REG - Agriterra Ltd - Final Results <Origin Href="QuoteRef">AGTAR.L</Origin> - Part 2
20/11/2015 07:01
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is measured at the
aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit
and loss as incurred.
The assets, liabilities and contingent liabilities of the acquiree are measured at their fair value at the date of
acquisition. Any excess of the fair value of the consideration paid over the fair value of the identifiable net assets
acquired is recognised as goodwill. If the fair value of the consideration is less than the fair value of the identifiable
net assets acquired, the difference is recognised directly in profit and loss.
3.13. Goodwill
Goodwill arising on the acquisition of subsidiaries is recognised as an asset.
Goodwill is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is
not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to cash generating units of the
acquirer which represent the smallest identifiable group of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets. On disposal of a subsidiary, associate or joint venture, the
attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.14. Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less accumulated depreciation (see below) and
impairment. Historical cost includes expenditure that is directly attributable to the acquisition. Subsequent costs are
included in the asset's carrying value when it is considered probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably.
Assets in the course of construction for production, rental or administrative purposes are carried at cost, less any
identified impairment loss. Cost includes professional fees and associated expenses.
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 7% - 25%
Motor vehicles 20% - 25%
Aviation 20%
Other assets 10% - 33%
Assets under construction Nil
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.
3.15. Impairment of property, plant and equipment and intangible assets excluding goodwill.
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets (other than
goodwill which is assessed in accordance with the policy described above) to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit and loss because the Group does not record any assets at a revalued amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in profit and loss.
3.16. Biological assets
Consumer biological assets, being the beef cattle herd, are measured in accordance with IAS 41, 'Agriculture' at fair value
less costs to sell, with gains and losses in the measurement to fair value recorded in profit and loss. The herd comprises
breeding and non-breeding cattle. The breeding cattle comprise bulls, cows and heifers. As these are expected to be held
for more than one year, breeding cattle are classified as non-current assets. The non breeding cattle comprise animals
(principally steers) that will be grown and sold for slaughter and are classified as current assets.
Cattle are recorded as assets at the year end and the fair value is determined by the size of the herd and market prices at
the reporting date.
The cost of forage is charged to the income statement over the period it is consumed.
3.17. Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories
is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them
to their existing location and condition.
3.18. Financial instruments
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to
the contractual provisions of the instrument.
3.18.1. Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified
as at fair value through profit and loss ('FVTPL'), which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets at 'FVTPL', 'held-to-maturity'
investments, 'available-for-sale' financial assets and 'loans and receivables'. The classification depends on the nature
and purpose of the financial asset and is determined at the time of initial recognition. The Company and Group currently
have financial assets in the category of 'loans and receivables' and FVTPL.
3.18.1.1. Loans and receivables
Trade receivables, loans receivable, bank balances, cash in hand and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the instrument, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
3.18.1.2. Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or is designated as at
FVTPL upon initial recognition. The Group holds certain investments in quoted companies which are designated as held for
trading. Financial assets at FVTPL are stated at fair value, with any gains and losses arising on re-measurement recognised
in profit or loss. The net gain or loss incorporates any dividends, interest earned, or foreign exchange gains and losses
on the financial asset and is included within other gains and losses in the income statement. Fair value is determined in
the manner described in note 22.
3.18.1.3. Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For loans and receivables carried at amortised cost, the amount of the impairment is the differences between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original
effective interest rate.
The carrying amount of the financial asset is reduced through the use of an allowance account. When a financial asset is
considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying amount of the allowance account are
recognised in profit or loss.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit
and loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been recognised.
3.18.1.4. Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
3.18.2. Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of
the contractual arrangement.
3.18.2.1. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue
costs.
3.18.2.2. Financial liabilities
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'. The Group
only has financial liabilities in the category of other financial liabilities.
3.18.2.2.1. Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
3.18.2.2.2. Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire.
4. REPRESENTATIONS TO THE CASH FLOW STATEMENT
In the financial year ended 31 May 2014, and consistent with preceding financial periods, the Group presented all cash
flows for the purchase, sale, slaughter or disposal by other means of its cattle within a single line in the Consolidated
cash flow statement entitled 'Increase in biological assets', a component of 'Cash flows from investing activities'. This
reflected the fact that, historically, a significant portion of the Group's cash flows for the purchase of animals related
to the purchase of the breeding herd.
In the current and preceding financial year, the Group did not purchase cattle to increase its breeding herd - all cattle
purchases were for slaughter herd animals, generally being animals taken directly into the feedlot. Cash flows of this
nature are more appropriately reflected within cash flows from operating activities. Accordingly, the Group has altered its
presentation for the purchase of slaughter herd animals, which are now included within the line item of the Consolidated
cash flow statement entitled 'Net decrease / (increase) in biological assets held for slaughter purchases', within 'Net
cash used in operating activities'. The comparative of $219,000 outflow has been reclassified from cash flows from
investing activities resulting in an increase in 'Net cash used in operating activities by continuing operations' and 'Net
cash used in operating activities' by $219,000 and a corresponding decrease in 'Net cash used in investing activities by
continuing operations' and 'Net cash used in investing activities'. The representation has no effect on net cash flows for
the year ended 31 May 2014, nor any effect on the Consolidated income statement or on the Consolidated statement of
financial position.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies which are described in note 3, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods. The effect on the financial statements
of changes in estimates in future periods could be material.
5.1. Going concern
The Group has prepared forecasts for the Group's ongoing businesses covering the period of at least 12 months from the date
of approval of these financial statements. These forecasts are based on assumptions including, inter alia, that there are
no significant disruptions to the supply of maize or cattle to meet its projected sales volumes and take into account the
investment in the beef herd, working capital and additional property plant and equipment that are expected to be required.
The Directors believe that with existing resources, including available undrawn borrowing facilities, the Group and Company
is able to manage its business risks and successfully grow its operating businesses. The Directors have a reasonable
expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of accounting in preparing these financial statements.
5.2. Impairments
Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment
of Assets. Where there are indicators of impairment, the net book value of the asset or cash generating unit is compared
with its fair value. The impairment review is sensitive to various assumptions, including the expected sales forecasts,
cost assumptions, capital requirements, and discount rates among others. Details of impairments recorded in the period are
included in note 12.
5.3. Biological assets
Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair value is
based on the estimated market value for cattle in Mozambique of a similar age and breed, less the estimated costs to bring
them to market, converted to US$ at the exchange rate prevailing at the period end. Changes in any estimates could lead to
the recognition of significant fair value changes in the consolidated income statement, or significant changes in the
foreign currency translation reserve for changes in the Metical to US$ exchange rate. At 31 May 2015 the value of the
breeding herd disclosed as a non-current asset was $2,246,000 (2014: $3,071,000). The value of the herd held for slaughter
disclosed as a current asset was $1,019,000 (2014: $1,201,000).
5.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax ('IVA') operates in a similar manner to UK Value Added Tax ('VAT'). The Group is exempt from IVA
on its sales of Maize under the terms of Mozambique tax law. The Group is able to recover input sales tax on substantially
all of the purchases of the Grain division. The Group is always therefore in a net recovery position of IVA in respect of
its Grain operations. To date the Group has not succeeded in recovering IVA from the Mozambique Government. Due to the
significant uncertainty over the recoverability of these IVA balances, the Group has provided in full against the assets as
at 31 May 2014 and 31 May 2015. As at 31 May 2015, the gross and net IVA recoverable assets are respectively $1,319,000
(2014: $1,345,000) and $nil (2014: $nil) at the US$ to Metical exchange rate of 36.90 (2014: 31.00) at that date.
6. Revenue
An analysis of the Group's revenue is as follows:
2015 2014
US$000 US$000
Continuing operations
Sale of goods 10,839 13,797
Hire of equipment and machinery 948 -
11,787 13,797
Investment revenues (note 13) 19 146
11,806 13,943
Discontinued operations
Sales of goods (note 17.2) - 1,907
11,806 15,850
7. Segment reporting
The ExCom consider that the Group's operating activities comprise the segments of Grain, Beef and Cocoa, all undertaken in
Africa. In addition, the Group has certain other unallocated expenditure, assets and liabilities, either located in Africa
or held as support for the Africa operations.
7.1. Segment revenue and results
The following is an analysis of the Group's revenue and results by operating segment:
Year ending 31 May 2015 Grain Beef Cocoa(3) Unallo-cated Discon-Tinued(4) Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Revenue
External sales(2) 5,517 5,366 904 - - - 11,787
Inter-segment sales(1) 524 - - - - (524) -
6,041 5,366 904 - - (524) 11,787
Segment results
- Operating loss (2,128) (2,317) (7,853) (2,166) 174 - (14,290)
- Interest (expense) / income (680) 2 - 14 - - (664)
- Other gains and losses - - - (849) - - (849)
Loss before tax (2,808) (2,315) (7,853) (3,001) 174 - (15,803)
Income tax (78) (3) - - - - (81)
Loss for the period from continuing operations (2,886) (2,318) (7,853) (3,001) 174 - (15,884)
Year ending 31 May 2014 Grain Beef Cocoa Unallo-cated Discon-tinued(4) Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Revenue
External sales(2) 9,716 4,081 1,907 - (1,907) - 13,797
Inter-segment sales(1) 412 - - - - (412) -
10,128 4,081 1,907 - (1,907) (412) 13,797
Segment results
- Operating loss (421) (3,436) (1,028) (2,456) 841 - (6,500)
- Interest (expense) / income (193) 2 (1) 128 1 - (63)
- Other gains and losses - - - 936 - - 936
Loss before tax (614) (3,434) (1,029) (1,392) 842 - (5,627)
Income tax (16) (9) - - - - (25)
Loss for the period from continuing operations (630) (3,443) (1,029) (1,392) 842 - (5,652)
(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 group company making the sale. Sales from the Grain and Beef divisions are principally for supply to the Mozambican market. Sales from the Cocoa division are supplied within Sierra Leone during the year (2014: supplied to the world market).
(3) Revenue reported in the Cocoa segment for the 12 months ended 31 May 2015 arises on the rental of certain of the Cocoa division's assets in aid of the relief effort against the Ebola crisis in Sierra Leone.
(4) Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment - refer to note 17.2.
The segment items included in the consolidated income statement for the year are as follows:
Year ending 31 May 2015 Grain Beef Cocoa Unallo-cated Discon-tinued(1) Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Depreciation 386 1,122 628 136 (61) - 2,211
Impairment of assets (note 12.1) - - 6,791 - - - 6,791
Year ending 31 May 2014 Grain Beef Cocoa Unallo-cated Discon-tinued(1) Elimina-tions Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Depreciation 504 1,124 133 138 (133) - 1,766
(1) Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment - refer to note 17.2.
7.2. Segment assets, liabilities and capital expenditure
Segment assets consist primarily of property, plant and equipment, biological assets, inventories and trade and other
receivables and cash and cash equivalents. Segment liabilities comprise operating liabilities, including overdraft
financing facilities in the Grain segment.
Capital expenditure comprises additions to property, plant and equipment and intangible assets, including capitalised
depreciation and amortisation where applicable.
The segment assets and liabilities at 31 May 2015 and capital expenditure for the year then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
Assets 9,603 16,057 1,656 6,982 34,298
Liabilities (3,297) (228) (146) (785) (4,456)
Capital expenditure 49 1,168 484 - 1,701
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
Assets Liabilities
US$000 US$000
Segment assets and liabilities 27,316 3,671
Unallocated:
Property, plant and equipment 78 -
Investments 380 -
Other receivables 495 -
Cash 6,029 -
Trade payables - 627
Accruals and deferred income - 158
Total 34,298 4,456
The segment assets and liabilities at 31 May 2014 and capital expenditure for the year then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
Assets 13,440 19,269 8,728 13,950 55,387
Liabilities (2,775) (442) (334) (1,287) (4,838)
Capital expenditure 409 1,203 4,048 746 6,406
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
Assets Liabilities
US$000 US$000
Segment assets and liabilities 41,437 3,551
Unallocated:
Property, plant and equipment 6,716 -
Investments 1,229 -
Other receivables 161 -
Cash 5,844 -
Trade payables - 540
Accruals and deferred income - 747
Total 55,387 4,838
Unallocated property, plant and equipment includes $nil (2014: $5,880,000) in respect of the lease over 45,000 hectares of
brownfield land suitable for Palm oil production and $76,000 (2014: $837,000) of Aviation assets. The Group's interest in
the aforementioned lease was impaired in the period as more fully described in note 12.2.
7.3. Significant customers
In the year ended 31 May 2015 one of the Beef division's customers generated $1,515,000 of revenue being 13% of Group
revenue. In the year ended 31 May 2014 one of the Cocoa division's customers generated $1,884,000 of revenue being 14% of
Group revenue.
8. Operating loss
Operating loss has been arrived at after charging / (crediting):
2015 2014
US000 US$000
Depreciation of property, plant and equipment 2,211 1,766
(Profit) / loss on disposal of property, plant and equipment (76) (149)
Net foreign exchange loss / (gain) 177 (52)
Impairment of assets (see note 12.1) 6,791 -
Staff costs (see note 10) 4,921 4,581
9. Auditors Remuneration
Amounts payable to RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) and their associates in respect of audit services
are as follows:
2015 2014
US$000 US$000
Fees payable to the Company's auditor for the audit of the Company's accounts 153 132
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries 52 58
Total audit fees 205 190
Other than as disclosed above, the Company's auditor and their associates have not provided additional services to the
Group.
10. Staff costs
The average monthly number of employees (including executive Directors) employed by the Group for the year was as follows:
2015 2014
Number Number
Office and Management 48 61
Operational 814 910
862 971
Of which relating to:
Continuing operations 849 900
Discontinued operations 13 71
862 971
Their aggregate remuneration comprised:
2015 2014
US$000 US$000
Wages and salaries 5,008 5,429
Social security costs 104 94
Share based payment charge 55 149
5,167 5,672
Less: capitalised and included in assets under construction (169) (685)
Amount charged to profit and loss 4,998 4,987
Of which relating to:
Continuing operations 4,921 4,581
Discontinued operations 77 406
4,998 4,987
11. REMUNERATION OF DIRECTORS
Year ended 31 May 2015 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
PH Edmonds 159 - - 159
AS Groves 159 - - 159
DL Cassiano-Silva 215 - 11 226
EA Kay 47 - 15 62
MN Pelham 50 - - 50
630 - 26 656
Year ended 31 May 2014 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
PH Edmonds 165 - - 165
AS Groves 162 - - 162
DL Cassiano-Silva 134 42 - 176
EA Kay 154 - 24 178
MN Pelham - - - -
615 42 24 681
12. IMPAIRMENT OF CURRENT AND NON-CURRENT ASSETS
In accordance with IAS 36, Impairment of assets, the Group conducted an impairment review of its tangible and intangible
assets as at 31 May 2015, resulting in an impairment against its cocoa division assets and palm lease assets, all held in
Sierra Leone, as follows:
2015
US$000
Cocoa division 6,791
Impairment against continuing operations 6,791
Palm activities 3,069
Impairment against discontinued operations 3,069
9,860
Further details are provided below.
12.1. Impairment of cocoa division current and non-current assets
As announced in September 2014 and as a result of the well-publicised Ebola outbreak affecting Western Africa, including
Sierra Leone, the Board made the decision to suspend development activities at the cocoa plantation in Sierra Leone, having
already ceased its cocoa trading activities by then. In addition to the significant restrictions in movement in country
causing a shortage of labour, the Board assessed that it was unsafe to pursue an expansion of the plantation at that stage,
which could increase the risk of Ebola developing on the plantation site and place staff at risk.
The Board continued to monitor the situation regarding Ebola in Sierra Leone and acknowledges that important strides have
been made to control the virus and restore confidence in investing in the country. However, the investment landscape in
Sierra Leone has not returned to the favourable environment that was present pre-Ebola, and, in the Board's opinion,
significant further regeneration and international development support is needed in the short to medium term to facilitate
further significant private sector investment.
In light of these developments, and following a review by the Board of its Group investment strategy and priorities, the
Board has maintained the suspension in development funding for its Cocoa operations in Sierra Leone; activities at the
plantation continue to be maintained at the level sufficient to protect staff while maintaining the Group's assets in
country. The Group's primary focus is now on the development of the Beef business in Mozambique.
As required by IFRS, the Group conducted an impairment review of all of the Group's cocoa division assets in Sierra Leone,
which principally comprise goodwill, property, plant and equipment, long term prepayments, and inventory. The impairment
review resulted in an impairment against the cocoa division's assets in Sierra Leone of $6,791,000 (2014: $nil), analysed
as follows:
2015
US$000
Impairment of goodwill 575
Impairment of property, plant and equipment 5,998
Impairment of non-current receivables 159
Impairment of inventory 59
6,791
Where assets are capable of generating cash flows that are largely independent from those generated by other assets, the
impairment review compared the carrying value of individual assets to their recoverable amount. Examples of such assets are
warehouses, vehicles, nurseries etc. Where the asset does not generate cash flows that are independent from other assets,
the Group estimated the recoverable amount of the cash-generating unit to which the asset belongs. Examples of such assets
are the plantation development assets, including the land itself, clearing costs, planting, maintenance and other
expenditure related to the growing of cocoa plants at the plantation. Due to the suspension of funding for the cocoa
operations, recoverable amount was generally determined for assets or cash generating units based on fair value less costs
of disposal, where fair value was based on the Directors best estimates of the likely realisable value for individual
assets within Sierra Leone. Where, given the current investment landscape in Sierra Leone there was no basis for making a
reliable estimate of fair value less costs of disposal - such as for the plantation development assets - recoverable amount
was measured by reference to value in use alone. This was estimated at $nil because the relevant assets, at their present
stage of development, are not capable of generating positive cash returns without further development funding. The
impairment review resulted in a write down of the cocoa divisions goodwill and non-current receivables (which represented
long term land lease rental payments) to $nil, and its property, plant and equipment to $1,180,000.
In the medium to long term, the Board remains positive about the future development potential in Sierra Leone for the cocoa
plantation, as well as the palm (refer below). With a projected cocoa bean deficit of up to one million metric tonnes by
2020/2021 driving prices upwards, the fundamentals of the cocoa market remain strong. The Board remains hopeful that
further value may be realised from its Cocoa operations in future periods, through development or sale, and accordingly the
operations continue to be presented as continuing operations.
12.2. Impairment of palm activities' non-current assets
The Group controls a lease of approximately 45,000 hectares of brownfield agricultural land suitable for palm oil
production in the Pujehun District in the Southern Province in Sierra Leone. The lease was acquired in 2012 and the Board
has continued to evaluate this property and its potential for commercialisation. Due to the factors described above which
resulted in an impairment against the Group's cocoa division assets, the Group has decided to suspend any activity on this
lease. The assets have accordingly been impaired to $nil and presented within discontinued operations.
The carrying value of these assets, included within Property, plant and equipment was $6,009,000, which includes the
initial purchase price of the lease, deferred consideration (refer to note 31.1) and expenditure incurred on maintaining
the lease (such as annual lease rental payments). The deferred consideration was to be settled in Ordinary Shares in the
Company, following the initial development of 1,000 hectares of the leasehold land. Due to the impairment, the Group no
longer intends to complete this initial development and accordingly the related obligation to issue shares (included within
the 'Shares to be issued reserve', a component of the Group and Company equity, with a carrying value of $2,940,000) has
been released to profit and loss, reducing the impairment arising on the palm activities to $3,069,000, which is included
in the results of discontinued operations (refer to note 17.3).
13. Investment revenues
2015 2014
US$000 US$000
Interest revenues:
Bank deposits 19 58
Other loans and receivables - 88
Total interest revenues 19 146
All investment revenues are earned on financial assets classified as loans and receivables (including cash and bank
balances).
14. Other gains and losses
2015 2014
US$000 US$000
(Decrease) / increase in fair value of quoted investments (note 22) (849) 936
15. Finance costs
2015 2014
US$000 US$000
Interest expense:
Bank borrowings 683 197
Loan notes - 12
Total finance expense 683 209
16. Taxation
2015 2014
US$000 US$000
Loss before tax from continuing activities (15,803) (5,627)
Tax credit at the Mozambican corporation tax rate of 32% (2014:32%) (5,057) (1,801)
Tax effect of expenses that are not deductible in determining taxable profit 67 73
Tax effect of losses not allowable 1,556 432
Tax effect of losses not recognised in overseas subsidiaries (net of effect of different rates) 3,434 1,296
Statutory taxation payments irrespective of income 9 25
Adjustment in respect of prior years 72 -
Tax expense 81 25
The tax reconciliation has been prepared using a 32% tax rate, the corporate income tax rate in Mozambique, as this is
where the Group's principal assets of its continuing operations are located.
The Group has recognised a tax charge of $nil (2014: charge of $1,000,000) in respect of the disposal of its Ethiopian oil
and gas interests, reported within discontinued operations.
The Group has operations in a number of overseas jurisdictions where it has incurred taxable losses which may be available
for offset against future taxable profits amounting to approximately $17,500,000 (31 May 2014: $14,570,000). In addition,
the Group has further deductible timing differences amounting to approximately $34,680,000 (31 May 2014: $21,047,000). No
deferred tax asset has been recognised for these tax losses and other deductible timing differences as the requirements of
IAS 12, 'Income taxes', have not been met.
The Company is resident for taxation purposes in Guernsey and its income is subject to Guernsey income tax, presently at a
rate of zero percent. per annum (2014: zero percent. per annum). No tax is payable for the year due to losses incurred.
Deferred tax has not been provided for, as brought forward tax losses are not recoverable under the Income Tax (Zero 10)
(Guernsey) Law, 2007 (as amended).
17. Discontinued operations
The profit / (loss) after tax arising on discontinued operations during the period is analysed by business operation as
follows:
2015 2014
US$000 US$000
Oil and gas activities 5,740 (1,378)
Cocoa trading activities (174) (986)
Palm activities (3,069) -
Net profit / (loss) after tax attributable to discontinued operations (attributable to owners of the Company) 2,497 (2,364)
17.1. Oil and gas
On 6 January 2009, the Shareholders approved the adoption of the investing strategy to acquire or invest in businesses or
projects operating in the agricultural and associated civil engineering industries in Southern Africa. At the same time the
Group suspended all exploration activities and reduced expenditure to the minimum required in order to retain exploration
licenses and extract potential value for Shareholders. Consequently the oil and gas activities were reclassified as a
discontinued operation.
In the financial year ended 31 May 2013, on 17 January 2013, the Group completed the disposal of its oil and gas interests
in Ethiopia, realising a gain before tax of $40,380,000. After deduction of tax due on this gain of $12,000,000 net of an
expected tax rebate of $1,000,000, the after tax profit realised was $29,380,000. This gain was written back against the
impairment provision made in prior years. During the year ended 31 May 2014 and due to uncertainties on the timing and
amount of the tax rebate to be recovered, the Group provided against the $1,000,000 expected tax rebate.
During the year ended 31 May 2014 the Group incurred expenditure on formal arbitration proceedings to recover the
compensation assessed by the National Petroleum Commission as being due to the Company for works undertaken by the Company
in the Republic of South Sudan and acknowledged as being due by the Ministry of Petroleum and Mining of the Republic of
South Sudan in April 2012. Expenditure of $378,000 was incurred in this matter during the year ended 31 May 2014. This
matter was resolved in the current financial year through the payment to the Company of £3,412,000 (being $5,659,000) in
cash which has been recognised in the current financial period within discontinued operations. A further net credit of
$81,000 has been recorded with respect to the re-imbursement of expenditure incurred in pursuing this claim.
17.2. Cocoa trading
Due to the serious and well-publicised Ebola outbreak and the associated precautionary restrictions on travelling in Sierra
Leone, accompanied by the ongoing losses suffered by the Cocoa trading operations, the Group ceased its Cocoa trading
operations in Sierra Leone in the financial year ended 31 May 2014. The Cocoa trading operations represented a significant
component of a business segment of the Group and accordingly, as required by IFRS 5, 'Non-current Assets Held for Sale and
Discontinued Operations', the results of the Cocoa trading operations are presented as discontinued operations within the
consolidated income statement. Cash flows pertaining to the Cocoa trading operations are presented in the consolidated cash
flow statement along with all cash flows relating to discontinued operations. The amounts recorded in the current financial
year relate to the winding down of the Cocoa Trading operations between June and August 2014. From 1 September 2014, all
expenditure in the Cocoa division has been included within continuing operations, relating either to the cocoa plantation
activities, or the logistics activities undertaken to provide assistance in the Ebola relief efforts.
The results of the discontinued Cocoa trading operations, which have been included in the Consolidated income statement,
were as follows:
2015 2014
US$000 US$000
Loss in the year from the Cocoa trading operations:
Revenue - 1,907
Expenses (174) (2,748)
Finance expense - (1)
Loss before taxation (174) (842)
Taxation - -
Loss after tax from discontinued Cocoa trading operations in the period (174) (842)
Loss on cessation of the Cocoa trading operations:
Loss on impairment of goodwill - (144)
Net loss attributable to discontinued Cocoa trading operations (attributable to owners of the Company) (174) (986)
17.3. Palm activities
The amount reported within discontinued operations for palm activities represents the impairment against the carrying value
of the Group's 45,000 hectare lease in the Pujehun District of Sierra Leone, net of the release of amounts deferred
consideration no longer expected to be due, as more fully described in note 12.2.
18. (LOSS) / Earnings per share
The calculation of the basic and diluted (loss) / earnings per share is based on the following data:
2015 2014
US$000 US$000
Loss for the purposes of basic and diluted earnings per share from continuing activities (15,884) (5,652)
Profit / (loss) for the purposes of basic and diluted earnings per share from discontinued activities 2,497 (2,364)
Loss for the purposes of basic and diluted earnings per share (loss for the year attributable to equity holders of the parent) (13,387) (8,016)
Weighted average number of Ordinary Shares for the purposes of basic and diluted (loss) / earnings per share 1,061,818,478 1,061,818,478
Basic and diluted loss per share (1.26) (0.76)
Basic and diluted loss per share from continuing activities (1.50) (0.53)
Basic and diluted earnings / (loss) per share from discontinued activities 0.24 (0.22)
19. Goodwill
US$000
BOOK VALUE
At 1 June 2013 697
Eliminated in the period (144)
Exchange rate adjustment 23
At 31 May 2014 576
Eliminated in the period (575)
Exchange rate adjustment (1)
At 31 May 2015 -
The Group's goodwill balance arose on the acquisition of the Cocoa operations, comprising the cocoa plantation and cocoa
trading business in Sierra Leone. Due to the cessation of the Cocoa trading operations in the year ended 31 May 2014 (refer
to note 17.2), the proportion of the goodwill attributed to that business was eliminated and is included in the computation
of the net loss from discontinued operations for the year ended 31 May 2014. The remaining balance of $576,000 attributed
to the cocoa plantation has been reviewed for impairment in accordance with the Group's accounting policy and written off
in full in the current period as more fully described in note 12.1.
20. Property, plant and equipment
Land and buildings Plant and machinery Motor vehicles Aviation Other assets Assets under construction Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 June 2013 22,747 11,117 5,211 573 546 - 40,194
Additions 1,880 1,039 285 739 68 2,395 6,406
Disposals - (20) (195) (62) (4) - (281)
Transfers 307 (409) 93 - 9 - -
Exchange rate adjustment (557) (1,158) 476 (72) (24) - (1,335)
At 31 May 2014 24,377 10,569 5,870 1,178 595 2,395 44,984
Additions 1,039 529 38 10 85 - 1,701
Disposals (1) (291) (241) - (18) - (551)
Transfers 2,195 200 - - - (2,395) -
Exchange rate adjustment (2,425) (1,483) (735) (202) (87) - (4,932)
At 31 May 2015 25,185 9,524 4,932 986 575 - 41,202
Accumulated Depreciation and impairment
At 1 June 2013 5 3,391 3,108 256 193 - 6,953
Charge for the year 312 1,067 775 142 74 - 2,370
Disposals - (8) (160) (37) (1) - (206)
Exchange rate adjustment 547
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