Woodbois Limited
(formerly known as Obtala Limited)
Financial
Statements
Company number: 52184
for the year ended
31 December
2018
WOODBOIS LIMITED | Financial statements 2018 DIRECTORS
Miles Pelham
Paul Dolan
Carnel Geddes
Martin Collins
Jacob Hansen
Hadi Ghossein
Zahid Abbas
Kevin Milne
Jessica Camus-Demarche
(Non-executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Deputy Chairman) – resigned 31 October 2018
(Chief Operating Officer) – appointed 11 January 2019
(Deputy Chairman) – appointed 11 January 2019
(Head of Trading) – appointed 11 January 2019
(Non-executive Director)
(Non-executive Director) – resigned 11 January 2019
COMPANY SECRETARY
William Place Secretaries Limited
Dixcart House,
Sir William Place,
St Peter Port,
Guernsey, GY1 4EZ
COMPANY NUMBER
52184 (Guernsey)
COMPANY WEBSITE
www.woodbois.com
REGISTERED OFFICE
P.O. Box 161, Dixcart House
Sir William Place
St Peter Port
Guernsey, GY1 1GX
NOMINATED ADVISER AND BROKER
Arden Partners Plc
125 Broad Street
London, EC2N 1AR
REGISTRAR
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen, B62 8HD
INDEPENDENT AUDITOR
PKF Littlejohn LLP
1 Westferry Circus
Canary Wharf
London, E14 4HD
LAWYERS TO THE COMPANY (UK)
DWF LLP
Bridgewater Place
Water Lane
Leeds, LS11 5DY
LAWYERS TO THE COMPANY (Guernsey)
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey, GY1 4B2
WOODBOIS LIMITED | Financial statements 2018
Contents
1
6
17
19
23
24
25
26
27
Strategic Report
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Statement of Profit or Loss and Total Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Financial Statements
WOODBOIS LIMITED | Financial statements 2018 Strategic Report
Strategic Report
CHAIRMAN’S STATEMENT
I am pleased to present the Annual Report and consolidated
financial statements for Woodbois Limited (formerly known
as Obtala Limited) (the “Company” and its subsidiaries the
“Group”) for the year ended 31 December 2018.
Business Performance
The Group continued its transformative path in 2018,
registering strong revenue growth in both timber trading
and production divisions. Revenues increased by 70% year
over year from $7.9m to $13.4m with gross profit for the
2018 year increasing to $2.1m from $0.5m in 2017 and pre-
tax loss for the 2018 year of $5.6m, down from a loss of
$7.3m in 2017.
initiated
in 2018 emphasised the
The growth plan
requirement to attract trade finance funding to capitalise on
the valuable commercial IP, developed over the last three
decades, within our trading division. Despite only modest
trade finance inflows being secured during 2018, the
demonstrable track record generated by the trading team in
deploying the Internal Trading Fund (ITF) has led to a total of
$10m in additional trade finance funding being committed
during the first quarter of 2019. This development signifies
a landmark breakthrough for this area of the business.
Strategy
Corporate restructuring
At the half year we announced that a strategic review of
the Group’s East African operations would be undertaken,
following which a decision was made to narrow our focus
to timber related businesses only, and to dispose of the
Group’s agricultural assets in Tanzania for a consideration
of US$2,500,000 (the “Tanzanian Disposal”).
By the year-end, Woodbois had concluded negotiations
with our long-standing partner in Tanzania, Envision, for
them to purchase our business interests in Tanzania. The
businesses were sold, inclusive of the fixed assets and
inventory at a small premium to the net book value of those
businesses as at 31st December 2018, generating a profit
to the Group of $176,000. The Group’s net investment over
the past 6 years has been approximately $8m. Further
information on the sale can be found in note 10 of the
Annual Report.
Woodbois also entered into a share purchase agreement
to acquire the 25% of Montara Continental Limited that
it did not previously own (the “Montara Continental
Consolidation”) from Africa Resource Investment Limited
(“ARI”) for a total consideration of $5m. This buy-out of
minorities further simplified the group structure and being
at a favourable price to shareholders, resulted in a total
gain of $14.4m, which is recorded in other comprehensive
income.
The transactions above conclude the reorganisation of
the group, and in changing our name in March 2019, from
Obtala Ltd (“Obtala”) to Woodbois Ltd, we signalled the
completion of a transition for the original Obtala, from a
diversified, African resources play, to a business focused
on the production, processing, manufacture and supply
of sustainable African hardwood and hardwood products,
and on the supply into Africa (and across the globe) of
sustainable softwood, hardwood and related products.
Outlook
The name change is appropriate given the evolution of the
group and its future ambitions, the strength of the Woodbois
brand globally and the elevation to the main board of the
three founding partners and business principals within
the original Woodbois International; Zahid Abbas, Jacob
Hansen and Hadi Ghossein.
The impact of the Basel 3 accord, due to be implemented
this year, and the resulting trend of de-risking by international
banks continues to cut Africa off from traditional sources
of international finance. In trade finance alone the African
Development Bank estimates an annual shortfall of
US$120bln. Given the growth backdrop of the continent
however, significant opportunities exist for those capable of
delivering funding solutions while carefully managing credit
risk. Achieving this is fundamental to our strategy and I’m
delighted that the time and effort invested by management
throughout 2018 has encouraged commitments of $10
million in trade finance loans since the start of 2019.
These commitments represent a major milestone for the
Group on its pathway to becoming a leading player in African
timber trading. This additional capital will enable the trading
team to add significant scale to their business during 2019.
1 |
WOODBOIS LIMITED | Financial statements 2018
In line with the rapid growth of urban populations across
Sub-Saharan Africa, we will seek to develop our intra-
African trading and supply chains, as well as expanding the
established Woodbois business of supplying sustainable
African hardwood and hardwood products to clients around
the globe. The additional funding will allow us to service the
needs of our end buyers through the securing of valuable
supplier agreements. We are excited to embrace this
immediate opportunity for growth and see it as another key
milestone towards building a position of leadership within
the marketplace.
Perhaps due to the rapid growth of the business, several
approaches were received during 2018 regarding potential
joint ventures and acquisition possibilities. For the time
being we are focussed on organic growth and maximising
returns from existing assets, but we remain open to all
avenues leading to profitable, sustainable, growth.
During the period, I increased my holding of Obtala’s
ordinary shares from 18,457,754 to 30,000,000, and my
holding in Argento Preference shares from 7,072 to 54,358
(72.5% of outstanding), demonstrating my confidence in
management’s ability to deliver on our long-term vision of
achieving a position of leadership in the sector.
Africa is widely forecasted to exhibit the highest rates
of population and economic growth on the planet for at
least the next two decades. Identifying, hiring, training,
empowering and providing financial capital for African
talent is therefore likely to yield above average returns on
investment. In my experience, attracting capital is the most
difficult of these objectives, so having started to crack
this very hard nut, we find ourselves incrementally well
positioned to significantly increase shareholder value.
I wish to thank all of you, our shareholders, for your
continued support.
Miles Pelham
Chairman
7 May 2019
Strategic Report
2 |
WOODBOIS LIMITED | Financial statements 2018 CHIEF EXECUTIVE OFFICER’S REVIEW
The high-level objective for 2018 was to maintain the rapid
growth of the business by increasing production from
existing facilities, commissioning a new veneer factory
and
included
increasing sales, sourcing trade finance funding, reducing
administration costs and generating improved performance
at an operating level.
improving margins. Further objectives
2018 financial performance overview
Year-on-year revenue grew by 70% in 2018, driven by
93% growth in Forestry division revenues from our own
production assets, and 57% growth in trading revenues.
2018 gross profit margin improved dramatically to 15.8%,
from 5.7% in 2017.
As expected, and in line with the Group’s growth, current
assets and current liabilities also increased.
• Trade and other receivables increased year-on-year
by 72%, with much of the growth attributable to
revenue expansion. However, one-off items such as
the current portion of the consideration due for the
sale of the Tanzanian businesses, also had an impact
Inventory
increased by 23% year-on-year. This
was largely attributable to the increase in timber
production in Gabon
•
• Payables increased by 43% year over year, slightly
below the growth in cost of goods sold.
Working capital requirements increased by $2.0m year-
over-year, also in line with management’s expectations
given the growth rate of the overall business. Working
capital requirements will continue to grow as the business
expands, hence the emphasis on attracting trade finance
funding.
Forestry & related capex
The forestry division contributed significantly to overall
margin expansion, recording a 21% gross profit for the
year versus 12% in 2017. The sawmill in Gabon achieved
an average recovery rate of lumber from logs of 34%. New
machinery to be purchased in 2019 should improve this
recovery rate, and alongside the installation of new kilns
is expected to drive further margin expansion. The new
sawmilling equipment will also improve the finished quality
of our sawn lumber which will in turn open new export
markets for our own production, enhancing our status with
clients as we move towards our objective of becoming
industry leaders.
Strategic Report
Thorough research and rigorous cost benefit analysis
was conducted during 2018 prior to making capex
commitments. As a result of this analysis, we are confident
that the additional equipment scheduled for installation
during 2019 will lead to further margin improvement.
Capex during 2018 was committed to strengthening core
infrastructure to underpin increased, consistent future
profit margins via:
•
•
increased harvesting capacity - 2 new Komatsu
bulldozers, 3 new MAN trucks
terminating outsourcing of kiln drying for sawn
timber in Gabon - New kilns are being installed in
2019 from Chinese company Techdry with 2000m3
monthly capacity for drying Okoume
• repair and upgrade to kilns at rented facility in Abidjan,
Ivory Coast with monthly capacity of 1400m3,
species dependent.
• reconditioning of container crane at the same facility
to allow quicker and more efficient movement of
containers, a key development as trading volumes
grow
• full commissioning of veneer factory
including
additional machinery to reduce some manually
intensive production and post-production processes.
Veneer factory
The highest production-related priority for 2018 was to fully
commission the veneer factory in Gabon. The emptying of
10 containers full of second-hand industrial equipment and
its assembly and integration with new custom-built boilers
and generators into a functioning factory was a remarkable
feat to witness. Hats off to the Moroccan engineering team
for delivering a state of the art, Cremona equipped factory
within the forecast budget.
As the factory became fully functional towards the end
of 2018, Mr Driss Farissi joined to take overall charge of
the facility with the objective of scaling up production of
high-quality product. Mr Farissi is a Moroccan national with
more than 25 years of experience in veneer production and
factory management and is familiar with Gabon having
spent 9 years there previously.
As with the equipment upgrades planned for the sawmill,
output from our impressive veneer facility will enhance our
product mix and reputation with clients around the world as
we move up the value chain.
3 |
WOODBOIS LIMITED | Financial statements 2018 Upgrade of logistics team
Monetising the forestry division’s scaled up levels of
production is dependent on close communication with the
logistics team, and the performance of this critical hub.
Anne Laure Boichot, a French national who joined us in April
2018, has proved an invaluable addition to the leadership
team in Libreville and merits a special mention in this report.
Anne Laure’s team dovetailed and kept pace as production
increased during 2018, shipping a total of 299 containers
from Libreville, creating a step change for the business and
for our cashflow.
Trading
The trading division delivered a gross profit margin of 12%,
consistent with management observations throughout the
year. The division had to exercise patience during 2018
with financial capacity to trade being tightly restricted since
investment was focused on the production units, where
higher levels of operating expenditure were required as
production increased. The $10m of funding committed
after the year end in early 2019 will be drawn down as
the trading team activates relationships with suppliers
with whom they have multi-year track-records as well as
with new suppliers. Our trading team, while ramping up
activity, will remain mindful of the global economic outlook,
including any signs of continued slowdown in China, a large
player in the tropical timber market. Having sold into more
than 40 different countries in the last two years, we have the
luxury of a diversified customer mix, with no dependence
on any single geography. China remains an opportunity for
the group since it was the destination for only 4% of our
total sales during 2018.
Cost management and internal controls
Internal control and financial monitoring capabilities have
continued to evolve and improve throughout 2018 under
the guidance of CFO Carnel Geddes.
We migrated to new web-based accounting software
allowing for round the clock access by group management
and minimising risk of loss of data. Some subsidiary
accounting functions were also centralised. A system
of monitoring controls for the ITF was designed and
implemented and is checked daily at board level. New
weekly reports for group sales and profit margins were also
initiated, as well as stock levels in Gabon and Ivory Coast
which are reviewed at executive board level together with
Group cash flow. In 2019 this has been further extended to
also track harvesting and shipping data against budgets.
During 2018, turnover increased by 70% while combined
operating and administration costs increased by only 26%.
Strategic Report
Operationally, the Libreville office houses our management
and logistics teams handling the day-to-day aspects of the
production business as well as timber exports from Gabon.
The offices in Ivory Coast and Denmark are trading and
back-office hubs. All three are scalable platforms and can
support a significant increase in levels of business.
At the half-year, I had noted that administration and
operational costs appeared high in the context of current
levels of profitability and targeted a 10% cost reduction for
administration expenses during the second half of 2018.
The administration cost reduction target was exceeded
with administrative expenses falling from a total of $3.9m
in 2017 to $2.11m in 2018.
Operating costs increased by $3.4m over the same period
as the Woodbois business was only consolidated for six
months of 2017 following its acquisition in the latter half of
2017. The disposal of the Tanzanian business will remove
$1.5m in operating costs in the current year. Mozambique
was responsible for 20% of the total operating cost base
of the Company but provided less than 2% of revenues.
Reflecting the prevailing business climate, the cost
reduction measures carried out in the second-half of 2018
will ensure that the operational cost base for Mozambique in
2019 falls much more closely into line with its contribution.
Mozambique
Due to issues documented in quarterly updates throughout
the year, largely related to export restrictions, we elected to
perform a very limited harvest in Mozambique during 2018,
which was sold mainly into the domestic market.
Given the high value of Mozambican hardwood species,
research is underway into broadening the ‘finished product’
mix from air dried sawn timber, including the cost and
availability of the additional machinery and skills required.
We have first class facilities, equipment and people in
Mozambique and look forward to increasing activity in the
future when, but not before, the clarity required for us to
re-allocate meaningful levels of operating capital, has been
provided by the relevant government ministries.
I must make a special mention of Adriano Rafael, a
Mozambican national, who with the support of the local
leadership team, and in particular the vastly experienced
Ivan Muir, has stepped seamlessly into the important
role of company administrator in Mozambique. Adriano’s
elevation to this role from data administrator at our bush
mill in 2016, speaks volumes of his drive and application,
and demonstrates the ability for smart dedicated people to
thrive within the Woodbois working environment.
4 |
WOODBOIS LIMITED | Financial statements 2018
Social impact and sustainability
In pursuit of our social impact objectives, in 2018 we
have continued to engage with high-level representatives
from international organisations, such as the African
Development Bank, the World Bank, local governments,
heads of local communities, certification bodies and
academic institutions. We also solicited the views of and
initiated discussions with local and international platforms,
the New Partnership for Africa’s Development (NEPAD)
and the World Economic Forum as well as multiple African
banks and investment specialists.
We continue to align our sustainability strategy with the
United Nations Sustainable Development Goals (SDGs)
which sets out a vision for ending poverty, hunger, inequality
and protecting the Earth’s natural resources. Through
our operations we aim to contribute to Africa’s economic
transformation with positive impact, social development
and strong environmental management.
Sustainably commercial considerations and alignment
with these goals will continue to shape decision making
internally, in alignment with our mission statement, which
equally sets out our growth ambitions while acknowledging
the responsibility we carry for the communities in which we
operate. With the ambition to become a market leader, the
Company has continued to recruit high quality personnel
and to train its staff to the highest standards.
A full sustainability report for 2018, detailing the various
initiatives carried out by the Company is currently in
production and is scheduled to be released shortly.
Sector Leadership
Last year’s annual report reflected upon the fact that the
integration period in the latter half of 2017 for two businesses
(Obtala and Woodbois) with operations and management
teams in 9 different countries had been relatively smooth.
Combining businesses with different histories, cultures
and working practices is a process rather than an event,
and it was of course necessary to continue to manage
this process closely throughout 2018. The common bond
of partnership which is reinforced by the shareholdings
of board members, has continued to strengthen, most
noticeably as team objectives have been achieved. As
the teams in different geographies have deepened their
respective relationships, committed leadership is fostering
a competitive spirit and a collaborative culture. The diverse
combination of skillsets within our leadership team is a
genuine differentiator for us in this industry, and supports
our ambition to become the leading producer and global
supplier of sustainable African hardwood and hardwood
products to the rest of the world.
Strategic Report
It only remains for me to thank the board and all of our
staff for demonstrating their care for each other and for the
Company as well as their incredible commitment in 2018; it
is a privilege to lead this team.
For and on behalf of the Board.
Paul Dolan
Chief Executive Officer
7 May 2019
5 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
Directors’ Report
The Directors submit their report on the affairs of the Group,
together with the financial statements and auditor’s report
for the year ended 31 December 2018.
PRINCIPAL ACTIVITIES AND
CORPORATE DEVELOPMENT
The principal activities of Woodbois Limited (“Woodbois”)
(formerly known as Obtala Limited) during 2018, together
with its subsidiaries (the “Group”) were forestry, timber
trading. These activities were
projects and
undertaken through both the Company and its subsidiaries.
The Company is quoted on AIM and is incorporated and
domiciled in Guernsey.
timber
BUSINESS REVIEW
A review of the Group’s performance and prospects is
included in the Chairman’s statement on pages 1 to 2 and
in the CEO’s Review on pages 3 to 5.
RESULTS AND DIVIDENDS
The consolidated loss for the year after taxation from
continuing operations attributable to shareholders was
$6.7m (2017: profit $4.9m).
The Directors do not recommend payment of an ordinary
dividend (2017: $Nil).
SHARE CAPITAL AND FUNDING
Full details of the authorised and issued share capital,
together with details of the movements in the Company’s
issued share capital during the year are shown in note 20.
The Company has one class of ordinary shares which carry
no right to fixed income. Each share carries the right to one
vote at general meetings of the Company.
The Company has unlimited authorised share capital divided
into ordinary shares of 1p each, of which 377,451,931 had
been issued as at the reporting date.
POST BALANCE SHEET EVENTS
Please refer to note 28 for details.
6 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
DIRECTORS
The Directors, who served during the year and to the date of this report were as follows:
Miles Pelham
Paul Dolan
Carnel Geddes
Kevin Milne
Jacob Hansen
Hadi Ghossein
Zahid Abbas
Martin Collins
Jessica Camus-Demarche
(appointed 11 January 2019)
(appointed 11 January 2019)
(appointed 11 January 2019)
(resigned 31 October 2018)
(resigned 11 January 2019)
(Non-executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Non-executive Director)
(Executive Director)
(Executive Director)
(Executive Director)
(Deputy Chairman)
(Non-executive Director)
DIRECTORS’ INDEMNITY INSURANCE
The Group has maintained insurance throughout the year for its Directors and Officers against the
consequences of actions brought against them in relation to their duties for the Group.
DIRECTORS’ INTERESTS
Directors’ interests in the shares of the Company, including family interests at 31 December were:
Argento 5%
Argento 5%
Ordinary shares
Ordinary shares
Preference shares*
Preference shares*
of 1p each
Shareholdings
Miles Pelham1
Paul Dolan2
Martin Collins
Kevin Milne3
Hadi Ghossein4
Jacob Hansen4
Zahid Abbas4
2018
54,358
1,001
-
-
-
-
-
2017
2017
1,001
-
-
-
-
-
2018
2018
of 1p each
2017
2017
16,128,571
14,728,571
-
199,793
5,213,883
5,213,883
5,213,883
3,178,571
122,252
-
-
-
*The Argento preference shares can be converted into
Woodbois Limited ordinary shares on a 1 Argento Preferred
Share for 2,057 Woodbois Limited Shares ratio.
1 Miles Pelham, Chairman of Woodbois Limited, holds
30,000,000 shares (7.95%) of which 29,056,530 shares
in the Company are held through HSBC Global Custody
Nominee (UK) Limited with the remainder being held
through other nominee companies.
2 Paul Dolan, Chief Executive Officer of Woodbois Limited,
held 16,128,571 shares (4.47%) of which 13,300,000 shares
in the Company are held through HSBC Client Holdings
Nominee (UK) Limited with the remainder being held
through other nominee companies as of 31st December
2018.
3 Kevin Milne, Non-executive Director of Woodbois Limited,
together with his wife hold 199,793 shares in the Company.
4 Hadi Ghossein, Jacob Hansen and Zahid Abbas were
issued 5,213,883 shares each on 4th July 2017 as part of
the WBI purchase agreement.
7 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
Options
On 5 July and 3 October 2017, the Board proposed and approved the issue of
long-dated, highly out-of-the-money share option awards to current and proposed
management.
Share option awards were made on the following structure within the Company’s
existing share scheme, the terms of which are detailed in Note 25:
Vesting Date
Award Amounts
June 2018
June 2019
June 2020
June 2021
6.375m options
6.375m options
6.375m options
6.375m options
The awards will be distributed to the Board as follows and the awardee must accept the option granted for it to be valid:
Miles Pelham
Chairman
1m per tranche (4m total)
Paul Dolan
CEO
1m per tranche (4m total)
Martin Collins*
Deputy Chairman (resigned *)
1m per tranche (4m total)
Jessica Camus-Demarche*
Non-executive Director
250k per tranche (1m total)
Carnel Geddes
CFO
250k per tranche (1m total)
Jacob Hansen
Chief Operating Officer
625k per tranche (2.5m total)
Hadi Ghossein
Deputy Chairman
625k per tranche (2.5m total)
Zahid Abbas
Head of Trading
625k per tranche (2.5m total)
*Martin Collins forfeited his share options upon resignation as a director on
31 October 2018. Jessica Camus-Demarche forfeited her share options upon
resignation as a director on 11 January 2019.
8 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
DIRECTORS’ REMUNERATION
The audited remuneration of the individual Directors who served in the year to 31 December 2018 was:
Salary & fees
Benefits
Deferred
acquisition
Share
based
payment
payments
Total
2018
$000
Total
2017
$000
Miles Pelham
Paul Dolan
Warren Deats
Kevin Milne
Martin Collins
Jessica Camus-Demarche
Hadi Ghossein
Zahid Abbas *
Jacob Hansen *
Carnel Geddes **
200
200
18
30
125
50
215
233
245
150
-
-
-
-
48
-
-
9
7
-
Total
1,466
64
-
-
-
-
-
-
-
430
430
-
860
57
57
-
-
110
40
103
103
103
40
613
257
257
18
30
283
90
318
775
785
190
467
467
201
30
104
65
-
-
-
56
3,003
1,390
It is the Company’s policy that executive Directors should have contracts with an indefinite term providing for
a maximum of 3-6 months’ notice. In the event of a take-over, the Directors’ contracts provide for compensa-
tion of 2 years salary as a bonus on the take-over in the event that the Executive loses his position.
*Zahid Abbas and Jacob Hansen were paid $21,442 of their fees through services companies.
**Carnel Geddes is paid in full through a services company.
Non-executive Directors are employed on letters of appointment which may be terminated on not less than 3
months’ notice. The current basic fees payable to Jessica Camus-Demarche and Kevin Milne were $50,000
and $30,000 per annum respectively.
9 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
PROFILES OF THE CURRENT DIRECTORS
MILES PELHAM, AGED 40,
NON-EXECUTIVE CHAIRMAN
JACOB HANSEN, AGED 51,
CHIEF OPERATING OFFICER
in Hong Kong, Miles enjoyed an
Based
illustrious
proprietary trading career in Asia with investment banks
Nomura, Barclays and Mizuho where he was Global
Head of Convertible Bonds, before founding Diginex, an
institutional-grade blockchain solutions business with
ambitions to shape the future of financial services and
technology in 2017. Miles has served as non-executive
Chairman since April 2016.
Based between Denmark and Africa, Jacob co-founded
Woodbois in 2005 and has spent more than 30 years in the
timber business. Jacob’s early career involved managing
sawmills in Sweden, Canada, and the UK before moving to
hardwood procurement in the Philippines. Subsequently,
Jacob held various international sales and procurement
roles for DLH Group based in France, the Middle East and
the Congo basin.
PAUL DOLAN, AGED 54,
CHIEF EXECUTIVE OFFICER
Based in the UK, Paul held senior management positions
within banking and hedge funds prior to joining Woodbois.
Paul has consistently built award winning, world-class
teams employing custom-built technology to manage
substantial pools of human and financial capital across
a diversified group of asset classes ranging from fixed
income and equity derivatives to soft commodities and
forestry.
ZAHID ABBAS, AGED 45,
HEAD OF TRADING
Based between Demark and Africa, Zahid co-founded
Woodbois in 2005. He started his career at DLH Group and
his roles have included procurement in Africa and Brazil
for European manufacturers as well as implementing the
Group’s environmental policy. Fluent in seven languages,
Zahid is well known and highly respected within the timber
industry globally.
HADI GHOSSEIN, AGED 58,
DEPUTY CHARIMAN
KEVIN MILNE, AGED 56,
NON-EXECUTIVE DIRECTOR
Based in Gabon, Hadi has 25 years of experience managing
forestry operations, including full ownership of a forestry
business. Hadi previously served as a diplomat, travelling
extensively across Africa, as well as owning various trading
and real estate companies. Hadi is fluent in Arabic, French,
Portuguese and English and holds Gabonese citizenship.
Kevin is a Chartered Fellow of the CISI, with over 30 years’
experience in Global Financial Services including leadership
and senior management positions in the financial sector
in the UK, Europe, Asia and Australia. Kevin has extensive
experience operating in highly regulated environments
including being a member of the Executive Committee of
the London Stock Exchange Group.
CARNEL GEDDES, AGED 40,
CHIEF FINANCIAL OFFICER
Based in South Africa, Carnel is a chartered accountant and
certified fraud examiner, dually qualified in the UK and South
Africa. During a 15-year career at BDO, the global audit, tax
and advisory group, Carnel served as director, forensic
services, of BDO London and partner of BDO Cape Town.
She has been a director and Board member of the largest
South African pomegranate farm company, Pomona, since
2008. She is also the Chair of POMASA, the Pomegranate
Growers Association of South Africa.
10 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
SUBSTANTIAL SHAREHOLDERS
The Company is aware that the following have, at 7 May 2019, an interest in three
percent or more of the issued ordinary share capital of the Company:
Name
Lombard Odier Asset Mgmt
Grandinex International Corp*
Spreadex Limited
HSBC Global Custody Nominee (UK) Limited**
Revilo Holding Limited
Richard Byworth
HSBC Client Holdings Nominee (UK) Limited**
Kenneth Michael Howlin
Number of 1p
ordinary shares
100,400,000
70,000,000
31,050,000
21,111,132
20,000,000
16,033,803
15,295,657
14,000,000
Percentage of the
issued share capital
22.34%
15.58%
6.91%
4.70%
4.45%
3.57%
3.40%
3.12%
* Francesco Scolaro is the controlling shareholder of
Grandinex International Corp. He holds a further 2,150,000
shares in the Company through nominee companies,
bringing his total interest to 72,150,000 (17.29%).
** Paul Dolan, Chief Executive Officer of Woodbois Limited,
holds 46,128,571 shares (9.91%) of which 13,300,000
shares in the Company are held through HSBC Client
Holdings Nominee (UK) Limited and 21,111,132 are held
through HSBC Global Custody Nominee (UK) Limited
with the remainder being held through other nominee
companies. Miles Pelham, Chairman, has a non-beneficial
interest in 30,000,000 of the shares in which Paul Dolan has
a beneficial interest, as Miles Pelham holds these shares
in trust for Paul Dolan under the terms of the Long-Term
Incentive Plan as announced on the 21st January 2019.
11 |
WOODBOIS LIMITED | Financial statements 2018 CORPORATE GOVERNANCE
The Board is committed to achieving the highest standards
of corporate governance, integrity and business ethics
and as Chairman, I am responsible for oversight of this.
The Board has adopted the Corporate Governance Code
produced by the Quoted Companies Alliance and has taken
steps to apply the principles of the QCA Code in so far as
they can be applied practically, given the size of the Group
and the nature of its operations. We set out below how the
Group complies with the QCA Code.
Directors’ report
1. Establish a strategy and business model which
promotes long-term value for shareholders
The strategy and business operations of the Group are set
out in the Strategic Report on pages 1 to 5 of the Financial
Statements for the year ended 31 December 2018.
Three distinct divisions were formed within the Group
during 2017: Trading, Forestry and Agriculture, and a clear
strategy had been devised for each. The Board continually
impresses upon the leadership teams of each division
that capital allocation must be both performance and
potential driven. Investment, either opex or capex, will
only be forthcoming for strategies that can demonstrate
significant return to shareholders over time. Running
loss-making business lines is not a sustainable business
strategy and simply not an option. We will leave no stone
unturned in our quest to support and fund businesses
where our combination of skills and experience give us
an edge. Conversely, if we cannot source the requisite
expertise to participate profitably in particular business
lines or geographies, we will not waste shareholder money
by trying. Consequently, during the year, the agriculture
business was put under an extensive review and by year
end it was decided to divest the farming operations and
focus exclusively on timber and timber related products.
2. Seek to understand and meet shareholder needs and
expectations
Shareholders play a key role in corporate governance, with
our Annual General Meeting for shareholders offering an
opportunity to exercise their decision-making power in
the Company. Shareholders are encouraged to attend
the AGM and any other General Meetings which are
convened throughout the year. Our Company Secretary,
William Place Secretaries Limited, is the contact point for
shareholder liaison and their contact details are set out in
these financial statements.
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term
success
The Board recognises that the long-term success of the
Group is reliant upon the efforts of the employees of the
Group and its contractors and suppliers. We continuously
12 |
WOODBOIS LIMITED | Financial statements 2018 engage with our stakeholders ranging from customers,
investors, international development banks, governments,
not for profit organisations and academia, to identify and
address issues of materiality and to gather feedback from
each of them. The Board ensures that all key relationships
are the responsibility of, or are closely supervised by, one of
the Directors.
to Africa’s economic
Woodbois is in a unique position to bring vital positive
impact
transformation, social
development and environmental management through
our operations. In this regard we have set out to align our
sustainability strategy with the United Nations Sustainable
Development Goals (SDGs) which provide a vision for
ending poverty, hunger, inequality and protecting the earth’s
natural resources.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The business of agriculture, forestry and timber trading
involves a high degree of risk, in addition to technical,
political and regulatory risk; the Group is exposed to
weather, nutrient and pest risks. Furthermore, the Group
is exposed to a number of financial risks which the Board
seeks to minimise by adopting a prudent approach which
is consistent with the corporate objectives of the Group.
Our approach to these risk factors is set out on pages 16
to 17 of the Financial Statements for the year ended 31
December 2018.
A comprehensive budgeting process is completed once a
year and is reviewed and approved by the Board. Budgets
are subsequently updated when there is a significant change
in any of the key assumptions to the budget. The Group’s
actual results, compared with the budget, are reported to
the Executive Board and the Chairman on a weekly basis.
Any material deviations from budget are followed up by a
member of the Executive Board.
in
The Group maintains appropriate
respect of actions taken against the Directors because
of their roles, as well as against material loss or claims
against the Group. The insured values and type of cover are
comprehensively reviewed on a periodic basis.
insurance cover
5. Maintain the Board as a well-functioning, balanced
team led by the Chair
The Board is responsible for establishing the strategic
direction of the Group, monitoring the Group’s trading
performance and appraising and executing development
and acquisition opportunities. The Company holds a
minimum of four Board meetings per year at which financial
Directors’ report
and other reports are considered and, where appropriate,
voted on. It also holds ad hoc meetings as required to
deal with specific issues. Board and Committee meetings
are convened at times convenient to eligible members to
ensure 100% attendance.
Details of the Directors’ beneficial interests in Ordinary
Shares and Argento Preference Shares are available on
our website and will be set out in the Directors’ Report.
The Directors comply with Rule 21 of the AIM Rules and
the Market Abuse Regulations 2014 relating to directors’
dealings and will take all reasonable steps to ensure
compliance by any employees of the Company to whom
regulations apply. The Company has, in addition, adopted
the Share Dealing Code for dealings in its Ordinary Shares
and Argento Preference Shares by directors and senior
employees.
As of the May 2019, the Board comprised of five Executive
Directors, one Independent Non-Executive Director, and one
Non-Independent Non-Executive Chairman, Miles Pelham.
The Non-Executive Chairman and Chief Executive Officer
have separate and clearly defined roles. The Chairman is
responsible for running the Board and the Chief Executive
Officer is responsible for the day to day management of the
Group and for delivering the key objectives of the business.
Executive Board members are considered full time
employees, while Non-Executives are required to commit
between 20 and 40 days per annum to their roles.
The Board is supported by the Audit, Remuneration and
Nominations Committee.
6. Ensure that between them, the Directors have the
necessary up-to-date experience, skills and capabilities
The Directors’ biographies can be found on page 10 and on
the Company’s website. The Board believes that their mix
of significant senior financial and commercial experience
gives a strong and appropriate background to formulate
and deliver long term shareholder value.
The Nominations Committee has been recently formed
to oversee the requirements for and recommendations
of any new Board appointments to ensure that it has the
necessary mix of skills and experience to support the
ongoing development of the Company. Any appointments
made will be on merit, against objective criteria and with
due regard for the benefits of diversity on the Board,
including gender. The Nomination Committee will also be
responsible for succession planning.
In addition to bringing considerable skills to the table,
appointments to the Board aim to provide a healthy balance
of both experience and gender.
13 |
WOODBOIS LIMITED | Financial statements 2018
7. Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
A clear organisation structure exists detailing lines of
authority and control responsibilities.
Directors’ report
Internal evaluation of the Board, the Committees and
individual Directors is seen as an important next step in
the development of the Board and one that is addressed.
An annual operational review of all members of the Board
is undertaken, in which their performance is evaluated,
and development needs identified and actions to be taken
agreed. Executive and non-executive Directors are subject
to re-election intervals as prescribed in the Company’s
Articles of Incorporation. At each Annual General Meeting
one-third of the Directors who are subject to retirement
by rotation shall retire from office. They can then offer
themselves for re-election.
8. Promote a corporate culture that is based on ethical
values and behaviours
The Company is committed to complying with all applicable
laws and best corporate governance practices, wherever
we operate. It is a core aspect of our mission to act with
integrity in all of our operations. The Board expects all
employees to comply with both the letter and spirit of the
law and governance codes.
The Company fosters a culture where our businesses
directly and indirectly promote a range of benefits for
the host community and host country on social and
environmental levels. One of the most fundamental and
positive social impacts associated with our Company’s
strategic growth objective is the skills development and
employment opportunity we bring to the region. The
Group also commits to providing a safe environment for
its staff and all other parties for which the Company has
responsibility. The Company is committed to protecting
the environment, contributing to sustainable management
of natural resources by strictly following guidelines set
out by host Governments and actively engaging with local
communities. The Company clearly articulates objectives
and has put in place an internal accountability mechanism
implement commitments, as well as
to effectively
ensuring that outcomes are measured and communicated
transparently.
9. Maintain governance structures and processes that are
fit for purpose and support good decision-making by the
Board
The following matters are reserved for the Board:
• Overall Group strategy
• Approval of major capital expenditure projects
• Approval of the annual and interim results
• Annual budgets
The Company is committed to high standards of corporate
governance. Both Management and the Board are dedicated
to implementing best practice as the Company grows.
The Board monitors the exposure to key business risks and
reviews the strategic direction of all trading subsidiaries,
their annual budgets, their performance in relation to those
budgets and their capital expenditure.
The agenda of the overall business is determined by
a Management Committee setting out agreed targets
that will maximise financial return. Opportunities and
improvements are identified and prioritised depending on
analysis carried out by Management. These projects are
supported by detailed financial planning.
Internal controls and systems have been introduced to
manage business objectives. As well as Board discussions,
regular meetings are held by Management to discuss
performance. Detailed information packs are prepared bi-
weekly to cover each major area of the business. Variances
from the budget and previous forecasts are analysed,
explained and acted on. Important capital investments are
regularly discussed both at a Board and at a Management
level where analysis of budget versus actual spend is
carried out.
Effective corporate governance remains key to the business
as it grows rapidly. The Company has a structure and
process in place to help identify areas in which corporate
governance can be improved. The Company is currently
implementing technology that will allow both the Board
and Management to oversee key performance indicators
across the business in real time.
Within the Trading division, the Company has mandated a
technology firm to create a custom-built tool to allow for
real-time tracking of all trades.
The Company is in discussion with several organisations
to implement innovative blockchain based technology
to manage both the traceability of the timber that the
Company produces as well as providing real-time oversight
of the business’s supply chain.
The Board has established an Audit Committee,
Remuneration Committee and Nominations Committee
with formally delegated duties and responsibilities.
Audit Committee:
The Board has established an Audit Committee with
formally delegated duties and responsibilities. During the
year the Audit Committee comprised of Non-executive
Directors Kevin Milne as the Chairman and Jessica Camus
(resigned from the Board in January 2019 and is yet to be
replaced) and met at least twice in the financial year.
14 |
WOODBOIS LIMITED | Financial statements 2018
Directors’ report
10. Communicate how the Company is governed and is
performing, by maintaining a dialogue with shareholders
and other relevant stakeholders
The Company encourages regular communications with
its various stakeholder groups and aims to ensure that
all communications concerning the Group’s activities are
clear, fair and accurate. Quarterly updates are announced
via RNS and are available on our website and users can
register to be alerted when announcements or details of
presentations and events are posted onto the website.
We aim to release our half and full year results to the market
well in advance of reporting deadlines and offer visibility
for shareholders by including segmental reporting. The
Company’s financial statements and Notices of General
Meetings of the Company can be found on the website.
The results of voting on all resolutions are announced
via RNS immediately following completion of General
Meetings and are available on the website. Any actions
that are required to be taken as a result of resolutions for
which votes against have been received from at least 20
per cent of independent shareholders will be detailed on the
RNS.
The terms of reference for the Audit Committee include
requirements:
• To monitor the integrity of the financial statements
of the Group and any formal announcements relating
to the Group’s financial performance, reviewing
significant financial reporting judgements contained
in them;
• To review the Group’s internal financial controls
together with the Group’s internal control and risk
management systems.
• To monitor and review
the external auditor’s
independence and objectivity and
to make
recommendations in relation to the appointment, re-
appointment and removal of the external auditor.
Remuneration Committee:
The Remuneration Committee meets as and when required.
During the year the Remuneration Committee comprised of
Non-executive Directors Kevin Milne as the Chairman and
Jessica Camus (resigned from the Board in January 2019
and is yet to be replaced).
The policy of the committee is to reward executive
Directors in line with the current remuneration of Directors
in comparable businesses in order to recruit, motivate and
retain high quality executives within a competitive market
place.
There are three main elements of the remuneration
packages for executive Directors and senior management:
• Basic annual salary (including directors’ fees) and
benefits;
• Discretionary annual bonus to be paid in accordance
with a bonus scheme developed by the Remuneration
Committee. This takes
individual
contribution, business performance and commercial
progress; and
• Equity Option
takes
into account the need to motivate and retain key
individuals.
incentive scheme which
into account
Nominations Committee:
The Nomination Committee which comprises of Paul
Dolan and Kevin Milne will meet at least once a year and
is responsible for the process of reviewing replacement
or additional Directors, the monitoring of compliance with
applicable laws, regulations and corporate governance
guidance and making appropriate recommendations to the
Board.
15 |
WOODBOIS LIMITED | Financial statements 2018
RISK MANAGEMENT
The business of agriculture, forestry and timber trading
involves a high degree of risk, in addition to technical,
political and regulatory risk; the Group is exposed to
weather, nutrient and pest risks. Furthermore, the Group
is exposed to a number of financial risks which the Board
seeks to minimise by adopting a prudent approach which is
consistent with the corporate objectives of the Group.
TECHNICAL RISK
The Company had sought expert analysis of soil and hydro
conditions to assess feasibility of planting agriculture
species within our farms. Plans had been adjusted as a
result of this analysis and the Company felt confident that
sufficient attention had been given to this issue. Since the
disposal of the agriculture division, any technical risks
attributed to the farms are no longer valid in the day to day
running of the Group.
The Company operates large scale machinery in the forms
of harvesting, sawmill and veneer equipment. All three
are key revenue contributors and as such, any significant
interruption to these assets could have an adverse effect
on our financial performance. A number of procedures
and programmes have been implemented to mitigate
these technical risks. Capital investment programmes
have replaced older equipment to improve both reliability
and overall efficiency of our machinery, also reducing
overall breakdown risk. The Group has actively sought
best-in-class hires that have significant experience with
the machinery that is currently being utilised, this has also
allowed the Group to adopt best practice. Additionally,
performance metrics for operating assets are monitored
by Management on a weekly basis to quickly identify and
resolve any issues.
POLITICAL AND REGULATORY RISK
The Board observes any political developments across the
geographies that Woodbois operates in closely. Gabon,
Ivory Coast and Mozambique had local and regional election
programs in 2018 that were successfully completed with
minor instances of unrest. On 7th January 2019, Gabon
witnessed a failed coup d’état by a small contingent of the
Gabonese Armed Forces. Besides brief internet outage,
there were no other disruptions to daily activities across
Gabon and the government reasserted control within
a few hours. The political environment across all the
countries that Woodbois operates in will remain an evolving
Directors’ report
discussion point for the Board, however the risk of political
unrest disruptive to the Group’s operations remains low.
The regulatory frameworks in place across the countries
that Woodbois operates in support the development of
forestry. However, the forestry sector in Mozambique
has been subject to frequent policy changes with regard
to exports and delays in issuing of annual licenses,
which has created uncertainty. Furthermore, there is no
assurance that future political and economic conditions
in these countries will not result in the Governments
changing their political attitude towards forestry. Any
changes in policy may result in changes in laws affecting
ownership of assets, land tenure, ability to export, taxation,
environmental protection and repatriation of income and
capital, which may adversely impact the Group’s ability to
carry out its activities.
OTHER RISKS
The Company carefully monitors the UK governments
progress in respect of its Brexit discussions with the
European Union. Given the location of the Company’s
trading operations and key assets it considers the key
areas of Brexit risk to focus on any potential changes to
the Company’s UK listing requirements and its ability to
raise funds on a UK listed market. The Board maintains
close dialogue with its advisors to ensure that any
proposed regulatory changes are identified and actioned
accordingly. The Board is in discussion with its investors
to identify any known issues with regards to the raising of
finance however the Board currently consider themselves
to be fully financed to meet their near-term objectives and
therefore consider themselves to have mitigated this Brexit
risk.
ENVIRONMENTAL RISK
The Group is exposed to climate, weather and the risk
of pests affecting its agriculture and forestry operations.
The availability of water for its irrigation as well as the
abundance of too much water also pose a risk to the
biological assets. These risks are managed by ongoing
assessment of local pests and the adoption of irrigation
methods. Adverse weather conditions may
impact
transport routes both within the Group’s countries of
operation and when exporting finished product.
FINANCIAL RISK
This comprises of a number of risks explained below.
16 |
WOODBOIS LIMITED | Financial statements 2018 Directors’ report
MARKET RISK
DONATIONS
Price risk
The Group is exposed to market risk in respect of its
equity investments as well as any potential market price
fluctuations that may affect the revenues of the agriculture,
forestry and timber trading operations. The Group mitigates
this risk by having established
investment appraisal
processes and asset monitoring procedures which are
subject to overall review by the Board.
LIQUIDITY RISK
No political donations were made during the year (2017: $
nil). Charitable donations amounting to $2,400 (2017: $ nil)
to a Danish cycling charity were made in the year.
POLICY ON PAYMENT OF
SUPPLIERS
The Group seeks to manage liquidity by regularly reviewing
cash levels and expenditure budgets to ensure that
sufficient liquidity is available to meet foreseeable needs
and to invest cash assets safely and profitably. The Group
had net cash balances of $1.910 million as at 31 December
2018 (2017: $2.089m).
It is Group and Company policy to agree and clearly
communicate the terms of payment as part of the
commercial arrangements negotiated with suppliers and
then to pay according to those terms based on the timely
receipt of an accurate invoice.
INTEREST RATE RISK
limited
The Group has
its exposure to the risk of
being negatively affected by variable interest rates by
predominantly borrowing using fixed interest instruments.
Refer to note 16 for a detailed assessment
CREDIT RISK
The Group’s principal financial asset is cash. The credit
risk associated with cash is considered to be limited.
The Group receives payment immediately upon delivery
of its agriculture and forestry products. The credit risk is
considered to be minimal as no credit terms are offered
and funds are received prior to the risk of ownership being
transferred to the purchaser. From time to time cash
is placed with certain institutions in support of trading
positions. The credit risk is considered minimal as the
Group only undertakes this with large reputable institutions.
EMPLOYMENT POLICIES
The Group supports employment of disabled people
wherever possible through recruitment, by retention of
those who become disabled and generally through training,
career development and promotion.
The Group is committed to keeping employees as fully-
informed as possible with regard to the Group’s performance
and prospects and seeks their views, wherever possible, on
matters which affect them as employees.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation. Company law requires the
Directors to prepare financial statements for each financial
year. Under that law the Directors have prepared the Group
financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
European Union (EU) as adopted by the European Union
(EU). Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
17 |
WOODBOIS LIMITED | Financial statements 2018 Group and Company and of the profit or loss of the Group
and Company for that period. In preparing the financial
statements, the directors are required to:
Group is in a sound financial position and will be able to
meet the Group’s foreseeable cash requirements and that
it remains appropriate to adopt the going concern basis in
preparing the financial statements.
Directors’ report
a. select suitable accounting policies and then apply
them consistently;
b. make judgements and accounting estimates that
are reasonable and prudent;
c. state whether they have been prepared
accordance with IFRS adopted by the EU; and
d. prepare the financial statements on the going
concern basis unless
inappropriate to
presume that the Group will continue in business.
in
is
it
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Companies (Guernsey) Law 2008.
The Directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial
information
included on the Woodbois Limited website. The Company
is compliant with AIM Rule 26 regarding the Woodbois
Limited website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
GOING CONCERN
An assessment of going concern is made by the Directors
at the date the Directors approve the annual financial
statements, taking into account the relevant facts and
circumstances at that date including:
• Review of profit and cashflow forecasts;
• Review of actual results against forecast;
• Timing of cashflows; and
• Financial or operational risks.
Having made reasonable enquiries, the Directors are
satisfied that the cash balance and resources and facilities
of the Group are sufficient to cover all known financial
liabilities for the next 12 months from the date of approval
of the financial statements. As at 31 December 2018 the
Group has a cash balance of circa $1.91 million (GBP1.5
million). After the year end, the Group successfully raised
an additional $6.27 million (GBP4.96 million) in equity and
has a sound capital expenditure plan over the 12 months.
As a result, the Directors have satisfied themselves that the
STATEMENT AS TO DISCLOSURE
OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval
of these financial statements have confirmed that, as far
as they are aware, there is no relevant audit information of
which the auditor is unaware. Each of the Directors have
confirmed that they have taken all the steps that they ought
to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish
that it has been communicated to the auditor.
AUDITOR
PKF Littlejohn LLP were appointed as auditors for 2018.
A resolution for their re-appointment will be put to the
members at the forthcoming Annual General Meeting.
On behalf of the Board
Paul Dolan
Chief Executive Officer
7 May 2019
18 |
WOODBOIS LIMITED | Financial statements 2018
Independent auditor’s report
Independent auditor’s report
Opinion
We have audited the financial statements of Woodbois
Limited (previously Obtala Limited) (the ‘parent company’)
and its subsidiaries (the ‘group’) for the year ended 31
December 2018 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 Companies (Guernsey) Law, 2008 and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s
affairs as at 31 December 2018 and of its profit for
the year then ended;
• have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
• have been properly 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.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of
accounting
in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial
identified material uncertainties
statements any
that may cast significant doubt about the Group’s
ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months
from the date when the financial statements are
authorised for issue.
Our application of materiality
Materiality is a key concept in the context of an audit. In
providing an opinion on whether the financial statements
provide a ‘true and fair’ view, we are providing an opinion on
whether the financial statements as a whole are free from
material misstatement whether due to fraud or error.
Materiality is an expression of the relative significance of a
particular matter in the context of the financial statements
as a whole. An item, either individually or in aggregate,
is considered material if omitting it or misstating it could
reasonably be expected to influence decisions that users
make on the basis of an entity’s financial statements.
Materiality has both quantitative and qualitative
characteristics. It depends on the size or nature of the
item or error judged in the particular circumstances of its
omission or misstatement.
We used 5% adjusted loss before tax, 1% turnover and 3%
adjusted gross assets as a basis for determining planning
materiality. We have determined our Overall Financial
Statement Materiality to be US$560,000. The adjusted loss
before tax is calculated by removing all items deemed to be
outside the normal course of business from profit before
tax, such as the contingent acquisition expense. Similarly,
the gross asset benchmark was calculated by removing the
fair value of the biological assets from gross assets, as this
is an area of significant judgement.
We consider turnover and adjusted profit before tax as
significant determinants of the Group’s performance used
by shareholders as the Group as Woodbois Limited is a
trading entity, generating significant revenues and its profit-
making ability is a significant point of interest for investors.
Equally, gross assets are a significant determinant of the
Group’s financial ability to continue as a going concern
used by shareholder’s, and by stripping out biological asset
we have ensured this benchmark does not skew the Overall
Financial Statement Materiality.
We set performance materiality at 50% of Overall Financial
Statement Materiality to reflect the audit risk associated
with it being our first year as Group auditor and the
19 |
WOODBOIS LIMITED | Financial statements 2018
risk associated with the judgemental and key areas of
management estimation within the financial statements.
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 caused us to revise
our materiality figure.
An overview of the scope of our audit
As part of 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. As in all of our audits, 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.
regional offices maintain
Our Group audit scope focused on the principal area of
operation, being Africa. The head office in South Africa
oversees the accounting function of the Group and its
subsidiaries, however,
the
accounting records for many of the components. The
components are based in Mauritius, Gabon, Mozambique,
Denmark and London therefore, given the nature of the
accounting function, our audit was conducted by local
component auditors within Gabon, Mozambique, Denmark
and Mauritius.
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 ten components were
considered to be significant due to identified risk and size.
These components have been subject to full scope audits by
component auditors and reviewed by us. Two components
were not subject to full scope audits and we performed
specific audit procedures due to the risk identified with the
sale of these entities in the year.
The audit was overseen and concluded in London where we
acted as Group auditor. As Group auditors we maintained
regular contact with the component auditors throughout all
stage of the audit and we were responsible for the scope
and direction of their work. We ensured that we challenged
their findings in order to form an opinion on the Group.
Independent auditor’s report
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. 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.
20 |
WOODBOIS LIMITED | Financial statements 2018
Independent auditor’s report
Key Audit Matter
How the scope of our audit responded
to the key audit matter
Revenue recognition (note 2 to the financial statements)
Revenue is a material figure within the financial statements
at US$13,557 and the Group has seen an increase in
revenues within the timber market since the acquisition of
WoodBois International ApS.
Particularly given the increase since the prior year and the
expected growth year on year, revenue is considered to be a
key balance within the financial statements and a key focus
of the shareholders.
We therefore consider revenue recognition a key audit matter.
Our work included:
• Gaining an understanding of the internal control
environment in operation for the significant revenue
streams and undertaking a walk-through to ensure
that the key controls within those systems have been
operating effectively;
• Substantive transactional testing of revenue
recognised in the financial
• statements across the different streams to ensure
accuracy of revenue;
• Reviewing the key contractual terms and terms of
business with customers to identify the material
performance obligations;
• Reviewing post-year end invoices, credit notes and
cash receipts to ensure completeness of income
recorded in the accounting period; and
• Consideration and assessment of the Group’s
application of IFRS 15.
Biological assets (note 13 to the financial statements)
The Group’s principal non-current assets relate to standing
timber within the forestry concessions. These biological
assets represent the most material balance in financial
statements at US$194.7m as at 31 December 2018.
Management assess at each reporting date the fair value of
the standing timber on a discounted cash flow basis which
involves significant Management judgement and estimates.
There is a risk that the biological assets are misstated due to
complex accounting treatment required by IAS 41 Biological
assets and a high degree of estimation and judgement
required by management in their valuation.
We therefore considered the valuation of biological assets
and the related disclosures to be a key audit matter.
Our work included:
• Reviewing the biological asset valuation models
prepared by management for accuracy and
challenging the estimates/assumptions made in the
inputs;
• Reviewing the discount rate used and challenging the
key inputs involved in arriving at the rate applied;
• Obtaining third party valuations and assessing their
competence and independence in order to place
reliance on management’s expert as well as ensuring
accuracy and reasonableness of the inputs used;
• Reviewing the sensitivity analysis of the key inputs,
together with a combination of sensitivities of such
inputs.
• Considering if there are any indications of
impairment; and
• Reviewing the disclosures in the financial statements
to ensure they are in accordance with IAS 41,
particularly the disclosures of key estimates and
assumptions which impact the fair values, and the
sensitivity analysis.
21 |
WOODBOIS LIMITED | Financial statements 2018 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 Group 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
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
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
• proper accounting records have not been kept by the
•
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 Directors’ responsibilities
statement, 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.
Independent auditor’s report
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
located on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
is
Use of our report
This report is made solely to the Group’s members, as a
body, in accordance with our engagement letter dated 12
December 2018. Our audit work has been undertaken so
that we might state to the Group’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 Group and the Group’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
8 May 2018
1 Westferry Circus
Canary Wharf
London E14 4HD
22 |
WOODBOIS LIMITED | Financial statements 2018 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND TOTAL
COMPREHENSIVE INCOME For the year ended 31 December 2018
Continuing operations
Turnover
Cost of sales
Gross profit
Other income
Gain / (loss) on fair value of Biological assets
Operating costs
Administrative expenses
Depreciation
Share based payment expense
Operating loss
Contingent acquisition expense
Gain on bargain purchase
Gain on disposal of Tanzanian business
Preference share liability expense
Foreign exchange gain
Finance income
Finance costs
(Loss) / Profit before taxation
Taxation
(Loss) / Profit for the year from continuing operations
Discontinued operations
Loss from discontinued operations, net of tax:
- Owners of the parent
- Non-controlling interests
(Loss) / Profit for the year
(Loss) / Profit attributable to:
- Owners of the parent
- Non-controlling interests
Other comprehensive income:
Gain on buy-out of minorities
Currency translation differences, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive loss for the year
Total comprehensive (loss) / income attributable to equity shareholders arises from:
- Continuing operations
- Discontinued operations
Earnings per share from continuing and discontinued operations attributable to the owners of the parent during the year (cents per share)
Basic earnings per share
From continuing operations (cents)
From discontinued operations (cents)
From (loss) / profit for the year
Diluted earnings per share
From continuing operations (cents)
From discontinued operations (cents)
From (loss) / profit for the year
10
(1.44)
(0.32)
(1.76)
10
(1.11)
(0.25)
(1.36)
The notes on pages 27 to 60 form an integral part of the consolidated financial statements.
Notes
2
2
5
13
25
3
24
24
10
20
6
7
8
2018
$000
13,448
(11,334)
2,114
160
1,611
(5,356)
(2,106)
(474)
(658)
(4,709)
(860)
-
176
-
263
-
(444)
(5,574)
(951)
(6,525)
2017
$000
7,892
(7,439)
453
131
(35,327)
(2,103)
(3,918)
(515)
(809)
(42,088)
(574)
37,525
-
(1,604)
261
20
(810)
(7,270)
12,173
4,903
10
(1,446)
(2,803)
(7,971)
2,100
9
26
26
26
10
(6,736)
(1,235)
(7,971)
14,373
(798)
5,604
6,839
(1,235)
5,604
8,285
(1,446)
6,839
9,861
(7,761)
2,100
-
(2,299)
(199)
7,562
(7,761)
(199)
9,640
(2,803)
7,562
1.72
(0.98)
0.74
1.17
(0.67)
0.50
23 |
WOODBOIS LIMITED | Financial statements 2018 WOODBOIS LIMITED | Fi nan c ial sta tem ents 201 8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
Attributable to the owners of the parent
AT 1 JANUARY 2017
Profit / (Loss) for the year
Other comprehensive income:
Currency translation differences
Total comprehensive income for the year
Transactions with owners:
Issue of preference shares
Issue of ordinary shares
Share based payment expense
Reserve transfer
AT 31 DECEMBER 2017
Profit / (Loss) for the year
Other comprehensive income:
Gain on minority buy-out (note 24)
Currency translation differences
Total comprehensive income for the year
Transactions with owners:
Issue of ordinary shares
Share options forfeited
Share based payment expense
Preference share dividend
AT 31 DECEMBER 2018
Share
Share
Merger
reserve
Preference
Foreign
share capital
exchange
Share based payment
capital
premium
(note 22)
reserve *
reserve (note 25)
$000
$000
$000
17,968
44,487
$000
4,240
-
-
-
-
-
-
-
-
260
4,372
-
-
-
-
-
-
-
-
14,318
-
-
-
$000
(1,619)
(2,299)
(2,299)
-
-
-
-
-
-
-
-
-
-
-
4,500
22,340
44,487
14,318
(3,918)
-
-
-
-
-
-
1,117
7,614
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(798)
(798)
-
-
-
-
5,617
29,954
44,487
14,318
(4,716)
Retained
earnings
$000
Non-
controlling
Total
$000
interests Total equity
$000
$000
20,582
87,056
28,369
115,425
9,861
9,861
(7,761)
2,100
-
(2,299)
-
9,861
7,562
(7,761)
-
-
-
1,398
14,318
4,632
979
-
-
-
-
-
31,841
114,547
(6,736)
(6,736)
20,608
(1,235)
14,373
14,373
(19,373)
(2,299)
(199)
14,318
4,632
979
-
135,155
(7,971)
(5,000)
(798)
-
7,637
-
679
-
(798)
6,839
8,731
-
712
(1,313)
(1,313)
38,844
129,516
-
(20,608)
(13,769)
-
-
-
-
8,731
-
712
(1,313)
129,516
$000
1,398
-
-
-
-
-
979
(1,398)
979
-
-
-
-
(679)
712
-
1,012
* Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income and accumulated in a separate reserve within equity.
The notes on pages 27 to 60 form an integral part of the consolidated financial statements.
24 |
Attributable to the owners of the parent
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
ASSETS
NON-CURRENT ASSETS
Assets under construction
Consideration receivable
Biological assets
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Trade and other receivables
Inventory
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Borrowings
Consideration payable
Contingent acquisition liability
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Deferred tax
Preference share liability
Other related party payables
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Merger reserve
Preference share capital
Foreign exchange reserve
Share based payment reserve
Retained earnings
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Non-controlling interests
TOTAL EQUITY
Notes
12
10
13
11
10/14
15
16
17
18
25
25
18
8
19
27
20
21
22
19
25
26
2018
$000
-
1,841
194,708
17,081
213,630
5,924
6,738
1,910
14,572
228,202
(5,751)
(5,024)
(5,000)
(1,269)
(17,044)
(5,086)
(62,655)
(13,901)
-
(81,642)
(98,686)
129,516
5,617
29,954
44,487
14,318
(4,716)
1,012
38,844
129,516
-
129,516
2017
$000
883
-
192,501
17,741
211,125
3,441
5,484
2,089
11,014
222,139
(4,017)
(6,472)
-
(574)
(11,063)
(742)
(61,728)
(12,588)
(863)
(75,921)
(86,984)
135,155
4,500
22,340
44,487
14,318
(3,918)
979
31,841
114,547
20,608
135,155
The notes on pages 27 to 60 form an integral part of the consolidated financial statements. The financial statements on
pages 23 to 60 were authorised for issue by the Board of Directors on 7 May 2019 and were signed on its behalf.
Miles Pelham
Chairman
25 |
WOODBOIS LIMITED | Financial statements 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
Notes
10
11
13
3
25
25
7
10
24
8
24
12
11
CASH GENERATED FROM OPERATIONS
(Loss) before taxation – continuing operations
Loss before taxation – discontinued operations
(loss) before taxation
Adjustment for:
Depreciation of property, plant and equipment
Fair value adjustment of biological asset
Inventory losses
Foreign exchange
Contingent acquisition expense
Non-cash consideration on acquisition of subsidiary
Preference share liability
Share based payments
Finance income
Finance costs
Gain on disposal of Tanzanian assets
Gain on bargain purchase
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Increase in inventory
CASH FLOWS FROM OPERATIONS
Finance costs paid
Finance income received
Income taxes paid
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash outflow from acquisition of subsidiary
Expenditure on assets under construction
Expenditure on property, plant and equipment
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from receipts loans and borrowings
Proceeds from ITF
Proceeds from the issue of ordinary shares
Proceeds from the issue of preference shares
CASH FLOWS FROM FINANCING ACTIVITIES
NET (DECREASE) / IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
Reconciliation of liabilities arising from financing actives
2018
$000
(5,574)
(1,446)
(7,020)
1,625
(1,611)
295
(263)
695
-
-
658
-
444
(176)
-
(1,852)
1,708
(1,764)
(7,261)
(257)
-
(52)
(7,570)
-
(420)
(2,825)
(3,245)
(1,771)
3,676
8,731
-
10,636
(179)
2,089
1,910
Borrowings
Ordinary shares
Preference shares
2017
$000
8,077
26,840
14,318
49,235
Cash flow
Non-cash changes
$000
2,033
8,731
-
10,764
$000
-
-
-
-
2018
$000
10,110
35,571
14,318
59,999
The notes on pages 27 to 60 form an integral part of the consolidated financial statements.
2017
$000
(7,270)
(2,803)
(10,073)
926
35,327
977
(2,553)
574
(3,683)
1,604
419
(20)
810
-
(37,525)
521
(9,857)
(2,884)
(25,437)
(154)
20
-
(25,571)
(3,000)
(883)
(4,040)
(7,923)
5,129
698
1,056
25,302
32,185
(1,309)
3,398
2,089
26 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
Notes to the financial
statements
1. ACCOUNTING POLICIES
GENERAL INFORMATION
Woodbois Limited (formerly known as Obtala Limited) (“the
Company” or “Woodbois”) is an AIM-quoted agriculture,
food processing and timber company limited by shares.
The Company is incorporated and domiciled in Guernsey,
the Channel Islands, with registered number 52184. Its
registered office is Dixcart House, Sir William Place, St
Peter Port, Guernsey, GY1 1GX.
The nature of the Group’s operations and its principal
activities are set out in the Directors’ Report.
The accounting policies set out herein, in pages 27 to 37,
have been consistently applied.
The principal activities and nature of the business are
included on pages 1 to 18.
BASIS OF ACCOUNTING
The consolidated financial statements have been prepared
in accordance with
International Financial Reporting
Standards as adopted by the European Union (“IFRS”),
IFRIC interpretations and those parts of the Companies
(Guernsey) Law 2008 applicable to Companies reporting
under IFRS. The financial statements have been prepared
under the historical cost convention except for biological
assets and certain financial assets and liabilities, which
have been measured at fair value.
FUNCTIONAL AND PRESENTATION
CURRENCY
These consolidated financial statements are presented in
United States Dollar (USD), which is the Group’s functional
currency. All amounts have been rounded to the nearest
thousand, unless otherwise indicated.
BASIS OF CONSOLIDATION
Subsidiaries are entities controlled by the Group. Control
is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and
has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if,
and only if, the Group has:
• Power over the investee (i.e. existing rights that give
it the current ability to direct the relevant activities of
the investee).
• Exposure, or rights, to variable returns from its
involvement with the investee
• The ability to use its power over the investee to
affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and
when the Group has less than a majority of the voting or
similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power
over an investee, including:
• The contractual arrangement with the other vote
holders of the investee.
• Rights arising from other contractual arrangements.
• The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated financial
statements from the date the Group gains control until
the date the Group ceases to control the subsidiary. The
acquisition method is used to account for the acquisition
of subsidiaries.
Any contingent consideration is recognised at fair value at
the acquisition date. Subsequent changes to the fair value
of the contingent consideration that is deemed to be an
asset or a liability is recognised in accordance with IFRS 9
either in profit or loss or as a change in other comprehensive
income. The unwinding of the discount on contingent
consideration liabilities is recognised as a finance charge
within profit or loss.
Acquisition related costs are expensed as incurred.
The Group measures goodwill at the acquisition date as the
excess of the fair value of the consideration transferred, plus
the recognised amount of any non-controlling interests, less
27 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
the recognised amount of the identifiable assets acquired
and liabilities assumed. If this consideration is lower than
the fair value of the net assets of the subsidiary acquired,
the difference is recognised in profit or loss as a bargain
purchase. Before recognizing a gain on a bargain purchase,
an assessment is made as to whether all assets acquired,
and liabilities assumed have been correctly identified. The
fair value measurement of the identifiable net assets and
cost of acquisition is also reviewed to evaluate whether
all available information at the acquisition date has been
considered.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting
policies used into line with those used by other members
of the Group. All significant intercompany transactions
and balances between group entities are eliminated on
consolidation.
When the Group ceases to consolidate a subsidiary as a
result of losing control and the Group retains an interest
in the subsidiary and the retained interest is an associate,
the Group measures the retained interest at fair value
at that date and the fair value is regarded as its cost on
initial recognition. The difference between the net assets
de-consolidated and the fair value of any retained interest
and any proceeds from disposing of a part interest in the
subsidiary is included in the determination of the gain or
loss on disposal. In addition, the Group accounts for all
amounts previously recognised in other comprehensive
income in relation to that associate on the same basis as
would be required if that subsidiary had directly disposed of
the related assets or liabilities.
Investments in associates and jointly controlled entities
are accounted for using the equity method of accounting
and are initially recognised at cost. The Group’s share of its
associates’ post-acquisition profits or losses is recognised
in profit or loss, and its share of post-acquisition movements
in reserves is recognised in other comprehensive income.
The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment.
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions.
Gains or losses on disposals to non-controlling interests
are recorded in equity.
As at 31 December 2018, the Group held equity interests in
the following undertakings:
Subsidiary
undertakings
Proportion held of
Country of
voting rights
incorporation
Nature of
business
Direct investments
Obtala Services Limited
100%
United Kingdom
Shared services
Montara Continental Limited
100%
Seychelles
Holding company
Obtala (Hong Kong) Limited
100%
Hong Kong
Financier
Indirect investments of Montara Continental Limited
Argento Limited
Montara Limited
100%
100%
Mauritius
Mauritius
Holding / treasury company – Forestry and Trading
Holding company - Agriculture
Indirect investments of Argento Limited
Argento Mozambique Limitada 100%
Mozambique
Holding company & Forestry
Madeiras SL Limitada
100%
Mozambique
Forestry
Jardim Zambezia Limitada
100%
Mozambique
Forestry
WoodBois International ApS
100%
WoodGroup ApS
Woodbois Gabon
SCI Yarim
100%
100%
100%
Denmark
Denmark
Gabon
Gabon
Timber Trading
Timber Trading
Forestry
Property holding
28 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
INTRA-GROUP TRANSACTIONS
All intra-group transactions, balances, and unrealised gains
on transactions between Group companies are eliminated
on consolidation. Subsidiaries’ accounting policies are
amended where necessary to ensure consistency with the
policies adopted by the Group. All financial statements are
made up to 31 December each year.
CHANGES IN ACCOUNTING POLICIES
a) New and amended standards adopted by the Group
The following IFRS or IFRIC interpretations were effective
for the first time for the financial year beginning 1 January
2018. Their adoption has not had any material impact
on the disclosures or on the amounts reported in these
financial statements:
Standards /interpretations
Application
Subsidiary
undertakings
Proportion held of
Country of
voting rights
incorporation
Nature of
business
Direct investments
Obtala Services Limited
100%
United Kingdom
Shared services
Montara Continental Limited
100%
Seychelles
Holding company
Obtala (Hong Kong) Limited
100%
Hong Kong
Financier
Indirect investments of Montara Continental Limited
Argento Limited
Montara Limited
100%
100%
Mauritius
Mauritius
Holding / treasury company – Forestry and Trading
Holding company - Agriculture
Indirect investments of Argento Limited
Argento Mozambique Limitada 100%
Mozambique
Holding company & Forestry
Madeiras SL Limitada
100%
Mozambique
Forestry
Jardim Zambezia Limitada
100%
Mozambique
Forestry
WoodBois International ApS
100%
WoodGroup ApS
Woodbois Gabon
SCI Yarim
100%
100%
100%
Denmark
Denmark
Gabon
Gabon
Timber Trading
Timber Trading
Forestry
Property holding
IFRS 15
Revenue from contracts with customers
Annual Improvements
2014 – 2016 Cycle (IFRS 1 & IAS 28)
IFRIC 22 – interpretation 22
Foreign Currency Transactions and Advance Consideration
IFRS 9
Financial Instruments
Amendments to IFRS 2
Measurement of share-based payment transactions
IFRS 9 has been adopted without restating comparative information. The reclassifications and adjustments arising
from adoption of IFRS 9 are not reflected in the balance sheet as at 31 December 2017 but are recognised in the
opening balance sheet on 1 January 2018. There were no adjustments resulting the adoption.
b) New and amended standards not yet adopted by the Group
Standards /interpretations
Application
IFRS 16
IFRIC 23
Leases: Effective 1 January 2019
Uncertainty over income tax treatments: Effective 1 January 2019
IFRS 9 amendments
Prepayment Features with Negative Compensation: Effective 1 January 2019
IFRS 28 amendments
Long-term Interests in Associates and Joint Ventures: Effective 1 January 2019
Annual Improvements
2015 – 2017 Cycle: Effective 1 January 2019
IFRS 19 amendments
Plan Amendment, Curtailment or Settlement: Effective 1 January 2019
IFRS 3 amendments
Business Combinations: Effective 1 January 2020*
IAS 1 & IAS 8 amendments
Definition of Material: Effective 1 January 2020*
*Subject to EU endorsement
There are no IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material
impact on the Company or Group.
29 |
WOODBOIS LIMITED | Financial statements 2018 SEGMENTAL REPORTING
The Group currently has the following revenue streams:
Notes to the financial statements
The reportable segments are identified by the Executive
Board (which is considered to be the Chief Operating
Decision Maker) by the way management has organised the
Group. The Group operates within four separate operational
divisions comprising agriculture, forestry, trading and head
office.
The Directors review the performance of the Group based
on total revenues and costs, for these four divisions and not
by any other segmental reporting.
REVENUE RECOGNITION
IFRS 15 was adopted from 1 January 2018. There were no
material changes to the revenue arising from the adoption.
Under IFRS 15, Revenue from Contracts with Customers,
five key points to recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance
obligations in the contract; and
Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation.
The Group recognises revenue when the amount of revenue
can be reliably measured, it is probable that future economic
benefits will flow to the entity, and specific criteria have been
met for each of the Group’s activities, as described below.
The Group bases its estimates on historical results,
taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement. Where
the Group makes sales relating to a future financial period,
these are deferred and recognised under ‘deferred revenue’
on the Statement of Financial Position.
• Timber and veneer sales are recognised following the
five-step approach outlined above. The performance
obligation set out in step two is when the risk and
reward of the goods is transferred to the customer,
and is transferred at the earlier of:
» when goods are sold subject to a letter of credit, on
the date that the buyer’s bank approves the transfer;
or
» when goods are prepaid in full by the buyer, based
on the incoterm specified in the contract/invoice; or
» when the bill of lading is exchanged with the buyer.
•
Interest income is accrued on a time basis, by
reference to the principal outstanding and at the
effective interest rate applicable.
• Dividend income from investments is recognised
when the shareholders’ rights to receive payment
have been established (provided that it is probable
that the economic benefits will flow to the Group and
the amount of revenue can be measured reliably).
FOREIGN CURRENCIES
(“the
functional currency”). The
The presentation currency of the Group is US Dollars (USD).
Items included in the Group’s financial statements of each
of the Group’s entities are measured using the currency
of the primary economic environment in which the entity
operates
functional
currency of the majority of the Group’s subsidiaries is
USD as this is the currency in which they trade on a local
basis. The consolidated financial statements are presented
in USD (“the presentation currency”) because this is the
currency better understood by the principal users of the
financial statements.
Foreign currency translation rates (against US$) for the significant currencies used by the Group were:
At 31 December
Annual average
At 31 December
Annual average
Great British Pound
Mozambique Metical
Tanzanian Shilling
Danish Krone
2018
1.27
60.67
2,294
6.52
West African CFA franc
573.02
for 2018
1.33
59.87
2,271
6.32
556.55
2017
0.74
58.37
2,229
6.21
for 2017
0.77
63.18
2,208
6.29*
547.53
554.77*
*Only applicable for the period 1 July 2017 – 31 December 2017
30 |
WOODBOIS LIMITED | Financial statements 2018 Transactions in foreign currencies are initially recorded
at the rates of exchange prevailing on the dates of the
transaction. At each reporting date, monetary assets and
liabilities that are denominated in foreign currency are
translated into the functional currency at the rate prevailing
on that date. Non-monetary assets and liabilities are
measured at fair value and are translated into the functional
currency at the rate prevailing on the reporting date. Gains
and losses arising on retranslation are included in profit
or loss for the year, except for exchange differences on
non-monetary assets and liabilities, which are recognised
directly in other comprehensive income when the changes
in fair value are recognised directly in other comprehensive
income.
On consolidation, the assets and liabilities of the Group’s
overseas operations are translated
into the Group’s
presentational currency at exchange rates prevailing at the
reporting date. Income and expense items are translated at
the average exchange rates for the year unless exchange
rates have fluctuated significantly during the year, in which
case the exchange rate at the date of the transaction is
used. Exchange differences arising, if any, are taken to
other comprehensive income and the Group’s translation
reserve. Such translation differences are recognised as
income or as expenses in the year in which the operation
is disposed of.
DISCONTINUED OPERATIONS
A discontinued operation is a component of the Group’s
business, the operations and cash flows of which can be
clearly distinguished from the rest of the Group and which:
• represents a separate major line of business or
•
•
geographic area of operations;
is part of a single co-ordinated plan to dispose of a
separate major line of business or geographic area
of operations; or
is a subsidiary acquired exclusively with a view to re-
sale.
Classification as a discontinued operation occurs at the
earlier of disposal or when the operation meets the criteria
to be classified as held-for-sale.
When an operation is classified as a discontinued operation,
the comparative statement of profit or loss and OCI is re-
presented as if the operation had been discontinued from
the start of the comparative year.
Notes to the financial statements
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical
cost less subsequent accumulated depreciation and any
accumulated impairment losses. If significant parts of
property, plant and equipment have different useful lives,
then they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant
and equipment is recognised in profit or loss.
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the
expenditure will flow to the Group.
Leased assets are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably certain
that the group will obtain ownership by the end of the lease
term.
Land has an indefinite useful life and therefore is not
depreciated.
Depreciation is calculated on a straight-line basis at rates
calculated to write each asset down to its estimated
residual value, which in most cases is assumed to be zero,
evenly over its expected useful life, as follows:
Buildings
Motor Vehicles
Fixtures and IT equipment
Plant and equipment
over 50 years
over 3 years
over 3 years
over 2-5 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
31 |
WOODBOIS LIMITED | Financial statements 2018 IMPAIRMENT OF PROPERTY, PLANT AND
EQUIPMENT
At each statement of financial position date, the Group
reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which
the asset belongs.
Where there has been a change in economic conditions that
indicate a possible impairment in a cash-generating unit,
the recoverability of the net book value relating to that field
is assessed by comparison with the estimated discounted
future cash flows based on management’s expectations of
future costs.
The recoverable amount is the higher of fair value less
costs to sell 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 (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where conditions giving rise to impairment subsequently
reverse, the effect of the impairment charge is also reversed
as a credit to the income statement, net of any depreciation
that would have been charged since the impairment.
BIOLOGICAL ASSETS
A biological asset is defined as a living animal or plant. The
Group’s biological assets comprise standing timber. The fair
value of the standing timber is determined using models
based on expected yields, market prices for the saleable
produce, after allowing for harvesting costs and other
costs yet to be incurred in getting the produce to maturity.
Any changes in fair value are recognised in the income
statement in the year in which they arise.
Forestry
IAS 41 requires biological assets to be measured at fair
value less costs to sell. The fair value of standing timber is
estimated based on the present value of the net future cash
flows from the asset, discounted at a current market-based
Notes to the financial statements
rate. In determining the present value of expected net cash
flows, the Group includes the net cash flows that market
participants would expect the asset to generate in its
most relevant market. Increases or decreases in value are
recognised in profit or loss. When the fair value estimates
are determined to be clearly unreliable due to insufficient
information being available to the Directors, the biological
asset is held at cost less any accumulated depreciation
and any accumulated losses.
All expenses incurred in maintaining and protecting the
assets are recognised in profit or loss. All costs incurred in
acquiring additional planted areas are capitalised.
Refer to “Critical Accounting Estimates and Areas of
Judgement” for further disclosures on the forestry
biological assets.
Agriculture
Crops which are planted from seed to undergoing the
process of transformation until they become mature
and productive are also stated at fair value less costs to
sell. Management review the crops on an ongoing basis
and should these be deemed to be unsuitable for further
cultivation, full provision for impairment loss is made at
that time.
A gain or loss arising on initial recognition of biological
assets at fair value less costs to sell and from a change in
fair value less costs to sell is recognised as profit or loss in
the period in which it arises.
Agricultural produce harvested from the Group’s biological
assets is measured at its fair value less costs to sell.
The fair value of agricultural produce is based on market
prices of agricultural produce of similar size and weight or
alternative estimates of fair value at the point of harvest.
Where fair value of a biological asset cannot be measured
reliably, the biological asset shall be measured at its cost
less any accumulated depreciation and any accumulated
impairment losses.
Costs incurred prior to the demonstration of commercial
feasibility of forestry and agriculture in a particular area are
written-off to profit and loss as incurred.
FINANCIAL INSTRUMENTS
(a) Classification
The Group adopted IFRS 9 on 1 January 2018 and applied
the standard prospectively. It noted no material change
upon initial adoption.
The Group classifies its financial assets in the following
measurement categories:
•
those to be measured subsequently at fair value
32 |
WOODBOIS LIMITED | Financial statements 2018 (either through OCI or through profit or loss); and
those to be measured at amortised cost.
•
• The classification depends on the Group’s business
model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be
recorded either in profit or loss or in OCI. For investments
in equity instruments that are not held for trading, this will
depend on whether the Group has made an irrevocable
election at the time of initial recognition to account for the
equity investment at fair value through other comprehensive
income (FVOCI). See Note 16 for further details.
(b) Recognition
Purchases and sales of financial assets are recognised on
trade date (that is, the date on which the Group commits
to purchase or sell the asset). Financial assets are
derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred
and the Group has transferred substantially all the risks and
rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset
at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that
are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at FVPL
are expensed in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of
contractual cash flows, where those cash flows represent
solely payments of principal and interest, are measured
at amortised cost. Interest income from these financial
assets is included in finance income using the effective
interest rate method.
Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in other gains/
(losses) together with foreign exchange gains and losses.
Impairment losses are presented as a separate line item in
the statement of profit or loss.
(d) Impairment
From 1 January 2018, the Group assesses, on a forward-
looking basis, the expected credit
losses associated
with its debt instruments carried at amortised cost. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk.
Notes to the financial statements
For trade receivables, the Group applies the simplified
approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of
the receivables.
LEASES
FINANCE LEASES
Leases that transfer substantially all of the risks and
rewards of ownership of the underlying asset to the Group
are classified as finance leases.
Finance leases where the Group is the lessee
Assets acquired in terms of finance leases are measured
at the lower of fair value and the present value of the
minimum lease payments at inception of the lease. The
capital element of future obligations under the leases are
included as a liability in the statement of financial position.
Lease payments are allocated using the effective interest
method to determine the lease finance cost, which is
recognised as a finance cost over the lease period, and the
capital repayment, which reduces the liability to the lessor
subsequent to initial recognition. The assets under finance
leases are treated in the same manner as owned assets.
OPERATING LEASES
Leases where the lessor retains the risk and rewards
of ownership of the underlying assets are classified as
operating leases. In the instance where the Group is the
lessee, no asset is recognised when a lease is classified as
an operating lease. Payments made under operating leases
are recognised in profit or loss on a straight-line basis over
the period of the lease.
INVENTORIES
Inventories are stated at the lower of cost-of-production or
estimated net realisable value. Cost of production includes
direct labour, all costs of purchase, conversion and other
costs incurred in bringing the inventories to their present
location and condition. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated selling expenses. The cost of inventories is
based on the weighted average cost method.
The cost of inventory of agricultural produce is obtained
from fair value less cost to sell at the point of harvest.
Product that has been containerised and shipped or remains
in storage at the port of departure, and where ownership
has not yet passed to the customer, is accounted for as
stock in transit and stated at the lower of cost of production
or estimated net realisable value.
33 |
WOODBOIS LIMITED | Financial statements 2018
Notes to the financial statements
EMPLOYEE BENEFITS
SHORT-TERM EMPLOYEE BENEFITS
In accordance with the Group’s environment policy
and applicable legal requirements, a provision for site
restoration in respect of contaminated land, and the related
expense, is recognised when the land is contaminated.
The costs of all short-term employee benefits are
recognised in the period in which the employee renders the
related service.
TAXATION
The accrual/liability for employee entitlements to wages,
salaries and annual leave represent the amount which
the Group has a present obligation to pay as a result of
employees’ services provided up to the reporting date. The
accruals have been calculated at undiscounted amounts
based on expected wage and salary rates.
SHARE-BASED PAYMENT ARRANGEMENTS
The grant-date fair value of equity-settled share-based
payment arrangements granted to employees is generally
recognised as an expense, with a corresponding increase in
equity. The amount recognised as an expense is adjusted to
reflect the number of awards for which the related service
and non-market performance conditions are expected to be
met, such that the amount ultimately recognised is based
on the number of awards that meet the related service and
non-market performance conditions at the vesting date. For
share-based payment awards with non-vesting conditions,
the grant-date fair value of the share-based payment is
measured to reflect such conditions and there is no true-
up for differences between expected and actual outcomes.
The fair value of the options granted is measured using
a modified Black Scholes valuation model for options,
taking into account the terms and conditions under which
the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share
options that vest.
PROVISIONS
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow
of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the
risks specific to the liability. The unwinding of discount is
recognised as a finance cost.
A provision for onerous contracts is recognised when
the expected benefits to be derived by the Group from a
contract are lower than the unavoidable cost of meeting its
obligations under the contract. The provision is measured
at the present value of the lower of the expected cost of
terminating the contract and the expected net cost of
continuing with that contract.
Income tax expense comprises current and deferred tax.
It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised
directly in equity or in OCI.
CURRENT TAX
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected
to be paid or received that reflects uncertainty related to
income taxes, if any. It is measured using tax rates enacted
or substantively enacted at the reporting date. Current tax
also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
DEFERRED TAX
is recognised
Deferred tax
in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes.
Deferred tax is not recognised for:
•
•
•
initial recognition
temporary differences on the
of assets or liabilities in a transaction that is not
a business combination and that affects neither
accounting nor taxable profit or loss;
temporary differences related to investments in
subsidiaries, associates and joint arrangements to
the extent that the Group is able to control the timing
of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable
future; and
taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences
to the extent that it is probable that future taxable profits
will be available against which they can be used. Future
taxable profits are determined based on the reversal of
relevant taxable temporary differences. If the amount of
taxable temporary differences is insufficient to recognise
a deferred tax asset in full, then future taxable profits,
34 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
adjusted for reversals of existing temporary differences,
are considered, based on the business plans for individual
subsidiaries in the Group. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability
of future taxable profits improves.
(ii)
Diluted earnings per share adjusts the figures
used in determining basic earnings per share to take into
account the after tax effects of interest and other financing
costs associated with dilutive potential ordinary shares
and the weighted average number of ordinary shares that
would have been outstanding assuming the conversion of
all diluted potential ordinary shares.
Unrecognised deferred tax assets are reassessed at each
reporting date and recognised to the extent that it has
become probable that future taxable profits will be available
against which they can be used.
Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the
reporting date.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner in which
the Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities. For
this purpose, the carrying amount of investment property
measured at fair value is presumed to be recovered through
sale, and the Group has not rebutted this presumption.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
BORROWINGS
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the
borrowings using the effective interest method. Fees paid
on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the
period of the facility to which it relates.
Borrowings are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
EARNINGS PER SHARE
(i)
Basic earnings per share is calculated by dividing
the profit attributable to the owners of the Company by the
weighted average number of ordinary shares outstanding
during the financial year.
GOING CONCERN
The financial statements have been prepared assuming
that the Group will continue as a going concern. Under this
assumption, an entity is ordinarily viewed as continuing
in business for the foreseeable future with neither the
intention nor necessity of liquidation, ceasing trading or
seeking protection from creditors for at least 12 months
from the date of the signing of the financial statements.
The assessment has been made on the Groups prospects,
which have been included in the financial budget, and from
managing working capital, in particular for 12 months
from the date of approval of the financial statements.
Consideration has been given to the current stage of the
Group’s life cycle, its losses and cash outflows, the expected
timing of revenues and the ability of the Directors to raise
further funds either through debt or equity.
Based on these assumptions, the Directors have a
reasonable expectation that the Group has adequate
resources to continue in operational existence for the
foreseeable future and therefore have adopted the going
concern basis of preparation in the financial statements.
CRITICAL ACCOUNTING ESTIMATES &
AREAS OF JUDGEMENT
The preparation of the consolidated financial statements
requires management to make estimates and judgements
and form assumptions that affect the reported amounts
of the assets, liabilities, revenue and costs during the
periods presented therein, and the disclosure of contingent
liabilities at the date of the financial statements. Estimates
and judgements are continually evaluated and based on
management’s historical experience and other factors,
including future expectations and events that are believed
to be reasonable. The estimates and assumptions that
have a significant risk of causing a material adjustment to
the financial results of the Group in future reporting periods
are discussed below.
The following critical accounting estimates and areas of
judgement are sufficiently disclosed in each of the separate
notes to the financial statements:
35 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
• Residual values and useful lives of property, plant and
equipment: refer to note 11
• Fair value of biological assets: refer to note 13
• Provision for doubtful debts. Refer to note 16
• Preference share liability: refer to note 19
• Fair value of assets on business combination: refer
to note 24
• Share based payments: refer to note 25
36 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
2. SEGMENTAL REPORTING
Segmental information is presented on the basis of the
information provided to the Chief Operating Decision Maker
(“CODM”), which is the Executive Board.
The Group is currently focused on forestry and timber
trading. These are the Group’s primary reporting segments,
operating in Gabon, Mozambique, Denmark and head office
operating from Mauritius and UK.
As on 31 December 2018 sales made to one customer
during the year accounted for 12% of the total turnover.
Sales made to a second customer during the year
accounted for 11% of the total turnover.
As at 31 December 2018, the Group sold its interest in
agriculture.
The Group’s Chief Executive Officer reviews the internal
management reports of each division at least quarterly.
There are varying levels of integration between the Forestry
and Trading segments. This integration includes transfers
of sawn timber and veneer, respectively. Inter-segment
pricing is determined on an arm’s length basis.
37 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
Information relating to each reportable segment is set out below. Segment profit / (loss) before tax is used to measure
performance because management believes that this information is the most relevant in evaluating the results of the respective
segments relative to other entities that operate in the same industry. All amounts are disclosed after taking into account any
intra-segment and intra-group eliminations:
INCOME STATEMENT
Turnover
Cost of Sales
Gross profit / (loss)
Other income
Operating costs
Administrative expenses
Depreciation
Share based payment expense
Foreign exchange (loss) / gain
Contingent acquisition expense
Gain on disposal of Tanzanian business
Gain on fair value of Biological assets
Segment operating loss
Finance income
Finance costs
Loss before taxation
Taxation
Loss after taxation
NET ASSETS
Assets:
Liabilities:
Deferred tax (liability) / asset
Net assets
OTHER SEGMENT ITEMS
Capital expenditure:
Biological assets
Property, plant and equipment
Forestry
Trading
Unallocated head office
$000
$000
5,579
(4,397)
1,182
5
(3,443)
-
(408)
(422)
(38)
-
-
1,611
(1,512)
-
-
(1,512)
(585)
(2,097)
159,944
(16,606)
(44,342)
98,996
194,708
16,958
7,869
(6,937)
932
-
(1,330)
(290)
(66)
(151)
(411)
(860)
-
-
(2,177)
-
(201)
(2,378)
(366)
(2,744)
56,572
(28,532)
(18,313)
9,727
-
113
costs
$000
-
-
-
155
(717)
(1,816)
-
(85)
712
-
176
-
(1,575)
-
(243)
(1,449)
-
(1,449)
11,686
9,107
-
20,793
-
10
Total
$000
13,448
(11,334)
2,114
160
(5,490)
(2,106)
(474)
(658)
263
(860)
176
1,611
(5,264)
-
(444)
(5,708)
(951)
(6,659)
228,202
(36,031)
(62,655)
129,516
194,708
17,081
38 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
The following table shows the segment analysis of the Group’s loss before tax for the year and net assets at 31 December 2017.
All amounts are disclosed after taking into account any intra-segment and intra-group eliminations:
Forestry
Trading
Unallocated head
Total
INCOME STATEMENT
Turnover
Cost of Sales
Gross profit
Other income
Operating costs
Administrative expenses
Depreciation
Share based payment expense
Forex
Gain on bargain purchase
Contingent acquisition expense
Preference share liability expense
Loss on fair value of Biological assets
Segment operating (loss)/profit
Finance income
Finance costs
Profit / (loss) before taxation
Taxation
Profit after taxation
NET ASSETS
Assets:
Liabilities:
Deferred tax (liability) / asset
Net assets
OTHER SEGMENT ITEMS
Capital expenditure
Biological assets
Property, plant and equipment
$000
2,884
(2,532)
352
-
(1,627)
(1,053)
(451)
(302)
487
-
-
-
(35,327)
(37,921)
20
(4)
(37,905)
12,032
(25,873)
210,850
(2,469)
(61,859)
146,522
192,501
14,874
$000
5,008
(4,907)
101
24
(442)
(333)
(64)
(110)
-
-
(574)
-
-
(1,398)
-
(150)
(1,548)
141
(1,407)
6,008
(8,618)
131
(2,479)
-
185
office costs
$000
$000
-
-
-
107
(34)
(2,532)
-
(397)
(226)
37,525
-
(1,604)
-
32,839
-
(656)
32,183
-
32,183
5,281
(14,169)
-
(8,888)
-
138
7,892
(7,439)
453
131
(2,103)
(3,918)
(515)
(809)
261
37,525
(574)
(1,604)
(35,327)
(6,480)
20
(810)
(7,270)
12,173
4,903
222,139
(25,256)
(61,728)
135,155
192,501
17,741
39 |
WOODBOIS LIMITED | Financial statements 2018 3. OPERATING LOSS
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment
Staff costs (see note 4)
Share based payment reserve expense (see note 26)
Operating lease costs
(Profit) / loss on fair value of Biological assets (see note 13)
Inventory losses
Auditor’s remuneration:
Audit services
– fees payable to the Company auditor for the audit of the consolidated accounts
Fees payable to associates of the Company auditor for other services
– auditing the accounts of subsidiaries pursuant to legislation
4. EMPLOYEE INFORMATION
The average monthly number of persons (including Directors) employed by the Group
during the year was:
Administration and management
Agriculture
Forestry
Trading
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Directors’ remuneration included in the aggregate remuneration above comprised:
Emoluments for qualifying services
2018
$000
1,625
4,171
712
73
(1,611)
295
50
65
2018
Number
4
247
192
6
449
2018
$000
4,236
39
4,275
2018
$000
1,530
Notes to the financial statements
2017
$000
926
3,838
979
187
35,327
977
18
76
2017
Number
4
346
233
6
589
2017
$000
3,833
-
3,833
2017
$000
893
Included above are emoluments of $246,000 (2017: $201,000) in respect of the highest paid Director. Full details of directors’
remuneration are included in the directors’ report.
No pension contributions were made on behalf of the Directors and other staff members.
5. OTHER INCOME
Bad debt recovered
Other
2018
$000
154
6
160
2017
$000
131
-
131
40 |
WOODBOIS LIMITED | Financial statements 2018 6. FINANCE INCOME
Bank interest
7. FINANCE COSTS
Bank interest
ITF interest
Interest accrued on preference shares
8. TAXATION
CURRENT TAX:
Corporation tax on profit for the year
DEFERRED TAX:
Origination and reversal of temporary differences
TAX ON PROFIT / (LOSS) ON ORDINARY ACTIVITIES
Group
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the average rate of corporation tax of 22% (2017: 24.5%)
Effects of:
Losses not recognised for deferred tax
Losses recognised for deferred tax
Gain on Bargain purchase
Loss allowance
Gain on disposal of Tanzanian business
Preference share liability expense
Share based payment expense
Effect of movement in fair value of biological assets
GROUP TAX CREDIT FOR THE YEAR
2018
$000
-
2018
$000
202
242
-
444
2018
$000
(79)
(872)
(951)
$000
(6,872)
(1,512)
853
99
-
18
(39)
-
157
(527)
(951)
Notes to the financial statements
2017
$000
20
2017
$000
106
48
656
810
2017
$000
-
12,173
12,173
$000
(9,927)
(2,432)
11,003
131
(9,194)
-
393
240
12,032
12,173
The prevailing tax rates of the operations of the Group range between 3% and 32%. Therefore, a rate of 22% has been used as
it best represents the weighted average tax rate experienced by the Group. The Group has estimated losses of $71.2 million
(2017: $45.5 million) available for carry forward against future taxable profits. No deferred tax assets have been recognised in
respect of losses due to the unpredictability of future taxable profit. All unused tax losses may be carried forward indefinitely.
41 |
WOODBOIS LIMITED | Financial statements 2018
The movement in the year in the Group’s recognised net deferred tax position was as follows:
Notes to the financial statements
Deferred tax liabilities
At 1 January
Increase / (decrease) in deferred tax liability
(Increase) / decrease in deferred tax asset
Deferred tax arising on acquisition (refer to note 25)
At 31 December
Deferred tax reconciliation
Deferred tax assets / liabilities
Deferred tax liability on the fair value adjustment of Biological Assets
Deferred tax asset on assessed tax loss
At 31 December
9. EARNINGS PER SHARE
2018
$000
61,728
527
400
-
62,655
2018
$000
(62,386)
(269)
(62,655)
2017
$000
55,848
(12,032)
(131)
18,043
61,728
2017
$000
(61,859)
131
(61,728)
Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year excluding own shares held jointly by the Woodbois Employee Share Trust,
“The Trust”, and certain employees.
Dilutive earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year
to assume conversion of all dilutive potential ordinary shares, being share options and the shares held by the Trust and certain
employees.
(Loss) / profit from continuing operations attributable to owners of the parent
Loss from discontinued operations attributable to owners of the parent
Total
Weighted average number of ordinary shares
Weighted average number of ordinary shares in issue
Weighted average number of ordinary shares used in calculating earnings per share
Number of options and own shares with dilutive effects
Weighted average number of ordinary shares used in calculating diluted earnings per share
Earnings per share from continuing operations
Basic (cents)
Diluted (cents)
Earnings per share from discontinued operations
Basic (cents)
Diluted (cents)
2018
$000
(6,525)
(1,446)
(7,971)
473,087,240
473,087,240
134,792,981
607,880,221
(1.17)
(0.90)
(0.32)
(0.25)
2017
$000
4,903
(2,803)
2,100
284,729,000
284,729,000
134,792,981
419,521,981
4.45
(0.98)
(0.98)
(0.67)
42 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
10. DISCONTINUED OPERATIONS
During the year, the Group announced its intention to dispose of its Tanzanian assets. The agricultural operation has been
accounted for as a discontinued operation from 31 October 2018.
At 31 December 2018 the Group disposed of the agricultural business and assets in Tanzania, namely Magole Agriculture
Limited, Milama Processing Company Limited, Magole Land Limited and Wami Agriculture Co. Limited. Mama Jo’s Fresh
Limited was deregistered on 21st July 2018.
Results of disposal Group:
Turnover
Cost of sales
Gross profit / (loss)
Other income
Operating costs
Administrative expenses
Share based payments
Foreign exchange gain / (loss0
Loss before tax
Taxation
Loss after tax
Net cash outflows from operating activities
Net cash inflows/(outflows) from investing activities
Net cash (outflows)/inflows from financing activities
Net decrease in cash generated by discontinued operations
2018
$000
109
(931)
(822)
116
(533)
(146)
(54)
7
(1,446)
-
(1,446)
2018
$000
575
2
(760)
(183)
2017
$000
514
(871)
(357)
-
(1,810)
(459)
(170)
(7)
(2,803)
-
(2,803)
2017
$000
(2,487)
(514)
3,132
131
The Group continued to account for non-cancellable leases amounting to $12,945 relating to African Home Stores business,
which was discontinued in 2016.
The following table summarises the recognised amounts of assets disposed measured at fair value:
Fixed Assets
Inventory
Total identifiable assets disposed
Cash flows on disposal
Consideration – cash
Consideration – buyer assumed loan
Total consideration
Gain on disposal
2018
$000
2,109
215
2,324
(2,015)
(485)
(2,500)
176
The cash consideration is payable by the buyer in 12 quarterly instalments. The first instalment of $250,000 is payable on 30
April 2019. The 11 subsequent instalments shall be equal amounts of $160,455. The non-current portion of the debt amounts
to $1,841,000. The current portion of $659,000 is included in trade and receivables.
The non-cash consideration relates to a loan amounting to $484,902 which was assumed by the buyer.
Total assets and liabilities held by the Group at the year end in relation to the discontinued operations amounted to $195,000
(2017 - $2,920,000) and $306,000 (2017 - $238,000) respectively.
43 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
11. PROPERTY, PLANT AND EQUIPMENT
Land & buildings
Motor
Plant & equipment
Fixtures & IT
COST
AT 1 JANUARY 2017
Additions
Assets obtained on acquisition
Effects of foreign exchange
AT 31 DECEMBER 2017
Additions
Disposal of subsidiary
Disposals (other)
Effects of foreign exchange
AT 31 DECEMBER 2018
DEPRECIATION
AT 1 JANUARY 2017
Charge for the year
Effects of foreign exchange
AT 31 DECEMBER 2017
Charge for the year
Disposals of subsidiary
Disposals
Effects of foreign exchange
AT 31 DECEMBER 2018
NET BOOK VALUE
AT 31 DECEMBER 2018
AT 31 DECEMBER 2017
$000
857
1,003
7,222
323
9,405
1,067
(1,180)
-
(502)
8,789
113
96
(1)
208
144
(78)
-
87
361
8,428
9,197
vehicles
$000
270
1,303
1,042
(110)
2,505
1,116
(65)
(63)
(260)
3,233
173
187
(155)
205
524
(22)
(20)
(167)
520
2,713
2,300
$000
2,171
1,616
3,942
(241)
7,488
1,619
(1,081)
(116)
(1,926)
5,984
1,098
633
(229)
1,502
934
(124)
-
(2,165)
148
5,836
5,986
equipment
$000
80
118
-
74
272
6
(10)
(131)
(2)
135
59
10
(55)
14
22
(3)
-
(2)
31
104
258
Motor vehicles having a net book value of USD 397,583 are pledged as security on car loans (see also note 19).
On acquisition of an asset, the estimated useful life is determined. The residual values for the majority of assets are
assumed to be zero. In subsequent years tests for impairment are carried out.
12. ASSETS UNDER CONSTRUCTION
As at 1 January - Sawmill
Costs incurred during the year
Transferred to Property, plant and equipment
As at 31 December
2018
$000
883
-
(883)
-
During the year ending 31 December 2018, the Group completed the construction of a sawmill in
Nampula, Mozambique.
Total
$000
3,378
4,040
12,206
46
19,670
3,807
(2,336)
(310)
(2,690)
18,141
1,443
926
(440)
1,929
1,625
(227)
(20)
(2,247)
1,060
17,081
17,741
2017
$000
-
883
883
44 |
WOODBOIS LIMITED | Financial statements 2018 13. BIOLOGICAL ASSETS
Standing timber
Carrying value at beginning of year
Increases due to purchases
Gains / (losses) arising from changes in fair value
Carrying value at end of year
The methods and assumptions used in determining the fair
value of standing timber within the forestry concessions
held has been based on discounted cash flow models
which require a number of significant judgements to be
made by the Directors in respect of sales price, operational
cost, discount rates, legislative rulings and operating
effectiveness
The discounted cash flow models cover the concession
areas in Mozambique and Gabon to which the group has
secured the rights. Management prepare separate models
for each country.
Harvesting levels are regulated by the Annual Permitted
Cut (“APC”) (total m3 per species) set in each management
plan and approved at federal and provincial government
level and can be reviewed and increased periodically, while
continued sustainability is ensured. The level of assumed
APC varies between 89,000m3 and 200,000m3 and at a
maximum represents 100% of the APC. This is based on
the current APC which may be subject to change depending
on legislative changes both with regards to the size of the
area and species. Such changes may impact the carrying
value of the biological assets held.
The valuation models assume pre-tax discount rates
between 10% and 12% depending on geography. The
discount rates have been calculated using a weighted
average cost of capital (“WACC”) methodology. Our
comparable company base is made up of Africa-focused
and global
forestry companies which management
consider would be categorized in the same sector as
Woodbois. Relevant country and equity risk premiums
have been used for Gabon and Mozambique. Management
have determined that, the discount rates are in line with the
overall industry consensus for timberland assets within
Africa.
The Group’s main class of biological assets comprise
of standing timber held through forestry concessions of
between 20 and 50 years. Biological assets are carried at
fair value less estimated costs to sell.
Notes to the financial statements
2018
$000
192,501
596
1,611
194,708
2017
$000
174,528
53,300
(35,327)
192,501
The brought forward biological assets are located in Gabon
in Mouila and Northern Mozambique in the states of Cabo
Delgado, Nyassa and Zambezia and are managed from
a central point in Mouila and Nampula. The additions are
located in Mozambique (2017: Gabon).
Fair value has been determined internally by discounting
a 20-year pre-tax cash flow projection (Level 3 of the fair
value hierarchy) based on a mix of wood species within
the concession areas. Real cost of production has been
factored in going forward.
(Ironwood), Combretum
In 2018 the Ministry of Land, Environment and Rural
Development (MITADER) in Mozambique, issued a ruling
on the exploitation and export of endangered species
of timber under which the exploitation and collection
of timber of Pterocarpus tinctorius, (Nkula), Swartzia
madagascariensis
imberbe
(Mondzo) is forbidden. Woodbois has never owned licences
to extract any of these species. In addition, the export of
Chanfuta, Umbila and Jambire will not be allowed, those
three species being licensed only for the domestic market.
Woodbois has previously exported both Chanfuta and
Umbila from Mozambique. We have reviewed the potential
financial implications of these measures to the Group, but
since Argento’s operations in Mozambique are certified by
MITADER, if they are adopted into law they should, in the
long term, benefit the Group from both an operational and
pricing perspective. However, it is unclear what the final
ruling will be and when it will come into force. As a result,
any changes to the final ruling may impact the Group’s
ability to harvest its biological assets within expectations.
Any such changes may result in an impairment to the asset
carrying amounts.
45 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
The following sensitivity analysis shows the effect of an increase or decrease in significant assumptions used:
Impact on fair value of biological asset
Effect of increase in discount rate by 1%
Effect of decrease in discount rate by 1%
Effect of 10% increase in volume of APC
Effect of 10% decrease in volume of APC
Effect of 10% increase in sales price
Effect of 10% decrease in sales price
14. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Deposits
Consideration due – sale of Tanzanian business – current portion (note 10)
Current tax receivable
VAT receivable
Prepayments and accrued income
2018
$000
(15,501)
18,636
18,730
(18,730)
38,979
(38,979)
2018
$000
2,874
824
35
659
-
242
1,290
5,924
2017
$000
(15,255)
18,340
18,038
(18,038)
38,067
(38,067)
2017
$000
960
1,326
29
-
28
242
856
3,441
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Refer to note 16
for the Group’s impairment policy.
15. INVENTORY
Agricultural supplies
Timber and veneer
Stock in transit
2018
$000
-
6,223
515
6,738
2017
$000
459
5,025
-
5,484
Write-downs of inventories to net realisable value amounted to $295,000 (2017 – $658,000). These were recognised as an
expense during the year ended 31 December 2018 and included in ‘cost of sales’ in profit or loss.
16. FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders. The overall strategy of the Company and Group is to minimise costs and liquidity risk.
46 |
WOODBOIS LIMITED | Financial statements 2018 The capital structure of the Group consists of equity
attributable to equity holders of the parent, comprising
issued share capital, share premium, reserves (merger
reserve, foreign exchange reserve, preference share capital
and share based payment reserve) and retained earnings
as disclosed in the Consolidated Statement of Changes in
Equity.
Notes to the financial statements
The Group is exposed to a number of risks through its normal
operations, the most significant of which are interest, credit,
foreign exchange and liquidity risks. The management of
these risks is vested in the Board of Directors.
The sensitivity has been prepared assuming the liability
outstanding at the balance sheet date was outstanding for
the whole period. In all cases presented, a negative number
in profit and loss represents an increase in finance expense
/ decrease in interest income.
2018
Financial assets/(liabilities)
Financial assets at
Financial liabilities at
amortised cost
amortised cost
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Preference share liability
Contingent acquisition liability
Other related party payables
2017
Financial assets/(liabilities)
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Preference share liability
Contingent acquisition liability
Other related party payables
$000
5,924
1,910
-
-
-
-
-
7,834
$000
-
-
(5,751)
(10,110)
(13,901)
(1,269)
-
(31,031)
Financial assets at
amortised cost
Financial liabilities at
amortised cost
$000
2,560
2,089
-
-
-
-
-
4,649
$000
-
-
(1,740)
(7,214)
(12,588)
(574)
(863)
(22,979)
Total
$000
5,924
1,910
(5,751)
(10,110)
(13,901)
(1,269)
-
(23,197)
Total
$000
2,560
2,089
(1,740)
(7,214)
(12,588)
(574)
(863)
(18,330)
FAIR VALUE MEASUREMENTS RECOGNISED
IN THE STATEMENT OF FINANCIAL POSITION
The following provides an analysis of the Group’s financial
instruments that are measured subsequent to
initial
recognition at fair value, grouped into Levels 1 & 2 based on
the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived
from
inputs other than quoted prices that are
observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
• Level 2 fair value measurements are those derived from
valuation techniques that include inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
• Level 3 assets are assets whose fair value cannot be
determined by using observable inputs or measures,
such as market prices or models. Level 3 assets
are typically very illiquid, and fair values can only be
calculated using estimates or risk-adjusted value ranges
47 |
WOODBOIS LIMITED | Financial statements 2018 EQUITY PRICE RISK
The Group is exposed to equity price risks arising from
equity investments. Equity investments are held for both
strategic and trading purposes.
MANAGEMENT OF MARKET RISK
The most significant area of market risk to which the Group
is exposed is interest rate risk.
The risk is limited to the reduction of interest received on
cash surpluses held and the increase in the interest on
borrowings.
+ 20 bp increase in interest rates
+ 50 bp increase in interest rates
+ 100 bp increase in interest rates
Notes to the financial statements
The majority of the Company’s debt is based on fixed
interest rates with no link or exposure to movements in
LIBOR. The trade finance facility that the Company raised
over the course of 2018 is priced below all of the quotes
received for a trade finance facility from institutions active
in Africa.
Woodbois also has the option to wind up the trade finance
facility within a 4-month timeframe, after an initial 12-month
period should more attractive financing rates be secured.
The following table details the group’s exposure to interest
rate changes, all of which affect profit and loss only with a
corresponding effect on accumulated losses.
2018
$000
(20)
(51)
(101)
6,738
The table above is prepared on the basis of an increase in rates. A decrease in rates would have the opposite effect.
GROUP
Cash and cash equivalents
Borrowings
Preference share liability
Total
2018
Fixed
rate
$000
-
(10,110)
(13,901)
(24,011)
2017
Fixed
rate
$000
-
-
(12,588)
(12,588)
2018
Floating
rate
$000
1,910
-
-
1,910
2017
Floating
rate
$000
2,089
(7,214)
-
(5,125)
2018
Total
$000
1,910
(10,110)
(13,901)
(22,101)
The impact of a 10% increase/decrease in the average base rates would be $1 million (2017: $0.7 million) on total cash and cash
equivalents balances, borrowings and on equity.
MANAGEMENT OF CREDIT RISK
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations and arises principally from
the Group’s receivables from customers and investments in
debt securities.
The carrying amount of financial assets represents the
maximum credit exposure.
The principal financial assets of the Company and Group are
bank balances and receivables. The Group deposits surplus
liquid funds with counterparty banks that have high credit
ratings. Cash is sometimes placed with certain institutions
in support of trading positions. The Group deposits such
funds with large well-known institutions and the Directors
consider the credit risk to be minimal.
The Group’s maximum exposure to credit by class of
individual financial instrument is shown in the table below:
48 |
2017
$000
(14)
(36)
(72)
5,484
2017
Total
$000
2,089
(7,214)
(12,588)
(17,713)
WOODBOIS LIMITED | Financial statements 2018 The table above is prepared on the basis of an increase in rates. A decrease in rates would have the opposite effect.
Notes to the financial statements
Cash and cash equivalents
Trade and other receivables
Total
2018
Carrying Value
2018
Maximum Exposure
2017
Carrying Value
2017
Maximum Exposure
$000
1,910
3,975
5,885
$000
1,910
3,975
5,885
$000
2,089
2,560
4,649
$000
2,089
2,560
4,649
No aged analysis of financial assets is presented as no
financial assets are past due at the reporting date.
Trade receivables
In the current period the Group has applied IFRS 9
Financial Instruments (as revised in July 2014) and the
related consequential amendments to other IFRSs. IFRS
9 introduces new requirements for the classification and
measurement of financial assets and financial liabilities
as well as the impairment for financial assets. IFRS 9
requirements have been applied prospectively with no
restatement of comparable periods and no significant
effect on the results upon initial application.
The only impact on the Group is in relation to the impairment
of trade receivables as detailed below.
In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model as opposed to an
incurred credit loss model under IAS 39. The expected credit
loss model required the Group to account for expected
credit losses and changes in those expected credit losses
at each reporting date to reflect changes in credit risk since
initial recognition of the financial assets. In other words, it
is no longer necessary for a credit event to have occurred
before credit losses are recognised.
The group applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables.
forward-looking
The expected loss rates are based on the payment profiles
of sales over a period of 36 month before 31 December
2018 or 1 January 2018 respectively and the corresponding
historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current
and
information on macroeconomic
factors affecting the ability of the customers to settle the
receivables. The group has identified the GDP and the
unemployment rate of the countries in which it sells its
goods to be the most relevant factors, and accordingly
adjusts the historical loss rates based on expected changes
in these factors.
On that basis, the loss allowance as at 31 December 2018
and 1 January 2018 (on adoption of IFRS 9) was determined
as follows for both trade receivables:
> 120 days
past due
> 90 days
past due
>60 days
past due
> 30 days
past due
Current
Total
31 December 2018
Expected loss rate
Gross carrying amount – trade receivables
Loss allowance
1.96%
2,197
(43)
4.86%
803
(39)
0%
89
-
0%
(43)
-
0%
203
-
3,249
(82)
The closing loss allowances for trade receivables and contract assets as at 31 December 2018 reconcile to the opening loss
allowances as follows:
31 December – calculated under IAS 39
Increase in loss allowance recognised in profit / (loss) during the year
Receivables written off during the year as uncollectible
At 31 December
2018
$000
-
82
-
82
2017
$000
319
-
-
319
49 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
MANAGEMENT OF FOREIGN EXCHANGE RISK
The Group operates internationally and is exposed to foreign exchange risk arising from commercial transactions, translation
of assets and liabilities and net investments in foreign operations. Exposure to commercial transactions arises from sales
or purchases by operating companies in currencies other than the companies’ functional currency. Currency exposures are
reviewed regularly.
The Group has a limited level of exposure to foreign exchange rate risk through their foreign currency denominated cash
balances:
Cash and cash equivalents
GBP
EUR
DKK
CFA
TZS
MZN
HKD
USD
Total
2018
$000
55
27
-
59
-
16
-
1,743
1,910
2017
$000
608
-
1
127
187
309
132
725
2,089
The table below summarises the impact of a 10% increase/decrease in the relevant foreign exchange rates versus the US Dollar
rate, on the Group’s pre-tax profit for the year and on equity:
IMPACT OF 10% RATE CHANGE
At 31 December
MANAGEMENT OF LIQUIDITY RISK
2018
$000
9
2017
$000
136
Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The group’s approach to managing liquidity is to ensure, as far as
possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the group’s reputation.
The Group seeks to manage liquidity risk by regularly reviewing cash flow budgets and forecasts to ensure that sufficient
liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is
sufficient liquidity for the foreseeable future.
The Group had cash and cash equivalents at 31 December as set out below.
Cash at bank
2018
$000
1,910
1,910
2017
$000
2,089
2,089
50 |
WOODBOIS LIMITED | Financial statements 2018 Notes to the financial statements
CONTRACTUAL MATURITY ANALYSIS
The Group has assessed the contractual maturity analysis as follows:
2018
0-3 months
3-12 months
Assets by contractual maturity
Trade and other receivables
Cash and cash equivalents
Liabilities by contractual maturity
Trade and other payables
Borrowings
Preference share liability
Contingent acquisition liability
Other related party payables
Net assets by contractual maturity
$000
2,290
1,910
4,200
$000
3,634
-
3,634
(5,390)
(361)
-
-
-
-
(5,390)
(1,190)
-
-
-
-
(361)
3,273
1 – 5 years
$000
-
-
-
-
(10,110)
(13,901)
(1,269)
-
(25,321)
(25,321)
2017
0-3 months
3-12 months
1 – 5 years
Assets by contractual maturity
Trade and other receivables
Cash and cash equivalents
Liabilities by contractual maturity
Trade and other payables
Borrowings
Preference share liability
Contingent acquisition liability
Other related party payables
Net assets by contractual maturity
17. TRADE AND OTHER PAYABLES
Trade payables
Accruals
Contract liabilities
Current tax payable
Provisions
Other payables
Debt to concession holders
$000
1,202
2,089
3,291
$000
1,358
-
1,358
(1,389)
(351)
-
-
-
-
(1,389)
1,902
$000
-
-
-
-
(7,214)
(12,588)
(574)
(863)
-
-
-
-
(351)
(21,239)
1,007
(21,239)
2018
$000
2,621
588
1,249
27
905
361
5,751
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Total
$000
5,924
1,910
7,834
(5,751)
(10,110)
(13,901)
(1,269)
-
(31,031)
(23,197)
Total
$000
2,560
2,089
4,649
(1,740)
(7,214)
(12,588)
(574)
(863)
(22,979)
(18,330)
2017
$000
1,004
385
620
28
-
1,578
351
4,017
51 |
WOODBOIS LIMITED | Financial statements 2018 18. BORROWINGS
Non-Current liabilities
Business loan
Internal Trade Finance Fund (“ITF”)
Car loans
Current liabilities
Business loans
Bank overdraft
Car loans
Total
Notes to the financial statements
2018
$000
1,256
3,804
26
5,086
613
4,394
17
5,024
10,110
2017
$000
695
-
47
742
693
5,764
15
6,472
7,214
As on 31 December the Trading division had the following outstanding borrowings:
Business loan with Nykredit that amounted to $1,155,390 (2017: $1,390,200). The business loan carries an interest rate of
2.64%. The purpose of the loan is for financing Timber trades.
Car Loans with Nykredit that amounted to $44,496 (2017: $62,346). The car loans carry an interest rate of 2.25% and 2.5%.
Bank overdraft facilities with Nykredit that amounted to $3.8 million (2017: $5.3 million). The Bank overdraft facilities carry
interest rates of 2.37%, 9.38% and 18.25%
The Group signed a combined security to the value of $1.7 million, which includes securities over the property, plant and
equipment, the total inventories and total trade receivables.
As at 31 December 2018 the Group had raised $3,803,542 (2017: 698,000) in the form of an Internal Trade Finance Fund. The ITF
is secured by selected stock and debtors and it bears interest at 11.5%, calculated daily, compounded semi-annually. A notice
period of 3 months applies to all fund withdrawals.
The contractual maturity of borrowings has been assessed in Note 16.
19. PREFERENCE SHARES
Preference shares: Liability component
Preference shares: Equity component
Total
Preference share liability
Interest accrued
Total
2018
$000
13,901
14,318
28,219
11,932
1,969
13,901
2017
$000
11,932
14,318
26,250
11,932
656
12,588
52 |
WOODBOIS LIMITED | Financial statements 2018
During the year ending 31 December 2017, the Group
issued 75,000 preference shares, in Argento Limited
(Mauritius subsidiary) at a par value of $350 per share.
The preference shares are convertible into either ordinary
Woodbois Limited (formerly known as Obtala Limited)
shares (1/1.435) or ordinary Argento Limited shares (1/1),
at any time, at the option of the shareholder. Conversion
ratios will be adjusted for any dilution.
The preference shares have priority for an annual dividend
equivalent to 5% of the amount subscribed for the Shares
(which will compound until paid) and paid pro rata for any
period up to a liquidity preference event (preferred dividend)
and will also participate pro-rata in any further dividend
paid on the ordinary shares. No dividend was paid in the
year (2017: Nil). The preference shares have no maturity
date.
20. SHARE CAPITAL
Authorised:
Ordinary shares of 1p each
Allotted, issued and fully paid:
Ordinary shares of 1p each
AT 1 JANUARY 2017
Shares issued
AT 31 DECEMBER 2017
Shares issued
AT 31 DECEMBER 2018
Notes to the financial statements
The preference shares do not carry the right to vote.
The preference shares have been determined to contain
both a host liability and an equity component and is
therefore classified as a compound financial instrument. In
valuing the preference shares, the fair value of the liability
component was determined first by valuing the preferred
shares at the market rate that would apply to an identical
financial instrument without the conversion option. The
average market rate used in determining the fair value of the
liability portion was 11%, which is based upon the weighted
average cost of capital for an investment in Mozambique
and as used in the valuation of the biological asset held in
Mozambique.
Number
Unlimited
273,260,664
20,018,603
293,279,267
84,172,664
377,451,931
$000
Unlimited
4,240
260
4,500
1,117
5,617
Balances classified as share capital include the nominal value on issue of the Company’s equity share capital, comprising
ordinary shares of 1p each.
During the year, 84,172,664 (2017: 20,018,603) ordinary shares with a nominal value of $1,117,000 (2017: $260,000) were issued
for a cash consideration of $9,598,431 (2017: $1 million).
On 2 February 2019 1,813,536 ordinary shares with a nominal value of $25,571 (£0.01) were issued for a cash consideration of
$319,636.
On 13 February 2019 7,158,059 ordinary shares with a nominal value of $100,929 (£0.01) were issued for a cash consideration
of $1,253,156.
On 28 February 2019 12,586,878 ordinary shares with a nominal value of $177,475 (£0.01) were issued for a cash consideration
of $2,206,850.
On 29 March 2019 12,878,308 ordinary shares with a nominal value of $181,584 (£0.01) were issued for a cash consideration
of $2,266,230.
On 30 October 2019 4.9,735,883 ordinary shares with a nominal value of $645,920 (£0.01) were issued for a cash consideration
of $3,552,560.
53 |
WOODBOIS LIMITED | Financial statements 2018 21. SHARE PREMIUM ACCOUNT
AT 1 JANUARY
Shares issued
AT 31 DECEMBER
Notes to the financial statements
2018
$000
22,340
7,614
29,954
2017
$000
17,968
4,372
22,340
Balances classified as share premium include the net proceeds in excess of the nominal share capital on issue of the
Company’s equity share capital.
22. MERGER RESERVE
AT 31 DECEMBER
2018
$000
44,487
2017
$000
44,487
The merger reserve arose on shares issued by Woodbois Limited (formerly known as Obtala Limited) to the previous owners of
Woodbois Services Limited (formerly known as Obtala Services Limited) under a scheme of arrangement concluded in August
2010.
23. CAPITAL AND OPERATING LEASE COMMITMENTS
The Group leases a warehouse under a non-cancellable operating lease expiring in one year. The Group had total commitments at the reporting date under non-cancellable
operating leases falling due as follows:
Land & buildings and office equipment
Land & buildings and office equipment
2018
$000
12
-
-
12
2017
$000
12
10
-
22
No later than one year
Later than one year and no later than five years
Later than five years
24. ACQUISITIONS
On 31 December 2018, the Group acquired the remaining 25% minority shares and voting interests in Montara Continental
Limited. The Group now owns 100% of the issued share capital.
The purchase price for the sale of shares was made up of the following:
- Initial consideration in cash of $2,500,000
- Deferred consideration of $2,500,000 or the issue of 40,000,000 ordinary shares of par value 1p each in the capital of
Woodbois Limited
The consideration of $5,000,000 is outstanding at the year end.
54 |
WOODBOIS LIMITED | Financial statements 2018
Gain from buy-out of minorities
Gain from buy-out of minorities arising from the acquisition has been recognised as follows.
Consideration
Value of non-controlling interests
Gain from buy-out of minorities
Notes to the financial statements
2018
$000
5,000
(19,508)
14,508
The minority interest was held by one individual. There
was no obligation for Woodbois to acquire the outstanding
shares and therefore the ability for the individual shareholder
to liquidate his shares was restricted. As a result Woodbois
were able to acquire the shares at a discount to the net
asset value resulting the gain noted.
The value of non-controlling interests has been valued at
the non-controlling interest’s proportionate share of the net
assets of Montara Continental Limited and its subsidiaries,
in accordance with IFRS 10.
Full details of the prior year acquisitions including the gain
from bargain purchase and contingent acquisition expense
are set out in the annual financial statements for the year
ended 31 December 2017.
25. SHARE BASED PAYMENTS
The share-based payments reserve is used to recognise
the grant date fair value of options issued to employees but
not exercised, the grant date fair value of shares issued to
employees and the fair value of share options forfeited by
employees.
The Group operates a share option plan, under which certain
Directors and employees have been granted options to
subscribe for ordinary shares. All options are equity settled.
The options have an exercise price, that ranges from 8.75p
to 18p, which was based upon the average value of the
Group’s ordinary shares for the ten days prior to the date of
grant. The Group has no legal or constructive obligation to
repurchase or settle the options in cash. The number and
weighted average exercise prices of share options are as
follows:
Vesting Date
June 2019
June 2020
June 2021
Award Amounts
6.375m options
6.375m options
6.375m options
The awards will be distributed to the Board as follows and the awardee must accept the option granted for it to be valid:
Miles Pelham
Paul Dolan
Martin Collins*
Jessica Camus*
Carnel Geddes
Jacob Hansen
Hadi Ghossein
Chairman
CEO
Deputy Chairman (resigned)
Non-executive Director
CFO
COO
Deputy Chairman
Number of options
1m per tranche (4m total)
1m per tranche (4m total)
1m per tranche (4m total)
250k per tranche (1m total)
250k per tranche (1m total)
625k per tranche (2.5m total)
625k per tranche (2.5m total)
* Martin Collins forfeited his share options upon resignation as a director on 31 October 2018. Jessica Camus-Demarche
forfeited her share options upon resignation as a director on 11 January 2019.
55 |
WOODBOIS LIMITED | Financial statements 2018
Notes to the financial statements
In respect of each tranche, the options are exercisable if
at the first possible vesting date for that tranche or any
subsequent date, the Woodbois Limited (formerly known
as Obtala Limited) monthly volume weighted for the three
consecutive months to such date is greater than the trigger
price for that tranche, the first such date being the vesting
date in respect of that tranche. The Option holder may
acquire the Option Shares in respect of a tranche following
the vesting date in respect of that tranche if they remain an
employee of the Group at that vesting date. If the awardee
is not in the employ at the time of vesting, then the awards
are forfeit.
The options belong to a class of exotic options called
partial time knock-in options and the valuations are based
on Black and Scholes model modified to account for the
properties of the exotic option. The model uses the grant
date, exercise price, vesting date, share price volatility and
risk-free rate to calculate the option fair value. The options
are accounted for over the vesting period. The fair value of
the options is not subsequently adjusted for changes in the
market conditions.
The table below shows the input ranges for the assumptions
used in the valuation model:
Exercise price
Share price volatility
Risk free rate
8.75p – 18.00p
37.47% - 57.58%
0.25% - 0.50%
Reconciliation of the share options in issue:
Total options
Weighted average strike
As on 1 January 2017
Issued during the financial year
Forfeited during the financial year
As on 31 December 2017
Issued during the financial year
Forfeited during the financial year
As on 31 December 2018
The following charge has been recognised in the current financial year:
AT 1 JANUARY
Reserve transfer for forfeitures
Issue of ordinary shares
Share based payment expense
AT 31 DECEMBER
Tvhere were no options exercisable at the reporting ate.
26. NON-CONTROLLING INTERESTS
AT 1 JANUARY 2017
Non-controlling interests share of losses in the year
AT 31 DECEMBER 2017
Non-controlling interests share of losses in the year
Buy-out of minorities
AT 31 DECEMBER 2018
21,000,000
17,500,000
(10,000,000)
28,500,000
1,000,000
(9,000,000)
20,500,000
2018
$000
979
(679)
-
712
1,012
price
8.75p
12.20p
(7.09p)
13.85p
17.62p
(15.82p)
13.78p
2017
$000
1,398
(1,398)
-
979
979
$000
28,369
(7,761)
20,608
(1,235)
19,373
56 |
WOODBOIS LIMITED | Financial statements 2018 The share of losses in the year represents the losses attributable to non-controlling interests for the year. As at 31 December
2018, the Group bought out the non-controlling interests in full.
Notes to the financial statements
27. RELATED PARTY TRANSACTIONS
RELATED PARTY BALANCES
Amount payable to the previous owners of WoodGroup
Funding raised for internal trade finance
AT 31 DECEMBER
2018
$000
-
(3,731)
(3,731)
2017
$000
(165)
(698)
(863)
As at 31 December 2018, the Group had raised $3,803,542 (2017: $698,000) into the ITF. The amount due to related parties is
as follows:
Name
Relationship
Richard Byworth Consultancy
Shareholder
Paul Dolan
Martin Collins
Jessica Camus-Demarche
Adam Barker
Shareholder and Director
Director
Director
Other key management personnel
Interest expense during the year is $116,000 (2017: $48,000).
Three of the Directors are paid salaries through service companies as follows:
Director
Carnel Geddes
Jacob Hansen
Zahid Abbas
Service Company name
Pomona Trust
Barsik Holding
Aka Holding
TRADING TRANSACTIONS
2018
$000
(417)
(1,839)
(264)
(211)
(1,000)
(3,731)
2018
$000
150
233
246
2017
$000
-
218
267
213
-
(698)
2017
$000
30
171
170
During the year the Group companies entered into the following transactions with related parties:
2018
2018
2017
2017
Transactions
in year
Balance at 31
December
Transactions
in year
Balance at 31
December
Loans to subsidiary undertakings
Amount owing to African Resource Investment Limited
Deferred consideration - Envision
$000
(7,209)
(5,000)
2,500
$000
26,521
(5,000)
2,500
$000
(7,356)
-
-
$000
19,312
-
-
57 |
WOODBOIS LIMITED | Financial statements 2018
Notes to the financial statements
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
The Group’s key management personnel comprised the following:
2018
Short-term employment benefits
Salaries, fees &
national insurance
contributions
Benefits
Deferred acquisition
payments
Share based payments
Total
$000
$000
$000
$000
$000
Directors
Miles Pelham
Paul Dolan
Martin Collins
Kevin Milne
Jacob Hansen
Hadi Ghossein
Zahid Abbas
Carnel Geddes
Jessica Camus-Demarche
Other key management personnel
Graham Impey
Sophie Hunter
Warren Deats
Sassine Bouchebel
Patrick Greene
Claus Wellov
Ivan Muir
Henning Visser
Tim Costin
Adam Barker
Tom Holroyd
Ben Slater
Ulrica Marshall
Ashkan Rahmati
Ilene Hardy
Maria Stoica
200
200
173
30
246
215
233
150
50
98
161
32
153
78
72
136
95
178
38
50
58
20
59
90
15
-
-
-
-
7
-
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
430
-
430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57
57
111
-
103
103
103
40
40
9
15
-
-
9
-
-
-
-
-
-
-
40
24
-
-
775
257
257
284
30
785
318
190
90
107
176
32
153
87
72
136
95
178
38
50
58
60
83
90
15
2,881
16
860
712
4,469
58 |
WOODBOIS LIMITED | Financial statements 2018
Notes to the financial statements
2017
Short-term employment benefits
Salaries, fees &
national insurance
contributions
Benefits
Deferred
acquisition
payments
Share based
payments
Total
$000
$000
$000
$000
$000
Directors
Miles Pelham
Paul Dolan
Warren Deats
Simon Rollason
Phillippe Cohen
Francesco Scolaro
Kevin Milne
Jean du Lac
Martin Collins
Jessica Camus
Carnel Geddes
Other key management personnel
Jacob Hansen
Hadi Ghossein
Zahid Abbas
Sophie Hunter
Graham Impey
Warren Deats
Patrick Greene
Claus Wellov
Tim Costin
Tom Holroyd
Mark Evans
Ben Salter
Adam Barker
Sassine Bouchebel
Ulrica Marshall
Maria Stoica
Ilene Hardy
200
200
159
50
77
15
30
9
38
39
30
171
170
170
163
102
36
100
66
77
6
69
72
123
122
18
27
90
-
-
42
1
-
-
-
-
3
-
-
-
-
-
-
3
-
22
5
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
287
-
287
-
-
-
-
-
-
-
-
-
-
-
-
-
-
267
267
-
-
-
-
-
-
63
26
26
35
35
35
67
67
-
67
-
-
-
-
-
-
-
24
-
-
467
467
201
51
77
15
30
9
104
65
56
493
205
492
230
172
36
189
71
77
6
69
74
123
122
42
27
90
2,454
77
574
979
4,086
59 |
WOODBOIS LIMITED | Financial statements 2018
Notes to the financial statements
28. EVENTS OCCURRING AFTER THE REPORTING DATE
On 20 March 2019 the Company held a General Meeting to approve the change of Company name to Woodbois Limited. This
was effective from Wednesday 20 March 2019.
In addition, the following name changes have been made:
20 March Obtala Services Limited (UK Company number 06458554) is now Woodbois Services Limited
18 April Obtala (Hong Kong) Limited (HK Company number 2476903) is now Woodbois Trading Limited
Date
Investor
No. Ordinary Shares
Price (pence)
Cash received
15/01/2019
1798 Volantis Fund Limited (Lombard
Odier)
40,000,000
5.00p
GBP 2,000,000
12/03/2019
Lombard Odier
32,000,000
6.25p
GBP 2,000,000
01/04/2019
Lombard Odier
16,000,000
6.00p
GBP 960,000
In April 2019 an additional $5 million was raised in the ITF.
29. ULTIMATE PARENT COMPANY
At 31 December 2018 the Directors do not believe that there was an ultimate controlling party.
60 |
WOODBOIS LIMITED | Financial statements 2018