REG - Agriterra Ltd - Annual Financial Report
30/09/2022 07:01
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RNS Number : 2490B Agriterra Ltd 30 September 2022
30 September 2022
Agriterra Limited ('Agriterra' or the 'Company')
Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture
Audited Annual Results for Year Ended 31 March 2022
Agriterra Limited, the AIM-quoted African agricultural company, announces its
audited annual results for the year ended 31 March 2022 (the "2022 Annual
Accounts").
The 2022 Annual Accounts are now available on the Company's website and an
extract of selected information from the 2022 Annual Accounts is set out
below. The 2022 Annual Accounts will be posted to Shareholders with the Notice
of Annual General Meeting to approve the 2022 Annual Accounts by 28 October
2022.
** ENDS **
For further information please visit www.agriterra-ltd.com or contact:
Agriterra Limited Strand Hanson Limited
(Nominated & Financial Adviser and Broker)
Caroline Havers Ritchie Balmer/ James Spinney / David Asquith
caroline@agriterra-ltd.com +44 (0) 207 409 3494
Chair's statement and strategic review
I am pleased to present the annual report of the Company for the year ending
31 March 2022. During the year, the Company focused on improving the existing
operating systems, improving sales and building the DECA Snax brand in the
local market.
The Company continues to observe the principles of the QCA Corporate
Governance Code (the "Code") to the extent that they consider them to be
applicable and appropriate for a Company of Agriterra's size and stage of
development, through the maintenance of efficient and effective management
frameworks accompanied by good communication. Further details are available
at:
http://www.agriterra-ltd.com/investor-relations/corporate-governance/
Strategy and Business Model
The Company's strategy is to operate efficient, profitable businesses in
Mozambique to create value for its shareholders and other stakeholders by
supplying beef and milled maize products to the local market.
The Company continues to focus on adding value along the entire maize and beef
value chain, by developing and offering new products to the market. It
currently has three operating divisions:
· Beef, which sources cattle from local farmers and then processes
them through its own feedlot, abattoir operations and retail units through
Mozbife Limitada ('Mozbife')
· Grain, which operates maize purchasing and processing businesses
through Desenvolvimento e Comercialização Agrìcola Limitada ('DECA') and
Compagri Limitada ('Compagri').
· Snax, which sources maize grits from DECA, processing them into
flavoured puffs and naks through DECA Snax, an operating entity that was
commissioned in December 2020 to add value to our grain meal and sell as a
snack.
These three divisions have built strong brands in Mozambique. During the year
the Company secured additional debt funding of c.US$2.4m to secure the
necessary maize quantities needed to meet the projected meal sales for this
financial year.
The Company is aware of its environmental, social and governmental
responsibilities and the need to maintain effective working relationships
across a range of stakeholders. The major shareholder is represented on the
Board ensuring their views are incorporated into the Board's decision-making
process. In addition to the Company's staff and shareholders, the local
community in Mozambique is a primary stakeholder. In purchasing maize and
cattle directly from the local community, the Company plays an important role
in local economic development, supporting small scale farmers and the
developing commercial sector.
Mozambique overview
FY2022 has proven to be a very challenging year, with the continued impact of
COVID-19 restrictions and the security situation in the North of the country.
The Central region was hit by a tropical storm in December 2021; Tropical
Storm Anna, passed through destroying crops and flooding fields in the main
maize producing belt. Farmers were forced to replant, which in turn caused
delays in the harvest and supply of grain to the market. The harvest period
moved from April to June and as a result the yields were lower. The impact of
the tropical cyclone will affect maize availability and prices for the 31
March 2023 financial year.
Mozambique continued with the COVID-19 lockdown until September 2021, but a
further lock down was required from December 2021 to March 2022, as a response
to the then new Omnicrom variant. The lockdown affected the economy generally,
but in particular the hospitality industry which impacted the operating
companies in both direct and wholesale sales.
National infection numbers appear to be under control and the vaccination
rates are improving. Beaches, restaurants and general day to day life began to
normalise in April 2022. The operating companies were affected in Q1-2022,
when at least 10 Management and 60 general staff were infected, but everyone
recovered. The companies continued with the training and awareness programmes
implemented at the start of the pandemic.
The insurgency in Northern Mozambique (1,500km north of Chimoio) intensified,
with SADC and Rwandan security forces assisting the Mozambican army since
September 2021. They have had a positive impact in reducing the number of
attacks around the O&G fields, but the war has moved further south,
towards the town of Pemba. This continues to be a threat, but Total and ENI
have indicated that they would be prepared to return in Q4-2022, if the
situation improves. This will certainly offer the economy a boost and help
move Mozambique forward.
During this same period the Metical remained steady against the US$, but
strengthened vs the Rand. This meant that South African imports were slightly
cheaper in the Maputo market. Annual inflation was higher at 5.7%, against
3.19% in 2020, in response to the increase in fuel and food prices, due to the
Ukrainian war. In response to the inflation, the Bank of Mozambique increased
its prime lending rate from 16% to 19%, forcing many business to slow down
their growth plans.
Operations review
Grain division
The Grain division has become more efficient over these last 12 months: the
mill upgrades have improved the overall extraction rate from 76.7% in FY21 to
78.0%; and cheaper maize purchases have improved the overall gross margin to
26.7% vs the 15.41% achieved in prior period. These efficiencies have enabled
the division to improve its overall performance per ton sold. However, volumes
sold declined to 17,094 tons (2021: 25,389 tonnes) and average selling price
decreased to MZN 26,983 per ton (2021: MZN 27,467).
The drop in sales is mainly due to the excessive volume of maize produced in
and being informally imported from Malawi and Zambia, where favourable
climatic conditions and government subsidised fertiliser schemes have resulted
in exceptionally high maize production for that year. The supply was far
greater than the local demand and hence the maize entering Mozambique and
eventually making its way south to Chimoio, Beira and Maputo, thus requiring a
reduction in price to compete with the cheaper maize available in the informal
markets.
A total of $6.1m borrowings were secured from commercial banks, contributing
towards the purchase of 29,264 tons of maize needed for this season. The
business has in silo a total stock of 7,690 tons of maize at year end (2021:
2,044 tons), which has enabled grain division operations to mill through to
June 2022, new crop was available to purchase in mid-June 2022.
Revenue for the year decreased to $7.1m (2021: $11.1m). Operating costs
increased by $0.3m to $1.9m resulting from the appointment of senior
management and additional bush buying administrative and transport expenses.
EBITDA increased to $0.54m (2021: EBITDA of $0.51m) due to extraction
efficiencies and reduced maize cost as compared to the prior year. However,
finance costs increased to $1.55m (2021: $1.07m) and the assets revaluation
led to an increase in depreciation cost to $0.5m from $0.18m in 2021 resulting
in a loss before tax of $1.41m (2021: loss $ 0.74m).
Loss after tax amounted to $1,515,000 (FY21: Loss after tax $742,000.
Beef division
The Beef division suffered a loss of business between March and April 2021,
following the suspension of all oil and gas related activities by Total Energy
and ENI, a response to the terrorist attacks in the north. The division has
focussed on identifying new customers, improving operating margins and cutting
overheads. Sales volumes were 24% below previous year (1,015 tons vs 1,331
tons in FY21).
The decrease in sales has been mitigated by improved Gross Margin of 23.87%
(FY-2021: 9.62%) resulting from higher average selling price of MZN 252 per kg
(FY-2021: MZN 221) whilst the average dress out rate of 51.2% (FY-2021: 51.7%)
remained the same for the year, improved cattle buying practises and training
of small farmers (average quarter weight is now 50kg vs the historical average
weight of 40kg) has allowed the business to improve quality and increase unit
prices.
The Company has embarked on a right sizing strategy, we offered voluntary
retrenchments and agreed not to replace staff that either resigned or whose
contract came to an end. We still have the cost of the 3 farms that remain in
care and maintenance whilst farming investment opportunities are being
evaluated to maximise the utilisation of these farms.
Loss after tax amounted to $504,000 (FY21: Loss after tax $1,063,000).
Snax Division
DECA Snax, a 50:50 joint venture with Snax for Africa Limited has, in its
second year of operations, managed to grow sales volumes by 500% to $1.5
million (FY21: $0.2 million) due to the successful launch of new products and
creation of an efficient sales distribution network. DECA Snax sold 707,385
bales during the current year (FY21: 128,805 bales).
Production volume is exceeding 80% of the installed capacity and plans are in
place to increase the production capacity of the Snax division in the next
financial year by utilising internally generated funds. Management is
encouraged by the positive demand for the products which is more than the
production capacity.
Profit after tax amounted to $109,889 (FY21: Loss after tax - Nil)
Key Performance Indicators
The Board monitors the Company's performance in delivery of strategy by
measuring progress against Key Performance Indicators (KPIs). These KPIs
comprise a number of operational, financial and non-financial metrics.
2022 2021 2020
Grain division
- Average milling yield 78.0% 76.7% 77%
- Meal sold (tonnes) 17,094 25,389 19,926
- Revenue $7,118,000 $11,061,000 $8,955,000
- EBITDA (note 5) $535,000 $510,000 $86,000
- Net debt ($9,521,266) ($5,856,106) ($4,001,000)
- Available headroom under banking facilities - $884,669 $746,000
Beef division
- Slaughter herd size - number of head 4,575 5,667 2,100
- Average daily weight gain in feedlot (% of body mass) 0.35 0.35 0.34
- Meat sold (tonnes) 734 890 1,094
- Revenue $3,159,000 $3,189,000 $3,955,000
- EBITDA (note 5) ($66,000) ($547,000) ($905,000)
- Net debt ($184,283) ($406,244) ($665,000)
- Available headroom under banking facilities - - $99,000
Snax division (note 23)
- Bales sold (units) 707,385 128,805
- Revenue $1,447,000 $117,000
- EBITDA $247,000 $10,000
- Net debt $Nil $23
- Available headroom under banking facilities N/A N/A
Group
- EPS (10.7) (10.3) (14.1)
- Liquidity - cash plus available headroom under facilities $107,000 $1,139,000 $1,162,000
Financial Review
In FY 22 Group revenue decreased by 28% to US$10.28m (FY21: US$14.25m) mainly
due to:
· Influx of maize from Malawi and Zambia which saturated the Mozambique
market and maize meal sales volumes decreased by 33% to 17,094 tons (FY21:
25,389 tons). The strengthening of the Metical against other currencies
offered Mozambique as an attractive market in Southern Africa. Grain division
purchased 30,000 tons, milled out 23,000 tons and carried forward 7,000 tons
into the next financial year.
· Reduction in beef demand during the peak of the pandemic and the loss
of key contracts due to the conflict in the north, resulting in lower than
budgeted beef sales by 17.5% to 734 tons (FY21: 890 tons). The decline in
sales volumes was mitigated by 14.06% improvement in selling price.
Even though sales volumes decreased, the Group's gross profit improved by 25%
to $2.6 million (FY21: Gross profit - $2.1 million) as a result operational
efficiencies in all divisions which included but are not limited to:
· Improved maize meal extraction rate and low cost of maize in the
Grain division.
· Low animal travel mass loss from buying points to the feedlot,
management of farm cost and efficient slaughtering process in the Beef
division.
Despite the operating expenses increasing by 11% to $3.5 million (FY21: $3.2
million), the operating loss decreased by 17% to $821 000 (FY21: $987,000)
even though low sales volumes were realised for the year. The Group
operational performance is expected to be profitable if volumes improve by
25%.
Net Debt at 31 March 2022 was US$9.7m (FY21: US$4.3m). Poor group performance
has resulted in the increase in debt due to high interest cost amounting to
$1.6 million eroding the significant portion of the Group earnings and
ultimately shareholder equity. Subsequent to the year end, the Group's debt
has been refinanced by means of a shareholder loan from Magister Investments
Limited (see note 26).
Risk management
The Company is subject to various risks and the future outlook for the
Company, and growth in shareholder value should be viewed with an
understanding of these risks. According to the risk, the Board may decide to
tolerate it, seek to mitigate it through controls and operating procedures, or
transfer it to third parties. The following table shows the principal risks
facing the Company and the actions taken to mitigate these:
Key risk factor Detail How it is managed Change in the period
Foreign Exchange The Company's operations are impacted by fluctuations in exchange rates and The Company's borrowing facilities are denominated in Metical. Decreased. The Metical has been stable in the past 12 months, while inflation
the volatility of the Metical. has increased, and interest rates increased. IMF and WB have begun lending to
the government of Mozambique (GoM), so we expect rates to remain steady.
Political instability Changes to government policy and applicable laws could adversely affect Contingency plans to protect assets and staff should political or military No Change. Following the peace accords signed with RENAMO, while military
operations or the financial condition of the Company. tensions escalate. tension in Northern Mozambique is slowly being resolved under a SADC military
conflict resolution assistance.
Land ownership in Mozambique Property rights and land are exclusive to the state. The state grants rights Observance of any conditions attaching to a DUAT. No change.
to use and develop land "DUATs". The operations are dependent upon maintaining
the relevant DUATs.
Maize growing season Adverse weather conditions, national or regional could impact on the Diversify sources of supply and sign supply agreements. The business has taken Increased. Cyclones and flooding have severely affected the farmer yields in
availability and pricing of grain. the initiative to go directly to the farmer, rather than depending entirely on central Mozambique.
traders.
Cattle and cattle feed Cattle are subject to diseases and infections. The availability and price of Stringent Bio-security measures are in place at the Farms and Feedlot. The No Change.
feed impacts profitability. division is now self-sufficient in roughage crops and acquires most of its
feed from the Grain division.
Access to working capital The Company is reliant on local banking facilities in Mozambique. During the year, the Company secured additional overdraft facilities. Increased. The exposure to reliance on the renewal of short-term facilities
has increased.
Compliance There is a risk of a breach of the Company's business or ethical conduct The Board reinforces an ethical corporate culture. Anti-bribery policies are No change.
standards and breach of anti-corruptions laws, resulting in investigations, in place, with regular training throughout the organization.
fines and loss of reputation.
COVID-19 COVID-19 has had a significant negative impact globally, both economically and Plans are in place to protect our staff and production capabilities. The No Change. Staff are being vaccinated and working practises have changed to
socially. There is a risk that there will be a significant outbreak of the Company remains alert to the fast-changing environment and is prepared to put accommodate the new normal.
COVID-19 virus in Mozambique which could potentially impact the population in place mitigating actions as events develop. Our products, meal and beef,
through contraction of COVID-19 and Government enforced measures, and in turn are key staples in the domestic Mozambican market and demand is not expected
impact the Company's operations. to be significantly affected should the pandemic take hold. The impact on
future liquidity has been discussed further in the Going Concern section
below.
The Board is also responsible for establishing and monitoring the Company's
systems of internal controls. Although no system of internal control can
provide absolute assurance against material misstatement or loss, the
Company's systems are designed to provide the directors with reasonable
assurance that problems are identified on a timely basis and dealt with
appropriately. The Board reviews the effectiveness of the systems of internal
control and considers the major business risks and the control environment on
a regular basis. In light of this control environment the Board considers that
there is no current requirement for a permanent separate internal audit
function.
Going concern
Details of the consideration of going concern are set out in note 3. The
Company has prepared forecasts for the Group's ongoing businesses covering the
period of 12 months from the date of approval of these financial statements.
These forecasts are based on assumptions including, inter alia, that there are
no significant disruptions to the supply of maize or cattle to meet its
projected sales volumes and that key inputs are achieved, such as forecast
selling prices and volume, budgeted cost reductions, and projected weight
gains of cattle in the feedlot. They further take into account working capital
requirements and currently available borrowing facilities and future renewals.
The forecasts show that the Group needs to achieve its operating targets and
secure working capital funding in addition to reducing the borrowing levels by
securing other forms of cheaper financing to meet its commitments as they fall
due, none of which are certain. Post year end, the Group has secured US$7.9
million from direct shareholder funding which will be used to repay the
commercial borrowings and the Group is expected to save at least US$0.7
million by repaying the US$6.1 million overdraft facility and US$1.8 million
bank loan after securing maize for the current year. In addition, the Group
also secured a US$1.4 million short term loan from Commercial Banks to fund
maize purchasing for the FY23 financial year. The group expect further short
term funding to be required to fund the current year working capital. These
conditions and events indicate the existence of a material uncertainty that
may cast significant doubt upon the Group's ability to continue as a going
concern and the Group Companies may therefore be unable to realise their
assets and discharge their liabilities in the ordinary course of business. The
auditors make reference to going concern in their audit report by way of a
material uncertainty. These financial statements do not include the
adjustments that would result if the Group were unable to continue as a going
concern.
COVID-19
The Mozambican Government continues to implement policies to minimise the
spread of COVID-19, but these are now very relaxed, and business is back to
normal. The beef and snax sales have been encouraging, but growth is being
restricted by the high inflation rates that are affecting the amount of
disposable income available in the region. The Grain division has suffered the
most with low volume of sales and there is a need to reduce overheads, improve
efficiencies and to identify new markets, where the division can increase
product up take.
Outlook
The Group had a difficult start to FY-23 as the COVID-19 lock down was
re-instated and remained in force until Q3-2022. This has made the overall
operation challenging, but management are protecting the gross margins and
ensuring that the business does not lose potential advantages in the market.
Grain: In order to improve margins, the division secured an additional working
capital facility, enabling it to purchase maize in the period when the market
is saturated, and prices are lowest. In addition, some of the larger clients
were encouraged to pre-pay for their meal, so as to secure the maize needed at
the same time. There has also been renewed focus on the commercial strategy to
better align our pricing with the market, to introduce a rebranding program to
drive the sales of the 1kg packs which offers better margins, and to
incentivise clients to buy more and pay quickly.
Beef: With demand under pressure from lockdown, the focus has been on
realigning the cost base with lower projected volumes and refocussing the
retail strategy. The depot, opened in 2020 in Maputo in now accounting for 40%
of all sales, with demand for our product increasing quickly. On the supply
side, the focus has been on strengthening supply chain links with the small
farmers who work with us and on getting the efficiencies on the feed lot to
improve. A new manager has been contracted and he is having a positive impact
on the bottom line.
Snax: The demand for the brand is growing quickly and penetrating new market
easily. The division will be introducing new flavours to widen customer
choices and further strengthen the brand presence in the market. Snax division
is targeting to generate USD 0.5 million revenue per month supported by
investment in a new extruder which will improve the production capacity.
Board and senior management changes
In March 2021 Mr. Sant'ana Afonso joined the board as an executive Director
and Chief Executive Officer. Mr. Sant'ana Afonso is a Mozambican citizen and
has worked with the company since March 2020 before being formally appointed
to the role of CEO in April 2021. He was Executive Director for Mozambique of
AgDevCo for 6 years and, prior to that, worked for 6 years as the Bulk Cargo
Manager at the Port of Maputo, where he gained significant supply chain and
logistics experience.Mr. Sant'ana Afonso has a BSc in Agriculture and an MSC
in Agricultural Economics and has held non-executive directorships in various
companies in the food commodity sector in Mozambique.
After the end of the current reporting period, Mr. Sant'ana Afonso resigned
from the Company effective 31 July 2022. Mr Hamish Rudland has assumed the
role of Interim Chief Executive Officer.
CSO Havers,
Non-Executive Chair
29 September 2022
Corporate Governance
The Company is quoted on AIM and is required to comply with the provisions of
a recognised corporate governance code. The Board elected to adopt the Quoted
Company Alliance Corporate Governance Code (the "QCA code"). Further details
are available at http://www.agriterra-ltd.com/corporategovernance.aspx
(http://www.agriterra-ltd.com/corporategovernance.aspx) .
The Board is committed to applying a standard of corporate governance
commensurate with its size and stage of growth and the nature of its
activities.
The Board
The board structure continues to be organised to ensure it has the appropriate
balance of skills and independence. At the year end the Board comprised the
Non-Executive Chair, Chief Executive, two non-independent Non-Executive
Directors and two independent Non-Executive Directors. Within Senior
Management, there is a Finance Director and General Manager who report to
the Board. The Board is looking to further enhance its composition, skills and
balance as the Company develops. The Board currently comprises:
Caroline Havers, Non-Executive Chair (AC; IC chair)
Ms. Havers is a highly experienced litigation/dispute resolution lawyer having
spent over 30 years within international law firms working with clients
operating in a variety of African jurisdictions and industry sectors. During
her legal career, Ms. Havers has been both a partner and managing director of
different law firms. She provides advice on compliance and governance and is a
long qualified CEDR Mediator.
Rui Sant'ana Afonso CEO, (Resigned 31 July 2022)
Mr. Sant'ana Afonso is a Mozambican citizen, who resides in Mozambique.
Previously he was Executive Director for Mozambique of AgDevCo for 6 years
and, prior to that, worked as Director of Operations for G4S in Mozambique. In
addition, he gained significant supply chain and logistics experience through
his role as Bulk Cargo Manager at the Port of Maputo, where he worked for 6
years.
Mr. Sant'ana Afonso has a BSc in Agriculture and an MSC in Agricultural
Economics and has held non-executive directorships in various companies in the
food commodity sector in Mozambique.
Hamish Rudland, Non-Executive Director (IC) (Acting CEO from 1 August 2022)
Mr. Rudland has extensive experience across logistics, agriculture,
agro-processing, distribution, and property. After graduating from Massey
University, New Zealand, he returned to Zimbabwe to start a passenger
transport business that soon diversified into fuel tank haulage. Thereafter
Mr. Rudland structured acquisitions of foreign-owned asset rich companies to
list on the Zimbabwe Stock Exchange where he has substantial investments which
focus on his core competencies but also synergise where advantages can be
made.
Mr. Hamish Rudland is the settlor of the Casa Trust which has interest in
Magister Investments and is also a Director of Magister investment. As a
result of Mr. Rudland's relationship to Magister Investments Limited, he is
not considered to be an "independent" director for the purposes of the QCA
Corporate Governance Code.
Gary Smith, Non-Executive Director (AC; RC)
Mr. Smith is an experienced finance professional and qualified Chartered
Accountant. He is currently a non-executive director of several companies in
Zimbabwe and Mauritius. Mr. Smith worked in the UK for several years where he
was employed at Deutsche Bank, University of Surrey, and Foxhills Club &
Resort. Upon returning to Africa, he worked for a large transport and
logistics company in Mozambique for four years before returning home to
Zimbabwe and the above positions.
As a result of Mr. Smith's relationship with Magister Investments Limited, he
is not considered to be an "independent" director for the purposes of the QCA
Corporate Governance Code.
Neil Clayton, Non-Executive Director (AC Chair; RC Chair)
Mr. Clayton is a Chartered Accountant and has over 30 years of experience in a
variety of listed and un-listed companies. Specifically, Mr. Clayton brings
significant experience and expertise as regards listed companies operating in
Africa as well as particular knowledge of the Company's business and
requirements, having held an interim finance role at the Company during 2019.
The Board considers Mr. Clayton to be an "independent" director for the
purposes of the QCA Corporate Governance Code.
Sergio Zandamela, Non-Executive Director (appointed 30 April 2021) (IC)
Mr. Zandamela is a Mozambican national with over 20 years' experience in
agriculture and business with a degree in Agronomy - Rural Engineering from
the Eduardo Mondlane University and subsequently an MBA from the Montford
University Southern Africa - Sandton Business School. From 2016 to 2020 Mr.
Zandamela was responsible from for all Mozambique commercial activities of
Tongaat Hulett (agriculture and agri-processing business, focusing on the
complementary feedstocks of sugarcane and maize).
The Board considers Mr. Zandamela to be an "independent" director for the
purposes of the QCA Corporate Governance Code.
Following the appointment of the CEO, the Non-Executive Chair is expected to
commit a minimum of a day a week and the Non-Executive Directors are expected
to commit 2 days a month. In addition, all directors are expected to devote
any additional time that might be required in order to discharge their duties.
Since the outbreak of COVID-19, Board meetings were held quarterly via Zoom.
The attendance record of directors who held office for the year is as follows:
Meetings held Meetings attended
Caroline Havers 4 4
Neil Clayton 4 4
Hamish Rudland 4 4
Gary Smith 4 4
Sergio Zandamela 4 3
Rui Sant'ana Afonso 4 4
The Board has entrusted the day-to-day responsibility for the direction,
supervision and management of the business to the Chief Executive Officer
(CEO), who leads an Executive Committee (EXCO). For the financial year ended
31 March 2022 the EXCO was comprised of the CEO, the General Manager, the
Operations Director, the Financial Director and the Commercial Director in
Mozambique.
The CEO and General Manager have a call each week with the Chair to review
strategy and discuss any matters arising.
Certain matters are specifically reserved to the Board for its decision
including, inter alia, the creation or issue of new shares and share options,
acquisitions, investments and disposals, material contractual arrangements
outside the ordinary course of business and the approval of all transactions
with related parties.
There is no agreed formal procedure for the directors to take independent
professional advice at the Company's expense. The Company's directors submit
themselves for re-election at the Annual General Meeting at regular intervals
in accordance with the Company's Articles of Incorporation.
The Company has adopted a share dealing code for directors' dealings which is
appropriate for an AIM quoted company. The directors and the Company comply
with the relevant provisions of the AIM Rules and the Market Abuse Regulation
(EU) No. 596/2014 relating to share dealings and take all reasonable steps to
ensure compliance by the Group's employees.
Board Committees
Due to the current size of the Board and the Company, there is no separate
Nominations Committee, and any new directors are appointed by the whole Board.
At the Board meeting held in March 2020 the new Audit ("AC"), Investment
("IC") and Remuneration Committees ("RC") were established. The Audit
Committee and the Investment Committees have met in the last financial year.
The Audit Committee was chaired by Neil Clayton. The Audit Committee has been
actively engaged in the planning and conduct of the Audit of these financial
statements. The Committee has met formally since the year end and the Chair
has had independent conversations with the Audit partners both in Mozambique
and London where executive management have not been present.
Terms and conditions for Directors
The Non-Executive Chair and Non-Executive Directors do not have service
contracts but appointment letters setting out their terms of appointment. The
appointments may be terminated on three (3) months' notice by either party.
The Non-Executive Directors receive an annual base fee reflecting their
respective time commitments and do not receive any benefits in addition to
their fees, nor are they eligible to participate in any pension, bonus or
share-based incentive arrangements.
Directors' remuneration
Remuneration details are set out in note 9 to the financial statements.
Evaluation of Board performance
Given the Company's size, no formal review of the effectiveness of its
performance as a unit, as well as that of its committees and the individual
directors has been taken. Performance reviews are to be carried out internally
from time to time. Reviews will endeavour to identify skills development or
mentoring needs of directors and the wider senior management team.
The Board recognizes that the current procedures remain to be formally
implemented and therefore do not accord with the QCA Guidelines. However, it
is anticipated that these procedures will be augmented to a standard
appropriate for the size and stage of development of the Company.
Communication with shareholders
The Company aims to ensure all communications concerning the Group's
activities are clear, fair and accurate. The Board is however keen to improve
its dialogue with shareholders. The Company's website is regularly updated,
and announcements are posted onto the Company's website.
The results of voting on all resolutions in future general meetings will be
posted to the Company's website, including any actions to be taken as a result
of resolutions for which votes against have been received from at least 20
percent of independent shareholders.
Directors' report
The Directors the Company hereby present their annual report together with the
audited financial statements for the year ended 31 March 2022 for the Group.
Except where otherwise noted, amounts are presented in this Directors' report
in United States Dollars ('$' or 'US$').
1. Listing details
Agriterra is a non-cellular Guernsey registered company limited by shares,
whose ordinary shares ('Ordinary Shares') are quoted on the AIM Market of the
London Stock Exchange ('AIM') under symbol AGTA.
2. PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The principal activity of the Company is the investment in, development of and
operation of agricultural projects in Africa. The Group's current operations
are focussed on maize and beef in Mozambique. A review of the Group's
performance by business segment and future prospects are given in the Chair's
statement and strategic review, together with a review of the risks and
uncertainties impacting on the Group's long-term performance.
3. Results and Dividends
The Group results for the year ending 31 March 2022 show a loss after taxation
of US$ 2,270,000 (2021: loss of $ 2,194,000). The Directors do not recommend
the payment of a final dividend (2021: US$ nil). No interim dividends were
paid in the year (2021: US$ nil).
Further details on the Group's performance in the year are included in the
Chair's statement and strategic review.
4. DIRECTORS
4.1. Directors in office
The Directors who held office during the year and until the date of this
report were:
Director Position
CSO Havers Non-Executive Chair
R Sant'ana Afonso (appointed 1 April 2021, Resigned 31 July 2022 ) Chief Executive Officer
NWH Clayton Non-Executive Director
HBW Rudland Non-Executive Director
GR Smith Non-Executive Director
S Zandamela Non-Executive Director
4.2. Directors' interests
As at the date of this report, the interests of the Directors and their
related entities in the Ordinary Shares of the Company were:
Ordinary Shares held
HBW Rudland* 10,743,833
*Mr Rudland's interest is held through Magister Investments Limited
('Magister'). Magister is a private limited company incorporated in the
Republic of Mauritius, controlled by Mauritius International Trust Company
Limited, as trustee of the Casa Trust (a Mauritius registered trust). Mr.
Hamish Rudland is the settlor of the Casa Trust and the beneficiaries of the
Casa Trust are Mr. Rudland, his wife, and their three children.
4.3. Directors' emoluments
Details of the nature and amount of emoluments payable by the Company for the
services of its Directors during the financial year are shown in note 9 to the
financial statements.
4.4. Directors' indemnities
The Company has made qualifying third-party indemnity provisions for the
benefit of its Directors which remain in force at the date of this report.
5. Substantial Shareholdings
To the best of the knowledge of the Directors, except as set out in the table
below, there are no persons who, as of 20 September 2022, are the direct or
indirect beneficial owners of, or exercise control or direction over 3% or
more of the Ordinary Shares in issue of the Company.
Number of Ordinary Shares % Holding
Magister Investments Limited 10,743,833 50.58%
Gersec Trust Reg. 2,779,656 13.90%
Mr. William Philip Seymour Richards 982,500 4.63%
Global Resources Fund 678,886 3.20%
Peter Gyllenhammar AB 647,500 3.05%
6. EMPLOYEE INVOLVEMENT POLICIES
The Company places considerable value on the awareness and involvement of its
employees in the Group's performance. Within bounds of commercial
confidentiality, information is disseminated to all levels of staff about
matters that affect the progress of the Group and that are of interest and
concern to them as employees.
7. SUPPLIER PAYMENT POLICY AND PRACTICE
The Company's policy is to ensure that, in the absence of dispute, all
suppliers are dealt with in accordance with its standard payment policy which
is to abide by the terms of payment agreed with suppliers for each
transaction. Suppliers are made aware of the terms of payment. The number of
days of average daily purchases included in trade payables at 31 March 2022
was 58 days (2021: 32 days).
8. POLITICAL AND CHARITABLE DONATIONS
During the year no political and charitable donations were made in cash.
The most significant event for the year was the continuation of the COVID-19
pandemic as new variants were being discovered and in circulation. Despite
that the Country was struck again by 2 cyclones which had made landfall in the
Central and Northern parts of Mozambique region in December 2021 and March
2022. Although not as strong as Cyclone Idai these cyclones brought heavy
rains with localised flooding and destruction of crops, roads and
infrastructure especially in Tete province. Coupled to this was the conflict
in the north of Mozambique affecting the oil and gas sector. As a result of
the above many programs and initiatives were affected by the pandemic
resulting in little or no visits taking place for safety reasons and
compliance. However, we did assist in the following areas:
· DECA donated 10 tons of meal and 1 ton of beans to the displaced
families in Tete when cyclone Ana struck the region. This was co-ordinated
through the Ministry of Agriculture who was distributing the food into rural
areas
· A MOU was signed between the group of companies and CHORC, an
association of motorcyclists who through their own efforts support many
initiatives in the communities in need within the province. CHORC visited the
district hospital in Dombe where they assisted in food and perishables for the
children. They also visited 2 orphanages in the province donating food and
clothing. In all cases DECA contributed dry goods in the form of mealie meal
and snax
· DECA participated in World Children's Day where we donated Mealie
meal and Snax for over 600 children in conjunction with Save the Children for
the days event
9. SOCIAL AND COMMUNITY ISSUES
Due to the ongoing pandemic and the fact that most institutes were closed or
working online the Group did its best to facilitate and accommodate programs
with minimal risk. These programs involved working in smaller groups, in open
air and where the risk of spreading COVID-19 was minimal.
The Group continued its policies of spreading out shifts, reducing transport
numbers and opening up working spaces all went hand in hand with community
programs. We also worked closely and in line with legislative requirements
ensuring we were compliant at all times. This certainly introduced a new way
of operating in and out of the business.
Particular activities undertaken during the year have focused on (1)
practical, 'on the ground' training for students from various universities in
Mozambique studying, inter alia, production practices in beef and cattle,
milling practices (including mill engineering), veterinary sciences and animal
sciences; (2) dissemination of agricultural management knowledge and
practices; and medical assistance for employees during the pandemic.
One specific partnership to mention is that with Save the Children. DECA has
added the details of the national helpline to its 1kg packages, for children
needing assistance and in 1 year the organization has registered a 7% increase
in calls for Manica Province alone. This is attributed to the campaign and
partnership undertaken with Deca in registering call centre details on its
packaging.
Grain Division
Despite the difficulties of the pandemic, DECA did host small groups of
students coordinated through Vale de Zambeze. These students were from various
Universities and were spread out through the various operations in line with
the Companies Covid policy and protocols.
The following students attended the various operations as follows
- 2 students were allocated to DECA on a 3 month attachment in Food
Production and Engineering
- 2 students were also allocated to DECA Snax as Food
Technologists
Beef Division
During the FY Mozbife hosted the following students in the following sectors
of the business
- 2 students were attached to the Abattoir studying Food Technology
and Processing
- 1 student attached was studying Environmental Science
- 1 student was allocated to the feedlot studying Agricultural
Engineering
- 3 students were attached to the feedlot studying Animal Science
A 2 day workshop was also held with the 9 associations in Mozbife where all
the CSCs are registered and in operation. This workshop focused on husbandry
practices, communication and processes associated to cattle breeding and
condition.
10. INDEPENDENT AUDITOR AND STATEMENT OF PROVISION OF INFORMATION TO THE
INDEPENDENT AUDITOR
PKF Littlejohn LLP have expressed their willingness to continue in office as
independent auditor of the Company and a resolution to re-appoint them will be
proposed at the forthcoming Annual General Meeting.
The Directors who held office at the date of approval of this Directors'
report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's auditor is not aware and each Director has
taken all the steps that he ought to have taken as a Director to make himself
aware of any relevant audit information and to establish that the Company's
auditor is aware of that information.
11. ADDITIONAL INFORMATION AND ELECTRONIC COMMUNICATIONS
Additional information on the Company can be found on the Company's website at
www.agriterra-ltd.com (http://www.agriterra-ltd.com) .
The maintenance and integrity of the Company's website is the responsibility
of the Directors; the work carried out by the auditor does not involve
consideration of these matters and accordingly, the auditor accepts no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
The Company's website is maintained in compliance with AIM Rule 26.
By Order of the Board.
CSO Havers
Non-Executive Chair
29 September 2022
Statement of Directors' responsibilities
The Directors are responsible for preparing the Directors' Report and the
financial statements in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the '2008 Law') requires the
Directors to prepare Group financial statements for each financial year in
accordance with generally accepted accounting principles.
The Directors are required by the AIM Rules for Companies of the London Stock
Exchange to prepare Group financial statements in accordance with
International Accounting Standards as adopted by the United Kingdom ('UK').
The financial statements of the Group are required by law to give a true and
fair view and are required by IFRS as adopted by the UK to present fairly the
financial position and financial performance of the Group.
In preparing the Group financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether they have been prepared in accordance with IFRSs as
adopted by the UK; and
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements are properly prepared in
accordance with the Companies (Guernsey) Law, 2008. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Directors confirm they have discharged their responsibilities as noted
above.
Independent auditor's report to the members of Agriterra Limited
Opinion
We have audited the group financial statements of Agriterra Limited (the
'group') for the year ended 31 March 2022 which comprise the Consolidated
Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of
Changes in Equity, the Consolidated Cash Flow Statement and notes to the group
financial statements, including significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK-adopted international accounting standards.
In our opinion, the group financial statements:
· give a true and fair view of the state of the group's affairs as at
31 March 2022 and of its loss for the year then ended;
· have been properly prepared in accordance with UK-adopted
international accounting standards; and
· have been prepared in accordance with the requirements of the
Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the group 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 group financial statements in the UK, including
the FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 3 in the group financial statements, which indicates
that the group is reliant upon achieving sales volumes, selling prices, cost
reductions and renewal of its bank facility in order for the group to meet
committed expenditure requirements. There is currently uncertainty regarding
the renewal of the bank facility which is required to meet the working capital
requirement. As stated in note 3, these events or conditions indicate that a
material uncertainty exists that may cast significant doubt on the group's
ability to continue as a going concern. Our opinion is not modified in respect
of this matter.
In auditing the group financial statements, we have concluded that the
director's use of the going concern basis of accounting in the preparation of
the group financial statements is appropriate. Our evaluation of the
directors' assessment of the group's ability to continue to adopt the going
concern basis of accounting included:
· consideration of the group's objectives, policies and processes in
managing its working capital as well as exposure to financial, credit and
liquidity risks;
· reviewing the cash flow forecasts for the ensuing twelve months from
the date of approval of these group financial statements and assessment
thereof;
· performing sensitivity analysis on the cash flow forecast prepared by
management, and challenging the assumptions included thereto;
· reviewing the management's going concern memorandum assessment and
discussing with management regarding the future plans and availability of
funding; and
· reviewing the adequacy and completeness of disclosures in the group
financial statements.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
For the purposes of determining whether the financial statements are free from
material misstatement, we define materiality as the magnitude of misstatement
that makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be changed or
influenced. We also determine a level of performance materiality which we use
to assess the extent of testing needed to reduce an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. Materiality is used to
determine the group 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 during the course of the audit which
required a revision to our group materiality for the group financial
statements as a whole.
Materiality for the group financial statements was set at $205,000 (2021:
$254,000). This was calculated based on 1.75% of gross revenue for the year.
Using our professional judgement, we have determined this to be the principal
benchmark within the group financial statements as it will be most relevant to
stakeholders in assessing the financial performance of the group as the key
focus of the group is to grow its business to meet its working capital needs
by increasing revenue from operations.
Materiality for the significant components of the group ranged from $44,000
(2021: $41,000) to $108,000 (2021: $150,000) based on 1.75% of turnover for
each component.
Performance materiality for the group financial statements was set at $143,000
(2021: $178,000) being 70% of materiality for the group financial statements
as a whole respectively. The performance materiality for the significant
components is calculated on the same basis as group materiality. In
determining performance materiality, we considered the following factors:
· our cumulative knowledge of the group and its environment, including
industry specific trends;
· the change in the level of judgement required in respect of the key
accounting estimates;
· the stability in key management personnel; and
· the level of misstatements identified in prior periods
We agreed to report to those charged with governance all corrected and
uncorrected misstatements we identified through our audit with a value in
excess of $10,000 (2021: $12,000). We also agreed to report any other audit
misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, together with areas subject to
significant management judgement.
In designing our audit, we determined materiality and assessed the risks of
material misstatement in the group financial statements. In particular we
looked at areas involving significant accounting estimates and judgements by
the directors and considered future events that are inherently uncertain.
These included, but were not limited to the valuation of biological assets and
the impairment of the underlying assets of the beef and grain divisions. We
also addressed the risk of management override of internal controls, including
among other matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
The scope of our audit focused on the principal area of operation, being
Mozambique, where subsidiaries of the ultimate parent company trade. Each
component was assessed as to whether they were significant or not to the group
by either their size or risk. The ultimate parent company and the three
operating subsidiaries were considered to be significant due to identified
risk and size. A joint venture was set up within the group was considered to
be material but not significant. We have performed the full scope audit of the
ultimate parent company that is registered in Guernsey. The four remaining
components located in Mozambique have been subject to full scope audits by
component auditor. As group auditor, we maintained oversight and regular
contact with the component auditor throughout all stages of the audit and we
were responsible for the scope and direction of their work.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the group 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 group
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section we
have determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter How the scope of our audit responded to the key audit matter
Valuation of Biological Assets (see Note 15)
The group has a material biological asset in respect of livestock within the Our work in this area included reviewing the work performed by the component
beef division. In accordance with IAS 41- Agriculture, this is held at fair auditor in relation to the:
value and there are significant estimates and assumptions required to
determine the fair value. As such, there is a risk that the biological asset Ø documents prepared by the board detailing the basis of the valuation of the
is misstated in the group financial statements and the valuation is not biological assets, including the key assumptions and estimation factors
appropriate. therein;
Ø reasonableness of the underlying inputs of the fair value calculation;
Ø physical verification of the assets as at the reporting date; and
Ø consideration of whether there were any indicators of impairment
We reviewed the financial presentation and disclosures in the group financial
statements to ensure it is in accordance with requirements of IAS 41.
Impairment of the underlying assets of the beef and grain division (see Note
4)
The group's assets relate to beef and grain divisions and the continuing Our work in this area included reviewing the work performed by the component
losses incurred by the group may indicate that there is a risk these assets auditor in relation to:
are impaired.
Management is required to assess whether there are potential indicators of
impairment at each reporting date and, if potential indicators of impairment Ø ownership and good title to the group's assets;
are identified, management are required to perform a full assessment of the
recoverable value of the assets.
Ø understanding of the internal control environment in operation surrounding
the impairment review of fixed assets; and
Given the uncertainty in the future production and sales profiles and the
volatility in cost, there is a risk that management may not adequately
identify all impairment indicators.
Ø review of assets for any indicators of impairment;
We further performed the below procedures:
Ø the review of managements considerations of impairment, including
challenging the key assumptions made;
Ø the sensitivity analysis performed on the cash flow forecast prepared by
management, and
Ø ensuring the presentation and disclosures in the group financial statements
are sufficient and in accordance with requirements of IAS 36- Impairment of
assets.
Other information
The other information comprises the information included in the annual report,
other than the group financial statements and our auditor's report thereon.
The directors are responsible for the other information contained within the
annual report. Our opinion on the group financial statements does not cover
the other information and we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the
group financial statements or our knowledge obtained in the course of 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 this gives rise to a material misstatement in the group
financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies (Guernsey) Law, 2008 requires us to report to you if, in
our opinion:
· adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by us; or
· the group financial statements are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the statement of director's responsibilities, the
directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of group financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the group financial statements
Our objectives are to obtain reasonable assurance about whether the group
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 group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and the industry in which
it operates to identify laws and regulations that could reasonably be expected
to have a direct effect on the group financial statements. We obtained our
understanding in this regard through discussions with management and the
application of our cumulative audit knowledge and experience of the industry.
· We determined the principal laws and regulations relevant to the
group in this regard to be those arising from AIM Listing Rules, Companies
(Guernsey) Law 2008, UK-adopted international accounting standards, Employment
Laws, Health and Safety Regulations and License requirements and local laws
and regulations in Mozambique. The team remained alert to instances of
non-compliance with laws and regulations throughout the audit.
· We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the group with those
laws and regulations. These procedures included, but were not limited to:
enquiries of management and legal counsel; discussion with component auditor
about compliance with laws and regulations in Mozambique; review of minutes of
meetings; review of the Regulatory News Service announcements and
correspondence.
· We have also discussed among the engagement how and where fraud might
occur and any potential indicators of fraud. We then challenged the key
assumptions made by management in respect of their significant accounting
estimates (see key audit matter).
· As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
· The component auditors designed audit procedures for each of the
components. This included reviewing journal entries for evidence of material
misstatement due to fraud; reviewing accounting estimates, judgements and
assumptions for evidence of management bias; and performing a review of the
bank transactions to ensure appropriate authorisation.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the group financial statements or non-compliance with
regulation. This risk increases the more that compliance with a law or
regulation is removed from the events and transactions reflected in the group
financial statements, as we will be less likely to become aware of instances
of non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the group
financial statements is located on the Financial Reporting Council's website
at: www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with our engagement letter dated 1 August 2022. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Joseph Archer (Engagement Partner) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Registered Auditor London E14 4HD
29 September 2022
Consolidated income statement
For the year ended 31 March 2022
Year Year
ended ended
31 March 31 March 2021
2022
Note US$000 US$000
Revenue 5 10,277 14,250
Cost of sales (7,715) (11,581)
Increase/(Decrease) in fair value of biological assets 1 (615)
Gross profit 2,563 2,054
Operating expenses (3,490) (3,156)
Other income 86 78
Profit on disposal of property, plant and equipment 20 37
Operating loss 6 (821) (987)
Finance costs 10 (1,627) (1,207)
Share of profit in equity-accounted investees, net of tax 23 55 -
Loss before taxation (2,393) (2,194)
Taxation 11 123 -
Loss for the year attributable to owners of the Company (2,270) (2,194)
US cents US cents
Earnings per Share
Basic and diluted earnings per share 12 (10.7) (10.3)
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year Year
ended ended
31 March 31 March
2022 2021
US$000 US$000
Loss for the year (2,270) (2,194)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences 932 1,433
Items that will not be reclassified to profit or loss
Revaluation of Property, plant and equipment 13 - 12,563
Other comprehensive income for the year 932 13,996
Total comprehensive income for the year attributable to owners of the Company (1,338) 11,802
Consolidated statement of financial position
As at 31 March 2022
31 March 31 March
2022 2021
Note US$000 US$000
Non-current assets
Property, plant and equipment 13 25,051 23,974
Intangible assets 14 18 59
Equity-accounted investees 23 56 1
25,125 24,034
Current assets
Biological assets 15 463 451
Inventories 16 2,176 933
Trade and other receivables 17 824 1,752
Cash and cash equivalents 107 231
3,570 3,367
Total assets 28,695 27,401
Current liabilities
Borrowings 18 8,809 4,016
Trade and other payables 19 960 2,046
9,769 6,062
Net current liabilities (6,199) (2,695)
Non-current liabilities
Borrowings 18 1,003 2,409
Deferred tax liability 11 6,243 5,912
7,246 8,321
Total liabilities 17,015 14,383
Net assets 11,680 13,018
Share capital 22 3,373 3,373
Share premium 151,442 151,442
Share based payment reserve 67 87
Revaluation reserve 12,312 12,563
Translation reserve (16,008) (16,940)
Accumulated loss (139,506) (137,507)
Equity attributable to equity holders of the parent 11,680 13,018
The financial statements on pages 18 to 46 were approved and authorised for
issue by the Board of Directors on 29 September 2022.
Signed on behalf of the Board of Directors by:
CSO Havers
Chair
29 September 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Share premium Share based payment reserve Translation reserve Revaluation reserve Accumulated Total
losses
capital Equity
Note US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1 April 2020 3,373 151,442 87 (18,373) - (135,313) 1,216
Loss for the year - - - - - (2,194) (2,194)
Other comprehensive income:
Revaluation of land and buildings - - - - 12,563 - 12,563
Exchange translation gain on foreign operations restated - - - 1,433 - - 1,433
Total comprehensive income for the year - - - 1,433 12,563 (2,194) 11,802
Transactions with owners
Balance at 31 March 2021 3,373 151,442 87 (16,940) 12,563 (137,507) 13,018
Loss for the year - - - - - (2,270) (2,270)
Other comprehensive income:
Exchange translation gain on foreign operations - - - 932 - - 932
Total comprehensive income for the year - - - 932 - (2,270) (1,338)
Transactions with owners
Share based payments 24 - - (20) - - 20 -
Revaluation surplus realised - - - - (251) 251
Total transactions with owners for the year - - (20) - (251) 271 -
Balance at 31 March 2022 3,373 151,442 67 (16,008) 12,312 (139,506) 11,680
Consolidated cash flow statement
For the year ended 31 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Note US$000 US$000
Cash flows from operating activities
Loss before tax (2,393) (2,194)
Adjustments for:
Amortisation and depreciation 13/14 874 574
Profit on disposal of property, plant and equipment (20) (47)
Foreign exchange gain 162 1,411
Net decrease in biological assets 15 (12) (401)
Decrease in value of biological assets 15 (1) 615
Share of profit in associate 23 (55) -
Net finance costs 10 1,627 1,207
Operating cash flows before movements in working capital 182 1,165
Increase in inventories (1,243) (108)
Decrease/(Increase) in trade and other receivables 928 (503)
Decrease in trade and other payables (1,086) (1,269)
Net cash used in operating activities (1,219) (715)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment net of expenses 20 47
incurred
Acquisition of property, plant and equipment 13 (79) (77)
Acquisition of intangible assets 14 - (9)
Net cash used in investing activities (59) (39)
Cash flows from financing activities
Net draw down of overdrafts 18 2,236 1,170
Net draw down of loans 18 644 43
Net repayment of leases (99) (55)
Finance costs (1,627) (1,207)
Net cash generated from / (used in) financing activities 1,154 (49)
Net decrease in cash and cash equivalents (124) (803)
Effect of exchange rates on cash and cash equivalents - -
Cash and cash equivalents at beginning of the year 231 1,034
Cash and cash equivalents at end of the year 107 231
Notes to the consolidated financial statements
1. GeNERAL INFORMATION
Agriterra is incorporated and domiciled in Guernsey, the Channel Islands, with
registered number 42643. Further details, including the address of the
registered office, are given on page 46. The nature of the Group's operations
and its principal activities are set out in the Directors' report. A list of
the investments in subsidiaries and associate companies held directly and
indirectly by the Company during the year and at the year-end, including the
name, country of incorporation, operation and ownership interest is given in
note 3.
The reporting currency for the Group is the US Dollar ('$' or 'US$') as it
most appropriately reflects the Group's business activities in the
agricultural sector in Africa and therefore the Group's financial position and
financial performance.
The financial statements have been prepared in accordance with International
Accounting Standards as adopted by United Kingdom.
The financial statements have been prepared on the historical cost basis,
except for the following items, which are measured at on alternative basis on
each reporting date:
Items Measurement basis
Biological assets Fair value
Property, plant and equipment - Land and building Subsequent measured at revalued amount- i.e. fair value at the date of
revaluation less subsequent depreciation and impairment losses.
2. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
Adoption of new and revised Standards
During the current year, the Group has adopted all of the new and revised
standards and interpretations issued by the IASB and the IFRS-IC that are
relevant to its operations and effective for annual reporting periods
beginning on 1 April 2021. The revised standards and interpretations has not
resulted in material changes to the Group's accounting policies.
The following new and amended standards are not expected to have a significant
impact on the Group's separate financial statements in the future being FY
2023.
· Onerous Contracts: Cost of Fulfilling a Contract (Amendments to IAS
37).
· COVID-19: Related Rent Concessions (Amendment to IFRS 16).
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16).
· Reference to Conceptual Framework (Amendments to IFRS 3).
· Classification of Liabilities as Current or Non-current (Amendments
to IAS 1).
· Insurance Contracts and amendments to Insurance Contracts (Amendment
to IFRS 17)
· Disclosure of Accounting policies (Amendment to IAS 1 and IFRS
Practice Statement 2).
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared on a historical cost basis, except
for certain financial instruments, biological assets and share based payments.
Historical cost is generally based on the fair value of the consideration
given in exchange for the assets acquired. The principal accounting policies
adopted are set out below in this note.
Going concern
The Company has prepared forecasts for the Group's ongoing businesses covering
the period of 12 months from the date of approval of these financial
statements. These forecasts are based on assumptions including, inter alia,
that there are no significant disruptions to the supply of maize or cattle to
meet its projected sales volumes and that key inputs are achieved, such as
forecast selling prices and volume, budgeted cost reductions, and projected
weight gains of cattle in the feedlot. They further take into account working
capital requirements and currently available borrowing facilities.
These forecasts show that, following the debt restructuring after the period
end (note 26), with active management of working capital and the timing of
capital expenditure, there is sufficient headroom under the banking facilities
currently available to the Group. Certain short-term facilities fall due for
renewal in June 2023. The group expect to renew this financing facilities. The
shareholder loan facility amounts to USD 7.9 million and was utilised to repay
commercial debt and secure grain for the current year financial year.
The Company's focus remains on continuing to improve operational performance
of the Grain and Beef divisions with emphasis on volume, cost reduction and
pricing to increase gross margins.
Over the last 12 months, the Grain division has made significant progress in
resolving the operating challenges to improve operating margins by controlling
the cost of maize and improving mealie meal extraction, but was unable to
achieve budgeted sales volumes which affected the overall performance of the
Grain division. A low positive EBIDTA of US$5355,000 was achieved and the
division was burdened with high finance costs. A loss of US$1.4 million was
incurred in the Grain division. With the divisions debt restructured after the
year end, the current year Grain division strategy is based on continuing the
improved operational performance achieved in prior year.
The Beef division has shown resilient performance even though it was operating
at less than 40% capacity. Most of the costs are fixed in nature and
efficiencies can only be improved by ramping up volume. The Beef division will
be supported with US$0.3 million to ramp up feedlot processing in the next
financial year. Beef division is expected to at least break even by 31 March
2023, processing at least 800 animals per month.
Snax division is expected to continue to penetrate the market. Sales revenue
increased to US$1.4 million and demand is strong in the market. A new extruder
will be installed to increase the production capacity of Snax division. After
the installation of the new extruder, Snax division will have the capability
to generate US$0.5 million in sales per month.
Corporate overheads are forecast to be consistent with the current run rate.
These divisional forecasts for FY-23 show a significant improvement in
operating performance as compared to that reported for the year ended 31 March
2022. However, there can be no certainty that these plans will be successful,
and the forecasts are sensitive to small adverse changes in the operations of
the divisions. As set out in notes 18 and 21 the Group is funded by a
combination of short and long-term borrowing facilities. The group has repaid
$6.3m of overdraft facilities after year end and the Group is required to make
$2.4m of repayments in respect of the bank loan instalments amount together
with principal on finance leases of $115,000. As set out in note 26, the Group
debt has been refinanced since the year end.
Based on the above, whilst there are no contractual guarantees, the directors
are confident that the existing and new financing will be available to the
Group. The directors, with the operating initiatives already in place and
funding options available are confident that the Group will achieve its cash
flow forecasts. Therefore, the directors have prepared the financial
statements on a going concern basis.
The forecasts show that the Group needs to achieve its operating targets in
order to remain within its existing bank and shareholder loan facilities and
to meet its commitments as they fall due. These conditions and events indicate
the existence of material uncertainties that may cast significant doubt upon
the Group's ability to continue as a going concern and the Group companies may
therefore be unable to realise their assets and discharge their liabilities in
the ordinary course of business. The auditors make reference to going concern
in their audit report by way of a material uncertainty. These financial
statements do not include the adjustments that would result if the Group were
unable to continue as a going concern.
Basis of consolidation
The Group accounts for business combinations using the acquisition method when
the acquired set of activities and assets meets the definition of a business
and control is transferred to the Group. In determining whether a particular
set of activities and assets is a business, the Group assesses whether the set
of assets and activities acquired includes, at a minimum, an input and
substantive process and whether the acquired set has the ability to produce
outputs.
The consideration transferred in the acquisition is generally measured at fair
value, as are the identifiable net assets acquired. Any goodwill that arises
is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity securities.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group 'controls' an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date on which
control commences until the date on which controls ceases.
Intra-Group transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are eliminated in
the same way as unrealised gains, but only to the extent that there is no
evidence of impairment.
Interest in equity accounted investees
The Group's interest in equity accounted investees comprise interest in a
joint venture.
A joint venture is an arrangement in which the Group has joint control,
whereby the Group has rights to the net assets of the arrangement rather than
rights to its assets and obligations for its liabilities.
Interest in Joint Ventures are accounted for using the equity method. There
are initially recognised at cost, which include transaction cost. Subsequent
to initial recognition, the consolidated financial statements include the
Group's share of the profit or loss and OCI of the equity accounted investees,
until the date on which joint control ceases.
As at 31 March 2022, the Company held equity interests in the following
undertakings:
Direct investments
Proportion held of equity instruments Country of incorporation and place of business Nature of business
Subsidiary undertakings
Agriterra (Mozambique) Limited 100% Guernsey Holding company
Indirect investments of Agriterra (Mozambique) Limited
Proportion held of equity instruments Country of incorporation and place of business Nature of business
Subsidiary undertakings
DECA - Desenvolvimento E Comercialização Agrícola Limitada 100% Mozambique Grain
Compagri Limitada 100% Mozambique Grain
Mozbife Limitada 100% Mozambique Beef
Carnes de Manica Limitada 100% Mozambique Dormant
Aviação Agriterra Limitada 100% Mozambique Dormant
Joint venture
DECA Snax Limitada 50% Mozambique Snax
Foreign currency
The individual financial statements of each company in the Group are prepared
in Mozambican Metical, the currency of the primary economic environment in
which it operates (its 'functional currency'). The consolidated financial
statements are presented in US Dollars.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the
date of the transaction. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's operations are translated at exchange rates
prevailing at the balance sheet date. Income and expense items are translated
at the average exchange rates for the year, unless exchange rates fluctuate
significantly during the year, in which case exchange rates at the date of
transactions are used. Exchange differences arising from the translation of
the net investment in foreign operations and overseas branches are recognised
in other comprehensive income and accumulated in equity in the translation
reserve. Such translation differences are recognised as income or expense in
the year in which the operation or branch is disposed of.
The following are the material exchange rates applied by the Group:
Average Rate Closing Rate
2022 2021 2022 2021
Mozambican Metical: US$ 66.31 68.12 63.83 68.78
Operating segments
The Chief Operating Decision Maker is the Board. The Board reviews the
Company's internal reporting in order to assess performance of the business.
Management has determined the operating segments based on the reports reviewed
by the Board which consider the activities by nature of business.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable for goods and services provided in the normal course of business,
net of discounts, value added taxes and other sales related taxes.
Performance obligations and timing of revenue recognition:
All of the Group's revenue is derived from selling goods with revenue
recognised at a point in time when control of the goods has transferred to the
customer. This is generally when the goods are collected by or delivered to
the customer. There is limited judgement needed in identifying the point
control passes once physical delivery of the products to the agreed location
has occurred, the Group no longer has physical possession, usually it will
have a present right to payment. Consideration is received in accordance with
agreed terms of sale.
Determining the contract price:
All of the Group's revenue is derived from fixed price lists and therefore the
amount of revenue to be earned from each transaction is determined by
reference to those fixed prices.
Allocating amounts to performance obligations:
For most sales, there is a fixed unit price for each product sold. Therefore,
there is no judgement involved in allocating the price to each unit ordered.
There are no long-term contracts in place. Sales commissions are expensed as
incurred. No practical expedients are used.
Operating loss
Operating loss is stated before investment revenues, other gains and losses,
finance costs and taxation.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial year of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. The Group did not incur
any borrowing costs in respect of qualifying assets in any year presented.
All other borrowing costs are recognised in profit or loss in the year in
which they are incurred.
Share based payments
The Company issues equity-settled share-based payments to certain employees of
the Group. These payments are measured at fair value (excluding the effect of
non-market based vesting conditions) at the date of grant and the value is
expensed on a straight-line basis over the vesting year, based on the
Company's estimate of the shares that will eventually vest and adjusted for
non-market based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life
used in the model is adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions and behavioural
considerations.
Employee benefits
Short-term employee benefits
Short-term employee benefits include salaries and wages, short-term
compensated absences and bonus payments. The Group recognises a liability and
corresponding expense for short-term employee benefits when an employee has
rendered services that entitle him/her to the benefit.
Post-employment benefits
The Group does not contribute to any retirement plan for its employees. Social
security payments to state schemes are charged to profit and loss as the
employee's services are rendered.
Leases
The Group as a lessee.
The Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
• Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual
value guarantees;
• The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated
statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a corresponding adjustment
to the related right-of-use asset) whenever:
• The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of exercise of
a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
• The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value, in which
cases the lease liability is remeasured by discounting the revised lease
payments using an unchanged discount rate (unless the lease payments change is
due to a change in a floating interest rate, in which case a revised discount
rate is used).
• A lease contract is modified, and the lease modification is
not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated
statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired
and accounts for any identified impairment loss as described in the 'Property,
Plant and Equipment' policy.
Variable rents that do not depend on an index or rate are not included in the
measurement of the lease liability and the right-of-use asset. The related
payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in operating
expenses in profit or loss.
Taxation
The Company is resident for taxation purposes in Guernsey and its income is
subject to income tax, presently at a rate of zero per cent per annum. The
income of overseas subsidiaries is subject to tax at the prevailing rate in
each jurisdiction.
The income tax expense for the year comprises current and deferred tax. Income
tax is recognised in the income statement except to the extent that it relates
to items recognised in other comprehensive income or directly in equity when
tax is recognised in other comprehensive income or directly in equity as
appropriate. Taxable profit differs from accounting profit as reported in the
income statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible.
Current tax expense is the expected tax payable on the taxable income for the
year. It is calculated on the basis of the tax laws and rates enacted or
substantively enacted at the balance sheet date and includes any adjustment to
tax payable in respect of previous years. Deferred tax is calculated using the
balance sheet liability method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax assets are
recognised to the extent that it is probable that taxable profit will be
available against which the asset can be utilised. This requires judgements to
be made in respect of the availability of future taxable income.
The Group's deferred tax assets and liabilities are calculated using tax rates
that are expected to apply in the year when the liability is settled or the
asset realised based on tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred income tax assets and liabilities are offset only when there is a
legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to
income taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where there is an intention to settle the
balances on a net basis.
No deferred tax asset or liability is recognised in respect of temporary
differences associated with investments in subsidiaries, branches and joint
ventures where the Group is able to control the timing of reversal of the
temporary differences and it is probable that the temporary differences will
not reverse in the foreseeable future.
Property, plant and equipment
Recognition
Items of property, plant and equipment are stated at historical purchase cost.
Cost includes expenditure that is directly attributable to the acquisition.
The cost of self-constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the assets to a
working condition for their intended use, the costs of dismantling and
removing the items and restoring the site on which they are located and
borrowing costs on qualifying assets.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably.
Subsequent measurement
Following initial recognition at cost, items of land and buildings are
subsequently measured using the revaluation model being the fair value at the
date of revaluation less any subsequent depreciation and subsequent impairment
losses. The revaluation model is only used when fair value can be reliably
measured. Revaluations are made regularly enough to ensure that at any
reporting date the carrying amount does not differ materially from the fair
value. Revaluations are performed by independent sworn valuators. When an item
of property, plant and equipment is revalued, the entire class of property,
plant, and equipment to which the asset belongs is revalued. Only land and
buildings are subsequently valued using the revaluation model and all others
are valued at cost model.
Any revaluation surplus is credited to revaluation reserve as part of other
comprehensive income, except to the extent that it reverses a revaluation
decrease of the same asset previously recognized in the profit or loss, in
which case the increase is recognized in the profit or loss. A revaluation
deficit is recognized in profit or loss, except to the extent that it offsets
an existing surplus on the same recognized in the asset revaluation reserve.
The revaluation reserve is realized over the period of the useful life of the
property by transferring the realized portion from the revaluation reserve to
retained earnings.
Depreciation
Depreciation is charged on a straight-line basis over the estimated useful
lives of each item, as follows:
Land and buildings:
Land Nil
Buildings and leasehold improvements 2% - 33%
Plant and machinery 5% - 25%
Motor vehicles 20% - 25%
Other assets 10% - 33%
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. Gains and losses on disposals are
determined by comparing proceeds received with the carrying amount of the
asset immediately prior to disposal and are included in profit and loss.
Intangible assets
Intangible assets comprise investment in management information and financial
software. This is amortised at 10% straight line.
Impairment of property, plant and equipment and intangible assets
At each balance sheet date, the Company reviews the carrying amounts of its
tangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised initially against amounts included in the revaluation reserve in
respect of the asset and subsequently in profit and loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit and loss.
Biological assets
Consumer biological assets, being the beef cattle herd, are measured in
accordance with IAS 41, 'Agriculture' at fair value less costs to sell, with
gains and losses in the measurement to fair value recorded in profit and loss.
Breeding cattle, comprising bulls, cows and heifers are expected to be held
for more than one year, and are classified as non-current assets. The
non-breeding cattle comprise animals that will be grown and sold for slaughter
and are classified as current assets.
Cattle are recorded as assets at the year-end and the fair value is determined
by the size of the herd and market prices at the reporting date.
Cattle ceases to be a biological asset from the point it is slaughtered, after
which it is accounted for in accordance with the accounting policy below for
inventories.
Forage crops are valued in accordance with IAS 41, 'Agriculture' at fair value
less costs to harvest. As there is no ready local market for forage crops,
fair value is calculated by reference to the production costs of previous
crops. The cost of forage is charged to profit or loss over the year it is
consumed.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses. The
cost of inventories is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition.
Financial assets and financial liabilities are recognised in the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost,
at fair value through other comprehensive income ("FVTOCI") or at fair value
through profit or loss ("FVPL") depending upon the business model for managing
the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVPL, at the end of each reporting period. The
Group applies a simplified approach to measure the credit loss allowance for
trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year-end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The Group applies a general approach on all other
receivables classified as financial assets. The general approach recognises
lifetime expected credit losses when there has been a significant increase in
credit risk since initial recognition.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
party. The Group derecognises financial liabilities when the Group's
obligations are discharged, cancelled or have expired.
Trade and other receivables
Trade receivables are accounted for at amortised cost. Trade receivables do
not carry any interest and are stated at their nominal value as reduced by
appropriate expected credit loss allowances for estimated recoverable amounts
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material. Other
receivables are accounted for at amortised cost and are stated at their
nominal value as reduced by appropriate expected credit loss allowances.
Financial liabilities
The classification of financial liabilities at initial recognition depends on
the purpose for which the financial liability was issued and its
characteristics.
All purchases of financial liabilities are recorded on trade date, being the
date on which the Group becomes party to the contractual requirements of the
financial liability. Unless otherwise indicated the carrying amounts of the
Group's financial liabilities approximate to their fair values.
The Group's financial liabilities consist of financial liabilities measured at
amortised cost and financial liabilities at fair value through profit or loss.
A financial liability (in whole or in part) is derecognised when the Group has
extinguished its contractual obligations, it expires or is cancelled. Any gain
or loss on derecognition is taken to the statement of comprehensive income.
Borrowings
Borrowings are included as financial liabilities on the Group balance sheet at
the amounts drawn on the particular facilities net of the unamortised cost of
financing. Interest payable on those facilities is expensed as finance cost in
the period to which it relates.
Trade and other payables
Trade and other payables are initially recorded at fair value and subsequently
carried at amortised cost.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
The fair value measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either in the principal
market for the asset or liability or, in the absence of a principal market, in
the most advantageous market for the asset or liability. The principal or the
most advantageous market must be accessible to the Company.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
For all other financial instruments not traded in an active market, the fair
value is determined by using valuation techniques deemed to be appropriate in
the circumstances. Valuation techniques include the market approach (i.e.
using recent arm's length market transactions adjusted as necessary and
reference to the current market value of another instrument that is
substantially the same) and the income approach (i.e. discounted cash flow
analysis and option pricing models making as much use of available and
supportable market data as possible).
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by re-assessing the categorisation (based on
the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting year.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group's accounting policies which are described in
note 3, the directors are required to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year or in the year of
the revision and future years if the revision affects both current and future
years. The effect on the financial statements of changes in estimates in
future years could be material on property plant and equipment (Note 13), and
biological assets (Note15).
Impairment and revaluation of land and buildings
Impairment reviews for non-current assets are carried out at each balance
sheet date in accordance with IAS 36, Impairment of Assets. Reported losses in
the Beef and Grain divisions were considered to be indications of impairment
and a formal impairment review was undertaken to review whether the carrying
amounts of non-current assets are greater than the recoverable amount.
The impairment reviews are sensitive to various assumptions, including the
expected sales forecasts, cost assumptions, rent per square metre, capital
requirements, and discount rates among others depending on how the recoverable
amount is determined. The forecasts of future cash flows were derived from the
operational plans in place to address the requirement to increase both volumes
and margins across the two divisions. Real commodity prices were assumed to
remain constant at current levels.
As at 31 March 2021, the Group engaged an Independent real estate valuer to
compute the fair value of land and buildings which also assisted in
determining the recoverable amount whilst revaluing non-current assets. The
Independent valuer used Royal Institute of Chartered Surveyors (RICS) and
International Financial Reporting Standards to determine the fair value of
land and buildings. Non-current assets fair value was increased to $23.4
million from a carrying amount of $4.9 million. Based on the assessment
performed by the independent real estate valuers at 31 March 2021, and the
improved operational outlook, management have concluded that, at 31 March
2022, non-current assets are not impaired as the recoverable value of
non-current assets is higher than and or equivalent to the carrying amount of
the assets.
No impairments were recorded in the year ended 31 March 2022 or the year ended
31 March 2021. The carrying amount of non-current assets is US$25.1million
(2021: $24.0 million).
Biological assets
Cattle are accounted for as biological assets and measured at their fair value
at each balance sheet date. Fair value is based on the estimated market value
for cattle in Mozambique of a similar age and breed, less the estimated costs
to bring them to market, converted to US$ at the exchange rate prevailing at
the year end. Changes in any estimates could lead to the recognition of
significant fair value changes in the consolidated income statement, or
significant changes in the foreign currency translation reserve for changes in
the Metical to US$ exchange rate.
The herd may be categorised as either the breeding herd or slaughter herd,
depending on whether it was principally held for reproduction or slaughter.
The value of the herd held for slaughter disclosed as a current asset was
$0.5m (31 March 2021: $0.5m).
5. Segment reporting
The Board considers that the Group's operating activities comprise the
segments of Grain, Snax and Beef and which are undertaken in Africa. In
addition, the Group has certain other unallocated expenditure, assets and
liabilities, either located in Africa or held as support for the Africa
operations.
Segment revenue and results
The following is an analysis of the Group's revenue and results by operating
segment:
Year ending 31 March 2022 Grain Beef Snax(*) Unallo-cated Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000
Revenue
External sales((2)) 7,118 3,159 - - - 10,277
Inter-segment sales((1)) 226 - - - (226) -
7,344 3,159 - - (226) 10,277
Segment results
- Operating loss (55) (444) - (429) - (928)
- Interest expense (1,548) (79) - - - (1,627)
- Other gains and losses 88 19 - - - 107
- Share of profit in equity-accounted investees - - 55 - - 55
Loss before tax (1,515) (504) 55 (429) - (2,393)
Income tax 111 12 - - - 123
Loss after tax (1,404) (492) 55 (429) - (2,270)
(*) The Snax division is equity accounted for as a Joint venture. Its income
statement is set out in note 23.
Year ending 31 March 2021 Grain Beef Snax(1) Unallo-cated Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000
Revenue
External sales((2)) 11,061 3,189 - - - 14,250
Inter-segment sales((1)) 309 - - - (309) -
11,370 3,189 - - (309) 14,250
Segment results
- Operating profit / (loss) 275 (970) - (389) - (1,084)
- Interest expense (1,071) (136) - - - (1,207)
- Other gains and losses 54 43 - - - 97
Loss before tax (742) (1,063) - (389) - (2,194)
Income tax - - - - - -
Loss after tax (742) (1,063) - (389) - (2,194)
(1) Inter-segment sales are charged at prevailing market prices.
(2) Revenue represents sales to external customers and is recorded in the country
of domicile of the Company making the sale. Sales from the Grain and Beef
divisions are principally for supply to the Mozambique market.
The segment items included in the consolidated income statement for the year
are as follows:
Year ending 31 March 2022 Grain Beef Snax Unallo-cated Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000
Depreciation and amortisation 502 359 - 13 - 874
Year ending 31 March 2021 Grain Beef Snax Unallo-cated Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000
Depreciation and amortisation 181 380 - 13 - 574
Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and equipment, biological
assets, inventories, trade and other receivables and cash and cash
equivalents. Segment liabilities comprise operating liabilities, including an
overdraft financing facility in the Grain segment, and bank loans and
overdraft financing facilities in the Beef segment.
Capital expenditure comprises additions to property, plant and equipment.
The segment assets and liabilities at 31 March 2022 and capital expenditure
for the year then ended are as follows:
Grain Beef Snax Unallocated Total
US$000 US$000 US$000 US$000 US$000
Assets 23,496 5,133 56 10 28,695
Liabilities (15,838) (973) - (204) (17,015)
Capital expenditure 65 14 - - 79
Segment assets and liabilities are reconciled to Group assets and liabilities
as follows:
Assets Liabilities
US$000 US$000
Segment assets and liabilities 28,685 (16,811)
Unallocated:
Intangible asset - -
Other receivables 10 -
Cash and cash equivalents - -
Accrued liabilities - (204)
28,695 (17,015)
The segment assets and liabilities at 31 March 2021 and capital expenditure
for the year then ended are as follows:
Grain Beef Snax Unallocated Total
US$000 US$000 US$000 US$000 US$000
Assets 21,495 5,883 1 22 27,401
Liabilities (12,518) (1,729) - (136) (14,383)
Capital expenditure 48 29 - - 77
Segment assets and liabilities are reconciled to Group assets and liabilities
as follows:
Assets Liabilities
US$000 US$000
Segment assets and liabilities 27,379 (14,246)
Unallocated:
Intangible asset 14 -
Other receivables 8 -
Cash and cash equivalents - -
Accrued liabilities - (137)
27,401 (14,383)
Key performance Indicators
The Board considers that earnings before interest, tax, depreciation and
amortisation ("EBITDA") is a key performance indicator in measuring
operational performance. EBITDA is a non IFRS measure and alternative
performance measure for the group which is calculated as follows:
Year ending 31 March 2022 Grain Beef Snax Unallocated Total
US$000 US$000 US$000 US$000 US$000
(Loss) / profit before tax (1,515) (504) 55 (429) (2,393)
- Interest expense 1,548 79 - - 1,627
- Depreciation and amortisation charge 502 359 - 13 874
- Share of profit in equity-accounted investees - - (55) - (55)
EBITDA 535 (66) - (416) 53
Year ending 31 March 2021 Grain Beef Snax Unallocated Total
US$000 US$000 US$000 US$000 US$000
Loss before tax (742) (1,063) - (389) (2,194)
- Interest expense 1,071 136 - - 1,207
- Depreciation and amortisation charge 181 380 - 13 574
EBITDA 510 (547) - (376) (413)
Significant customers
In the year ended 31 March 2022, two largest customers of the Grain segment
generated revenue of $3.2 million (31 March 2021: $3.1m) constituting 44% (31
March 2021: 28%) of the Grain division's revenue. The two largest customers of
the Beef segment generated revenue of $0.2m (31 March 2021: $1 million)
amounting to 9% (31 March 2021:30%) of the Beef division's revenue.
6. Operating loss
Operating loss has been arrived at after charging / (crediting):
Year Year
ended ended
31 March 2022 31 March 2021
US$000 US$000
Depreciation of property, plant and equipment (see note 13) 831 534
Amortisation of intangible asset (see note 14) 43 40
Profit on disposal of property, plant and equipment (20) (47)
Net foreign exchange (gain)/loss (1) 615
Staff costs (see note 8) 865 743
7. Auditors Remuneration
Amounts payable to the auditors and their associates in respect of audit
services are as follows:
Year Year
Ended Ended
31 March 2022 31 March 2021
US$000 US$000
Fees payable to the Company's previous auditor and their associates
Overruns in respect of prior years 14 -
14 -
Fees payable to the Company's auditor and their associates
For the audit of the Company's accounts 56 53
For the audit of the Company's subsidiaries 37 44
Total audit fees 93 97
Other than as disclosed above, the Company's auditor and their associates have
not provided additional services to the Company.
8. Staff costs
The average monthly number of employees (including executive Directors)
employed by the Group for the year was as follows:
Year Year
ended ended
31 March 2022 31 March 2021
Number Number
Office and Management 27 27
Operational 347 432
374 459
Their aggregate remuneration comprised:
Year Year
ended ended
31 March 2022 31 March 2021
US$000 US$000
Wages and salaries 775 683
Social security costs 90 60
865 743
9. REMUNERATION OF DIRECTORS
Year Year
ended ended
31 March 2022 31 March 2021
US$000 US$000
CSO Havers 27 25
NWH Clayton 8 8
HBW Rudland 8 8
GR Smith 8 8
SML Zandamela 8 8
59 57
In addition, N Clayton received $Nil (2021: $4,239) in respect of consultancy
services to the Company. All remuneration relates to short term benefits.
Directors are considered to be key management personnel.
10. Finance costs
Year Year
Ended Ended
31 March 2022 31 March 2021
US$000 US$000
Interest expense on bank borrowings and overdrafts (1,556) (1,128)
Interest expense on leases (71) (79)
Net finance costs (1,627) (1,207)
11. Taxation
Year Year
Ended Ended
31 March 2022 31 March 2021
US$000 US$000
Current tax expense
Current tax - -
Deferred tax 123 -
123 -
Effective tax reconciliation
Loss before tax from continuing activities (2,393) (2,194)
Tax credit at the Mozambican corporation tax rate of 32% (765) (702)
Tax effect of expenses that are not deductible in determining taxable profit 42 578
Tax effect of (income not taxable) or losses not allowable 18 -
Tax effect of net losses not recognised in overseas subsidiaries (net of 582 124
effect of different rates)
Tax expense (123) -
The tax reconciliation has been prepared using a 32% tax rate, the corporate
income tax rate in Mozambique, as this is where the Group's principal assets
of its continuing operations are located. Losses amounting to US$ 4 million
have been carried forward (2021: US$ 3.5 million).
The Company is resident for taxation purposes in Guernsey and its income is
subject to Guernsey income tax, presently at a rate of zero percent per annum
(2021: zero percent per annum). No tax is payable for the year. Deferred tax
has not been provided for, as brought forward tax losses are not recoverable
under the Income Tax (Zero 10) (Guernsey) Law, 2007 (as amended).
Deferred tax
Movement in deferred tax balances
Net balance as at 1 April 2021 Recognised in OCI Recognised in P/L Foreign exchange gain or loss Net balance as at 31 March 2022
US$000 US$000 US$000 US$000 US$000
Property, plant and equipment (5,912) - 123 (454) (6,243)
Tax losses carried forward - - - - -
Total (5,912) - 123 (454) (6,243)
Net balance as at 1 April 2020 Recognised in OCI Recognised in P/L Foreign exchange gain or loss Net balance as at 31 March 2021
US$000 US$000 US$000 US$000 US$000
Property, plant and equipment - (5,912) - - (5,912)
Tax losses carried forward - - - - -
Total - (5,912) - - (5,912)
Deferred tax liability is resulting from revaluation gain on land and
buildings amounting to $18,475,127 recognised using an income tax rate of 32%
which is prevailing in Mozambique. $123,000 of the deferred tax has been
realised during the year.
The Group has not recognised any tax credits for the year ended 31 March 2022
(2021: $nil). The Group has operations in overseas jurisdictions where it has
incurred taxable losses which may be available for offset against future
taxable profits amounting to approximately $12,621,884 (2021: $10,803,610). No
deferred tax asset has been recognised for these tax losses and other
deductible timing differences as the requirements of IAS 12, 'Income taxes',
have not been met.
12. earnings per share
Year ended Year ended
31 March 2022 31 March 2021
US$000 US$000
The calculation of the basic and diluted earnings per share is based on the
following data:
Loss for the year for the purposes of basic and diluted earnings per share (2,270) (2,194)
attributable to equity holders of the Company
Weighted average number of Ordinary Shares for the purposes of basic and 21,240,618 21,240,618
diluted earnings per share
Basic and diluted earnings per share - US cents (10.7) (10.3)
Basic and diluted earnings per share from continuing activities - US cents (10.7) (10.3)
The Company has issued options over ordinary shares which could potentially
dilute basic loss per share in the future. There is no difference between
basic loss per share and diluted loss per share as the potential ordinary
shares are anti-dilutive. Details of options are set out in note 24.
13. Property, plant and equipment
Land and buildings Plant and machinery Motor vehicles Other Total
Assets
US$000 US$000 US$000 US$000 US$000
Cost
At 1 April 2020 8,135 5,153 1,302 66 14,656
Additions - 38 6 33 77
Revaluation 15,451 - - - 15,451
Disposals - (134) (40) - (174)
Exchange rate adjustment (158) (73) (25) (7) (263)
At 31 March 2021 23,428 4,984 1,243 92 29,747
Additions - 58 - 21 79
Disposals - - (142) - (142)
Exchange rate adjustment 1,818 367 90 29 2,304
At 31 March 2022 25,246 5,409 1,191 142 31,988
Accumulated depreciation and impairment
At 1 April 2020 2,801 4,617 1,142 47 8,607
Charge for the year 280 168 58 28 534
Revaluation (3,024) - - - (3,024)
Disposals - (134) (40) - (174)
Exchange rate adjustment (57) (85) (23) (5) (170)
At 31 March 2021 - 4,566 1,137 70 5,773
Charge for the year 601 144 57 29 831
Disposals - - (142) - (142)
Exchange rate adjustment 24 339 86 26 475
At 31 March 2022 625 5,049 1,138 125 6,937
Net book value
31 March 2022 24,621 360 53 17 25,051
31 March 2021 23,428 418 106 22 23,974
In prior year, the Group revised the accounting policy for land and buildings
from cost model to revaluation model. In accordance with the International
Financial Reporting Standards, such revaluation exercises should be performed
regularly. The Group adopted a policy to revalue land and buildings after
every 3 years.
The Group revalued the land and buildings by $18,475,127 recognised on land
and buildings in Mozambique value for DECA, Compagri and Mozbife amounting to
$12,094,969, $4,531,025 and $1,849,133 respectively. Land and buildings
accumulated depreciation amounting to $3,024,058 was offset as a result of the
revaluation. Property, plant and equipment with a carrying amount of
$20,832,740 (2021: $21,153,034) have been pledged to secure the Group's bank
overdrafts and loans (note 18). The Group is not allowed to pledge these
assets as security for other borrowings or sell them to another entity.
For the year ended 31 March 2022, a depreciation charge of $831,000 (2021:
$534,000) has been included in the consolidated income statement within
operating expenses. Certain motor vehicles and equipment have been purchased
with finance leases. Included in property plant and equipment are
right-of-use-assets with a carrying value of $244,282 (2022: $386,719) and
$49,883 (2021: $92,585) for machinery and motor vehicles respectively.
14. Intangible Assets
US$000
Cost
At 1 April 2020 126
Additions 9
Exchange rate adjustment (2)
At 31 March 2021 133
Additions -
Exchange rate adjustment 7
At 31 March 2022 140
Accumulated amortisation
At 1 April 2020 34
Charge for the year 40
Exchange rate adjustment -
At 31 March 2021 74
Charge for the year 43
Exchange rate adjustment 5
At 31 March 2022 122
Net book value
31 March 2022 18
31 March 2021 59
Intangible assets comprise investment in management information and financial
software.
At 31 March 2022 and 31 March 2021, the Group had no contractual commitments
for the acquisition of intangible assets.
15. Biological assets
US$000
Fair value
At 31 March 2020 665
Purchase of biological assets 1,924
Sale, slaughter or other disposal of biological assets (1,514)
Change in fair value of the herd (615)
Foreign exchange adjustment (9)
At 31 March 2021 451
Purchase of biological assets 1,606
Sale, slaughter or other disposal of biological assets (1,630)
Change in fair value of the herd 1
Foreign exchange adjustment 35
At 31 March 2022 463
At 31 March 2022 and 2021, all cattle are held for slaughter. The slaughter
herd has been classified as a current asset. Forage crops included in current
assets are US$ 10,802 (2021: US$ Nil).
At 31 March 2022 the slaughter herd comprised 1,334 head (2021: 1,745), with
an average weight of 283kgs (2021: 221kgs) and average value of US$339 (2021:
US$259).
For valuation purposes, animals in the feedlot, their weight has been
estimated based on their individual weigh in data at the closest weigh in date
to the year end. Cattle are generally kept for periods less than 3 months
before slaughter.
16. Inventories
31 March 31 March
2022 2021
US$000 US$000
Consumables and spares 310 189
Raw materials 1,611 428
Finished goods 255 316
2,176 933
During the year inventories amounting to US$6,158,016 (2021: US$10,017,225)
were included in cost of sales.
17. Trade and other receivables
31 March 31 March
2022 2021
US$000 US$000
Trade receivables 302 298
Other receivables 522 1,454
Prepayments - -
824 1,752
Trade receivables
31 March 31 March
2022 2021
US$000 US$000
Trade receivables - gross 321 354
Loss allowance (19) (56)
302 298
Trade receivables are amounts due from customers for goods sold in the
ordinary course of business. They are generally due for settlement within 30
days and therefore are all classified as current. Trade receivables are
recognised initially at the amount of consideration that is unconditional. The
Group holds the trade receivables with the objective to collect the
contractual cash flows and therefore measures them subsequently at amortised
cost using the effective interest method.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade receivables have
been grouped based on the days past due.
At 31 March 2022 Current More than 30 days More than 60 Days More than 90 days Total
US$000 US$000 US$000 US$000 US$000
Expected loss rate 0% 0% 0% 83% 6%
Gross trade receivables 239 41 18 23 321
Loss allowance - - - 19 19
At 31 March 2021 Current More than 30 days More than 60 Days More than 90 days Total
US$000 US$000 US$000 US$000 US$000
Expected loss rate 0% 0% 0% 84% 16%
Gross trade receivables 79 208 - 67 354
Loss allowance - - - 56 56
The closing loss allowances for trade receivables as at 31 March reconcile to
the opening loss allowances as follows:
31 March 31 March
2022 2021
US$000 US$000
Loss allowances at 1 April 56 350
(Decrease)/Increase in loan loss allowance recognised in profit or loss during (37) 20
the year
Receivables written off during the year as uncollectable - (311)
Exchange rate adjustment - (3)
Loss allowances at 31 March 19 56
Trade receivables are provided for when there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a repayment plan
with the Group, and a failure to make contractual payments for a period of
greater than 120 days past due. This is used as the basis of the ECL provision
disclosed above. The Group determines the percentage based on historic trends.
Impairment losses on trade receivables are presented as net impairment losses
within operating profit. Subsequent recoveries of amounts previously written
off are credited against the same line item.
Further details on the Group's financial assets are provided in note 21.
18. Borrowings
31 March 2022 31 March 2021
US$000 US$000
Non-current liabilities
Bank loans 783 2,107
Leases 220 302
1,003 2,409
Current liabilities
Bank loans 2,438 263
Leases 115 102
Overdraft 6,256 3,651
8,809 4,016
9,812 6,425
Bank Borrowings
Beef division
Beef division does not have any finance facilities except equipment leases as
at 31 March 2022.
Grain division
In May 2019 the division's overdraft facility was restructured into a 240
million Metical ($3.77m) 5 year term loan with an interest rate of the Bank's
prime lending rate +0.25% and a 12 month 60 million Metical ($0.94m) overdraft
facility at the Bank's prime lending rate less 1.75%. On 30 September 2020,
the outstanding overdraft facility was subsequently restructured into a 60
million Metical ($0.9m) 33 month term loan at the Bank's prime lending rate
less 1.75%. The above mentioned facilities are from one financial institution
and mature in July 2023 and are secured by land and buildings.
Grain division also restructured another overdraft facility amounting to 60
million Metical into a 5 year loan at Prime lending rate plus 1.5%. The
facility is secured by Grain division land and buildings. At 31 March 2022,
the principal outstanding on the term loans were 206 million Metical ($3.22m).
As at 31 March 2022, Grain division had contracted 399 million Meticals ($6.3
million) overdraft facility at Prime Lending rate less 3.75% for working
capital funding maturing on 30 July 2022. The overdraft facility was secured
by a Bank guarantee from Magister amounting to US$6.1 million and maize
pledged value at $0.25 million. The overdraft facility was extended by 3
months and subsequently repaid 31 July 2022.
The facilities are secured as follows:
31 March 2022 31 March
2021
US$000 US$000
Fixed Charge
Property, plant and equipment 20,833 21,153
Floating Charge
Maize and maize product inventories 250 -
Trade receivables - -
21,083 21,153
As further security to the bank loans and overdrafts, Agriterra Limited has
issued a corporate guarantee in favour of the bank. Under the terms of the
guarantee, it may only be called upon once the bank has exhausted all possible
means of recovering the debt in Mozambique.
Reconciliation to cash flow statement
At 31 March 2021 Cash flow Foreign Exchange At 31 March 2022
US$000 US$000 US$000 US$000
Non-current bank loan 2,107 (1,431) 107 783
Non-current leases 302 (103) 21 220
Current bank loan 263 2,075 100 2,438
Current leases 102 4 9 115
Overdrafts 3,651 2,236 369 6,256
6,425 2,781 606 9,812
At 31 March 2020 Cash flow Foreign Exchange At 31 March 2021
US$000 US$000 US$000 US$000
Non-current bank loan 1,661 484 (37) 2,107
Non-current leases 383 (72) (7) 302
Current bank loan 711 (441) (10) 263
Current leases 87 17 (2) 102
Overdrafts 2,541 1,170 (60) 3,651
5,383 1,158 (116) 6,425
Leases
At 31 March 2022, the Group is committed to $335 000 (2021 $404,000) for
leases. The total cash outflow for leases (principal and interest) amounts to
$335,000 (2021: $531,000).
31 March 31 March
Maturity Analysis 2022 2021
$'000 $'000
Year 1 123 102
Year 2 201 115
Year 3 11 187
Year 4 -
Year 5 - -
335 404
Analysed as:
Current 115 102
Non-current 220 302
335 404
The Group does not face a significant liquidity risk with regard to its lease
liabilities.
19. Trade and other payables
31 March 2022 31 March
2021
US$000 US$000
Trade payables 597 1,018
Other payables 44 1,006
Accrued liabilities 319 22
960 2,046
'Trade payables', 'Other payables' and 'Accrued liabilities' principally
comprise amounts outstanding for trade purchases and ongoing costs. No
interest is charged on any balances.
The Directors consider that the carrying amount of financial liabilities
approximates their fair value.
20. Leases
Right of use assets
Right of use assets relate to equipment and motor vehicle acquired under
finance leases. These are presented as property plant and equipment.
Machinery Motor vehicles Total
US$000 US$000 US$000
Cost
At 1 April 2020 721 189 910
Exchange rate adjustment (14) (4) (18)
At 31 March 2021 707 185 892
Exchange rate adjustment 55 15 70
At 31 March 2022 762 200 962
Accumulated depreciation and impairment
At 1 April 2020 163 47 210
Charge for the year 162 47 209
Exchange rate adjustment (5) (1) (6)
At 31 March 2021 320 93 413
Charge for the year 166 48 214
Exchange rate adjustment 31 9 40
At 31 March 2022 517 150 667
Net book value
31 March 2022 245 50 295
31 March 2021 387 92 479
Average lease term for motor vehicles and equipment is 5 years. The maturity
analysis of lease liability is presented in note 18.
Amounts recognised in profit or loss
31 March 2022 31 March 2021
US$000 US$000
Depreciation expense on right-of-use assets 214 209
Interest expense on lease liabilities 71 137
Expenses relating to short term leases and low value assets 45 50
330 396
21. FINANCIAL INSTRUMENTS
21.1. Capital risk management
The Company manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising the return to
shareholders. The capital structure of the Group comprises its net debt (the
borrowings disclosed in note 18 after deducting cash and bank balances) and
equity of the Company as shown in the statement of financial position. The
Company is not subject to any externally imposed capital requirements.
The Board reviews the capital structure on a regular basis and seeks to match
new capital requirements of subsidiary companies to new sources of external
debt funding denominated in the currency of operations of the relevant
subsidiary. Where such additional funding is not available, the Company funds
the subsidiary company by way of loans from the Company. The Company places
funds which are not required in the short term on deposit at the best interest
rates it is able to secure from its bankers.
Current interest rates on borrowings in Mozambique are very high, with the
prime lending rate at 18.60% at 31 March 2022 (2021: 15.5%). In light of this,
the Group has been rationalising its operations, with particular focus on
disposing of surplus assets to reduce external debt levels. The Group has
restructured its loan facilities in Mozambique to finance its Grain operations
(note 18).
21.2. Categories of financial instruments
The following are the Group financial instruments as at the year-end held at
amortised cost:
31 March 2022 31 March 2021
US$000 US$000
Financial assets
Cash and bank balances 107 231
Other loans and receivables 321 354
428 585
Financial liabilities
Trade and other payables 960 2,046
Borrowings - current 8,809 4,016
Borrowings - non-current 1,003 2,409
10,772 8,471
(10,344) (7,886)
21.3. Financial risk management objectives
The Group manages the risks arising from its operations, and financial
instruments at Executive operating and Board level. The Board has overall
responsibility for the establishment and oversight of the Group's risk
management framework and to ensure that the Group has adequate policies,
procedures and controls to manage successfully the financial risks that the
Group faces.
While the Group does not have a written policy relating to risk management of
the risks arising from any financial instruments held, the close involvement
of the senior executives in the day to day operations of the Group ensures
that risks are monitored and controlled in an appropriate manner for the size
and complexity of the Group. Financial instruments are not traded, nor are
speculative positions taken. The Group has not entered into any derivative or
other hedging instruments.
The Group's key financial market risks arise from changes in foreign exchange
rates ('currency risk') and changes in interest rates ('interest risk'). The
Group is also exposed to credit risk and liquidity risk. The principal risks
that the Group faces as at 31 March 2022 with an impact on financial
instruments are summarised below.
21.4. Market Risk
The Group is exposed to currency risk and interest risk. These are discussed
further below on note 21.5 and note 21.6.
21.5. Currency risk
Certain of the Group companies have functional currencies other than US$ and
the Group is therefore subject to fluctuations in exchange rates in
translation of their results and financial position into US$ for the purposes
of presenting consolidated accounts. The Company does not hedge against this
translation risk. The Group's financial assets and liabilities by functional
currency of the relevant company are as follows:
Assets Liabilities
31 March 31 March 31 March 31 March
2022 2021 2022 2021
US$000 US$000 US$000 US$000
United States Dollar ('US$') - - - -
Great British Pound ('GBP') - - 109 136
Mozambique Metical ('MZN') 922 1,711 10,447 12,007
922 1,711 10,556 12,143
The Group transacts with suppliers and/or customers in currencies other than
the functional currency of the relevant Company (foreign currencies). The
Group does not hedge against this transactional risk. As at 31 March 2022 and
31 March 2021, the Group's outstanding foreign currency denominated monetary
items were principally exposed to changes in the US$ / GBP and US$ / MZN
exchange rate.
The following tables detail the Group's exposure to a 5, 10 and 15 per cent
depreciation in the US$ against GBP and separately to a 10, 20 and 30 per cent
depreciation of the US$ against the Metical. For a strengthening of the US$
against the relevant currency, there would be a comparable impact on the
profit and other equity, and the balances would be of opposite sign. The
sensitivity analysis includes only outstanding foreign currency denominated
items and excludes the translation of foreign subsidiaries and operations into
the Group's presentation currency. The sensitivity also includes intra-Company
loans where the loan is in a currency other than the functional currency of
the lender or borrower. A negative number indicates a decrease in profit and
other equity.
31 March 31 March
2022 2021
US$000 US$000
GBP Impact
Profit or loss
5% Increase in US$ (5) (7)
10% Increase in US$ (11) (13)
15% Increase in US$ (16) (18)
Other equity
5% Increase in US$ (5) (7)
10% Increase in US$ (11) (13)
15% Increase in US$ (16) (18)
MZN Impact
Profit or loss
10% Increase in US$ - -
20% Increase in US$ - -
30% Increase in US$ - -
Other equity((1))
10% Increase in US$ (1,561) (94)
20% Increase in US$ (3,122) (2,103)
30% Increase in US$ (4,683) (7,542)
((1)) This is mainly due to the exposure arising on the translation of US$
denominated intra-Company loans provided to Metical functional currency
entities which are included as part of the Company's net investment in the
related entities.
21.6. Interest rate risk
The Group is exposed to interest rate risk because entities in the Group hold
cash balances and borrow funds at floating interest rates. As at 31 March 2022
and 31 March 2021, the Group has no interest-bearing fixed rate instruments.
The Group maintains cash deposits at variable rates of interest for a variety
of short-term periods, depending on cash requirements. The Grain and Beef
operations in Mozambique are also financed through bank facilities. The rates
obtained on cash deposits are reviewed regularly and the best rate obtained in
the context of the Group's needs. The weighted average interest rate on
deposits was nil% (2021: nil). The weighted average interest on drawings under
the overdraft facilities and bank loans was 18.9% (2021: 18.68%). The Group
does not hedge interest rate risk.
The following table details the Group's exposure to interest rate changes, all
of which affect profit and loss only with a corresponding effect on
accumulated losses. The sensitivity has been prepared assuming the liability
outstanding at the balance sheet date was outstanding for the whole year. In
all cases presented, a negative number in profit and loss represents an
increase in finance expense/decrease in interest income. The sensitivity as at
31 March 2022 and 31 March 2021 is presented assuming interest rates on cash
balances remain constant, with increases of between 20bp and 1000bp on
outstanding overdraft and bank loans. This sensitivity to interest rate rises
is deemed appropriate because the Group interest bearing liabilities are
Metical based. Although the macroeconomic scenario in Mozambique is now
improving the prime lending rate remain high with prime rates of 18.6% at 31
March 2022 (2021: 15.5%). The Prime lending rate increased to 20.6% in June
2022.
31 March 31 March
2022((1)) 2021((1))
US$000 US$000
+ 20 bp increase in interest rates (19) (18)
+ 50 bp increase in interest rates (48) (44)
+100 bp increase in interest rates (97) (88)
+200 bp increase in interest rates (194) (176)
+500 bp increase in interest rates (484) (441)
+800 bp increase in interest rates (775) (707)
+1000 bp increase in interest rates (969) (884)
((1)) The table above is prepared on the basis of an increase in rates. A decrease
in rates would have the opposite effect.
21.7. Credit risk
Credit risk arises from cash and cash equivalents, and deposits with banks and
financial institutions, as well as outstanding receivables. The Group's
principal deposits are held with various banks with a high credit rating to
diversify from a concentration of credit risk. Receivables are regularly
monitored and assessed for recoverability. The impact of COVID-19 on the
credit risk of the Group has been considered in the Going Concern disclosures
in note 3.
The maximum exposure to credit risk is the carrying value of the Group
financial assets disclosed in note 21.2. Details of provisions against
financial assets are provided in note 17.
21.8. Liquidity risk
The Company policy throughout the year has been to ensure that it has adequate
liquidity by careful management of its working capital. The operating
executives continually monitor the Group's actual and forecast cash flows and
cash positions. They pay particular attention to ongoing expenditure, both for
operating requirements and development activities, and matching of the
maturity profile of the Group's overdrafts to the processing and sale of the
Group's maize and beef products. The impact of COVID-19 on the liquidity risk
of the Group has been considered in the going concern disclosures in note 3.
At 31 March 2022 the Group held cash deposits of $107,000 (2021: $231,000). As
at 31 March 2022 the Group had overdraft and bank loans facilities of
approximately $9,812,558 (2021: $9,464,961) of which $9,812,558 (2021:
$6,425,531) were drawn.
The following table details the Group's remaining contractual maturity of its
financial liabilities. The table is drawn up utilising undiscounted cash flows
and based on the earliest date on which the Company could be required to
settle its obligations and assuming business conditions at 31 March 2022. The
table includes both interest and principal cash flows.
31 March 31 March
2022 2021
US$000 US$000
1 month 358 977
2 to 3 months 716 212
4 to 12 months 9,481 3,731
1 to 2 years 434 1,325
3 to 5 years 1,131 1,402
12,120 7,647
22. Share capital
Authorised Allotted and fully paid
Number Number US$000
At 31 March 2020 and 31 March 2021 and 31 March 2022 23,450,000 21,240,618 3,135
At 31 March 2020 and 31 March 2021 and 31 March 2022
Deferred shares of 0.1p each 155,000,000 155,000,000 238
Total share capital 178,450,000 176,240,618 3,373
The Company has one class of ordinary share which carries no right to fixed
income.
The deferred shares carry no right to any dividend; no right to receive
notice, attend, speak or vote at any general meeting of the Company; and on a
return of capital on liquidation or otherwise, the holders of the deferred
shares are entitled to receive the nominal amount paid up after the repayment
of £1,000,000 per ordinary share. The deferred shares may be converted into
ordinary shares by resolution of the Board.
23. Equity-ACCOUNTED INVESTEES
31 March 31 March
2022 2021
US$000 US$000
Interest in joint venture 56 1
56 1
DECA Snax Limitada is a joint venture in which the Group has joint control and
a 50% ownership interest. It is one of the Group's strategic customers of
grits and principally engaged in the production of corn snacks in Mozambique.
DECA Snax Limitada's principal place of business is Chimoio in Mozambique and
is not listed.
DECA Snax Limitada is structured as a separate vehicle and the Group has
residual interest in the net assets of DECA Snax Limitada. Accordingly, the
Group has classified DECA Snax Limitada as a joint venture. In accordance with
the agreement under which DECA Snax Limitada is established, the Group and the
other investor in the joint venture have agreed to make additional
contributions in proportion of their interest if additional investment is
required in DECA Snax Limitada.
The following table summarises the financial information of DECA Snax Limitada
as included in its own financial statements. The table also reconciles the
summary information to the carrying amount of the Group's interest in DECA
Snax Limitada.
31 March 31 March
2022 2021
US$000 US$000
Percentage ownership interest 50% 50%
Non-current assets 466 252
Current assets (including cash and cash equivalents - 2022: US$73,000, 2021: 337 108
US$23,000)
Current liabilities (Trade and other payables) (233) (49)
Non-current liabilities (458) (310)
Net assets (100%) 112 1
Net assets (Carrying amount of joint venture) 56 1
1,447 117
Revenue
Cost of Sales (1,008) (79)
Depreciation and amortisation (71) (10)
Operating expenses (192) (28)
Interest expense - -
Income tax expense (66) -
Profit and other comprehensive income (100%) 110 -
Profit and other comprehensive income (50%) 55 -
Elimination of unrealised profit - -
Group's share of total comprehensive income - -
Dividends received by the Group - -
24. Share based payments
24.1. Charge in the year
The Company recorded a charge within Operating expenses for share based
payments of $ Nil (2021: $ Nil) in respect of options issued in previous years
vesting during the year. No options were issued during the year (2021: $ Nil).
24.2. Outstanding options and warrants
The Group, through the Company, have two unapproved share option schemes which
were established to provide equity incentives to the Directors of, employees
of and consultants to the Company. The schemes' rules provide that the Board
shall determine the exercise price for each grant which shall be at least the
average mid-market closing price for the three days immediately prior to the
grant of the options. The minimum vesting year is generally one year. If
options remain unexercised after vesting period from the date of grant, the
options expire. Options are forfeited if the employee leaves the Group before
the options vest.
In addition to share options issued under the unapproved share option schemes,
on 1 June 2015, the Company created a warrant instrument (the 'Instrument') to
provide suitable incentives to the Group's employees, consultants and agents,
and in particular those based, or those spending considerable time, on site at
the Group's operations. Up to 1,000,000 warrants (the 'Warrants') to subscribe
for new Ordinary Shares in the Company (the 'Warrant Shares') maybe issued
pursuant to the Instrument. The exercise price of each Warrant is £0.65 (the
share price of the Company being approximately 60p when the Instrument was
created) and the subscription year during which time the Warrants may be
exercised and Warrants Shares issued is the 5-year period from 1 June 2016 to
1 June 2022. Subject to various acceleration provisions, a holder of Warrants
is not entitled to sell more than 1,000 Warrant Shares in any day nor more
than 10,000 Warrant Shares (in aggregate) in any calendar month, without Board
consent. 50,000 Warrants are in issue.
The following table provides a reconciliation of share options and warrants
outstanding during the year. The number of shares or warrants and their
respective exercise prices have been adjusted to reflect the share
consolidation (see note 24):
Year Weighted average exercise price (p) Year ended Weighted average exercise price (p)
ended 31 March 2021
31 March 2022 Number
Number
At beginning of year 93,080 142 93,080 142
Granted in the year - - - -
Terminated in the year - - - -
Lapsed in the year (50,000) 65 - -
At end of year 43,080 232 93,080 142
Exercisable at year end 43,080 232 93,080 142
At 31 March 2022, the following options and warrants over ordinary shares of
10p each have been granted and remain unexercised:
Date of grant Total Exercisable Exercise price Expiry date
options Options P
29 July 2012 18,080 18,080 350p 29 July 2023
15 March 2014 25,000 25,000 150p 15 March 2024
43,080 43,080
25. Related party disclosures
Magister Investments Limited ("Magister"), holds 50.58% of the ordinary share
capital of the Company and is the ultimate controlling party. In addition,
Magister has also assisted the Group with bank guarantees for the group to
secure Commercial loans. Bank guarantee fees of 1.75% are payable to Magister
amounting to US$74,725. The following Director of Agriterra is also a Director
of Magister:
· Hamish Rudland
The remuneration of the Directors, who are the key management personnel of the
Company, is set out in note 9.
26. Events subsequent to the balance sheet date
At the end of June 2022, the Group commenced the implementation of a business
turnaround strategy which resulted in the announcement of:
· Significant injection of US$7.9 million from Magister Investments
Limited at interest rate of SOFR (SOFR is currently 1.53%)+6% to reduce of the
finance cost which has been increasing over the years and will be used to pay
commercial borrowings in Mozambique which attract interest rates above 18% per
annum. The Group will save at least US$ 792,000). The shareholder loan is made
up of:
o US$6.1 million convertible facility which has a 3 year tenure
o US$1.8 million convertible facility which has a 12 months tenure.
· Operating expenses cost reduction amounting US$47,000 per month
(US$564,000 per annum) by rightsizing the business. All expenditure to be
incurred is evaluated to improve the Group financial performance and cash flow
of the Group.
In August 2022, Grain division successfully repaid a US$6.1 million overdraft
facility owed to First Capital Bank thereby reducing the finance costs by
US$82 000 per month. The Group is planning to repay the Standard Bank loan
amounting to US$2.4 million by February 2023 utilising US$1.8 million injected
by Magister Investments Limited and internally generated funds amounting to
US$0.6 million.
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