Agriterra Ltd Annual Report 2016

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FY2016 Annual Report · Agriterra Ltd

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Annual Report
2016

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Chair’s statement

Operational and financial review

Directors’ report

Corporate governance

Statement of Directors’ responsibilities

Independent auditor’s report to the members of Agriterra Limited

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated cash flow statement

Notes to the consolidated financial statements

Company information and advisers

Chair’s statement

Having taken on the role of Chair of the Board of Agriterra on 29 April 2016, this is my first substantive
opportunity to communicate with shareholders and I am pleased to be able to provide an update on our recent
activity and outline our plans for the future.

Since 2009 Agriterra has focussed on building an agricultural business with a portfolio centred on beef and
maize in Mozambique and cocoa in Sierra Leone. As discussed more fully below, the Group’s operations are
now focussed entirely on Mozambique following the sale of our cocoa operations in Sierra Leone in a
management buy-out transaction (after the end of FY2016).

As shareholders are aware, the economic environment in Mozambique has altered substantially during the
2016 calendar year, most notably due to the combination of a decline in commodity prices, a prolonged and
severe drought and the significant weakening of the Mozambique Metical against the United States $ (~110%
since 31 May 2015) and the South African Rand (~100% since 31 May 2015). As a result, Mozambique is
experiencing high inflation rates (reaching 25.5% for the 12 months to 31 October 2016), accompanied by
a rapid increase in interest rates (prime lending rates are now at 28% compared to 16% at 31 May 2015).
In addition to the economic complexities, Mozambique is experiencing military tension, particularly in the centre
of the country.

Clearly these economic and political factors, together with the continuing ongoing operational losses that the
Group has experienced, present real and significant hurdles to overcome. Having said this, there is still scope
for Agriterra to capitalise on the growth opportunities present in Mozambique. In order to do so, we will need
to continue to reduce our costs, wherever possible, to ensure that we operate as efficiently as possible, whilst
also addressing and minimising the inherent challenges of operating in the African agriculture sector. Market
conditions in Mozambique are such that our long-term aim should be to become a pre-eminent player in the
national Mozambique beef and maize flour markets through effective implementation of our strategy by our
operational teams. We are currently part-way through a period of consolidation, streamlining and optimisation
around our existing operations, and I am hopeful that following completion we will see significant mid-term
leveraging of the considerable investment which Agriterra has already made into Mozambique in order to build
shareholder value.

The current situation in Mozambique presents both opportunities and challenges for businesses operating in the
country. On the one hand, prices of imported products have risen rapidly, at a rate faster than inflation. This
reduced competitiveness of imported products, combined with the lack of foreign currency available in country,
has made our products more competitive; this is particularly reflected in the case of our beef products - we are
now able to supply the Maputo market, the largest and most affluent market in Mozambique. On the other
hand, wages have risen at a slower pace than inflation and therefore progressively more of a typical household
budget is consumed by the purchase of fewer products. While our maize flour products continue to sell well in
this environment - being a staple food produced from locally sourced maize - this has left less household income
available for purchase of protein products, which has the effect of reducing the demand for our beef products.
The net effect so far has been positive, with record volumes and revenue in Metical terms in our Beef division
in FY2016, and the second highest year in terms of volumes and highest year in terms of Metical revenue in
our Grain division. These trends have continued since the period end, with our highest ever month of sales in
the Beef division occurring in August 2016 (generating revenues of approximately 35.5 million Metical). In
this context, the Board believe that we are able to continue to strengthen our market position in both the Grain
and Beef divisions.

In addition to improving efficiencies and driving revenue generation, our focus on reducing Group-wide costs
and disposing of non-revenue generating assets (such as our aircraft) has also been important during FY2016.
The savings made from these programmes have contributed to the Grain division returning an overall profit
before depreciation of $561,000 (2015: loss of $2,500,000) and after depreciation of $322,000 (2015:
loss of $2,886,000). Despite the positive effect of cost savings, the Beef division returned an operating loss
during FY2016, before impairments, of $2,912,000 (2015: loss of $2,317,000), reflecting, in part, the
investment and development in our farming infrastructure. Subsequent to the end of FY2016, the Board took
the decision to de-stock the cattle farms and place them in care and maintenance. This decision was made in

light of the military tension in country and the need to protect the value of the herd and security of our employees.
This programme is well under way, and the Inhazonia and Mavonde ranches are now substantially de-stocked.
While the Board continue to see the longer term potential of the farms, it is uncertain if and when the political
and military tensions will be resolved and, until such time as resolution is reached, there will inevitably be
significant uncertainty regarding the security of investment in certain parts of the country. This uncertainty, along
with the general economic climate in Mozambique, has led to an impairment against the Beef division assets
of $3,069,000 (2015: $nil).

Although placing the farms into “care and maintenance” is a significant change in our previously conceived
strategy for the Beef division, it reduces the cash requirements of continuing the ongoing development of these
assets; at the same time, the revised approach provides sizeable cash inflow through the de-stocking of the
animals. This cash inflow, along with the income from the disposal of surplus, non-revenue generating assets,
will be applied to reducing the Beef division’s existing bank finance, which was taken during the expansion
period, prior to the development of the current economic and political situation in country.

With regards to our cocoa operations in Sierra Leone, the Group had placed its plantation assets in “care and
maintenance” during FY2015, with the assets being maintained and ready to return to operations when and
if circumstances permitted. At the same time during FY2015, in order to support the country in its fight against
and its recovery from the Ebola crisis, we leased part of our vehicle fleet and some of our warehousing
infrastructure to international aid organisations. The country was initially declared Ebola free by the World
Health Organisation in early November 2015 and finally in March 2016. While the Group successfully
established and maintained the necessary infrastructure from which a large scale commercial cocoa plantation
and trading business can be developed, the next stage in the development of these assets requires significant
capital investment. Given the impact of Ebola on the West African region as a whole and the lack of investment
appetite from traditional finance sources, the Board formed the view, after due investigations and careful
consideration, that the Group would be unlikely to be able to raise the finance to continue with the development
of the cocoa plantation in the foreseeable future. In this context, the Board therefore believed that it was in the
best interests of the Group to dispose of the cocoa division in a management buy-out transaction to bolster the
Group’s cash reserves and to enable the management team behind the Cocoa division to access other finance
sources, such as dedicated development and sustainability funds. The cocoa operations were sold after the
end of FY2016 for cash consideration of $750,000 which is payable by 9 January 2017.

Corporate update
On 22 April 2016, Phil Edmonds stepped down as Chairman of the Board. Phil has been retained by the
Company in a part-time consultancy capacity, providing us with ongoing access to his significant knowledge
of the Group’s operations and the benefit of his insights and experience of operating in Africa. I would like to
thank Phil for his continued support and hard work for Agriterra over the years, and wish him well for the future.

Outlook
The African agriculture market remains an area of growth potential, with Mozambique having particularly strong
prospects because of the eagerly anticipated establishment of a liquefied natural gas industry in the north of
the country. As and when this industry gains significant development and production traction in Mozambique,
it is expected to significantly change the economy of the entire country, which will translate into consequential
growth in our revenue potential.

Subject to certain assumptions on the development of the natural gas resources in Mozambique, estimates by
the IMF (in January 2016) suggest that average real GDP growth rates could achieve 24% between 2021
and 2025, thereafter stabilising at 3 - 4% from 2028 once liquefied natural gas production peaks (6 – 6.5%
for the non-liquefied natural gas sector). This level of development will inevitably result in a significant increase
in national demand for our products, initially to provide food products for staff in direct and related support
industries during project construction phases, and later within a general population with higher disposable
incomes (liquefied natural gas alone is expected to be sufficient to raise the country from one of the poorest in

Chair’s statement
continued

the world to a low middle income country). The development of Mozambique’s liquefied natural gas resources
is of course dependent on macroeconomic factors, not least of which is the demand for gas in Asia where the
premium markets are, the available supply of gas worldwide, and the price of substitutes such as oil. Final
investment decisions on the development of liquefied natural gas projects are expected later this year, or early
in 2017. Encouragingly in late September 2016, multinational oil and gas company Eni S.p.A. (‘ENI’)
confirmed that it has approached bankers regarding project finance for the development of its first offshore
floating liquefied natural gas platform, and it is also reported to have agreed initial terms with BP for the sale
of liquefied natural gas from Mozambique. Further, Exxon Mobil is reported to have acquired a multi-billion
dollar stake in certain other Mozambique assets from ENI. The fundamentals for the energy markets remain
strong and there is now general optimism that the projects will be developed. We hope to capitalise on this
growth and are already working with sizeable contractors in the camp management arena supplying services
to the gas sector.

In the shorter term, with particular focus on FY2017, the significant cost savings which we implemented during
FY2016 will yield their full benefit during FY2017. We have progressed well in our maize buying programme
during the 2016 buying season and have already secured most of our maize requirement; subject to achieving
our forecast selling prices, we expect the Grain division to return positive cash flows again in FY2017. With
respect to the Beef division, once the farms are de-stocked and in “care and maintenance”, subject to achieving
targeted operating parameters, we hope to be at monthly break even in cash terms by the end of FY2017; as
the farms are de-stocked we will continue to buy animals from the national herd to satisfy our retail and wholesale
targets, with a view to adding value during the time the animals spend in our feedlot. Within the Beef division
we are also exploring options for the acquisition of mobile abattoir units to maximise efficiencies in our
logistics chain.

Taking account of the inherent operational, economic and political risks which our business has to address on
an ongoing basis, we remain committed to developing our business so as to increase value for all stakeholders.
As we move forwards towards achieving this objective I wish to thank our entire team for their continued
commitment and our shareholders for their ongoing support.

CSO Havers


17 November 2016

Operational and financial review

The Group loss for the year from continuing operations - which excludes the results of the discontinued cocoa
operations - reduced from $8,205,000 in FY2015 to $7,677,000 in FY2016. Excluding non-recurring
impairments recorded against property, plant and equipment in the Beef division of $3,069,000 (2015: $nil),
the loss has decreased by 44% to $4,608,000. The decrease in loss reflects both an increase in gross profit
of $1,251,000, primarily in the Grain division, combined with a decrease in other operating expenses of
$2,222,000, primarily in the Grain division and central corporate overheads. Overall, the operating profit of
the Grain division was $811,000 compared to an operating loss of $2,128,000 in FY2015, while the
operating loss of the Beef division, excluding impairments of property, plant and equipment increased from
$2,317,000 to $2,912,000.

Grain division
Agriterra operates its established maize buying and processing business from its Desenvolvimento E
Comercialização Agricola Limitada (‘DECA’) facility in Chimoio, central Mozambique, which has a 35,000
tonne storage capacity, and its 15,000 tonne capacity Compagri Limitada (‘Compagri’) facility in Tete, north-
west Mozambique. Maize is purchased from local out-growers through a network of buying stations, which is
then stored and processed before being sold to the retail market.

The performance in the Grain division has been particularly encouraging this year, where revenues (before
elimination of bran sales to the Beef division) increased in underlying Metical terms by nearly 190% on a 118%
increase in the total volume of products sold. The increase in US$ terms was nearly 122%, from $5,517,000
to $12,246,000 – the lower percentage increase resulting from the relative weakening of the Metical to US$
exchange rate year on year, which moved from an average rate of 32.45 Metical / US$ in FY2015 to 43.61
Metical / US$ in FY2016. Total volume of maize products sold in the year was 39,400 tonnes compared to
18,100 tonnes in FY2015, with 27,900 tonnes of maize flour sold compared to 13,600 tonnes in FY2015;
this represents the Group’s second highest volume ever sold of maize flour.

The increase in volume reflects in part a return to a more normal maize growing season in Mozambique at an
estimated 1.7 million tonnes; the FY2015 results reflected an exceptionally large harvest, estimated at around
2.3 million tonnes, which saturated the local market and reduced the demand for processed products which
we market under our DECA brand.

In the main though, the increase in volume reflects successful implementation of our strategy in this division, which
has been to reduce our cost base to allow us to price our products more competitively in the market, at marginally
lower prices than our competitors. This has allowed us to position DECA as a lower price brand, thereby providing
a solid base on which to develop the business in the current economic climate in Mozambique, where price is
a key factor. The Mozambique consumer is now facing a significant reduction in purchasing power as a result
of wages increasing at a much slower pace than inflation. In addition, the 2016 maize harvest has been
significantly impacted by an El-Niño induced drought in Sub-Saharan Africa, reducing available volumes and
significantly increasing price. Substitute products are also increasing rapidly in price due to the significant
devaluation in the Metical. This has left the Mozambique consumer with limited choice, spending an increasing
amount of the household income on buying staple food products, of which maize flour is the preferred product.
With DECA’s products competitively priced, we expect to continue to gain market share.

In addition to maize flour, the Grain division produces maize bran as a by-product. This bran has historically
been sold directly to our Beef division or third party customers. In order to improve the quality of animal feed
for our Beef division, as well as to capitalise on the maximum potential uplift in value from the bran, we have
recently acquired an animal feed pelletizer. This allows us to pre-mix animal feed, ensuring the optimum ratio
of ingredients to provide feed with the appropriate nutritional characteristics for our cattle, as determined by
specialist animal nutritionists. At present we are able to supply all of the Beef division’s feed requirements from
the pelletizer and have spare capacity for sales to the Mozambique animal feed market. We are currently
finalising the development of appropriate feed products and, subject to the availability of surplus bran, expect
to start supplying some volume to this market in H2-2017.

Operational and financial review
continued

The Grain division’s working capital is financed by a 300 million Metical overdraft facility provided by Standard
Bank in Mozambique (approximately $5,034,000 at the 31 May 2016 exchange rate). Interest rates have
risen rapidly in Mozambique to a prime rate of 28% as at the date of this report. Despite this high rate, with
milling capacity in excess of 75,000 tonnes of maize per annum, storage capacity in excess of 50,000 tonnes,
a favourable sales environment, and steady supplies of raw maize coming from our established buying network,
we are optimistic that FY2017 will continue to be a profitable and cash generative year for the Grain division.

Beef division
In Mozambique, Agriterra operates its Beef division through Mozbife Limitada (‘Mozbife’). The Group has a
feedlot facility, an abattoir and own branded retail units in addition to three ranches which are in the process
of being destocked.

In line with our strategy, the Beef division has continued to grow its revenues in the year, with a 52% increase
in volume sold and Metical revenues. After adjusting for the weaker Metical to US$ exchange rate, this is an
increase in US$ revenues of 17% from $5,366,000 to $6,265,000. Subsequent to the period end in August
2016, the Beef division achieved record monthly revenues in excess of 35.5 million Metical which, at the
average exchange rate for FY2016, would equate to a monthly revenue of approximately $815,000. The
growth in revenue has principally been from our existing operations, as we have sought to reduce the planned
roll out of additional large retail sites in light of the economic and political developments in the country. In
particular, the delay in the development of the LNG projects in the Northern provinces has put on hold our
previously announced expansion plans into Pemba and Nacala; these sites remain under review and, if the
LNG projects go ahead, will likely become development targets again.

A promising development in our retail business has been the expansion of sales into Maputo towards the end
of FY2016 and into FY2017. Maputo, as the capital, is the largest and most affluent market in Mozambique.
Due to its proximity to South Africa, it has historically been supplied with imported products. The devaluation in
the Metical, and the lack of availability of foreign currency, has made these imports very expensive while
making our products price competitive, opening up this attractive market to us. Our existing sales are currently
to wholesalers and are supplied from our Chimoio abattoir, avoiding the need for us to establish a costly fixed
presence in this market. With the Maputo market open, Mozbife is the only Mozambique wide supplier of
domestically produced beef products.

The weakness in the Metical has also increased the price competitiveness of Mozambique beef in international
markets. These markets require a relatively high quality animal and, as previously announced, export activities
were being investigated by the Group, which relied on animals being reared or fattened on our ranches. The
need for a reliable source of high quality animals to supply the affluent segment of the national market, as well
as to provide animals for export opportunities, was the driving factor behind the Group’s development plans
for the ranches, where the Group had invested extensively to increase our stocking capacity. The expansion of
the herd, where we have capacity for over 10,000 head across our ranches, was supported by capital
investment in pivot irrigation at the farms, which now stands at 258 hectares at Mavonde and 118 hectares
at Inhazonia. In addition to the pivot irrigation, we have an additional 110 hectares at Mavonde under
line irrigation.

Disappointingly and despite all efforts, the recent military tension in the areas surrounding our ranches, coupled
with the economic environment in Mozambique, led the Board to suspend the development of the ranches and
destock the cattle to safeguard and crystallise its considerable livestock capital. The circa 4,200 head of cattle
that we had on the ranches at 31 May 2016 are currently gradually being transferred to the Vanduzi feedlot
and processed to slaughter; we expect the final animals to be taken off the ranches by the end of April 2017.
Once the ranches are de-stocked, we will maintain a skeleton workforce to ensure our assets are maintained
in readiness for future development.

In the longer run the farms remain an important asset in order to supply our retail outlets and capitalise on
potential export opportunities with high quality beef products. This established infrastructure and capacity

potential mean that we are well placed for growth once appropriate investment conditions for this more rural
infrastructure are re-established in Mozambique.

In order to keep our retail units stocked with the highest quality beef products, and to ensure the full uplift in
value is secured within the Group’s own operations, all beef sold within Mozbife’s retail units is sourced from
the Group’s state-of-the-art abattoir at Chimoio. 9,705 animals were processed through the abattoir during the
period, an increase over the 5,013 animals processed during FY2015. With a current run rate of approximately
900 animals per month, the abattoir continues to perform well. With a monthly slaughter capacity of
approximately 4,000 head there remains considerable flexibility to increase slaughter rates as the beef
operations expand.

In order to achieve the best price for our cattle when slaughtered, our animals spend time at our Vanduzi feedlot,
which has a current carrying capacity of approximately 4,000 head to provide in excess of 1,000 head for
slaughter each month to the abattoir. At the period end there were ~2,600 animals in the feedlot, sourced
from Mozbife’s own ranches or from cattle purchased from the surrounding areas. In addition to feeding pens,
the feedlot also has 1,050 hectares of land used for feed production which provides the twin benefits of
reducing costs and providing certainty of supply. Furthermore, the feedlot works strategically with other
companies in the Group, by using bran, the by-product from the grain processing facilities, as a feed supplement
for the cattle, or more recently, pelletized animal feed. Performance in the feedlot was adversely impacted in
the latter half of the year due to the El Niño drought conditions which resulted in locally sourced animals being
under weight, weak, and poorly conditioned at purchase. This has led to additional feed costs and lower
average live exit weights than would normally be the case. These issues have continued in the early part of
FY2017, but the effects have been partially offset by the higher quality animals coming off our farms due to the
destocking process. The rainy season is now starting in the areas where we buy cattle and normal to higher-
than-normal precipitation is expected, which should help improve the local cattle source. In addition, the
pelletized feed produced by DECA has started to be fed in the feedlot, which we expect will improve
feeding efficiencies.

The economic, political and military environment in Mozambique led the Group to complete an impairment
review of its property, plant and equipment in the Beef division, resulting in an impairment of $3,069,000
(2015: $nil).

The Beef division is partially funded by bank finance of approximately 105 million Metical (approximately
$1,760,000 at the 31 May 2016 exchange rate). Due to the recent increase in interest rates, and the de-
stocking of the farms, the Group is utilising cash savings to pay down these bank facilities wherever possible.

Cocoa division
In addition to the Grain and Beef divisions, the Group operated its Cocoa division in Sierra Leone during
FY2016. This division was sold subsequent to the period end for cash consideration of $750,000, which is
payable by 9 January 2017. The net assets of the Cocoa division at 31 May 2016 were $433,000. The
Cocoa division returned a loss of $965,000 (2015: $7,853,000, including impairment of goodwill, property,
plant and equipment, non-current receivables and inventory of $6,791,000) which is presented within
discontinued operations.

As a result of the well-publicised Ebola outbreak affecting West Africa, including Sierra Leone, the Board made
the decision to suspend development activities at the plantation in FY2015. Accordingly, during all of FY2016,
activities at the plantation were significantly reduced and maintained solely at a level sufficient to protect staff
while maintaining the Group’s assets in country.

While the Group had successfully established and maintained the necessary infrastructure from which a large
scale commercial cocoa plantation and trading business can be developed in Sierra Leone, the next stage in
the development of these assets requires significant capital investment. Given the impact of Ebola on the West
African region as a whole and the lack of investment appetite from traditional finance sources, the Board formed

Operational and financial review
continued

the view, after due investigations and careful consideration, that the Group would be unlikely to be able to
raise sufficient finance to continue with the development of the cocoa plantation in the foreseeable future. In
this context, the Board therefore believed that it was in the best interests of the Group to dispose of the Cocoa
division in a management buy-out transaction to bolster the Group’s cash reserves and to enable the
management team behind the Cocoa division to access other finance sources, such as dedicated development
and sustainability funds.

Conclusion
While we continue to strive to build our business towards profitability, ultimately we are still in the investment
phase of the Group’s development, particularly in the Beef division; that investment is now on hold until the
military tension and economic uncertainties in the country are resolved. Our strategy has now adapted to this
change in circumstances with a greater short term focus being placed on operating efficiencies and cash
generation across our businesses. We continue to believe that Mozambique has enormous potential and that
our businesses are well positioned to take advantage of this potential.

Directors’ report

The directors (the ‘Directors’ or the ‘Board’) of Agriterra Limited (‘Agriterra’ or the ‘Company’) hereby present
their annual report together with the audited financial statements for the year ended 31 May 2016 (‘FY2016’)
for the Company and its subsidiaries (collectively the ‘Group’).

Except where otherwise noted, amounts are presented in this Directors’ report in United States Dollars (‘$’ or ‘US$’).

Listing details

1.
Agriterra is a non-cellular Guernsey registered company limited by shares, whose ordinary shares (‘Ordinary
Shares’) are quoted on the AIM Market of the London Stock Exchange (’AIM’) under symbol AGTA.

2. Principal activities, business review and future developments
The principal activity of the Group is the investment in, development of and operation of agricultural and
associated civil engineering projects in Africa. The Group’s current operations are focussed on maize and beef
in Mozambique. As at 31 May 2016, the Group also held interests in certain cocoa operations in Sierra
Leone. These operations were sold subsequent to the period end as more fully described in note 34.2. A review
of the Group’s performance by business segment, key performance indicators and future prospects are given
in the Chair’s statement and the Operational and financial review. A review of the risks and uncertainties
impacting on the Group’s long term performance is included in the Corporate Governance report.

3. Results and dividends
The Group results show a loss after taxation and discontinued operations of $8,455,000 (2015: loss
$13,387,000), including an impairment charge against current and non-current assets of $3,069,000 (2015:
$9,860,000) arising against the Group’s beef assets in Mozambique (2015: against the Group’s cocoa and
palm assets in Sierra Leone). The Directors do not recommend the payment of a final dividend (2015: $nil).
No interim dividends were paid in the year (2015: $nil).

4. Directors
4.1. Directors in office
The Directors who held office during the period and until the date of this report were:

Director

PH Edmonds
CSO Havers
AS Groves
DL Cassiano-Silva

Position

Chair
Chair
Chief Executive Officer
Finance Director

Date of appointment / cessation of
office in the period 1 June 2015
to the date of this report

Resigned 22 April 2016
Appointed 29 April 2016
–
–

4.2. Directors’ interests
As at the date of this report, the interests of the Directors and their related entities in the Ordinary Shares of the
Company were:

AS Groves

Ordinary Shares held

15,040,000

4.3. Directors emoluments
Details of the nature and amount of emoluments payable by the Group for the services of its Directors during
the financial year are shown in note 10 to the financial statements.

Directors’ report
continued

4.4. Directors’ share options
Details of the Director’s interests in share options of the Company during the financial year are as follows:

Director

DL Cassiano-Silva

At
1 June 2015 and
31 May 2016

Exercise Date from which
exercisable

price GBP

Expiry date

2,500,000

1.47

(1)

(2)

(1)

(2)

These options were granted on 15 May 2014 and vest 20% per annum on the first to fifth anniversary from the date of grant.

These options expire five years after the date they vest.

4.5. Directors’ indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its Directors which remain
in force at the date of this report.

5. Substantial shareholdings
To the best of the knowledge of the Directors, except as set out in the table below, there are no persons who,
as of 16 November 2016, are the direct or indirect beneficial owners of, or exercise control or direction over
3% or more of the Ordinary Shares in issue of the Company.

Beyond Africa Fund Limited
Global Resources Fund
Mr. William Philip Seymour Richards
Libra Fund LP
Oppenheimer Funds, Inc.
World Precious Minerals Fund

Number of Ordinary Shares

% Holding

106,776,005
67,888,600
54,000,000
52,729,574
40,000,000
38,476,200

10.06%
6.39%
5.09%
4.97%
3.77%
3.62%

6. 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.

7. Supplier 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 which is to abide by the terms of payment agreed with suppliers for 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 2016 was 5 days (2015: 8 days).

8. Political and charitable donations
During the year no political and charitable donations were made (2015: $nil).

9. Social and community issues
As a Group, we strongly believe that it is part of our wider responsibility to promote the development of the
countries in which we operate. Central to this development and continued economic growth is employment
and training. Wherever possible, the Group continues to ensure that its expertise and specialist skills and facilities
are made available to the broader community. We also believe that it is part of our role to assist in activities
designed to reduce hunger – we have been active in this area during the year and hope to continue, in

particular, to support Mozambique through the current drought period caused by the El Nino phenomenon that
has affected Sub-Saharan Africa in 2016.

Particular activities undertaken during the year have focussed on (1) practical, ‘on the ground’ training for
students from the Manica Province Agricultural College, the Manica Province University and the University of
Eduardo Mondelane in Maputo; (2) dissemination of agricultural management knowledge and practices; and
(3) provision of health and medical assistance.

With respect to educational activities, these have included a day trip for 30 students focussing on food
production at our milling operations, a three month internship in a maize milling position, various animal and
veterinary science students visiting our abattoir for practical aspects of their university courses (these visits are
guided by our in house vet who has more than 30 years’ experience in the field of animal health in
Mozambique) and 6 veterinary students obtaining practical work experience at our feedlot for 15 days.

With respect to agricultural management knowledge and practices, we undertook a trial with 40 small scale
farmers to evaluate the effects of using certified seed and basal fertilizers on maize production, and to highlight
the importance of these inputs to obtaining better yields. The results were encouraging as yields at least doubled
on all trial plots. This concept can be spread rapidly through the local community as the farmers undertaking
the trial will now train friends and family in these relatively simple, but highly effective agricultural practices.

With respect to the promotion of health and medical assistance, a contracted doctor visits our sites and facilities
on a regular basis to deal with day to day ailments and concerns. He also coordinates and monitors progress
on mid to long term treatments ensuring employees are supported through whatever treatments are required.
He also follows up on any previous illnesses that may have occurred to ensure that employees are supported
during their recovery period.

Wherever possible, the Group is also committed to the promotion of food security in Mozambique. We are
particularly proud to be working with a leading international food donor programme, providing high quality
maize flour products to both alleviate national hunger and support the education of the younger population –
the majority of the maize flour we have provided to this food programme has been distributed to school children.
We believe that the partner relationship we have built over the year will remain strong in future years, and we
hope to continue working extensively with food donor programmes in the future.

10. Independent auditor and statement of provision of information to the

independent auditor

RSM UK Audit LLP have expressed their willingness to continue in office as independent auditor of the Company
and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting.

The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are
each aware, there is no relevant audit information of which the Company’s auditor is not aware; and each
Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company’s auditor is aware of that information.

11. Additional information and electronic communications
Additional information on the Company can be found on the Company’s website at www.agriterra-ltd.com.

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.

Directors’ report
continued

The Company’s website is maintained in compliance with AIM Rule 26.

By order of the Board.

CSO Havers


17 November 2016

Corporate governance

The Board is accountable to the Company’s shareholders for good corporate governance. The Company is
quoted on AIM and is therefore not required to comply with the provisions of the UK Corporate Governance
Code (the ‘Code’) on corporate governance as published by the UK Listing Authority. Nevertheless, the Directors
recognise the value and importance of effective corporate governance and observe provisions of good
governance to the extent that they consider them to be appropriate for a group of this size and stage of
development. Set out below is a summary of how, at 31 May 2016, the Group was dealing with corporate
governance issues.

1. The Board of Directors and the Executive Committee
The Group is led and controlled by a Board comprising the Chair, the Chief Executive Officer and the Finance
Director.

The Board has entrusted the day-to-day responsibility for the direction, supervision and management of the
business of the Group to the Group Executive Committee (the ‘ExCom’). The ExCom is currently comprised of
the Chief Executive Officer and the Finance Director.

Certain matters are specifically reserved to the Board for its decision including, , the creation or issue
of new shares and share options, acquisitions, investments and disposals, material contractual arrangements
outside the ordinary course of business and the approval of all transactions with related parties.

Due to the current size of the Board and the Company, there is no separate Nomination Committee 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 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 Group has adopted a share dealing code for Directors’ dealings which is appropriate for an AIM quoted
company. The Directors and the Company comply with the relevant provisions of the AIM Rules and the Market
Abuse Regulation (EU) No. 596/2014 relating to share dealings and take all reasonable steps to ensure
compliance by the Group’s employees.

The Company has remuneration and audit committees as more fully described below.

2. 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 administers
any equity incentive schemes. The remuneration committee is constituted on an ad hoc basis and comprises at
least two members.

Details of the remuneration of each Director are set out in note 10 to the financial statements.

3. 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 meets at least twice a year and has unrestricted access to
the auditor. In addition to meeting with the auditor and reviewing the report from the auditor relating to the
accounts and internal control, 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 audit committee is constituted annually and
comprises of at least two members, one of which is the Chair of the Company, who acts as Chair of
the committee.

Corporate governance
continued

4. 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.

Internal audit

5.
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.

6. 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 Prevention of 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.

7. Going concern
The Board has detailed its considerations relating to Going concern in note 4.1 to the financial statements.

8. Risks and uncertainties
There are a number of risks and uncertainties facing the Group, principally the following:

8.1. Foreign exchange
The Group conducts its operations in multiple jurisdictions with differing currencies 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. Fluctuations in exchange rates may affect the underlying
amounts that the Group will pay for goods or services (‘transaction risk’), or the translation of the results of
subsidiary companies into US$ for the purpose of reporting the Group results (‘translation risk’). Translation risk
has been particularly noticeable this financial year with respect to the Mozambique operations – the
Mozambique to US$ exchange rate has moved from 36.9 MZN / US$ at 31 May 2015 to 59.61 MZN /
US$ at 31 May 2016. Subsequent to the period end, the Metical has further devalued to approximately 77
MZN / US$. As more fully discussed in the Chair’s statement, once converted to US$, this fall in the value of
the Metical has offset a significant part of the increase in revenues that have been achieved in both our Grain
and Beef businesses during the year.

8.2. 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.

8.3. General 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 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.

During the 2016 calendar year Mozambique has experienced, and continues to experience, a complex
economic crisis (arising through a combination of factors including the decline in commodity prices, strong
devaluation of the Metical, a rise in inflation and natural disasters) and military conflict focussed in the central
regions of the country. At present it is uncertain if and when the political and military tensions will be resolved
and, until these matters are resolved, there will inevitably be significant uncertainty regarding the security of
investment in certain parts of the country. This uncertainty surrounding security, along with the general economic
climate in Mozambique at present, led the Board to initiate the de-stocking of the animals from the cattle farms
in June 2016. Further details are provided in note 34.1 and the Chair’s statement.

In the event that the ongoing political and military tensions escalate further, the Group will be obligated to
assess the risks to staff and consider risk mitigation (including, without limitation, suspension of operations) so
as to protect staff and assets, so far as practicable.

8.4. Land ownership in Mozambique
Under the laws of Mozambique, proprietary rights in land are exclusive to the state. The Mozambique
constitution prescribes 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 cannot 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 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.

8.5. Maize growing season
The Group anticipates a six month buying/growing season for maize. 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.

8.6. Cattle ranching and feedlot
The Group has significant cattle ranching and feedlot assets in Mozambique, with approximately 6,800 head
as at 31 May 2016. While all necessary measures are taken to ensure the cattle remain disease and infection
free, there is a risk that the animals may be affected by unforeseen illnesses which could impact on the future
profitability of these operations. Mozambique is also subject to significant temperature and precipitation changes
during and between years. In some years, particularly ‘El Niño’ years such as calendar year 2016, the country
may be subject to drought conditions which impact on the availability of grazing feed for cattle (thereby
necessitating the implementation of supplementary feeding programmes to maintain the condition of the animals).
Any unexpected supplementary feeding programmes, or increases in the price of purchased feed (such as
maize, bran, sunflower cake etc) resulting from lower than anticipated local supplies, may impact on the
profitability of the ranching operations.

Corporate governance
continued

As more fully described in note 34.1, the Group has commenced de-stocking the animals from its cattle ranches
into the feedlot as a precautionary measure due to the military conflict in the central provinces in Mozambique
where the ranches are located. The risks associated with cattle ranching will therefore reduce in the short term.
In the medium to longer term, the Group hopes to recommence cattle farming operations and will ensure that
the relevant risks are re-assessed at that time to ensure appropriate risk mitigation procedures are implemented.

8.7. Health risks

The Group operates in countries that are, or may be, subject to significant health risks. For example, due to the
Ebola epidemic in Sierra Leone in 2014 and 2015, the Group suspended the development of its Cocoa
plantation and has subsequently disposed of this asset. In the event of other unforeseen epidemics in the future,
there is a risk that the Group’s operations may be further temporarily disrupted, or require additional
precautionary measures. Accordingly, in such circumstances, the Group may be unable to develop its projects
in the timeframe and budget initially projected, which may impact on the cash requirements or profitability of
these projects.

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 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’).

The financial statements are required by IFRS as adopted by the EU to present fairly the financial position and
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
Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group and Company transactions and disclose with reasonable accuracy at any time the financial position
of the Group and Company 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 Company 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.

Independent auditor’s report to the members of Agriterra Limited

We have audited the Group financial statements of Agriterra Limited for the year ended 31 May 2016 on
pages 18 to 61. 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 auditor
As more fully explained in the Statement of Directors’ responsibilities set out on page 16, 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 the other financial and non-financial information contained in the annual report and consider the
implications for our report if we become aware of any material inconsistency with the financial statements or
with knowledge acquired by us in the course of performing the audit, or any material misstatement of fact within
the other information. We also read the information in the Directors’ report and consider the implications for our
report if we become aware of any material inconsistency with the financial statements.

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 Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.

Opinion on the financial statements
In our opinion:

•

the financial statements give a true and fair view of the state of the Group’s affairs as at 31 May 2016
and of the Group’s loss for the year then ended;

the Group financial statements are in accordance with IFRSs as adopted by the European Union; and

the Group financial statements comply 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

the Company’s accounts are not in agreement with the accounting records; or

we have not received all the information and explanations which, to the best of our knowledge and belief,
we consider are necessary for the purposes of our audit.

RSM UK Audit LLP, Auditor
Chartered Accountants and Registered Auditors
25 Farringdon Street
London, EC4A 4AB

17 November 2016

Consolidated income statement
For the year ended 31 May 2016

Continuing operations
Revenue
Cost of sales
Gross profit
Increase in value of biological assets
Operating expenses
Impairment of current and non-current assets
Other income
(Loss)/profit on disposal of property, plant and equipment
and adjustments to the carrying value of assets classified as held for sale
Operating loss

Investment revenues
Other gains and losses
Finance costs

Loss before taxation
Taxation
Loss for the year from continuing operations

Discontinued operations
Loss for the year from discontinued operations

Loss for the year attributable to owners of the Company

LOSS PER SHARE
Basic and diluted loss per share from continuing operations
Basic and diluted loss per share from continuing
and discontinued operations

Note

11.1

12
13
14

2015
(re-presented –
note 16)
US$000

10,883
(10,402)
481
1,910
(9,085)
–
22

61
(6,611)

19
(849)
(683)

(8,124)
(81)
(8,205)

2016
US$000

18,511
(16,779)
1,732
1,637
(6,863)
(3,069)
57

(110)
(6,616)

11
(360)
(678)

(7,643)
(34)
(7,677)

(778)

(5,182)

(8,455)

(13,387)

US cents

(0.72)

(0.77)

(0.80)

(1.26)

Consolidated statement of comprehensive income
For the year ended 31 May 2016

Loss for the year
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences
Other comprehensive income for the year
Total comprehensive income for the year attributable to owners of the Company

2016
US$000

(8,455)

(8,139)
(8,139)
(16,594)

2015
US$000

(13,387)

(4,435)
(4,435)
(17,822)

Consolidated statement of financial position
As at 31 May 2016

Non-current assets
Property, plant and equipment
Interests in associates
Investments in quoted companies
Biological assets

Current assets
Biological assets
Inventories
Trade and other receivables
Assets classified as held for sale
Cash and cash equivalents

Total assets
Current liabilities
Borrowings
Trade and other payables
Liabilities directly associated with assets classified as held for sale

Net current assets
Non-current liabilities
Borrowings

Total liabilities
Net assets

Share capital
Share premium
Share based payment reserve
Translation reserve
Accumulated losses
Equity attributable to equity holders of the parent

Note

19
20
21
22

22
23
24
25

26
27
25

30.1

2016
US$000

7,505
4
16
888
8,413

1,106
1,357
1,290
860
4,055
8,668
17,081

1,812
708
142
2,662
6,006

1,105
1,105
3,767
13,314

2015
US$000

19,746
4
376
2,246
22,372

1,019
2,892
1,594
–
6,421
11,926
34,298

3,079
1,377
–
4,456
7,470

–
–
4,456
29,842

1,960
148,622
1,980
(16,382)
(122,866)
13,314

1,960
148,622
1,914
(8,243)
(114,411)
29,842

The financial statements of Agriterra Limited were approved and authorised for issue by the Board of Directors
on 17 November 2016. Signed on behalf of the Board of Directors by:

CSO Havers


17 November 2016

Consolidated statement of changes in equity
For the year ended 31 May 2016

Share
capital
US$000

Share Shares to be
issued
US$000

premium
US$000

Note

Share based
payment
reserve
US$000

Translation Accumulated
losses
US$000

reserve
US$000

Total
equity
US$000

11.3

Balance at
1 June 2014
Loss for the year
Other comprehensive
income:
Exchange translation loss
on foreign operations
Total comprehensive
income for the year
Share-based payments
Released to profit
and loss
Balance at
31 May 2015
Loss for the year
Other comprehensive
income:
Exchange translation loss
on foreign operations
Total comprehensive
income for the year
Share-based payments
Balance at
31 May 2016

1,960
–

148,622
–

2,940
–

1,859
–

(3,808)
–

(101,024)
(13,387)

50,549
(13,387)

–

–
–

–

–
–

–

–
–

(2,940)

–

(4,435)

–

(4,435)

–
55

–

(4,435)
–

(13,387)
–

(17,822)
55

(2,940)

1,960
–

148,622
–

–

–
–

–

–
–

1,960

148,622

–
–

–

–
–

–

1,914
–

(8,243)
–

(114,411)
(8,455)

29,842
(8,455)

–

(8,139)

–

(8,139)

–
66

(8,139)
–

(8,455)
–

(16,594)
66

1,980

(16,382)

(122,866)

13,314

Consolidated cash flow statement
For the year ended 31 May 2016

Note

31.1

22
14
12
21
11.1

Cash flows from operating activities
Loss before tax from continuing operations
Adjustments for:
Depreciation
Profit on disposal of property, plant and equipment
Adjustments to the carrying value of assets classified as held for sale
Share based payment expense
Foreign exchange (gain)/loss
Increase in value of biological assets
Finance costs
Investment revenues
Decrease in fair value of quoted investments
Impairment of current and non-current assets
Operating cash flows before movements in working capital
Decrease in inventories
Increase in trade and other receivables
Decrease in trade and other payables
Net decrease in biological assets
Cash used in operating activities by continuing operations
Corporation tax paid
Finance costs
Interest received
Net cash used in operating activities by continuing operations
Net cash (used in)/provided by operating activities
by discontinued operations
Net cash used in operating activities

Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
net of expenses incurred
Acquisition of property, plant and equipment
Net cash used in investing activities by continuing operations
Net cash from/(used in) investing activities by discontinued operations
Net cash used in investing activities

Cash flows from financing activities
Net draw down of overdrafts
Net draw down of loans
Net cash from financing activities from continuing operations
Net cash used in financing activities by discontinued operations
Net cash from financing activities
Net decrease in cash and cash equivalents
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

2015
(re-presented –
note 16)
US$000

2016
US$000

(7,643)

(8,124)

1,160
(15)
125
66
(37)
(1,637)
678
(11)
360
3,069
(3,885)
122
(291)
(325)
1,592
(2,787)
(34)
(678)
11
(3,488)

(133)
(3,621)

105
(465)
(360)
106
(254)

53
1,721
1,774
–
1,774
(2,101)
(265)
6,421
4,055

1,644
(61)
–
55
177
(1,910)
683
(19)
849
–
(6,706)
1,158
(848)
(719)
2,281
(4,834)
(9)
(683)
19
(5,507)

5,291
(216)

239
(1,217)
(978)
(286)
(1,264)

1,376
–
1,376
(200)
1,176
(304)
(269)
6,994
6,421

Notes to the consolidated financial statements

1. General information
Agriterra is incorporated and domiciled in Guernsey, the Channel Islands, with registered number 42643.
Further details, including the address of the registered office, are given on page 62. The nature of the Group’s
operations and its principal activities are set out in the Directors’ report. A list of the investments in subsidiaries
and associate companies held directly and indirectly by the Company during the period and at the period
end, including the name, country of incorporation, operation and ownership interest is given in note 3.2.

The reporting currency for the Group is the US Dollar (‘$’ or ‘US$’) as it most appropriately 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 IFRSs as adopted by the EU.

2. Adoption of new and revised standards and interpretations
2.1. New standards and interpretations adopted with no significant effect on the financial statements
The following new and revised Standards and Interpretations have been adopted in these financial statements.
Their adoption has not had any significant impact on the amounts reported in these financial statements, but
may impact the accounting for future transactions and arrangements.

IFRS 10

Amendment 2015

IAS 28

Amendment 2015

Consolidated Financial Statements: Amendments
deferring the effective date of the September 2014
amendments (effective immediately)
Investments
Joint Ventures:
in Associates and
Amendments deferring the effective date of the
September 2014 amendments (effective immediately)

New Standards and Interpretations in issue but not yet effective

2.2.
At the date of authorisation of these financial statements, the following Standards and Interpretations are in
issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 2

Amendment 2016

IFRS 4 & IFRS 9

Amendment 2016

IFRS 9 (2014)

New 2009, Amendment 2010,
2011, 2013 and 2014

IFRS 10, IFRS 12,
IAS 27 and IAS 28

Amendment 2014

IFRS 11

Amendment 2014

Amendments to clarify the classification and
measurement of share-based payment transactions
(effective for annual periods beginning on or after
1 January 2018)
Amendments regarding the interaction of IFRS 4 and
IFRS 9. (An entity choosing to apply the overlay
approach retrospectively to qualifying financial assets
does so when it first applies IFRS 9. An entity choosing
to apply the deferral approach does so for annual
periods beginning on or after 1 January 2018)
Financial instruments (Hedge Accounting and
amendments to IFRS 9, IFRS 7 and IAS 39)
(effective for annual periods beginning on or after
1 January 2018)
Sale or contribution of assets and application of the
consolidation exemption (effective for annual periods
beginning on or after 1 January 2016)
Acquisition of an interest in a joint operation
(effective for annual periods beginning on or after
1 January 2016)

IFRS 14

IFRS 15

IFRS 16

IAS 12

New 2014

New 2014, Amendments 2015
and 2016
New 2016

Amendment 2016

IAS 16

Amendments 2014

IAS 38

Amendments 2014

IAS 41

Amendment 2014

Disclosure initiative

Amendments 2014

Disclosure initiative

Amendments 2016

September 2014
Annual Improvements
to IFRSs

Amendments 2014

Regulatory deferral accounts (effective for annual
periods beginning on or after 1 January 2016)
Revenue from contracts with customers (effective for
annual periods beginning on or after 1 January 2018)
Leases (effective for annual periods beginning on or
after 1 January 2019)
Amendments regarding the recognition of deferred
tax assets for unrealised losses (effective for annual
periods beginning on or after 1 January 2017)
Amendments bringing bearer plants into the scope
of IAS 16 and clarifying acceptable methods of
depreciation (effective for annual periods beginning
on or after 1 January 2016)
Amendment clarifying acceptable methods of
amortisation (effective for annual periods beginning
on or after 1 January 2016)
Amendments bringing bearer plants into the scope
of IAS 16 (effective for annual periods beginning on
or after 1 January 2016)
Amendments resulting from the disclosure initiative
(effective for annual periods beginning on or after
1 January 2016)
Amendments resulting from the disclosure initiative
(effective for annual periods beginning on or after
1 January 2017)
Effective for annual periods beginning on or after
1 January 2016

The Directors do not anticipate that the adoption of these Standards and Interpretations will have a material
impact on the Group’s financial statements in the period of initial application.

3. Significant accounting policies
The financial statements have been prepared on a historical cost basis, except for certain financial instruments,
biological assets and share based payments. Historical cost is generally based on the fair value of the
consideration given in exchange for the assets acquired. The principal accounting policies adopted are set out
below in this note.

3.1. Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
has 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. Further detail is provided in
note 4.1 to the financial statements.

3.2. Basis of consolidation
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 achieved when the Company has the power
to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Notes to the consolidated financial statements
continued

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.

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.

As at 31 May 2016, the Company held equity interests in the following undertakings:

Direct investments

Subsidiary undertakings
Agriterra (Mozambique) Limited
Agriterra Aviation (Pty) Limited
Agriterra East Africa Limited
West Africa Cocoa Services Limited(1)
Shawford Investments Inc.
Baranca Tide Limited(1)

Associate undertakings
African Management Services Limited

Proportion held

Country of
incorporation

100%
100%
100%
100%
100%
100%

Guernsey
South Africa
Mauritius
British Virgin Islands
British Virgin Islands
British Virgin Islands

Nature of business

Holding company
Aviation services
Trading
Holding company
Holding company
Holding company

40%

United Kingdom Business support services

Indirect investments of Agriterra (Mozambique) Limited

Proportion held

Country of
incorporation

Nature of business

Subsidiary undertakings
Desenvolvimento E Comercialização
Agrícola Limitada
Compagri Limitada
Mozbife Limitada
Carnes de Manica Limitada
Aviação Agriterra Limitada

100%
100%
100%
100%
100%

Mozambique
Mozambique
Mozambique
Mozambique
Mozambique

Grain
Grain
Beef
Beef
Aviation services

Indirect investments of West Africa Cocoa Services Limited

Subsidiary undertakings
Tropical Farms (SL) Limited(1)

Indirect investments of Baranca Tide Limited

Proportion held

Country of
incorporation

Nature of business

100%

Sierra Leone Cocoa and coffee trading

Subsidiary undertakings
Tropical Farms Plantation (SL) Limited(1)

100%

Sierra Leone

Cocoa plantation

Proportion held

Country of
incorporation

Nature of business

Indirect investments of Shawford Investments Inc.

Subsidiary undertakings
Red Bunch Ventures (SL) Limited

Proportion held

Country of
incorporation

Nature of business

100%

Sierra Leone

Palm oil

(1)

These companies form part of the Cocoa disposal group. Refer to note 25 for further details.

Foreign currency

3.3.
The individual financial statements of each company in the Group are prepared in the currency of the primary
economic environment in which it operates (its ‘functional currency’). The consolidated financial statements are
presented in US Dollars.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the date of the
transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.

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 each month, unless exchange rates fluctuate significantly during
the month, 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 other
comprehensive income and accumulated in equity in the translation reserve. Such translation differences are
recognised as income or expense in the year in which the operation or branch is disposed of.

The following are the material exchange rates applied by the Group:

Mozambican Meticais: US$
Sierra Leone Leones: US$

Average Rate

Closing Rate

2016

43.61
5,067

2015

32.45
4,301

2016

59.61
6,200

2015

36.90
4,295

3.4. Operating segments
The Chief Operating Decision Maker is the ExCom. The ExCom reviews the Group’s internal reporting in order
to assess performance of the business. Management has determined the operating segments based on the
reports reviewed by the ExCom which consider the activities by nature of business.

3.5. Revenue recognition
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, value added taxes 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.

Income arising from the rental of surplus plant and machinery is stated on an accruals basis at the amount due
for rental until 31 May of the relevant financial year.

3.6. Operating loss
Operating loss is stated before investment revenues, other gains and losses, finance costs and taxation.

Notes to the consolidated financial statements
continued

3.7. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use or
sale. The Group did not incur any borrowing costs in respect of qualifying assets in the period.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

3.8. Share based payments
The Company issues equity-settled share-based payments to certain employees of the Group. 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.

3.9. Employee benefits
3.9.1. Short term employee benefits
Short-term employee benefits include salaries and wages, short-term compensated absences and bonus
payments. The Group recognises a liability and corresponding expense for short-term employee benefits when
an employee has rendered services that entitle him/her to the benefit.

3.9.2. Post-employment benefits
The Group does not contribute to any retirement plan for its employees. Social security payments to state schemes
are charged to profit and loss as the employee’s services are rendered.

3.10. Leases
Leases that transfer substantially all the risks and reward of ownership are classified as finance leases. All other
leases are classified as operating leases. As at 31 May 2015 and 31 May 2016 the Group does not have
any finance leases. During the periods presented in these financial statements, the Group was counterparty to
certain operating lease contracts. Rentals payable under operating leases are charged to income on a straight-
line basis over the term of the relevant lease.

3.11. Taxation
The Company is resident for taxation purposes in Guernsey and its income is subject to income tax, presently
at a rate of zero per cent per annum. 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.

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.

3.12. 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. Acquisition related costs
are recognised in profit and loss 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 profit and loss.

3.13. Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less accumulated 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 the course of construction for production, rental or administrative purposes are carried at cost, less
any identified impairment loss. Cost includes professional fees and associated expenses.

Other than for Aviation assets, depreciation is charged on a straight-line basis over the estimated useful lives of
each item, as follows:

•

Land and buildings:

Land

Buildings and leasehold improvements

•

Plant and machinery

• Motor vehicles

• Other assets

•

Assets under construction

Nil

2% – 33%

5% – 25%

20% – 25%

10% – 33%

Nil

Depreciation on Aviation assets is charged based on the separate components of the aircraft, on an hours
flown basis for engines and on a straight-line basis over 15 years for the airframe.

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 received with the carrying amount
of the asset immediately prior to disposal and are included in profit and loss.

Notes to the consolidated financial statements
continued

3.14. Impairment of property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit and loss because the Group does not record any assets at a revalued amount.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in
profit and loss.

3.15. Biological assets
Consumer biological assets, being the beef cattle herd, are measured in accordance with IAS 41, ‘Agriculture’
at fair value less costs to sell, with gains and losses in the measurement to fair value recorded in profit and loss.
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 animals (principally 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.

Cattle ceases to be a biological asset from the point it is slaughtered, after which it is accounted for in
accordance with the accounting policy below for inventories.

The cost of forage is charged to the income statement over the period it is consumed.

3.16. 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.

3.17. Non-current assets held for sale
Non-current assets (and disposal groups) held for sale are measured at the lower of carrying amount and fair
value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
through a sale transaction rather than through continuing use. This condition is regarded as met only when the
sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.
Management must be committed to the sale which should be expected to qualify for recognition as a completed
sale within one year from the date of classification.

When the Group is committed to a sale plan involving the loss of control of a subsidiary, all of the assets and
liabilities of that subsidiary are classified as held for sale when the criteria above are met.

A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of
a disposal group classified as held for sale.

Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are
recognised in profit or loss.

3.18. Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes
a party to the contractual provisions of the instrument.

3.18.1. Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial
asset is under a contract whose terms require delivery of the financial asset within the timeframe established by
the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial
assets classified as at fair value through profit and loss (‘FVTPL’), which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets at ‘FVTPL’, ‘held-to-maturity’
investments, ‘available-for-sale’ financial assets and ‘loans and receivables’. The classification depends on the
nature and purpose of the financial asset and is determined at the time of initial recognition. The Company and
Group currently have financial assets in the category of ‘loans and receivables’ and FVTPL.

3.18.1.1. Loans and receivables
Trade receivables, loans receivable, bank balances, cash in hand and other receivables that have fixed or
determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans
and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.

The effective interest method is a method of calculating the amortised cost of a financial instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees 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 instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.

3.18.1.2. Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or is designated as
at FVTPL upon initial recognition. The Group holds certain investments in quoted companies which are
designated as held for trading. Financial assets at FVTPL are stated at fair value, with any gains and losses
arising on re-measurement recognised in profit or loss. The net gain or loss incorporates any dividends, interest
earned, or foreign exchange gains and losses on the financial asset and is included within other gains and
losses in the income statement. Fair value is determined in the manner described in note 21.

3.18.1.3. Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have
been affected.

For loans and receivables carried at amortised cost, the amount of the impairment is the differences between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.

Notes to the consolidated financial statements
continued

The carrying amount of the financial asset is reduced through the use of an allowance account. When a financial
asset is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the carrying amount of
the allowance account are recognised in profit or loss.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through profit and loss to the extent that the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortised cost would have been had the impairment not been recognised.

3.18.1.4. De-recognition of financial assets
The Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.

3.18.2. Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.

3.18.2.1. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting
all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct
issue costs.

3.18.2.2. Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’. The Group
only has financial liabilities in the category of other financial liabilities.

3.18.2.2.1. Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.

3.18.2.2.2. De-recognition of financial liabilities
The Group de-recognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or they expire.

3.19. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the asset or liability or, in the absence of a principal market,
in the most advantageous market for the asset or liability. The principal or the most advantageous market must
be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.

For all other financial instruments not traded in an active market, the fair value is determined by using valuation
techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach
(i.e., using recent arm’s length market transactions adjusted as necessary and reference to the current market
value of another instrument that is substantially the same) and the income approach (i.e., discounted cash flow
analysis and option pricing models making as much use of available and supportable market data as possible).

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement
is directly or indirectly observable

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by re-assessing the categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

4. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group’s accounting policies which are described in note 3, the Directors are required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods. The effect on the
financial statements of changes in estimates in future periods could be material.

4.1. Going concern
The Group has prepared forecasts for the Group’s ongoing businesses covering the period of at least 12 months
from the date of approval of these financial statements. These forecasts are based on assumptions including,
inter alia, that there are no significant disruptions to the supply of maize or cattle to meet its projected sales
volumes and that key inputs are achieved, such as anticipated sales price increases to reflect underlying inflation
in Mozambique, and projected weight gains of cattle in the feedlot. They further take into account the expected
meat to be obtained by de-stocking the beef herd from the beef ranches, planned disposals of property plant
and equipment, general working capital requirements and available borrowing facilities.

The Directors believe that with existing resources, including available undrawn borrowing facilities, the Group
and Company is able to manage its business risks. 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 these financial statements.

4.2. Impairment
Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS
36, Impairment of Assets. Where there are indicators of impairment, the net book value of the asset or cash
generating unit is compared with its fair value. The impairment review is sensitive to various assumptions,
including the expected sales forecasts, cost assumptions, capital requirements, and discount rates among others.
Details of impairments recorded in the period are included in note 11.

Notes to the consolidated financial statements
continued

4.3. Biological assets
Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair
value is based on the estimated market value for cattle in Mozambique of a similar age and breed, less the
estimated costs to bring them to market, converted to US$ at the exchange rate prevailing at the period end.
Changes in any estimates could lead to the recognition of significant fair value changes in the consolidated
income statement, or significant changes in the foreign currency translation reserve for changes in the Metical
to US$ exchange rate.

The herd is further categorised as either breeding herd of slaughter herd, depending on whether it is principally
held for reproduction or slaughter. At 31 May 2016 the value of the breeding herd disclosed as a non-current
asset was $888,000 (2015: $2,246,000). The value of the herd held for slaughter disclosed as a current
asset was $1,106,000 (2015: $1,019,000). Subsequent to the period end the Group has commenced de-
stocking its cattle farms (where the breeding herd is held) into the feedlot and these animals are being processed
for slaughter. The de-stocking is expected to be complete by the end of April 2017 and accordingly, the value
of the breeding herd will now be realised within 12 months of the balance sheet date. The decision to close
the cattle ranches was not made until after the period end and, accordingly, the breeding herd continues to be
disclosed as a non-current asset as at 31 May 2016. Further details on the de-stocking are included in note
34.1 and the Chair’s statement.

4.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax (‘IVA’) operates in a similar manner to UK Value Added Tax (‘VAT’). The Group
is exempt from IVA on its sales of maize products under the terms of Mozambique tax law. The Group is able
to recover input sales tax on substantially all of the purchases of the Grain division. The Group is always
therefore in a net recovery position of IVA in respect of its Grain operations. To date the Group has not
succeeded in recovering IVA from the Mozambique Government. Due to the significant uncertainty over the
recoverability of these IVA balances, the Group has provided in full against the assets as at 31 May 2015 and
31 May 2016. As at 31 May 2016, the gross and net IVA recoverable assets are respectively $837,000
(2015: $1,319,000) and $nil (2015: $nil) at the US$ to Metical exchange rate of 59.61 (2015: 36.90)
at that date.

4.5. Presentation of ‘Other cocoa activities’ as discontinued operations and classification of related assets and

liabilities as held for sale

As discussed in note 16.3, the results of the Group’s Cocoa division are presented as discontinued operations
in the period and the related assets and liabilities are classified as a disposal group held for sale (refer to note 25).
The classification requires, inter alia, that:

•(cid:0)

the disposal group is available for immediate sale in its present condition, subject only to terms that are
usual and customary for the sale of such a group; and

•(cid:0)

the sale of the disposal group must be highly probable.

As at 31 May 2016, the Board had reached the decision to sell the Cocoa division if an appropriate offer
was made and confidential discussions had been initiated with a number of parties including the incumbent
management team of the Cocoa division. These discussions indicated that the disposal of the Cocoa division
would achieve a realistically acceptable price and accordingly, its sale within twelve months of the balance
sheet date was considered highly probable. Accordingly the Cocoa division was classified as available for
sale as at 31 May 2016. Subsequent to the period end, the incumbent management team of the Cocoa
division agreed the detailed purchase terms for the holding companies that control the Cocoa division,
confirming this assessment. Further details are provided in note 34.2.

5. Revenue

An analysis of the Group’s revenue is as follows:

Continuing operations
Sale of goods
Hire of equipment and machinery

Investment revenues (note 12)

Discontinued operations
Sales of goods (note 16)
Hire of equipment and machinery (note 16)

2015
(re-presented –
note 16)
US$000

10,839
44
10,883
19
10,902

–
904
904
11,806

2016
US$000

18,334
177
18,511
11
18,522

161
228
389
18,911

Segment reporting

6.
The ExCom consider that the Group’s operating activities comprise the segments of Grain, Beef and Cocoa,
all undertaken in Africa. In addition, the Group has certain other unallocated expenditure, assets and liabilities,
either located in Africa or held as support for the Africa operations.

Notes to the consolidated financial statements
continued

6.1. Segment revenue and results
The following is an analysis of the Group’s revenue and results by operating segment:

Year ending
31 May 2016

Grain
US$000

Beef
US$000

Cocoa(3)
US$000

Unallo-
cated
US$000

Discon-
tinued(4)
US$000

Elimi-
nations
US$000

Revenue
External sales(2)
Inter-segment sales(1)

12,246
660
12,906

6,265
–
6,265

389
–
389

–
–
–

(389)
–
(389)

–
(660)
(660)

Segment results
– Operating
profit/(loss)

– Interest (expense)

/income
– Other gains
and losses
Profit/(loss)
before tax
Income tax
Profit/(loss) for
the period from
continuing operations

811

(5,981)

(965)

(1,446)

965

(473)

(205)

–

338
(16)

–

(6,186)
(18)

–

(360)

(965)
–

(1,795)
–

–

965
–

322

(6,204)

(965)

(1,795)

965

–

–
–

–

Year ending
Grain
31 May 2015
(re-presented – note 16) US$000

Beef
US$000

Cocoa(3)
US$000

Unallo-
cated
US$000

Discon-
tinued(4)
US$000

Elimi-
nations
US$000

Total
US$000

18,511
–-
18,511

(6,616)

(667)

(360)

(7,643)
(34)

(7,677)

Total
US$000

Revenue
External sales(2)
Inter-segment sales(1)

Segment results
– Operating loss
– Interest (expense)

/income
– Other gains
and losses
Loss before tax
Income tax
Loss for the period
from continuing
operations

5,517
524
6,041

5,366
–
5,366

904
–
904

–
–
–

(904)
–
(904)

–
(524)
(524)

10,883
–
10,883

(2,128)

(2,317)

(7,853)

(2,166)

7,853

(680)

–

–
(2,808)
(78)

–
(2,315)
(3)

–
(7,853)
–

(849)
(3,001)
–

–
7,853
–

(2,886)

(2,318)

(7,853)

(3,001)

7,853

–

–
–
–

–

(6,611)

(664)

(849)
(8,124)
(81)

(8,205)

(1)

(2)

(3)

(4)

Inter-segment sales are charged at prevailing market prices.
Revenue represents sales to external customers and is recorded in the country of domicile of the group company making the sale.
Sales from the Grain and Beef divisions are principally for supply to the Mozambique market. $161,000 of sales from the
Cocoa division were supplied to the world market during the year, with the remainder supplied within Sierra Leone (2015:
supplied in full within Sierra Leone during the year).
$228,000 (2015: $904,000) of revenue reported in the Cocoa segment for the year ended 31 May 2016 arises on the
rental of certain of the Cocoa division’s assets, principally in aid of the relief effort against the Ebola crisis in Sierra Leone.
Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment – refer to notes 16.2 and 16.3.

The segment items included in the consolidated income statement for the year are as follows:

Year ending
31 May 2016

Depreciation
Impairment of
assets (note 11.1)

Grain
US$000

239

Beef
US$000

889

Cocoa(3)
US$000

391

–

3,069

–

Year ending
Grain
31 May 2015
(re-presented – note 16) US$000

Depreciation
Impairment of
assets (note 11.2)

386

–

Beef
US$000

1,122

Cocoa(3)
US$000

628

Unallo-
cated
US$000

–

Unallo-
cated
US$000

136

Discon-
tinued(1)
US$000

(391)

–

Discon-
tinued(1)
US$000

(628)

Elimi-
nations
US$000

–

Elimi-
nations
US$000

–

Total
US$000

1,160

3,069

Total
US$000

1,644

–

6,791

–

(6,791)

(1)

Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment – refer to notes 16.2
and 16.3.

Segment assets, liabilities and capital expenditure

6.2.
Segment assets consist primarily of property, plant and equipment, biological assets, inventories, trade and
other receivables and cash and cash equivalents. Segment liabilities comprise operating liabilities, including
an overdraft financing facility in the Grain segment, and bank loans and overdraft financing facilities in the
Beef segment.

Capital expenditure comprises additions to property, plant and equipment, including capitalised depreciation
where applicable in the year ended 31 May 2015.

The segment assets and liabilities at 31 May 2016 and capital expenditure for the year then ended are as follows:

Assets
Liabilities
Capital expenditure

Grain
US$000

6,167
(1,496)
(85)

Beef
US$000

6,401
(1,889)
(380)

Cocoa
US$000

Unallocated
US$000

–
–
–

4,513
(382)
–

Total
US$000

17,081
(3,767)
(465)

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

Segment assets and liabilities
Unallocated:
Investments in quoted companies and interests in associates
Other receivables
Assets classified as held for sale
Cash and cash equivalents
Liabilities directly associated with assets classified as held for sale
Trade payables
Accrued liabilities
Total

Assets
US$000

12,568

20
568
607
3,318
–
–
–
17,081

Liabilities
US$000

3,385

–
–
–
–
142
96
144
3,767

Notes to the consolidated financial statements
continued

The segment assets and liabilities at 31 May 2015 and capital expenditure for the year then ended are as follows:

Assets
Liabilities
Capital expenditure

Grain
US$000

9,603
(3,297)
49

Beef
US$000

16,057
(228)
1,168

Cocoa
US$000

Unallocated
US$000

1,656
(146)
484

6,982
(785)
–

Total
US$000

34,298
(4,456)
1,701

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

Segment assets and liabilities
Unallocated:
Property, plant and equipment
Investments in quoted companies and interests in associates
Other receivables
Cash and cash equivalents
Trade payables
Accrued liabilities
Total

Assets
US$000

27,316

78
380
495
6,029
–
–
34,298

Liabilities
US$000

3,671

–
–
–
–
627
158
4,456

Significant customers

6.3.
In the year ended 31 May 2016, no single customer contributed more than 10% of the Group’s revenue.
During the year ended 31 May 2015, one of the Beef division’s customers generated $1,515,000 of revenue
being 13.9% of Group revenue.

7. Operating loss
Operating loss has been arrived at after charging/(crediting):

Depreciation of property, plant and equipment
Profit on disposal of property, plant and equipment
Loss on re-measurement of assets classified as held for sale
Net foreign exchange (gain)/loss
Impairment of assets (see note 11.1)
Staff costs (see note 9)

2015
(re-presented
– note 16)
US$000

1,644
(61)
–
177
–
4,326

2016
US000

1,160
(15)
125
(37)
3,069
3,360

8. Auditors remuneration

Amounts payable to RSM UK Audit LLP and their associates in respect of audit services are as follows:

Fees payable to the Company’s auditor for the audit of the Company’s accounts
Fees payable to the Company’s auditor and their associates for other services
to the Group:
The audit of the Company’s subsidiaries
Total audit fees

2016
US$000

121

–
121

2015
US$000

153

52
205

Other than as disclosed above, the Company’s auditor and their associates have not provided additional
services to the Group.

9. 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

Of which relating to:
Continuing operations
Discontinued operations

Their aggregate remuneration comprised:

Wages and salaries
Social security costs
Share based payment charge

Less: capitalised and included in property, plant and equipment
Amount charged to profit and loss

Of which relating to:
Continuing operations
Discontinued operations

2016
Number

47
746
793

730
63
793

2016
US$000

3,615
78
66
3,759
–
3,759

3,360
399
3,759

2015
(re-presented
– note 16)
Number

48
814
862

707
155
862

2015
(re-presented
– note 16)
US$000

5,008
104
55
5,167
(169)
4,998

4,326
672
4,998

Notes to the consolidated financial statements
continued

10. Remuneration of Directors

Year ended 31 May 2016

PH Edmonds
CS Havers
AS Groves
DL Cassiano-Silva

Year ended 31 May 2015

PH Edmonds
AS Groves
DL Cassiano-Silva
EA Kay
MN Pelham

Salary
US$000

Bonus
US$000

Share based
payment
US$000

136
4
149
202
491

13
–
13
16
42

–
–
–
13
13

Salary
US$000

Bonus
US$000

Share based
payment
US$000

159
159
215
47
50
630

–
–
–
–
–
–

–
–
11
15
–
26

Total
US$000

149
4
162
231
546

Total
US$000

159
159
226
62
50
656

11. Impairment of current and non-current assets
In accordance with IAS 36, , the Group conducted an impairment review of its tangible
assets as at 31 May 2016, resulting in an impairment against its Beef division assets held in Mozambique.
The equivalent impairment review conducted as at 31 May 2015 resulted in an impairment against the tangible
and intangible cocoa and palm lease assets, all held in Sierra Leone. Details of the recorded impairments are
as follows:

Beef division
Impairment against continuing operations

Cocoa division
Palm activities
Impairment against discontinued operations

Further details are provided below.

2015
(re-presented
– note 16)
US$000

–
–
6,791
3,069
9,860
9,860

2016
US$000

3,069
3,069
–
–
–
3,069

11.1. Impairment of Beef division non-current assets in the financial year ended 31 May 2016
The economic environment in Mozambique has altered substantially during the 2016 calendar year, having been
affected by a combination of a decline in commodity prices, the strong devaluation of the Metical, a rise in
inflation, natural disasters and military conflict in the central regions of the country. On the one hand, this changing
economic environment has presented significant sales opportunities for the Group, particularly in the ability to
supply local product to substitute previously preferred imported goods which are now relatively more expensive.
The increased price competitiveness of our beef products in particular has opened up the sizeable Maputo market
and we are now seeing record monthly sales volumes as a result. On the other hand, it is uncertain if and when
the political and military tensions will be resolved and, until these matters are resolved, there will inevitably be
significant uncertainty regarding the security of investment in certain parts of the country. This uncertainty, along
with the general economic climate in Mozambique, led the Board to initiate the de-stocking of the animals from
the cattle farms in June 2016. Further details are provided in note 34.1 and the Chair’s statement.

As a result of the above, and as required by IFRS, the Group conducted an impairment review of the Beef
division assets in Mozambique, resulting in an impairment against property, plant and equipment in the Beef
division of $3,069,000 (2015: $nil).

$2,408,000 of the impairment charge relates to the farming assets, which comprise in the main the initial
purchase price of the land, fixed land improvements (such as land clearing and preparation or the construction
of the Mavonde dam) and semi-fixed improvements (such as fencing). Given the political and military tensions
in Mozambique, and their consequential impact on the investment landscape, there was no basis for making
a reliable estimate of fair value less costs of disposal and therefore recoverable amount was measured by
reference to value in use alone. This was estimated at $nil because the farm assets at their stage of development
as cattle farms, are not capable of generating positive cash returns without further development funding.

$197,000 of the impairment charge relates to vehicles, heavy plant and machinery and agricultural equipment
(including irrigation pivots). Recoverable amount was determined for assets or cash generating units based on
fair value less costs of disposal, where fair value was based on the Directors best estimates of the likely realisable
value for individual assets within Mozambique.

The remaining charge of $464,000 was recorded against the Vanduzi feedlot assets where recoverable amount
was estimated based on a value in use discounted cash flow basis. The retail and abattoir assets were also assessed
for impairment on a value in use discounted cash flow basis. No impairments were recorded against these assets.
The impairment review utilised the cash flow forecasts for the Beef division (which are not reliant on the ongoing
supply of animals from the cattle farms) are based on the most recent financial budgets approved by management
for the next five years. Cash flows were estimated in real terms. No growth is assumed in subsequent years which
are maintained at constant levels. The key assumptions in the value in use calculations are those regarding the
discount rate, expected changes to selling prices and, for the feedlot, expected daily weight gains. Where
appropriate, the expected cash flows have been probability weighted in respect of these key assumptions.
Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value
of money and the risks specific to the cash generating unit. Changes in selling prices are based on expectations of
future changes in the market and, in particular, reflect the expected price rises that should be achievable given the
recent devaluation in the Metical and inflation which have not as yet been reflected in the selling prices. Daily
weight gains in the feedlot are estimated based on past experience. The rate used to discount cash flows was
17.5%, reflecting the estimated real interest rate in Mozambique of 12.5% and a 5% adjustment for risks specific
to the assets which have not been reflected in the underlying cash flows.

Notes to the consolidated financial statements
continued

The Board notes that the impairment review does not reflect the significant upside potential in Mozambique
from the development of the liquefied natural gas (‘LNG’) operations in the North. Further detail regarding the
current status of these projects is included in the Chair’s statement.

11.2.
Impairment of Cocoa division current and non-current assets in the financial year ended 31 May 2015
During the year ended 31 May 2015, and as a result of the Ebola outbreak affecting Western Africa, including
Sierra Leone, the Company suspended development activities at the cocoa plantation in Sierra Leone. In addition
to the significant restrictions in movement in country causing a shortage of labour, the Board assessed that it
was unsafe to pursue an expansion of the plantation at that stage, which could increase the risk of Ebola
developing on the plantation site and place staff at risk. Further, despite significant efforts to eradicate the virus
and restore confidence in the country, the Board was of the opinion that the investment landscape in Sierra
Leone had not returned to the favourable environment that was present pre-Ebola, and, in the Board’s opinion,
significant further regeneration and international development support was needed in the short to medium term
to facilitate further significant private sector investment.

Activities at the plantation have since been maintained at the level sufficient to protect staff while maintaining
the Group’s assets in country.

As required by IFRS, in 2015, the Group conducted an impairment review of all of the Group’s Cocoa division
assets in Sierra Leone, which principally comprised goodwill, property, plant and equipment, long term
prepayments, and inventory. The impairment review resulted in an impairment against the Cocoa division’s
assets in Sierra Leone of $6,791,000, analysed as follows:

Impairment of goodwill
Impairment of property, plant and equipment
Impairment of non-current receivables
Impairment of inventory

2015
US$000

575
5,998
159
59
6,791

Where assets were capable of generating cash flows that were largely independent from those generated by
other assets, the impairment review compared the carrying value of individual assets to their recoverable amount.
Examples of such assets were warehouses, vehicles, nurseries etc. Where the asset did not generate cash flows
that were independent from other assets, the Group estimated the recoverable amount of the cash-generating
unit to which the asset belonged. Examples of such assets were the plantation development assets, including the
land itself, clearing costs, planting, maintenance and other expenditure related to the growing of cocoa plants
at the plantation. Due to the suspension of funding for the cocoa operations, recoverable amount was generally
determined for assets or cash generating units based on fair value less costs of disposal, where fair value was
based on the Directors best estimates of the likely realisable value for individual assets within Sierra Leone.
Where, given the investment landscape in Sierra Leone there was no basis for making a reliable estimate of fair
value less costs of disposal - such as for the plantation development assets - recoverable amount was measured
by reference to value in use alone. This was estimated at $nil because the relevant assets, at their stage of
development, were not capable of generating positive cash returns without further development funding. The
impairment review resulted in a write down of the cocoa divisions goodwill and non-current receivables (which
represented long term land lease rental payments) to $nil, and its property, plant and equipment to $1,180,000.

The impairment of the Cocoa division assets was presented within continuing operations in the year ended
31 May 2015 because, in the medium to long term, the Board remained positive about the future development
potential in Sierra Leone for the cocoa plantation. As more fully described in note 16.3, during the year ended
31 May 2016, the Board made the decision to dispose of all of the Cocoa division’s assets through sale.
Accordingly and as required by IFRS 5. ‘’, the
comparative amounts, including the impairment charge, have been reclassified to discontinued operations.

11.3. Impairment of palm activities’ non-current assets in the financial year ended 31 May 2015
The Group controls a lease of approximately 45,000 hectares of brownfield agricultural land suitable for palm
oil production in the Pujehun District in the Southern Province in Sierra Leone. The lease was acquired in 2012
and the Board has continued to evaluate this property and its potential for commercialisation. Due to the factors
described above which resulted in an impairment against the Group’s Cocoa division assets in the financial year
ended 31 May 2015, the Group decided to suspend any activity on this lease. The assets were accordingly
impaired to $nil and presented within discontinued operations in the financial year ended 31 May 2015.

The carrying value of these assets, included within Property, plant and equipment was $6,009,000, which
included the initial purchase price of the lease, deferred consideration, and expenditure incurred on maintaining
the lease (such as annual lease rental payments). The deferred consideration was to be settled in Ordinary Shares
in the Company, following the initial development of 1,000 hectares of the leasehold land. Due to the impairment,
the Group no longer intended to complete this initial development and accordingly the related obligation to issue
shares (which was included within the ‘Shares to be issued reserve’, a component of the Group equity, with a
carrying value of $2,940,000) was released to profit and loss, reducing the impairment arising on the palm
activities to $3,069,000, which was included in the results of discontinued operations (refer to note 16.4).

12. Investment revenues

Interest income on bank deposits

2016
US$000

2015
US$000

All investment revenues are earned on cash and bank balances which are financial assets classified as loans
and receivables.

13. Other gains and losses

Decrease in fair value of quoted investments (note 21)

14. Finance costs

Interest expense on bank borrowings

2016
US$000

360

2016
US$000

678

2015
US$000

849

2015
US$000

683

Notes to the consolidated financial statements
continued

15. Taxation

Loss before tax from continuing activities

Tax credit at the Mozambican corporation tax rate of 32% (2015: 32%)
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of losses not allowable
Tax effect of losses not recognised in overseas subsidiaries (net of effect of
different rates)
Statutory taxation payments irrespective of income
Adjustment in respect of prior years
Tax expense

2015
(re-presented –
note 16)
US$000

(8,124)

(2,600)
67
1,556

977
9
72
81

2016
US$000

(7,643)

(2,446)
55
463

1,928
14
20
34

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 recognised a tax credit of $187,000 (2015: $nil) in respect of the disposal of its Ethiopian oil
and gas interests, reported within discontinued operations.

The Group has operations in a number of overseas jurisdictions where it has incurred taxable losses which may
be available for offset against future taxable profits amounting to approximately $9,652,000 (31 May 2015:
$13,460,000). In addition, the Group has further deductible timing differences amounting to approximately
$31,285,000 (31 May 2015: $13,575,000). No deferred tax asset has been recognised for these tax losses
and other deductible timing differences 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 percent. per annum (2015: zero percent. per annum). 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).

16. Discontinued operations
The loss after tax arising on discontinued operations during the period is analysed by business operation as follows:

Oil and gas activities
Cocoa trading activities
Other cocoa activities(1)
Palm activities
Net loss after tax attributable to discontinued operations
(attributable to owners of the Company)

2015
(re-presented –
note 16.3)
US$000

5,740
(174)
(7,679)
(3,069)

2016
US$000

187
–
(965)
–

(778)

(5,182)

(1)

The corresponding amounts for ‘Other cocoa activities’ were previously reported within continuing operations for the year ended
31 May 2015. For the reasons described in note 16.3, these activities are classified as discontinued operations in the year
ended 31 May 2016 and, as required by IFRS 5, ‘       ’, the
comparative amounts have been reclassified.

16.1. Oil and gas
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.
At the same time the Group suspended all exploration activities and reduced expenditure to the minimum
required in order to retain exploration licenses and extract potential value for Shareholders. Consequently the
oil and gas activities were reclassified as a discontinued operation.

In the financial year ended 31 May 2013 the Group completed the disposal of its oil and gas interests in
Ethiopia. The gain on disposal was taxed in full in Ethiopia in that year, without taking into consideration certain
tax deductible expenditure incurred by the Group. In the current financial year the Group has been successful
in recovering $187,000 as full and final settlement of amounts due to the Group from overpaid tax arising on
the aforementioned gain on disposal.

During the year ended 31 May 2015 the Group was paid £3,412,000 (being $5,659,000) in cash as
compensation due to the Company by the Government of the Republic of South Sudan for works undertaken
by the Company in the Republic of South Sudan. A further net credit of $81,000 was recorded in the year
ended 31 May 2015 with respect to the re-imbursement of expenditure incurred in pursuing this claim. No
amounts were recorded in respect of this matter in the current financial year.

16.2. Cocoa trading
Due to the serious and well-publicised Ebola outbreak and the associated precautionary restrictions on travelling
in Sierra Leone, accompanied by the ongoing losses suffered by the cocoa trading operations, the Group
ceased its cocoa trading operations in Sierra Leone in the financial year ended 31 May 2014. The cocoa
trading operations represented a significant component of a business segment of the Group and accordingly
the results of the cocoa trading operations were presented as discontinued operations within the consolidated
income statement. No amounts are recorded with respect to the cocoa trading operations in the current financial
year. The amounts recorded in the consolidated income statement in the preceding financial year, which relate
to the winding down of the cocoa trading operations between June and August 2014, were as follows:

Expenses
Loss before taxation
Taxation
Loss after tax and net loss attributable to the discontinued cocoa trading operations in the
period (attributable to owners of the Company)

2015
US$000

(174)
(174)
–

(174)

Cash flows pertaining to the cocoa trading operations are presented in the consolidated cash flow statement
along with all cash flows relating to discontinued operations.

16.3. Other cocoa activities
From 1 September 2014 and following the cessation of all cocoa trading related activities (refer to note 16.2),
the Cocoa division focussed its efforts on maintaining the cocoa plantation assets, while undertaking revenue
generating logistics activities, principally providing assistance in the Ebola relief efforts (collectively the ‘Other
cocoa activities’). Due to the significant efforts undertaken to control the Ebola epidemic by international aid
and health organisations, Sierra Leone was declared Ebola free during the current financial year, initially in
November 2015 and subsequently in March 2016. Consequently, the logistics activities which were being
undertaken to provide cash support for the Cocoa division reduced in scale such that the available income
from these activities no longer substantially covered the costs of the Cocoa division.

Notes to the consolidated financial statements
continued

While the Group has successfully established and maintained the necessary infrastructure from which a large
scale commercial cocoa plantation and trading business can be developed in Sierra Leone, the next stage in
the development of these assets requires significant capital investment. Given the impact of Ebola on the West
African region as a whole and the lack of investment appetite from traditional finance sources, the Board formed
the view, after due investigations and careful consideration that the Group would be unlikely to be able to raise
the finance to continue with the development of the cocoa plantation in the foreseeable future. In this context,
the Board therefore believed that it was in the best interests of the Group to sell the Cocoa division to bolster
the Group’s cash reserves and to enable the Cocoa division to access other finance sources, such as dedicated
development and sustainability funds.

The Other cocoa activities represented a business segment of the Group and accordingly the results of the
Other cocoa activities are presented as discontinued operations within the consolidated income statement.
Comparative amounts have been represented as required by IFRS 5. The amounts recorded in the consolidated
income statement related to the Other cocoa activities were as follows:

Revenue
Cost of sales
Gross profit
Operating expenses
Profit on disposal of property, plant and equipment
Other income
Impairment of current and non-current assets (note 11.2)
Loss before taxation
Taxation
Loss after tax and net loss attributable to the discontinued Other cocoa
activities in the period (attributable to owners of the Company)

2016
US$000

389
(277)
112
(1,126)
49
–
–
(965)
–

2015
US$000

904
(260)
644
(1,558)
15
11
(6,791)
(7,679)
–

(965)

(7,679)

Cash flows pertaining to the Other cocoa activities are presented in the consolidated cash flow statement along
with all cash flows relating to discontinued operations.

The net assets of the Cocoa division, all of which related to the Other cocoa activities, are classified as held
for sale as at 31 May 2016. Further details are provided in notes 4.5 and 25.

The Cocoa division was sold subsequent to the period end for cash consideration of $750,000. Further details
are provided in note 34.2.

16.4. Palm activities
The amount reported within discontinued operations for palm activities during the year ended 31 May 2015
represents the impairment against the carrying value of the Group’s 45,000 hectare lease in the Pujehun District
of Sierra Leone, net of the release of deferred consideration which was assessed as no longer being due, as
more fully described in note 11.3.

17. Loss per share

The calculation of the basic and diluted loss per share is based on the following data:

Loss for the purposes of basic and diluted earnings per share from
continuing activities
Loss for the purposes of basic and diluted earnings per share from
discontinued activities
Loss for the purposes of basic and diluted earnings per share (loss for
the year attributable to equity holders of the Company)

2015
(re-presented –
note 16)
US$000

2016
US$000

(7,677)

(8,205)

(778)

(5,182)

(8,455)

(13,387)

Weighted average number of Ordinary Shares for the purposes of basic
and diluted loss per share

1,061,818,478 1,061,818,478

Basic and diluted loss per share
Basic and diluted loss per share from continuing activities
Basic and diluted loss per share from discontinued activities

(0.80)
(0.72)
(0.08)

18. Goodwill
The movements in the carrying value of the Group’s goodwill are as follows:

At 1 June 2014
Eliminated in the period
Exchange rate adjustment
At 31 May 2015 and 31 May 2016

(1.26)
(0.77)
(0.49)

US$000

576
(575)
(1)
–

The Group’s goodwill balance, which related to the cocoa plantation, was written off in full in the year ended
31 May 2015 as more fully described in note 11.2.

Notes to the consolidated financial statements
continued

19. Property, plant and equipment

Cost
At 1 June 2014
Additions
Disposals
Transfers
Exchange rate
adjustment
At 31 May 2015
Additions
Disposals
Transfer to assets
classified as held
for sale
Exchange rate
adjustment
At 31 May 2016

Accumulated
depreciation and
impairment
At 1 June 2014
Charge for the year
Disposals
Impairment
loss (note 11)
Exchange rate
adjustment
At 31 May 2015
Charge for the year
Disposals
Impairment loss
(note 11)
Transfer to assets
classified as held
for sale
Exchange rate
adjustment
At 31 May 2016

Net book value
31 May 2016

Land and
buildings
US$000

Plant and
machinery
US$000

Motor
vehicles
US$000

24,377
1,039
(1)
2,195

(2,425)
25,185
124
(5)

10,569
529
(291)
200

(1,483)
9,524
151
(297)

5,870
38
(241)
–

(735)
4,932
92
(427)

Aviation
US$000

1,178
10
–
–

(202)
986
78
–

(4,510)

(1,020)

(623)

(1,000)

(6,858)
13,936

(3,471)
4,887

(1,722)
2,252

(64)
–

864
421
–

3,067
1,101
(112)

4,187
645
(219)

11,766

175

(160)
12,891
283
–

(456)
3,775
762
(209)

(620)
4,025
417
(361)

2,497

546

341
174
–

–

(72)
443
44
–

–

(4,182)

(996)

(538)

(434)

(2,245)
9,244

(1,491)
2,387

(1,490)
2,078

(53)
–

–

543

31 May 2015

12,294

5,749

4,692

2,500

174

907

Other Assets under
construction
assets
US$000
US$000

595
85
(18)
–

(87)
575
20
–

(53)

(213)
329

257
77
(5)

(41)
322
45
–

(53)

(125)
190

139

253

2,395
–
–
(2,395)

–
–
–
–

–

–
–

–
–
–

–
–
–
–

–

–
–

–

Total
US$000

44,984
1,701
(551)
–

(4,932)
41,202
465
(729)

(7,206)

(12,328)
21,404

8,716
2,418
(336)

12,007

(1,349)
21,456
1,551
(570)

3,069

(6,203)

(5,404)
13,899

7,505

19,746

Additions to land and buildings include $nil (2015: $399,000) of acquisition and development costs of the
Group’s cocoa plantation in Sierra Leone. Included in this sum is $nil (2015: $146,000) of depreciation in
respect of plant and equipment and $nil (2015: $169,000) of wages and salaries.

A depreciation charge of $1,160,000 (2015: $1,644,000) has been included in the consolidated income
statement within operating expenses and $391,000 (2015: $628,000) has been included within
discontinued operations.

Property, plant and equipment with a carrying amount of $5,311,000 (2015: $2,173,000) have been
pledged to secure the Group’s bank overdrafts and loans (note 26). The Group is not allowed to pledge these
assets as security for other borrowings or sell them to another entity.

At 31 May 2016 and 31 May 2015, the Group had no contractual commitments for the acquisition of
property, plant and equipment.

20. Interests in associates
The Group’s interest in associates represents a 40% equity investment in African Management Services Limited
(‘AMS’). The Group’s share of the result of AMS for all periods presented was $nil. The share of the cumulative
results and net assets of AMS is $4,000 (2015: $4,000). The Group’s initial investment in AMS was $nil.

21. Investments in quoted companies
‘Investments in quoted companies’ comprise financial assets at FVTPL. Changes in market value are recorded
in profit and loss within other gains and losses. As at 31 May 2016 and 31 May 2015, these investments
comprise 8,337,682 ordinary shares in Atlas African Industries Limited (formerly Atlas Development & Support
Services Limited) (‘AAI’), an AIM quoted company. Movements in the value of the investment in AAI were
as follows:

At 1 June 2014
Decrease in fair value (note 13)
At 31 May 2015
Decrease in fair value (note 13)
At 31 May 2016

US$000

1,225
(849)
376
(360)
16

The fair value has been determined based on quoted market prices in an active market and comprises a level 1
fair value in the IFRS 13 fair value hierarchy.

Notes to the consolidated financial statements
continued

22. Biological assets

Fair value
At 1 June 2014
Purchase of biological assets
Sale, slaughter or other disposal of biological assets
Change in fair value
Foreign exchange adjustment
At 31 May 2015
Purchase of biological assets
Sale, slaughter or other disposal of biological assets
Change in fair value
Foreign exchange adjustment
At 31 May 2016

US$000

4,272
1,666
(3,947)
1,910
(636)
3,265
2,815
(4,407)
1,637
(1,316)
1,994

Biological assets comprise cattle in Mozambique held for breeding purposes (the ‘Breeding herd’) or for
slaughter (the ‘Slaughter herd’). The Slaughter herd has been classified as a current asset. The Breeding herd
is classified as a non-current asset. Biological assets are accordingly classified as current or non-current assets
as follows:

Non-current asset
Current asset

2016
Head

3,564
3,216
6,780

2015
Head

4,395
2,772
7,167

2016
US$000

888
1,106
1,994

2015
US$000

2,246
1,019
3,265

For valuation purposes, cattle are grouped into classes of animal (e.g. bulls, cows, steers etc). A standard
animal weight per breed and class is then multiplied by the number of animals in each class to determine the
estimated total live weight of all animals in the herd. The herd is then valued by reference to market prices for
meat in Mozambique, less estimated costs to sell. The valuation is accordingly a level 2 valuation in the IFRS 13
hierarchy whereby inputs other than quoted prices that are observable for the asset are used.

The Group’s biological assets have been pledged in full to secure the Beef division’s bank overdraft and loans
(see note 26).

Subsequent to the period end and for the reasons described in note 34.1, the Board made the decision to
close the breeding farms. Accordingly, the breeding herd are being moved to the Vanduzi feedlot where they
are being fattened and will eventually be slaughtered.

23. Inventories

Consumables and spares
Raw materials
Work in progress
Finished goods

2016
US$000

139
1,028
14
176
1,357

2015
US$000

120
2,452
27
293
2,892

During the year inventories amounting to $14,267,000 (2015: $8,191,000) were included in cost of sales
and $127,000 (2015: $nil) were included within discontinued operations.

Inventories with a carrying amount of $1,022,000 (2015: $2,140,000) have been pledged to secure the
Grain division’s bank overdraft and inventories with a carrying value of $134,000 (2015: $nil) have been
pledged to secure the Beef division’s bank overdraft and loans (see note 26).

24. Trade and other receivables

Trade receivables
Other receivables
Prepayments

2016
US$000

678
580
32
1,290

2015
US$000

1,018
492
84
1,594

‘Trade receivables’ and ‘Other receivables’ disclosed above are classified as loans and receivables and
measured at amortised cost.

Included in ‘Trade receivables’ and ‘Other receivables’ are receivables which have been provided against.
Movements in the allowance account against these receivables are as follows:

At 1 June 2014
Charged to profit and loss
Foreign exchange gain
At 31 May 2015
Charged to profit and loss
Written off in the period
Foreign exchange gain
At 31 May 2016

US$000

1,345
224
(250)
1,319
182
(96)
(495)
910

$837,000 (2015: $1,319,000) of the allowance account relates to input IVA recoverable in Mozambique
(refer to note 4.4). The movement in the allowance account against the IVA recoverable during both periods
presented principally reflects the increase in the underlying input IVA balance recorded by the Group offset by
the effect of the devaluation of the Mozambique Metical against the United States Dollar.

Other receivables include $361,000 (2015: $350,000) due from related parties (see note 32).

Trade receivables with a carrying amount of $496,000 (2015: $nil) have been pledged to secure the Grain
division’s bank overdraft and trade receivables with a carrying value of $182,000 (2015: $nil) have been
pledged to secure the Beef division’s bank overdraft and loans (see note 26).

The Directors consider that the carrying amount of financial assets approximates their fair value. Included within
Other receivables are $385,000 of receivables which are past due but not impaired (2015: there are no
significant amounts past due which have not been provided against). The ageing of past due but not impaired
receivables is as follows:

Greater than 120 days

Further details on the Group’s financial assets are provided in note 28.

2016
US$000

385

Notes to the consolidated financial statements
continued

25. Disposal groups held for sale
The major classes of assets and liabilities comprising the operations classified as held for sale as at
31 May 2016 are as follows:

Cocoa
disposal
group
US$000

Aircraft
disposal
group
US$000

Assets classified as held for sale:
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets classified as held for sale
Liabilities associated with assets classified as held for sale:
Trade and other payables
Total liabilities associated with assets classified as held for sale
Net assets of the disposal group

436
126
2
11
575

(142)
(142)
433

There were no assets classified as held for sale as at 31 May 2015.

285
–
–
–
285

–
–
285

Total
US$000

721
126
2
11
860

(142)
(142)
718

Assets and associated liabilities within the ‘Cocoa disposal group’ represent the net assets of the Group’s Cocoa
division. As more fully described in note 16.3, all activities in the Cocoa division were discontinued in the
period. This division was sold subsequent to the period end realising gross proceeds of $750,000 (refer to
note 34.2). No impairments were recorded against the assets in the Cocoa division during the year, or
subsequent to the period end.

Assets classified as held for sale within the ‘Aircraft disposal group’ comprise all of the Group’s aircraft assets,
being one fixed wing plane and two helicopters, which were identified as being surplus to requirements. The
aircraft were sold subsequent to the period end, realising gross proceeds of $570,000. No impairments were
recorded against the aircraft assets upon transfer from property, plant and equipment. Subsequent revisions to
the expected sales proceeds from the disposal of the fixed wing aircraft, offset by favourable exchange rate
movements, resulted in a net write down in the carrying value of the Aircraft disposal group by $125,000
(refer to note 7). No further adjustments have been made to the carrying value of the Aircraft disposal group
subsequent to the period end.

26. Borrowings

Non-current liabilities
Bank loans

Current liabilities
Bank loans
Overdraft

2016
US$000

1,105

137
1,675
1,812
2,917

2015
US$000

–
–

–
3,079
3,079
3,079

As at 31 May 2016, the Group has overdraft and bank loan facilities to finance the Beef division provided
by Standard Bank S.A. (‘Standard Bank’), and overdraft facilities to finance the Grain division provided by
ABC Bank MZ (‘ABC Bank’) and Standard Bank. Further details are provided below.

Beef division
On 24 June 2015, the Group agreed lending facilities totalling 105,000,000 Metical with Standard Bank to
finance the Beef division in Mozambique. The facilities comprise 75,000,000 Metical ($1,258,000 at the
31 May 2016 US$ to MZN exchange rate) of term loans for the purchase of cattle, irrigation equipment,
butchery equipment, refrigerated vehicles and general capital purposes, and a 30,000,000 Metical
($503,000 at the 31 May 2016 US$ to MZN exchange rate) overdraft. The term loans carry interest at the
bank’s prime lending rate plus 0.25% (being a rate of 19.75% as at 31 May 2016), and have a five year
term from draw down with a moratorium on capital repayments of 15 months. Capital repayments on these
loans commence in October 2016. The overdraft renews annually, with the latest renewal on 29 September
2016, and carries interest at the bank’s prime lending rate (being a rate of 19.5% as at 31 May 2016). The
lending facilities are secured with a fixed charge against certain of the Group’s property, plant and equipment
with a carrying value of $2,137,000 (2015: $nil) (refer to note 19), and with floating charges against all
cattle and meat inventories with a carrying value of respectively $1,994,000 (2015: $nil) (refer to note 22)
and $134,000 (2015: $nil) (refer to note 23), and trade receivables with a carrying value of $182,000
(2015: $nil) (refer to note 24).

As at 31 May 2016, the Beef division had available, undrawn borrowing facilities of approximately
4,477,000 Metical ($75,000 at the 31 May 2016 US$ to MZN exchange rate).

Grain division
At 31 May 2016, the Group had an overdraft facility of 179,000,000 Metical ($3,003,000 at the 31 May
2016 US$ to MZN exchange rate) (2015: 179,000,000 Metical) provided by ABC Bank for working capital
funding in the Grain division, principally for the purchase of maize and related operating expenditure. It was
secured by a fixed charge against $1,273,000 (2015: $2,173,000) of the Group’s property, plant and
equipment (refer to note 19) and by a floating charge over all maize inventory and finished maize products
totalling $1,022,000 (2015: $2,140,000) (refer to note 23). Interest was charged at ABC Bank’s prime
lending rate less 3% (2015: counterparty bank’s prime lending rate less 3%), being a rate as at 31 May 2016
of 13% (2015: 13%). As at 31 May 2016, this overdraft facility was in the process of being settled in full,
with a new overdraft facility being provided by Standard Bank. This process was completed subsequent to the
period end.

On 19 May 2016, the Group entered into a separate 300,000,000 Metical ($5,034,000 at the
31 May 2016 US$ to MZN exchange rate) overdraft facility with Standard Bank (the ‘Facility’) to provide
working capital funding, principally for the purchase of maize and related operating expenditure. It is secured
by a fixed charge against $3,174,000 (2015: $nil) of the Group’s property, plant and equipment (refer to
note 19), and by floating charges against all maize inventory and finished maize products totalling
$1,022,000 (2015: $nil) (refer to note 23) and trade receivables totalling $496,000 (2015: $nil) (refer to
note 24). Interest is charged at the counterparty bank’s prime lending rate less 1.75%, being a rate as at
31 May 2016 of 17.75%. Unless it is cancelled by either party, the facility will renew on 25 March 2017.
Fees of approximately $33,000 were recorded in connection with the Facility in the year ended 31 May 2016.
These fees were paid subsequent to the period end.

The first drawdowns on the Facility were made in May 2016; subsequent to the period end, the Facility was
in part utilised to discharge the Group’s obligations to ABC Bank on the overdraft disclosed above at which
point the ABC Bank overdraft facility was extinguished and ceased to be available to the Group. The Group
completed the provision of the new security over its land and buildings and the discharge of the security to
ABC Bank subsequent to the period end (note 34.3).

As at 31 May 2016, the Grain division had available, undrawn borrowing facilities of approximately
224,756,000 Metical ($3,771,000 at the 31 May 2016 US$ to MZN exchange rate).

Notes to the consolidated financial statements
continued

27. Trade and other payables

Trade payables
Other payables
Accrued liabilities

2016
US$000

266
125
317
708

2015
US$000

314
623
440
1,377

‘Trade payables’, ‘Other payables’ and ‘Accrued liabilities’ principally comprise amounts outstanding for trade
purchases and ongoing costs. No interest is charged on any balances.

The Directors consider that the carrying amount of financial liabilities approximates their fair value.

28. Financial instruments
28.1. Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns
while maximising the return to shareholders. The capital structure of the Group comprises its net debt (the
borrowings disclosed in note 26 after deducting cash and bank balances) and equity of the Group as shown
in the Statement of financial position. The Group is not subject to any externally imposed capital requirements.

The ExCom reviews the capital structure on a regular basis and seeks to match new capital requirements of
subsidiary companies to new sources of external debt funding denominated in the currency of operations of the
relevant subsidiary. Where such additional funding is not available, the Group funds the subsidiary company
by way of loans from the Company. The Group places funds which are not required in the short term on deposit
at the best interest rates it is able to secure from its bankers. In accordance with this policy, the Group has
maintained its overdraft facility in Mozambique to finance its Grain operations and has secured additional
borrowing facilities in Mozambique for its Beef operations (note 26).

28.2. Categories of financial instruments
The following are the Group financial instruments as at 31 May:

Financial assets
Cash and bank balances
Fair value through profit and loss:
Held for trading
Other loans and receivables

Financial liabilities
Amortised cost

2016
US$000

2015
US$000

4,055

16
1,257
5,328

3,560
3,560
1,768

6,421

376
1,510
8,307

4,456
4,456
3,851

28.3. Financial risk management objectives
The Group manages the risks arising from its operations, and financial instruments at ExCom and Board level.
The Board has overall responsibility for the establishment and oversight of the Group’s risk management
framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully
the financial risks that the Group faces.

While the Group does not have a written policy relating to risk management of the risks arising from any
financial instruments held, the close involvement of the ExCom in the day to day operations of the Group ensures
that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group.
Financial instruments are not traded, nor are speculative positions taken. The Group has not entered into any
derivative or other hedging instruments.

The Group’s key financial market risks arise from changes in foreign exchange rates (‘currency risk’) and changes
in interest rates (‘interest risk’). To a lesser extent the Group is exposed to other price risk in respect of its
investments in quoted companies. The Group is also exposed to credit risk and liquidity risk. The principal risks
that the Group faces as at 31 May 2016 with an impact on financial instruments are summarised below.

28.4. Market Risk
The Group is exposed to currency risk, interest risk and other price risk (in respect of its investments in quoted
companies). These are discussed further below.

28.4.1. Currency risk
Certain of the Group companies have functional currencies other than US$ and the Group is therefore subject
to fluctuations in exchange rates in translation of their results and financial position into US$ for the purposes of
presenting consolidated accounts. The Group does not hedge against this translation risk. The Group’s financial
assets and liabilities by functional currency of the relevant Group company are as follows:

United States Dollar (‘US$’)
Mozambique Metical (‘MZN’)
Sierra Leone Leones (‘SLL’)
Other

Assets

Liabilities

2016
US$000

3,877
1,450
–
1
5,328

2015
US$000

6,880
1,143
284
–
8,307

2016
US$000

222
3,336
–
2
3,560

2015
US$000

786
3,524
146
–
4,456

The Group transacts with suppliers and/or customers in currencies other than the functional currency of the
relevant group company (foreign currencies), and hold investments in quoted companies which are traded in
currencies other than US$. The Group does not hedge against this transactional risk. As at 31 May 2015 and
31 May 2016, the Group’s outstanding foreign currency denominated monetary items were principally exposed
to changes in the US$/GBP and US$/MZN exchange rate.

The following tables detail the Group’s exposure to a 5, 10 and 15 per cent increase in the US$ against GBP
and separately to a 10, 20 and 30 per cent increase against MZN. For a weakening of the US$ against the
relevant currency, there would be a comparable impact on the profit and other equity, and the balances would
be of opposite sign. The sensitivity analysis includes only outstanding foreign currency denominated items and
excludes the translation of foreign subsidiaries and operations into the Group’s presentation currency. The
sensitivity also includes intra-group loans where the loan is in a currency other than the functional currency of
the lender or borrower. A negative number indicates a decrease in profit and other equity.

Notes to the consolidated financial statements
continued

GBP Impact
Profit or loss
5% Increase in US$
10% Increase in US$
15% Increase in US$

Other equity
5% Increase in US$
10% Increase in US$
15% Increase in US$

MZN Impact
Profit or loss
10% Increase in US$
20% Increase in US$
30% Increase in US$

Other equity(1)
10% Increase in US$
20% Increase in US$
30% Increase in US$

2016
US$000

(4)
(7)
(11)

(69)
(138)
(208)

23
46
69

(10)
(20)
(30)

–
–
–

(6,039)
(12,078)
(18,117)

(5,820)
(11,640)
(17,460)

(1)

This is mainly due to the exposure arising on the translation of US$ denominated intra-group loans provided to MZN functional currency
entities which are included as part of the Group’s net investment in the related entities.

28.4.2. Interest rate risk
The Group is exposed to interest rate risk because entities in the Group hold cash balances and borrow funds
at floating interest rates. As at 31 May 2015 and 31 May 2016, the Group has no interest bearing fixed
rate instruments.

The Group maintains cash deposits at variable rates of interest for a variety of short term periods, depending
on cash requirements. The operations in Mozambique are also financed through overdraft facilities and bank
loans. The rates obtained on cash deposits are reviewed regularly and the best rate obtained in the context of
the Group’s needs. The weighted average interest rate on deposits was 0.23% (2015: 0.59%). The weighted
average interest on drawings under the overdraft facilities and bank loans was 16.42% (2015: 14%). The
Group does not hedge interest rate risk.

The following table details the Group’s exposure to interest rate changes, all of which affect profit and loss only
with a corresponding effect on accumulated losses. The sensitivity has been prepared assuming the liability
outstanding at the balance sheet date was outstanding for the whole year. In all cases presented, a negative
number in profit and loss represents an increase in finance expense/decrease in interest income. The sensitivity
as at 31 May 2016 is presented assuming interest rates on cash balances remain constant, with increases of
between 20bp and 1000bp on outstanding overdraft and bank loans. This sensitivity to interest rate rises is
deemed appropriate because the Group interest bearing liabilities are Metical based. The current
macroeconomic circumstances in Mozambique, particularly due to the significant weakening of the Metical,
have led to a rapid increase in interest rates following the year end to a prime rate of 28.0% by the date of
this report. This alone is an 850 bp increase compared to 31 May 2016.

+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
+100 bp increase in interest rates
+200 bp increase in interest rates
+500 bp increase in interest rates
+800 bp increase in interest rates
+1000 bp increase in interest rates

2016(2)
US$000

2015(1)(2)
US$000

(6)
(15)
(29)
(58)
(146)
(233)
(291)

(7)
(17)
(34)
(68)
(170)
(272)
(340)

(1)

(2)

The sensitivity as at 31 May 2015 was prepared on the basis of changes to interest rates affecting both interest income and expense.
The table above is prepared on the basis of an increase in rates. A decrease in rates would have the opposite effect.

28.4.3. Other price risk
The Group is exposed to equity price risk on its investments in quoted securities which are measured at fair
value (refer to note 21). Investments in quoted companies comprise investments in one company, AAI. If AAI’s
share price increased/(decreased) by 10% and the US$/GBP exchange rate remained unchanged, the
Group’s net profit would increase/(decrease) by $2,000 (2015: $38,000).

28.5. 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 principal deposits are 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 maximum exposure to credit risk is the carrying value of the Group financial assets disclosed in note 28.2.
Details of provisions against financial assets are provided in note 24.

28.6. Liquidity risk
The Group policy throughout the year has been to ensure that it has adequate liquidity by careful management
of its working capital. The ExCom continually monitors the Group’s actual and forecast cash flows and cash
positions. The ExCom pays particular attention to ongoing expenditure, both for operating requirements and
development activities, and matching of the maturity profile of the Group’s overdrafts to the processing and sale
of the Group’s maize and beef products.

At 31 May 2016 the Group held cash deposits of $4,055,000 (2015: $6,421,000). At 31 May 2016 the
Group had overdraft and bank loans facilities of approximately $6,800,000 (2015: overdraft facility of
approximately $4,850,000) of which $2,950,000 (2015: $3,079,000) was drawn. As at the date of this
report the Group has adequate liquidity to meet its obligations as they fall due.

The following table details the Group’s remaining contractual maturity of its financial liabilities. The table is
drawn up utilising undiscounted cash flows and based on the earliest date on which the Group could be
required to settle its obligations. The table includes both interest and principal cash flows.

1 month
2 to 3 months
12 months
1 to 2 years
2 to 5 years

2016
US$000

689
100
2,224
501
892
4,406

2015
US$000

1,410
67
3,379
–
–
4,856

Notes to the consolidated financial statements
continued

Fair values

28.7.
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 financial assets and liabilities of the Group as at
31 May 2016 and 31 May 2015.

29. Share capital

At 31 May 2015 and 31 May 2016:
Ordinary shares of 0.1p each
Deferred shares of 0.1p each
Total share capital

Authorised
Number

Allotted and
fully paid
Number

2,345,000,000
155,000,000
2,500,000,000

1,061,818,478
155,000,000
1,216,818,478

US$000

1,722
238
1,960

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. The deferred shares may be converted into ordinary shares by resolution of the Board.

30. Reserves
Movements in the Group reserves are included in the consolidated statement of changes in equity. A description
of each reserve is provided below.

30.1. Translation reserve
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items
are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during
that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising,
if any, are taken to the translation reserve.

31. Share based payments
31.1. Charge in the period
The Group recorded a charge within Operating expenses for share based payments of $66,000
(2015: $55,000).

31.2. Outstanding options and warrants
The Group, through the Company, has two unapproved share option schemes which were established to
provide equity incentives to the Directors of, employees of and consultants to the Group. The schemes’ rules
provide that the Board shall determine the exercise price for each grant which shall be at least the average
mid-market closing price for the three days immediately prior to the grant of the options. The minimum vesting
period is generally one year. If options remain unexercised after a period of 4 or 5 years from the date of
grant, or vesting, the options expire. Options are forfeited if the employee leaves the Group before the
options vest.

In addition to share options issued under the unapproved share option schemes, on 1 June 2015, the Group
created a warrant instrument (the ‘Instrument’) to provide suitable incentives to the Group’s employees, consultants
and agents, and in particular those based, or those spending considerable time, on site at the Group’s
operations. Up to 100,000,000 warrants (the ‘Warrants’) to subscribe for new Ordinary Shares in the
Company (the ‘Warrant Shares’) may be issued pursuant to the Instrument. The exercise price of each Warrant
is 0.65p (the share price of the Company being approximately 0.6p when the Instrument was created) and
the subscription period during which time the Warrants may be exercised and Warrants Shares issued is the
5-year period from 1 June 2016 to 1 June 2021. Subject to various acceleration provisions, a holder of
Warrants is not entitled to sell more than 100,000 Warrant Shares in any day nor more than 1m Warrant
Shares (in aggregate) in any calendar month, without Board consent. 22,500,000 Warrants have been issued
during the period to employees.

The following table provides a reconciliation of share options and warrants outstanding during the period:

At 1 June
Granted in the year
Terminated in the year
Lapsed in the year
At 31 May

Exercisable at year end

2016
Number

36,499,998
22,500,000
(5,166,000)
(2,830,000)
51,003,998

47,504,006

Weighted
average
exercise
price

3.4
0.7
4.5
4.5
2.0

1.9

2015
Number

42,249,998
–

(5,750,000)
36,499,998

27,500,004

Weighted
average
exercise
price

4.6p
–

3.0p
3.4p

3.3p

The fair value of the 22,500,000 Warrants granted during the year ended 31 May 2016 was determined
using the Black-Scholes option pricing model using the following assumptions:

– Share price at the date of grant was the closing price on that date, being 0.54p.

– The risk free rate was 0.91% based on the gilt yield over the expected life of the Warrants at the date of grant.

– The annual dividend yield was expected to be nil based on the Board’s intention to reinvest operating

cash flows.

– The annual volatility was 83.82% and was derived from the historic daily share prices of the Company over

the period matching the expected life of the Warrants at the date of grant.

– The Warrants have a fair value of 0.27p with the total fair value of the Warrants granted during the year

ended 31 May 2016 calculated at $92,000.

On 12 January 2010, options over 50,000,000 ordinary shares with an exercise price of 5.5p were issued
to Ely Place Nominees Limited (‘EPN’) to be held on trust to be issued at the discretion of the Board as incentives
to Directors, employees or consultants (the ‘Incentive Options’). Between January 2010 and 15 May 2014,
14,999,999 Incentive Options were allocated. On 15 May 2014 and in light of the share price at that date,
the Directors concluded that these Incentive Options would not provide an appropriate mechanism for
incentivising Directors, employees and consultants. As such, and with the agreement of EPN, EPN waived their
rights to the Incentive Options, which were cancelled and replaced by 35,000,001 new incentive options
granted at the prevailing price on 15 May 2014 (rounded up to the nearest half penny) of 1.5p, otherwise to
be held on the same terms as the Incentive Options. No further Incentive Options have been allocated.

Notes to the consolidated financial statements
continued

At 31 May 2016, the following options and warrants over ordinary shares of 0.1p each have been granted
and remain unexercised:

Date of grant
13 July 2011
1 December 2011
29 July 2012
29 July 2012
01 May 2013
01 May 2013
15 May 2014
1 June 2015

Total
options
5,000,000
10,000,000
3,501,999
3,501,999
2,000,000
2,000,000
2,500,000
22,500,000
51,003,998

Exercisable
options
5,000,000
10,000,000
2,502,003
2,502,003
2,000,000
2,000,000
1,000,000
22,500,000
47,504,006

Exercise
price
3.0p
2.0p
3.5p
5.5p
2.8p
5.5p
1.5p
0.7p

Expiry
date
13 July 2017
1 December 2016
29 July 2023
11 January 2020
30 April 2019
11 January 2020
15 May 2024
1 June 2021

32. Related party disclosures
AS Groves and PH Edmonds, current or former directors of the Company, are also directors of Liberian Cocoa
Corporation (‘LCC’) and African Management Services Limited (‘AMS’). In addition, AS Groves is, or was
during the period, a Director of Consolidated Growth Holdings Limited (formerly Sable Mining Africa Limited,
‘CGH’), Atlas African Industries Limited (formerly Atlas Development & Support Services Limited, ‘AAI’), East
Africa Packaging Limited (‘EAPC’) and African Property Corporation (‘APC’). The Group has transacted with
these companies during 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, office, treasury and administrative services to the Group for fees of
$510,000 (2015: $388,000). As at 31 May 2016 the Group was owed $116,000 by AMS (2015:
$107,000).

At 31 May 2016 the Group was owed $89,000 from LCC (2015: $89,000).

During the year the Group and CGH incurred certain expenses on each other’s behalf, which were refunded
in full during the year. At 31 May 2016, the amount due to CGH was $nil (2015: $nil).

During the year the Group and AAI incurred certain expenses on each other’s behalf. In addition, AAI acquired
EAPC, and assumed EAPC’s outstanding debt to the Group of $150,000 (2015: $150,000). At 31 May
2016, the amount due from AAI to the Group was $156,000 (2015: $nil).

During the year ended 31 May 2015, the Group incurred certain expenses on behalf of, or advanced loan
funding to, APC. At 31 May 2015 APC owed the Group $3,000, which was settled in the current financial
year. No amounts are due from APC at 31 May 2016.

PH Edmonds resigned as a Director of the Company on 22 April 2016 and has subsequently been retained
as a consultant to the Group. Consultancy fees charged in the year ended 31 May 2016 were $9,000
(2015: $nil). No amounts were outstanding at the period end.

The remuneration of the Directors, who are the key management personnel of the Group, is set out in note 10.

33. Operating leases
At 31 May the Group had commitments for future minimum lease payments under non-cancellable operating
leases for land and buildings, which fall due as follows:

Within one year
In the second to fifth years inclusive

Operating lease rentals recognised as an expense in the consolidated
income statement were as follows:
Land and buildings

2016
US$000

152
190
342

2015
US$000

138
95
233

187

209

34. Events subsequent to the balance sheet date
34.1. Destocking of the cattle ranches
As announced on 21 April 2016, the political and economic environment in Mozambique has deteriorated
during the course of 2016 and militias are entrenched in some rural areas in the Manica province, where the
Group’s three farms are located. As announced on 23 June 2016, due to the well documented political unrest
in the area around its cattle ranching operations in Central Mozambique, the Group began destocking its cattle
in order to safeguard and crystallise its considerable livestock capital. The decision was made to destock these
farms in order to protect the value of the herd during a period in which there is an increased possibility of
livestock theft and an increased risk in the movement of people and goods in the country.

The Group’s three farms, at Mavonde, Dombe and Inhazonia, held approximately 4,200 head of cattle at
31 May 2016. Over the forthcoming months, the cattle will continue to be delivered to the Vanduzi feedlot
for fattening and subsequent slaughter. The feedlot, which continues to operate as normal, enables the Group
to produce a well finished, high quality animal for slaughter ensuring premium grade meat is available to supply
its butcheries and wholesale operations.

Once the farms have been completely destocked, which is anticipated to be by the end of April 2017, the
Vanduzi feedlot will exclusively process locally reared animals. The Board is confident that suitable quality
animals are available in the local market for these purposes, having seen a growth in local commercial cattle
farming in recent times, in part as a result of the market generated by the Company’s feedlot and
abattoir infrastructure.

The decision to destock the ranches was the outcome of a lengthy internal deliberation and risk assessment.
This process was completed subsequent to the period end when the final decision was made, although factors
leading to that decision were present at 31 May 2016. The decision to destock the farms has accordingly
been taken into consideration for the purposes of the Group’s impairment review of its tangible assets in the
Beef division for the year ended 31 May 2016. Further details of the impairment review are included in
note 11.1.

34.2. Disposal of the Cocoa division
On 5 October 2016, the Group completed the sale of its Sierra Leone Cocoa division in a management buy-
out transaction (the ‘MBO’) for cash consideration of $750,000 (the ‘Consideration’). The net assets of the
Cocoa division had a carrying value as at 31 May 2016 of $433,000 (refer to note 25). The Cocoa division
principally comprised the 3,200 hectare cocoa plantation in the Kenema district of Sierra Leone, a 2,000 m2
warehouse, and related support infrastructure and vehicles.

Notes to the consolidated financial statements
continued

Under the terms of the MBO, the Group disposed of its interests in Baranca Tide Limited and West Africa
Cocoa Services Limited (the intermediate holdings companies which hold the assets comprising the Group’s
cocoa business in Sierra Leone, the ‘Target Companies’) with immediate effect; payment of the Consideration
is deferred for a period of 65 business days from completion of the MBO (i.e. until 9 January 2017); in the
event that the Consideration is not paid on the due date, the ownership of the Target Companies will immediately
revert to the Group.

The sale of these assets pursuant to the MBO is part of the Group’s ongoing rationalisation programme. The
proceeds of the sale of these assets will be applied towards the Group’s general working capital requirements.

34.3. Repayment of ABC Bank overdraft, discharge of mortgages and creation of new mortgages in favour of
Standard Bank
As more fully described in note 26, the Group has an overdraft facility of 300,000,000 Metical with Standard
Bank to provide working capital funding, principally for the purchase of maize and related operating
expenditure. Inter alia, the Facility is secured against certain of the Group’s property, plant and equipment.
These items of property, plant and equipment were previously mortgaged to ABC Bank. Subsequent to the
period end, and following the repayment in full of the ABC Bank overdraft facility, the deeds discharging the
ABC Bank mortgage and perfecting this security in the name of Standard Bank were completed. Standard
Bank’s final mortgage was registered on 29 June 2016.

34.4. Disposal of the Group’s aircraft
Subsequent to the period end and as more fully described in note 25, the Group sold its aircraft assets, realising
gross proceeds of $570,000 and net proceeds after expenses of approximately $526,000. The sale of these
assets is part of the Group’s ongoing rationalisation programme.

Company information and advisers

Country of incorporation

Registered address

Directors

Auditor

Solicitors

Nominated adviser and broker

Registrars

Guernsey, Channel Islands

Richmond House
St Julian’s Avenue
St Peter Port
Guernsey, GY1 1GZ

Ms Caroline Havers (Chair)
Mr Andrew Groves (Chief Executive)
Mr Daniel Cassiano-Silva (Finance Director)

RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London, EC4A 4AB

Carey Olsen
8-10 Throgmorton Avenue
London, EC2N 2DL

Cantor Fitzgerald Europe
One Churchill Place
London, E14 5RB

Capita Registrars (Guernsey) Limited
Longue House
Longue House Lane
St Sampson’s
Guernsey, GY2 4JN

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Annual Report
2016