AGRITERRA LIMITED
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED
31 MARCH 2020
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Table of Contents
Chair’s statement and strategic review ............................................................................................................................................................. 1
Corporate governance ...................................................................................................................................................................................... 5
Directors’ report ............................................................................................................................................................................................... 7
Statement of directors' responsibilities .......................................................................................................................................................... 10
Independent auditor's report to the members of Agriterra Limited ................................................................................................................ 11
Consolidated income statement ..................................................................................................................................................................... 14
Consolidated statement of comprehensive income ......................................................................................................................................... 14
Consolidated statement of financial position .................................................................................................................................................. 15
Consolidated statement of changes in equity ................................................................................................................................................. 16
Consolidated cash flow statement .................................................................................................................................................................. 17
Notes to the consolidated financial statements .............................................................................................................................................. 18
Company information and advisers .................................................................................................................................................................................. 42
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Chair’s statement
CHAIR’S STATEMENT AND STRATEGIC REVIEW
I am pleased to present the annual report of the Company for the year ending 31 March 2020. During the year, the Company focused on stabilising the
operations in the aftermath of Cyclones Idai and Kenneth which significantly affected Mozambique.
The Company continues to observe the principles of the QCA Corporate Governance Code (the “Code”) to the extent that they consider them to be
applicable and appropriate for a Company of Agriterra’s size and stage of development, through the maintenance of efficient and effective
management frameworks accompanied by good communication. Further details are available at:
http://www.agriterra-ltd.com/corporategovernance.aspx.
Strategy and Business Model
The Company’s strategy is to operate efficient, profitable businesses in Mozambique so as to create value for its shareholders and other stakeholders
by supplying beef and milled maize products to the local market.
The Company currently has two operational agricultural divisions:
•
Beef, which sources cattle from local farmers and then processes them through its own feedlot, abattoir operations and retail units through
Mozbife Limitada ('Mozbife')
• Grain, which operates maize purchasing and processing businesses through Desenvolvimento e Comercialização Agrìcola Limitada ('DECA')
and Compagri Limitada ('Compagri').
These two divisions have built strong brands in Mozambique. During the period the Company secured new investment of c.US$1m to set up a maize
snack processing business on the site in Chimoio under the brand name of DECA Snax, to complement and add value to the maize meal operation,
while expanding the range of products offered to the consumer. It was intended that this factory would become operational in this financial year, but
COVID-19 related issues in China resulted in a delay in the supply of the necessary equipment and commencement of operations have been delayed
until Q4 of 2020. The production line has now been commissioned and initial sales were made in December 2020.
The Company is aware of its environmental, social and governmental responsibilities and the need to maintain effective working relationships across a
range of stakeholder companies. The major shareholder is represented on the Board ensuring their views are incorporated into the Board’s decision-
making process. In addition to the Company’s staff and shareholders, the local community in Mozambique is a primary stakeholder. In purchasing
maize and cattle directly from the local community, the Company plays an important role in local economic development, supporting small scale
farmers and the developing commercial sector.
Mozambique overview
On 14 March 2019, Cyclone Idai made landfall at the port of Beira, Mozambique, before moving across the region. Millions of people in Malawi,
Mozambique, and Zimbabwe were affected by what UNICEF declared, was the worst natural disaster to hit southern Africa in at least two decades. Six
weeks later, Cyclone Kenneth made landfall in northern Mozambique – the first time in recorded history two strong tropical cyclones have hit the
country in the same season. The UN estimate that due to the devastation caused by the cyclones 715,000ha of crop production was decimated,
160,000 homes destroyed and a total of 2.5 million people in Mozambique required humanitarian assistance.
The Company’s operations are located in the affected areas, and although the buildings and assets were not damaged, there was an impact on our
business; 50 members of staff lost their homes, and many of the small farmers who would normally supply maize and cattle were left without
products to sell during the harvest season (April to August)
During this same period the Metical depreciated against the US$ going from 61 MZN in January 2019 to 63MZN after Cyclone Idai and ending at
65MZN to the US$ in March 2020. The Metical did remain steady against the Rand (4.30MZ), which helped reduce the annualised inflation in
Mozambique from c.3.9% in 2018 to c.2.8% in 2019. As a result Standard Bank’s prime Metical lending rate has reduced to 18% (19.5% at 31 March
2018).
Operations review
Grain division
Due to the disruptions caused by the cyclones, there was a major shortage of food in the central region of the country. As a result, DECA was
contracted to process 3,000 tons of maize into meal for the World Food Programme (“WFP”) for immediate aid into the region which lasted into
the month of May.
Total maize purchased for the year (excluding WFP) was 24,498 tons and processed into 19,926 tons meal. Maize prices late season were driven up by
a shortage in production caused by the cyclones where an estimated 700,000ha of crops was destroyed thus impacting on the ability to purchase
affordable maize late season.
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Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Beef division
The cyclones impacted on the ability to access the communities where the Company has traditionally sourced animals. The livestock sector was
impacted in that a large number of animals died as a result of the cyclone (+5,000) and the animals that survived were affected by the lack or low
quality of pasture and feed, and poor-quality drinking water, (+ 130,000). This increased prices and access became a constraint for the buying teams.
Total animals bought for the year was 6,045 head resulting in 1,200 tons of beef being produced for sale into the local market.
Mozbife was awarded a grant to build 9 Cattle Service Centres by the World Bank in 2 provinces, and these were completed in June 2020.
Key Performance Indicators
The Board monitors the Company’s performance in delivery of strategy by measuring progress against Key Performance Indicators (KPIs). These KPIs
comprise a number of operational, financial and non-financial metrics.
Grain division
- Average milling yield
- Meal sold (tonnes)
- EBITDA (note 5) (2019: as restated)
- Net debt
- Available headroom under banking facilities
Beef division
- Slaughter herd size – number of head
- Average daily weight gain in feedlot (% of body mass)
- Meat sold (tonnes)
- EBITDA (note 5) (2019: as restated)
- Net debt
- Available headroom under banking facilities
Group
- EPS (2019: as restated)
- Liquidity - cash plus available headroom under facilities
2020
2019
2018
77%
19,926
86,000
(4,001,000)
746,000
2,100
0.34
1,094
(905,000)
(665,000)
99,000
76.2%
16,791
(509,000)
(3,670,000)
537,000
2,468
0.32
1,260
(520,000)
(663,000)
195,000
72.6%
16,472
(597,000)
(3,625,000)
1,709,000
3,956
0.25
1,453
(1,252,000)
(180,000)
309,000
(14.1)
1,162,000
(15.5)
2,702,000
(31.1)
4,769,000
These indicators have been budgeted for the first time for FY-20 and are used to monitor progress on a monthly basis. Further strategic KPIs will be
introduced once the immediate key goal of moving the existing businesses into profitability has been achieved.
Financial Review
In FY-20 Group revenue increased 22% to US$12.9m (FY19: US$10.6m). The effects of the cyclones meant that the first half of the year
accounted for less than 30% of the total revenue earned. Our management team had to work hard to push the sales up in the second part of
the year, to end the year with a Gross Margin of US$1.8m (FY19: US$1.2m) and EBITDA loss of US$(1.4m) (FY19: US$(1.7m). Finance costs
were US$1.0m (FY19: US$1.0m) and depreciation charges were US$0.6m (FY19:US$0.6m) bringing the Loss attributable to shareholders to
US$3.0m (FY19: US$3.3m) The grain division accounted for 69% of the revenue and 31% of the overall loss, while the beef generated 31% of the
revenue and 51% of the overall loss. The management team are focussed on improving the overall performance of both businesses and to take the
necessary actions that will get the beef operation to a point where it becomes a contributor towards the overall success of the Company.
During the year, a new fixed asset register was prepared. Asset values were brought in line with tax depreciation in Mozambique giving rise
to an uplift in the net book value of assets. The uplift has been accounted for as a prior year adjustment (note 13) and the increase in the net
book value at 1 April 2018 was $793,000. There was a consequential increase in the depreciation charge for the year ending 2019 of
$136,000 and a write down in the value of intangible assets of $59,000.
Net Debt at 31 March 2020 was US$ 4.3m (FY19: US$2.4m). Since the year-end, additional working capital facilities have been agreed, to enable the
Grain division to secure sufficient grain to meet its operational targets in the 2021 season.
Risk management
The Company is subject to various risks and the future outlook for the Company, and growth in shareholder value should be viewed with an
understanding of these risks. According to the risk, the Board may decide to tolerate it, seek to mitigate it through controls and operating procedures,
or transfer it to third parties. The following table shows the principal risks facing the Company and the actions taken to mitigate these:
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Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Key risk factor
Foreign Exchange
Political instability
Land ownership in
Mozambique
Maize
season
growing
Company’s
Detail
are
The
impacted by fluctuations in exchange
rates and the volatility of the Metical.
operations
Changes to government policy and
applicable laws could adversely affect
operations or the financial condition
of the Company.
Property rights and land are exclusive
to the state. The state grants rights to
use and develop land “DUATs”. The
operations are dependent upon
maintaining the relevant DUATs.
Adverse weather conditions, national
impact on the
or regional could
availability and pricing of grain.
Cattle and cattle
feed
Cattle are subject to diseases and
infections. The availability and price of
feed impacts profitability.
Access to working
capital
Compliance
COVID-19
The Company
banking facilities in Mozambique.
is reliant on
local
or
impact
resulting
fines and
There is a risk of a breach of the
Company's
ethical
business
conduct standards and breach of anti-
in
corruptions
laws,
investigations,
loss of
reputation.
significant
COVID-19 has had a
both
negative
economically and socially. There is a
risk that there will be a significant
outbreak of the COVID-19 virus in
Mozambique which could potentially
through
the population
impact
contraction
and
Government enforced measures, and
in
the Company’s
turn
operations.
COVID-19
globally,
impact
of
How it is managed
The Company’s borrowing facilities are
denominated in Metical.
Contingency plans to protect assets and
staff should political or military tensions
escalate.
Observance of any conditions attaching to
a DUAT.
Change in the period
No change. The Metical has been
relatively stable over the last couple of
years as inflation falls and interest
rates come down.
Reduced following the election results
in December 2019, while military
tension has
in Northern
increased
Mozambique.
No change.
Diversify sources of supply and sign supply
agreements.
Stringent Bio-security measures are
in
place at the Farms and Feedlot. The
division is now self-sufficient in roughage
crops and acquires most of its feed from
the Grain division.
During the year, the Company secured
additional overdraft facilities.
The Board reinforces an ethical corporate
culture. Anti-bribery policies are in place,
with regular training throughout the
organization.
Reduced - Cyclone Idai destroyed a
large part of the crop in 2019, but
fortunately
to have
this appears
recovered in the 2020 season.
Reduced – Improved farming and silage
facilities. Some Foot and
storage
Mouth restrictions have been lifted.
Increased – the exposure to reliance on
the renewal of short-term facilities has
increased.
No change.
The outbreak of COVID-19 occurred
post period end. The outbreak has not
yet spread significantly to Mozambique
with only limited cases reported to
date.
to
the
Plans are in place to protect our staff and
production capabilities. The Company
remains alert
fast-changing
environment and is prepared to put in
place mitigating actions as events develop.
Our products, meal and beef, are key
in the domestic Mozambican
staples
market and demand is not expected to be
significantly affected should the pandemic
take hold. The impact on future liquidity
has been discussed further in the Going
Concern section below.
The Board is also responsible for establishing and monitoring the Company’s systems of internal controls. Although no system of internal control can
provide absolute assurance against material misstatement or loss, the Company’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 on a regular basis. In light of this control environment the Board considers
that there is no current requirement for a permanent separate internal audit function.
Going concern
The Mozambican Government implemented a policy to minimise the spread of COVID-19 on the 1st April 2020 and has maintained this
policy into December, with the likelihood that it will continue into 2021. The closure of the borders, industries and the logistics sectors have
had a negative impact on the overall economy in Mozambique. The grain and beef sales have been encouraging, but growth is being restricted by
the removal of the informal retail sector, which accounted for the bulk of our clientele.
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Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Grain
The absence of reliable inter-province transportation and cash (due to movement restrictions) has resulted in a delay in the maize harvesting
and buying season by over 3 months. This resulted in high raw material costs, more intense efforts to secure the maize and an adjustment of
the initial forecast from 42,000 tons of maize to 35,000 tons. To date we have purchased at total of 27,000 tons (more than in FY2020) and
we are confident that we will successfully secure the balance of 8,000 tons in the coming 3 months. Over the last 12 months, the Grain division
has made significant progress in meeting the operating challenges to increase volumes and margins in order to move into profitability. More
importantly this has been achieved whilst having to live within its means. New products and improved quality have been a significant factor in this
performance and underpin the continued improvement in volumes in the FY21 forecast, together with the start-up phase of the DECA Snax project.
Beef
The beef operation has had a negative impact due to the lockdown. We have encountered difficulties in accessing the cattle production areas
and the market has shrunk significantly, since the oil and gas projects have slowed down due to a global contraction related to COVID-19. Our
largest clients (accounting for 60% of monthly sales) were those supplying these companies in Northern Mozambique. The result is revenue
22% below budget and there is an expectation that this will not improve significantly in remainder of FY21. However, the overall operating
performance is ahead of budget as a result of improved operating efficiencies and an increased unit value per tonne of meat.
These forecasts show that the Company needs to achieve its operating targets and renew its existing overdraft facilities to meet its commitments as
they fall due. These conditions and events indicate the existence of material uncertainties that may cast significant doubt upon the Company’s ability
to continue as a going concern and the Company may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of
business. These financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern.
Outlook
The Company had a difficult start to FY-21 as the COVID-19 lockdown was implemented in April 2020 and is expected to remain in force until early
2021. This has resulted in a challenging first quarter for both the grain and the beef operations.
Grain: In order to improve margins, the division secured an additional working capital facility early in the season, enabling it to purchase maize in the
period when the market is saturated, and prices are lowest. In addition, some of the larger clients were encouraged to pre-pay for their meal, so as to
secure the maize needed at the same time. There has also been renewed focus on the commercial strategy to align our pricing with the market;
introduce a rebranding program to drive the sales of the 1kg packs (offering better margins); and finally , to encourage clients to buy more and pay
quickly.
Beef: With demand under pressure from lockdown, the focus has been on realigning the cost base with lower projected volumes and refocusing the
retail strategy. Non-performing retail outlets have been closed, a depot opened in Maputo to receive and sell carcasses and meat to the city market
and rebranding of the product to focus on the retail consumer. On the supply side, the focus has been on strengthening supply chain links with
commercial farmers, who are able to supply higher grade animals.
While the business environment is negatively affected by COVID-19, the outbreak of COVID-19 has not yet spread significantly in Mozambique with a
relatively low volume of cases reported. Plans have been put in place to protect our staff and production capabilities. Our products, meal and beef, are
key staples in the domestic Mozambican market and although demand is not expected to be significantly affected as the pandemic increases, there are
potential short term risks associated with the availability of cash in the market, as companies in the tourism, services, logistics and extractives sectors
are forced to reduce the staffing, until things normalise.
Board and senior management changes
On 30 April 2020 Ms. Thorburn stepped down as a non-executive director in order to focus on her other business interests in the region. Mr. Clayton
took on the role of Head of the Audit Committee following Ms. Thorburn's resignation. I would like to thank Amanda for her contributions and wish her
well in her new ventures.
Also, on 30 April 2020 Mr. Zandamela joined the Board as a non-executive director. Mr. Zandamela is a Mozambican national with over 20 years'
experience in agriculture and business with a degree in Agronomy - Rural Engineering from the Eduardo Mondlane University and subsequently an
MBA from the Montford University Southern Africa - Sandton Business School. From 2016 to 2019 Mr. Zandamela was responsible for all Mozambique
commercial activities of Tongaat Hulett (agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and
maize).
Mr. Zandamela is currently Chairman of the Board of Directors of the Association of Sugar Producers of Moçambique and acted as Chairman of the
National Sugar Distributors of Moçambique. I welcome Sergio to the Board, his experience in the agri-sector in Mozambique will give the Board
valuable insight into Mozambique.
CSO Havers
Executive Chair
24 December 2020
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Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
CORPORATE GOVERNANCE
The Company is quoted on AIM and is required to comply with the provisions of a recognised corporate governance code. The board elected to adopt
the Quoted Company Alliance Corporate Governance Code (the “QCA code”). Further details are available at http://www.agriterra-
ltd.com/corporategovernance.aspx.
The Board is committed to applying a standard of corporate governance commensurate with its size and stage of growth and the nature of its
activities.
The Board
The board structure continues to be organised to ensure it has the appropriate balance of skills and independence. The Board currently comprises the
Executive Chair, two non-independent Non-Executive Directors and two independent Non-Executive Directors who were appointed during the year.
The Board is looking to further enhance its composition, skills and balance as the Company develops. The Board currently comprises:
Caroline Havers, Executive Chair (AC; IC chair)
Ms. Havers is a highly experienced litigation/dispute resolution lawyer having spent over 30 years within international law firms working with clients
operating in a variety of African jurisdictions and industry sectors. During her legal career, Ms. Havers has been both a partner and managing director
of different law firms. She provides advice on compliance and governance and is a long qualified CEDR Mediator.
Whilst the Company consolidates its operations in Mozambique, the Board appointed Ms. Havers as Executive Chair. It is intending to appoint a Chief
Executive Officer, based in Mozambique in due course.
Hamish Rudland, Non-Executive Director (IC)
Mr. Rudland has extensive experience across logistics, agriculture, agro-processing, distribution and property. After graduating from Massey
University, New Zealand, he returned to Zimbabwe in 1997 to start a passenger transport business that he soon diversified into fuel tank haulage in
the early 2000s. Thereafter Mr. Rudland structured acquisitions of foreign-owned asset rich companies to list on the Zimbabwe Stock Exchange. Mr.
Rudland has substantial investments in Zimbabwe Stock Exchange listed companies which focus on his core competencies but also synergise where
advantages can be made.
As a result of Mr. Rudland’s relationship to Magister Investments Limited, he is not considered to be an “independent” director for the purposes of
the QCA Corporate Governance Code.
Gary Smith, Non-Executive Director (AC; RC)
Mr. Smith is an experienced finance professional and is currently a non-executive director of several companies in Zimbabwe and Mauritius. Mr. Smith
worked in the UK for several years where he was employed at Deutsche Bank, University of Surrey and Foxhills Club & Resort. Upon returning to Africa
he worked for a large transport and logistics company in Mozambique for four years before returning home to Zimbabwe and the above positions.
Mr. Smith is a Chartered Accountant and a resident and citizen of Zimbabwe. As a result of Mr. Smith’s relationship with Magister Investments
Limited, he is not considered to be an “independent” director for the purposes of the QCA Corporate Governance Code.
Neil Clayton, Non-Executive Director (AC Chair; RC Chair)
Mr. Clayton is a Chartered Accountant and has over 30 years of experience in a variety of listed and un-listed companies. Specifically, Mr. Clayton
brings significant experience and expertise as regards listed companies operating in Africa as well as particular knowledge of the Company's business
and requirements, having held an interim finance role at the Company during 2018.
Despite his recent work with the Company the Board considers Mr. Clayton to be an “independent” director for the purposes of the QCA Corporate
Governance Code.
Sergio Zandamela, Non-Executive Director (appointed 30 April 2020) (IC)
Mr. Zandamela is a Mozambican national with over 20 years' experience in agriculture and business with a degree in Agronomy - Rural Engineering
from the Eduardo Mondlane University and subsequently an MBA from the Montford University Southern Africa - Sandton Business School. From
2016 to 2019 Mr. Zandamela was responsible from for all Mozambique commercial activities of Tongaat Hulett (agriculture and agri-processing
business, focusing on the complementary feedstocks of sugarcane and maize. Mr. Zandamela is currently Chairman of the Board of Directors of the
Association of Sugar Producers of Moçambique and acted as Chairman of the National Sugar Distributors of Moçambique.
The Board considers Mr. Zandamela to be an “independent” director for the purposes of the QCA Corporate Governance Code.
The Executive Chair is expected to commit a minimum of 2 weeks per month and the non-executive directors are expected to commit 2 days a month.
In addition, all directors are expected to devote any additional time that might be required in order to discharge their duties.
5
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Until March 2020, Board meetings were held quarterly in Mozambique. The attendance record of directors who held office for the year is as follows:
Caroline Havers
Neil Clayton
Hamish Rudland
Gary Smith
Amanda Thorburn
Meetings held
4
4
4
4
4
Meetings attended
4
4
4
4
3
The Board has entrusted the day-to-day responsibility for the direction, supervision and management of the business to the Senior Management
Committee (the ‘SMT’). For the financial year ended 31 March 2020 the SMT was comprised of the Executive Chair, the Operations Director and Chief
Financial Officer in Mozambique.
Certain matters are specifically reserved to the Board for its decision including, inter alia, 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.
There is no agreed formal procedure for the directors to take independent professional advice at the Company’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 Company 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 Company’s employees.
Board committees
Due to the current size of the Board and the Company, there is no separate Nominations Committee and any new directors are appointed by the
whole Board.
At the Board meeting held in March 2019 the new Audit (“AC”), Investment (“IC”) and Remuneration Committees (“RC”) were established. The Audit
Committee and the Investment Committees have met in the last financial year.
The Audit Committee was chaired by Amanda Thorburn until her resignation on 30th April 2020, when Neil Clayton took over as Chair. The Audit
Committee has been actively engaged in the planning and conduct of the Audit of these financial statements. The Committee has met formally since
the year end and the Chair has had independent conversations with the Audit partners both in Mozambique and London where executive
management have not been present.
Terms and conditions for Directors
The Executive Chair and Non-Executive Directors do not have service contracts but appointment letters setting out their terms of appointment. The
appointments may be terminated on three months’ notice by either party. The Non-Executive Directors receive an annual base fee reflecting their
respective time commitments and do not receive any benefits in addition to their fees, nor are they eligible to participate in any pension, bonus or
share-based incentive arrangements.
Directors' remuneration
Remuneration details are set out in note 9 to the financial statements.
Evaluation of Board performance
Given the Company’s size, and the reconstitution of the Board since the end of 2017, no formal review of the effectiveness of its performance as a
unit, as well as that of its committees and the individual directors has been taken. Performance reviews are to be carried out internally from time to
time. Reviews will endeavour to identify skills development or mentoring needs of directors and the wider senior management team.
The Board recognises that the current procedures remain to be formally implemented and therefore do not accord with the QCA Guidelines. However
it is anticipated that these procedures will be augmented to a standard appropriate for the size and stage of development of the Company.
Communication with shareholders
The Company aims to ensure all communications concerning the Company’s activities are clear, fair and accurate. The Board is however keen to
improve its dialogue with shareholders. The Company’s website is regularly updated, and announcements are posted onto the Company’s website.
The results of voting on all resolutions in future general meetings will be posted to the Company’s website, including any actions to be taken as a
result of resolutions for which votes against have been received from at least 20 percent of independent shareholders.
6
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
DIRECTORS’ REPORT
The directors the Company hereby present their annual report together with the audited financial statements for the year ended 31 March 2020 for
the Company.
Except where otherwise noted, amounts are presented in this Directors’ report in United States Dollars (‘$’ or ‘US$’).
1.
LISTING DETAILS
Agriterra is a non-cellular Guernsey registered company limited by shares, whose ordinary shares (‘Ordinary Shares’) are quoted on the AIM Market of
the London Stock Exchange (’AIM’) under symbol AGTA.
2.
PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The principal activity of the Company is the investment in, development of and operation of agricultural projects in Africa. The Company’s current
operations are focussed on maize and beef in Mozambique. A review of the Company’s performance by business segment and future prospects are
given in the Chair’s statement and strategic review, together with a review of the risks and uncertainties impacting on the Company’s long-term
performance.
3.
RESULTS AND DIVIDENDS
The Company results for the year ending 31 March 2020 show a loss after taxation of US$ 2,993,000 (2019: loss as restated of $ 3,290,000). The
Directors do not recommend the payment of a final dividend (2019: US$ nil). No interim dividends were paid in the year (2018: US$ nil).
Further details on the Company’s performance in the year are included in the Chair’s statement and strategic review.
4.
DIRECTORS
4.1.
Directors in office
The Directors who held office during the year and until the date of this report were:
Director
Position
CSO Havers
NWH Clayton
HBW Rudland
GR Smith
A Thorburn (resigned 30 April 2020)
SML Zandamela (appointed 30 April 2020)
4.2.
Directors’ interests
Executive Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
As at the date of this report, the interests of the Directors and their related entities in the Ordinary Shares of the Company were:
HBW Rudland*
Ordinary Shares held
10,622,433
Mr. Rudland's interest is held through Magister Investments Limited ('Magister'). Magister is a private limited company incorporated in the Republic
of Mauritius, wholly owned by Mauritius International Trust Company Limited, as trustee of the Casa Trust (a Mauritius registered trust). Mr. Hamish
Rudland is the Settlor of the Casa Trust and the beneficiaries of the Casa Trust are Mr. Rudland, his wife, Mrs. Bridgette Rudland and their three
children (all of whom are under 18 years old).
7
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
4.3.
Directors' emoluments
Details of the nature and amount of emoluments payable by the Company for the services of its Directors during the financial year are shown in note
9 to the financial statements.
4.4.
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 20 December 2020, 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.
Magister Investments Limited
Gersec Trust Reg.
Mr. William Philip Seymour Richards
Global Resources Fund
Peter Gyllenhammar AB
6.
EMPLOYEE INVOLVEMENT POLICIES
Number of Ordinary
Shares
10,622,433
2,779,656
982,500
678,886
647,500
% Holding
50.01%
13.90%
4.63%
3.20%
3.05%
The Company places considerable value on the awareness and involvement of its employees in the Company’s performance. Within bounds of
commercial confidentiality, information is disseminated to all levels of staff about matters that affect the progress of the Company and that are of
interest and concern to them as employees.
7.
SUPPLIER PAYMENT POLICY AND PRACTICE
The Company’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 March 2020 was 39 days (2019: 20 days).
8.
POLITICAL AND CHARITABLE DONATIONS
During the year no political and charitable donations were made in cash. However the Company did assist in the following form just after cyclone Idai
where 15 tons of maize meal was donated to the Provincial Government Department of Disaster Management of Manica who was dealing with 1000’s
of displaced communities in the districts who had been affected by localised flooding. This donation was received and immediately distributed to the
districts where communities were most affected. (2019: $nil).
1000kgs of meal and 200 kgs of meat were also donated to the local hospital at the time of the cyclone which had suddenly been inundated with
patients injured and sick after the event.
Management and employees also embarked on their own fundraising campaign where blankets, clothing and dried goods were collected and donated
through the local Red Cross agency.
The Company also supported the plight of the 30 employees who were isolated and trapped for 4 weeks on Dombe farm after the cyclone where
access was completely cut off. We managed to deliver dry goods and medication the employees and their families by boat during that period. The
company also assisted employees financially whose houses were destroyed in the cyclone.
9.
SOCIAL AND COMMUNITY ISSUES
The mission of the Company in Mozambique is to work with and support the local producers only by creating an efficient route to market of a top
quality national product. We strongly believe in the “field to fork” process and will continue to develop this concept as the Company grows. We have
recently created a slogan called “Do campo para mesa” meaning “From the field to the table” which simply cements our beliefs in the business. We
respect 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 Company continues to ensure that its expertise and specialist skills
and facilities are made available to the broader community.
Particular activities undertaken during the year have focused on (1) practical, ‘on the ground’ training for students from various universities in
Mozambique studying, inter alia, production practices in beef and cattle, milling practices (including mill engineering), veterinary sciences and animal
sciences; (2) dissemination of agricultural management knowledge and practices; and (3) provision of health and medical assistance.
8
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Milling
With respect to educational activities, this year DECA hosted another two 6 month post-graduation internship for post graduate students in HR. One
student has remained and IT technology in HR assisting the HR Manager in the day to day functions of the Administration department. Then we
recruited 2 post graduate students in Finance who are currently under an internship and if successful will be taken on permanently in the finance
department as cost accountants. We have also hosted one position for 3 months in the Technical department in the milling section in food
technology, production and plant maintenance. Our Manager in Tete has recently graduated in business and economics and continues to run our
facility in Tete as the senior Manager in charge post-graduation the previous year.
Beef
The Mozbife Vanduzi feedlot hosted 38 animal and veterinary science students on practical excursions and 17 students in the abattoir throughout the
year as our facility offers a live and real time platform for students to view and learn many aspects in veterinary practices and applications. We have
hosted 4 students on a 6 months placement from the Instituto Superior Politecnico de Gaza and 1 student from the Instituto Agrario de Chimoio
throughout the year. In the abattoir we have had 2 female and 3 male students on attachment for practical aspects of their university courses from
Gaza. We have recently employed a post graduate food technologist in the abattoir to support the quality control system who has since become
permanent. We recently trained 60 employees in the abattoir and butcheries on meat processing and quality control practices to ensure our product
is always of a high standard. Mozbife is currently working to become HACCP (international food standards accreditation) accredited from the farm to
the feedlot in ensuring traceability and quality standard of products at all times.
With respect to the promotion of health and medical assistance, DECA recently donated its ambulance to Dr Abrantes' clinic in Chimoio which is the
first port of call for the operations in case of any emergency. He also coordinates and monitors progress on mid to long term treatments ensuring
employees are supported through whatever treatments are required. We have undertaken further work on the clinic in the district of Dombe to
provide a service base for this very rural community.
Community relations initiatives have recently received a major boost this year. Mozbife has managed a US$ 823,000 project with the Catalytic fund to
construct 9 community buying points in the various areas we operate in. The cattle service centres were finally completed in June 2020 after
numerous challenges and delays initially caused by the cyclone and then by the time access was secured into these areas the rainy season had started.
These cattle buying centres (or known as CBCs) will formalize the buying process by having state of the art equipment and infrastructure in place to
support the activities. This investment has also brought about the creation of 9 associations who have all been registered and have received training
in functioning as an association. The CBCs will certainly go a long way in cementing our support within these communities. We envisage bolting on
other activities like maize buying and the selling of other produce which the association will supply.
Once again at Vanduzi, manure from the feedlot is given to surrounding small scale farming associations, being out growers for Companhia de Vanduzi
and Westfalia who commercially export fruit and vegetables to the European market. Both DECA and Mozbife sponsored the annual Christmas party
for three orphanages with over 200 children in Msika district, and meal was distributed to certain communities during the planting season to ensure
local seed stocks were planted.
10.
INDEPENDENT AUDITOR AND STATEMENT OF PROVISION OF INFORMATION TO THE INDEPENDENT AUDITOR
PKFLittlejohn 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.
The Company’s website is maintained in compliance with AIM Rule 26.
By Order of the Board.
CSO Havers
Executive Chair
24 December 2020
9
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the ‘2008 Law’) requires the Directors to prepare Company financial statements for each financial
year in accordance with generally accepted accounting principles.
The Directors are required by the AIM Rules of the London Stock Exchange to prepare Company financial statements in accordance with International
Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’).
The financial statements of the Company are required by law to give a true and fair view and are required by IFRS as adopted by the EU to present
fairly the financial position and financial performance of the Company.
In preparing the Company 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 Company and Company
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial
statements are properly prepared in accordance with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of
the 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 Company’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.
10
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Independent auditor’s report to the members of Agriterra Limited
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AGRITERRA LIMITED
Opinion
We have audited the group financial statements of Agriterra Limited (the ‘group’) for the year ended 31 March 2020 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. 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.
In our opinion, the group financial statements:
•
•
•
give a true and fair view of the state of the group’s affairs as at 31 March 2020 and of its loss for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to Note 3 in the financial statements, which indicates that the group is reliant upon the sales volume, prices and renewal of its
bank facility in order for the group to meet committed expenditure requirements and working capital needs. There is currently uncertainty regarding
the renewal of the facility. As stated in Note 3, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on
the company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage,
materiality is used to determine the financial statement areas that are included within the scope of our audit and the extent of sample sizes during the
audit. No significant changes have come to light through the audit fieldwork which has required a revision our materiality figure.
We used 1.25% of the average of the 3 years turnover as a basis for determining Group materiality as the Group’s key driver is revenue and there is a
volatility with regards to revenue. We have determined our overall financial statement materiality to be US$148,000. Materiality for the significant
components of the Group ranged from $29,000 to $120,000 based on 1.25% of the average of turnover for each component.
Group performance materiality was set at $89,000
We agreed to report to those charged with governance all corrected and uncorrected misstatements we identified through our audit with a value in
excess of $7,400. We also agreed to report any other audit misstatements below that threshold that we believe warranted reporting on qualitative
grounds.
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked
at areas involving significant accounting estimates and judgements by the Directors and considered future events that are inherently uncertain. These
included, but were not limited to the valuation of the biological assets and the impairment iof the underlying assets of the beef and grain divisions.
We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to fraud.
Our Group audit scope focused on the principal area of operation, being Mozambique, where the subsidiaries of the Parent Company trade. Each
component was assessed as to whether they were significant or not significant to the group by either their size or risk. The parent Company and the
three operating subsidiaries were considered to be significant due to identified risk and size. We have performed the audit of the Parent Company
that is registered on Guernsey. However, the three remaining components located in Mozambique have been subject to full scope audits by a
component auditor (a PKF network firm). As group auditors we maintained oversight and regular contact with the component auditor throughout all
stages of the audit and we were responsible for the scope and direction of their work.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
11
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded to the key audit matter
Valuation of Biological Assets (see note 15)
The Group has a material biological asset in respect livestock
within the beef division. Under IAS41, this is held at fair value
and there are significant estimates and assumptions required to
determine the fair value. As such, there is a risk that the
biological asset is overstated in the financial statements and the
fair value valuation is not appropriate.
Impairment of the underlying assets of the Beef and Grain
Division (see Note 4)
The Group's principal assets relate property, plant and
equipment held within the Beef and Grain Divisions and the
continuing losses incurred by the Group may indicate that there
is a risk these assets are impaired.
Management must assess whether there is any objective
evidence of impairment of the Group's assets at the reporting
date.
Our work in this area included reviewing the work performed by
the component auditor in relation to the following:
•
•
•
•
•
•
documents prepared by the board detailing
the basis of valuation of the biological assets,
including the key assumptions and estimation
factors therein;
the discounted cashflow valuation workings
prepared by management and verifying their
mathematical accuracy;
the key assumptions and judgements used in
the estimation by management;
the reasonableness of the underlying inputs of
the fair value calculation;
a sensitivity analysis to ensure any major
fluctuations in the subjective elements of the
FV calculation of the biological assets would
not result in material misstatement and if they
do, that they are appropriately disclosed; and
Consideration of whether there were any
other indicators of impairment
Our work in this area included the following:
§ Reviewed the work performed by the component
auditor in relation to their work on the following:
•
•
indications of impairment (e.g. adverse
business changes, decrease in value, change in
use, physical damage, operating losses,
planned disposal, etc.); and
Review and challenge pf the management's
budgets, cash flow forecasts and projections of
the beef and grain division to ensure that the
assets are recoverable
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
12
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us to report to you if,
in our opinion:
proper accounting records have not been kept by the parent company; or
the financial statements are not in agreement with the accounting records; or
•
•
• we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes
of our audit
Responsibilities of directors
As explained more fully in the Statement of director’s responsibilities, the directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with our engagement letter date 19 May 2020. 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.
Joseph Archer (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
24 December 2020
15 Westferry Circus
Canary Wharf
London E14 4HD
13
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Consolidated income statement
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2020
Continuing operations
Revenue
Cost of sales
(Decrease) / increase in fair value of biological assets
Gross profit
Operating expenses
Other income
Profit on disposal of property, plant and equipment
Operating loss
Finance costs
Loss before taxation
Taxation
Loss for the year attributable to owners of the Company
Earnings per share
Basic and diluted earnings per share
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 MARCH 2020
Loss for the year
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences
Other comprehensive loss for the year
Total comprehensive loss for the year attributable to owners of the Company
Note
5
6
6
10
11
12
Year
ended
31 March
2020
US$000
12,910
(10,643)
(489)
1,778
Year
ended
31 March
2019
US$000
As
restated
10,629
(9,891)
478
1,216
(4,700)
(4,055)
842
80
(2,000)
(964)
(2,964)
(29)
(2,993)
225
340
(2,274)
(1,016)
(3,290)
-
(3,290)
US cents
US cents
(14.1)
(15.5)
Year
ended
31 March
2020
US$000
(2,993)
(1,517)
(1,517)
(4,510)
Year
ended
31 March
2019
US$000
As
restated
(3,290)
(119)
(119)
(3,409)
14
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Non-current assets
Property, plant and equipment
Intangible 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
Net current (liabilities) / 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
13
14
15
16
17
18
19
18
21
31 March
2020
US$000
31 March
2019
US$000
1 April
2018
US$000
As restated As restated
6,049
92
6,141
665
825
1,249
-
1,034
3,773
9,914
3,339
3,315
6,654
(2,881)
2,044
2,044
8,698
1,216
6,963
107
7,070
830
675
698
-
2,197
4,400
7,108
-
7,108
1,137
938
1,096
19
3,541
6,731
11,470
13,839
1,708
1,186
2,894
1,506
2,850
2,850
5,744
5,726
4,235
469
4,704
2,027
-
-
4,704
9,135
3,373
151,442
87
(18,373)
3,373
151,442
172
(16,856)
3,373
151,442
1,988
(16,737)
(135,313)
(132,405)
(130,931)
1,216
5,726
9,135
The financial statements on pages 18 to 41 were approved and authorised for issue by the Board of Directors on 23 December 2020.
Signed on behalf of the Board of Directors by:
CSO Havers
Executive Chair
24 December 2020
15
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Share
capital
Share
premium
Share based
payment reserve
Translation
reserve
Accumulated
losses
Total
Equity
Note
US$000
US$000
US$000
US$000
US$000
US$000
Balance at 1 April 2018
Prior year adjustment
Balance at 1 April 2018 restated
13
3,373
-
3,373
151,442
-
151,442
Loss for the year restated
Other comprehensive income:
Exchange translation loss on foreign
operations restated
Total comprehensive loss for the year
Transactions with owners
Share based payments
Total transactions with owners for the
year
Balance at 31 March 2019
restated
Loss for the year
Other comprehensive income:
Exchange translation loss on foreign
operations
Total comprehensive loss for the year
Transactions with owners
Share based payments
Total transactions with owners for the
year
Balance at 31 March 2020
-
-
-
-
-
-
-
-
-
-
3,373
-
151,442
-
-
-
-
-
-
-
-
-
3,373
151,442
1,988
-
1,988
-
-
-
(1,816)
(1,816)
172
-
-
-
(85)
(85)
87
(16,737)
-
(16,737)
(131,724)
793
(130,931)
8,342
793
9,135
-
(3,290)
(3,290)
(119)
(119)
-
-
-
(3,290)
(119)
(3,409)
1,816
1,816
-
-
(16,856)
-
(132,405)
(2,993)
5,726
(2,993)
(1,517)
(1,517)
-
(1,517)
(2,993)
(4,510)
-
-
85
85
-
-
(18,373)
(135,313)
1,216
16
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE year ended 31 March 2020
Cash flows from operating activities
Loss before tax from continuing operations
Adjustments for:
Amortisation and depreciation
Profit on disposal of property, plant and equipment
Foreign exchange (gain) / loss
Net (increase) / decrease in biological assets
Decrease / (increase) in value of biological assets
Net finance costs
Operating cash flows before movements in working capital
(Increase) / decrease in inventories
(Increase) / decrease in trade and other receivables
Increase in trade and other payables
Cash used in operating activities
Corporation tax paid
Interest received
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
Acquisition of intangible assets
Net cash generated from / (used in) investing activities
Cash flows from financing activities
Net drawdown / (repayment) of overdrafts
Net (repayment) / draw down of loans
Net draw down of leases
Finance costs
Net cash generated from / (used in) 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
Note
13/14
15
15
10
13
14
18
18
Year ended
31 March
2020
US$000
Year ended
31 March
2019
US$000
As restated
(2,964)
(3,290)
619
(80)
(1,383)
(366)
489
964
(2,721)
(192)
(579)
2,207
(1,285)
(14)
14
(1,285)
80
(46)
(15)
19
1,732
(732)
108
(978)
130
(1,136)
(27)
2,197
1,034
756
(281)
80
754
(478)
1,016
(1,443)
238
392
744
(69)
-
-
(69)
346
(920)
(193)
(767)
(3,258)
3,773
-
(1,016)
(501)
(1,337)
(7)
3,541
2,197
17
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Agriterra is incorporated and domiciled in Guernsey, the Channel Islands, with registered number 42643. Further details, including the address of the
registered office, are given on page 41. The nature of the Company’s operations and its principal activities are set out in the Directors’ report. A list of
the investments in subsidiaries and associate companies held directly and indirectly by the Company during the year and at the year-end, including
the name, country of incorporation, operation and ownership interest is given in note 3.
The reporting currency for the Company is the US Dollar (‘$’ or ‘US$’) as it most appropriately reflects the Company’s business activities in the
agricultural sector in Africa and therefore the Company’s financial position and financial performance.
The financial statements have been prepared in accordance with IFRSs.
2. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
New and amended IFRS Standards that are effective for the current year
Impact of initial application of IFRS 16 Leases
In the current period, the Group has applied IFRS 16 Leases (as issued by the IASB in January 2016) that is effective for annual periods that begin on
or after 1 January 2019.
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by
removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at
commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In
contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. Details of these new requirements are
described in Note 3. The impact of the adoption of IFRS 16 on the Group’s consolidated financial statements is described below.
The date of initial application of IFRS 16 for the Group is 1 April 2019.
The Group has applied IFRS 16 using the cumulative catch-up approach which:
• Requires the Group to recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings
at the date of initial application (date of acquisition).
• Does not permit restatement of comparatives, which continue to be presented under IAS 17 and IFRIC 4.
(a) Impact of the new definition of a lease
The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease.
Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 continues to be applied to those leases entered or changed before 1 April
2019.
The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of
whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to
the focus on ‘risks and rewards’ in IAS 17 and IFRIC 4.
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or changed on or after 1 April
2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an
implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the
definition of a lease for the Group.
b) Impact on Lessee Accounting
(i) Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet.
Applying IFRS 16, for all leases (except as noted below), the Group:
• Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of
the future lease payments, with the right-of-use asset adjusted by the amount of any prepaid or accrued lease payments in accordance with IFRS
16:C8(b)(ii).
• Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;
•
Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing
activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS
17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses on a straight line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal computers, small items of
18
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
office furniture and telephones), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is
presented within ‘other expenses’ in profit or loss.
The Group has used the following practical expedients when applying the cumulative catch-up approach to leases previously classified as operating
leases applying IAS 17.
•
•
•
•
The Group has applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
The Group has elected not to recognise right-of-use assets and lease liabilities to leases for which the lease term ends within 12 months of the
date of initial application.
The Group has excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application.
The Group has used hindsight when determining the lease term when the contract contains options to extend or terminate the lease.
(ii) Former finance leases
For leases that were classified as finance leases applying IAS 17, the carrying amount of the leased assets and obligations under finance leases
measured applying IAS 17 immediately before the date of initial application is reclassified to right-of-use assets and lease liabilities respectively
without any adjustments, except in cases where the Group has elected to apply the low-value lease recognition exemption.
The right-of-use asset and the lease liability are accounted for applying IFRS 16 from 1 January 2019.
(c) Impact on Lessor Accounting
The Group is not a Lessor
(d) Financial impact of initial application of IFRS 16
Other than short term leases, the Company does not have any operating leases. The weighted average incremental borrowing rate applied to lease
liabilities previously categorised as finance leases is 18.5%.
In the current year, the Group has applied a number of amendments to IFRS Standards and Interpretations issued by the IASB that are effective for
an annual period that begins on or after 1 January 2019. Their adoption has not had any material impact on the disclosures or on the amounts
reported in these financial statements.
Amendments to IFRS 9
Amendments to IAS 28
Prepayment Features with Negative Compensation
Long-term Interests in Associates and Joint Ventures
Annual Improvements to IFRS Standards
2015–2017 Cycle Amendments to:
IFRS 3 Business Combinations
IFRS 11 Joint Arrangements
IAS 12 Income Taxes
IAS 23 Borrowing Costs
Amendments to IAS 19
Employee Benefits Plan Amendment, Curtailment or Settlement
IFRIC 23
Uncertainty over Income Tax Treatments
New and revised IFRS Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that
have been issued but are not yet effective [and [in some cases] have not yet been adopted by the EU]:
IFRS 17
IFRS 10 and IAS 28
(amendments)
Insurance Contracts
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IFRS 3
Amendments to IAS 1 and IAS 8
Definition of a business
Definition of material
Conceptual Framework
Amendments to References to the Conceptual Framework in IFRS Standards
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of
the Group in future periods
19
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
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.
Going concern
The Company has prepared forecasts for the Company’s ongoing businesses covering the period of 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 forecast selling prices and volume, budgeted cost reductions, and
projected weight gains of cattle in the feedlot. They further take into account working capital requirements and currently available borrowing
facilities.
These forecasts show that with active management of working capital and the timing of capital expenditure, there is sufficient headroom under the
banking facilities currently available to the Company. Certain short-term overdraft facilities fall due for renewal in May 2021. Whilst there are no
contractual obligations, the Company will continue to rely on the bank guarantee currently provided by its majority shareholder.
The Company’s focus remains on continuing to improve operational performance of the Grain and Beef divisions with emphasis on volume and pricing
growth to increase gross margins.
Over the last 12 months, the Grain division has made significant progress in meeting the operating challenges to increase volumes and margins in
order to move into profitability. More importantly this has been achieved whilst having to live within its means. New products and improved quality
have been a significant factor in this performance and underpin the continued improvement in volumes in the FY21 forecast, together with the start-
up phase of the DECA Snax project.
The Beef division is starting to show a recovery in profitability as a result of the actions taken by management over the last 12 months and is expected
to generate positive operational cash flows over the next 18 months.
COVID-19: As set out in the strategic report, the actions taken by the Government of Mozambique to limit the spread of COVID-19, has impacted the
availability of local maize and demand for Beef form the Oil and Gas sector. The Key focus of the Company has been to maintain the health of its
workforce with stringent hygiene measures implemented at all our operations. To date there has been no site closures or cessation of operations.
However, the future evolution of COVID-19 is not currently known and therefore a sensitised version of the Company’s forecasts has been prepared.
Corporate overheads are forecast to be consistent with the current run rate.
The divisional forecasts for FY-21 show a significant improvement in operating performance as compared to that reported for the year ended 31
March 2020. However, there can be no certainty that the turnaround plans will be successful, and the forecasts are sensitive to small adverse changes
in the operations of the divisions. As set out in notes 18 and 20 the Company is funded by a combination of short and long-term borrowing facilities.
$2.7m of overdraft facilities are due for renewal within the next 12 months and the Company is required to make $0.7m of repayments in respect of
the bank loan instalments amount together with principal on finance leases of $167,000. The forecasts show that the Company will require the
renewal of its overdraft facilities in the review period.
The Company has also received correspondence from the banks providing overdraft facilities indicating that they do not presently see any reason why
the current overdraft facilities would not be extended at their respective renewal dates. Consequently, the forecasts include all contractual interest
and capital repayments and assume that both the term loan and overdraft facilities will continue to be available and will be renewed for a further year
when they are reviewed in 2021.
Based on the above, whilst there are no contractual guarantees, the directors are confident that the existing financing will remain available to the
Company. The directors, with the operating initiatives already in place and funding options available are confident that the Company will achieve its
cash flow forecasts. Therefore, the directors have prepared the financial statements on a going concern basis.
The forecasts show that the Company needs to achieve its operating targets and renew its existing overdraft facilities to meet its commitments as
they fall due. These conditions and events indicate the existence of material uncertainties that may cast significant doubt upon the Company’s ability
to continue as a going concern and the Company may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of
business. The auditors make reference to going concern in their audit report by way of a material uncertainty. These financial statements do not
include the adjustments that would result if the Company were unable to continue as a going concern.
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 March 2020. The company controls an investee if all three of the following elements are present: power over the investee, exposure to
variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of these elements of control.
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.
20
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
As at 31 March 2020, the Company held equity interests in the following undertakings:
Direct investments
Subsidiary undertakings
Agriterra (Mozambique) Limited
Indirect investments of Agriterra (Mozambique) Limited
Proportion held of
equity instruments
Country of
and place of business
incorporation
Nature of business
100%
Guernsey
Holding company
Proportion held of
equity instruments
Country of incorporation and
place of business
Nature of business
Subsidiary undertakings
DECA - Desenvolvimento E Comercialização Agrícola
Limitada
Compagri Limitada
Mozbife Limitada
Carnes de Manica Limitada
Aviação Agriterra Limitada
100%
100%
100%
100%
100%
Foreign currency
Mozambique
Mozambique
Mozambique
Mozambique
Mozambique
Grain
Grain
Beef
Beef
Dormant
The individual financial statements of each company in the Group are prepared in Mozambican Metical 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 Company’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 Company:
Mozambican Metical: US$
Operating segments
Average Rate
Closing Rate
2020
2019
2020
2019
65.59
60.82
67.45
63.73
The Chief Operating Decision Maker is the Board. The Board reviews the Company’s internal reporting in order to assess performance of the business.
Management has determined the operating segments based on the reports reviewed by the Board which consider the activities by nature of business.
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.
Performance obligations and timing of revenue recognition:
All of the Company’s revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to
the customer. This is generally when the goods are collected or delivered to the customer. There is limited judgment needed in identifying the point
control passes: once physical delivery of the products to the agreed location has occurred, the Company no longer has physical possession, usually it
will have a present right to payment. Consideration is received in accordance with agreed terms of sale.
Determining the contract price:
All of the Company’s revenue is derived from fixed price lists and therefore the amount of revenue to be earned from each transaction is determined
by reference to those fixed prices.
21
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Allocating amounts to performance obligations:
For most sales, there is a fixed unit price for each product sold. Therefore, there is no judgment involved in allocating the price to each unit ordered.
There are no long-term contracts in place. Sales commissions are expensed as incurred. No practical expedients are used.
Operating loss
Operating loss is stated before investment revenues, other gains and losses, finance costs and taxation.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial year 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 Company did not incur any borrowing costs in respect of qualifying assets in any year presented.
All other borrowing costs are recognised in profit or loss in the year in which they are incurred.
Share based payments
The Company issues equity-settled share-based payments to certain employees of the Company. 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
year, based on the Company’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.
Employee benefits
Short-term employee benefits
Short-term employee benefits include salaries and wages, short-term compensated absences and bonus payments. The Company recognises a liability
and corresponding expense for short-term employee benefits when an employee has rendered services that entitle him/her to the benefit.
Post-employment benefits
The Company 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.
Leases
The Group has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has not been restated and is presented
under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are presented separately below.
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using
the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
•
•
•
•
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
The amount expected to be payable by the lessee under residual value guarantees;
The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments made.
22
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
•
•
•
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a
purchase option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which
cases the lease liability is re-measured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments
change is due to a change in a floating interest rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-measured
based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of
the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement
day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the
extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the
‘Property, Plant and Equipment’ policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related
payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in
operating expenses in profit or loss.
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 year 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 Company's deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the year 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 Company 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.
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 Company and the cost of the item can be measured reliably.
23
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
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
Nil
2% – 33%
5% – 25%
20% – 25%
10% – 33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are
determined by comparing proceeds received with the carrying amount of the asset immediately prior to disposal and are included in profit and loss.
Intangible assets
Intangible assets comprise investment in management information and financial software. This is amortised at 10% straight line.
Impairment of property, plant and equipment and intangible assets
At each balance sheet date, the Company 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 Company 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 Company
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.
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. Breeding cattle, comprising bulls, cows and heifers are expected to be held for
more than one year, and are classified as non-current assets. The non-breeding cattle comprise animals 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.
Forage crops are valued in accordance with IAS 41, ‘Agriculture’ at fair value less costs to harvest. As there is no ready local market for forage crops,
fair value is calculated by reference to the production costs of previous crops. The cost of forage is charged to profit or loss over the year it is
consumed.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
Financial assets and financial liabilities are recognised in the Company’s balance sheet when the Company becomes a party to the contractual
provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (“FVTOCI”) or at fair value
through profit or loss (“FVPL”) depending upon the business model for managing the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
24
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
A loss allowance for expected credit losses is determined for all financial assets, other than those at FVPL, at the end of each reporting period. The
Company applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime expected credit loss provision.
The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history, payments made subsequent to year-end
and prior to reporting, past default experience and the impact of any other relevant and current observable data. The Company applies a general
approach on all other receivables classified as financial assets. The general approach recognises lifetime expected credit losses when there has been a
significant increase in credit risk since initial recognition.
The Company derecognises a financial asset 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 party. The Company derecognises financial liabilities when the
Company’s obligations are discharged, cancelled or have expired.
Trade and other receivables
Trade receivables are accounted for at amortised cost. Trade receivables do not carry any interest and are stated at their nominal value as reduced by
appropriate expected credit loss allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be material. Other receivables are accounted for at amortised cost and are stated at
their nominal value as reduced by appropriate expected credit loss allowances.
Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.
All purchases of financial liabilities are recorded on trade date, being the date on which the Company becomes party to the contractual requirements
of the financial liability. Unless otherwise indicated the carrying amounts of the Company’s financial liabilities approximate to their fair values.
The Company’s financial liabilities consist of financial liabilities measured at amortised cost and financial liabilities at fair value through profit or loss.
A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any
gain or loss on de-recognition is taken to the statement of comprehensive income.
Borrowings
Borrowings are included as financial liabilities on the Company balance sheet at the amounts drawn on the particular facilities net of the unamortised
cost of financing. Interest payable on those facilities is expensed as finance cost in the period to which it relates.
Trade and other payables
Trade and other payables are initially recorded at fair value and subsequently carried at amortised cost.
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 Company.
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 Company 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 year.
25
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies which are described in note 3, the directors are required to make judgments, 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 year in which
the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future
years. The effect on the financial statements of changes in estimates in future years could be material.
Impairment
Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment of Assets. Reported
losses in the Beef and Grain divisions were considered to be indications of impairment and a formal impairment review was undertaken.
The impairment reviews are sensitive to various assumptions, including the expected sales forecasts, cost assumptions, capital requirements, and
discount rates among others. The forecasts of future cash flows were derived from the operational plans in place to address the requirement to
increase both volumes and margins across the two divisions. Real commodity prices were assumed to remain constant at current levels.
Discount rate: Current central bank prime MIMO benchmark rate is 10.25% and with inflation at around 3.2%, the benchmark real interest rate is
around 7.05%. The real rate assumed in these forecasts is 12.5%, consistent with prior years. Current nominal bank borrowing rates are 15.9%, but
these are expected to fall further as the economy recovers from the COVID-19 Pandemic and inflation remains stable. Neither division is sensitive to
an increase in the discount rate to 25%
Grain division: The forecasts for the Grain division show a return towards the 10 year moving average with meal sales increasing to 31,000 tonnes in
FY-21 (Year ending 31 March 2020: 19,926). A shortfall in the projected volumes of 18% or a reduction in the gross margin of more than 16% would
lead to an indication of impairment.
Beef division: The forecasts for the Beef division show volumes of all meat products improving to 1,193 tonnes in FY-21 (Year ending 31 March 2020:
1,094 tonnes) and to 1,797 tonnes in FY-22. A fall in forecasted sales volumes of 4% or a reduction in budgeted gross margin of 2% would be required
to indicate possible further impairment. The assets of the Beef division were impaired by $ 3.1m in the year ended 31 May 2016 following the decision
to destock the ranches. The Board continues to evaluate the development of these assets, however it is too early to consider whether or not the
previous impairment charge should be reversed.
No impairments were recorded in the year ended 31 March 2020 or the year ended 31 March 2019.
Non-current assets
During the year, the Company implemented the new asset module in the Mozambique operations. The project included the compilation of a new
register of assets from a review of all existing assets. In addition, it was decided to bring the accounting values for these assets into line with the
written down values in accordance with tax legislation in Mozambique. As a result, there was an overall uplift in the value of fixed assets of $793,000
at 1 April 2018. This has been accounted for as a prior year adjustment. There was a fall in the value of intangible assets of $59,000 at 1 April 2019.
Further details are given in notes 13 and 14.
Biological assets
Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair value is based on the estimated market
value for cattle in Mozambique of a similar age and breed, less the estimated costs to bring them to market, converted to US$ at the exchange rate
prevailing at the year 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 may be categorised as either the breeding herd or slaughter herd, depending on whether it was principally held for reproduction or
slaughter. At 31 March 2020 the value of the breeding herd disclosed as a non-current asset was $nil (31 March 2019: $nil). The value of the herd held
for slaughter disclosed as a current asset was $ 0.7m (31 March 2019: $ 0.8m).
Recoverability of input Value Added Tax
Mozambique Value Added Tax (‘IVA’) operates in a similar manner to UK Value Added Tax (‘VAT’). The Company is exempt from IVA on its sales of
maize products under the terms of Mozambique tax law. The Company is able to recover input sales tax on substantially all of the purchases of the
Grain division. The Company is always therefore in a net recovery position of IVA in respect of its Grain operations. To date the Company has
succeeded in recovering a portion of the IVA balance from prior years from the Mozambique Government amounting to $0.8m, while the remaining
historical IVA balance has been fully provided for. As at 31 March 2020, the gross and net IVA recoverable assets are respectively $ 0.1 million (31
March 2019: $1,046,000) and $nil (31 March 2019: $nil) at the US$ to Metical exchange rate of 67.45 (31 March 2019: 63.73) at that date.
26
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
5. SEGMENT REPORTING
The Board considers that the Company’s operating activities comprise the segments of Grain and Beef and which are undertaken in Africa. In addition,
the Company has certain other unallocated expenditure, assets and liabilities, either located in Africa or held as support for the Africa operations.
Segment revenue and results
The following is an analysis of the Company’s revenue and results by operating segment:
Year ending 31 March 2020
Revenue
External sales(2)
Inter-segment sales(1)
Segment results
- Operating loss
- Interest expense
- Other gains and losses
Loss before tax
Income tax
Loss after tax
Year ending 31 March 2019 as restated
Revenue
External sales(2)
Inter-segment sales(1)
Segment results
- Operating loss
- Interest expense
- Other gains and losses
Loss before tax
Income tax
Loss after tax
Grain
Beef
US$000
US$000
Unallo-
cated
US$000
8,955
453
9,408
(964)
(805)
883
(886)
(29)
(915)
3,955
-
3,955
(1,452)
(155)
95
(1,512)
-
(1,512)
-
-
-
(562)
(4)
-
(566)
-
(566)
Grain
Beef
US$000
US$000
Unallo-
cated
US$000
5,586
873
6,459
(956)
(916)
309
(1,563)
-
(1,563)
5,043
-
5,043
(1,380)
(100)
252
(1,228)
-
(1,228)
-
-
-
(503)
-
4
(499)
-
(499)
Elimina-
tions
US$000
-
(453)
(453)
-
-
-
-
-
-
Elimina-
tions
US$000
-
(873)
(873)
-
-
-
-
-
-
Total
US$000
12,910
-
12,910
(2,978)
(964)
978
(2,964)
(29)
(2,993)
Total
US$000
10,629
-
10,629
(2,839)
(1,016)
565
(3,290)
-
(3,290)
Inter-segment sales are charged at prevailing market prices.
(1)
(2) Revenue represents sales to external customers and is recorded in the country of domicile of the Company making the sale. Sales from the
Grain and Beef divisions are principally for supply to the Mozambique market.
The segment items included in the consolidated income statement for the year are as follows:
Year ending 31 March 2020
Depreciation and amortisation
Year ending 31 March 2019 as restated
Grain
Beef
US$000
US$000
Unallo-
cated
US$000
Elimina-
tions
US$000
167
Grain
452
Beef
US$000
US$000
-
-
Unallo-
cated
US$000
Elimina-
tions
US$000
Total
US$000
619
Total
US$000
Depreciation and amortisation
138
608
10
-
756
27
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Segment assets, liabilities and capital expenditure
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.
The segment assets and liabilities at 31 March 2020 and capital expenditure for the year then ended are as follows:
Assets
Liabilities
Capital expenditure
Grain
US$000
5,223
(7,249)
16
Beef
US$000
4,332
(1,300)
45
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
Segment assets and liabilities
Unallocated:
Intangible asset
Other receivables
Cash and cash equivalents
Accrued liabilities
Unallocated
US$000
359
(149)
-
Assets
US$000
9,555
27
16
316
-
9,914
The segment assets and liabilities at 31 March 2019 and capital expenditure for the year then ended are as follows:
Assets
Liabilities
Capital expenditure
Grain
US$000
4,636
(4,742)
355
Segment assets and liabilities are reconciled to Company assets and liabilities as follows:
Segment assets and liabilities
Unallocated:
Intangible asset
Other receivables
Cash and cash equivalents
Accrued liabilities
Beef
US$000
Unallocated
US$000
4,825
(861)
727
2,009
(141)
31
Assets
US$000
9,461
21
16
1,972
-
11,470
Total
US$000
9,914
(8,698)
61
Liabilities
US$000
(8,549)
-
-
-
(149)
(8,698)
Total
US$000
11,470
(5,744)
1,113
Liabilities
US$000
(5,603)
-
-
-
(141)
(5,744)
28
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Key performance Indicator
The Board considers that earnings before interest, tax, depreciation and amortisation (“EBITDA”) is a key performance indicator in measuring
operational performance. It is calculated as follows:
Year ending 31 March 2020
Grain
Beef
Unallocated
Total
Loss before tax
- Interest expense
- Depreciation and amortisation charge
EBITDA
Year ending 31 March 2019 as restated
Loss before tax
- Interest expense
- Depreciation and amortisation charge
EBITDA
US$000
US$000
US$000
US$000
(886)
805
167
86
Grain
(1,512)
155
452
(905)
(566)
4
-
(562)
(2,964)
964
619
(1,381)
Beef
Unallocated
Total
US$000
US$000
US$000
US$000
(1,563)
916
138
(509)
(1,228)
100
608
(520)
(499)
-
10
(489)
(3,290)
1,016
756
(1,654)
Significant customers
In the year ended 31 March 2020, two customers of the Grain segment generated revenue of $3.5m amounting to 18.7% of Company revenue for one
customer and 8.5% for the other. Two customers of the Beef segment generated revenue of $1.5m amounting to 7.1% of Company revenue for one
customer and 4.7% for the other (Year ended 31 March 2019: two customers of the Grain division generated revenue of $ 2.3m amounting to 22.0%
of Company revenue and one customer of the Beef division generated revenue of $1.3m amounting to 12.5% of Company revenue).
6. OPERATING LOSS
Operating loss has been arrived at after charging / (crediting):
Other income: recovery of historic VAT claim
Depreciation of property, plant and equipment (see note 13)
Amortisation of intangible asset (see note 14)
Profit on disposal of property, plant and equipment
Net foreign exchange gain
Staff costs (see note 8)
7. AUDITORS REMUNERATION
Amounts payable to the auditors and their associates in respect of audit services are as follows:
Fees payable to the Company’s previous auditor and their associates
For the audit of the Company’s accounts
For the forensic audit of the Company’s subsidiaries
For the audit of the Company’s subsidiaries
Overruns in respect of prior years
Fees payable to the Company’s auditor and their associates
For the audit of the Company’s accounts
For the audit of the Company’s subsidiaries
Total audit fees
Year
ended
31 March 2020
US$000
Year
ended
31 March 2019
US$000
(804)
595
24
(80)
56
1,915
-
736
20
(810)
(11)
1,971
Year
Ended
31 March 2020
US$000
Year
Ended
31 March 2019
US$000
-
-
-
68
68
58
37
163
130
55
79
-
264
-
-
264
Prior to their appointment as the Company’s auditor for the year ended 31 March 2020, PKF Littlejohn LLP were engaged to perform an independent
forensic audit of the Company’s subsidiaries for the previous year end. The fee was $122,000.
Other than as disclosed above, the Company’s auditor and their associates have not provided additional services to the Company.
29
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
8. STAFF COSTS
The average monthly number of employees (including executive Directors) employed by the Company for the year was as follows:
Office and Management
Operational
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Correction of prior period social security costs
9. REMUNERATION OF DIRECTORS
CS Havers
NWH Clayton
HWB Rudland
GR Smith
A Thorburn
Year
ended
31 March 2020
Number
Year
ended
31 March 2019
Number
31
488
519
60
497
557
Year
ended
Year
ended
31 March 2020
US$000
31 March 2019
US$000
1,808
60
47
1,915
1,904
67
-
1,971
Year
ended
31 March 2020
31
10
12
12
11
76
Year
ended
31 March 2019
41
2
10
10
1
64
In addition N Clayton received $55,000 (2019: $5,000) and A Thorburn received $27,000 (2019: $nil) in respect of consultancy services to the
Company. All remuneration relates to short term benefits.
10. FINANCE COSTS
Interest receivable on bank deposits
Interest expense on bank borrowings and overdrafts
Interest expense on leases
Net finance costs
Year
Ended
31 March 2020
US$000
Year
Ended
31 March 2019
US$000
14
(890)
(88)
(964)
-
(1,009)
(7)
(1,016)
30
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
11. TAXATION
Loss before tax from continuing activities
Tax credit at the Mozambican corporation tax rate of 32% (2019: 32%)
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of (income not taxable) or losses not allowable
Tax effect of net losses not recognised in overseas subsidiaries (net of effect of different rates)
Statutory taxation payments irrespective of income
Tax expense
Year
Ended
31 March 2020
US$000
(2,964)
(949)
66
264
619
29
29
Year
Ended
31 March 2019
US$000
As restated
(3,290)
(1,053)
107
125
821
-
-
The tax reconciliation has been prepared using a 32% tax rate, the corporate income tax rate in Mozambique, as this is where the Company’s principal
assets of its continuing operations are located.
The Company has not recognised any tax credits for the year ended 31 March 2020 (2019: $nil). The Company has operations in overseas jurisdictions
where it has incurred taxable losses which may be available for offset against future taxable profits amounting to approximately $ 9,049,000 (2019: $
11,386,000). 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 (2019: zero percent per annum). No tax is payable for the year. 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).
12. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended
31 March 2020
US$000
Year ended
31 March 2019
US$000
As restated
Loss for the year for the purposes of basic and diluted earnings per share attributable to equity holders
of the Company
(2,993)
(3,290)
Weighted average number of Ordinary Shares for the purposes of basic and diluted earnings per share
21,240,618
21,240,618
Basic and diluted earnings per share - US cents
Basic and diluted earnings per share from continuing activities - US cents
(14.1)
(14.1)
(15.5)
(15.5)
The Company has issued options over ordinary shares which could potentially dilute basic loss per share in the future. There is no difference between
basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive. Details of options are set out in note 22.
31
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
13. PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 April 2018
Prior year adjustment
At 1 April 2018 as restated
Additions
Disposals
Exchange rate adjustment
At 31 March 2019 as restated
Additions
Disposals
Exchange rate adjustment
At 31 March 2020
Accumulated depreciation and impairment
At 1 April 2018
Prior year adjustment
At 1 April 2018 as restated
Charge for the year
Disposals
Exchange rate adjustment
At 31 March 2019 as restated
Charge for the year
Disposals
Exchange rate adjustment
At 31 March 2020 as restated
Net book value
31 March 2020
Land and
buildings
US$000
Plant and
machinery
US$000
Motor
vehicles
US$000
Other
Assets
US$000
7,659
1,226
8,886
53
-
(329)
8,610
-
-
(475)
8,135
3,327
(771)
2,556
216
-
(105)
2,667
291
-
(157)
2,801
4,362
848
5,210
545
(100)
(226)
5,429
42
(17)
(301)
5,153
2,521
1,635
4,156
814
(88)
(185)
4,697
204
(17)
(267)
4,617
1,856
(801)
1,055
598
(212)
(56)
1,385
-
(7)
(76)
1,302
1,823
(501)
1,322
47
(202)
(44)
1,123
90
(7)
(64)
1,142
325
(297)
28
41
-
(3)
66
4
-
(4)
66
217
(181)
36
6
-
(2)
40
10
-
(3)
47
Total
US$000
14,202
976
15,178
1,237
(312)
(613)
15,490
46
(24)
(856)
14,656
7,887
183
8,070
1,083
(290)
(336)
8,527
595
(24)
(491)
8,607
5,334
536
160
19
6,049
31 March 2019
6,963
During the year, a new fixed asset register was prepared. Asset values were brought in line with tax depreciation in Mozambique giving rise to an
uplift in the net book value of assets. The uplift has been accounted for as a prior year adjustment and the increase in the net book value at 1 April
2018 was $673,000. There was a consequential increase in the depreciation charge for the year ending 2019 of $136,000.
5,943
732
262
26
For the year ended 31 March 2020, a depreciation charge of $595,000 (2019: $ 736,000) has been included in the consolidated income statement
within operating expenses.
Property, plant and equipment with a carrying amount of $4,366,000 (2019: $ 4,719,000) have been pledged to secure the Company’s bank overdrafts
and loans (note 18). The Company is not allowed to pledge these assets as security for other borrowings or sell them to another entity.
The Company adopted IFRS 16 on 1 April 2019. At 31 March 2020 the net book value of plant and equipment and motor vehicles classified as right of
use assets amounted to $328,000 (2019: $421,000) and $142,000 (2019: $nil) respectively.
At 31 March 2020 and 31 March 2019, the Company had no contractual commitments for the acquisition of property, plant and equipment.
32
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
14. INTANGIBLE ASSETS
Cost
At 1 April 2018
Additions
Exchange rate adjustment
At 31 March 2019
Prior year adjustment
At 1 April 2019 as restated
Additions
Exchange rate adjustment
At 31 March 2020
Accumulated amortisation
At 1 April 2018
Charge for the year
Exchange rate adjustment
At 31 March 2019
Prior year adjustment
At 1 April 2019 as restated
Charge for the year
Exchange rate adjustment
At 31 March 2020
Net book value
31 March 2020
31 March 2019 as restated
US$000
Nil
193
(7)
186
(69)
117
15
(6)
126
Nil
20
-
20
(10)
10
24
-
34
92
107
Intangible assets comprise investment in management information and financial software. As part of the review of the Group’s non-current assets,
software with a net book value of $59,000 that had been capitalised in the prior year was written off as an operating expense in the prior year and
included in prior year adjustments.
15. BIOLOGICAL ASSETS
Fair value
At 31 March 2018
Purchase of biological assets
Sale, slaughter or other disposal of biological assets
Change in fair value of the herd
Foreign exchange adjustment
At 31 March 2019
Purchase of biological assets
Sale, slaughter or other disposal of biological assets
Change in fair value of the herd
Foreign exchange adjustment
At 31 March 2020
US$000
1,137
1,608
(2,362)
478
(31)
830
2,395
(2,029)
(489)
(42)
665
At 31 March 2020 and 2019, all cattle are held for slaughter. The slaughter herd has been classified as a current asset. Forage crops included in current
assets are US$ 5,978 (2019: US$ 5,000).
At 31 March 2020 the slaughter herd comprised 2,100 head (2019: 2,468), with an average weight of 250kgs (2019: 270 kgs) and average value of US$
314 (2019: US$ 335).
For valuation purposes, cattle that are not in the feedlot are grouped into classes of animal (e.g. bulls, cows, steers etc.) and a standard animal weight
per breed and class was then multiplied by the number of animals in each class to determine the estimated total live weight of all animals in the herd.
This methodology is supported by the induction weights recorded when the cattle are subsequently moved to the feedlot. For animals in the feedlot,
their weight has been estimated based on their individual weigh in data at the closest weigh in date to the year end. Cattle are generally kept for
periods less than 3 months before slaughter.
The Company’s slaughter herd have been pledged in full to secure the Beef division’s bank overdraft and loans (see note 18).
33
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
16. INVENTORIES
Consumables and spares
Raw materials
Finished goods
31 March
2020
US$000
31 March
2019
US$000
157
189
479
825
297
48
330
675
During the year inventories amounting to US$9,174,000 (2019: US$7,690,000) were included in cost of sales.
Inventories with a carrying amount of $442,000 (2019: $331,000) have been pledged to secure the Grain division’s bank overdraft and inventories
with a carrying value of $179,000 (2019: $168,000) having been pledged to secure the Beef division's bank overdraft and loans (see note 18).
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
Trade receivables
Trade receivables - gross
Loss allowance
31 March
2020
US$000
31 March
2019
US$000
522
712
15
1,249
31 March
2020
US$000
872
(350)
522
542
138
18
698
31 March
2019
US$000
865
(323)
542
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement within 30
days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional. The
Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised
cost using the effective interest method.
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade receivables have been grouped based on the days past due.
At 31 March 2020
Expected loss rate
Gross trade receivables
Loss allowance
At 31 March 2019
Expected loss rate
Gross trade receivables
Loss allowance
Current
More
30 days
than
More
60 Days
than
More
90 days
than
Total
US$000
0%
209
-
US$000
0%
184
-
US$000
0%
93
-
US$000
91%
386
350
Current
More
30 days
than
More
60 Days
than
More
90 days
than
Total
US$000
0%
384
-
US$000
0%
124
-
US$000
0%
25
-
US$000
97%
332
323
US$000
40%
872
350
US$000
37%
865
323
34
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
The closing loss allowances for trade receivables as at 31 March 2020 reconcile to the opening loss allowances as follows:
Loss allowances at 1 April previously calculated under IAS 39
Increase in loan loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
Exchange rate adjustment
Loss allowances at 31 March
31 March
2020
US$000
31 March
2019
US$000
323
32
-
(5)
350
39
297
-
(13)
323
Trade receivables are provided for when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a repayment plan with the Company, and a failure to make contractual payments for a
period of greater than 120 days past due. This is used as the basis of the ECL provision disclosed above. The Company determines the percentage
based on historic trends. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.
Trade receivables with a carrying amount of $98,000 (2019: $134,000) have been pledged to secure the Grain division’s bank overdraft and trade
receivables with a carrying value of $229,000 (2019: $324,000) have been pledged to secure the Beef division's bank overdraft and loans (see note
18).
Further details on the Company’s financial assets are provided in note 20.
18. BORROWINGS
Non-current liabilities
Bank loans
Leases
Current liabilities
Bank loans
Leases
Overdraft
Bank Borrowings
Beef division
31 March
2020
US$000
31 March
2019
US$000
1,661
383
2,044
711
87
2,541
3,339
5,383
2,510
340
2,850
753
48
907
1,708
4,558
The Beef division has an overdraft facility of 30 million Metical ($ 0.44m). The amount drawn down at 31 March 2020 was $ 0.41m (2019: $ 0.32m).
The facility carries an interest rate at the Bank’s prime lending rate (15.2%) at 31 March 2020 (2019: 19.5%). The facility was repaid in October 2020
and is no longer available.
The facilities are secured as follows:
Fixed Charge
Property, plant and equipment
Floating Charge
Cattle
Meat Inventories
Trade receivables
Grain division
31 March
2020
US$000
31 March
2019
US$000
2,676
659
179
229
3,743
2,913
825
168
324
4,230
In May 2018 the division’s overdraft facility was restructured into a 240 million Metical ($ 3.77m) 5 year term loan with an interest rate of the Bank’s
prime lending rate +0.25% and a 12 month 60 million Metical ($ 0.94m) overdraft facility at the Bank’s prime lending rate less 1.75%. At 31 March
35
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
2020, the principal outstanding on the term loan was 160 million Metical ($ 2.37m) and the amount drawn on the overdraft facility was 53.8 million
Metical ($ 0.80m). On 30 September 2020, the overdraft facility was restructured into a 60 million Metical ($0.9m) 33 month term loan at the Bank’s
prime lending rate less 1.75%
The facilities are secured as follows:
Fixed Charge
Property, plant and equipment
Floating Charge
Maize and maize product inventories
Trade receivables
31 March 2020
US$000
1,690
442
98
2,230
31 March
2019
US$000
1,806
331
134
2,271
As further security to the bank loans and overdrafts, Agriterra Limited has issued a Corporate guarantee in favour of the bank. Under the terms of the
guarantee, it may only be called upon once the bank has exhausted all possible means of recovering the debt in Mozambique.
Reconciliation to cash flow statement
Non-current bank loan
Non-current leases
Current bank loan
Current leases
Overdrafts
Non-current bank loan
Non current leases
Current bank loan
Current leases
Overdrafts
Leases
At 31 March
2019
US$000
2,510
340
753
48
907
4,558
At 31 March
2018
US$000
-
-
50
-
4,185
4,235
Cash flow
US$000
(732)
64
-
44
1,732
1,108
Cash flow
US$000
2,631
356
736
50
(3,258)
515
Foreign
Exchange
US$000
(117)
(21)
(42)
(5)
(98)
(283)
Foreign
Exchange
US$000
(121)
(16)
(33)
(2)
(20)
(192)
At 31 March
2020
US$000
1,661
383
711
87
2,541
5,383
At 31 March
2019
US$000
2,510
340
753
48
907
4,558
The Company applied IFRS 16 on 1 April 2019 and used the cumulative catch up approach on transition. Accordingly, the comparatives have not been
restated.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases and low value assets
31 March
2020
$’000
132
88
50
270
31 March
2019
$’000
12
6
50
68
At 31 March 2020, the Group is committed to $13,000 (2019 $50,000) for short-term leases. The total cash outflow for leases (principal and interest)
amounts to $174,000 (2019: $55,000).
36
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Maturity Analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Analysed as:
Current
Non-current
The Group does not face a significant liquidity risk with regard to its lease liabilities.
19. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accrued liabilities
31 March
2019
$’000
-
-
-
470
-
470
87
383
470
31 March
2020
US$000
1,386
1,775
154
3,315
31 March
2019
$’000
-
-
-
-
388
388
48
340
388
31 March
2019
US$000
622
294
270
1,186
‘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.
20. FINANCIAL INSTRUMENTS
20.1. Capital risk management
The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximising the return to
shareholders. The capital structure of the Company comprises its net debt (the borrowings disclosed in note 18 after deducting cash and bank
balances) and equity of the Company as shown in the statement of financial position. The Company is not subject to any externally imposed capital
requirements.
The Board 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
Company funds the subsidiary company by way of loans from the Company. The Company 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.
Current interest rates on borrowings in Mozambique are very high, with the prime lending rate at 18.0% at 31 March 2020 (2019: 19.5%). In light of
this, the Company has been rationalising its operations, with particular focus on disposing of surplus assets to reduce external debt levels. The
Company has restructured its loan facilities in Mozambique to finance its Grain operations (note 18).
37
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
20.2. Categories of financial instruments
The following are the Company financial instruments as at the year-end held at amortised cost:
Financial assets
Cash and bank balances
Other loans and receivables
Financial liabilities
Trade and other payables
Borrowings – current
Borrowings – non-current
31 March
2020
US$000
1,034
827
1,861
3,315
3,339
2,044
8,698
(6,837)
31 March 2019
US$000
2,197
681
2,878
1,186
1,708
2,850
5,744
(2,866)
20.3. Financial risk management objectives
The Company manages the risks arising from its operations, and financial instruments at Executive operating and Board level. The Board has overall
responsibility for the establishment and oversight of the Company’s risk management framework and to ensure that the Company has adequate
policies, procedures and controls to manage successfully the financial risks that the Company faces.
While the Company does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close
involvement of the senior executives in the day to day operations of the Company ensures that risks are monitored and controlled in an appropriate
manner for the size and complexity of the Company. Financial instruments are not traded, nor are speculative positions taken. The Company has not
entered into any derivative or other hedging instruments.
The Company’s key financial market risks arise from changes in foreign exchange rates (‘currency risk’) and changes in interest rates (‘interest risk’).
The Company is also exposed to credit risk and liquidity risk. The principal risks that the Company faces as at 31 March 2020 with an impact on
financial instruments are summarised below.
20.4. Market Risk
The Company is exposed to currency risk and interest risk. These are discussed further below.
20.5. Currency risk
Certain of the Company companies have functional currencies other than US$ and the Company 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 Company does not hedge
against this translation risk. The Company’s financial assets and liabilities by functional currency of the relevant company are as follows:
United States Dollar (‘US$’)
Great British Pound (‘GBP’)
Mozambique Metical (‘MZN’)
Assets
31 March
2020
US$000
321
10
1,530
1,861
31 March
2019
US$000
1,972
-
906
2,878
Liabilities
31 March
2020
US$000
-
149
8,538
8,687
31 March
2019
US$000
141
-
5,603
5,744
The Company transacts with suppliers and/or customers in currencies other than the functional currency of the relevant Company (foreign
currencies). The Company does not hedge against this transactional risk. As at 31 March 2020 and 31 March 2019, the Company’s outstanding foreign
currency denominated monetary items were principally exposed to changes in the US$ / GBP and US$ / MZN exchange rate.
The following tables detail the Company’s exposure to a 5, 10 and 15 per cent depreciation in the US$ against GBP and separately to a 10, 20 and 30
per cent depreciation of the US$ against the Metical. For a strengthening 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 Company’s presentation currency. The sensitivity also
includes intra-Company 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.
38
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
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$
31 March
2020
US$000
31 March
2019
US$000
(7)
(14)
(21)
(7)
(14)
(21)
-
-
-
(7)
(14)
(21)
(7)
(14)
(21)
-
-
-
(2,242)
(4,484)
(6,726)
(6,407)
(12,815)
(19,222)
(1)
This is mainly due to the exposure arising on the translation of US$ denominated intra-Company loans provided to Metical functional
currency entities which are included as part of the Company’s net investment in the related entities.
20.6. Interest rate risk
The Company is exposed to interest rate risk because entities in the Company hold cash balances and borrow funds at floating interest rates. As at 31
March 2020 and 31 March 2019, the Company has no interest-bearing fixed rate instruments.
The Company maintains cash deposits at variable rates of interest for a variety of short-term periods, depending on cash requirements. The Grain and
Beef operations in Mozambique are also financed through bank facilities. The rates obtained on cash deposits are reviewed regularly and the best rate
obtained in the context of the Company’s needs. The weighted average interest rate on deposits was nil % (2019: nil). The weighted average interest
on drawings under the overdraft facilities and bank loans was 18.68% (2019: 20.14%). The Company does not hedge interest rate risk.
The following table details the Company’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 March 2020 and 31 March 2019 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 Company interest
bearing liabilities are Metical based. Although the macroeconomic scenario in Mozambique is now improving and interest rates are falling, they
remain high with prime rates of 18% at 31 March 2020 (2019: 19.5%). Any further depreciation in the Metical could see this trend reverse.
+ 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
31 March
2020(1)
US$000
(9)
(22)
(43)
(87)
(217)
(348)
(435)
31 March
2019(1)
US$000
(5)
(12)
(24)
(47)
(118)
(189)
(236)
(1)
The table above is prepared on the basis of an increase in rates. A decrease in rates would have the opposite effect.
20.7. Credit risk
Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as outstanding receivables. The Company’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 impact of COVID-19 on the credit risk of the Company has been considered in the Going Concern
disclosures in note 3.
39
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
The maximum exposure to credit risk is the carrying value of the Company financial assets disclosed in note 20.2. Details of provisions against financial
assets are provided in note 17.
20.8. Liquidity risk
The Company policy throughout the year has been to ensure that it has adequate liquidity by careful management of its working capital. The
operating executives continually monitor the Company’s actual and forecast cash flows and cash positions. They pay particular attention to ongoing
expenditure, both for operating requirements and development activities, and matching of the maturity profile of the Company’s overdrafts to the
processing and sale of the Company’s maize and beef products. The impact of COVID-19 on the liquidity risk of the Company has been considered in
the Going Concern disclosures in note 3.
At 31 March 2020 the Company held cash deposits of $1,034,000 (2019: $2,197,000). At 31 March 2020 the Company had overdraft and bank loans
facilities of approximately $6,805,041 (2019: $5,063,000) of which $5,383,107 (2019: $ 4,558,000) were drawn. As at the date of this report the
Company has adequate liquidity to meet its obligations as they fall due.
The following table details the Company’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 Company could be required to settle its obligations and assuming business conditions at 31 March
2020. The table includes both interest and principal cash flows.
1 month
2 to 3 months
4 to 12 months
1 to 2 years
3 to 5 years
21. SHARE CAPITAL
At 31 March 2018 and 31 March 2019 and 31 March 2020
At 31 March 2018 and 31 March 2019 and 31 March 2020
Deferred shares of 0.1p each
Total share capital
31 March
2020
US$000
2,650
218
982
2,619
437
6,906
31 March
2019
US$000
2,159
134
601
1,634
1,216
5,744
Authorised
Number
23,450,000
Allotted and fully
paid
Number
21,240,618
US$000
3,135
155,000,000
155,000,000
238
178,450,000
176,240,618
3,373
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.
22. SHARE BASED PAYMENTS
22.1. Charge in the year
The Company recorded a charge within Operating expenses for share based payments of $ nil (2019: $ nil) in respect of options issued in previous
years vesting during the year. No options were issued during the year (2019: $nil).
22.2. 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 Company. 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 year is
generally one year. If options remain unexercised after a year of 4 or 5 years from the date of grant, or vesting, the options expire. Options are
forfeited if the employee leaves the Company before the options vest.
40
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
In addition to share options issued under the unapproved share option schemes, on 1 June 2015, the Company created a warrant instrument (the
‘Instrument’) to provide suitable incentives to the Company’s employees, consultants and agents, and in particular those based, or those spending
considerable time, on site at the Company’s operations. Up to 1,000,000 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 £0.65 (the share price of the
Company being approximately 0.6p when the Instrument was created) and the subscription year during which time the Warrants may be exercised
and Warrants Shares issued is the 5-year year from 1 June 2016 to 1 June 2021. Subject to various acceleration provisions, a holder of Warrants is not
entitled to sell more than 1,000 Warrant Shares in any day nor more than 10,000 Warrant Shares (in aggregate) in any calendar month, without Board
consent. 50,000 Warrants are in issue.
The following table provides a reconciliation of share options and warrants outstanding during the year. The number of shares or warrants and their
respective exercise prices have been adjusted to reflect the share consolidation (see note 21):
Year
ended
31 March
2020
Number
Year ended
31 March
2019
Number
Weighted
average
exercise
price (p)
Weighted
average
exercise
price (p)
At beginning of year
Granted in the year
Terminated in the year
Lapsed in the year
At end of year
Exercisable at year end
151,160
-
-
(58,080)
93,080
93,080
263
-
-
455
142
142
335,850
-
-
(184,690)
151,160
151,160
160
-
-
83
263
263
A transfer of $84,681 was made from the share-based payments reserve to the accumulated losses reserve in respect of the options that lapsed
during the year.
At 31 March 2020, the following options and warrants over ordinary shares of 10p each have been granted and remain unexercised:
Date of grant
29 July 2012
15 March 2014
1 June 2015
23. RELATED PARTY DISCLOSURES
Total
options
18,080
25,000
50,000
93,080
Exercisable
Options
Exercise price
P
18,080
25,000
50,000
93,080
350p
150p
65p
Expiry date
29 July 2023
15 March 2024
1 June 2021
Magister Investments Limited (“Magister”), holds 50.01% of the ordinary share capital of the Company and is the ultimate controlling party.
The remuneration of the Directors, who are the key management personnel of the Company, is set out in note 9.
24. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
The impact of COVID-19 is a non-adjusting event after the reporting period. The impact of COVID-19 on the estimates and judgments of the financial
statements has been considered by the Company and although there are inherent risks and uncertainties as disclosed on page 3 in the Chair's
statement, as at the date of signing, COVID-19 has not had a material impact on the financial statements. Further details in relation to Going Concern
are disclosed in note 3.
On 26 May 2020, the Company announced that the Grain division has entered into a new one-year revolving overdraft facility of 306m Metical with an
interest rate of 85% of the Prime lending rate. This facility has been secured by a guarantee from Magister Investments Limited, the Company’s
majority shareholder.
41
Agriterra Limited – Annual Report and Financial Statements for the year ended 31 March 2020
Company statement of financial position
Company information and advisers
COMPANY INFORMATION AND ADVISERS
Country of incorporation
Registered address
Directors
Auditor
Solicitors
Nominated adviser and broker
Registrars
Guernsey, Channel Islands
Connaught House
St Julian’s Avenue
St Peter Port
Guernsey GY1 1GZ
Caroline Havers (Executive Chair)
Neil Clayton (Non-executive)
Hamish Rudland (Non-executive)
Gary Smith (Non-executive)
Sergio Zandamela (Non-executive)
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
Carey Olsen
8-10 Throgmorton Avenue
London EC2N 2DL
Strand Hanson
26 Mount Row
London W1K 3SQ
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen B62 8HD
42