Notes to the consolidated financial statements

 

1.    GeNERAL INFORMATION

 

Agriterra is incorporated and domiciled in Guernsey, the Channel Islands, with registered number 42643. Further details, including the address of the registered office, are given on page 46. The nature of the Group's operations and its principal activities are set out in the Directors' report. A list of the investments in subsidiaries and associate companies held directly and indirectly by the Company during the year and at the year-end, including the name, country of incorporation, operation and ownership interest is given in note 3.

 

The reporting currency for the Group is the US Dollar ('$' or 'US$') as it most appropriately reflects the Group's business activities in the agricultural sector in Africa and therefore the Group's financial position and financial performance.

 

The financial statements have been prepared in accordance with International Accounting Standards as adopted by United Kingdom.

The financial statements have been prepared on the historical cost basis, except for the following items, which are measured at on alternative basis on each reporting date:

Items	Measurement basis
Biological assets	Fair value
Property, plant and equipment - Land and building	Subsequent measured at revalued amount- i.e. fair value at the date of revaluation less subsequent depreciation and impairment losses.

 

 

2.    ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

Adoption of new and revised Standards

During the current year, the Group has adopted all of the new and revised standards and interpretations issued by the IASB and the IFRS-IC that are relevant to its operations and effective for annual reporting periods beginning on 1 April 2021. The revised standards and interpretations has not resulted in material changes to the Group's accounting policies.

The following new and amended standards are not expected to have a significant impact on the Group's separate financial statements in the future being FY 2023.

·    Onerous Contracts: Cost of Fulfilling a Contract (Amendments to IAS 37).

·    COVID-19: Related Rent Concessions (Amendment to IFRS 16).

·    Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).

·    Reference to Conceptual Framework (Amendments to IFRS 3).

·    Classification of Liabilities as Current or Non-current (Amendments to IAS 1).

·    Insurance Contracts and amendments to Insurance Contracts (Amendment to IFRS 17)

·    Disclosure of Accounting policies (Amendment to IAS 1 and IFRS Practice Statement 2).

·    Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

 

3.    SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared on a historical cost basis, except for certain financial instruments, biological assets and share based payments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets acquired. The principal accounting policies adopted are set out below in this note.

 

Going concern

 

The Company has prepared forecasts for the Group's ongoing businesses covering the period of 12 months from the date of approval of these financial statements. These forecasts are based on assumptions including, inter alia, that there are no significant disruptions to the supply of maize or cattle to meet its projected sales volumes and that key inputs are achieved, such as forecast selling prices and volume, budgeted cost reductions, and projected weight gains of cattle in the feedlot. They further take into account working capital requirements and currently available borrowing facilities.

 

These forecasts show that, following the debt restructuring after the period end (note 26), with active management of working capital and the timing of capital expenditure, there is sufficient headroom under the banking facilities currently available to the Group. Certain short-term facilities fall due for renewal in June 2023. The group expect to renew this financing facilities. The shareholder loan facility amounts to USD 7.9 million and was utilised to repay commercial debt and secure grain for the current year financial year.

 

The Company's focus remains on continuing to improve operational performance of the Grain and Beef divisions with emphasis on volume, cost reduction and pricing to increase gross margins.

 

Over the last 12 months, the Grain division has made significant progress in resolving the operating challenges to improve operating margins by controlling the cost of maize and improving mealie meal extraction, but was unable to achieve budgeted sales volumes which affected the overall performance of the Grain division. A low positive EBIDTA of US$5355,000 was achieved and the division was burdened with high finance costs. A loss of US$1.4 million was incurred in the Grain division. With the divisions debt restructured after the year end, the current year Grain division strategy is based on continuing the improved operational performance achieved in prior year.

 

The Beef division has shown resilient performance even though it was operating at less than 40% capacity. Most of the costs are fixed in nature and efficiencies can only be improved by ramping up volume. The Beef division will be supported with US$0.3 million to ramp up feedlot processing in the next financial year. Beef division is expected to at least break even by 31 March 2023, processing at least 800 animals per month.

 

Snax division is expected to continue to penetrate the market. Sales revenue increased to US$1.4 million and demand is strong in the market. A new extruder will be installed to increase the production capacity of Snax division. After the installation of the new extruder, Snax division will have the capability to generate US$0.5 million in sales per month.

 

Corporate overheads are forecast to be consistent with the current run rate.

 

These divisional forecasts for FY-23 show a significant improvement in operating performance as compared to that reported for the year ended 31 March 2022. However, there can be no certainty that these plans will be successful, and the forecasts are sensitive to small adverse changes in the operations of the divisions. As set out in notes 18 and 21 the Group is funded by a combination of short and long-term borrowing facilities. The group has repaid $6.3m of overdraft facilities after year end and the Group is required to make $2.4m of repayments in respect of the bank loan instalments amount together with principal on finance leases of $115,000. As set out in note 26, the Group debt has been refinanced since the year end. 

 

Based on the above, whilst there are no contractual guarantees, the directors are confident that the existing and new financing will be available to the Group. The directors, with the operating initiatives already in place and funding options available are confident that the Group will achieve its cash flow forecasts. Therefore, the directors have prepared the financial statements on a going concern basis.

 

The forecasts show that the Group needs to achieve its operating targets in order to remain within its existing bank and shareholder loan facilities and to meet its commitments as they fall due. These conditions and events indicate the existence of material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern and the Group companies may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of business. The auditors make reference to going concern in their audit report by way of a material uncertainty. These financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

 

Basis of consolidation

 

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

 

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

 

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which controls ceases.

 

Intra-Group transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

Interest in equity accounted investees

The Group's interest in equity accounted investees comprise interest in a joint venture.

 

A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement rather than rights to its assets and obligations for its liabilities.

 

 Interest in Joint Ventures are accounted for using the equity method. There are initially recognised at cost, which include transaction cost. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and OCI of the equity accounted investees, until the date on which joint control ceases.

 

As at 31 March 2022, the Company held equity interests in the following undertakings:

 

 

 

 

Direct investments

 

	Proportion held of equity instruments	Country of incorporation and place of business	Nature of business
Subsidiary undertakings
Agriterra (Mozambique) Limited	100%	Guernsey	Holding company

 

Indirect investments of Agriterra (Mozambique) Limited

 

	Proportion held of equity instruments	Country of incorporation and place of business	Nature of business
Subsidiary undertakings
DECA - Desenvolvimento E Comercialização Agrícola Limitada	100%	Mozambique	Grain
Compagri Limitada	100%	Mozambique	Grain
Mozbife Limitada	100%	Mozambique	Beef
Carnes de Manica Limitada	100%	Mozambique	Dormant
Aviação Agriterra Limitada	100%	Mozambique	Dormant
Joint venture
DECA Snax Limitada	50%	Mozambique	Snax

 

Foreign currency

 

The individual financial statements of each company in the Group are prepared in Mozambican Metical, the currency of the primary economic environment in which it operates (its 'functional currency'). The consolidated financial statements are presented in US Dollars.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the year, in which case exchange rates at the date of transactions are used. Exchange differences arising from the translation of the net investment in foreign operations and overseas branches are recognised in other comprehensive income and accumulated in equity in the translation reserve. Such translation differences are recognised as income or expense in the year in which the operation or branch is disposed of.

 

The following are the material exchange rates applied by the Group:

 

	Average Rate			Closing Rate
	2022	2021		2022	2021
Mozambican Metical: US$	66.31	68.12		63.83	68.78

 

Operating segments

 

The Chief Operating Decision Maker is the Board. The Board reviews the Company's internal reporting in order to assess performance of the business. Management has determined the operating segments based on the reports reviewed by the Board which consider the activities by nature of business.

 

Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, value added taxes and other sales related taxes.

 

Performance obligations and timing of revenue recognition:

All of the Group's revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer. This is generally when the goods are collected by or delivered to the customer. There is limited judgement needed in identifying the point control passes once physical delivery of the products to the agreed location has occurred, the Group no longer has physical possession, usually it will have a present right to payment. Consideration is received in accordance with agreed terms of sale.

 

Determining the contract price:

All of the Group's revenue is derived from fixed price lists and therefore the amount of revenue to be earned from each transaction is determined by reference to those fixed prices.

 

Allocating amounts to performance obligations:

For most sales, there is a fixed unit price for each product sold. Therefore, there is no judgement involved in allocating the price to each unit ordered.

 

There are no long-term contracts in place. Sales commissions are expensed as incurred. No practical expedients are used.

 

Operating loss

 

Operating loss is stated before investment revenues, other gains and losses, finance costs and taxation.

 

Borrowing costs

 

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial year of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The Group did not incur any borrowing costs in respect of qualifying assets in any year presented.

 

All other borrowing costs are recognised in profit or loss in the year in which they are incurred.

 

Share based payments

 

The Company issues equity-settled share-based payments to certain employees of the Group. These payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant and the value is expensed on a straight-line basis over the vesting year, based on the Company's estimate of the shares that will eventually vest and adjusted for non-market based vesting conditions. 

 

Fair value is measured by use of the Black Scholes model. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

Employee benefits

 

Short-term employee benefits

 

Short-term employee benefits include salaries and wages, short-term compensated absences and bonus payments. The Group recognises a liability and corresponding expense for short-term employee benefits when an employee has rendered services that entitle him/her to the benefit.

 

Post-employment benefits

 

The Group does not contribute to any retirement plan for its employees. Social security payments to state schemes are charged to profit and loss as the employee's services are rendered.

 

Leases

 

The Group as a lessee.

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

•       Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

•       Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

•       The amount expected to be payable by the lessee under residual value guarantees;

•       The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

•       Payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

•       The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

•       The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

•       A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group did not make any such adjustments during the periods presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the consolidated statement of financial position.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in operating expenses in profit or loss.

 

Taxation

 

The Company is resident for taxation purposes in Guernsey and its income is subject to income tax, presently at a rate of zero per cent per annum.  The income of overseas subsidiaries is subject to tax at the prevailing rate in each jurisdiction.

 

The income tax expense for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity when tax is recognised in other comprehensive income or directly in equity as appropriate. Taxable profit differs from accounting profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

 

Current tax expense is the expected tax payable on the taxable income for the year. It is calculated on the basis of the tax laws and rates enacted or substantively enacted at the balance sheet date and includes any adjustment to tax payable in respect of previous years. Deferred tax is calculated using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the asset can be utilised. This requires judgements to be made in respect of the availability of future taxable income.

The Group's deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the year when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in subsidiaries, branches and joint ventures where the Group is able to control the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Property, plant and equipment

 

Recognition

Items of property, plant and equipment are stated at historical purchase cost. Cost includes expenditure that is directly attributable to the acquisition. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

 

Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

 

Subsequent measurement

Following initial recognition at cost, items of land and buildings are subsequently measured using the revaluation model being the fair value at the date of revaluation less any subsequent depreciation and subsequent impairment losses. The revaluation model is only used when fair value can be reliably measured. Revaluations are made regularly enough to ensure that at any reporting date the carrying amount does not differ materially from the fair value. Revaluations are performed by independent sworn valuators. When an item of property, plant and equipment is revalued, the entire class of property, plant, and equipment to which the asset belongs is revalued. Only land and buildings are subsequently valued using the revaluation model and all others are valued at cost model.

 

Any revaluation surplus is credited to revaluation reserve as part of other comprehensive income, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the profit or loss, in which case the increase is recognized in the profit or loss. A revaluation deficit is recognized in profit or loss, except to the extent that it offsets an existing surplus on the same recognized in the asset revaluation reserve. The revaluation reserve is realized over the period of the useful life of the property by transferring the realized portion from the revaluation reserve to retained earnings.

 

Depreciation

Depreciation is charged on a straight-line basis over the estimated useful lives of each item, as follows:

 

Land and buildings:
Land	Nil
Buildings and leasehold improvements	2%	-   33%
Plant and machinery	5%	-   25%
Motor vehicles	20%	-   25%
Other assets	10%	-   33%

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are determined by comparing proceeds received with the carrying amount of the asset immediately prior to disposal and are included in profit and loss.

 

Intangible assets

               

Intangible assets comprise investment in management information and financial software.  This is amortised at 10% straight line.

 

Impairment of property, plant and equipment and intangible assets

               

At each balance sheet date, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised initially against amounts included in the revaluation reserve in respect of the asset and subsequently in profit and loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

 

Biological assets

 

Consumer biological assets, being the beef cattle herd, are measured in accordance with IAS 41, 'Agriculture' at fair value less costs to sell, with gains and losses in the measurement to fair value recorded in profit and loss. Breeding cattle, comprising bulls, cows and heifers are expected to be held for more than one year, and are classified as non-current assets. The non-breeding cattle comprise animals that will be grown and sold for slaughter and are classified as current assets.

 

Cattle are recorded as assets at the year-end and the fair value is determined by the size of the herd and market prices at the reporting date.

 

Cattle ceases to be a biological asset from the point it is slaughtered, after which it is accounted for in accordance with the accounting policy below for inventories.

Forage crops are valued in accordance with IAS 41, 'Agriculture' at fair value less costs to harvest. As there is no ready local market for forage crops, fair value is calculated by reference to the production costs of previous crops. The cost of forage is charged to profit or loss over the year it is consumed.

 

Inventories

 

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

 

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

 

Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income ("FVTOCI") or at fair value through profit or loss ("FVPL") depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the financial asset.

 

A loss allowance for expected credit losses is determined for all financial assets, other than those at FVPL, at the end of each reporting period. The Group applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime expected credit loss provision. The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history, payments made subsequent to year-end and prior to reporting, past default experience and the impact of any other relevant and current observable data. The Group applies a general approach on all other receivables classified as financial assets. The general approach recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition.

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or have expired.

 

Trade and other receivables

 

Trade receivables are accounted for at amortised cost. Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate expected credit loss allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material. Other receivables are accounted for at amortised cost and are stated at their nominal value as reduced by appropriate expected credit loss allowances.

 

Financial liabilities

 

The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.

 

All purchases of financial liabilities are recorded on trade date, being the date on which the Group becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group's financial liabilities approximate to their fair values.

 

The Group's financial liabilities consist of financial liabilities measured at amortised cost and financial liabilities at fair value through profit or loss.

 

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

 

Borrowings

 

Borrowings are included as financial liabilities on the Group balance sheet at the amounts drawn on the particular facilities net of the unamortised cost of financing. Interest payable on those facilities is expensed as finance cost in the period to which it relates.

 

Trade and other payables

 

Trade and other payables are initially recorded at fair value and subsequently carried at amortised cost.

 

Fair value measurement

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Company.

 

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

For all other financial instruments not traded in an active market, the fair value is determined by using valuation techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e. using recent arm's length market transactions adjusted as necessary and reference to the current market value of another instrument that is substantially the same) and the income approach (i.e. discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible).

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing the categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting year.

 

4.    CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

 

In the application of the Group's accounting policies which are described in note 3, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years. The effect on the financial statements of changes in estimates in future years could be material on property plant and equipment (Note 13), and biological assets (Note15).

 

Impairment and revaluation of land and buildings

 

Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment of Assets. Reported losses in the Beef and Grain divisions were considered to be indications of impairment and a formal impairment review was undertaken to review whether the carrying amounts of non-current assets are greater than the recoverable amount.

 

The impairment reviews are sensitive to various assumptions, including the expected sales forecasts, cost assumptions, rent per square metre, capital requirements, and discount rates among others depending on how the recoverable amount is determined. The forecasts of future cash flows were derived from the operational plans in place to address the requirement to increase both volumes and margins across the two divisions. Real commodity prices were assumed to remain constant at current levels.

 

As at 31 March 2021, the Group engaged an Independent real estate valuer to compute the fair value of land and buildings which also assisted in determining the recoverable amount whilst revaluing non-current assets. The Independent valuer used Royal Institute of Chartered Surveyors (RICS) and International Financial Reporting Standards to determine the fair value of land and buildings. Non-current assets fair value was increased to $23.4 million from a carrying amount of $4.9 million. Based on the assessment performed by the independent real estate valuers at 31 March 2021, and the improved operational outlook, management have concluded that, at 31 March 2022, non-current assets are not impaired as the recoverable value of non-current assets is higher than and or equivalent to the carrying amount of the assets.

 

No impairments were recorded in the year ended 31 March 2022 or the year ended 31 March 2021. The carrying amount of non-current assets is US$25.1million (2021: $24.0 million).

 

Biological assets

Cattle are accounted for as biological assets and measured at their fair value at each balance sheet date. Fair value is based on the estimated market value for cattle in Mozambique of a similar age and breed, less the estimated costs to bring them to market, converted to US$ at the exchange rate prevailing at the year end. Changes in any estimates could lead to the recognition of significant fair value changes in the consolidated income statement, or significant changes in the foreign currency translation reserve for changes in the Metical to US$ exchange rate.

 

The herd may be categorised as either the breeding herd or slaughter herd, depending on whether it was principally held for reproduction or slaughter. The value of the herd held for slaughter disclosed as a current asset was $0.5m (31 March 2021: $0.5m).

 

 

 

 

5.    Segment reporting

 

The Board considers that the Group's operating activities comprise the segments of Grain, Snax and Beef and which are undertaken in Africa. In addition, the Group has certain other unallocated expenditure, assets and liabilities, either located in Africa or held as support for the Africa operations.

 

Segment revenue and results

 

The following is an analysis of the Group's revenue and results by operating segment:

 

Year ending 31 March 2022	Grain		Beef		Snax*		Unallo-cated		Elimina-tions		Total
	US$000		US$000		US$000		US$000		US$000		US$000
Revenue
External sales(2)	7,118		3,159		-		-		-		10,277
Inter-segment sales(1)	226		-		-		-		(226)		-
	7,344		3,159		-		-		(226)		10,277
Segment results
- Operating loss	(55)		(444)		-		(429)		-		(928)
- Interest expense	(1,548)		(79)		-		-		-		(1,627)
- Other gains and losses	88		19		-		-		-		107
- Share of profit in equity-accounted investees	-		-		55		-		-		55
Loss before tax	(1,515)		(504)		55		(429)		-		(2,393)
Income tax	111		12		-		-		-		123
Loss after tax	(1,404)		(492)		55		(429)		-		(2,270)

 

^* The Snax division is equity accounted for as a Joint venture. Its income statement is set out in note 23.

 

 

Year ending 31 March 2021	Grain		Beef		Snax1		Unallo-cated		Elimina-tions		Total
	US$000		US$000		US$000		US$000		US$000		US$000
Revenue
External sales(2)	11,061		3,189		-		-		-		14,250
Inter-segment sales(1)	309		-		-		-		(309)		-
	11,370		3,189		-		-		(309)		14,250
Segment results
- Operating profit / (loss)	275		(970)		-		(389)		-		(1,084)
- Interest expense	(1,071)		(136)		-		-		-		(1,207)
- Other gains and losses	54		43		-		-		-		97
Loss before tax	(742)		(1,063)		-		(389)		-		(2,194)
Income tax	-		-		-		-		-		-
Loss after tax	(742)		(1,063)		-		(389)		-		(2,194)

 

(1)	Inter-segment sales are charged at prevailing market prices.
(2)	Revenue represents sales to external customers and is recorded in the country of domicile of the Company making the sale. Sales from the Grain and Beef divisions are principally for supply to the Mozambique market.

 

The segment items included in the consolidated income statement for the year are as follows:

 

Year ending 31 March 2022	Grain		Beef		Snax		Unallo-cated		Elimina-tions		Total
	US$000		US$000		US$000		US$000		US$000		US$000
Depreciation and amortisation	502		359		-		13		-		874

 

 

 

Year ending 31 March 2021	Grain		Beef		Snax		Unallo-cated		Elimina-tions		Total
	US$000		US$000		US$000		US$000		US$000		US$000
Depreciation and amortisation	181		380		-		13		-		574

 

 

Segment assets, liabilities and capital expenditure

 

Segment assets consist primarily of property, plant and equipment, biological assets, inventories, trade and other receivables and cash and cash equivalents. Segment liabilities comprise operating liabilities, including an overdraft financing facility in the Grain segment, and bank loans and overdraft financing facilities in the Beef segment.

 

Capital expenditure comprises additions to property, plant and equipment.

 

The segment assets and liabilities at 31 March 2022 and capital expenditure for the year then ended are as follows:

 

	Grain		Beef		Snax		Unallocated		Total
	US$000		US$000		US$000		US$000		US$000
Assets	23,496		5,133		56		10		28,695
Liabilities	(15,838)		(973)		-		(204)		(17,015)
Capital expenditure	65		14		-		-		79

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 

	Assets		Liabilities
	US$000		US$000
Segment assets and liabilities	28,685		(16,811)
Unallocated:
Intangible asset	-		-
Other receivables	10		-
Cash and cash equivalents	-		-
Accrued liabilities	-		(204)
	28,695		(17,015)

 

The segment assets and liabilities at 31 March 2021 and capital expenditure for the year then ended are as follows:

	Grain		Beef		Snax		Unallocated		Total
	US$000		US$000		US$000		US$000		US$000
Assets	21,495		5,883		1		22		27,401
Liabilities	(12,518)		(1,729)		-		(136)		(14,383)
Capital expenditure	48		29		-		-		77

 

Segment assets and liabilities are reconciled to Group assets and liabilities as follows:

 

	Assets		Liabilities
	US$000		US$000
Segment assets and liabilities	27,379		(14,246)
Unallocated:
Intangible asset	14		-
Other receivables	8		-
Cash and cash equivalents	-		-
Accrued liabilities	-		(137)
	27,401		(14,383)

 

Key performance Indicators

 

The Board considers that earnings before interest, tax, depreciation and amortisation ("EBITDA") is a key performance indicator in measuring operational performance.  EBITDA is a non IFRS measure and alternative performance measure for the group which is calculated as follows:

 

Year ending 31 March 2022	Grain		Beef		Snax		Unallocated		Total
	US$000		US$000		US$000		US$000		US$000
(Loss) / profit before tax	(1,515)		(504)		55		(429)		(2,393)
- Interest expense	1,548		79		-		-		1,627
- Depreciation and amortisation charge	502		359		-		13		874
- Share of profit in equity-accounted investees	-		-		(55)		-		(55)
EBITDA	535		(66)		-		(416)		53

 

Year ending 31 March 2021	Grain		Beef		Snax		Unallocated		Total
	US$000		US$000		US$000		US$000		US$000
Loss before tax	(742)		(1,063)		-		(389)		(2,194)
- Interest expense	1,071		136		-		-		1,207
- Depreciation and amortisation charge	181		380		-		13		574
EBITDA	510		(547)		-		(376)		(413)

 

Significant customers

In the year ended 31 March 2022, two largest customers of the Grain segment generated revenue of $3.2 million (31 March 2021: $3.1m) constituting 44% (31 March 2021: 28%) of the Grain division's revenue. The two largest customers of the Beef segment generated revenue of $0.2m (31 March 2021: $1 million) amounting to 9% (31 March 2021:30%) of the Beef division's revenue.

 

6.    Operating loss

 

Operating loss has been arrived at after charging / (crediting):

	Year ended		Year ended
	31 March 2022		31 March 2021
	US$000		US$000
Depreciation of property, plant and equipment (see note 13)	831		534
Amortisation of intangible asset (see note 14)	43		40
Profit on disposal of property, plant and equipment	(20)		(47)
Net foreign exchange (gain)/loss	(1)		615
Staff costs (see note 8)	865		743

 

7.    Auditors Remuneration

 

Amounts payable to the auditors and their associates in respect of audit services are as follows:

		Year Ended		Year Ended
		31 March 2022		31 March 2021
		US$000		US$000
Fees payable to the Company's previous auditor and their associates
Overruns in respect of prior years		14		-
		14		-
Fees payable to the Company's auditor and their associates
For the audit of the Company's accounts		56		53
For the audit of the Company's subsidiaries		37		44
Total audit fees		93		97

 

 

Other than as disclosed above, the Company's auditor and their associates have not provided additional services to the Company.

 

 

 

 

8.    Staff costs

 

The average monthly number of employees (including executive Directors) employed by the Group for the year was as follows:

 

	Year  ended		Year ended
	31 March 2022		31 March 2021
	Number		Number
Office and Management	27		27
Operational	347		432
	374		459

 

Their aggregate remuneration comprised:

	Year  ended		Year  ended
	31 March 2022		31 March 2021
	US$000		US$000
Wages and salaries	775		683
Social security costs	90		60
	865		743

 

9.    REMUNERATION OF DIRECTORS

 

					Year ended 31 March 2022 US$000		Year ended 31 March 2021 US$000
CSO Havers					27		25
NWH Clayton					8		8
HBW Rudland					8		8
GR Smith					8		8
SML Zandamela					8		8
					59		57

 

In addition, N Clayton received $Nil (2021: $4,239) in respect of consultancy services to the Company. All remuneration relates to short term benefits. Directors are considered to be key management personnel.

 

10.  Finance costs

	Year  Ended		Year Ended
	31 March 2022		31 March 2021
	US$000		US$000
Interest expense on bank borrowings and overdrafts	(1,556)		(1,128)
Interest expense on leases	(71)		(79)
Net finance costs	(1,627)		(1,207)

 

 

11.  Taxation

	Year Ended		Year Ended
	31 March 2022		31 March 2021
	US$000		US$000
Current tax expense
Current tax	-		-
Deferred tax	123		-
	123		-
Effective tax reconciliation
Loss before tax from continuing activities	(2,393)		(2,194)
Tax credit at the Mozambican corporation tax rate of 32%	(765)		(702)
Tax effect of expenses that are not deductible in determining taxable profit	42		578
Tax effect of (income not taxable) or losses not allowable	18		-
Tax effect of net losses not recognised in overseas subsidiaries (net of effect of different rates)	582		124
Tax expense	(123)		-

 

The tax reconciliation has been prepared using a 32% tax rate, the corporate income tax rate in Mozambique, as this is where the Group's principal assets of its continuing operations are located.  Losses amounting to US$ 4 million have been carried forward (2021: US$ 3.5 million).

 

The Company is resident for taxation purposes in Guernsey and its income is subject to Guernsey income tax, presently at a rate of zero percent per annum (2021: zero percent per annum). No tax is payable for the year. Deferred tax has not been provided for, as brought forward tax losses are not recoverable under the Income Tax (Zero 10) (Guernsey) Law, 2007 (as amended).

 

Deferred tax

 

Movement in deferred tax balances

 

	Net balance as at 1 April 2021		Recognised in OCI		Recognised in P/L		Foreign exchange gain or loss		Net balance as at 31 March 2022
	US$000		US$000		US$000		US$000		US$000
Property, plant and equipment	(5,912)		-		123		(454)		(6,243)
Tax losses carried forward	-		-		-		-		-
Total	(5,912)		-		123		(454)		(6,243)

 

 

	Net balance as at 1 April 2020		Recognised in OCI		Recognised in P/L		Foreign exchange gain or loss		Net balance as at 31 March 2021
	US$000		US$000		US$000		US$000		US$000
Property, plant and equipment	-		(5,912)		-		-		(5,912)
Tax losses carried forward	-		-		-		-		-
Total	-		(5,912)		-		-		(5,912)

 

 

Deferred tax liability is resulting from revaluation gain on land and buildings amounting to $18,475,127 recognised using an income tax rate of 32% which is prevailing in Mozambique. $123,000 of the deferred tax has been realised during the year.

 

The Group has not recognised any tax credits for the year ended 31 March 2022 (2021: $nil). The Group has operations in overseas jurisdictions where it has incurred taxable losses which may be available for offset against future taxable profits amounting to approximately $12,621,884 (2021: $10,803,610). No deferred tax asset has been recognised for these tax losses and other deductible timing differences as the requirements of IAS 12, 'Income taxes', have not been met. 

 

 

 

 

12.  earnings per share

	Year ended		Year ended
	31 March 2022		31 March 2021
	US$000		US$000
The calculation of the basic and diluted earnings per share is based on the following data:
Loss for the year for the purposes of basic and diluted earnings per share attributable to equity holders of the Company	(2,270)		(2,194)
Weighted average number of Ordinary Shares for the purposes of basic and diluted earnings per share	21,240,618		21,240,618
Basic and diluted earnings per share - US cents	(10.7)		(10.3)
Basic and diluted earnings per share from continuing activities - US cents	(10.7)		(10.3)

 

The Company has issued options over ordinary shares which could potentially dilute basic loss per share in the future. There is no difference between basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive. Details of options are set out in note 24.

 

13.  Property, plant and equipment

 

	Land and buildings		Plant and machinery		Motor vehicles		Other Assets		Total
	US$000		US$000		US$000		US$000		US$000
Cost
At 1 April 2020	8,135		5,153		1,302		66		14,656
Additions	-		38		6		33		77
Revaluation	15,451		-		-		-		15,451
Disposals	-		(134)		(40)		-		(174)
Exchange rate adjustment	(158)		(73)		(25)		(7)		(263)
At 31 March 2021	23,428		4,984		1,243		92		29,747
Additions	-		58		-		21		79
Disposals	-		-		(142)		-		(142)
Exchange rate adjustment	1,818		367		90		29		2,304
At 31 March 2022	25,246		5,409		1,191		142		31,988
Accumulated depreciation and impairment
At 1 April 2020	2,801		4,617		1,142		47		8,607
Charge for the year	280		168		58		28		534
Revaluation	(3,024)		-		-		-		(3,024)
Disposals	-		(134)		(40)		-		(174)
Exchange rate adjustment	(57)		(85)		(23)		(5)		(170)
At 31 March 2021	-		4,566		1,137		70		5,773
Charge for the year	601		144		57		29		831
Disposals	-		-		(142)		-		(142)
Exchange rate adjustment	24		339		86		26		475
At 31 March 2022	625		5,049		1,138		125		6,937
Net book value
31 March 2022	24,621		360		53		17		25,051
31 March 2021	23,428		418		106		22		23,974

 

In prior year, the Group revised the accounting policy for land and buildings from cost model to revaluation model. In accordance with the International Financial Reporting Standards, such revaluation exercises should be performed regularly. The Group adopted a policy to revalue land and buildings after every 3 years.

 

The Group revalued the land and buildings by $18,475,127 recognised on land and buildings in Mozambique value for DECA, Compagri and Mozbife amounting to $12,094,969, $4,531,025 and $1,849,133 respectively. Land and buildings accumulated depreciation amounting to $3,024,058 was offset as a result of the revaluation. Property, plant and equipment with a carrying amount of $20,832,740 (2021: $21,153,034) have been pledged to secure the Group's bank overdrafts and loans (note 18). The Group is not allowed to pledge these assets as security for other borrowings or sell them to another entity.

 

For the year ended 31 March 2022, a depreciation charge of $831,000 (2021: $534,000) has been included in the consolidated income statement within operating expenses. Certain motor vehicles and equipment have been purchased with finance leases. Included in property plant and equipment are right-of-use-assets with a carrying value of $244,282 (2022: $386,719) and $49,883 (2021: $92,585) for machinery and motor vehicles respectively.

 

14.  Intangible Assets

									US$000
Cost
At 1 April 2020									126
Additions									9
Exchange rate adjustment									(2)
At 31 March 2021									133
Additions									-
Exchange rate adjustment									7
At 31 March 2022									140
Accumulated amortisation
At 1 April 2020									34
Charge for the year									40
Exchange rate adjustment									-
At 31 March 2021									74
Charge for the year									43
Exchange rate adjustment									5
At 31 March 2022									122
Net book value
31 March 2022									18
31 March 2021									59

 

Intangible assets comprise investment in management information and financial software.

 

At 31 March 2022 and 31 March 2021, the Group had no contractual commitments for the acquisition of intangible assets.

 

15.  Biological assets

 

			US$000
Fair value
At 31 March 2020			665
Purchase of biological assets			1,924
Sale, slaughter or other disposal of biological assets			(1,514)
Change in fair value of the herd			(615)
Foreign exchange adjustment			(9)
At 31 March 2021			451
Purchase of biological assets			1,606
Sale, slaughter or other disposal of biological assets			(1,630)
Change in fair value of the herd			1
Foreign exchange adjustment			35
At 31 March 2022			463

 

At 31 March 2022 and 2021, all cattle are held for slaughter. The slaughter herd has been classified as a current asset. Forage crops included in current assets are US$ 10,802 (2021: US$ Nil).

 

At 31 March 2022 the slaughter herd comprised 1,334 head (2021: 1,745), with an average weight of 283kgs (2021: 221kgs) and average value of US$339 (2021: US$259).

 

For valuation purposes, animals in the feedlot, their weight has been estimated based on their individual weigh in data at the closest weigh in date to the year end. Cattle are generally kept for periods less than 3 months before slaughter.

 

 

 

 

 

 

 

 

16.  Inventories

 

	31 March 2022		31 March 2021
	US$000		US$000
Consumables and spares	310		189
Raw materials	1,611		428
Finished goods	255		316
	2,176		933

 

During the year inventories amounting to US$6,158,016 (2021: US$10,017,225) were included in cost of sales.

 

17.  Trade and other receivables

               

	31 March 2022		31 March 2021
	US$000		US$000
Trade receivables	302		298
Other receivables	522		1,454
Prepayments	-		-
	824		1,752

 

Trade receivables

	31 March 2022		31 March 2021
	US$000		US$000
Trade receivables - gross	321		354
Loss allowance	(19)		(56)
	302		298

 

Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on the days past due.

 

 

At 31 March 2022	Current	More than 30 days	More than 60 Days	More than 90 days	Total
	US$000	US$000	US$000	US$000	US$000
Expected loss rate	0%	0%	0%	83%	6%
Gross trade receivables	239	41	18	23	321
Loss allowance	-	-	-	19	19

 

 

At 31 March 2021	Current	More than 30 days	More than 60 Days	More than 90 days	Total
	US$000	US$000	US$000	US$000	US$000
Expected loss rate	0%	0%	0%	84%	16%
Gross trade receivables	79	208	-	67	354
Loss allowance	-	-	-	56	56

 

 

 

The closing loss allowances for trade receivables as at 31 March reconcile to the opening loss allowances as follows:

 

	31 March 2022		31 March 2021
	US$000		US$000
Loss allowances at 1 April	56		350
(Decrease)/Increase in loan loss allowance recognised in profit or loss during the year	(37)		20
Receivables written off during the year as uncollectable	-		(311)
Exchange rate adjustment	-		(3)
Loss allowances at 31 March	19		56

 

Trade receivables are provided for when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 120 days past due. This is used as the basis of the ECL provision disclosed above. The Group determines the percentage based on historic trends. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.

 

Further details on the Group's financial assets are provided in note 21.

 

18.  Borrowings

	31 March 2022		31 March 2021
	US$000		US$000
Non-current liabilities
Bank loans	783		2,107
Leases	220		302
	1,003		2,409
Current liabilities
Bank loans	2,438			263
Leases	115			102
Overdraft	6,256			3,651
	8,809			4,016
	9,812			6,425

 

Bank Borrowings

 

Beef division

 

Beef division does not have any finance facilities except equipment leases as at 31 March 2022.

 

 

Grain division

 

In May 2019 the division's overdraft facility was restructured into a 240 million Metical ($3.77m) 5 year term loan with an interest rate of the Bank's prime lending rate +0.25% and a 12 month 60 million Metical ($0.94m) overdraft facility at the Bank's prime lending rate less 1.75%. On 30 September 2020, the outstanding overdraft facility was subsequently restructured into a 60 million Metical ($0.9m) 33 month term loan at the Bank's prime lending rate less 1.75%. The above mentioned facilities are from one financial institution and mature in July 2023 and are secured by land and buildings.

 

Grain division also restructured another overdraft facility amounting to 60 million Metical into a 5 year loan at Prime lending rate plus 1.5%. The facility is secured by Grain division land and buildings. At 31 March 2022, the principal outstanding on the term loans were 206 million Metical ($3.22m).

 

As at 31 March 2022, Grain division had contracted 399 million Meticals ($6.3 million) overdraft facility at Prime Lending rate less 3.75% for working capital funding maturing on 30 July 2022. The overdraft facility was secured by a Bank guarantee from Magister amounting to US$6.1 million and maize pledged value at $0.25 million. The overdraft facility was extended by 3 months and subsequently repaid 31 July 2022.

 

 

 

 

The facilities are secured as follows:

	31 March 2022		31 March 2021
	US$000		US$000
Fixed Charge
Property, plant and equipment	20,833		21,153
Floating Charge
Maize and maize product inventories	250		-
Trade receivables	-		-
	21,083		21,153

 

As further security to the bank loans and overdrafts, Agriterra Limited has issued a corporate guarantee in favour of the bank. Under the terms of the guarantee, it may only be called upon once the bank has exhausted all possible means of recovering the debt in Mozambique.

 

Reconciliation to cash flow statement

 

	At 31 March 2021		Cash flow		Foreign Exchange		At 31 March 2022
	US$000		US$000		US$000		US$000
Non-current bank loan	2,107		(1,431)		107		783
Non-current leases	302		(103)		21		220
Current bank loan	263		2,075		100		2,438
Current leases	102		4		9		115
Overdrafts	3,651		2,236		369		6,256
	6,425		2,781		606		9,812

 

	At 31 March 2020		Cash flow		Foreign Exchange		At 31 March 2021
	US$000		US$000		US$000		US$000
Non-current bank loan	1,661		484		(37)		2,107
Non-current leases	383		(72)		(7)		302
Current bank loan	711		(441)		(10)		263
Current leases	87		17		(2)		102
Overdrafts	2,541		1,170		(60)		3,651
	5,383		1,158		(116)		6,425

 

Leases

 

At 31 March 2022, the Group is committed to $335 000 (2021 $404,000) for leases. The total cash outflow for leases (principal and interest) amounts to $335,000 (2021: $531,000).

Maturity Analysis				31 March  2022		31 March  2021
				$'000		$'000
Year 1				123		102
Year 2				201		115
Year 3				11		187
Year 4				-
Year 5				-		-
				335		404
Analysed as:
Current				115		102
Non-current				220		302
				335		404

The Group does not face a significant liquidity risk with regard to its lease liabilities.

 

 

19.  Trade and other payables

	31 March 2022		31 March 2021
	US$000		US$000
Trade payables	597		1,018
Other payables	44		1,006
Accrued liabilities	319		22
	960		2,046

 

'Trade payables', 'Other payables' and 'Accrued liabilities' principally comprise amounts outstanding for trade purchases and ongoing costs. No interest is charged on any balances.

 

The Directors consider that the carrying amount of financial liabilities approximates their fair value. 

 

20.  Leases

 

Right of use assets

Right of use assets relate to equipment and motor vehicle acquired under finance leases. These are presented as property plant and equipment.

 

	Machinery		Motor vehicles		Total
	US$000		US$000		US$000
Cost
At 1 April 2020	721		189		910
Exchange rate adjustment	(14)		(4)		(18)
At 31 March 2021	707		185		892
Exchange rate adjustment	55		15		70
At 31 March 2022	762		200		962
Accumulated depreciation and impairment
At 1 April 2020	163		47		210
Charge for the year	162		47		209
Exchange rate adjustment	(5)		(1)		(6)
At 31 March 2021	320		93		413
Charge for the year	166		48		214
Exchange rate adjustment	31		9		40
At 31 March 2022	517		150		667
Net book value
31 March 2022	245		50		295
31 March 2021	387		92		479

 

Average lease term for motor vehicles and equipment is 5 years. The maturity analysis of lease liability is presented in note 18.

 

Amounts recognised in profit or loss

 

	31 March 2022		31 March 2021
	US$000		US$000
Depreciation expense on right-of-use assets	214		209
Interest expense on lease liabilities	71		137
Expenses relating to short term leases and low value assets	45		50
	330		396

 

 

 

 

 

 

 

 

21.  FINANCIAL INSTRUMENTS

 

21.1.  Capital risk management

 

The Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders. The capital structure of the Group comprises its net debt (the borrowings disclosed in note 18 after deducting cash and bank balances) and equity of the Company as shown in the statement of financial position. The Company is not subject to any externally imposed capital requirements.

 

The Board reviews the capital structure on a regular basis and seeks to match new capital requirements of subsidiary companies to new sources of external debt funding denominated in the currency of operations of the relevant subsidiary. Where such additional funding is not available, the Company funds the subsidiary company by way of loans from the Company. The Company places funds which are not required in the short term on deposit at the best interest rates it is able to secure from its bankers.

 

Current interest rates on borrowings in Mozambique are very high, with the prime lending rate at 18.60% at 31 March 2022 (2021: 15.5%). In light of this, the Group has been rationalising its operations, with particular focus on disposing of surplus assets to reduce external debt levels. The Group has restructured its loan facilities in Mozambique to finance its Grain operations (note 18).

 

21.2.  Categories of financial instruments

               

The following are the Group financial instruments as at the year-end held at amortised cost:

 

	31 March 2022		31 March 2021
	US$000		US$000
Financial assets
Cash and bank balances	107		231
Other loans and receivables	321		354
	428		585
Financial liabilities
Trade and other payables	960		2,046
Borrowings - current	8,809		4,016
Borrowings - non-current	1,003		2,409
	10,772		8,471
	(10,344)		(7,886)

 

21.3.  Financial risk management objectives

The Group manages the risks arising from its operations, and financial instruments at Executive operating and Board level. The Board has overall responsibility for the establishment and oversight of the Group's risk management framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully the financial risks that the Group faces.

 

While the Group does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close involvement of the senior executives in the day to day operations of the Group ensures that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group. Financial instruments are not traded, nor are speculative positions taken. The Group has not entered into any derivative or other hedging instruments.

 

The Group's key financial market risks arise from changes in foreign exchange rates ('currency risk') and changes in interest rates ('interest risk'). The Group is also exposed to credit risk and liquidity risk. The principal risks that the Group faces as at 31 March 2022 with an impact on financial instruments are summarised below.

 

21.4.  Market Risk

The Group is exposed to currency risk and interest risk. These are discussed further below on note 21.5 and note 21.6.

 

21.5.  Currency risk

Certain of the Group companies have functional currencies other than US$ and the Group is therefore subject to fluctuations in exchange rates in translation of their results and financial position into US$ for the purposes of presenting consolidated accounts. The Company does not hedge against this translation risk. The Group's financial assets and liabilities by functional currency of the relevant company are as follows:

 

 

 

 

 

 

	Assets				Liabilities
	31 March 2022		31 March 2021		31 March 2022		31 March 2021
	US$000		US$000		US$000		US$000
United States Dollar ('US$')	-		-		-		-
Great British Pound ('GBP')	-		-		109		136
Mozambique Metical ('MZN')	922		1,711		10,447		12,007
	922		1,711		10,556		12,143

 

The Group transacts with suppliers and/or customers in currencies other than the functional currency of the relevant Company (foreign currencies). The Group does not hedge against this transactional risk. As at 31 March 2022 and 31 March 2021, the Group's outstanding foreign currency denominated monetary items were principally exposed to changes in the US$ / GBP and US$ / MZN exchange rate.

 

The following tables detail the Group's exposure to a 5, 10 and 15 per cent depreciation in the US$ against GBP and separately to a 10, 20 and 30 per cent depreciation of the US$ against the Metical. For a strengthening of the US$ against the relevant currency, there would be a comparable impact on the profit and other equity, and the balances would be of opposite sign. The sensitivity analysis includes only outstanding foreign currency denominated items and excludes the translation of foreign subsidiaries and operations into the Group's presentation currency. The sensitivity also includes intra-Company loans where the loan is in a currency other than the functional currency of the lender or borrower. A negative number indicates a decrease in profit and other equity.

 

	31 March 2022 US$000		31 March 2021 US$000
GBP Impact
Profit or loss
5% Increase in US$	(5)		(7)
10% Increase in US$	(11)		(13)
15% Increase in US$	(16)		(18)
Other equity
5% Increase in US$	(5)		(7)
10% Increase in US$	(11)		(13)
15% Increase in US$	(16)		(18)
MZN Impact
Profit or loss
10% Increase in US$	-		-
20% Increase in US$	-		-
30% Increase in US$	-		-
Other equity(1)
10% Increase in US$	(1,561)		(94)
20% Increase in US$	(3,122)		(2,103)
30% Increase in US$	(4,683)		(7,542)

               

(1)	This is mainly due to the exposure arising on the translation of US$ denominated intra-Company loans provided to Metical functional currency entities which are included as part of the Company's net investment in the related entities.

 

21.6.  Interest rate risk

 

The Group is exposed to interest rate risk because entities in the Group hold cash balances and borrow funds at floating interest rates. As at 31 March 2022 and 31 March 2021, the Group has no interest-bearing fixed rate instruments.

 

The Group maintains cash deposits at variable rates of interest for a variety of short-term periods, depending on cash requirements. The Grain and Beef operations in Mozambique are also financed through bank facilities. The rates obtained on cash deposits are reviewed regularly and the best rate obtained in the context of the Group's needs. The weighted average interest rate on deposits was nil% (2021: nil). The weighted average interest on drawings under the overdraft facilities and bank loans was 18.9% (2021: 18.68%). The Group does not hedge interest rate risk.

 

The following table details the Group's exposure to interest rate changes, all of which affect profit and loss only with a corresponding effect on accumulated losses. The sensitivity has been prepared assuming the liability outstanding at the balance sheet date was outstanding for the whole year. In all cases presented, a negative number in profit and loss represents an increase in finance expense/decrease in interest income. The sensitivity as at 31 March 2022 and 31 March 2021 is presented assuming interest rates on cash balances remain constant, with increases of between 20bp and 1000bp on outstanding overdraft and bank loans. This sensitivity to interest rate rises is deemed appropriate because the Group interest bearing liabilities are Metical based. Although the macroeconomic scenario in Mozambique is now improving the prime lending rate remain high with prime rates of 18.6% at 31 March 2022 (2021: 15.5%). The Prime lending rate increased to 20.6% in June 2022.

 

	31 March 2022(1)		31 March 2021(1)
	US$000		US$000
+ 20 bp increase in interest rates	(19)		(18)
+ 50 bp increase in interest rates	(48)		(44)
+100 bp increase in interest rates	(97)		(88)
+200 bp increase in interest rates	(194)		(176)
+500 bp increase in interest rates	(484)		(441)
+800 bp increase in interest rates	(775)		(707)
+1000 bp increase in interest rates	(969)		(884)

 

(1)	The table above is prepared on the basis of an increase in rates. A decrease in rates would have the opposite effect.

 

21.7.  Credit risk

 

Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as outstanding receivables. The Group's principal deposits are held with various banks with a high credit rating to diversify from a concentration of credit risk. Receivables are regularly monitored and assessed for recoverability. The impact of COVID-19 on the credit risk of the Group has been considered in the Going Concern disclosures in note 3.

 

The maximum exposure to credit risk is the carrying value of the Group financial assets disclosed in note 21.2. Details of provisions against financial assets are provided in note 17.

 

21.8.  Liquidity risk

 

The Company policy throughout the year has been to ensure that it has adequate liquidity by careful management of its working capital. The operating executives continually monitor the Group's actual and forecast cash flows and cash positions. They pay particular attention to ongoing expenditure, both for operating requirements and development activities, and matching of the maturity profile of the Group's overdrafts to the processing and sale of the Group's maize and beef products. The impact of COVID-19 on the liquidity risk of the Group has been considered in the going concern disclosures in note 3.

 

At 31 March 2022 the Group held cash deposits of $107,000 (2021: $231,000). As at 31 March 2022 the Group had overdraft and bank loans facilities of approximately $9,812,558 (2021: $9,464,961) of which $9,812,558 (2021: $6,425,531) were drawn.

 

The following table details the Group's remaining contractual maturity of its financial liabilities. The table is drawn up utilising undiscounted cash flows and based on the earliest date on which the Company could be required to settle its obligations and assuming business conditions at 31 March 2022. The table includes both interest and principal cash flows.

 

	31 March 2022		31 March 2021
	US$000		US$000
1 month	358		977
2 to 3 months	716		212
4 to 12 months	9,481		3,731
1 to 2 years	434		1,325
3 to 5 years	1,131		1,402
	12,120		7,647

 

22.  Share capital

 

		Authorised		Allotted and fully paid
		Number		Number		US$000
At 31 March 2020 and 31 March 2021 and 31 March 2022		23,450,000		21,240,618		3,135
At 31 March 2020 and 31 March 2021 and 31 March 2022
Deferred shares of 0.1p each		155,000,000		155,000,000		238
Total share capital		178,450,000		176,240,618		3,373

 

The Company has one class of ordinary share which carries no right to fixed income.

 

The deferred shares carry no right to any dividend; no right to receive notice, attend, speak or vote at any general meeting of the Company; and on a return of capital on liquidation or otherwise, the holders of the deferred shares are entitled to receive the nominal amount paid up after the repayment of £1,000,000 per ordinary share. The deferred shares may be converted into ordinary shares by resolution of the Board.

 

23.  Equity-ACCOUNTED INVESTEES

 

	31 March 2022		31 March 2021
	US$000		US$000
Interest in joint venture	56		1
	56		1

 

DECA Snax Limitada is a joint venture in which the Group has joint control and a 50% ownership interest. It is one of the Group's strategic customers of grits and principally engaged in the production of corn snacks in Mozambique. DECA Snax Limitada's principal place of business is Chimoio in Mozambique and is not listed.

 

DECA Snax Limitada is structured as a separate vehicle and the Group has residual interest in the net assets of DECA Snax Limitada. Accordingly, the Group has classified DECA Snax Limitada as a joint venture. In accordance with the agreement under which DECA Snax Limitada is established, the Group and the other investor in the joint venture have agreed to make additional contributions in proportion of their interest if additional investment is required in DECA Snax Limitada.

 

The following table summarises the financial information of DECA Snax Limitada as included in its own financial statements. The table also reconciles the summary information to the carrying amount of the Group's interest in DECA Snax Limitada.

 

 

	31 March 2022		31 March 2021
	US$000		US$000
Percentage ownership interest	50%		50%
Non-current assets	466		252
Current assets (including cash and cash equivalents - 2022: US$73,000, 2021: US$23,000)	337		108
Current liabilities (Trade and other payables)	(233)		(49)
Non-current liabilities	(458)		(310)
Net assets (100%)	112		1
Net assets (Carrying amount of joint venture)	56		1
Revenue	1,447		117
Cost of Sales	(1,008)		(79)
Depreciation and amortisation	(71)		(10)
Operating expenses	(192)		(28)
Interest expense	-		-
Income tax expense	(66)		-
Profit and other comprehensive income (100%)	110		-
Profit and other comprehensive income (50%)	55		-
Elimination of unrealised profit	-		-
Group's share of total comprehensive income	-		-
Dividends received by the Group	-		-

 

24.  Share based payments

 

24.1.  Charge in the year

 

The Company recorded a charge within Operating expenses for share based payments of $ Nil (2021: $ Nil) in respect of options issued in previous years vesting during the year. No options were issued during the year (2021: $ Nil).

 

24.2.  Outstanding options and warrants

 

The Group, through the Company, have two unapproved share option schemes which were established to provide equity incentives to the Directors of, employees of and consultants to the Company. The schemes' rules provide that the Board shall determine the exercise price for each grant which shall be at least the average mid-market closing price for the three days immediately prior to the grant of the options. The minimum vesting year is generally one year. If options remain unexercised after vesting period from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

 

In addition to share options issued under the unapproved share option schemes, on 1 June 2015, the Company created a warrant instrument (the 'Instrument') to provide suitable incentives to the Group's employees, consultants and agents, and in particular those based, or those spending considerable time, on site at the Group's operations. Up to 1,000,000 warrants (the 'Warrants') to subscribe for new Ordinary Shares in the Company (the 'Warrant Shares') maybe issued pursuant to the Instrument. The exercise price of each Warrant is £0.65 (the share price of the Company being approximately 60p when the Instrument was created) and the subscription year during which time the Warrants may be exercised and Warrants Shares issued is the 5-year period from 1 June 2016 to 1 June 2022. Subject to various acceleration provisions, a holder of Warrants is not entitled to sell more than 1,000 Warrant Shares in any day nor more than 10,000 Warrant Shares (in aggregate) in any calendar month, without Board consent. 50,000 Warrants are in issue.

The following table provides a reconciliation of share options and warrants outstanding during the year. The number of shares or warrants and their respective exercise prices have been adjusted to reflect the share consolidation (see note 24):

 

		Year  ended 31 March 2022 Number		Weighted average exercise price (p)		Year ended 31 March 2021 Number		Weighted average exercise price (p)
At beginning of year		93,080		142		93,080		142
Granted in the year		-		-		-		-
Terminated in the year		-		-		-		-
Lapsed in the year		(50,000)		65		-		-
At end of year		43,080		232		93,080		142
Exercisable at year end		43,080		232		93,080		142

 

At 31 March 2022, the following options and warrants over ordinary shares of 10p each have been granted and remain unexercised:

 

Date of grant	Total options		Exercisable Options	Exercise price P		Expiry date
29 July 2012	18,080		18,080	350p		29 July 2023
15 March 2014	25,000		25,000	150p		15 March 2024
	43,080		43,080

 

25.  Related party disclosures

 

Magister Investments Limited ("Magister"), holds 50.58% of the ordinary share capital of the Company and is the ultimate controlling party. In addition, Magister has also assisted the Group with bank guarantees for the group to secure Commercial loans. Bank guarantee fees of 1.75% are payable to Magister amounting to US$74,725. The following Director of Agriterra is also a Director of Magister:

·    Hamish Rudland

 

The remuneration of the Directors, who are the key management personnel of the Company, is set out in note 9.

 

26.  Events subsequent to the balance sheet date

 

At the end of June 2022, the Group commenced the implementation of a business turnaround strategy which resulted in the announcement of:

·    Significant injection of US$7.9 million from Magister Investments Limited at interest rate of SOFR (SOFR is currently 1.53%)+6% to reduce of the finance cost which has been increasing over the years and will be used to pay commercial borrowings in Mozambique which attract interest rates above 18% per annum. The Group will save at least US$ 792,000). The shareholder loan is made up of:

o  US$6.1 million convertible facility which has a 3 year tenure

o  US$1.8 million convertible facility which has a 12 months tenure.

·    Operating expenses cost reduction amounting US$47,000 per month (US$564,000 per annum) by rightsizing the business. All expenditure to be incurred is evaluated to improve the Group financial performance and cash flow of the Group.

 

In August 2022, Grain division successfully repaid a US$6.1 million overdraft facility owed to First Capital Bank thereby reducing the finance costs by US$82 000 per month. The Group is planning to repay the Standard Bank loan amounting to US$2.4 million by February 2023 utilising US$1.8 million injected by Magister Investments Limited and internally generated funds amounting to US$0.6 million.