REG - Woodbois Limited - Audited results for FY 2022
09/06/2023 07:00
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RNS Number : 1778C Woodbois Limited 09 June 2023
9 June 2023
Woodbois Limited
("Woodbois", the "Group" or the "Company")
Audited results for FY 2022
Woodbois, the African focused sustainable forestry, reforestation, carbon
sequestration and timber trading company, announces its audited results for
the full year ended 31 December 2022.
Highlights
· Turnover increased by 32% to $23.1m (2021: $17.5m)
· Forestry division generated 66% of turnover and third-party
trading was 34%.
· Gross profit increased by 69% to $5.9m vs $3.5m in FY 2021
· Gross profit margin increased to 25%, up from 20% in FY 2021
· Significant increase in EBITDAS(( 1 )) to $3.3m (2021: $1.0m)
· Net loss for the year of $111m principally driven by net non-cash
revaluation downwards(( 2 )) of $108.7m of the Company's biological assets
· Cash balance of $2.3m as at 31st December 2022
· 2022 sawn timber production of approximately 18,600m(3), a 42%
increase year-on-year
· 2022 veneer production of approximately 5,200m(3), a 38% increase
year-on-year
· Installation of second veneer line completed during H2 2022
· Post year end fund raise in March 2023 of $3.4m
· Post year end termination in April 2023 of $6m credit line by
Danish bank and cash of $3.1m offset. Repayment plan agreed in June 2023.
· Post year end grant of 50,000 hectares of low carbon stock land
in Gabon for initial large-scale afforestation project
Commenting on today's announcement Chief Executive Paul Dolan said:
"Our financial and operational results for 2022 clearly point to the growth
potential of the Group, with an EBITDAS for the year of $3.3m. The business
has been greatly interrupted in 2023 by unforeseen events announced
previously. We are confident that, subject to a successful refinancing, of
which we remain confident but which cannot be guaranteed, our previously
established growth trajectory and improvement in profitability can resume."
Enquiries:
Woodbois Limited
Paul Dolan - Chief Executive Officer + 44 (0)20 7099 1940
Carnel Geddes - Chief Financial Officer
Canaccord Genuity (Nominated Advisor and Broker) + 44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
Harry Pardoe
Gordon Hamilton
Novum Securities (Joint Broker) + 44(0)20 7399 9427
Colin Rowbury
Jon Belliss
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which forms part of UK law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR").
Non-IFRS measures
The Company uses certain measures to assess the financial performance of the
company. These terms may be defined as "non-IFRS measures" as they exclude
amounts that are included in, or include amounts that are excluded from, the
most directly comparable measure calculated and presented in accordance with
IFRS. They also may not be calculated using financial measures that are in
accordance with IFRS. These non-IFRS measures include the Company's EBITDAS.
The Company uses such measures to measure and monitor performance and
liquidity, in presentations to the Board and as a basis for strategic planning
and forecasting. The directors believe that these and similar measures are
used widely by market participants, stakeholders, and other interested parties
as supplemental measures of performance and liquidity.
The non-IFRS measures may not be directly comparable to other similarly titled
measures used by other companies and may have limited use as an analytical
tool. This should not be considered in isolation or as a substitute for
analysis of the Company's operating results as reported under IFRS.
The Company does not regard these non-IFRS measures as a substitute for, or
superior to, the equivalent measures calculated and presented in accordance
with IFRS or those calculated using financial measures that are calculated in
accordance with IFRS.
CHAIR AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Dear Shareholder,
Following a year of rapid growth and continued progress across the Group's
operations we are delighted to present Woodbois' 2022 annual report. The Group
continued to demonstrate that conventional metrics of business success can be
achieved in tandem with meaningful action for a sustainable future by
delivering material improvements in production volumes, along with increases
in both sales and profit margins. Our ambition is to build scale as and when
opportunities present themselves and external conditions allow, on the back of
an asset-rich, cash generative engine. The headwind of elevated inflation and
higher interest rates during the second half of the year however led to the
pragmatic decision for our trading business to temporarily take a defensive
stance as the economic backdrop became more uncertain. As announced in April
2023, the termination of a bank line of credit has led to the Company seeking
alternative financing arrangements. A repayment plan was agreed and announced
on 6 June 2023, as set out in note 24. There is currently no certainty as to
the outcome of these efforts, but assuming these arrangements are able to be
put in place (and given that a repayment plan has now been announced) we are
confident that when we are able to restore our activity levels, that our
constantly evolving and improving platform can provide a strong foundation for
further profitability growth into the future in balance with benefits to the
environment and society.
2022 Business performance
The Company maintained its record of improvement on measures of production and
financial performance in 2022, achieving a 32% increase in revenue, 69%
increase in gross profit and more-than trebling EBITDAS 1 to $3.3m. As a
result of the increased activity, operating costs increased by 15%
year-on-year ("YOY") while administration expenses were strictly controlled
and decreased by 3% YOY.
The Company operates three divisions: Forestry, Trading, Carbon
Forestry (including timber production):
Sawmill output increased by 42% to 18,600m(3) and veneer output increased by
38% to 5,200m(3). The total volume of goods shipped from Gabon increased by
79% YOY as the Covid-induced strain on the global freight shipping industry
began to dissipate and the reversion to mean of shipping rates contributed to
the improvement in margins. These significantly higher levels of output
required correspondingly increased levels of working capital to fund an
approximately five-month cycle.
The forest area that was purchased in 2021 is in the process of being
amalgamated under a new 25-year Forest Management Plan which will minimise
impact on the forest while maximising supply of raw material for our enlarged
processing facilities where capacity enhancements over the last two years
leave plenty of room for a higher volume of output.
The amalgamated Forest Management Plan is also a critical step towards
achieving full certification of our forests and factories, aimed for in 2024.
Limited progress was made during 2022 owing to budget constraints, with many
of the remaining outstanding items requiring a level of Capex to complete.
Gabon's forest management plans, which are strictly enforced, are designed to
provide economic services and goods in the long term while maintaining and
preserving the forest's ecological functions and contributing to the economic
development and improvement of living conditions of local communities. We
expect the new amalgamated management plan to be completed around September
2023 and are authorised to harvest under the existing individual plans during
the interim period.
While there were clearly many highlights in 2022, we experienced an over-run
in both cost and time on the installation of the second veneer line, and at
the time of writing, are still look forward to benefitting from running the
line at a level close to its capacity, which is targeted for H2 2023, subject
to sufficient working capital being in place.
Once the anticipated refinancing has taken place, our 2023 priority is to
return to the high production levels achieved in the past year, further
consolidate the gains made in recent years, and ensure ongoing growth and
productivity improvements by working existing assets and advancing our
certification process, before investing in any major new capital expenditures.
Trading:
As output at our factories increased during 2022, higher levels of working
capital were required to support activities resulting in limited availability
of funding for third party trading. Despite this constraint, revenues of $7.8m
were generated during 2022 vs $9.5m the previous year with margins improving
from 11% to 13%. In alignment with our internal objectives of gaining FSC
certification for our forests and factories, the trading team focused on
developing relationships with FSC-certified third-party suppliers and on those
with similar certification aspirations.
The proprietary software technology that we have developed in-house over more
than four years to optimise sales of our own production and to provide a
strong competitive edge for our trading division was fully rolled out across
all business lines and functions during 2022 and now connects our staff in six
separate locations. Having stepped back from taking trading positions towards
the end of 2022, our visibility into the marketplace suggests that low-risk
opportunities to re-enter the market will once again emerge, and we will
actively seek dedicated capital to deploy in order to scale up trading
operations during the second half of 2023 subject to financing being in
place.
Carbon:
While geopolitical events, in particular the war in Ukraine have dominated
headlines over the last twelve months, the existential threat of climate
change has escalated to near crisis levels. As the world heats up due to the
accumulation of carbon dioxide, the urgent deployment of renewable energy and
sequestration of carbon, through programs such as restoration of nature, are
vital to mitigate these effects. Woodbois has had a stated objective since
2021 to acquire a land lease that would allow the company to develop a
large-scale indigenous species afforestation project to sequester carbon,
contribute to addressing climate change and at the same time, generate value
through carbon credit sales and provide additional local employment
opportunities. We are delighted to announce that Woodbois has recently (in
2023) been awarded a conditional grant of 50,000 hectares of land in Gabon for
this project, an area equivalent to the New Forest in England. Woodbois now
has the opportunity to play its part in restoring nature at scale,
sequestering carbon and to be well rewarded for doing so in the OECD's highest
ranked country for cost-efficiency in carbon sequestration.
During 2022, we worked to lay the groundwork for this project and to develop
relationships. Highlights include (1) When Gabon hosted the African Climate
Week in August 2022, senior Woodbois management and members of our carbon team
who were in attendance enjoyed opportunities to meet and connect with
delegates from national governments, UN experts and private sector companies
to introduce our proposed solutions to tackling climate change and to learn
about alternative approaches being taken. (2) Similarly, we attended the
African-hosted COP27 where Gabon was rewarded for played a major role in
negotiations in recognition of its exemplary model of environmental
conservation. Having become the first country to receive results-based
payments for reduced forest emissions in 2021, Gabon followed up in 2022 by
announcing its intention to sell up to 200 million certified carbon credits.
Post year-end event: banking facility terminated, recapitalisation in train
The Company announced on 19 April 2023 that one of its wholly-owned
subsidiaries had received a notice from its Danish bank that it was
terminating a $6 million debt facility. The subsidiary company, Woodgroup ApS,
was fully utilising its $6m facility at that time but held a cash balance of
$3.1 million in an ancillary account which the bank used as an offset in
partial repayment of the facility.
Following this unexpected termination, the Company took all necessary steps to
preserve the business, revising internal cash-flow forecasts, engaging in
contingency planning and consulting external professionals. The Company
continues to assess alternative funding sources and will update the market in
due course once any such agreement has been reached. The Company is also
working on the potential deferment of c.$1.5m of debts, which fall due at the
end of June. Whilst the Directors are confident that the Company will obtain
alternative funding in the coming weeks, should they fail to do so, the
Company may be reliant on the deferment of these near-term creditors in order
to continue to trade. Assuming this recapitalisation is effected and whilst
expecting a difficult trading period in the short term, management believe
that the fundamentals of the business are sound and that it can then continue
to operate as a going concern.
At the time of writing, multiple different funding offers have been received
including debt, equity and hybrid structures and a decision on which avenue to
take is expected in the coming weeks. While management intend at this time to
continue building out the three divisions of forestry, trading and carbon, the
quantum of refinancing funding received, and the expectations of its providers
may influence internal allocation of capital in the near term and the future
direction of the Group.
The Board
After almost four years as a Non-Independent Non-Executive Director and owing
to his growing other work commitments at Lombard Odier, Henry Turcan stood
down from the Board in October 2022. Henry's energy and guidance helped to
transform the financial health of the Company, its performance and its
governance.
After approximately a year, initially in a consultancy capacity and latterly
as CEO, Federico Tonetti stood down from the board in May 2022 with Paul Dolan
moving back from Executive Chair to CEO and Non-Executive Director Graeme
Thomson moving to Non-Executive Chair and Senior Independent Director. The
Board express their grateful thanks to both Henry and Federico on behalf of
all stakeholders for their efforts.
The Board is actively looking to extend its expertise by adding at least one
non-executive director.
Looking forward and strategic priorities
Despite near-term headwinds, the overarching strategic aim of the group
remains to build three distinct but synergistic divisions outlined below, each
with its own dedicated management, leveraging proprietary technology and
minimising central costs.
The Forestry division will return to and prioritise consolidation of the
production gains made during 2022 while ensuring the delivery of consistently
high-quality products to our customers. We see clear opportunities to improve
efficiencies and further improve profit margins through process improvement
and some re-configuration of production lines. Our ambition to grow the
business however extends beyond purely organic growth. We will actively seek
aligned Joint Venture or M&A opportunities in Gabon and elsewhere in the
Congo Basin as we look to build scale. The highest priority of all however
within the Forestry division is the completion of the FSC certification
process for our forests and factories to ensure that the highest levels of
compliance are observed at every level within our value chain.
Although margins will always lower than those in the Forestry division, the
Trading division can deliver substantial revenue growth from the $40 billion
per annum global hardwood market, whilst also generating healthy profitability
if a dedicated financing facility is found. As well as providing wider market
intelligence regarding pricing and availability, which helps to maximise value
within our Forestry division, the Trading division also creates relationships
and touchpoints throughout the industry which is invaluable for a Group that
intends to pursue an expansionary M&A strategy. A key priority for the
Trading division during 2023 will be to align with Group strategy by offering
support to suppliers who demonstrate high levels of industry compliance or who
are also following the path to certification.
With the Gabonese government announcing that Woodbois has been granted 50,000
hectares for our initial large-scale afforestation project, the immediate
priorities for the Carbon division are to agree and sign legal documentation
with the government. Once in place, commercial and legal documentation must be
agreed with the funder of the initial 4-year trial phase: planning will
continue in order to ensure that work can then commence with immediate effect.
Re-creating a natural forest of up to 50 million indigenous and principally
Okoume species trees will require the participation and harnessing of skills
of the local population as well as overseas tropical forestry experts. We hope
that bringing this team together and executing on the plan will generate
widespread support and serve as a blueprint for other large-scale
carbon-sequestering project in Africa and beyond.
Competition for African resources
Since the beginning of 2023, China's Foreign Minister Qin Gang, US Treasury
Secretary Janet Yellen and Russian Foreign Minister Sergei Lavrov and have all
visited Africa. French President Emmanuel Macron visited Gabon and three other
African countries in March and US President Joe Biden has pledged to travel to
the continent this year. Following the US-Africa Leaders' Summit in December,
and ahead of the second Russia-Africa Summit in July, these high-level visits
highlight growing competition between major powers, placing resource-rich
African countries in a strong position as they choose their geopolitical and
private sector partners. These clear statements of intent from the world's
biggest superpowers reinforce our conviction that Africa will become an
increasingly important strategic investment destination for the major investor
nations in the years ahead.
Within the context of the emerging African continent, Gabon's leadership on
climate action through forest preservation and its position as one of the most
carbon positive (i.e., absorbing) countries in the world makes it an obvious
anchor country to continue to grow the business, organically or through Joint
Ventures or full-blown mergers. From our government level conversations with
several Central and West African countries, we expect that companies with
large, successful operations in Gabon will increasingly be welcomed and
incentivised as the implementation of sustainable forestry practices and
payment for the protection of forests increasingly becomes a reality across
the Congo Basin.
Outlook
Assuming we can resolve the funding issues resulting from the Danish bank's
actions noted earlier and elsewhere in this Report, as the business enters its
next stage of development: we expect each of the three divisions (production,
trading and carbon) to scale and become self-sufficient, and in each case to
be led and driven by dedicated, expert management which will be responsible
for all aspects of their division's business development and P&L.
Allocating responsibility to each divisional head will sharpen focus and force
clear accountability which we expect will enable accelerated growth within
each division and across the Company. Capital allocation to each division will
become increasingly based on performance and on demonstrable risk-adjusted IRR
earnings potential which will be transparent to the Board and to all
stakeholders. Although the divisions are strategically complementary to each
other within the Group's broad 'sustainable forestry' umbrella, the
differentiated pools of capital that could be attracted in support of each
division lies behind our thinking as we consider the organic, Joint Venture
and M&A strategies that each division has the potential to pursue.
After a difficult Q1 in 2023, as described in our quarterly update and
following the withdrawal of banking facilities noted above and efforts for the
required recapitalisation, revenue in the first half of 2023 will be lower
than had previously been expected. However, if successful in our efforts to
obtain alternative finance, we remain optimistic for the second half.
We do not expect head office or administrative costs to increase while these
changes are implemented. Indeed we believe that we can deliver further cost
savings in these areas, particularly through the further development of our
industry-unique, cutting-edge proprietary process management technology. We
thank all of our employees, so many of whom go above and beyond in their
service to the Company, for their industry in 2022, and our advisers and other
stakeholders for their continued support for our development.
Paul Dolan
Graeme Thomson
Chief Executive Officer
Non-Executive Chair and Senior Independent Director
9 June 2023
CHIEF FINANCIAL OFFICER'S REPORT
Summary reflections on 2022
The year marked another solid year of progress for the Group with operating
activities turning cash flow positive (2022: inflow of $1.1m: 2021:
outflow of $2.5m). Increased levels of production at both factories in Gabon
resulted in a revenue increase of 32% to $23.1m and a 69% rise in Gross Profit
to $5.9m. EBITDAS 3 (#_ftn3) increased more than three-fold. Our focus on
higher value-add products and markets, in combination with the gradual decline
in shipping costs throughout the year, allowed an improvement in gross profit
margins to 25%, up from 20% in 2021 (and 8% in 2020). In terms of segment
contribution, our own production sales generated a margin of 32% in 2022 v 30%
in 2021 and Trading of 3rd party products generated a margin of 13% in 2022 v
11% in 2021.
Year ended 31 December 2022 Year ended 31 December 2021
$000 $000
(Loss)/profit before taxation (158,867) 90,702
Add back fair value loss/(gain) on biological assets 156,983 (4,253)
Add back finance costs 1,029 591
Add back gain on bargain purchase - (88,292)
Add back share based payment expense 418 233
Add back reclassification of FCTR 4 on deregistered entities 1,529 -
Add back depreciation and amortisation 222 326
Add back depreciation in Cost of Sales 1,959 1,737
EBITDAS 3,273 1,044
2022 Financial performance review
We dealt with a number of challenges during 2022, including an increase in the
cost and, at times, limited supply of diesel, as well as a later and heavier
than usual rainy season severely affecting forestry operations and
transportation of raw material. Sawn timber provided the largest contribution
to the growth of revenues with the investment made in plant and machinery in
our sawmill over the last three years reflected in consistently higher levels
of production. The contribution from sales of veneer was more muted owing to
logistical delays in the commissioning of the second production line,
completed in H2 2022. The shortfall in expected veneer revenue was partially
made up by log sales to other veneer producers in Gabon. Despite these
challenges, I am pleased to report that we achieved, following a necessary
revision in October 2022, our revenue and EBITDAS targets. This marks our
second consecutive year of positive EBITDAS.
In terms of the hard numbers, Revenue increased by 32% to $23.1 million in
2022 (2021: $17.5 million). Gross Profit was up 69% to $5.9 million compared
to $3.5 million in 2021 reflecting the focus on higher value-add products and
markets in combination with the gradual decline in shipping costs throughout
the year. Gross profit margin rose to 25% in 2022 compared to 20% in 2021
and 8% realised for the full year 2020. As expected, operating costs
increased marginally (15%) in 2022 principally owing to inflation of diesel
prices, much less than production of sawn timber and veneer which increased by
42% and 38% respectively YOY. Our administration expenses decreased by 3%
in 2022 compared to 2021 owing to the Group's policy of continuous cost review
and minimisation; it includes costs of $0.8m in connection with our
application for the afforestation project which under accounting standards
have to be written-off until the licence is awarded when they can thereafter
be capitalised. In line with having taken on more debt to fund capex, finance
charges increased to $1.0 million in 2022 compared to $0.6 million in 2021 and
significantly lower than the levels of 2020 ($2.8 million). We booked a
Foreign Exchange gain of $0.9 million (2021: gain $0.8 million).
We recorded a non-cash gross fair value loss of $157.0 million (2021: gain
$4.3 million) following the annual review of biological asset values in 2022.
This reflected dramatically increasing interest rates worldwide, together with
higher country discount rates being applied. A non-cash downwards revaluation
of $82 million (net of deferred tax) of the biological assets in Gabon
resulted. The $26.7m (net of deferred tax) downwards revaluation of the
biological assets in Mozambique also reflected the Group's decision to
minimise its forward looking harvesting activities and hence its effect
thereof on maximum permitted harvest rates whilst reviewing its strategic
options there. Our Gabonese concessions now account for 100% of our total
biological assets of $179.8 million (see note 11 for more details).
During the year, the Group received notification of the final deregistration
of certain dormant companies that formed part of the Group's historical
business operations in Tanzania. This allowed us to further simplify the group
structure. IFRS, the accounting framework that the Group applies, stipulates
that historical foreign currency translation differences that arose on
consolidation of those entities, be reclassified from equity to profit and
loss upon that final deregistration - this is what the $1.5 million
reclassification in the profit and loss represents. Previously these
differences were shown as part of Equity and included in the Foreign Currency
Translation Reserve ("FCTR"). The FCTR (Equity) has increased by the same
amount (i.e. is included as part of the $83 thousand net movement - also see
note 22).
Revenues from own production increased by 91% from $8.0 million in 2021 to
$15.3 million in 2022 and generated a gross margin of 32% vs 24% in 2021.
Third party Trading revenues decreased by 17% from $9.5 million in 2021 to
$7.8 million in 2022, however gross margin increased from 11% in 2021 to 13%
in 2022. Own production sales represented 66% of total sales in 2022 vs 46%
in 2021. The higher margins achieved in each division in 2022, together with
the change in divisional sales mix, resulted in an increase of overall margin
from 20% in 2021 to 25% in 2022. See note 2 for further information.
Cash and working capital
The year 2022 saw the Group's operating activities turning cash flow positive
(2022: $1.0 million, 2021: outflow of $2.5 million). Our largest items of
investment were to add harvesting and production plant and machinery ($3.9
million), paying the final instalment ($0.3 million) for the 2021 acquisition
of the additional forest in Gabon and settling the final deferred
consideration payment ($0.3 million) for the 2017 purchase of Woodbois
International Aps. Our year end 2022 cash of $2.3 million compared with $0.9
million at the end of 2021.
At the end of 2022 the Group's receivables and inventory were $10.9 million
(2021: $10.8 million), whilst payables and were reduced to $3.7 million (2021:
$4.5 million). Total borrowings (excluding the convertible bond) increased
from $8.3 million in 2021 to $14.3 million at the end of 2022. Of this $8.6
million (2021: $5.4 million) was classified as current. As further explained
in note 16 and 24, $6 million of this is a revolving facility with a Danish
bank that had no specified maturity date and which, although there was no
expectation that it would need to be repaid in 2023, had nonetheless been
classified as a current liability, consistent with the prior year. As
announced by the Company on 19 April 2023, the bank notified the Company of
the termination of this facility and as such the classification as a current
liability is unchanged. Net working capital 5 was $9.6 million, up from
$7.5 million in 2021.
Net Assets
The decrease in the Company's net assets year-on-year, from $258.5 million in
2021 to $147.9 million, is largely due to the annual non-cash revaluation,
this year downwards, of our biological assets in Gabon and Mozambique set out
above and in Note 11.
In June 2022, $0.2 million of 2023 0% Convertible Bonds converted into 5.9
million Voting Ordinary Shares and in August 2022, 2.0 million share options,
issued under the Company's Share Option Plan, were exercised and converted
into Voting Ordinary Shares.
Between May 2022 and November 2022, a total of 390 million Non-Voting Ordinary
Shares have been converted into Voting Ordinary Shares.
At 31 December 2022 the Group's share capital of 2,490 million ordinary
shares, was comprised of 2,255 million Voting Shares and 235 million
Non-Voting Shares.
As set out more fully in the Directors' report, the Independent Auditor's
Report and in Notes 1 and 24 of the financial statements, although there is a
material uncertainty, the Company continues to adopt the going concern basis
in the preparation of this Annual Report and at the date of this report.
Looking ahead to 2023
Assuming the Company is able to resolve the funding issues caused by the
Danish bank's withdrawal of our line of credit and the offsetting of a
substantially all its cash (announced on 19 April 2023), our overriding
priority will be to generate consistent, positive cash flows from our
substantial Gabonese forestry assets to ensure that we continue to grow the
business and also meet any debt repayments. The scale at which we are able to
grow and generate net cash in the immediate future will be subject mainly to
how quickly we can recapitalise the business, but also subject to external
economic conditions, which we continue to monitor closely and respond to.
We will continue to invest in delivering further operational productivity
improvements, development of our in-house systems to optimise sales of our own
products and working towards certification of our forests and factories, which
will be a high priority. The investment and work that have been undertaken in
recent periods provide grounds for optimism that the Company will deliver
further improvements in profitability.
In March 2023 a liquidity boost of $3.6 million to working capital was secured
by way of a fundraise in which 250 million new Ordinary Voting shares at a
price of 1.2p per share to existing and new institutions. As noted in this
report, $3.1 million of this raise was offset by the Danish bank in April
2023.
The Company has mandated a real estate broker in Gabon to explore the
potential for a sale and lease-back of its unencumbered 14 hectares of
real-estate production sites in Mouila, Gabon. These were independently valued
at $15m in May 2021. This would help the working capital situation, could
enable the Company to reduce some of its more expensive debt, to allocate
additional capital to business lines with the highest anticipated IRRs and
fund initial work on its afforestation project.
On 11 April 2023, the Company announced that it had been conditionally awarded
the first 40-year land lease by the Gabonese government for a voluntary carbon
credit afforestation project of up to 50,000 hectares. On completion,
expected in the coming months, the Company will commence a 4-year, 2,000
hectare pilot programme to demonstrate the afforestation potential of the
land. The project will be designed to deliver high quality carbon and
biodiversity credits. The Company estimates that the project has the
potential to generate more than 30 million carbon credits over its 40-year
life cycle with the expectation that the first credits are to be issued in
2028. The Gabonese government will be entitled to 20% of the carbon credits
generated over the lifetime of the project. External funding will be needed
for the pilot programme which is estimated to cost total of approximately $5
million in the period. The Company is currently examining a number of
possible funding possibilities at the project level and the optimum funding
structure thereof.
On 19 April 2023, the Company announced that Woodgroup Aps, a wholly owned
subsidiary of the Company, had unexpectedly received a notice from a Danish
bank, terminating the fully-drawn $6 million debt facility. The Group had an
ancillary account with a cash balance of $3.1 million. The bank had a floating
charge against the assets of Woodgroup ApS and offset this $3.1 million in
partial repayment of the facility. The reason cited by the bank for
terminating the facility was that Woodgroup ApS generated a loss in Q1 2023.
The bank believe that, as a consequence, the circumstances of Woodgroup ApS
have changed significantly to their detriment. Management do not agree with
the bank's conclusion and, whilst acknowledging the poor performance in Q1,
believed the Company had been well placed to deliver a very positive
performance for the remainder of the year. As part of the notice the bank
also requested that Woodgroup ApS present a plan for the repayment of the
outstanding $2.9 million of the Facility. As reported by the Company on 6
June 2023, the Company has reached an agreement with Sydbank under which the
outstanding balance will be repaid by no later than 29 December 2023. The
Company has undertaken to repay approximately $145k on each of 15 June and 30
June 2023. Thereafter a further $145k is to be paid in the middle of each
subsequent month with any additional lump sums being paid to ensure repayment
of the total outstanding balance and interest by the final repayment date.
There are also financial incentives in place if the Group settles the
outstanding balance earlier in the year. Existing security arrangements, per
the original loan facility agreement, will remain in place until the line of
credit is fully settled.
The unexpected liquidity event necessitates the securing of replacement
working capital. The Company continues to assess alternative funding
sources, including raising funds through the issuance of shares and the
deferment of $1.5m of debts due at the end of June. The Directors are
convening a General Meeting on 16 June 2023 so that the Company has the
flexibility to issue ordinary shares quickly if agreement is reached on the
terms of an equity issue. The Company does not currently have the authority to
issue shares.
Demand for our products remains high. Planned capital expenditure in 2023
includes commencement of the afforestation pilot programme and work required
to (almost) complete certification of both our production facilities and our
forest. Apart from efficiency improvements, no further material investment
is planned on our production facilities.
Since the termination, the Company has had to operate with an emphasis on cash
realisation and limiting new liabilities. On the 6 June 2023 our cash
balance was $0.4 million, with estimated net working capital of $5.5 million
and interest-bearing bank and other borrowings of $11.4 million.
Carnel Geddes
Chief Financial Officer
9 June 2023
SOCIAL IMPACT AND SUSTAINABILITY
As we move into 2023, the importance of ESG investments and sustainable
forestry management continues to grow. At Woodbois, we remain fully committed
to advance and strengthen our leadership position in these areas by
prioritizing transparency and best practices. The sustainable forestry model
we practice is designed with the long-term protection of our forest
concessions in mind, while also creating social and economic benefits for all
stakeholders and generating value.
Health and Safety
The health and safety at work of all of our employees is a key priority. In
2022, our dedicated Quality Health, Safety and Environment team in Gabon
focused on the Health and Safety of workers, and aimed to create a workplace
culture where everyone is encouraged to contribute to enhancing workplace
safety. As part of our continuous improvements process, in line with seeking
to improve production efficiency we worked to improve the implementation of
our HSE plan and the HSE awareness campaigns within our various working sites.
We remain committed to these initiatives as we move forward in line with
industry best practice.
Sustainability
Looking back at 2022, Woodbois once again received recognition for its
sustainable approach in the Sustainability Policy Transparency Toolkit
('SPOTT') ESG policy transparency assessments for the worldwide timber and
pulp industries. In the annual assessment of operations and approaches to ESG,
we continue to be ranked in the top 10.
By prioritising transparency and adopting a sustainability-focused operating
model, we are setting the stage for continued growth and evolution in the
years ahead. Our dedication to these values not only benefits our company, but
also our stakeholders and the wider community, as we strive to create a more
sustainable future for all.
FSC
Woodbois is dedicated to promoting sustainable forestry practices in Gabon and
has made significant progress towards achieving full forest certification. The
Ngounié and Nyanga Forests Programme exemplifies the company's commitment to
balancing economic growth with social and environmental responsibility. While
faced with challenges in 2022 we remain determined to continue integrating the
new forest and allocate the necessary resources to ensure a successful
certification process. As part of this effort, the company has decided to
combine its concessions into one, which will not only improve environmental,
social, and economic performance but also build upon existing management
practices and allow management full oversight of forest activities.
Additionally, Woodbois has taken further steps to ensure responsible forestry
practices by signing contracts committing to High Conservation Value (HCV) and
Biodiversity reports. These reports will provide a comprehensive assessment of
the forest's ecological, social, and cultural values, and inform our
management practices. We are confident that the results of these reports will
contribute significantly to our 2023/4 forest certification and that many of
the positive outcomes highlighted in our 2023 Integrated Report will be a
direct result of the implementation of these reports.
Carbon
We are incredible excited that we have been awarded in principle our first
Afforestation/Carbon Sequestration project from the Government of Gabon. The
project aims to regenerate natural forest in savannah areas, which are
contiguous to forests, by introducing local pioneer species and preventing
fires. This approach will create a forest rich in Okoumé, an important tree
species in the economy of Gabon and the daily life of rural populations.
The afforestation project will also have significant positive impacts on
biodiversity and water resources services. The new forest will increase the
diversity of ecosystems in southern Gabon and have a root network that
improves soil structure, increases water absorption, storage, and filtration,
and reduces surface runoff. Forests also stabilize soils, reduce erosion, and
infiltration into groundwater, thereby benefiting downstream users who depend
on the water. Moreover, forests "consume" more water than most other types of
vegetation, thereby reducing runoff and promoting better water infiltration to
rivers and/or aquifers. Forests have a positive impact on water quality, and
variability in water flow by reducing surface runoff, incidence, and effects
of flooding, and landslides.
The afforestation project is expected to create at least 1,000 permanent jobs
on average over the first ten years of planting and 250 over the 40 years of
the project, not including the jobs that will be created for the later
possible exploitation and processing of wood. This project will benefit small
businesses in Ndende and Tchibanga and service providers, and supply contracts
will be concluded with farmers for the supply of bananas, cassava, and other
staple foods. The transfer of technical skills to the local communities is
also a major positive effect of the establishment of plantations. Initial and
continuing training in planting and maintenance techniques is one aspect of
this. Training in nursery techniques, and eventually the creation of village
nurseries, will generate local skills.
We are excited to be at the forefront of afforestation and hope to work with
other African governments to replicate projects of this kind across the
region. As a company, we believe in the importance of sustainable forestry and
environmental protection, and we are committed to playing our part in building
a more sustainable future for all.
Community
In 2022, we made a conscious effort to support the communities in which we
operate by providing essential food items. We believe in promoting the
well-being of both our employees and those in our communities and are
committed to upholding our reputation as a responsible corporate citizen. Our
dedicated community engagement team has played a key role in this effort by
prioritizing the establishment of regular and sustainable partnerships with
local organizations. By striking a balance between our business goals and our
social responsibility, we are proud to contribute to the positive development
of our communities while achieving our organizational objectives.
The Company recognises its impact on the communities in which it operates. We
are committed to engaging with stakeholders in those communities to ensure
that we are listening to, learning from and taking into account their views as
we conduct our business. We are also committed to creating economic
opportunity in the local communities in which we operate.
Ambitions
We strive to establish ourselves as a leading ESG-sensitive company in the
global timber industry through our diverse operations. The directors present
their report on the Group's activities, along with the financial statements
and auditor's report for the fiscal year ended December 31, 2022.
DIRECTORS' REPORT
The principal activities of Woodbois Limited ("Woodbois") during 2022,
together with its subsidiaries (the "Group") were forestry and timber trading.
These activities were undertaken through both the Company and its
subsidiaries. The Company is quoted on AIM and is incorporated and domiciled
in Guernsey.
BUSINESS REVIEW
A review of the Group's performance and prospects is included in the Chair and
Chief Executive Officer's statement.
RESULTS AND DIVIDENDS
The total comprehensive loss for the year attributable to shareholders was
$111.2 million (2021: total comprehensive income $93.3 million), of which
$157.0 million (less $47.8 million in non-cash movement in deferred taxes) was
attributable to the annual non-cash revaluation of biological assets,
principally owing to reduced harvesting estimates in Mozambique and the impact
of higher worldwide interest and discount rates.
The directors do not recommend payment of an ordinary dividend (2021: $Nil).
SHARE CAPITAL AND FUNDING
Full details of the authorised and issued share capital, together with details
of the movements in the Company's issued share capital during the year are
shown in note 18. The Company has two classes of ordinary shares, which carry
no right to fixed income. One class of ordinary shares carries a right to one
vote at the general meetings of the Company ("Voting"). The other class does
not carry any right to vote at the general meetings of the Company
("Non-Voting").
During the year the Company issued 7.9 million new Ordinary Shares and 390
million Non-Voting shares were converted into new Voting Shares. The Company
has unlimited authorised share capital divided into ordinary shares of 1p
each, of which 2,489,988,873 had been issued as at 31 December 2022 comprising
2,254,988,873 Voting shares and 235,000,000 Non-Voting shares.
POST BALANCE SHEET EVENTS
Please refer to note 23 of the financial statements, in addition to the Chair
and Chief Executive Officer's Statement and the CFO's Report for details.
DIRECTORS
The directors, who served during the year and to the date of this report were
as follows:
P Dolan (Chief Executive Officer)
H Ghossein (Deputy Chair & Head of Gabon Operations)
C Geddes (Chief Financial Officer)
G Thomson (Non-Executive Chair and Senior Independent)
D Rothschild (Independent Non-Executive Director)
F Tonetti (Resigned 16 April 2022) (Executive Director)
H Turcan (Resigned 17 October 2022) (Non-Executive Director)
Directors' indemnity insurance
The Group's policy is to maintain directors' and officers' insurance and to
indemnify directors against the consequences of actions brought against them
in relation to their duties for the Group.
Directors' interests
Directors' interests in the Voting shares of the Company, including family
interests at 31 December 2022 and at the date of approval of this report were:
Percentage of Voting Shares held Percentage of Voting Shares held Voting Ordinary shares of 1p each Voting Ordinary shares of 1p each
Shareholding 2022 2021 2022 2021
P Dolan 3.34% 4.06% 75,400,032 75,400,032
H Ghossein 0.94% 1.13% 21,075,736 21,075,736
G Thomson 0.06% 0.07% 1,250,000 1,250,000
P Dolan, Chief Executive Officer of Woodbois Limited, held 75,400,032 Voting
Shares (4.06%): 72,517,461 of his Voting Shares in the Company are held
through HSBC Client Holdings Nominee (UK) Limited, with the remainder being
held as paper certificates.
Share Options
At the start of 2022 a total of 114 million share options were in issue and at
31 December 2022 there were 150.0 million.
On the 1st of March 2022, the Company issued LTIP's (long-term incentive plan)
to its executive directors and key employees of which 38.0 million were in
issue at 31 December 2022. The fair value of these LTIP's as at the grant date
was determined by an independent specialist in financial valuations. 19.0
million of the granted LTIP's are subject to TSR (Total Shareholder Return)
linked criteria and were valued using a Monte Carlo simulation. 19.0 million
share options are subject to EBITDA-linked criteria and were valued using a
Monte Carlo Simulation on the basis that they include a market-based exercise
condition. Only market conditions have been considered in estimating the fair
value of the LTIP's.
Please see note 21 for more information.
At the date of this report the share options of the directors were:
Director Total number of Share Options held as at 31 December 2022 (exercise price of Number of LTIP's held as at 31 December 2022 (exercise price of 1p per Share) Total number of Shares under option Share Options as a % of Issued Share Capital 6
2p per Share)
P Dolan (CEO) 50,000,000 4,000,000 54,000,000 2.17%
C Geddes (CFO) 22,500,000 4,000,000 26,500,000 1.06%
H Ghossein (Deputy Chair) 22,500,000 4,000,000 26,500,000 1.06%
G Thomson (NED Chair & Senior NED) 10,000,000 - 10,000,000 0.40%
The total number of Options in issue at any time under all Company option
schemes will not exceed 10% of the total issued Voting and Non-Voting share
capital.
Directors' remuneration
The audited remuneration of the individual directors who served in the year to
31 December 2022 was:
Salary or fees Benefits Total Total
2022
2021
$000 $000 $000 $000
P Dolan 7 200 - 200 200
H Ghossein 190 38 228 262
F Tonetti (Resigned 16 April 2022) 100 1 101 70
C Geddes 8 200 - 200 200
G Thomson 62 - 62 69
D Rothschild 50 - 50 9
H Turcan 9 (Resigned 17 October 2022) - - - -
Total 802 39 841 810
All of the above directors' remunerations are considered short term in nature
and exclude national insurance contributed by the employer.
The above table excludes final deferred consideration payments made directly
to or to companies owned and controlled by H Ghossein of $0.25 million in 2022
(2021: $0.5 million). These payments arose on the purchase of WoodBois
International ApS in 2017, as amended under the Deed of Variation effected on
5 August 2020.
It is the Company's policy that Executive Directors should have contracts with
an indefinite term providing for a maximum of 3-6 months' notice. In the event
of a take-over, the directors' contracts relating to P Dolan, H Ghossein and C
Geddes provide for compensation of one year's salary on the take-over in the
event that the Executive loses their position.
Non-Executive Directors are employed on letters of appointment which may be
terminated on not less than 1-3 months' notice. The basic fees payable at the
end of the year to Graeme Thomson as Non-Executive Chair and Senior
Independent Director are £50,000 pa and £40,000 pa to David Rothschild as
Independent Non-Executive Director.
ProfileS of the CURRENT Directors
P DOLAN, AGED 59, CHIEF EXECUITIVE OFFICER
Based in the UK, Mr Dolan held senior management positions within banking and
hedge funds prior to joining Woodbois. He has consistently built award
winning, world-class teams employing custom-built technology to manage
substantial pools of human and financial capital across a diversified group of
asset classes ranging from fixed income and equity derivatives to soft
commodities and forestry.
C GEDDES, AGED 44, CHIEF FINANCIAL OFFICER
Based in South Africa, Mrs Geddes is a Fellow of the Institute of Chartered
Accountants in England and Wales, a member of the South African Institute of
Chartered Accountants and a Certified Fraud Examiner. During a 15-year career
at BDO, the global audit, tax and advisory group, she served as director,
forensic services, of BDO London and partner of BDO Cape Town. She has been a
director and Board member of one of the largest South African pomegranate
farming and export companies, Pomona, since 2008. She was also the Chair of
POMASA (2018 to 2023), the Pomegranate Growers Association of South Africa.
H GHOSSEIN, AGED 62, DEPUTY CHAIR & HEAD OF GABON OPERATIONS
Based in Gabon, Mr Ghossein has 25 years of experience managing forestry
operations, including full ownership of a forestry business. He previously
served as a diplomat, travelling extensively across Africa, as well as owning
various trading and real estate companies. Hadi is fluent in Arabic, French,
Portuguese and English and holds Gabonese citizenship.
G THOMSON, AGED 66, NON-EXECUTIVE CHAIR & SENIOR INDEPENDENT DIRECTOR
Mr Thomson is a Fellow of the Institute of Chartered Accountants in England
and Wales and has been a public company director in a variety of sectors for
many decades, as a CEO, CFO/Company Secretary and as a Non-Executive. He has
varied commercial UK and international experience, including of Audit and
Remuneration Committees.
DAVID ROTHSCHILD, AGED 63, INDEPENDENT NON-EXECUTIVE DIRECTOR
David has a wide range of experience in growing businesses and improving their
performance as a senior manager and adviser. He has been active in the African
resource and agricultural sectors over the past 20 years, including as
co-developer of a Liberian greenfield sustainable palm oil operation, and as
advisor on environmental and social action planning. He has also been actively
involved in governmental and NGO relations and was an early Steering Committee
Member of the High Carbon Stock Approach Group, which ensures responsible
development. A French speaker with over 40 years' experience in international
business, including six years at the consultancy, McKinsey & Co, he is a
dual national of the USA and South Africa and holds both B.Com and MBA
degrees.
SUBSTANTIAL SHAREHOLDERS
The Company has been notified that the following have, at the date of this
report, an interest in three percent or more of the issued Voting Ordinary
share capital of the Company:
Name Number of 1p Voting ordinary shares Percentage of the issued Voting share capital
MCM Investment Partners SPC - MCM Sustainable Resource SP 133,625,000 5.38%
Sparta Premier S.A. 100,000,000 4.00%
P Dolan (CEO) 75,400,032 3.03%
CORPORATE GOVERNANCE
The Board is committed to achieving the highest standards of corporate
governance, integrity and business ethics and is responsible for oversight of
this. The Board has adopted the Corporate Governance Code produced by the
Quoted Companies Alliance and has taken steps to apply the principles of the
QCA Code in so far as they can be applied practically and with the exception
set out below, given the size of the Group and the nature of its operations.
We set out below how the Group complies with the QCA Code.
1. Establish a strategy and business model which promotes long-term value for
shareholders. The strategy and business operations of the Group are set out
in this Annual Report and in the Group's separate annual Sustainability
Report.
The Group had three divisions during the year: Forestry, Trading, and Carbon
Solutions. A clear strategy has been devised for each. The Board continually
impresses upon the leadership teams of each division that capital allocation
must be both performance and potential driven. Investment, either opex or
capex, will only be forthcoming for strategies that can demonstrate
significant return to shareholders over time. Running loss-making business
lines is not a sustainable business strategy. We will prioritise support and
fund businesses where our combination of skills and experience give us an
edge. Conversely, if we cannot source the requisite expertise to participate
profitably in particular business lines or geographies, we will look to cease
these activities.
2. Seek to understand and meet shareholder needs and expectations
Shareholders play a key role in corporate governance, with our Annual General
Meeting for shareholders offering an opportunity to exercise their
decision-making power in the Company. Shareholders are encouraged to attend
and vote at the AGM and any other General Meeting's which are convened
throughout the year, either online or in person, and for which our Company
Secretaries are the point of contact for shareholders. Our Executive
Directors and our Investor relations officer are the primary contact points
for shareholder updates and wider liaison. The contact details are set out in
these financial statements.
3. Take into account wider stakeholder and social responsibilities and their
implications for long-term success
The Board recognises that the long-term success of the Group is reliant upon
the efforts of the employees of the Group and its contractors and suppliers.
We continuously engage with our stakeholders ranging from employees,
customers, investors, international development banks, governments,
not-for-profit organisations and academia, to identify and address issues of
materiality and to gather feedback from each of them. The Board ensures that
all key relationships are the responsibility of, or are closely supervised by,
one of the directors.
Woodbois is in a unique position to bring vital positive impact to Africa's
economic transformation, social development and environmental management
through our operations. In this regard we have set out to align our
sustainability strategy with the United Nations Sustainable Development Goals
(SDGs), which provide a vision for ending poverty, hunger, inequality and
protecting the earth's natural resources.
4. Embed effective risk management, considering both opportunities and
threats, throughout the organisation
The business of forestry and timber trading involves a high degree of risk: in
addition to technical, political and regulatory risk, the Group is exposed to
weather, nutrient and pest risks. Furthermore, the Group is exposed to a
number of financial risks, which the Board seeks to minimise by adopting a
prudent approach consistent with the corporate objectives of the Group. Our
approach to these risk factors is set out in the Financial Statements for the
year ended 31 December 2022.
A comprehensive budgeting process is completed once a year and is reviewed and
approved by the Board. Budgets are subsequently updated when there is a
significant change in any of the key assumptions to the budget. The Group's
actual results, compared with the budget, are reported to the Executive
Directors on a weekly basis and any material deviations from budget are
followed up by a member of the Executive Board. Variances are reviewed at
least monthly by the Board.
The Group maintains appropriate directors' and officers' insurance cover in
respect of actions taken against the directors because of their roles, as well
as insurance against material loss or claims against the Group, where it is
considered cost-effective. The insured values and type of cover are
comprehensively reviewed on a yearly-basis or where new assets or risks
arise.
5. Maintain the Board as a well-functioning, balanced team led by the
Executive Chair.
The Board is responsible for establishing the strategic direction of the
Group, monitoring the Group's trading performance and appraising and executing
development and acquisition opportunities. The Company holds a minimum of nine
Board meetings per year at which financial and other reports are considered
and, where appropriate, voted on. It also holds ad hoc meetings as required to
deal with specific issues. During 2022 the Board met 12 times. Board and
Committee meetings are convened at times convenient to eligible members to
ensure 100% attendance. Details of the directors' beneficial interests in
Ordinary Shares are available on our website and are set out in the Directors'
Report.
The directors comply with Rule 21 of the AIM Rules and the Market Abuse
Regulations 2014 relating to directors' dealings and will take all reasonable
steps to ensure compliance by any employees of the Company to whom regulations
apply. The Company has, in addition, adopted the Share Dealing Code for
dealings in its Ordinary Shares by directors and senior employees.
As of the date of this report the Board comprised of three Executive Directors
and two Independent Non-Executive Directors. Executive Board members are
considered full time employees, while Non-Executives are required to commit
between 20 and 40 days per annum to their roles. The Board will recommence its
recruitment of a further Non-Executive Director once recapitalised.
The Board is supported by the Audit and the Remuneration Committees, which are
comprised of Non-Executive Directors only, and the Nominations Committee which
also includes the Chief Executive Officer.
6. Ensure that between them, the directors have the necessary up-to-date
experience, skills and capabilities
The directors' biographies can be found in this Directors' Report and on the
Company's website. The Board believes that their mix of significant senior
financial and commercial experience gives a strong and appropriate background
to formulate and deliver long term shareholder value.
The Nominations Committee oversees the requirements for and recommendations of
any new Board appointments to ensure that it has the necessary mix of skills
and experience to support the on-going development of the Company. Any
appointments made will be on merit, against objective criteria and with due
regard for the benefits of diversity and inclusivity on the Board. The
Nominations Committee will also be responsible for succession planning.
7. Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement
Internal evaluation of the Board, the Committees and individual directors is
seen as an important next step in the development of the Board and one that is
addressed. An annual operational review of all members of the Board is
undertaken, in which their performance is evaluated, and development needs
identified and actions to be taken agreed. Executive and Non-Executive
Directors are subject to re-election intervals as prescribed in the Company's
Articles of Incorporation. At each Annual General Meeting one-third of the
directors who are subject to retirement by rotation shall retire from office.
They can then offer themselves for re-election.
8. Promote a corporate culture that is based on ethical values and
behaviours
The Company is committed to complying with all applicable laws and best
corporate governance practices, wherever we operate. It is a core aspect of
our mission to act with integrity in all of our operations. The Board expects
all employees and contractors to comply with both the letter and spirit of the
law and governance codes.
The Company fosters a culture where our businesses directly and indirectly
promote a range of benefits for the host community and host country on social
and environmental levels. One of the most fundamental and positive social
impacts associated with our Company's strategic growth objective is the skills
development and employment opportunity we bring to the region. The Group also
commits to providing a safe environment for its staff and all other parties
for which the Company has responsibility. The Company is committed to
protecting the environment, contributing to sustainable management of natural
resources by strictly following guidelines set out by host Governments and
actively engaging with local communities. The Company clearly articulates
objectives and has put in place an internal accountability mechanism to
effectively implement commitments, as well as ensuring that outcomes are
measured and communicated transparently.
9. Maintain governance structures and processes that are fit for purpose and
support good decision-making by the Board.
The following Group matters are reserved for the Board:
· Overall strategy
· Approval of major capital expenditure projects
· Approval of the annual and interim results
· Annual budgets, KPI's and revisions thereto
· ESG matters, including climate change initiatives and actions.
The Company is committed to high standards of corporate governance. Both
Management and the Board are dedicated to implementing best practice as the
Company grows.
A clear organisation structure exists detailing lines of authority and control
responsibilities.
The Board monitors the exposure to key business risks and reviews the
strategic direction of all trading subsidiaries, their annual budgets, their
performance in relation to those budgets and their capital expenditure.
The agenda of the business overall is determined by a Management Committee,
which sets out agreed targets that including financial return, sustainability
and actions on climate change. Opportunities and improvements are identified
and prioritised depending on analysis carried out by Management. These
projects are supported by detailed financial planning. Comprehensive internal
controls and systems enable the Board to manage business objectives. As well
as Board discussions, regular meetings are held by Management to discuss
performance. Detailed information packs are prepared bi-weekly to cover each
major area of the business. Variances from the budget and previous forecasts
are analysed, explained and acted on.
Important capital investments are regularly discussed both at a Board and at a
Management level where analysis of budget versus actual spend is carried out.
Effective corporate governance remains key to the business as it grows
rapidly. The Company has a structure and process in place to help identify
areas in which corporate governance can be improved. The Company is currently
implementing technology that will allow both the Board and Management to
oversee key performance indicators across the business in real time.
Within the Trading division, the Company has developed a custom-built tool to
allow for real-time tracking of all trades, which has been progressively
implemented in 2022. Substantially all of the cost associated with its
development has been expensed as incurred due to the strict accounting rules
governing the capitalisation of internally generated intangible assets.
The Company is in discussion with several organisations to implement
innovative blockchain based technology to manage both the traceability of the
timber that the Company produces as well as providing real-time oversight of
the business's supply chain.
The Audit Committee, Remuneration Committee and Nominations Committee have
formally delegated duties and responsibilities.
Audit Committee:
The Board has established an Audit Committee with formally delegated duties
and responsibilities. During the year, the Audit Committee comprised of the
Non-Executive Directors with Graeme Thomson as Chair. It meets at least
three times in the financial year. In addition, the Chair has a regular
dialogue with our auditors.
The terms of reference for the Audit Committee include requirements:
· To monitor the integrity of the financial statements of the Group
and any formal announcements relating to the Group's financial performance,
reviewing significant financial reporting judgements contained in them.
· To review the Group's internal financial controls together with the
Group's internal control and risk management systems.
· To monitor and review the external auditor's independence and
objectivity and to make recommendations in relation to the appointment,
re-appointment and removal of the external auditor.
Remuneration Committee:
The Remuneration Committee meets as and when required. During the year the
Remuneration Committee comprised of Non-Executive Directors with Graeme
Thomson as the Chair. It meets at least three times per year.
The policy of the committee is to reward Executive Directors in line with the
current remuneration of directors in comparable businesses in order to
recruit, motivate and retain high quality executives within a competitive
marketplace.
There were three main elements of the remuneration packages for Executive
Directors and senior management in 2022:
- Basic annual salary (including directors' fees) and benefits;
- Discretionary annual bonus; and
- Equity share option incentive scheme,
- All of these elements take into account the need to motivate and
retain key individuals.
Nominations Committee:
The Nomination Committee which comprises of the Non-Executive Directors and
the Chief Executive Officer meets at least twice a year and is responsible for
the process of reviewing replacement or additional directors, the monitoring
of compliance with applicable laws, regulations and corporate governance
guidance and making appropriate recommendations to the Board.
10. Communicate how the Company is governed and is performing, by maintaining
a dialogue with shareholders and other relevant stakeholders
The Company encourages regular communications with its various stakeholder
groups and aims to ensure that all communications concerning the Group's
activities are clear, fair and accurate. Quarterly updates are announced via
RNS and are available on our website and users can register to be alerted when
announcements or details of presentations and events are posted onto the
website.
We aim to release our half and full year results to the market well in advance
of reporting deadlines and offer visibility for shareholders by including
segmental reporting. The Company's financial statements and Notices of General
Meetings of the Company can be found on its website.
The results of voting on all resolutions are announced via RNS immediately
following completion of General Meetings and are available on its website.
Any actions required to be taken as a result of resolutions for which votes
against have been received from at least 20 per cent of independent
shareholders will be detailed on the RNS.
RISK MANAGEMENT
The business of forestry and timber trading involves a high degree of risk, in
addition to technical, political and regulatory risk, the Group is exposed to
weather, nutrient and pest risks. Furthermore, the Group is exposed to a
number of financial risks, which the Board seeks to minimise by adopting a
prudent approach which is consistent with the corporate objectives of the
Group.
Technical Risk
The Company operates large-scale machinery in the forms of harvesting, sawmill
and veneer equipment. All three are key revenue contributors and as such, any
significant interruption to these assets could have an adverse effect on our
financial performance. A number of procedures and programmes have been
implemented to mitigate these technical risks. Capital investment programmes
have replaced older equipment to improve both reliability and overall
efficiency of our machinery, also reducing overall breakdown risk. The Group
has actively sought best-in-class hires that have significant experience with
the machinery that is currently being utilised, this has also allowed the
Group to adopt best practice. Additionally, performance metrics for operating
assets are monitored by Management on a weekly basis to quickly identify and
resolve any issues.
PANDEMIC RISK
Public health risks may add to instability in world economies and markets
generally. The extent of the impact of a pandemic will be correlated with the
magnitude and duration thereof, both aspects of which will be uncertain.
Entities may experience conditions often associated with a general economic
downturn. This includes, but is not limited to, financial market volatility
and erosion, deteriorating credit and increased borrowing rates, volatility in
exchange rates, liquidity concerns, supply chain disruptions, further
increases in government intervention, increasing unemployment, broad declines
in consumer discretionary spending, increasing inventory levels, reductions in
production because of decreased demand, layoffs and furloughs, and other
restructuring activities. The continuation of these circumstances could result
in an even broader economic downturn which could have a prolonged negative
impact on an entity's financial results. What recovery/emergence may look
like will also be speculation.
Political and Regulatory Risk
The Board observes any political developments across the geographies that
Woodbois operates in closely, notably in Gabon and Mozambique. The political
environment across all the countries that Woodbois operates in will remain an
evolving discussion point for the Board, however the risk of political unrest
disruptive to the Group's areas of operations remains low. It is noted that
since 2017 the insurgency in Cabo Delgado Province, Mozambique has been
ongoing. Although currently unaffected by the conflict, the Board continues to
closely monitoring any wider implications.
The regulatory frameworks in place across the countries that Woodbois operates
in support the development of forestry. However, the forestry sector in
Mozambique has been subject to frequent policy changes with regard to exports
and delays in issuing of annual licenses, which has created uncertainty.
Furthermore, there is no assurance that future political and economic
conditions in these countries will not result in the Governments changing
their political attitude towards forestry. Any changes in policy may result in
changes in laws affecting ownership of assets, land tenure, ability to export,
taxation, environmental protection and repatriation of income and capital,
which may adversely impact the Group's ability to carry out its activities.
OTHER RISKS
The UK departed from the European Union at the end of 2020. Whilst there have
been many regulatory and operational changes in trade between the parties this
has to-date had a very limited effect on the Group's operations. The Board
will maintain close dialogue with its advisors to ensure that any proposed
regulatory changes are identified and actioned accordingly.
ENVIRONMENTAL RISK
The Group is exposed to climate, weather and the risk of pests affecting its
forestry operations. The availability of water for its irrigation as well as
the abundance of too much water also pose a risk to the biological assets.
These risks are managed by ongoing assessment of local pests and the adoption
of irrigation methods. Adverse weather conditions may impact transport routes
both within the Group's countries of operation and when exporting finished
product.
Financial Risk
This comprises of a number of risks explained below.
Market PRICE risk
The Group is exposed to market risk in respect of any equity investments as
well as any potential market price fluctuations that may affect the revenues
of the forestry and timber trading operations. The Group mitigates this risk
by having established investment appraisal processes and asset monitoring
procedures, which are subject to overall review by the Board.
Liquidity risk
The Group seeks to manage liquidity by regularly reviewing cash levels and
expenditure budgets to ensure that sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably. The Group
had net cash balances of $2.3 million as at 31 December 2022 (2021: $0.9
million). To ensure sufficient access to liquidity, the Group has been
actively seeking alternative sources of funding following the termination of
the $6m credit line from Sydbank in April 2023, including equity, debt and
hybrid solutions.
INTEREST RATE RISK
The Group has limited its exposure to the risk of being negatively affected by
variable interest rates by predominantly borrowing using fixed interest
instruments. Refer to note 14 for a detailed assessment.
Credit risk
The Group's principal financial asset is cash. The credit risk associated with
cash is considered to be limited. The Group receives payment immediately upon
delivery of its forestry products. The credit risk is considered to be minimal
as no credit terms are offered and funds are received prior to the risk of
ownership being transferred to the purchaser. From time to time cash is placed
with certain institutions in support of trading positions. The credit risk is
considered minimal as the Group only undertakes this with large reputable
institutions.
DONATIONS
No political or charitable donations were made during the year (2021: nil).
POLICY ON PAYMENT OF SUPPLIERS
It is Group and Company policy to agree and clearly communicate the terms of
payment as part of the commercial arrangements negotiated with suppliers and
then to pay according to those terms based on the timely receipt of an
accurate invoice.
EMPLOYMENT POLICIES
The Group is an equal opportunities employer: it promotes inclusion and
diversity in the organisation wherever possible through recruitment, training,
career development and promotion.
The Group is committed to keeping employees as fully-informed as possible with
regard to the Group's performance and prospects and seeks their views,
wherever possible, on matters which affect them as employees.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with International Financial Reporting Standards
(IFRS) as adopted by the United Kingdom (UK). Under company law the Directors
must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and Company and
of the profit or loss of the Group and Company for that period.
In preparing the financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and
prudent;
c. state whether they have been prepared in accordance with UK adopted
International Accounting Standards; and
d. prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies (Guernsey) Law
2008. The directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Woodbois Limited website.
The Company is compliant with AIM Rule 26 regarding the Woodbois Limited
website. Legislation in Guernsey governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Going concern
An assessment of going concern is made by the directors at the date the
directors approve the annual financial statements, taking into account the
relevant facts and circumstances at that date including:
· Review of profit and cash flow forecasts for a period of not less
than 12 months from the date hereof;
· Review of actual results against forecast;
· Timing of cash flows and working capital resources; and
· Financial or operational risks.
To ensure sufficient access to liquidity, the Group has been actively seeking
alternative sources of funding following the termination of the $6m credit
line from Sydbank and its offset of $3.1m of cash balances in April 2023,
including equity, debt and hybrid solutions. As announced on 6 June 2023, it
has reached an agreement with Sydbank under which the outstanding balance of
c$2.8m (as at 31 May 2023) will be repaid by the 2023 year end, discussions
with a number of parties are progressing which may include raising funds
through the issuance of shares and/or reducing or rescheduling other debts of
the Group. Whilst there is currently no indication that the additional
financing required will not be obtained, it cannot be certain. Although the
audit report is not modified in respect of this matter, these events or
conditions, along with the other matters as set forth in the notes, indicate
that a material uncertainty exists that may cast significant doubt on the
Company's ability to continue as a going concern. Your attention is drawn to
the corporate update issued on 6 June 2023, summarised in Note 24.
Further details on the assumptions and their conclusion thereon are included
in the statement on going concern included in note 1 to the Financial
Statements.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of these financial
statements have confirmed that, as far as they are aware, there is no relevant
audit information of which the auditor is unaware. Each of the directors have
confirmed that they have taken all the steps that they ought to have taken as
directors in order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
AUDITOR
PKF Littlejohn LLP were reappointed as auditors for 2022 and a resolution to
reappoint then will be proposed at the 2023 AGM.
On behalf of the Board
Paul Dolan
Chief Executive Officer
9 June 2023
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WOODBOIS LIMITED
For the year ended 31 December 2022
Opinion
We have audited the financial statements of Woodbois Limited (the 'group') for
the year ended 31 December 2022 which comprise: the Consolidated Statement of
Profit or Loss and Other Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Financial Position, the
Consolidated Statement of Cash Flows and notes to the 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 financial statements:
· give a true and fair view of the state of the Group's affairs as at
31 December 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 financial statements section of our report. We are independent of
the company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which indicates that
the group incurred a net loss of $111,191,000 during the year ended 31
December 2022, principally as a result of a non-cash impairment to the
valuation of the biological assets held, and that one of the group's banking
facilities, held by a Danish bank, was withdrawn post year end which created
critical cashflow pressures. The group is in discussions with parties to
replace the withdrawn banking facility and whilst there is no indication at
the date of this report that these discussions will not be successful, there
is no guarantee that the required level of financing will be made available to
the group. As stated in note 1, these events or conditions, along with the
other matters as set forth in the notes, indicate that a material uncertainty
exists that may cast significant doubt on the group's and company's ability to
continue as a going concern. Our opinion is not modified in respect of this
matter.
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's and company's ability to continue to adopt the going
concern basis of accounting included testing the cashflow forecasts to assess
their ability to meet their commitments and a qualitative assessment of the
facts and circumstances. Procedures included:
· Obtaining management's forecast cash flows covering the period from
the date of signing to June 2024. We assessed the assumptions within the
forecast with regards to revenue generation, capital funding and cash flows;
· Reviewing and challenging the Board's controllable mitigation plans
and their forecast impact on the ability of the business to continue to
operate. We obtained supporting documentation to evaluate the plausibility and
achievability of management's mitigation plans, including sensitised scenario
forecasts;
· Assessing the status of the discussions that management have
entered into regarding replacement financing facilities;
· A comparison of actual results for the year to past budgets to
assess the forecasting ability/accuracy of management;
· Agreeing available borrowing facilities to underlying agreements
and the extent to which additional facilities could be utilised and funds
raised from other sources; and
· Assessing the adequacy of going concern disclosures within the
Annual Report and Accounts
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
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatement. At the planning stage,
materiality is used to determine the financial statement areas that are
including within the scope of our audit and the extent of sample sizes during
the audit.
We determined our overall financial statements materiality to be US$303,000
(2021: US$448,000). This was based on an average of three year's adjusted
profit or loss before tax which is calculated by removing all items reasonably
deemed to be outside the normal course of business, such as the contingent
asset acquisition expense, fair value gain or loss on biological assets and
gain on bargain purchase in the prior year, as these are areas which involve
management estimation. We consider adjusted profit or loss before tax to be
the performance measure used by the shareholders as Woodbois Limited is a
trading entity and its profit-making ability is a significant point of
interest for investors.
We set performance materiality at 70% (2021:70%) of overall financial
statements materiality to reflect the risk associated with the judgemental and
key areas of management estimation within the financial statements.
No significant changes have come to light through the fieldwork which has
caused us to revise our materiality figure. We set group triviality at $15,150
(2021: $15,680), and the range of component materiality was from Group
Materiality of $303,000 to $55,484 (2021: $205,708 to $62,260).
Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of
material misstatement in the financial statements. In particular we looked at
areas involving significant accounting estimates and judgements (such as the
valuation of biological assets) by the Directors and considered future events
that are inherently uncertain. We also address the risk of management override
of controls, including among other matters consideration of whether there was
evidence of bias that represented a risk of material misstatement due to
fraud.
Our audit scope focused on the principal area of operation, being Africa. The
head office in South Africa oversees the accounting function of the group and
its subsidiaries, however, regional offices maintain the accounting records
for many of the components. The components are based in Mauritius, Gabon,
Mozambique, Denmark and London therefore given the nature of the accounting
function, our audit was conducted by local component auditors within Gabon,
Mozambique, Denmark and Mauritius.
Each component was assessed as to whether they were significant or not
significant to the group by either their size or risk. The parent company and
six components were considered to be significant due to their identified size
and risk. These components have been subject to full scope audits by component
auditors and reviewed by us.
The audit was overseen and concluded in London where we acted as group
auditor. As group auditors we maintained regular contact with the component
auditors throughout all stages of the audit and we were responsible for the
scope and direction of their work. We ensured that we challenged their
findings in order to form an opinion on the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. 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 our scope addressed this matter
Valuation of biological assets (note 11)
Biological assets represent the most material balance in the financial Our work included:
statements (US$180m as at 31 December 2022).
· Reviewing the biological asset valuation models prepared by
The valuation of these assets is the key assertion considered here, as there management for accuracy and challenging the estimates/assumptions made in the
is a risk that the biological assets are incorrectly valued and therefore inputs;
misstated due to the high degree of estimation and judgement required by
management. · Reviewing the model estimates such as discount rates used and
challenging the key inputs involved in arriving at the rate applied;
· Reviewing the sensitivity of the key inputs, together with a
Management have reassessed their inputs used within the value in use combination of sensitivities of such inputs;
calculations due to changes in the country specific discount rates and risk
free rates applied. These inputs are judgemental and have the greatest impact · Considering if there are any indications of impairment and ensuring
upon valuation. that those identified by management are reasonable; and
· Reviewing disclosures in the financial statements to ensure they
are in accordance with IAS 41, particularly the disclosures of key estimates
and assumptions which impact fair values and the sensitivity analysis.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, 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 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 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 company 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:
· 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 directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company'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 company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
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 sector in which
it operates to identify laws and regulations that could reasonably be expected
to have a direct effect on the financial statements. We obtained our
understanding in this regard through enquires with management, industry
research, review of component auditor work papers, and our application of
cumulative audit knowledge and experience of the sector.
· We determined the principal laws and regulations relevant to the
group in this regard to be those arising from:
Aim Rules, Companies (Guernsey) Law 2008, health and safety regulations and
relevant tax legislation in the jurisdictions in which the group operates.
· 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:
o Enquiries of management
o Review of board minutes
o Review of RNS announcements
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, that the potential for management bias identified in relation to
the valuation of biological assets and as noted above, we addressed this by
challenging the assumptions and judgements made by management when auditing
that significant accounting estimate.
· 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; review of revenue
recognition, 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.
· As part of group reporting instructions issued, component auditors
were required to report areas of non-compliance with laws and regulations,
including fraud. As part of our review of component auditors work, we held
regular update meetings during all stages of the audit and included within the
discussions matters relating to country laws and regulations as well as how
the risk of fraud at component level was being addressed.
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 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 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 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 letter of engagement. 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.
15 Westferry Circus
PKF Littlejohn LLP
Canary Wharf
Registered Auditor
London E14 4HD
9 June 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2022
Notes 2022 2021
$000 $000
Turnover 2 23,108 17,465
Cost of sales 2 (17,244) (13,970)
Gross profit 5,864 3,495
Operating costs (4,166) (3,620)
Administrative expenses (1,288) (1,324)
Depreciation (222) (326)
Share based payment expense 21 (418) (233)
(Loss)/gain on fair value of biological assets 11 (156,983) 4,253
Operating (loss)/profit 3 (157,213) 2,245
Gain on bargain purchase 5 - 88,292
Reclassification of Foreign Currency Translation Reserve 22 (1,529) -
on deregistered entities
Foreign exchange gain 904 756
Finance costs 6 (1,029) (591)
(Loss)/profit before tax (158,867) 90,702
Taxation 7 47,676 (591)
(Loss)/profit for the year (111,191) 90,111
Other comprehensive income:
Items that may be reclassified subsequently to
profit or loss
Currency translation differences (1,612) (3,032)
Reclassification of FCTR on deregistered entities 22 1,529 -
Items that will not be reclassified to profit or loss
Revaluation of land and buildings, net of tax 10 - 6,254
Total comprehensive (loss)/income for the year (111,274) 93,333
Basic (loss)/earnings per share (cents) 8 (4.47) 3.69
Diluted earnings per share (cents) 8 (4.47) 3.65
The notes form an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share capital Share premium Foreign exchange reserve * Share based payment reserve (note 21) Revaluation Retained earnings Total equity
Convertible bonds Reserve
(note 10)
$000 $000 $000 $000 $000 $000 $000 $000
At 1 JANUARY 2021 31,119 58,609 52 (5,291) 226 - 72,113 156,828
Profit for the year - - - - - - 90,111 90,111
Other comprehensive income for the year - - - (3,032) - 6,254 - 3,222
Total comprehensive income for the year - - - (3,032) - 6,254 90,111 93,333
Transactions with owners:
Issue of ordinary shares 1,409 6,645 - - - - - 8,054
Share based payment expense - - - - 233 - - 233
Share options forfeited - - - - (24) - 24 -
At 31 December 2021 32,528 65,254 52 (8,323) 435 6,254 162,248 258,448
Loss for the year - - - - - - (111,191) (111,191)
Other comprehensive income for the year - - - (83) - - - (83)
Total comprehensive loss for the year - - - (83) - - (111,191) (111,274)
Transactions with owners:
Issue of ordinary shares 24 75 - - (51) - - 48
Redemption of convertible bonds 73 220 (28) - - - - 265
Share based payment expense - - - - 418 - - 418
At 31 December 2022 32,625 65,549 24 (8,406) 802 6,254 51,057 147,905
* Exchange differences arising on translation of the foreign controlled
entities are recognised in other comprehensive income and accumulated in a
separate reserve within equity.
The notes form an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 31 December 2022
2022 2021
Notes $000 $000
ASSETS
Non-current assets
Biological assets 11 179,815 336,798
Property, plant and equipment 9 32,226 30,119
Total non-current assets 212,041 366,917
Current assets
Trade and other receivables 12 6,330 4,616
Inventory 13 4,606 6,159
Cash and cash equivalents 14 2,296 887
Total current assets 13,232 11,662
TOTAL ASSETS 225,273 378,579
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings 16 (5,665) (2,898)
Deferred tax 7 (58,675) (106,475)
Convertible bonds - host liability 17 - (931)
Total non-current liabilities (64,340) (110,304)
Current liabilities
Trade and other payables 15 (3,547) (4,078)
Borrowings 16 (8,603) (5,369)
Provisions 20 (130) (130)
Convertible bonds - host liability 17 (748) -
Contingent acquisition liability 22 - (250)
TOTAL CURRENT LIABILITIES (13,028) (9,827)
TOTAL LIABILITIES (77,368) (120,131)
NET ASSETS 147,905 258,448
EQUITY
Share capital 18 32,625 32,528
Share premium 19 65,549 65,254
Convertible bonds - equity component 17 24 52
Foreign exchange reserve (8,406) (8,323)
Share based payment reserve 21 802 435
Revaluation reserve 10 6,254 6,254
Retained earnings 51,057 162,248
TOTAL EQUITY 147,905 258,448
The notes form an integral part of the consolidated financial statements. The
consolidated financial statements were authorised for issue by the board of
directors on 9 June 2023 and were signed on its behalf.
Paul Dolan
Chief Executive Officer
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
2022 2021
Notes $000 $000
CASH USED IN OPERATIONS
(Loss)/profit before taxation (158,867) 90,702
Adjustment for:
Depreciation of property, plant and equipment 9 2,181 2,063
Fair value adjustment of biological asset 11 156,983 (4,253)
Transaction costs deducted from equity - (42)
Foreign exchange (904) (756)
Reclassification of FCTR on deregistered entities 1,529 -
Accrued expense 15 322 391
Share based payments 21 418 233
Finance costs 6 1,029 591
Gain on bargain purchase 5 - (88,292)
Increase in trade and other receivables (1,714) (838)
Decrease in trade and other payables (632) (460)
Decrease/(increase) in inventory 1,553 (1,267)
CASH FLOWS FROM OPERATIONS 1,898 (1,928)
Finance costs paid (759) (495)
Income taxes paid (2) (57)
cash FLOWS from operatiNG ACTIVITIES 1,137 (2,480)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditure on property, plant and equipment (3,907) (4,310)
Settlement of deferred consideration 22 (250) (500)
Settlement of purchase price for acquired subsidiary 5 (341) (1,107)
cash FLOWS from investing activities (4,498) (5,917)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings 6,193 -
Repayment of loans and borrowings (1,470) (1,387)
Proceeds from the issue of ordinary shares (net of issue costs) 47 8,111
cash fLOWS from financing activities 4,770 6,724
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,409 (1,673)
Cash and cash equivalents at beginning of year 887 2,560
CASH AND CASH EQUIVALENTS AT end of YEAR 2,296 887
Net debt reconciliation
2021 Cash flow Non-cash changes 2022
$000 $000 $000 $000
Borrowings 8,267 4,723 1,278 14,268
The notes form an integral part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022
1. SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION
Woodbois Limited ("the Company" or "Woodbois") is an AIM-quoted forestry and
timber trading company limited by shares. The Company is incorporated and
domiciled in Guernsey, the Channel Islands, with registered number 52184. Its
registered office is Dixcart House, Sir William Place, St Peter Port,
Guernsey, GY1 1GX.
The nature of the Group's operations and its principal activities are set out
in the Directors' Report.
The accounting policies have been consistently applied.
The principal activities and nature of the business are included above.
BASIs OF ACCOUNTING
The consolidated financial statements have been prepared in accordance with UK
adopted international accounting standards adopted by the United Kingdom
applied in accordance with the provisions of the Companies (Guernsey) Law
2008. The consolidated financial statements have been prepared under the
historical cost convention except for biological assets and certain financial
assets and liabilities, which have been measured at fair value.
FUNCTIONAL AND PRESENTATION CURRENCY
These consolidated financial statements are presented in United States Dollar
(USD), which is the Group's presentation currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated.
BASIS OF CONSOLIDATION
Subsidiaries are entities controlled by the Group. Control is achieved when
the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its
power over the investee. Specifically, the Group controls an investee if, and
only if, the Group has:
· Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee).
· Exposure, or rights, to variable returns from its involvement with
the investee
· The ability to use its power over the investee to affect its
returns.
Generally, there is a presumption that a majority of voting rights result in
control. To support this presumption and when the Group has less than a
majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an
investee, including:
· The contractual arrangement with the other vote holders of the
investee.
· Rights arising from other contractual arrangements.
· The Group's voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated financial statements from the
date the Group gains control until the date the Group ceases to control the
subsidiary. The acquisition method is used to account for the acquisition of
subsidiaries.
Any contingent consideration is recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration
that is deemed to be an asset or a liability is recognised in accordance with
IFRS 9 either in profit or loss or as a change in other comprehensive income.
The unwinding of the discount on contingent consideration liabilities is
recognised as a finance charge within profit or loss.
Acquisition related costs are expensed as incurred.
The Group measures goodwill at the acquisition date as the excess of the fair
value of the consideration transferred, plus the recognised amount of any
non-controlling interests, less the recognised amount of the identifiable
assets acquired, and liabilities assumed. If this consideration is lower than
the fair value of the net assets of the subsidiary acquired, the difference is
recognised in profit or loss as a bargain purchase.
Before recognising a gain on a bargain purchase, an assessment is made as to
whether all assets acquired, and liabilities assumed have been correctly
identified. The fair value measurement of the identifiable net assets and cost
of acquisition is also reviewed to evaluate whether all available information
at the acquisition date has been considered. An adjustment made to the fair
value of the net assets acquired will impact the amount of goodwill or bargain
purchased recognised at acquisition.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used
by other members of the Group. All significant intercompany transactions and
balances between group entities are eliminated on consolidation.
When the Group ceases to consolidate a subsidiary as a result of losing
control and the Group retains an interest in the subsidiary and the retained
interest is an associate, the Group measures the retained interest at fair
value at that date and the fair value is regarded as its cost on initial
recognition. The difference between the net assets de-consolidated and the
fair value of any retained interest and any proceeds from disposing of a part
interest in the subsidiary is included in the determination of the gain or
loss on disposal. In addition, the Group accounts for all amounts previously
recognised in other comprehensive income in relation to that associate on the
same basis as would be required if that subsidiary had directly disposed of
the related assets or liabilities.
Investments in associates and jointly controlled entities are accounted for
using the equity method of accounting and are initially recognised at cost.
The Group's share of its associates' post-acquisition profits or losses is
recognised in profit or loss, and its share of post-acquisition movements in
reserves is recognised in other comprehensive income. The cumulative
post-acquisition movements are adjusted against the carrying amount of the
investment.
Transactions with non-controlling interests that do not result in loss of
control are accounted for as equity transactions. Gains or losses on disposals
to non-controlling interests are recorded in equity.
As at 31 December 2022, the Group held equity interests in the following
undertakings:
Subsidiary undertakings Proportion held of voting rights Country of incorporation Nature of business
Direct investments
Woodbois Services Limited 100% England Shared services
Woodbois Trading Limited 100% Hong Kong Financier
Argento Limited 100% Mauritius Holding / treasury company - Forestry and Trading
Woodbois Liberia Inc. 100% Liberia Dormant
Carbonarbor Limited 100% England Carbon solutions
Indirect investments of Argento Limited
Argento Mozambique Limitada 100% Mozambique Holding company & Forestry
Madeiras SL Limitada 100% Mozambique Forestry
Jardim Zambezia Limitada 100% Mozambique Forestry
Baia Branca Limitada 100% Mozambique Forestry
Ligohna Timber Products Limitada 100% Mozambique Forestry
Ligohna Timber Products (2) Limitada 100% Mozambique Forestry
Montara Forest Lda 100% Mozambique Forestry
Petroforge Mozambique Lda 100% Mozambique Forestry
WoodBois International ApS 100% Denmark Timber Trading
WoodGroup ApS 100% Denmark Timber Trading
Woodbois Gabon 100% Gabon Forestry
SCI Yarim 100% Gabon Property holding
La Gabonaise des Forêts et de l'Industrie du Bois (LGFIB) 100%
Gabon Forestry
The registered offices of the Group's subsidiaries are as follows:
Subsidiary undertakings Registered office
Direct investments
Woodbois Services Limited 118 Piccadilly, London, England, W1J 7NW
Woodbois Trading Limited New Mandarin Plaza Tower B, 14 Science Museum Rd, Hong Kong
Argento Limited Dias Pier Building, Le Caudan Waterfront, Port Louis, Mauritius
Woodbois Liberia Inc. Daviers Compound, Williams Road, Monrovia, Libreville
Carbonarbor Limited Canterbury Court, 1-3 Brixton Road, London, England, SW9 6DE
Indirect investments of Argento Limited
Argento Mozambique Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Madeiras SL Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Jardim Zambezia Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Baia Branca Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Ligohna Timber Products Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Ligohna Timber Products (2) Limitada Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Montara Forest Lda Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
Petroforge Mozambique Lda Bairro da Polana, Av. Ahmed Sekou Toure 571 R/C, Distrito Kampfumo, Cidade de
Maputo, Mozambique
WoodBois International ApS Hoeffdingsvej 34, 2500 Valby, Denmark
WoodGroup ApS Hoeffdingsvej 34, 2500 Valby, Denmark
Woodbois Gabon Boite Postale 5333, Montée de Louis vers L'Ex Maringa, Libreville, Gabon
SCI Yarim 3568, Centre Ville Vers La Renovation, Libreville, Gabon
La Gabonaise des Forêts et de l'Industrie du Bois (LGFIB) Louis (a cote de l'ex Marin a) 5333, Libreville, Gabon
Intra-group transactions
All intra-group transactions, balances, and unrealised gains and losses on
transactions between Group companies are eliminated on consolidation.
Subsidiaries' accounting policies are amended where necessary to ensure
consistency with the policies adopted by the Group. All financial statements
are made up to 31 December each year.
Business combination
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 Group has an option to apply a 'concentration test' that permits a
simplified assessment of whether an acquired set of activities and assets is
not a business. The optional concentration test is met if substantially all of
the fair value of the gross assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets.
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.
The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss.
Changes in Accounting policies
a) New and amended standards adopted by the Group
The following IFRS or IFRIC interpretations were effective for the first time
for the financial year beginning 1 January 2022. Their adoption has not had
any material impact on the disclosures or on the amounts reported in these
consolidated financial statements:
Standards /interpretations Application
IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
IFRS 1, 9, 16 and IAS 41 Annual Improvements to IFRS Standards 2018-2020 Cycle
IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
b) Accounting standards and interpretations not yet effective
The following new or amended standards are not expected to have a significant
impact on the group's financial statements
Standards /interpretations Application
IAS 1 Classification of Liabilities as Current or Non-current
IFRS 17 Amendments to IFRS 17 Insurance Contracts
IAS 8 Definition of Accounting Estimates
IAS 12 Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
SEGMENTAL REPORTING
The reportable segments are identified by the Executive Board (which is
considered to be the Chief Operating Decision Maker) by the way management has
organised the Group. The Group operates within three separate operational
divisions comprising forestry, trading and carbon solutions
The directors review the performance of the Group based on total revenues and
costs, for these three divisions and not by any other segmental reporting.
FOREIGN CURRENCIES
The presentation currency of the Group is US Dollars (US$). Items included
in the Group's financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The functional currency of the
majority of the Group's subsidiaries is USD as this is the currency in which
they trade on a local basis. The consolidated financial statements are
presented in USD ("the presentation currency") because this is the currency
better understood by the principal users of the financial statements.
Foreign currency translation rates (against US$) for the significant
currencies used by the Group were:
At 31 December Annual average At 31 December Annual average
for 2022
for 2021
2022 2021
UK Pound 1.21 1.23 1.35 1.38
Mozambique Metical 63.88 63.85 63.83 65.33
Danish Krone 6.97 7.07 6.57 6.29
West African CFA franc 614.48 623.52 579.26 556.02
Transactions in foreign currencies are initially recorded at the rates of
exchange prevailing on the dates of the transaction. At each reporting date,
monetary assets and liabilities that are denominated in foreign currency are
translated into the functional currency at the rate prevailing on that date.
Non-monetary assets and liabilities are measured at fair value and are
translated into the functional currency at the rate prevailing on the
reporting date. Gains and losses arising on retranslation are included in
profit or loss for the year, except for exchange differences on non-monetary
assets and liabilities, which are recognised directly in other comprehensive
income when the changes in fair value are recognised directly in other
comprehensive income.
On consolidation, the assets and liabilities of the Group's overseas
operations are translated into the Group's presentational currency at exchange
rates prevailing at the reporting date. Income and expense items are
translated at the average exchange rates for the year unless exchange rates
have fluctuated significantly during the year, in which case the exchange rate
at the date of the transaction is used. Exchange differences arising, if any,
are taken to other comprehensive income and the Group's translation reserve.
Such translation differences are recognised as income or as expenses in the
year in which the operation is disposed of.
CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
The preparation of the consolidated financial statements requires management
to make estimates and judgements and form assumptions that affect the reported
amounts of the assets, liabilities, revenue and costs during the periods
presented therein, and the disclosure of contingent liabilities at the date of
the consolidated financial statements.
Estimates and judgements are continually evaluated and based on management's
historical experience and other factors, including future expectations and
events that are believed to be reasonable. The estimates and assumptions that
have a significant risk of causing a material adjustment to the financial
results of the Group in future reporting periods are discussed below.
Information about assumptions and estimation uncertainties at 31 December that
have a significant risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities in the next financial year is included in
the following notes:
· Residual values and useful lives of property, plant and equipment:
refer to note 1
· Fair value of biological assets: refer to note 11
· Provision for doubtful debts: refer to note 1
· Share Based Payments: refer to note 21
Revenue recognition
Under IFRS 15, Revenue from Contracts with Customers, five key points to
recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the
contract; and
Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation.
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the
entity, and specific criteria have been met for each of the Group's
activities, as described below.
The Group bases its estimates on historical results, taking into consideration
the type of customer, the type of transaction and the specifics of each
arrangement. Where the Group makes sales relating to a future financial
period, these are deferred and recognised under 'deferred revenue' on the
Statement of Financial Position.
The Group currently has the following revenue streams:
· Sale of goods: Revenue is recognised following the five-step
approach outlined above. The performance obligation set out in step two is
when the risk and reward of the goods is transferred to the customer (revenue
recognised at a point in time), and is transferred at the earlier of:
o when goods are sold subject to a letter of credit, on the date that the
bill of lading is dispatched to the buyer's bank; or
o when goods are prepaid in full by the buyer, based on the incoterm
specified in the contract/invoice; or
o when the bill of lading is exchanged.
· Service revenue: Revenue is recognised following the five-step
approach outlined above. The performance obligation set out in step two is
when the work has been certified by the customer (revenue recognised at a
point in time).
· Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable.
· Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established (provided that
it is probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably).
LEASES
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
Short‐term leases and leases of low‐value assets
The Group applies the short‐term lease recognition exemption to its
short‐term leases (i.e., those leases that have a lease term of 12 months or
less from commencement date and do not contain a purchase option). It also
applies the lease of low‐value assets recognition exemption to leases of
equipment that are considered of low value (i.e., below $5,000). Lease
payments on short‐term leases and leases of low‐value assets are
recognized as occupancy expense on a straight‐line basis over the lease
term.
Long‐term leases
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
Group uses its incremental borrowing rate.
The right of use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day and any
initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
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 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 the initial 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); or
· 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 by discounting the revised lease payments using a revised discount
rate.
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 Group applies IAS 36 Impairment of Assets to determine whether a right of
use asset is impaired.
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.
Property, PLANT AND EQUIPMENT
Land and Buildings are recognised at fair value based on periodic, but at
least triennial, valuations by external independent valuers. Any revaluation
gains are recognised in other comprehensive income. Revaluation losses are
recognised with other comprehensive income, against any pre-existing gains,
with anything over and above pre-existing gains being recognised as an expense
in profit and loss.
All other Property, plant and equipment is stated at historical cost less
subsequent accumulated depreciation and any accumulated impairment losses. If
significant parts of property, plant and equipment have different useful
lives, then they are accounted for as separate items (major components) of
property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is
recognised in profit or loss.
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
Leased assets are depreciated over the shorter of the lease term and their
useful lives unless it is reasonably certain that the group will obtain
ownership by the end of the lease term.
Land has an indefinite useful life and therefore is not depreciated.
Depreciation is calculated on a straight-line basis at rates calculated to
write each asset down to its estimated residual value, which in most cases is
assumed to be zero, evenly over its expected useful life, as follows:
Motor vehicles
over 3 years
Fixtures and IT equipment
over 3 - 7 years
Plant and equipment
over 2 - 5 years
Management judgement and assumptions are necessary in estimating the methods
of depreciation, useful lives and residual values. Depreciation methods,
useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
At each statement of financial position date, the Group reviews the carrying
amounts of its tangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Where there has been a change in economic conditions that indicate a possible
impairment in a cash-generating unit, the recoverability of the net book value
relating to that field is assessed by comparison with the estimated discounted
future cash flows based on management's expectations of future costs.
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately.
Where conditions giving rise to impairment subsequently reverse, the effect of
the impairment charge is also reversed as a credit to the income statement,
net of any depreciation that would have been charged since the impairment.
biological assets
A biological asset is defined as a living animal or plant. The Group's
biological assets comprise standing timber. The fair value of the standing
timber is determined using models based on expected yields, market prices for
the saleable produce, over 5 years, after allowing for harvesting costs and
other costs yet to be incurred in getting the produce to maturity. Any changes
in fair value are recognised in the income statement in the year in which they
arise.
Forestry
IAS 41 requires biological assets to be measured at fair value less costs to
sell. The fair value of standing timber is estimated based on the present
value of the net future cash flows from the asset, discounted at a current
market-based rate. In determining the present value of expected net cash
flows, the Group includes the net cash flows that market participants would
expect the asset to generate in its most relevant market. Increases or
decreases in value are recognised in profit or loss. When the fair value
estimates are determined to be clearly unreliable due to insufficient
information being available to the directors, the biological asset is held at
cost less any accumulated depreciation and any accumulated losses.
All expenses incurred in maintaining and protecting the assets are recognised
in profit or loss. All costs incurred in acquiring additional planted areas
are capitalised.
Where fair value of a biological asset cannot be measured reliably, the
biological asset shall be measured at its cost less any accumulated
depreciation and any accumulated impairment losses.
Costs incurred prior to the demonstration of commercial feasibility of
forestry and agriculture in a particular area are written-off to profit and
loss as incurred.
CONVERTIBLE BONDS
The net proceeds received from the issue of convertible bonds are split
between a liability element and an equity component at the date of issue. The
fair value of the liability component is estimated using the prevailing market
interest rate for similar nonconvertible debt. The portion which represents
the embedded option to convert the liability into equity of the Company is
included in equity and its fair value at initial recognition was estimated
using the Monte Carlo method of valuing such instruments. The equity portion
is not remeasured subsequent to initial recognition and the liability
component is carried at amortised cost. Issue costs are apportioned between
the liability and equity components of the convertible bonds based on their
relative carrying amounts at the date of issue. The portion relating to the
equity component is charged directly against equity. The interest expense on
the liability component is calculated by applying the prevailing market
interest rate, at the time of issue, for similar non-convertible debt to the
liability component of the instrument. The difference between this amount and
the interest paid is added to the carrying amount of the convertible bonds.
FINANCIAL INSTRUMENTS
(a) Classification
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through OCI
or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the Group's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded either in
profit or loss or in OCI. For investments in equity instruments that are not
held for trading, this will depend on whether the Group has made an
irrevocable election at the time of initial recognition to account for the
equity investment at fair value through other comprehensive income (FVOCI).
(b) Recognition
Purchases and sales of financial assets are recognised on trade date (that is,
the date on which the Group commits to purchase or sell the asset). Financial
assets are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of contractual cash flows,
where those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial assets is
included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in profit or
loss and presented in other gains/(losses) together with foreign exchange
gains and losses. Impairment losses are presented as a separate line item in
the statement of profit or loss.
(d) Impairment
The Group assesses, on a forward-looking basis, the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
INVENTORIES
Inventories are measured at the lower of cost-of-production or estimated net
realisable value. Cost of production includes direct labour, all costs of
purchase, conversion and other costs incurred in bringing the inventories to
their present location and condition. Net realisable value is the estimated
selling price in the ordinary course of business, less the estimated selling
expenses. The cost of inventories is based on the weighted average cost
method.
Product that has been containerised and shipped or remains in storage at the
port of departure, and where ownership has not yet passed to the customer, is
accounted for as stock in transit and stated at the lower of cost of
production or estimated net realisable value.
eMPLOYEE benefits
short-term employee benefits
The costs of all short-term employee benefits are recognised in the period in
which the employee renders the related service.
The accrual/liability for employee entitlements to wages, salaries and annual
leave represent the amount which the Group has a present obligation to pay as
a result of an employees' services provided up to the reporting date. The
accruals have been calculated at undiscounted amounts based on expected wage
and salary rates.
SHARE-BASED PAYMENT ARRANGEMENTS
The grant-date fair value of equity-settled share-based payment arrangements
granted to employees is generally recognised as an expense, with a
corresponding increase in equity. The amount recognised as an expense is
adjusted to reflect the number of awards for which the related service and
non-market performance conditions are expected to be met, such that the amount
ultimately recognised is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date. For
share-based payment awards with non-vesting conditions, the grant-date fair
value of the share-based payment is measured to reflect such conditions and
there is no true-up for differences between expected and actual outcomes.
The fair value of the options granted is measured using a Monte-Carlo
valuation model for market performance criteria and Black-Scholes valuation
model for non-market performance criteria, considering the terms and
conditions under which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest.
PROVISIONS
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
discount is recognised as a finance cost.
A provision for onerous contracts is recognised when the expected benefits to
be derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract. The provision is measured at the
present value of the lower of the expected cost of terminating the contract
and the expected net cost of continuing with that contract.
In accordance with the Group's environment policy and applicable legal
requirements, a provision for site restoration in respect of contaminated
land, and the related expense, is recognised when the land is contaminated.
TAXATION
Income tax expense comprises current and deferred tax. It is recognised in
profit or loss except to the extent that it relates to a business combination,
or items recognised directly in equity or in other comprehensive income.
CURRENT TAX
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years.
The amount of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects uncertainty related
to income taxes, if any. It is measured using tax rates enacted or
substantively enacted at the reporting date. Current tax also includes any tax
arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are
met.
DEFERRED TAX
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is not recognised for:
· temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
· temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future; and
· taxable temporary differences arising on the initial recognition of
goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Future taxable profits are determined based on the reversal of relevant
taxable temporary differences. If the amount of taxable temporary differences
is insufficient to recognise a deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing temporary differences, are
considered, based on the business plans for individual subsidiaries in the
Group. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will
be realised; such reductions are reversed when the probability of future
taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and
recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities. For this
purpose, the carrying amount of investment property measured at fair value is
presumed to be recovered through sale, and the Group has not rebutted this
presumption.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
BORROWINGS
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the extent there is
no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
EARNINGS PER SHARE
(i) Basic earnings per share is calculated by dividing the profit
attributable to the owners of the Company by the weighted average number of
ordinary shares outstanding during the financial year.
(ii) Diluted earnings per share adjusts the figures used in determining
basic earnings per share to take into account the after tax effects of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of ordinary shares that would have been
outstanding assuming the conversion of all diluted potential ordinary shares.
Where there is a loss attributable to the owners of the company, it is not
necessary to disclose the diluted earnings per share.
GOING CONCERN
The consolidated financial statements have been prepared assuming that the
Group will continue as a going concern. Under this assumption, an entity is
ordinarily viewed as continuing in business for the foreseeable future with
neither the intention nor necessity of liquidation, ceasing trading or seeking
protection from creditors for at least 12 months from the date of the signing
of the consolidated financial statements.
Management have performed their consideration on various scenarios. The base
case includes the rescheduling of debts and/or financing being raised whether
as equity, debt or a hybrid thereof. In their scenario planning
management have considered inter alia:
· the timing of and the ability of the Company to raise sufficient
working capital;
· the timing of and the ability of the Company to raise the finance
required to settle the balance of the Danish bank facility that was terminated
on 19 April 2023;
· the likely outcome(s) of the Company's negotiations with its
creditors;
· the current stage of the Group's life cycle;
· its performance and cashflow;
· the expected timing of revenues;
· financing both committed and those that management consider is
available and;
· operational risks.
The forecasts, show that the Company will have to reschedule or raise funds in
connection with $1.5m of its near-term debt due at the end of June 2023, in
addition to raising sufficient working capital in order to have adequate
resources to continue in operational existence for the foreseeable future and
to meet its liabilities as they fall due in the next 12 months. Your attention
is drawn to the RNS dated 6 June 2023, summarised in note 24. At the date of
these consolidated financial statements, financing proposals were still
subject to due diligence and shareholder approval to issue new ordinary shares
at the General Meeting (scheduled for 16 June 2023), set out in the circular
to shareholders dated 26 May 2023. Whilst the directors currently believe
that the additional financing required will be obtained, there can be no
certainty. Although the audit report is not modified in respect of this
matter, these events or conditions, along with the other matters as set forth
in the notes, indicate that a material uncertainty exists that may cast
significant doubt on the company's ability to continue as a going concern. As
of the date hereof the directors consider it appropriate to adopt the going
concern basis of preparation in the consolidated financial statements.
2. SEGMENTAL REPORTING
Segmental information is presented on the basis of the information provided to
the Chief Operating Decision Maker ("CODM"), which is the Executive Board.
The Group is currently focused on forestry, timber trading and carbon
solutions. These are the Group's primary reporting segments, operating in
Gabon, Mozambique, Denmark, London, Guernsey and head operating offices in
Mauritius. Certain support services are performed in the UK.
As on 31 December 2022 sales made to one customer during the year accounted
for 14% (2021 10%) of the total turnover.
The Group's directors review the internal management reports of each division
at least monthly.
There are varying levels of integration between the Forestry and Trading
segments. This integration includes transfers of sawn timber and veneer,
respectively. Inter-segment pricing is determined on an arm's length basis.
Information relating to each reportable segment is set out below. Segment
profit/(loss) before tax is used to measure performance because management
believes that this information is the most relevant in evaluating the results
of the respective segments relative to other entities that operate in the same
industry.
The following table shows the segment analysis of the Group's profit before
tax for the year and net assets at 31 December 2022. All amounts are disclosed
after taking into account any intra-segment and intra-group eliminations:
2022 Forestry Trading Carbon Solutions Total
$000 $000 $000 $000
Income statement
Turnover 15,262 7,846 - 23,108
Cost of Sales (10,450) (6,794) - (17,244)
Gross profit 4,812 1,052 - 5,864
Operating costs (2,360) (1,467) (339) (4,166)
Administrative expenses (429) (429) (430) (1,288)
Depreciation (206) (16) - (222)
Share based payment expense (171) (121) (126) (418)
Loss on fair value of biological assets (156,983) - - (156,983)
Segment operating loss (155,337) (981) (895) (157,213)
Foreign exchange (loss)/gain (135) 1,039 - 904
Finance costs (614) (415) - (1,029)
Loss before tax (156,086) (357) (895) (157,338)
Taxation 47,681 (5) - 47,676
Loss for the year (108,405) (362) (895) (109,662)
NET ASSETS
Assets: 215,486 9,787 - 225,273
Liabilities: (5,881) (12,812) - (18,693)
Deferred tax liability (58,680) 5 - (58,675)
Net assets 150,925 (3,020) - 147,905
Reconciliation of information on reportable segments to the amounts reported
in the consolidated financial statements:
2022 2021
(Loss)/profit before tax $000 $000
Total (loss)/profit before tax for reportable segments (109,662) 90,702
Unallocated amount: reclassification of FCTR on deregistered entities (1,529) -
Consolidated (loss)/profit before tax (111,191) 90,702
The following table shows the segment analysis of the Group's loss before tax
for the year and net assets at 31 December 2021. All amounts are disclosed
after taking into account any intra-segment and intra-group eliminations:
Forestry Trading Carbon Solutions Total
2021
$000 $000 $000 $000
Income statement
Turnover 7,988 9,477 - 17,465
Cost of Sales (5,569) (8,401) - (13,970)
Gross profit 2,419 1,076 - 3,495
Operating costs (1,511) (1,531) (578) (3,620)
Administrative expenses (330) (334) (660) (1,324)
Depreciation (321) (5) - (326)
Share based payment expense (59) (58) (116) (233)
Gain on fair value of biological assets 4,253 - - 4,253
Segment operating profit/(loss) 4,451 (852) (1,354) 2,245
Finance costs (241) (350) - (591)
Foreign exchange (loss)/gain (78) 834 - 756
Bargain purchase 88,292 - - 88,292
Profit/(loss) before tax 92,424 (368) (1,354) 90,702
Taxation (591) - - (591)
Profit/(loss) for the year 91,833 (368) (1,354) 90,111
NET ASSETS
Assets: 370,433 8,146 - 378,579
Liabilities: (3,901) (9,755) - (13,656)
Deferred tax liability (106,475) - - (106,475)
Net assets 260,057 (1,609) - 258,448
Geographical information
In presenting the below geographical information, segment revenue and
non-current assets are based on the entity's country of domicile.
Denmark Gabon Mozambique Total
2022 $000 $000 $000 $000
External sales 7,846 15,130 132 23,108
Non-Current Assets 1,524 210,182 335 212,041
2021 $000 $000 $000 $000
External sales 9,477 7,710 278 17,465
Non-Current Assets 273 326,884 39,760 366,917
The below segment revenue has been based on the geographic location of the
customer. Only material amounts were included.
2022 2021
Location: $000 $000
Libya 2,790
4,401
Gabon 3,922 1,274
Dominican Republic 2,350 1,220
Pakistan 2,275 4,418
Italy 1,800 -
Bangladesh 1,621 1,535
Turkey 1,591 901
Iraq 1,283 690
Morocco 805 732
USA 574 569
Belgium 534 129
21,156 14,258
3. OPERATING LOSS/profit
2022 2021
$000 $000
Operating loss/profit is stated after charging/(crediting):
Depreciation of property, plant and equipment 2,181 2,063
Staff costs (see note 4) 4,276 3,936
Share based payment reserve expense (see note 21) 418 233
Lease expense 89 81
Loss/(gain) on fair value of Biological assets (see note 11) 156,983 (4,253)
Auditor's remuneration:
Audit services
- fees payable to the Company's auditor for the audit of the consolidated 78 75
accounts
Fees payable to associates of the Company's auditor
- auditing the accounts of subsidiaries pursuant to legislation 76 70
4. EMPLOYEE INFORMATION
2022 2021
Number Number
The average monthly number of persons (including directors) employed by the
Group during the year was:
Administration and management 5 5
Carbon solutions 2 2
Forestry 393 342
Trading 9 9
409 358
2022 2021
$000 $000
The aggregate remuneration comprised:
Wages and salaries 4,138 3,834
Social security costs 138 102
4,276 3,936
2022 2021
$000 $000
Directors' remuneration included in the aggregate remuneration above
comprised
Emoluments for qualifying services 841 810
Included above are emoluments of $247,000 (2021: $262,000) in respect of the
highest paid director. Deferred final acquisition payments arising from the
acquisition of WoodBois International ApS are excluded in both periods. Full
details of directors' remuneration are included in the Directors' Report.
Pension contributions of $6,936 (2021: $13,750) were made on behalf of the
directors and other staff members.
5. acquisition OF SUBSIDIARY
On 6 August 2021, the Group acquired 100% of the shares and voting interests
in Forêts et de l'Industrie du Bois ("LGFIB") for a cash consideration of
$1.5 million.
Through the acquisition of LGFIB, the Group acquired 71,000 hectares of forest
concessions in Gabon (56,000 of which is currently covered by a management
plan). This additional hectarage, which is located within 100km of our
manufacturing base in Mouila, provides increased levels of sustainably
harvested timber required as additional production capacity comes online at
our sawmill and veneer factory.
No harvesting had taken place during the 2021 financial year in the newly
acquired concession and therefore the acquisition of LGFIB did not materially
contribute to the consolidated revenue and profit for that period.
A. Consideration transferred
A cash consideration of $1.534m represents the acquisition-date fair value of
the total consideration transferred.
B. Acquisition related costs
Acquisition related costs spent on legal and due diligence were expensed and
have been included in operating costs.
C. Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the date of acquisition.
2021
Note $000
Biological assets 11 128,322
Deferred tax 7 (38,496)
Total identifiable net assets acquired 89,826
D. Gain on bargain purchase
A gain from bargain purchase arising from the acquisition was recognised as
follows:
2021
Note $000
Consideration transferred a (1,534)
Fair value of identifiable net assets c 89,826
Gain on bargain purchase 88,292
Occasionally, an acquirer will make a bargain purchase. This is usually in a
business combination that is a forced sale in which the seller is acting under
compulsion. In this case, the sellers were not distressed and not acting under
compulsion.
The gain on bargain purchase arises due to the difference in accounting
frameworks applied by the Company and LGFIB, the Gabonese company it acquired.
Specifically, the difference relates to the measurement of Biological
Assets. The Company applies IFRS which stipulates that acquired assets and
liabilities be recognised, at the date of acquisition, at its fair value.
LGFIB, who applies Gabonese accounting standards, does not carry Biological
Assets on its Balance Sheet, but instead expensed the cost of acquiring the
rights over time and no fair value assessment is made for accounting purposes.
The Company applied IAS 41 when determining the Fair Value of the Biological
Assets acquired. Further information on the inputs to the valuation is set
out in Note 11. In addition to the effect of the different accounting
standards applied, the previous owner's financial position, his inability to
acquire finance to operate the asset and the threat of potentially losing it
due to non-operation together with the quick exit and certainty of being paid
offered by WoodBois contributed to the gain realised.
6. FINANCE COSTS
2022 2021
$000 $000
Bank interest 741 503
Working capital facility interest 206 -
Convertible bond amortised interest 82 88
1,029 591
7. TAXATION
2022 2021
$000 $000
Current tax:
Corporation tax on profit for the year 125 (81)
Deferred tax:
Origination and reversal of temporary differences (47,801) (510)
Tax on profit/(loss) on ordinary activities (47,676) (591)
2022 2021
$000 $000
Group
(Loss)/profit before tax (158,867) 90,701
(Loss)/profit before tax multiplied by the average rate of corporation tax of (23,830) 17,233
15% (2021: 19%)
Effects of:
Losses carried forward/(utilised) (199) (189)
Non-taxable gain on bargain purchase - (16,775)
Non-taxable foreign exchange gain (147) (111)
Non-taxable movement in fair value of biological assets (24,249) (1,318)
Non-deductible share-based payment expense 63 44
Non-deductible other expenditure 457 525
Reclassification of FCTR 10 (#_ftn10) on deregistered entities 229 -
Group tax credit for the year (47,676) (591)
The prevailing tax rates of the operations of the Group range between 3% and
32%. Therefore, a rate of 15% (2021:19%) has been used as it best represents
the weighted average tax rate experienced by the Group. The Group has
estimated losses of $26 million (2021: $28 million) available to carry forward
against future taxable profits. Tax losses utilized during the year related
principally to profits realised by subsidiaries in certain jurisdictions and
tax gains realised on liquidation of various subsidiaries. No deferred tax
assets have been recognised in respect of losses due to the unpredictability
of future taxable profit. All unused tax losses may be carried forward
indefinitely for most entities. Unused tax losses arising from Mozambique may
be carried forward for a five-year period.
The movement in the year in the Group's recognised net deferred tax position
was as follows:
2022 2021
Deferred tax liabilities $000 $000
At 1 January 106,475 64,788
Decrease in deferred tax liability: fair value adjustment of Biological Assets (47,795) 39,006
Decrease in deferred tax liability: property, plant and equipment (5) -
Increase in deferred tax liability: fair value adjustment on property, plant - 2,681
and equipment
At 31 December 58,675 106,475
Deferred tax reconciliation
2022 2021
Deferred tax assets / (liabilities) $000 $000
Deferred tax liability on the fair value adjustment of Biological Assets (53,945) (101,740)
Deferred tax liability on property, plant and equipment 5 -
Deferred tax liability on the fair value adjustment on property, plant and
equipment
(4,735) (4,735)
At 31 December (58,675) (106,475)
8. EARNINGS PER SHARE
Summary:
2022 2021
cents cents
Basic (loss)/earnings per share (4.47) 3.69
Diluted earnings per share (4.47) 3.65
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average aggregate number of
Voting and Non-Voting Ordinary Shares in issue during the year.
The calculation of diluted EPS has been based on dividing the profit
attributable to ordinary shareholders and weighted-average number of ordinary
shares outstanding after adjustment for the effects of all dilutive potential
ordinary shares.
The Company has incurred a loss in the year ended 31 December 2022, and
therefore the diluted earnings per share is the same as the basic loss per
share as the loss has an anti-dilutive effect.
2022 2021
$000 $000
Total (loss)/profit for the year (110,191) 90,111
The earnings used for diluted earnings per share are the same as the earnings
used for basic earnings per share, which equates to loss attributable to the
owners of the Company of $111 million.
Reconciliation of shares in issue to weighted average and dilutive weighted
average number of ordinary shares
2022 2021
'000 '000
Shares in issue at beginning of year 2,482,117 2,382,216
Treasury shares - (99)
Shares issued during the year weighted for period in issue (note 18) 3,894 62,466
Weighted average number of ordinary shares in issue for the year 2,486,011 2,444,583
Conversion of convertible bonds 15,740 21,612
Dilutive weighted average number of ordinary shares in issue for the year 2,501,751 2,466,195
9. PROPERTY, plant and equipment
Land & buildings Motor vehicles Plant & equipment Fixtures & IT equipment Total
$000 $000 $000 $000 $000
Cost
At 1 JANUARY 2021 7,775 4,694 12,201 191 24,861
Additions - 1,779 3,072 218 5,069
Revaluation of land and buildings (note 10) 8,934 - - - 8,934
Disposals - - (20) - (20)
Effects of foreign exchange (1,278) (279) (679) 22 (2,214)
At 31 December 2021 15,431 6,194 14,574 431 36,630
Additions - 1,715 2,929 1,478 6,122
Disposals - (26) - (306)
(280)
Effects of foreign exchange (884) (305) (1,374) 90 (2,473)
At 31 December 2022 14,547 7,578 16,129 1,719 39,973
Depreciation
At 1 JANUARY 2021 - 1,725 2,879 54 4,658
Charge for the year - 626 1,419 18 2,063
Disposals - - (20) - (20)
Effects of foreign exchange - (79) (126) 15 (190)
At 31 December 2021 - 2,272 4,152 87 6,511
Charge for the year - 742 1,390 49 2,181
Disposals - (26) - - (26)
Effects of foreign exchange - (95) (826) 2 (919)
At 31 December 2022 - 2,893 4,716 138 7,747
Net book value
At 31 December 2021 15,431 3,922 10,422 344 30,119
At 31 December 2022 14,547 4,685 11,413 1,581 32,226
On acquisition of an asset, the estimated useful life is determined. The
residual values for the majority of assets, except for Land and Buildings, are
assumed to be zero.
10. Revaluation of land and buildings
It is the Company's policy to revalue Owner Occupied Land and Buildings every
4 to 6 years based on the understanding of the property market and budgeted
capex spend.
The date of the previous revaluation was in the first half of 2017 so the
Company engaged an external, independent property valuer, having the
appropriate recognised professional qualifications and experience, to
determine the fair value of the Group's Owner Occupied Land and Buildings
located in Gabon. The valuation was completed in May 2021. A revaluation net
gain of $6.3 million (comprised of a gross gain of $8.9m net of deferred tax
of $2.6m) was recognised in Other Comprehensive Income in 2021.
The Company acquired the Land and Buildings in June 2017 and at that time, the
fair value, at initial recognition was $7.2m. Therefore, the carrying amount
for those assets, if the cost model had been applied by the Company, would
have been 2022: $7.2m (2021: $7.2m).
The replacement cost approach was used to determine the fair value. The
replacement cost method involves arriving at an asset's value by reference to
the present-day cost, in an arms-length transaction, of replacing that asset
with a similar asset in a similar condition. Average construction prices in
the area were used to determine the fair value. A deterioration percentage
estimate was then applied against the fair value to represent the asset's
current condition.
Significant unobservable inputs used to calculate the fair value include:
- Estimated construction prices per m(2). The estimated fair value would
increase (decrease) if the construction prices would be lower (higher).
- Deterioration percentage estimate. The estimated fair value would
increase (decrease) if the deterioration percentage estimate would be lower
(higher).
The fair value measurement for the land and buildings has been categorised as
a level 3 fair value based on the inputs used in the valuation technique.
Please refer to note 9 for a reconciliation of the carrying amount of land and
buildings.
Management is not aware of any factors that impacted property valuations in
Gabon and therefore noted that during 2022 the fair value of the revalued
asset, when stated in its local currency, did not differ materially from its
carrying amount and therefore no revaluation was performed in 2022.
11. biological assets
2022 2021
Standing timber $000 $000
Carrying value at beginning of year 336,798 204,223
Additions (Note 5) - 128,322
Fair value movement (156,983) 4,253
Carrying value at end of year 179,815 336,798
2022 2021
Carrying value per location $000 $000
Gabon 179,815 297,506
Mozambique - 39,292
Carrying value at end of year 179,815 336,798
The methods and assumptions used in determining the fair value of standing
timber within the forestry concessions held is based on IAS 41 Agriculture,
applicable to companies that hold biological assets, which uses discounted
cash flow models and which require a number of significant judgements to be
made by the directors in respect of sales price, operational cost, discount
rates, growth rates, legislative rulings and operating effectiveness. As
with all discounted cash flow valuations on long-term assets, small changes to
input variables can create significant changes to the resultant valuation.
Following the fair value assessment in 2022, a net fair value loss (after
deferred tax) of $109 million (loss of $26.7 million for Mozambique and a loss
of $82.3 million for Gabon) was recognised.
The fair value loss was due to a number of factors:
· WACC discount rates increased significantly from the prior year.
The risk-free rate and the equity and country risk premiums increased due to a
rise in inflation, poor economic performance, rise in interest rates and a
pessimistic outlook on the stock market. Woodbois' cost of debt increased in
2022 due to an increase in the Danish banking facilities interest rates as
well as taking on two shareholder loans from Lombard Odier and Rhino
Ventures at 8.5%.
· Specifically relating to the biological assets in Mozambique, the
revaluation downwards was mainly prompted by Group's decision to minimise its
forward looking harvesting activities (and the expected effect thereof on
maximum permitted harvest rates) while reviewing its strategic options in that
geography.
The discounted cash flow models cover the concession areas in Mozambique and
Gabon to which the group has secured the rights. Management prepares separate
models for each country.
Harvesting levels are regulated by the Annual Permitted Cut ("APC") (total
m(3) per species) set in each management plan and approved at federal and
provincial government level and can be reviewed and increased periodically,
while continued sustainability is ensured. The level of assumed APC varies
between 2,537m(3) (for Mozambique) and 237,983m(3) (for Gabon) (2021:
55,780m(3) (for Mozambique) and 237,983m(3) (for Gabon)). This is based on the
current expected harvesting activities for Mozambique and the approved APC for
Gabon which may be subject to change depending on legislative changes both
with regards to the size of the area and species. Such changes may impact the
carrying value of the biological assets held.
The valuation models assume pre-tax discount rates of 18% (2021:11%) for Gabon
and 20% (2021:13%) for Mozambique. The discount rates have been calculated
using a weighted average cost of capital ("WACC") methodology. Our comparable
company base is made up of Africa-focused and global forestry companies which
management consider would be categorized in the same sector as Woodbois.
Relevant country and equity risk premiums have been used for Gabon and
Mozambique. When considering the discount rate applicable to the Mozambique
model, management has specifically ensured that the discount rate adequately
incorporates the risk associated with the current unrest being experienced in
the northern parts of the country. Management have further determined that
the discount rates are in line with the overall industry consensus for
timberland assets within Africa. The increase in pre-tax discount rates from
the prior year is due to the increase in the risk-free rate, country risk
premium and the cost of debt which is used in calculating the WACC.
The Group's main class of biological assets comprise of standing timber held
through forestry concessions of between 20 and 50 years. Biological assets are
carried at fair value less estimated costs to sell.
The brought forward biological assets are located in Gabon in Mouila and
Northern Mozambique in the states of Cabo Delgado, Nyassa, Nampula and
Zambezia and are managed from a central point in Mouila and Nampula. The newly
acquired concession in 2021 is located in Mimongo, Gabon.
Fair value has been determined internally by discounting a 5-year pre-tax cash
flow projection (Level 3 of the fair value hierarchy) based on a mix of wood
species within the concession areas. Real cost of production has been factored
in going forward.
The following sensitivity analysis shows the effect of an increase or decrease
in significant assumptions used:
Impact on year end fair value of biological assets
2022 2021
$000 $000
Effect of 1% increase in the discount rate (10,694) (33,285)
Effect of 1% decrease in the discount rate 12,197 41,919
Effect of 10% increase in volume of APC 18,374 34,547
Effect of 10% decrease in volume of APC (18,374) (34,547)
Effect of 10% increase in sales price 21,158 42,409
Effect of 10% decrease in sales price (21,158) (42,409)
12. TRADE AND OTHER RECEIVABLES
2022 2021
$000 $000
Trade receivables 4,561 2,093
Other receivables 12 12
Deposits 128 127
Current tax receivable 16 14
VAT receivable 174 589
Prepayments 1,439 1,781
6,330 4,616
The directors consider that the carrying amount of trade and other receivables
approximates their fair value. Refer to Note 14 for details of the trade
debt aging profile and for the Group's impairment policy.
13. INVENTORY
2022 2021
$000 $000
Finished goods 2,377 2,747
Stock in transit 2,229 2,129
Work in progress - 1,283
4,606 6,159
Provision for net realisable value amounted to $nil (2021: $nil).
14. financial INSTRUMENTS
Capital risk management
The Company manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
stakeholders. The overall strategy of the Company and Group is to minimise
costs and liquidity risk.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, share premium,
reserves (foreign exchange reserve and share based payment reserve) and
retained earnings as disclosed in the Consolidated Statement of Changes in
Equity.
The Group is exposed to a number of risks through its normal operations, the
most significant of which are interest, credit, foreign exchange and liquidity
risks. The management of these risks is vested in the board of directors.
The sensitivity has been prepared assuming the liability outstanding at the
balance sheet date was outstanding for the whole period. In all cases
presented, a negative number in profit and loss represents an increase in
finance expense / decrease in interest income.
Categorisation of financial instruments
2022 Financial assets at amortised cost Financial liabilities at amortised cost Total
Financial assets/(liabilities) Financial assets at fair value Financial liabilities at fair value
$000 $000 $000 $000 $000
Trade and other receivables 4,701 - - - 4,701
Cash and cash equivalents 2,296 - - - 2,296
Trade and other payables - - (2,465) - (2,465)
Borrowings - - (14,268) - (14,268)
Convertible bond liability - - (748) - (748)
6,997 - (17,481) - (10,484)
2021 Financial assets at amortised cost Financial liabilities at amortised cost Total
Financial assets/(liabilities) Financial assets at fair value Financial liabilities at fair value
$000 $000 $000 $000 $000
Trade and other receivables 2,232 - - - 2,232
Cash and cash equivalents 887 - - - 887
Trade and other payables - - (2,366) - (2,366)
Borrowings - - (8,268) - (8,268)
Convertible bond liability - - (931) - (931)
Contingent acquisition liability - - (250) - (250)
3,119 - (11,815) - (8,696)
Fair value measurements recognised in the statement of financial position
The following provides an analysis of the Group's financial instruments that
are measured subsequent to initial recognition at fair value, grouped into
Levels 1 & 2 based on the degree to which the fair value is observable.
· Level 1 fair value measurements are those derived from inputs other
than quoted prices that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 2 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
· Level 3 assets are assets whose fair value cannot be determined
by using observable inputs or measures, such as market prices or
models. Level 3 assets are typically very illiquid, and fair values can
only be calculated using estimates or risk-adjusted value ranges.
At the year end, included in property, plant and equipment, there is land and
buildings held at fair value of $14.5m (2021: $15.4m) measured in accordance
with level 3 and Biological Assets of $179.8m (2021: $336.8m) measured in
accordance with level 3 of the fair value hierarchy.
Equity price Risk
The Group is exposed to equity price risks arising from equity investments.
Equity investments are held for both strategic and trading purposes.
Management of market risk
The most significant area of market risk to which the Group is exposed is
interest rate risk.
The risk is limited to the reduction of interest received on cash surpluses
held and the increase in the interest on borrowings.
Majority of the Company's debt was based on fixed interest rates with no link
or exposure to movements in LIBOR.
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.
2022 2021
$000 $000
+ 20 bp increase in interest rates (26) (19)
+ 50 bp increase in interest rates (65) (47)
+ 100 bp increase in interest rates (130) (93)
The table above is prepared on the basis of an increase in rates. A decrease
in rates would have the opposite effect.
2022 2021 2022 2021 2022 2021
Fixed Fixed Floating Floating Total Total
rate rate rate Rate
Group $000 $000 $000 $000 $000 $000
Borrowings (5,028) (1,513) (9,240) (6,755) (14,268) (8,268)
Cash and cash equivalents - - 2,296 887 2,296 887
Convertible bond liability (748) (931) - - (748) (931)
Total (5,776) (2,444) (6,944) (5,868) (12,720) (8,312)
Management of credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables from customers
and investments in debt securities.
The carrying amount of financial assets represents the maximum credit
exposure.
The principal financial assets of the Company and Group are bank balances and
receivables. The Group deposits surplus liquid funds with counterparty banks
that have high credit ratings. Cash is sometimes placed with certain
institutions in support of trading positions. The Group deposits such funds
with large well-known institutions and the directors consider the credit risk
to be minimal.
The Group's maximum exposure to credit by class of individual financial
instrument is shown in the table below:
2022 2022 2021 2021
Carrying Value Maximum Exposure Carrying Value Maximum
Exposure
$000 $000 $000 $000
Cash and cash equivalents 2,296 2,296 887 887
Trade and other receivables 4,701 4,701 2,232 2,232
Total 6,997 6,997 3,119 3,119
TRADE RECEIVABLES
Trade receivables are recognised initially at the amount of consideration that
is unconditional, unless they contain significant financing components when
they are recognised at fair value. They are subsequently measured at amortised
cost using the effective interest method, less loss allowance.
The only impact on the Group is in relation to the impairment of trade
receivables as detailed below.
The expected loss rates are based on the payment profiles of sales over a
period of 36 month before 31 December 2022 or 1 January 2023 respectively and
the corresponding historical credit losses experienced within this period. The
historical loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to
settle the receivables.
The group has identified the GDP and the unemployment rate of the countries in
which it sells its goods to be the most relevant factors, and accordingly
adjusts the historical loss rates based on expected changes in these factors.
On that basis, the loss allowance as at 31 December 2022 and 31 December 2021
were determined as follows for both trade receivables and contract assets:
More than 120 days past due More than 90 days past due More than 60 days past due More than 30 days past due Current Total
2022
Expected loss rate 67.40% 0% 0% 0% 0% 12,84%
Gross carrying amount - trade receivables 997 425 1,531 1,151 1,159 5,233
Loss allowance (672) - - - - (672)
2021
Expected loss rate 23.70% 0% 0% 0% 0% 6.90%
Gross carrying amount - trade receivables 654 143 454 449 547 2,247
Loss allowance (155) - - - - (155)
The closing loss allowances for trade receivables and contract assets as at 31
December reconcile to the opening loss allowances as follows:
2022 2021
$000 $000
Opening loss allowance at 1 January 155 216
Increase in loss allowance recognised in profit and loss during the year 558 -
Receivables written off during the year as uncollectible (43) (61)
Closing loss allowance at 31 December 670 155
Management of foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from commercial transactions, translation of assets and liabilities
and net investments in foreign operations. Exposure to commercial transactions
arises from sales or purchases by operating companies in currencies other than
the companies' functional currency. Currency exposures are reviewed regularly.
The Group has a limited level of exposure to foreign exchange rate risk
through their foreign currency denominated cash balances:
2022 2021
$000 $000
Cash and cash equivalents
GBP 16 4
EUR 572 67
DKK 1 17
CFA 271 72
MZN 14 2
USD 1,422 725
Total 2,296 887
The table below summarises the impact of a 10% increase in the relevant
foreign exchange rates versus the US Dollar rate, on the Group's pre-tax
profit for the year and on equity:
2022 2021 2022 2021
Income Statement Income Statement Equity Equity
Impact of 10% rate change $000 $000 $000 $000
Cash and cash equivalents (33) (1) (33) (1)
The table above is prepared on the basis of an increase in rates. A decrease
in rates would have the opposite effect.
Management of liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the group's reputation.
The Group seeks to manage liquidity risk by regularly reviewing cash flow
budgets and forecasts to ensure that sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably. The Group
deems there is sufficient liquidity for the foreseeable future.
The Group had cash and cash equivalents at 31 December as set out below.
2022 2021
$000 $000
Cash at bank 2,296 887
ContracTual maturity analysis
The Group has assessed the contractual maturity analysis as follows:
2022 0-3 months 3-12 months 1 - 5 years Total
$000 $000 $000 $000
Assets by contractual maturity
trade and other receivables 1,263 5,067 - 6,330
Cash and cash equivalents 2,296 - - 2,296
3,559 5,067 - 8,626
Liabilities by contractual maturity
Trade and other payables (2,884) (664) - (3,548)
Borrowings - (8,603) (5,665) (14,268)
Convertible bond liability - (748) - (748)
(2,884) (10,015) (5,665) (18,564)
Net liabilities by contractual maturity 675 (4,595) (5,665) (9,585)
2021 0-3 months 3-12 months 1 - 5 years Total
$000 $000 $000 $000
Assets by contractual maturity
trade and other receivables 1,246 3,370 - 4,616
Cash and cash equivalents 887 - - 887
2,133 3,370 - 5,503
Liabilities by contractual maturity
Trade and other payables (3,449) (629) - (4,078)
Borrowings - (5,369) (2,898) (8,267)
Convertible bond liability - - (931) (931)
Contingent acquisition liability (250) - - (250)
(3,699) (5,998) (3,829) (13,526)
Net liabilities by contractual maturity (1,566) (2,628) (3,829) (8,023)
15. TRADE AND OTHER PAYABLES
2022 2021
$000 $000
Trade payables 1,213 1,275
Accruals 309 680
Contract liabilities (prepayments received) 892 1,643
Current tax payable 190 69
Other payables 920 340
Debt due to concession holders 23 71
3,547 4,078
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
16. BORROWINGS
2022 2021
$000 $000
Non-Current liabilities
Business loans 1,757 1,282
Working capital facility 3,908 1,616
5,665 2,898
Current liabilities
Business loans 888 1,250
Bank overdraft 196 128
Working capital facility 7,519 3,991
8,603 5,369
Total borrowings 14,268 8,267
As at 31 December 2022 the trading division had the following outstanding
borrowings:
Business loan with a Danish bank that amounted to $1 million (2021: $1.1
million). The business loan carries an interest rate of 4%. The purpose of the
loan is for financing timber trades.
Working capital facilities with Danish banks amounted to $8.2 million (2021:
$5.6 million). These facilities carry interest at rates 4.65% and 8.45%. One
of the facilities, for $6 million, has been included in current liabilities:
this is a revolving facility with no maturity date. At the year end there
was no indication from the credit provider that the facility would be
terminated, but on 19 April 2023, notice was received and as such, the Company
has classified and disclosed it as being a current liability (see Note 24).
As at 31 December 2022 the forestry division had the following outstanding
borrowings:
Business loans with a Gabonese bank that amounted to $1.6 million (2021: $1.4
million). These loans carry an interest rate of between 13% and 14%. A bank
overdraft with a Gabonese bank amounted to $0.2 million (2021: $0.1 million)
and carries an interest rate of 10%. The purpose of the loans is for
operational asset financing.
During the year the Group drew down $2 million from a general purpose two-year
working capital facility with Rhino Ventures Limited, a shareholder. The
facility amounted to $2.2 million as at 31 December 2022 and carried interest
at 8.5%. The Group also drew down $1 million from an additional short-term
working capital facility with Lombard Odier, a shareholder. The facility
amounted to $1 million as at 31 December 2022 and carried interest at 8.5%.
Woodbois Limited signed a parent guarantee to a maximum of $2 million to a
Gabonese bank.
The Group has also signed security in favour of Danish banks to the value of
$5.5 million.
The contractual maturity of borrowings has been assessed in Note 14.
The Group had undrawn facilities available at 31 December 2022 that amounted
to $0.1 million (2021: $0.1million).
17. CONVERTIBLE BONDS
2022 2021
$000 $000
Convertible bonds: Liability component 748 931
Convertible bonds: Equity component 24 52
Total 772 983
Convertible bond liability 477 741
Amortised interest 271 190
Total 748 931
The terms of the convertible bonds are as follows:
1. Final Redemption Date of 30 June 2023
2. Convertible at a price of 4p per ordinary share
3. Interest rate at zero percent
18. SHARE CAPITAL
Number $000
Authorised:
Ordinary shares of 1p each Unlimited Unlimited
Allotted, issued and fully paid:
Ordinary shares of 1p each
AT 31 DECEMBER 2020 2,382,216,431 31,119
Shares issued 99,900,622 1,409
AT 31 DECEMBER 2021 2,482,117,053 32,528
Shares issued 7,871,820 97
AT 31 DECEMBER 2022 2,489,988,873 32,625
Voting 2,254,988,873
Non-Voting 235,000,000
Balances classified as share capital include the nominal value on issue of the
Company's equity share capital, comprising ordinary shares of 1p each.
During 2022 a total of 390,000,000 Non-Voting Ordinary Shares have been
converted into Voting Ordinary Shares.
During June 2022 the Company converted $293,591 of 2023 0% Convertible Bonds
into 5,871,820 Voting Ordinary Shares. The Convertible Bond terms specify
conversion is at an exchange rate of £:$1.25 and 4p per Ordinary Share.
During August 2022 the Company issued 2,000,000 New-Voting Ordinary Shares
following the exercise of options under the Company's Share Option Plan
19. SHARE PREMIUM ACCOUNT
2022 2021
$000 $000
AT 1 JANUARY 65,254 58,609
Shares issued (note 18) 295 6,645
AT 31 DECEMBER 65,549 65,254
Balances classified as share premium include the net proceeds in excess of the
nominal share capital on issue of the Company's equity share capital.
20. Provisions
2022 2021
$000 $000
AT 1 JANUARY 130 132
Movement - (2)
AT 31 DECEMBER 130 130
The balance comprises of one provision, to the amount of $0.1 million, which
relates to a tax dispute with the Mozambique tax authorities. The provision is
classified as a current liability as at 31 December 2022.
21. SHARE BASED PAYMENT/LONG-TERM INCENTIVES
The Group operates two share option plans, under which certain directors, key
employees and consultants have been granted options to subscribe for ordinary
shares. All options are equity settled. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
The share option awards in issue as at 1 January 2022 totalled 112.0m shares
under the Share Option Scheme: these were issued as of 6 August 2020 and are
exercisable at 2p per share. The vesting of the awards is substantially geared
towards material improvement in both operating results and share price
appreciation.
On the 1(st) of March 2022, the Company issued LTIP's (long-term incentive
plan) to its directors and key employees of which 38m were in issue at 31
December 2022. The fair value of these LTIP's as at the grant date was
determined by an independent specialist in financial valuations.
19m of the granted LTIP's are subject to TSR (Total Shareholder Return) linked
criteria and were valued using a Monte Carlo simulation. 19m share options are
subject to EBITDA-linked criteria and were valued using a Monte Carlo
Simulation on the basis that they include a market-based exercise condition.
Only market conditions have been considered in estimating the fair value of
the LTIP's.
1. The key terms and conditions related to the LTIP's are as follows:
A. Market Performance Condition
• Grant Date: 1 March 2022
• Contractual life of LTIP's: 4.6 years
• Vesting conditions: Total Shareholder Return - The performance criteria
sets out that of the total 38m LTIP's granted, up to 50% can vest in
increments of 10% if the VWAP (Weighted Average Price) remains above each of
the following thresholds for a period of 30 consecutive days: £0.06, £0.07,
£0.08, £0.09 and £0.10. Full vesting of this 50% tranche will be achieved
if the share price increases to over £0.10.
B. Non-Market Performance Condition
• Grant Date: 1 March 2022
• Contractual life of LTIP's: 4.6 years
• Vesting conditions: Target EBITDA - Of the total 38m LTIP's granted, 50%
can vest
at an incremental rate of 16.6% per annum by the Company achieving internal
EBITDA targets for each of the financial years 2022-2024. Any vesting shall
arise equally for the achieving of each target, which is subject to a
cumulative "catch-up" being permitted.
C. Service Condition
• Recipients must be employed by Woodbois at the time of vesting and the
share price must be above 6p at the exercise date. This condition applies to
all of the granted share options.
The table below shows the input ranges for the assumptions used in the
valuation models:
Fair value at grant date £0.02 - £0.03
Exercise price £0.01
Share price at grant date £0.0405
Annual share price volatility (weighted average) 65%
Risk free rate 0.83%
Expected life 4.6 years
The annualised volatility in the share price was determined using the
historical volatility of Woodbois Limited and other listed companies in
similar businesses over a time period in line with the simulation period. A
monthly volatility of 19.0% was used in the simulation (annual volatility of
65%).
Each of Paul Dolan, Carnel Geddes and Hadi Ghossein, Executive Directors, were
awarded 4,000,000 LTIP's and these were outstanding as of 31 December 2022.
2. The key terms and conditions related to the Share Options are as follows:
A. Market Performance Condition
• Grant Date: 6 August 2020
• Contractual life of options: 4 years
• Vesting conditions: Total Shareholder Return - 50% of the
share options are subject to the Market Performance Condition whereby none
will vest at a share price of 2p; one third of these options will vest on a
straight-line basis between a share price of 2-4p; two thirds will vest on a
straight-line basis between a share price of 4-6p per share, and full vesting
will occur when the share price exceeds 6p, each vesting being based on the
volume weighted average share price over a period of 30 days. All of these
options had vested by the end of 2021.
B. Non-Market Performance Condition
• Grant Date: 6 August 2020
• Contractual life of options: 4 years
• Vesting Conditions: Target EBITDA - 50% of the share options
are subject to Non-Market Performance Conditions, whereby 12.5% of these
options can vest per annum based on achieving internal EBITDA targets for each
of the financial years 2020-2023. There is also a cumulative provision whereby
a shortfall (or excess) in one or more years can be offset against other years
for the purposes of vesting. As of the date hereof a quarter of these share
options have vested.
C. Non-Subject to Performance Criteria
• Grant Date: 6 August 2020
• Contractual life of options: 4 years
• A one-off award of 10m share options was made to Mr G
Thomson (Senior Independent Non-Executive). In accordance with corporate
governance advice, his options are not subject to performance criteria but may
not vest for 4 years from the time of grant.
The awards outstanding to directors in the year are:
Number of
options
(2p exercise price)
P Dolan Executive Chair 50,000,000
C Geddes CFO 22,500,000
H Ghossein Deputy Chair 22,500,000
G Thomson Senior Independent NED 10,000,000
57.25 million of the granted share options are subject to TSR (Total
Shareholder Return) linked criteria and were valued using a Monte Carlo
simulation. 57.25 million share options are subject to EBITDA-linked criteria
and were valued using a Black Scholes Option Pricing Model. The fair value of
the 10m Share Options which are not subject to performance criteria were
valued using a Black Scholes Option Pricing Model. Only market conditions have
been considered in estimating the fair value of the LTIP's.
The table below shows the input ranges for the assumptions used in the
valuation models:
Fair value at grant date £0.0097 - £0,0104
Exercise price £0.02
Share price at grant date £0.0215
Annual share price volatility (weighted average) 62%
Risk free rate 0.1%
Expected life 4 years
The annualised volatility in the share price was determined using the
historical volatility of Woodbois Limited and other listed companies in
similar businesses over a time period in line with the simulation period. A
monthly volatility of 18.0% was used in the simulation (annual volatility of
62%).
Reconciliation of the total Share Options and LTIP's in issue:
Total options Weighted average strike price (Pence)
As at 31 December 2020 144,500,000 2p
Forfeited during the financial year (30,500,000) (2p)
As at 31 December 2021 114,000,000 2p
Issue of LTIP's 38,000,000 1p
Exercised during the financial year (Note 18) (2,000,000) 2p
As at 31 December 2022 150,000,000 1.75p
The following charge has been recognised in the current financial year:
2022 2021
$000 $000
AT 1 JANUARY 435 968
Reserve transfer for forfeitures - (766)
Share options exercised (51) -
Share based payment expense 418 233
AT 31 DECEMBER 802 435
22. Reclassification of foreign currency translation differences on
deregistered entities
The Group formally completed the deregistration of three dormant entities
located in Tanzania. These three entities include Wami Agriculture Co.
Limited, Magole Agriculture Limited and Milama processing Company Limited.
As required by IFRS, the Group reclassified the foreign currency translation
differences that arose on historical consolidation of those entities ($1.5
million) from the FCTR (equity) to profit or loss.
23. RELATED PARTY TRANSACTIONS AND Related party balances
related party balances
2022 2021
$000 $000
Loan from Rhino Ventures (2,162) -
Loan from Lombard Odier (1,022) -
Amount due to H. Ghossein, a director - (340)
Contingent acquisition liability due to H. Ghossein, a director re purchase of - (250)
WoodBois International ApS in 2017
AT 31 DECEMBER (3,184) (590)
40,000,000 warrants were issued to Lombard Odier in January 2019, exercisable
at 8p before 1 April 2023.
Trading transactions
During the year the Group companies entered into the following transactions
with related parties:
2022 2022 2021 2021
Transactions Balance at 31 December Transactions Balance at 31 December
in year
in year
$000 $000 $000 $000
Loans to subsidiary undertakings 14,364 17,304 11,985 2,940
Transactions with key management personnel
The Group's key management personnel comprised the following:
2022 Short-term employment benefits
Salaries, fees & national insurance contributions Benefits Total
$000 $000 $000
Directors
P Dolan 200 - 200
H Ghossein * 190 38 228
F Tonetti (Resigned 16 April 2022) 100 1 100
C Geddes ** 200 - 200
G Thomson 62 - 62
D Rothschild 50 - 50
H Turcan *** (Resigned 17 October 2022) - - -
802 39 841
*Excludes deferred acquisition payments made during the year (NOTE 23)
** Paid through a service company
*** H Turcan was a representative of Lombard Odier and received no fee.
All of the above directors' remunerations exclude national insurance
contributed by the employer.
2021 Short-term employment benefits
Salaries, fees & national insurance contributions Benefits Total
$000 $000 $000
Directors
P Dolan 200 - 200
H Ghossein* 220 42 262
F Tonetti 69 1 70
C Geddes ** 200 - 200
G Thomson 69 - 69
D Rothschild 9 - 9
H Turcan *** - - -
767 43 810
*Excludes deferred acquisition payments made during the year directly to or to
companies owned and controlled by H Ghossein ($0.25m).
** Paid through service companies
*** H Turcan was a representative of Lombard Odier and received no fees.
All of the above directors' remunerations exclude national insurance
contributed by the employer.
24. Events occurring after the reporting date
· Treasury shares
In January 2023 following a final adjustment in relation to the 2017 purchase
of Woodbois International Aps, the Company has received approximately 19
million ordinary voting shares which have been taken into Treasury.
· £3 million placing and appointment of Joint Broker
On 13 March 2023 the Company announced a placing of 250 million Ordinary
Voting Shares, of 1p each, generating net proceeds of £2.85 million
(approximately $3.4 million). The placing price was 1.2p per New Ordinary
Share.
Novum Securities Limited acted as broker and placing agent in respect of the
fundraise which was to new institutional and other investors. The placing
shares represent 10 per cent of the existing issued Ordinary Share Capital of
the Company prior to the fundraise. Proceeds of the Placing will be used for
general working capital purposes.
Following admission, the Company's total number of Ordinary Shares in issue
will become 2,739,988,873 and this will consisted of 2,485,850,726 Voting
Ordinary Shares, 19,138,147 Treasury Shares and 235,000,000 Non-Voting
Ordinary Shares.
On 11 April 2023, the Company announced that it had been conditionally awarded
the first 40-year land lease for a voluntary carbon credit afforestation
project of up to 50,000 hectares by the Gabonese government. On completion,
expected in the coming months, the Company will commence a 4-year, 2,000
hectare pilot programme to demonstrate the reforestation potential of the
land. The project will be designed to deliver high quality carbon and
biodiversity credits. The Company estimates that the project has the
potential to generate more than 30 million carbon credits over its 40-year
life cycle with the expectation that the first credits are to be issued in
2028. The Gabonese government will be entitled to 20% of the carbon credits
generated over the lifetime of the project. External funding will be needed
for the pilot programme which is estimated to cost $5m. The Company is
currently examining a number of possible funding possibilities for this
project and the optimum funding structure thereof.
· Repayment of Lombard Odier loan
On 11 April 2023, the Company repaid $0.3m capital plus interest of the loan
owing to Lombard Odier (see note 16). The balance ($0.7m capital plus
interest) is due to be paid in full during June 2023.
· Termination of $6m working capital facility
On 19 April 2023, the Company announced that Woodgroup Aps, a wholly owned
subsidiary of the Company, had received a notice from a Danish bank, that it
was terminating a $6 million debt facility. The $6m facility was fully
utilised and had an ancillary account with a cash balance of $3.1 million. The
bank had a floating charge against the assets of Woodgroup ApS and have offset
this $3.1 million in partial repayment of the facility. The reason cited by
the bank for terminating the facility was that Woodgroup ApS generated a loss
in Q1 2023. The bank believed that, as a consequence, the circumstances of
Woodgroup ApS have changed significantly to their detriment. Management did
not agree with the bank's conclusion and, whilst acknowledging the poor
performance in Q1, believed the Company had been well placed to deliver a very
positive performance for the remainder of the year. As part of the notice
the bank also requested that Woodgroup ApS present a plan for the repayment of
the outstanding $2.9 million of the Facility. As reported by the Company on
6 June 2023, the Company has reached an agreement with Sydbank under which the
outstanding balance of c.$2.8m will be repaid by no later than 29 December
2023. The Company has undertaken to repay approximately $145k on each of 15
June and 30 June 2023. Thereafter a further $145k is to be paid in the middle
of each subsequent month with any additional lump sums being paid to ensure
repayment of the total outstanding balance and interest by the final repayment
date. There are also financial incentives in place if the Group settles the
outstanding balance earlier in the year. Existing security arrangements, per
the original loan facility agreement, will remain in place until the line of
credit is fully settled.
· Refinancing
Since the termination of the above line of credit by the bank, the Company has
had to operate with an emphasis on cash realisation and limiting new
liabilities.
The Company continues to assess alternative funding sources and will update
the market in due course once any such agreement has been reached. The Company
is also working on the potential deferment of c.$1.5m of debts, which fall due
at the end of June. Whilst the Directors are confident that the Company will
obtain alternative funding in the coming weeks, should they fail to do so, the
Company may be reliant on the deferment of these near-term creditors in order
to continue to trade. The Company has convened a General Meeting to be held
on 16 June 2023 for shareholders to vote on resolutions that will provide the
Company with important flexibility to issue ordinary shares quickly, if it is
considered to be in the best interests of stakeholders.
The circular convening the General Meeting set out that a further result of
the termination, the Company's share price has fallen below its nominal value
of 1p. As the Company's Articles of Association prohibit the issuance of
shares at a discount to nominal value, there is a need to re-designate the
nominal value. The directors have proposed a resolution to reduce the
nominal value of the ordinary shares of the Company, but with no change to the
number of ordinary shares in issue, as well as resolutions for the renewal and
widening of the waiver of pre-emptive rights to enable the company to meet the
exceptional circumstances set out above.
The Company has urged shareholders to vote in favour of all resolutions.
25. ULTIMATE PARENT COMPANY
At 31 December 2022, the directors do not believe that there was an ultimate
controlling party.
1 Non-IFRS measure. Earnings before interest, tax, depreciation,
amortization, share based payments & other non-cash items. Please see
financial review for EBITDAS reconciliation
2 According to valuation principles as required by International Accounting
Standards 41 ("IAS41"), see note 11
3 Earnings before interest, tax, depreciation, amortization, share based
payments and other non-cash items
4 Foreign currency translation differences
5 Cash, plus Inventory, plus Receivables, less Trade Payables.
6 Issued Share Capital of 2,490m shares comprises of 2,255m Voting Shares
and 235m Non-Voting Shares.
7 Paid in GBP at a fixed rate of £150,000 pa
8 C Geddes services are provided through a service company, Pomona
9 No fees are paid directly to Henry Turcan or Lombard Odier for his
services
10 Foreign currency translation reserve
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