
311
6,190
2,286
585
(138)
311
3,044
790
(29)
205
4,010
449
-
(125)
35
359
359
-
(75)
643
-
100
(28)
-
72
85
-
(15)
142
Total
$’000
14,648
2,569
(1,513)
2,702
18,406
13,599
(44)
1,672
33,633
4,662
1,228
(1,365)
617
5,142
1,878
(29)
399
407
14
-
37
458
182
-
22
662
210
34
-
12
256
50
-
6
312
7,390
COST
1 June 2010
Additions
Disposals
Exchange rate adjustment
1 June 2011
Additions
Disposals
Exchange rate adjustment
31 May 2012
DEPRECIATION
1 July 2010
Charge for the year
Disposals
Exchange rate adjustment
1 June 2011
Charge for the year
Disposals
Exchange rate adjustment
31 May 2012
Net book value
31 May 2012
31 May 2011
17,812
6,889
5,400
4,668
2,180
1,218
501
287
350
202
26,243
13,264
A depreciation charge of $1,878,000 (2011: $1,228,000) has been included in the income statement within operating
expenses for the current and comparative years.
58 Agriterra Report and Financial Statements 2011–2012
14. BIOLOGICAL ASSETS
At 1 June 2010
Purchase of biological assets
Sale of biological assets
Change in fair value
Foreign exchange
At 1 June 2011
Purchase of biological assets
Sale of biological assets
Change in fair value
Foreign exchange
At 31 May 2012
$’000
236
289
(34)
214
83
788
1,428
(5)
400
49
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:
Non-current asset
Current asset
2012
Head
2,704
1,897
4,601
2011
Head
1,153
292
1,445
2012
$’000
1,642
1,018
2,660
The change in fair value has been excluded from cost of sales and gross margin in the income statement.
15. INVENTORIES
Consumables and spares
Raw materials
Work in progress
Finished goods
2012
$’000
399
6,178
52
72
6,701
2011
$’000
631
157
788
2011
$’000
300
2,422
140
114
2,976
During the year inventories amounting to $8,783,000 (2011: $8,433,000) were included in cost of sales in the income
statement.
The Group has an overdraft facility of $2m secured upon its grain inventories in Mozambique. The balance
outstanding on the facility at 31 May 2012 was $123,000 (2011: $nil) (see note 17).
Agriterra Report and Financial Statements 2011–2012
59
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
16. INVESTMENT IN ASSOCIATE AND FINANCIAL ASSETS
31 May 2012
Non-current assets
Investment in associate
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
31 May 2011
Non-current assets
Investment in associate
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Investment in
associate
$’000
Loans and
receivables
$’000
Total
$’000
-
9
9
-
-
-
9
1,146
2,482
3,553
7,181
Associate
$’000
Loans and
receivables
$’000
-
-
-
-
-
-
814
1,225
8,172
10,211
1,146
2,482
3,553
7,190
Total
$’000
-
814
1,225
8,172
10,211
The Group’s associate comprises the 40% stake in African Management Services Limited, which provides accounting
services. The Group’s share of the profit of the associate for the period ended 31 May 2012 was $9,000 (2011: loss
$20,000). The share of the cumulative profit of the associate is $9,000 (2011: $nil).
Other receivables include amounts due from related parties (see note 20).
Cash balances include $108,000 (2011: $112,000) of restricted cash relating to cash held on deposit as security for
certain bank guarantees.
The directors consider that the carrying amount of financial assets approximates their fair value. There are no
significant amounts past due (2011: $nil).
60 Agriterra Report and Financial Statements 2011–2012
17. CURRENT LIABILITIES
Bank overdraft
Trade and other payables
Trade payables
Other payables
Corporation tax
Accrued liabilities
2012
$’000
123
209
831
56
1,142
2,361
2011
$’000
-
368
678
130
1,502
2,678
The Group has an overdraft facility of $2m secured upon its grain inventories in Mozambique. The facility is repayable
on demand and carries an interest rate at the Mozambique prime lending rate less 0.5%. This is currently 22%.
Trade payables, other payables and accruals principally comprise amounts outstanding for trade purchases and
ongoing costs.
Other payables include amounts payable to related parties (see note 20).
The directors consider that the carrying amount of financial liabilities approximates their fair value. The average
credit period taken for trade purchases is 6 days (2011: 11 days).
Agriterra Report and Financial Statements 2011–2012
61
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
18. SHARE CAPITAL
Group and company
Ordinary shares of 0.1p each
At 1 June 2010
Issue of shares
At 31 May 2011
Issue of shares
At 31 May 2012
Deferred shares of 0.1p each
Authorised
Allotted and fully paid
Number
Number
2,345,000,000
547,771,554
-
145,483,334
2,345,000,000
693,254,888
-
366,461,350
2,345,000,000
1,059,716,238
$’000
923
226
1,149
570
1,719
At 1 June 2010, 2011 and 31 May 2012
155,000,000
155,000,000
238
Total share capital
At 31 May 2012
At 31 May 2011
2,500,000,000
1,214,716,238
2,500,000,000
848,254,888
1,957
1,387
The Company has one class of ordinary share which carries no right to fixed income.
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 £1,000,000 per ordinary share. In the
event that disputes over certain oil and gas assets are satisfactorily resolved, the deferred shares may be converted
into ordinary shares by resolution of the board.
On 16 November 2010 the Company issued 145,483,334 ordinary shares of 0.1p each for cash at 3p per share raising
gross cash proceeds of $6.9m to provide funding for the continued development of the Company’s cattle ranching
and feedlot production business in Mozambique.
On 2 December 2011 the Company issued 8,333,334 ordinary shares of 0.1p each at 3p per share in settlement of
deferred consideration in respect of the acquisition of Tropical Farms Limited.
On 2 December 2011 the Company issued 37,800,000 ordinary shares of 0.1p each at 5p per share as consideration
for the acquisition of Red Bunch Ventures Limited. The consideration includes deferred consideration which is
payable by the future issue of 37,800,000 ordinary shares of 0.1p each at a price of 5p per share (see note 22).
On 2 December 2011 the Company issued 320,328,016 ordinary shares of 0.1p each at 3p per share raising gross
cash proceeds of $15m to provide funding for the continued development of its Mozambique beef business and
its Cocoa business in Sierra Leone.
62 Agriterra Report and Financial Statements 2011–2012
Share Options:
At 31 May 2012, the following options over ordinary shares of 0.1p each have been granted to directors and
employees and remain unexercised:
Date of grant
Number of shares
Exercise price
Exercise period
9 January 2009
13 July 2011
5,750,000
5,000,000
3p
3p
9 January 2010 to 9 January 2019
13 July 2012 to 13 July 2017
19. SHARE BASED PAYMENTS
Equity – settled share option plan
The Group unapproved share option scheme was established to provide equity incentives to the directors of,
employees of and consultants to the company.
2012
Options
Number
Weighted
average
exercise price
Options at the beginning of the year
Granted
Options at the end of the year
5,750,000
5,000,000
10,750,000
Exercisable at year end
5,750,000
3p
3p
3p
3p
2011
Options
Number
5,750,000
-
5,750,000
5,750,000
Weighted
average
exercise price
3p
-
3p
3p
At 31 May 2012 the weighted average remaining contractual life of the options outstanding was 3.2 years (31 May
2011: 2.5 years).
The fair value of the options granted during the period was determined using the Black-Scholes option pricing
model using the following assumptions:
–
Share price at the date of grant was the average mid market closing price for the three days immediately prior
to grant.
– The risk free rate is 1.96% based on the 5 year gilt yield at the date of grant.
–
The annual dividend yield is expected to be nil based on management’s immediate intention to reinvest
operating cash flows.
The annual volatility of 66% is derived from the daily share prices of the Company over the year preceding the
date of grant.
–
– The exercise period is 3.5 years, being 50% of the exercise period after the vesting date of one year.
Agriterra Report and Financial Statements 2011–2012
63
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
19. SHARE BASED PAYMENTS (continued)
On 12 January 2010, options over 50 million shares with an exercise price of 5.5p were issued to Ely Place Nominees
Limited to be held on trust to be issued at the discretion of the board to directors, employees or consultants to the
company. Following a board resolution dated 29 July 2012, the expiration date of these options has been extended
to 11 January 2020. During the year no options were allocated from this reserve.
On 1 December 2011, the following options were issued as part of the issue costs for the placing:
Date of grant
Number of shares
Exercise price
Exercise period
1 December 2011
10,000,000
2p
1 December 2011 to 1 December 2016
The fair value of the options granted was determined using the Black-Scholes option pricing model using the
following assumptions:
– Share price at the date of grant was the average mid market closing price for the three days immediately prior to
grant, 2.63p.
– The risk free rate is 1.02% based on the 5 year gilt yield at the date of grant.
– The annual dividend yield is expected to be nil based on management’s immediate intention to reinvest operating
cash flows.
– The annual volatility of 46% is derived from the daily share prices of the Company over the year preceding the
date of grant.
– The exercise period is 2.5 years, being 50% of the exercise period.
The value of the options was $160,000.
64 Agriterra Report and Financial Statements 2011–2012
20. RELATED PARTY DISCLOSURES
1.
PH Edmonds and AS Groves, directors of the Company, are also directors of Sable Mining Africa Limited (“Sable”),
Liberian Cocoa Corporation (“LCC”), African Potash Limited (“African Potash”) and African Management Services
Limited (“AMS”). PH Edmonds and AS Groves were also directors of African Medical Investments plc (“AMI”)
during the year, but not at the end of the year. Related party transactions are entered into on an arm’s length
basis. No provisions have been made in respect of amounts owed by or to related parties.
During the year AMS provided accounting, treasury and administrative services to the Group for a management
fee of $264,000 (2011: $378,000). The Group also incurred certain expenditures on behalf of AMS. As at 31 May
2012 the Group owed $26,500 to AMS (2011: $613,000 due from AMS). This has been settled after the year end.
During the year, the Group incurred certain expenses on behalf of VIP Healthcare Solutions Limited a 100%
subsidiary of AMI. As at 31 May 2012 the amount due to the Group was $11,000 (2011: due from AMI $5,000).
This balance remains outstanding as at the date of these financial statements.
During the year, the Group incurred certain expenses on behalf of LCC. As at 31 May 2012 the Group was due
$89,000 from LCC (2011: $16,000). This balance remains outstanding as at the date of these financial statements.
During the year the Group and Sable incurred certain expenses on each other’s behalf. At 31 May 2012, the
amount due from Sable was $14,000 (2011: $110,000). This has been settled since the year end.
During the year the Group incurred certain expenses on behalf of African Potash Limited. At 31 May 2012, the
amount due from African Potash was $40,000. This has been settled since the year end.
During the year services for fees of $nil (2011: $204,000) were provided by Ardan Risk and Support Services
Limited, a company controlled by MN Pelham. At 31 May 2012 the amount due to Ardan was $nil (2011:
$10,000).
During the year no fees (2011: $161,000) were paid to Ocelot Investment Group Limited, a company controlled
by AS Groves. The fees paid in the previous period were in relation to fundraising and were charged to the share
premium reserve.
2.
3.
4. Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in
aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the
remuneration of individual directors is provided in note 7.
Short-term employee benefits
Share options and other long term incentive plans
2012
$’000
408
50
458
2011
$’000
492
-
492
Agriterra Report and Financial Statements 2011–2012
65
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2012
21. 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.
22. ACQUISITION OF SUBSIDIARIES
On 13 July 2011, the Company (as to 0.1%) and its wholly owned subsidiary West Africa Cocoa Services Limited
(as to 99.9%), acquired the entire issued share capital of Tropical Farms Limited. The transaction was treated as a
business combination.
On
acquisition
$’000
Fair value
adjustments
$’000
142
83
115
(239)
(298)
(197)
-
-
-
-
-
-
Property plant and equipment
Other current assets
Cash
Current liabilities
Debt
Net liabilities acquired
Goodwill arising on acquisition
Satisfied by :
Cash
Equity
The consideration comprised cash $100,000 and the issue of 8,333,334 ordinary shares of 0.1p each.
Goodwill comprises:
Management team
Buying infrastructure
Total
$’000
142
83
115
(239)
(298)
(197)
697
500
100
400
500
$’000
150
547
697
TFL had established a high quality, sustainable and traceable cocoa buying operation. There were four buying
centers in operation and a direct buying register of approximately 2,000 cocoa farmers.
66 Agriterra Report and Financial Statements 2011–2012
In addition to the existing infrastructure and sourcing register, TFL has an experienced management team
who will enable TFL to accelerate the development of additional community buying centers, solar drying and
fermentation facilities.
On 1 December 2011 the Company announced that it acquired Shawford Investments Inc, the parent of Red Bunch
Ventures (SL) Limited (“Red Bunch”). Red Bunch holds a lease over 43,000 hectares of agricultural land suitable for
palm oil production in Pujehun District in Sierra Leone.
The transaction was treated as an acquisition of assets.
Leasehold land
Net assets acquired
Satisfied by :
Issue of equity
Deferred consideration
$’000
5,880
5,880
2,940
2,940
5,880
Initial consideration comprising the issue of 37,800,000 ordinary shares of 0.1p each at a value of 5p each was
settled on 2 December 2011.
The deferred consideration comprising the issue of 37,800,000 ordinary shares of 0.1p each at a value of 5p each,
becomes payable once 1,000 hectares of the leasehold land has been developed.
Agriterra Report and Financial Statements 2011–2012
67
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 May 2012
ASSETS
Non-current assets
Property, plant and equipment
Investment in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
NET ASSETS
EQUITY
Issued capital
Share premium
Shares to be issued
Share based payment reserve
Translation reserve
Retained earnings
TOTAL EQUITY
Note
25
26
27
27
2012
$’000
4
41,547
41,551
1,760
2,434
4,194
2011
$’000
8
24,143
24,151
975
2,922
3,897
45,745
28,048
28
(1,428)
(1,354)
44,317
26,694
18
1,957
148,530
2,940
1,620
3,515
1,387
131,593
-
1,360
5,262
(114,245)
(112,908)
44,317
26,964
The notes on pages 71 to 77 form part of the financial statements.
The financial statements on pages 68 to 77 were approved and authorised for issue by the Board of Directors on
12 November 2012 and were signed on its behalf.
PH Edmonds
Chairman
68 Agriterra Report and Financial Statements 2011–2012
STATEMENT OF CHANGES IN EQUITY
Ordinary
share
capital
$’000
Deferred
share
capital
$’000
Share
premium
$’000
Shares
to be
issued
$’000
Share
based
payment
reserve
$’000
Translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Balances at 1 June 2010
923
238
125,184
Loss for the year
Other comprehensive
income
Exchange translation
differences on foreign
operations
Total comprehensive
income for the year
Transactions with
owners
Share issues
Issue costs
Total transactions with
owners
-
-
-
226
-
226
-
-
-
-
-
-
-
-
-
6,570
(161)
6,409
Balances at 1 June 2011
1,149
238
131,593
Loss for the year
Other comprehensive
income
Exchange translation
differences on foreign
operations
Total comprehensive
income for the year
Transactions with owners
Share issues
Issue costs
Shares to be issued
Share based payment
charge
Total transactions with
owners
Balances at 31 May 2012
-
-
-
570
-
-
-
570
1,719
-
-
-
17,707
(770)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,360
2,240
(112,679)
17,266
-
-
-
-
-
-
-
(229)
(229)
3,022
3,022
-
(229)
3,022
2,793
-
-
-
-
-
-
6,796
(161)
6,635
1,360
5,262
(112,908)
26,694
-
-
-
-
160
-
100
-
(1,337)
(1,337)
(1,747)
-
(1,747)
(1,747)
(1,337)
(3,084)
-
-
-
-
-
-
-
-
-
-
18,277
(610)
2,940
100
20,707
3,515
(114,245)
44,317
-
-
2,940
-
16,937
238
148,530
2,940
2,940
260
1,620
The notes on pages 71 to 77 form part of the financial statements.
Agriterra Report and Financial Statements 2011–2012
69
COMPANY CASH FLOW STATEMENT
For the year ended 31 May 2012
Operating activities
Loss before tax
Adjustments for:
– Depreciation of property, plant and equipment
– Loss on foreign exchange
– Share based payment charge
– Profit on disposal of investment
– Net interest income
Operating cash flow before movements in working capital
Working capital adjustments:
– Increase in receivables
– Increase in payables
Cash used in operations
Interest received
Net cash (used in) / from continuing operating activities
Net cash from / (used in) discontinued activities
Net cash used in operating activities
Investing activities
Proceeds from sale of investment in financial assets
Net cash from investing activities
Financing activities
Proceeds from issue of share capital
Share issue costs
Loan to subsidiaries
Net cash from financing continuing activities
Year ended
31 May
2012
$’000
Year ended
31 May
2011
$’000
(2,058)
4
1
100
-
(22)
(1,975)
(841)
152
(2,664)
22
(2,642)
721
(1,921)
-
-
(112)
5
26
-
(4)
(785)
(870)
(351)
556
(665)
785
120
(155)
(35)
128
128
15,000
(600)
(12,782)
1,618
6,883
(161)
(4,364)
2,358
Net (decrease) / increase in cash and cash equivalents
(303)
2,451
Cash and cash equivalents at start of the year
Exchange rate adjustment
2,922
(185)
309
162
Cash and cash equivalents at end of the year
2,434
2,922
The notes on pages 71 to 77 form part of the financial statements.
70 Agriterra Report and Financial Statements 2011–2012
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 May 2012
23. COMPANY ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union.
The information relating to financial risk factors and critical accounting estimates and judgements are as described
for the Group in note 3 above.
Basis of accounting
The financial statements have been prepared on the historical cost basis except for financial instruments measured
at fair value. The accounting policies of the Company where applicable are consistent with those of the Group as
described in note 2 unless otherwise noted below. They have been applied consistently throughout the year and
the preceding year.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less where appropriate any provision for impairment.
24. LOSS FOR THE YEAR
The company has elected not to present its own income statement. The Company reported a loss for the year of
$1,332,000 (2011: loss $229,000).
The auditor’s remuneration for audit and other services is disclosed in note 6 to the financial statements.
Agriterra Report and Financial Statements 2011–2012
71
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 May 2012
25. PROPERTY, PLANT AND EQUIPMENT
Cost
1 June 2010
Additions
Disposals
Exchange rate adjustment
1 June 2011
Additions
Disposals
Exchange rate adjustment
31 May 2012
Depreciation
1 July 2010
Charge for the year
Disposals
Exchange rate adjustment
1 June 2011
Charge for the year
Disposals
Exchange rate adjustment
31 May 2012
Net book value
31 May 2012
31 May 2011
Motor
vehicles
$’000
1,665
-
-
-
1,665
-
(1,665)
-
-
1,665
-
-
-
1,665
-
(1,665)
-
-
-
-
Plant and
machinery
$’000
Other
assets
$’000
1,566
-
(1,199)
-
367
-
(367)
-
-
1,566
-
(1,199)
-
367
-
(367)
-
-
-
-
463
-
(276)
2
189
-
(174)
-
15
452
5
(276)
-
181
4
(174)
-
11
4
8
Total
$’000
3,694
-
(1,475)
2
2,221
-
(2,206)
-
15
3,683
5
(1,475)
-
2,213
4
(2,206)
-
11
4
8
72 Agriterra Report and Financial Statements 2011–2012
26. INVESTMENT IN SUBSIDIARIES
Cost
31 May 2010
Additions
Exchange rate adjustment
1 June 2011
Additions
Exchange rate adjustment
31 May 2012
Impairment
31 May 2010, 2011 and 2012
Net book value
31 May 2012
31 May 2011
Investment
$’000
3,801
-
-
3,801
5,900
(21)
9,680
Loans
$’000
28,659
4,364
2,697
35,720
13,184
(1,659)
47,245
Total
$’000
32,460
4,364
2,697
39,521
19,084
(1,680)
56,925
3,801
11,577
15,378
5,879
-
35,668
24,143
41,547
24,143
Loans to subsidiaries fall due after more than one year. The impairment in loans to subsidiary companies in prior
years relates to reductions in the value of the underlying business as a result of movements in exchange rates.
As at 31 May 2012, the Company held equity in the following principal undertakings:
Direct investments:
Subsidiary undertakings
Agriterra (Mozambique) Limited
P A Energy Africa Limited
Agriterra Aviation (Pty) Limited
Agriterra East Africa Limited
Dodgemart Investments Limited
Agriterra Guinea SA
West Africa Cocoa Services Limited
Shawford Investments Inc
Proportion held
Country of
incorporation
Nature of business
100%
Guernsey
Holding Company
100% British Virgin Islands
Inactive
100%
100%
100%
100%
South Africa
Aviation services
Mauritius
Zimbabwe
Trading
Agriculture
Guinea
Infrastructure
100% British Virgin Islands
Holding Company
100% British Virgin Islands
Holding Company
Agriterra Report and Financial Statements 2011–2012
73
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 May 2012
26. INVESTMENT IN SUBSIDIARIES (continued)
Indirect investments of Agriterra Mozambique Limited:
Subsidiary undertakings
Proportion held
Desenvolvimento E Comercialização
Agricola Limitada
Compagri Limitada
Mozbife Limitada
Carnes de Manica Limitada
Agriterra Aviação Limitada
100%
100%
100%
100%
100%
Indirect investments of West Africa Cocoa Services Limited:
Country of
incorporation
Mozambique
Mozambique
Mozambique
Mozambique
Nature of business
Grain
Grain
Beef
Beef
Mozambique
Aviation services
Subsidiary undertakings
Tropical Farms Limited
Proportion held
Country of
incorporation
Nature of business
100%
Sierra Leone
Cocoa & Coffee
Indirect investments of Shawford Investments Inc.:
Subsidiary undertakings
Red Bunch Ventures (SL) Limited
Proportion held
100%
Country of
incorporation
Sierra Leone
Nature of business
Palm Oil
As set out in note 4, the directors have decided to suspend further expenditure on all oil and gas exploration
and evaluation projects. The company considers its investment in and its loan to PA Energy Africa Limited to be
impaired and full provision has been made in prior periods.
74 Agriterra Report and Financial Statements 2011–2012
27. FINANCIAL ASSETS
31 May 2012
Non-current assets
Financial asset investments
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Total financial assets at 31 May 2012
31 May 2011
Non-current assets
Financial asset investments
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Total financial assets at 31 May 2011
Loans and
receivables
$’000
Total
$’000
-
-
209
1,551
2,434
4,194
Loans and
receivables
$’000
209
1,551
2,434
4,194
Total
$’000
-
-
209
766
2,922
3,897
209
766
2,922
3,897
The Company holds a 40% stake in African Management Services Limited (see note 16).
Other receivables include amounts due from related parties (see note 29).
Cash balances include $108,000 (2011: $112,000) of restricted cash relating to cash held on deposit as security for
certain bank guarantees.
The directors consider that the carrying amount of financial assets approximates their fair value. There are no
significant amounts past due (2011: $nil).
Agriterra Report and Financial Statements 2011–2012
75
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 May 2012
28. FINANCIAL LIABILITIES
Trade and other payables
Trade payables
Other payables
Accruals and deferred income
2012
$’000
200
613
615
1,428
2011
$’000
229
606
519
1,354
Trade payables, other payables and accruals principally comprise amounts outstanding for trade purchases and
ongoing costs.
Other payables include amounts payable to related parties (see note 29).
The directors consider that the carrying amount of financial liabilities approximates their fair value.
76 Agriterra Report and Financial Statements 2011–2012
29. Related party disclosures
The transactions of the Company with related parties other than with subsidiary companies are disclosed in note 20.
Related party transactions are entered into on an arm’s length basis. No provisions have been made in respect of amounts
owed by or to related parties except where disclosed.
Subsidiary companies are financed by means of parent company loans which bare a market rate of interest.
During the year the Company provided funding to Agriterra Mozambique Limited. At 31 May 2012 the balance due to
the Company was $1,463,000 (2011: $1,564,000).
At 31 May 2012, the Company had an outstanding loan to P A Energy Africa Limited amounting to £205,000. This loan
has been fully provided for in prior years.
During the year, the Company provided funding to Agriterra Aviation (Pty) Limited. As at 31 May 2012 the balance due to
the Company was $763,000 (2011: $514,000).
During the year the Company and Agriterra East Africa Limited incurred various expenditure on each other’s behalf. At 31
May 2012 the balance outstanding due from the Company was $221,000 (2011: due from the Company $67,000).
During the year the Company provided funding to Dodgemart Investments Limited. At 31 May 2012 the balance
outstanding was $135,000 (2011: $152,000).
During the year the Company provided funding to Agriterra Guinea SA. At 31 May 2012 the balance outstanding was
$377,000 (2011: $335,000).
During the year the Company provided funding to Desenvolvimento E Comercialização Agricola Limitada (‘DECA’). At 31
May 2012 the balance outstanding was $12,534,000 (2011: $13,184,000).
During the year the Company provided funding to Compagri Limitada (‘Compagri’). At 31 May 2012 the balance
outstanding was $14,175,000 (2011: $14,785,000).
During the year the Company provided funding to Mozbife Limitada (‘Mozbife’). At 31 May 2012 the balance outstanding
was $16,002,000 (2011: $7,048,000).
During the year the Company provided funding to Carnes de Manica Limitada. At 31 May 2012 the balance outstanding
was $1,000 (2011: $1,000).
During the year the Company provided funding to Agriterra Aviação Limitada. At 31 May 2012 the balance outstanding
was $1,000 (2011: $1,000).
During the year the Company provided funding to West Africa Cocoa Services Limited. At 31 May 2012, the balance
outstanding was $688,000 (2011: $nil).
During the year the Company provided funding to Tropical farms (SL) Limited. At 31 May 2012, the balance outstanding
was $2,253,000 (2011: $nil).
At 31 May 2011 and 2010, the Company has made a general provision against the loans to DECA, Compagri and
Mozbife in respect of the depreciation of the Mozambican Meticais amounting to $10,000,000.
Agriterra Report and Financial Statements 2011–2012
77
Notes
78 Agriterra Report and Financial Statements 2011–2012
Notes
Agriterra Report and Financial Statements 2011–2012
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Production by: Ker Management Limited
Cover printed on Essential Silk 350gsm
Text printed on Essential Velvet 170gsm
ISO 14001/9001 Accredited Mill
ECF Elemental Chlorine Free
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Agriterra Report and Financial Statements 2011 – 2012