REG - Agriterra Ltd - Final Results <Origin Href="QuoteRef">AGTAR.L</Origin> - Part 2
18/11/2016 07:05
- Part 2: For the preceding part double click ID:nRSR5118Pa
behalf of an associate.
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
As at 31 May 2016, the Company held equity interests in the following undertakings:
Direct investments
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Agriterra (Mozambique) Limited 100% Guernsey Holding company
Agriterra Aviation (Pty) Limited 100% South Africa Aviation services
Agriterra East Africa Limited 100% Mauritius Trading
West Africa Cocoa Services Limited (1) 100% British Virgin Islands Holding company
Shawford Investments Inc. 100% British Virgin Islands Holding company
Baranca Tide Limited (1) 100% British Virgin Islands Holding company
Associate undertakings
African Management Services Limited 40% United Kingdom Business support services
Indirect investments of Agriterra (Mozambique) Limited
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Desenvolvimento E Comercialização Agrícola Limitada 100% Mozambique Grain
Compagri Limitada 100% Mozambique Grain
Mozbife Limitada 100% Mozambique Beef
Carnes de Manica Limitada 100% Mozambique Beef
Aviação Agriterra Limitada 100% Mozambique Aviation services
Indirect investments of West Africa Cocoa Services Limited
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Tropical Farms (SL) Limited(1) 100% Sierra Leone Cocoa and coffee trading
Indirect investments of Baranca Tide Limited
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Tropical Farms Plantation (SL) Limited (1) 100% Sierra Leone Cocoa plantation
Indirect investments of Shawford Investments Inc.
Proportion held Country of incorporation Nature of business
Subsidiary undertakings
Red Bunch Ventures (SL) Limited 100% Sierra Leone Palm oil
(1) These companies form part of the Cocoa disposal group. Refer to note 25 for further details.
3.3. Foreign currency
The individual financial statements of each company in the Group are prepared in the currency of the primary economic
environment in which it operates (its 'functional currency'). The consolidated financial statements are presented in US
Dollars.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the date of the transaction.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations are
translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average
exchange rates for each month, unless exchange rates fluctuate significantly during the month, in which case exchange rates
at the date of transactions are used. Exchange differences arising from the translation of the net investment in foreign
operations and overseas branches are recognised in other comprehensive income and accumulated in equity in the translation
reserve. Such translation differences are recognised as income or expense in the year in which the operation or branch is
disposed of.
The following are the material exchange rates applied by the Group:
Average Rate Closing Rate
2016 2015 2016 2015
Mozambican Meticais: US$ 43.61 32.45 59.61 36.90
Sierra Leone Leones: US$ 5,067 4,301 6,200 4,295
3.4. Operating segments
The Chief Operating Decision Maker is the ExCom. The ExCom reviews the Group's internal reporting in order to assess
performance of the business. Management has determined the operating segments based on the reports reviewed by the ExCom
which consider the activities by nature of business.
3.5. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the
normal course of business, net of discounts, value added taxes and other sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed. Delivery occurs when the products have
arrived at the specified location, and the risks and rewards of ownership have been transferred to the customer.
Income arising from the rental of surplus plant and machinery is stated on an accruals basis at the amount due for rental
until 31 May of the relevant financial year.
3.6. Operating loss
Operating loss is stated before investment revenues, other gains and losses, finance costs and taxation.
3.7. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of
those assets, until such time as the assets are substantially ready for their intended use or sale. The Group did not incur
any borrowing costs in respect of qualifying assets in the period.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.8. Share based payments
The Company issues equity-settled share-based payments to certain employees of the Group. These payments are measured at
fair value (excluding the effect of non-market based vesting conditions) at the date of grant and the value is expensed on
a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and
adjusted for non-market based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life used in the model is adjusted, based on
management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
3.9. Employee benefits
3.9.1. Short term employee benefits
Short-term employee benefits include salaries and wages, short-term compensated absences and bonus payments. The Group
recognises a liability and corresponding expense for short-term employee benefits when an employee has rendered services
that entitle him / her to the benefit.
3.9.2. Post-employment benefits
The Group does not contribute to any retirement plan for its employees. Social security payments to state schemes are
charged to profit and loss as the employee's services are rendered.
3.10. Leases
Leases that transfer substantially all the risks and reward of ownership are classified as finance leases. All other leases
are classified as operating leases. As at 31 May 2015 and 31 May 2016 the Group does not have any finance leases. During
the periods presented in these financial statements, the Group was counterparty to certain operating lease contracts.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
3.11. Taxation
The Company is resident for taxation purposes in Guernsey and its income is subject to income tax, presently at a rate of
zero per cent per annum. The income of overseas subsidiaries is subject to tax at the prevailing rate in each
jurisdiction.
The income tax expense for the period comprises current and deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised in other comprehensive income or directly in equity, when tax is
recognised in other comprehensive income or directly in equity as appropriate. Taxable profit differs from accounting
profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible.
Current tax expense is the expected tax payable on the taxable income for the year. It is calculated on the basis of the
tax laws and rates enacted or substantively enacted at the balance sheet date, and includes any adjustment to tax payable
in respect of previous years. Deferred tax is calculated using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be
available against which the asset can be utilised. This requires judgements to be made in respect of the availability of
future taxable income.
The Group's deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the period
when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted by
the reporting date.
Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in
subsidiaries, branches and joint ventures where the Group is able to control the timing of reversal of the temporary
differences and it is probable that the temporary differences will not reverse in the foreseeable future.
3.12. Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured at the
aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or assumed and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit
and loss as incurred.
The assets, liabilities and contingent liabilities of the acquiree are measured at their fair value at the date of
acquisition. Any excess of the fair value of the consideration paid over the fair value of the identifiable net assets
acquired is recognised as goodwill. If the fair value of the consideration is less than the fair value of the identifiable
net assets acquired, the difference is recognised directly in profit and loss.
3.13. Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less accumulated depreciation (see below) and
impairment. Historical cost includes expenditure that is directly attributable to the acquisition. Subsequent costs are
included in the asset's carrying value when it is considered probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably.
Assets in the course of construction for production, rental or administrative purposes are carried at cost, less any
identified impairment loss. Cost includes professional fees and associated expenses.
Other than for Aviation assets, depreciation is charged on a straight-line basis over the estimated useful lives of each
item, as follows:
Land and buildings:
Land Nil
Buildings and leasehold improvements 2% - 33%
Plant and machinery 5% - 25%
Motor vehicles 20% - 25%
Other assets 10% - 33%
Assets under construction Nil
Depreciation on Aviation assets is charged based on the separate components of the aircraft, on an hours flown basis for
engines and on a straight-line basis over 15 years for the airframe.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains
and losses on disposals are determined by comparing proceeds received with the carrying amount of the asset immediately
prior to disposal and are included in profit and loss.
3.14. Impairment of property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit and loss because the Group does not record any assets at a revalued amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in profit and loss.
3.15. Biological assets
Consumer biological assets, being the beef cattle herd, are measured in accordance with IAS 41, 'Agriculture' at fair value
less costs to sell, with gains and losses in the measurement to fair value recorded in profit and loss. The herd comprises
breeding and non-breeding cattle. The breeding cattle comprise bulls, cows and heifers. As these are expected to be held
for more than one year, breeding cattle are classified as non-current assets. The non-breeding cattle comprise animals
(principally steers) that will be grown and sold for slaughter and are classified as current assets.
Cattle are recorded as assets at the year end and the fair value is determined by the size of the herd and market prices at
the reporting date.
Cattle ceases to be a biological asset from the point it is slaughtered, after which it is accounted for in accordance with
the accounting policy below for inventories.
The cost of forage is charged to the income statement over the period it is consumed.
3.16. Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories
is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them
to their existing location and condition.
3.17. Non-current assets held for sale
Non-current assets (and disposal groups) held for sale are measured at the lower of carrying amount and fair value less
costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly
probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date
of classification.
When the Group is committed to a sale plan involving the loss of control of a subsidiary, all of the assets and liabilities
of that subsidiary are classified as held for sale when the criteria above are met.
A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a
disposal group classified as held for sale.
Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised
in profit or loss.
3.18. Financial instruments
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to
the contractual provisions of the instrument.
3.18.1. Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified
as at fair value through profit and loss ('FVTPL'), which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets at 'FVTPL', 'held-to-maturity'
investments, 'available-for-sale' financial assets and 'loans and receivables'. The classification depends on the nature
and purpose of the financial asset and is determined at the time of initial recognition. The Company and Group currently
have financial assets in the category of 'loans and receivables' and FVTPL.
3.18.1.1. Loans and receivables
Trade receivables, loans receivable, bank balances, cash in hand and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are
measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the instrument, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
3.18.1.2. Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or is designated as at
FVTPL upon initial recognition. The Group holds certain investments in quoted companies which are designated as held for
trading. Financial assets at FVTPL are stated at fair value, with any gains and losses arising on re-measurement recognised
in profit or loss. The net gain or loss incorporates any dividends, interest earned, or foreign exchange gains and losses
on the financial asset and is included within other gains and losses in the income statement. Fair value is determined in
the manner described in note 21.
3.18.1.3. Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the asset have been affected.
For loans and receivables carried at amortised cost, the amount of the impairment is the differences between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original
effective interest rate.
The carrying amount of the financial asset is reduced through the use of an allowance account. When a financial asset is
considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying amount of the allowance account are
recognised in profit or loss.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit
and loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been recognised.
3.18.1.4. De-recognition of financial assets
The Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
3.18.2. Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of
the contractual arrangement.
3.18.2.1. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue
costs.
3.18.2.2. Financial liabilities
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'. The Group
only has financial liabilities in the category of other financial liabilities.
3.18.2.2.1. Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
3.18.2.2.2. De-recognition of financial liabilities
The Group de-recognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or
they expire.
3.19. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability
takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the
Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.
For all other financial instruments not traded in an active market, the fair value is determined by using valuation
techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e., using
recent arm's length market transactions adjusted as necessary and reference to the current market value of another
instrument that is substantially the same) and the income approach (i.e., discounted cash flow analysis and option pricing
models making as much use of available and supportable market data as possible).
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within
the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by re-assessing the categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies which are described in note 3, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods. The effect on the financial statements
of changes in estimates in future periods could be material.
4.1. Going concern
The Group has prepared forecasts for the Group's ongoing businesses covering the period of at least 12 months from the date
of approval of these financial statements. These forecasts are based on assumptions including, inter alia, that there are
no significant disruptions to the supply of maize or cattle to meet its projected sales volumes and that key inputs are
achieved, such as anticipated sales price increases to reflect underlying inflation in Mozambique, and projected weight
gains of cattle in the feedlot. They further take into account the expected meat to be obtained by de-stocking the beef
herd from the beef ranches, planned disposals of property plant and equipment, general working capital requirements and
available borrowing facilities.
The Directors believe that with existing resources, including available undrawn borrowing facilities, the Group and Company
is able to manage its business risks. The Directors have a reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing these financial statements.
4.2. Impairment
Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment
of Assets. Where there are indicators of impairment, the net book value of the asset or cash generating unit is compared
with its fair value. The impairment review is sensitive to various assumptions, including the expected sales forecasts,
cost assumptions, capital requirements, and discount rates among others. Details of impairments recorded in the period are
included in note 11.
4.3. Biological assets
Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair value is
based on the estimated market value for cattle in Mozambique of a similar age and breed, less the estimated costs to bring
them to market, converted to US$ at the exchange rate prevailing at the period end. Changes in any estimates could lead to
the recognition of significant fair value changes in the consolidated income statement, or significant changes in the
foreign currency translation reserve for changes in the Metical to US$ exchange rate.
The herd is further categorised as either breeding herd of slaughter herd, depending on whether it is principally held for
reproduction or slaughter. At 31 May 2016 the value of the breeding herd disclosed as a non-current asset was $888,000
(2015: $2,246,000). The value of the herd held for slaughter disclosed as a current asset was $1,106,000 (2015:
$1,019,000). Subsequent to the period end the Group has commenced de-stocking its cattle farms (where the breeding herd is
held) into the feedlot and these animals are being processed for slaughter. The de-stocking is expected to be complete by
the end of April 2017 and accordingly, the value of the breeding herd will now be realised within 12 months of the balance
sheet date. The decision to close the cattle ranches was not made until after the period end and, accordingly, the breeding
herd continues to be disclosed as a non-current asset as at 31 May 2016. Further details on the de-stocking are included in
note 34.1 and the Chair's statement.
4.4. Recoverability of input Value Added Tax
Mozambique Value Added Tax ('IVA') operates in a similar manner to UK Value Added Tax ('VAT'). The Group is exempt from IVA
on its sales of maize products under the terms of Mozambique tax law. The Group is able to recover input sales tax on
substantially all of the purchases of the Grain division. The Group is always therefore in a net recovery position of IVA
in respect of its Grain operations. To date the Group has not succeeded in recovering IVA from the Mozambique Government.
Due to the significant uncertainty over the recoverability of these IVA balances, the Group has provided in full against
the assets as at 31 May 2015 and 31 May 2016. As at 31 May 2016, the gross and net IVA recoverable assets are respectively
$837,000 (2015: $1,319,000) and $nil (2015: $nil) at the US$ to Metical exchange rate of 59.61 (2015: 36.90) at that date.
4.5. Presentation of 'Other cocoa activities' as discontinued operations and classification of related assets and
liabilities as held for sale
As discussed in note 16.3, the results of the Group's Cocoa division are presented as discontinued operations in the period
and the related assets and liabilities are classified as a disposal group held for sale (refer to note 25). The
classification requires, inter alia, that:
· the disposal group is available for immediate sale in its present condition, subject only to terms that are usual and
customary for the sale of such a group; and
· the sale of the disposal group must be highly probable.
As at 31 May 2016, the Board had reached the decision to sell the Cocoa division if an appropriate offer was made and
confidential discussions had been initiated with a number of parties including the incumbent management team of the Cocoa
division. These discussions indicated that the disposal of the disposal of the Cocoa division would achieve a realistically
acceptable price and accordingly, its sale within twelve months of the balance sheet date was considered highly probable.
Accordingly the Cocoa division was classified as available for sale as at 31 May 2016. Subsequent to the period end, the
incumbent management team of the Cocoa division agreed the detailed purchase terms for the holding companies that control
the Cocoa division, confirming this assessment. Further details are provided in note 34.2.
5. REVENUE
An analysis of the Group's revenue is as follows:
2016 2015
(re-presented - note 16)
US$000 US$000
Continuing operations
Sale of goods 18,334 10,839
Hire of equipment and machinery 177 44
18,511 10,883
Investment revenues (note 12) 11 19
18,522 10,902
Discontinued operations
Sales of goods (note 16) 161 -
Hire of equipment and machinery (note 16) 228 904
389 904
18,911 11,806
6. 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.
6.1. Segment revenue and results
The following is an analysis of the Group's revenue and results by operating segment:
Year ending 31 May 2016 Grain 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) 12,246 6,265 389 - (389) - 18,511
Inter-segment sales(1) 660 - - - - (660) -
12,906 6,265 389 - (389) (660) 18,511
Segment results
- Operating profit / (loss) 811 (5,981) (965) (1,446) 965 - (6,616)
- Interest (expense) / income (473) (205) - 11 - - (667)
- Other gains and losses - - - (360) - - (360)
Profit / (loss) before tax 338 (6,186) (965) (1,795) 965 - (7,643)
Income tax (16) (18) - - - - (34)
Profit / (loss) for the period from continuing operations 322 (6,204) (965) (1,795) 965 - (7,677)
Year ending 31 May 2015(re-presented - note 16) 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 - (904) - 10,883
Inter-segment sales(1) 524 - - - - (524) -
6,041 5,366 904 - (904) (524) 10,883
Segment results
- Operating loss (2,128) (2,317) (7,853) (2,166) 7,853 - (6,611)
- Interest (expense) / income (680) 2 - 14 - - (664)
- Other gains and losses - - - (849) - - (849)
Loss before tax (2,808) (2,315) (7,853) (3,001) 7,853 - (8,124)
Income tax (78) (3) - - - - (81)
Loss for the period from continuing operations (2,886) (2,318) (7,853) (3,001) 7,853 - (8,205)
(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 Mozambique market. $161,000 of sales from the Cocoa division were supplied to the world market during the year, with the remainder supplied within Sierra Leone (2015: supplied in full within Sierra Leone during the year).
(3) $228,000 (2015: $904,000) of revenue reported in the Cocoa segment for the year ended 31 May 2016 arises on the rental of certain of the Cocoa division's assets, principally in aid of the relief effort against the Ebola crisis in Sierra Leone.
(4) Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment - refer to notes 16.2 and 16.3.
The segment items included in the consolidated income statement for the year are as follows:
Year ending 31 May 2016 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 239 889 391 32 (391) - 1,160
Impairment of assets (note 11.1) - 3,069 - - - - 3,069
Year ending 31 May 2015(re-presented - note 16) 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 (628) - 1,644
Impairment of assets (note 11.2) - - 6,791 - (6,791) - -
(1) Amounts reclassified to discontinued operations in both periods presented relate to the Cocoa segment - refer to notes 16.2 and 16.3.
6.2. 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, including capitalised depreciation where
applicable in the year ended 31 May 2015.
The segment assets and liabilities at 31 May 2016 and capital expenditure for the year then ended are as follows:
Grain Beef Cocoa Unallocated Total
US$000 US$000 US$000 US$000 US$000
Assets 6,167 6,401 - 4,513 17,081
Liabilities (1,496) (1,889) - (382) (3,767)
Capital expenditure (85) (380) - - (465)
Segment assets and liabilities are reconciled to Group assets and liabilities as follows:
Assets Liabilities
US$000 US$000
Segment assets and liabilities 12,568 3,385
Unallocated:
Investments in quoted companies and interests in associates 20 -
Other receivables 568 -
Assets classified as held for sale 607
Cash and cash equivalents 3,318 -
Liabilities directly associated with assets classified as held for sale - 142
Trade payables - 96
Accrued liabilities - 144
Total 17,081 3,767
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 in quoted companies and interests in associates 380 -
Other receivables 495 -
Cash and cash equivalents 6,029 -
Trade payables - 627
Accrued liabilities - 158
Total 34,298 4,456
6.3. Significant customers
In the year ended 31 May 2016, no single customer contributed more than 10% of the Group's revenue. During the year ended
31 May 2015, one of the Beef division's customers generated $1,515,000 of revenue being 13.9% of Group revenue.
7. OPERATING LOSS
Operating loss has been arrived at after charging / (crediting):
2016 2015
(re-presented - note 16)
US000 US$000
Depreciation of property, plant and equipment 1,160 1,644
Profit on disposal of property, plant and equipment (15) (61)
Loss on re-measurement of assets classified as held for sale 125 -
Net foreign exchange (gain) / loss (37) 177
Impairment of assets (see note 11.1) 3,069 -
Staff costs (see note 9) 3,360 4,326
8. AUDITORS REMUNERATION
Amounts payable to RSM UK Audit LLP and their associates in respect of audit services are as follows:
2016 2015
US$000 US$000
Fees payable to the Company's auditor for the audit of the Company's accounts 121 153
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries - 52
Total audit fees 121 205
Other than as disclosed above, the Company's auditor and their associates have not provided additional services to the
Group.
9. STAFF COSTS
The average monthly number of employees (including executive Directors) employed by the Group for the year was as follows:
2016 2015
(re-presented - note 16)
Number Number
Office and Management 47 48
Operational 746 814
793 862
Of which relating to:
Continuing operations 730 707
Discontinued operations 63 155
793 862
Their aggregate remuneration comprised:
2016 2015
(re-presented - note 16)
US$000 US$000
Wages and salaries 3,615 5,008
Social security costs 78 104
Share based payment charge 66 55
3,759 5,167
Less: capitalised and included in property, plant and equipment - (169)
Amount charged to profit and loss 3,759 4,998
Of which relating to:
Continuing operations 3,360 4,326
Discontinued operations 399 672
3,759 4,998
10. REMUNERATION OF DIRECTORS
Year ended 31 May 2016 Salary Bonus Share based payment Total
US$000 US$000 US$000 US$000
PH Edmonds 136 13 - 149
CS Havers 4 - - 4
AS Groves 149 13 - 162
DL Cassiano-Silva 202 16 13 231
491 42 13 546
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
11. IMPAIRMENT OF CURRENT AND NON-CURRENT ASSETS
In accordance with IAS 36, Impairment of assets, the Group conducted an impairment review of its tangible assets as at 31
May 2016, resulting in an impairment against its Beef division assets held in Mozambique. The equivalent impairment review
conducted as at 31 May 2015 resulted in an impairment against the tangible and intangible cocoa and palm lease assets, all
held in Sierra Leone. Details of the recorded impairments are as follows:
2016 2015
(re-presented - note 16)
US$000 US$000
Beef division 3,069 -
Impairment against continuing operations 3,069 -
Cocoa division - 6,791
Palm activities - 3,069
Impairment against discontinued operations - 9,860
3,069 9,860
Further details are provided below.
11.1. Impairment of Beef division non-current assets in the financial year ended 31 May 2016
The economic environment in Mozambique has altered substantially during the 2016 calendar year, having been affected by a
combination of a decline in commodity prices, the strong devaluation of the Metical, a rise in inflation, natural disasters
and military conflict in the central regions of the country. On the one hand, this changing economic environment has
presented significant sales opportunities for the Group, particularly in the ability to supply local product to substitute
previously preferred imported goods which are now relatively more expensive. The increased price competitiveness of our
beef products in particular has opened up the sizeable Maputo market and we are now seeing record monthly sales volumes as
a result. On the other hand, it is uncertain if and when the political and military tensions will be resolved and, until
these matters are resolved, there will inevitably be significant uncertainty regarding the security of investment in
certain parts of the country. This uncertainty, along with the general economic climate in Mozambique, led the Board to
initiate the de-stocking of the animals from the cattle farms in June 2016. Further details are provided in note 34.1 and
the Chair's statement.
As a result of the above, and as required by IFRS, the Group conducted an impairment review of the Beef division assets in
Mozambique, resulting in an impairment against property, plant and equipment in the Beef division of $3,069,000 (2015:
$nil).
Where assets were capable of generating cash flows that were largely independent from those generated by other assets, the
impairment review compared the carrying value of individual assets to their recoverable amount. Examples of such assets
were mainly vehicles, agricultural equipment, heavy plant and machinery etc. Where the asset did not generate cash flows
that were independent from other assets, the Group estimated the recoverable amount of the cash-generating unit to which
the asset belonged. Examples of such assets were (1) the farm and feedlot development assets (for each of Mavonde,
Inhazonia, Dombe and Vanduzi), including the land itself, clearing costs, planting, maintenance and other expenditure, and
(2) the abattoir and retail units.
$2,408,000 of the impairment charge relates to the farming assets, which comprise in the main the initial purchase price of
the land, fixed land improvements (such as land clearing and preparation or the construction of the Mavonde dam) and
semi-fixed improvements (such as fencing). Given the political and military tensions in Mozambique, and their consequential
impact on the investment landscape, there was no basis for making a reliable estimate of fair value less costs of disposal
and therefore recoverable amount was measured by reference to value in use alone. This was estimated at $nil because the
farm assets at their stage of development as cattle farms, are not capable of generating positive cash returns without
further development funding.
$197,000 of the impairment charge relates to vehicles, heavy plant and machinery and agricultural equipment (including
irrigation pivots). Recoverable amount was determined for assets or cash generating units based on fair value less costs of
disposal, where fair value was based on the Directors best estimates of the likely realisable value for individual assets
within Mozambique.
The remaining charge of $464,000 was recorded against the Vanduzi feedlot assets where recoverable amount was estimated
based on a value in use discounted cash flow basis. The retail and abattoir assets were also assessed for impairment on a
value in use discounted cash flow basis. No impairments were recorded against these assets. The impairment review utilised
the cash flow forecasts for the Beef division (which are not reliant on the ongoing supply of animals from the cattle
farms) are based on the most recent financial budgets approved by management for the next five years. Cash flows were
estimated in real terms. No growth is assumed in subsequent years which are maintained at constant levels. The key
assumptions in the value in use calculations are those regarding the discount rate, expected changes to selling prices and,
for the feedlot, expected daily weight gains. Where appropriate, the expected cash flows have been probability weighted in
respect of these key assumptions. Management estimates discount rates using pre-tax rates that reflect the current market
assessments of the time value of
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