Agriterra Ld Regulatory News (AGTA)

Information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

24 December 2020

Agriterra Limited ('Agriterra' or the 'Company')

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

Audited Annual Results for Year Ended 31 March 2020

Agriterra Limited, the AIM-quoted African agricultural company, announces its audited annual results for the year ended 31 March 2020 (the "2020 Annual Accounts").

The 2020 Annual Accounts are now available on the Company's website and an extract of selected information from the 2020 Annual Accounts is set out below. The 2020 Annual Accounts will be posted to Shareholders with the Notice of Annual General Meeting to approve the 2020 Annual Accounts by 5 January 2021.

In line with the guidance issued by AIM Regulation in an Inside AIM notification dated 9 June 2020, and the ongoing COVID-19 related disruption to processes, the Company is availing of the one-month extension to the date by which it is required under AIM Rule 18 to publish its interim accounts for the six months ended 30 September 2020. Accordingly, the Company is required to publish its 2021 interim accounts by 31 January 2021.

** ENDS **

For further information please visit www.agriterra-ltd.com or contact:

Chair's statement and strategic review

I am pleased to present the annual report of the Company for the year ending 31 March 2020. During the year, the Company focused on stabilising the operations in the aftermath of Cyclones Idai and Kenneth which significantly affected Mozambique.

The Company continues to observe the principles of the QCA Corporate Governance Code (the "Code") to the extent that they consider them to be applicable and appropriate for a Company of Agriterra's size and stage of development, through the maintenance of efficient and effective management frameworks accompanied by good communication. Further details are available at:

http://www.agriterra-ltd.com/corporategovernance.aspx.

Strategy and Business Model

The Company's strategy is to operate efficient, profitable businesses in Mozambique so as to create value for its shareholders and other stakeholders by supplying beef and milled maize products to the local market.

The Company currently has two operational agricultural divisions:

· Beef, which sources cattle from local farmers and then processes them through its own feedlot, abattoir operations and retail units through Mozbife Limitada ('Mozbife')

· Grain, which operates maize purchasing and processing businesses through Desenvolvimento e Comercialização Agrìcola Limitada ('DECA') and Compagri Limitada ('Compagri').

These two divisions have built strong brands in Mozambique. During the period the Company secured new investment of c.US$1m to set up a maize snack processing business on the site in Chimoio under the brand name of DECA Snax, to complement and add value to the maize meal operation, while expanding the range of products offered to the consumer. It was intended that this factory would become operational in this financial year, but COVID-19 related issues in China resulted in a delay in the supply of the necessary equipment and commencement of operations have been delayed until Q4 of 2020. The production line has now been commissioned and initial sales were made in December 2020.

The Company is aware of its environmental, social and governmental responsibilities and the need to maintain effective working relationships across a range of stakeholder companies. The major shareholder is represented on the Board ensuring their views are incorporated into the Board's decision-making process. In addition to the Company's staff and shareholders, the local community in Mozambique is a primary stakeholder. In purchasing maize and cattle directly from the local community, the Company plays an important role in local economic development, supporting small scale farmers and the developing commercial sector.

Mozambique overview

On 14 March 2019, Cyclone Idai made landfall at the port of Beira, Mozambique, before moving across the region. Millions of people in Malawi, Mozambique, and Zimbabwe were affected by what UNICEF declared, was the worst natural disaster to hit southern Africa in at least two decades. Six weeks later, Cyclone Kenneth made landfall in northern Mozambique - the first time in recorded history two strong tropical cyclones have hit the country in the same season. The UN estimate that due to the devastation caused by the cyclones 715,000ha of crop production was decimated, 160,000 homes destroyed and a total of 2.5 million people in Mozambique required humanitarian assistance.

The Company's operations are located in the affected areas, and although the buildings and assets were not damaged, there was an impact on our business; 50 members of staff lost their homes, and many of the small farmers who would normally supply maize and cattle were left without products to sell during the harvest season (April to August)

During this same period the Metical depreciated against the US$ going from 61 MZN in January 2019 to 63MZN after Cyclone Idai and ending at 65MZN to the US$ in March 2020. The Metical did remain steady against the Rand (4.30MZ), which helped reduce the annualised inflation in Mozambique from c.3.9% in 2018 to c.2.8% in 2019. As a result Standard Bank's prime Metical lending rate has reduced to 18% (19.5% at 31 March 2018).

Operations review

Grain division

Due to the disruptions caused by the cyclones, there was a major shortage of food in the central region of the country. As a result, DECA was contracted to process 3,000 tons of maize into meal for the World Food Programme ("WFP") for immediate aid into the region which lasted into the month of May.

Total maize purchased for the year (excluding WFP) was 24,498 tons and processed into 19,926 tons meal. Maize prices late season were driven up by a shortage in production caused by the cyclones where an estimated 700,000ha of crops was destroyed thus impacting on the ability to purchase affordable maize late season.

Beef division

The cyclones impacted on the ability to access the communities where the Company has traditionally sourced animals. The livestock sector was impacted in that a large number of animals died as a result of the cyclone (+5,000) and the animals that survived were affected by the lack or low quality of pasture and feed, and poor-quality drinking water, (+ 130,000). This increased prices and access became a constraint for the buying teams.

Total animals bought for the year was 6,045 head resulting in 1,200 tons of beef being produced for sale into the local market.

Mozbife was awarded a grant to build 9 Cattle Service Centres by the World Bank in 2 provinces, and these were completed in June 2020.

Key Performance Indicators

The Board monitors the Company's performance in delivery of strategy by measuring progress against Key Performance Indicators (KPIs). These KPIs comprise a number of operational, financial and non-financial metrics.

These indicators have been budgeted for the first time for FY-20 and are used to monitor progress on a monthly basis. Further strategic KPIs will be introduced once the immediate key goal of moving the existing businesses into profitability has been achieved.

Financial Review

In FY-20 Group revenue increased 22% to US$12.9m (FY19: US$10.6m). The effects of the cyclones meant that the first half of the year accounted for less than 30% of the total revenue earned. Our management team had to work hard to push the sales up in the second part of the year, to end the year with a Gross Margin of US$1.8m (FY19: US$1.2m) and EBITDA loss of US$(1.4m) (FY19: US$(1.7m). Finance costs were US$1.0m (FY19: US$1.0m) and depreciation charges were US$0.6m (FY19:US$0.6m) bringing the Loss attributable to shareholders to US$3.0m (FY19: US$3.3m) The grain division accounted for 69% of the revenue and 31% of the overall loss, while the beef generated 31% of the revenue and 51% of the overall loss. The management team are focussed on improving the overall performance of both businesses and to take the necessary actions that will get the beef operation to a point where it becomes a contributor towards the overall success of the Company.

During the year, a new fixed asset register was prepared. Asset values were brought in line with tax depreciation in Mozambique giving rise to an uplift in the net book value of assets. The uplift has been accounted for as a prior year adjustment (note 13) and the increase in the net book value at 1 April 2018 was $793,000. There was a consequential increase in the depreciation charge for the year ending 2019 of $136,000 and a write down in the value of intangible assets of $59,000.

Net Debt at 31 March 2020 was US$ 4.3m (FY19: US$2.4m). Since the year-end, additional working capital facilities have been agreed, to enable the Grain division to secure sufficient grain to meet its operational targets in the 2021 season.

Risk management

The Company is subject to various risks and the future outlook for the Company, and growth in shareholder value should be viewed with an understanding of these risks. According to the risk, the Board may decide to tolerate it, seek to mitigate it through controls and operating procedures, or transfer it to third parties. The following table shows the principal risks facing the Company and the actions taken to mitigate these:

The Board is also responsible for establishing and monitoring the Company's systems of internal controls. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Company's systems are designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The Board reviews the effectiveness of the systems of internal control and considers the major business risks and the control environment on a regular basis. In light of this control environment the Board considers that there is no current requirement for a permanent separate internal audit function.

Going concern

The Mozambican Government implemented a policy to minimise the spread of COVID-19 on the 1st April 2020 and has maintained this policy into December, with the likelihood that it will continue into 2021. The closure of the borders, industries and the logistics sectors have had a negative impact on the overall economy in Mozambique. The grain and beef sales have been encouraging, but growth is being restricted by the removal of the informal retail sector, which accounted for the bulk of our clientele.

Grain

The absence of reliable inter-province transportation and cash (due to movement restrictions) has resulted in a delay in the maize harvesting and buying season by over 3 months. This resulted in high raw material costs, more intense efforts to secure the maize and an adjustment of the initial forecast from 42,000 tons of maize to 35,000 tons. To date we have purchased at total of 27,000 tons (more than in FY2020) and we are confident that we will successfully secure the balance of 8,000 tons in the coming 3 months. Over the last 12 months, the Grain division has made significant progress in meeting the operating challenges to increase volumes and margins in order to move into profitability. More importantly this has been achieved whilst having to live within its means. New products and improved quality have been a significant factor in this performance and underpin the continued improvement in volumes in the FY21 forecast, together with the start-up phase of the DECA Snax project.

Beef

The beef operation has had a negative impact due to the lockdown. We have encountered difficulties in accessing the cattle production areas and the market has shrunk significantly, since the oil and gas projects have slowed down due to a global contraction related to COVID-19. Our largest clients (accounting for 60% of monthly sales) were those supplying these companies in Northern Mozambique. The result is revenue 22% below budget and there is an expectation that this will not improve significantly in remainder of FY21. However, the overall operating performance is ahead of budget as a result of improved operating efficiencies and an increased unit value per tonne of meat.

These forecasts show that the Company needs to achieve its operating targets and renew its existing overdraft facilities 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 Company's ability to continue as a going concern and the Company may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of business. These financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern.

Outlook

The Company had a difficult start to FY-21 as the COVID-19 lockdown was implemented in April 2020 and is expected to remain in force until early 2021. This has resulted in a challenging first quarter for both the grain and the beef operations.

Grain: In order to improve margins, the division secured an additional working capital facility early in the season, enabling it to purchase maize in the period when the market is saturated, and prices are lowest. In addition, some of the larger clients were encouraged to pre-pay for their meal, so as to secure the maize needed at the same time. There has also been renewed focus on the commercial strategy to align our pricing with the market; introduce a rebranding program to drive the sales of the 1kg packs (offering better margins); and finally , to encourage clients to buy more and pay quickly.

Beef: With demand under pressure from lockdown, the focus has been on realigning the cost base with lower projected volumes and refocusing the retail strategy. Non-performing retail outlets have been closed, a depot opened in Maputo to receive and sell carcasses and meat to the city market and rebranding of the product to focus on the retail consumer. On the supply side, the focus has been on strengthening supply chain links with commercial farmers, who are able to supply higher grade animals.

While the business environment is negatively affected by COVID-19, the outbreak of COVID-19 has not yet spread significantly in Mozambique with a relatively low volume of cases reported. Plans have been put in place to protect our staff and production capabilities. Our products, meal and beef, are key staples in the domestic Mozambican market and although demand is not expected to be significantly affected as the pandemic increases, there are potential short term risks associated with the availability of cash in the market, as companies in the tourism, services, logistics and extractives sectors are forced to reduce the staffing, until things normalise.

Board and senior management changes

On 30 April 2020 Ms. Thorburn stepped down as a non-executive director in order to focus on her other business interests in the region. Mr. Clayton took on the role of Head of the Audit Committee following Ms. Thorburn's resignation. I would like to thank Amanda for her contributions and wish her well in her new ventures.

Also, on 30 April 2020 Mr. Zandamela joined the Board as a non-executive director. Mr. Zandamela is a Mozambican national with over 20 years' experience in agriculture and business with a degree in Agronomy - Rural Engineering from the Eduardo Mondlane University and subsequently an MBA from the Montford University Southern Africa - Sandton Business School. From 2016 to 2019 Mr. Zandamela was responsible for all Mozambique commercial activities of Tongaat Hulett (agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize).

Mr. Zandamela is currently Chairman of the Board of Directors of the Association of Sugar Producers of Moçambique and acted as Chairman of the National Sugar Distributors of Moçambique. I welcome Sergio to the Board, his experience in the agri-sector in Mozambique will give the Board valuable insight into Mozambique.

CSO Havers,

Executive Chair

24 December 2020

Corporate Governance

The Company is quoted on AIM and is required to comply with the provisions of a recognised corporate governance code. The board elected to adopt the Quoted Company Alliance Corporate Governance Code (the "QCA code"). Further details are available at http://www.agriterra-ltd.com/corporategovernance.aspx.

The Board is committed to applying a standard of corporate governance commensurate with its size and stage of growth and the nature of its activities.

The Board

The board structure continues to be organised to ensure it has the appropriate balance of skills and independence. The Board currently comprises the Executive Chair, two non-independent Non-Executive Directors and two independent Non-Executive Directors who were appointed during the year. The Board is looking to further enhance its composition, skills and balance as the Company develops. The Board currently comprises:

Caroline Havers, Executive Chair (AC; IC chair)

Ms. Havers is a highly experienced litigation/dispute resolution lawyer having spent over 30 years within international law firms working with clients operating in a variety of African jurisdictions and industry sectors. During her legal career, Ms. Havers has been both a partner and managing director of different law firms. She provides advice on compliance and governance and is a long qualified CEDR Mediator.

Whilst the Company consolidates its operations in Mozambique, the Board appointed Ms. Havers as Executive Chair. It is intending to appoint a Chief Executive Officer, based in Mozambique in due course.

Hamish Rudland, Non-Executive Director (IC)

Mr. Rudland has extensive experience across logistics, agriculture, agro-processing, distribution and property. After graduating from Massey University, New Zealand, he returned to Zimbabwe in 1997 to start a passenger transport business that he soon diversified into fuel tank haulage in the early 2000s. Thereafter Mr. Rudland structured acquisitions of foreign-owned asset rich companies to list on the Zimbabwe Stock Exchange. Mr. Rudland has substantial investments in Zimbabwe Stock Exchange listed companies which focus on his core competencies but also synergise where advantages can be made.

As a result of Mr. Rudland's relationship to Magister Investments Limited, he is not considered to be an "independent" director for the purposes of the QCA Corporate Governance Code.

Gary Smith, Non-Executive Director (AC; RC)

Mr. Smith is an experienced finance professional and is currently a non-executive director of several companies in Zimbabwe and Mauritius. Mr. Smith worked in the UK for several years where he was employed at Deutsche Bank, University of Surrey and Foxhills Club & Resort. Upon returning to Africa he worked for a large transport and logistics company in Mozambique for four years before returning home to Zimbabwe and the above positions.

Mr. Smith is a Chartered Accountant and a resident and citizen of Zimbabwe. As a result of Mr. Smith's relationship with Magister Investments Limited, he is not considered to be an "independent" director for the purposes of the QCA Corporate Governance Code.

Neil Clayton, Non-Executive Director (AC Chair; RC Chair)

Mr. Clayton is a Chartered Accountant and has over 30 years of experience in a variety of listed and un-listed companies. Specifically, Mr. Clayton brings significant experience and expertise as regards listed companies operating in Africa as well as particular knowledge of the Company's business and requirements, having held an interim finance role at the Company during 2018.

Despite his recent work with the Company the Board considers Mr. Clayton to be an "independent" director for the purposes of the QCA Corporate Governance Code.

Sergio Zandamela, Non-Executive Director (appointed 30 April 2020) (IC)

Mr. Zandamela is a Mozambican national with over 20 years' experience in agriculture and business with a degree in Agronomy - Rural Engineering from the Eduardo Mondlane University and subsequently an MBA from the Montford University Southern Africa - Sandton Business School. From 2016 to 2019 Mr. Zandamela was responsible from for all Mozambique commercial activities of Tongaat Hulett (agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize. Mr. Zandamela is currently Chairman of the Board of Directors of the Association of Sugar Producers of Moçambique and acted as Chairman of the National Sugar Distributors of Moçambique.

The Board considers Mr. Zandamela to be an "independent" director for the purposes of the QCA Corporate Governance Code.

The Executive Chair is expected to commit a minimum of 2 weeks per month and the non-executive directors are expected to commit 2 days a month. In addition, all directors are expected to devote any additional time that might be required in order to discharge their duties.

Until March 2020, Board meetings were held quarterly in Mozambique. The attendance record of directors who held office for the year is as follows:

The Board has entrusted the day-to-day responsibility for the direction, supervision and management of the business to the Senior Management Committee (the 'SMT'). For the financial year ended 31 March 2020 the SMT was comprised of the Executive Chair, the Operations Director and Chief Financial Officer in Mozambique.

Certain matters are specifically reserved to the Board for its decision including, inter alia, the creation or issue of new shares and share options, acquisitions, investments and disposals, material contractual arrangements outside the ordinary course of business and the approval of all transactions with related parties.

There is no agreed formal procedure for the directors to take independent professional advice at the Company's expense. The Company's directors submit themselves for re-election at the Annual General Meeting at regular intervals in accordance with the Company's Articles of Incorporation.

The Company has adopted a share dealing code for directors' dealings which is appropriate for an AIM quoted company. The directors and the Company comply with the relevant provisions of the AIM Rules and the Market Abuse Regulation (EU) No. 596/2014 relating to share dealings and take all reasonable steps to ensure compliance by the Company's employees.

Board committees

Due to the current size of the Board and the Company, there is no separate Nominations Committee and any new directors are appointed by the whole Board.

At the Board meeting held in March 2019 the new Audit ("AC"), Investment ("IC") and Remuneration Committees ("RC") were established. The Audit Committee and the Investment Committees have met in the last financial year.

The Audit Committee was chaired by Amanda Thorburn until her resignation on 30th April 2020, when Neil Clayton took over as Chair. The Audit Committee has been actively engaged in the planning and conduct of the Audit of these financial statements. The Committee has met formally since the year end and the Chair has had independent conversations with the Audit partners both in Mozambique and London where executive management have not been present.

Terms and conditions for Directors

The Executive Chair and Non-Executive Directors do not have service contracts but appointment letters setting out their terms of appointment. The appointments may be terminated on three months' notice by either party. The Non-Executive Directors receive an annual base fee reflecting their respective time commitments and do not receive any benefits in addition to their fees, nor are they eligible to participate in any pension, bonus or share-based incentive arrangements.

Directors' remuneration

Remuneration details are set out in note 9 to the financial statements.

Evaluation of Board performance

Given the Company's size, and the reconstitution of the Board since the end of 2017, no formal review of the effectiveness of its performance as a unit, as well as that of its committees and the individual directors has been taken. Performance reviews are to be carried out internally from time to time. Reviews will endeavour to identify skills development or mentoring needs of directors and the wider senior management team.

The Board recognises that the current procedures remain to be formally implemented and therefore do not accord with the QCA Guidelines. However it is anticipated that these procedures will be augmented to a standard appropriate for the size and stage of development of the Company.

Communication with shareholders

The Company aims to ensure all communications concerning the Company's activities are clear, fair and accurate. The Board is however keen to improve its dialogue with shareholders. The Company's website is regularly updated, and announcements are posted onto the Company's website.

The results of voting on all resolutions in future general meetings will be posted to the Company's website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 percent of independent shareholders.

Directors' report

The directors the Company hereby present their annual report together with the audited financial statements for the year ended 31 March 2020 for the Company.

Except where otherwise noted, amounts are presented in this Directors' report in United States Dollars ('$' or 'US$').

1. Listing details

Agriterra is a non-cellular Guernsey registered company limited by shares, whose ordinary shares ('Ordinary Shares') are quoted on the AIM Market of the London Stock Exchange ('AIM') under symbol AGTA.

2. PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS

The principal activity of the Company is the investment in, development of and operation of agricultural projects in Africa. The Company's current operations are focussed on maize and beef in Mozambique. A review of the Company's performance by business segment and future prospects are given in the Chair's statement and strategic review, together with a review of the risks and uncertainties impacting on the Company's long-term performance.

3. Results and Dividends

The Company results for the year ending 31 March 2020 show a loss after taxation of US$ 2,993,000 (2019: loss as restated of $ 3,290,000). The Directors do not recommend the payment of a final dividend (2019: US$ nil). No interim dividends were paid in the year (2018: US$ nil).

Further details on the Company's performance in the year are included in the Chair's statement and strategic review.

4. DIRECTORS

4.1. Directors in office

The Directors who held office during the year and until the date of this report were:

4.2. Directors' interests

As at the date of this report, the interests of the Directors and their related entities in the Ordinary Shares of the Company were:

Mr. Rudland's interest is held through Magister Investments Limited ('Magister'). Magister is a private limited company incorporated in the Republic of Mauritius, wholly owned by Mauritius International Trust Company Limited, as trustee of the Casa Trust (a Mauritius registered trust). Mr. Hamish Rudland is the Settlor of the Casa Trust and the beneficiaries of the Casa Trust are Mr. Rudland, his wife, Mrs. Bridgette Rudland and their three children (all of whom are under 18 years old).

4.3. Directors' emoluments

Details of the nature and amount of emoluments payable by the Company for the services of its Directors during the financial year are shown in note 9 to the financial statements.

4.4. Directors' indemnities

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors which remain in force at the date of this report.

5. Substantial Shareholdings

To the best of the knowledge of the Directors, except as set out in the table below, there are no persons who, as of 20 December 2020, are the direct or indirect beneficial owners of, or exercise control or direction over 3% or more of the Ordinary Shares in issue of the Company.

6. EMPLOYEE INVOLVEMENT POLICIES

The Company places considerable value on the awareness and involvement of its employees in the Company's performance. Within bounds of commercial confidentiality, information is disseminated to all levels of staff about matters that affect the progress of the Company and that are of interest and concern to them as employees.

7. SUPPLIER PAYMENT POLICY AND PRACTICE

The Company's policy is to ensure that, in the absence of dispute, all suppliers are dealt with in accordance with its standard payment policy which is to abide by the terms of payment agreed with suppliers for each transaction. Suppliers are made aware of the terms of payment. The number of days of average daily purchases included in trade payables at 31 March 2020 was 39 days (2019: 20 days).

8. POLITICAL AND CHARITABLE DONATIONS

During the year no political and charitable donations were made in cash. However the Company did assist in the following form just after cyclone Idai where 15 tons of maize meal was donated to the Provincial Government Department of Disaster Management of Manica who was dealing with 1000's of displaced communities in the districts who had been affected by localised flooding. This donation was received and immediately distributed to the districts where communities were most affected. (2019: $nil).

1000kgs of meal and 200 kgs of meat were also donated to the local hospital at the time of the cyclone which had suddenly been inundated with patients injured and sick after the event.

Management and employees also embarked on their own fundraising campaign where blankets, clothing and dried goods were collected and donated through the local Red Cross agency.

The Company also supported the plight of the 30 employees who were isolated and trapped for 4 weeks on Dombe farm after the cyclone where access was completely cut off. We managed to deliver dry goods and medication the employees and their families by boat during that period. The company also assisted employees financially whose houses were destroyed in the cyclone.

9. SOCIAL AND COMMUNITY ISSUES

The mission of the Company in Mozambique is to work with and support the local producers only by creating an efficient route to market of a top quality national product. We strongly believe in the "field to fork" process and will continue to develop this concept as the Company grows. We have recently created a slogan called "Do campo para mesa" meaning "From the field to the table" which simply cements our beliefs in the business. We respect that it is part of our wider responsibility to promote the development of the countries in which we operate. Central to this development and continued economic growth is employment and training. Wherever possible, the Company continues to ensure that its expertise and specialist skills and facilities are made available to the broader community.

Particular activities undertaken during the year have focused on (1) practical, 'on the ground' training for students from various universities in Mozambique studying, inter alia, production practices in beef and cattle, milling practices (including mill engineering), veterinary sciences and animal sciences; (2) dissemination of agricultural management knowledge and practices; and (3) provision of health and medical assistance.

Milling

With respect to educational activities, this year DECA hosted another two 6 month post-graduation internship for post graduate students in HR. One student has remained and IT technology in HR assisting the HR Manager in the day to day functions of the Administration department. Then we recruited 2 post graduate students in Finance who are currently under an internship and if successful will be taken on permanently in the finance department as cost accountants. We have also hosted one position for 3 months in the Technical department in the milling section in food technology, production and plant maintenance. Our Manager in Tete has recently graduated in business and economics and continues to run our facility in Tete as the senior Manager in charge post-graduation the previous year.

Beef

The Mozbife Vanduzi feedlot hosted 38 animal and veterinary science students on practical excursions and 17 students in the abattoir throughout the year as our facility offers a live and real time platform for students to view and learn many aspects in veterinary practices and applications. We have hosted 4 students on a 6 months placement from the Instituto Superior Politecnico de Gaza and 1 student from the Instituto Agrario de Chimoio throughout the year. In the abattoir we have had 2 female and 3 male students on attachment for practical aspects of their university courses from Gaza. We have recently employed a post graduate food technologist in the abattoir to support the quality control system who has since become permanent. We recently trained 60 employees in the abattoir and butcheries on meat processing and quality control practices to ensure our product is always of a high standard. Mozbife is currently working to become HACCP (international food standards accreditation) accredited from the farm to the feedlot in ensuring traceability and quality standard of products at all times.

With respect to the promotion of health and medical assistance, DECA recently donated its ambulance to Dr Abrantes' clinic in Chimoio which is the first port of call for the operations in case of any emergency. He also coordinates and monitors progress on mid to long term treatments ensuring employees are supported through whatever treatments are required. We have undertaken further work on the clinic in the district of Dombe to provide a service base for this very rural community.

Community relations initiatives have recently received a major boost this year. Mozbife has managed a US$ 823,000 project with the Catalytic fund to construct 9 community buying points in the various areas we operate in. The cattle service centres were finally completed in June 2020 after numerous challenges and delays initially caused by the cyclone and then by the time access was secured into these areas the rainy season had started. These cattle buying centres (or known as CBCs) will formalize the buying process by having state of the art equipment and infrastructure in place to support the activities. This investment has also brought about the creation of 9 associations who have all been registered and have received training in functioning as an association. The CBCs will certainly go a long way in cementing our support within these communities. We envisage bolting on other activities like maize buying and the selling of other produce which the association will supply.

Once again at Vanduzi, manure from the feedlot is given to surrounding small scale farming associations, being out growers for Companhia de Vanduzi and Westfalia who commercially export fruit and vegetables to the European market. Both DECA and Mozbife sponsored the annual Christmas party for three orphanages with over 200 children in Msika district, and meal was distributed to certain communities during the planting season to ensure local seed stocks were planted.

10. INDEPENDENT AUDITOR AND STATEMENT OF PROVISION OF INFORMATION TO THE INDEPENDENT AUDITOR

PKFLittlejohn LLP have expressed their willingness to continue in office as independent auditor of the Company and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting.

The Directors who held office at the date of approval of this Directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is not aware and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

11. ADDITIONAL INFORMATION AND ELECTRONIC COMMUNICATIONS

Additional information on the Company can be found on the Company's website at www.agriterra-ltd.com.

The maintenance and integrity of the Company's website is the responsibility of the Directors; the work carried out by the auditor does not involve consideration of these matters and accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

The Company's website is maintained in compliance with AIM Rule 26.

By Order of the Board.

Statement of Directors' responsibilities

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

The Companies (Guernsey) Law, 2008, as amended (the '2008 Law') requires the Directors to prepare Company financial statements for each financial year in accordance with generally accepted accounting principles.

The Directors are required by the AIM Rules of the London Stock Exchange to prepare Company financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU').

The financial statements of the Company are required by law to give a true and fair view and are required by IFRS as adopted by the EU to present fairly the financial position and financial performance of the Company.

In preparing the Company financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and accounting estimates that are reasonable and prudent;

- state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company and Company transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements are properly prepared in accordance with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm they have discharged their responsibilities as noted above.

Independent auditor's report to the members of Agriterra Limited

Opinion

We have audited the group financial statements of Agriterra Limited (the 'group') for the year ended 31 March 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the group financial statements:

· give a true and fair view of the state of the group's affairs as at 31 March 2020 and of its loss for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the European Union; 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 group 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 relating to going concern

We draw attention to Note 3 in the financial statements, which indicates that the group is reliant upon the sales volume, prices and renewal of its bank facility in order for the group to meet committed expenditure requirements and working capital needs. There is currently uncertainty regarding the renewal of the facility. As stated in Note 3, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage, materiality is used to determine the financial statement areas that are included within the scope of our audit and the extent of sample sizes during the audit. No significant changes have come to light through the audit fieldwork which has required a revision our materiality figure.

We used 1.25% of the average of the 3 years turnover as a basis for determining Group materiality as the Group's key driver is revenue and there is a volatility with regards to revenue. We have determined our overall financial statement materiality to be US$148,000. Materiality for the significant components of the Group ranged from $29,000 to $120,000 based on 1.25% of the average of turnover for each component.

Group performance materiality was set at $89,000

We agreed to report to those charged with governance all corrected and uncorrected misstatements we identified through our audit with a value in excess of $7,400. We also agreed to report any other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.

An overview of the scope of our 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 by the Directors and considered future events that are inherently uncertain. These included, but were not limited to the valuation of the biological assets and the impairment iof the underlying assets of the beef and grain divisions. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Our Group audit scope focused on the principal area of operation, being Mozambique, where the subsidiaries of the Parent Company trade. 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 the three operating subsidiaries were considered to be significant due to identified risk and size. We have performed the audit of the Parent Company that is registered on Guernsey. However, the three remaining components located in Mozambique have been subject to full scope audits by a component auditor (a PKF network firm). As group auditors we maintained oversight and regular contact with the component auditor throughout all stages of the audit and we were responsible for the scope and direction of their work.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 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.

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. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept by the parent company; or

· the financial statements are not in agreement with the accounting records; or

· we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit

Responsibilities of directors

As explained more fully in the Statement of director's responsibilities, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the group financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the 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.

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. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with our engagement letter date 19 May 2020. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Joseph Archer (Engagement Partner) 15 Westferry Circus

For and on behalf of PKF Littlejohn LLP Canary Wharf

Statutory Auditor London E14 4HD

24 December 2020

Consolidated income statement

For the year ended 31 March 2020

Consolidated statement of comprehensive income

For the year ended 31 March 2020

Consolidated statement of financial position

As at 31 March 2020

The financial statements on pages 18 to 41 were approved and authorised for issue by the Board of Directors on 23 December 2020.

Signed on behalf of the Board of Directors by:

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated cash flow statement

For the year ended 31 March 2020

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 41. The nature of the Company'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 Company is the US Dollar ('$' or 'US$') as it most appropriately reflects the Company's business activities in the agricultural sector in Africa and therefore the Company's financial position and financial performance.

The financial statements have been prepared in accordance with IFRSs.

2. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

New and amended IFRS Standards that are effective for the current year

Impact of initial application of IFRS 16 Leases

In the current period, the Group has applied IFRS 16 Leases (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019.

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. Details of these new requirements are described in Note 3. The impact of the adoption of IFRS 16 on the Group's consolidated financial statements is described below.

The date of initial application of IFRS 16 for the Group is 1 April 2019.

The Group has applied IFRS 16 using the cumulative catch-up approach which:

• Requires the Group to recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings at the date of initial application (date of acquisition).

• Does not permit restatement of comparatives, which continue to be presented under IAS 17 and IFRIC 4.

(a) Impact of the new definition of a lease

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 continues to be applied to those leases entered or changed before 1 April 2019.

The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on 'risks and rewards' in IAS 17 and IFRIC 4.

The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or changed on or after 1 April 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a lease for the Group.

b) Impact on Lessee Accounting

(i) Former operating leases

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet.

Applying IFRS 16, for all leases (except as noted below), the Group:

• Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments, with the right-of-use asset adjusted by the amount of any prepaid or accrued lease payments in accordance with IFRS 16:C8(b)(ii).

• Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;

• Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.

Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses on a straight line basis.

Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.

For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within 'other expenses' in profit or loss.

The Group has used the following practical expedients when applying the cumulative catch-up approach to leases previously classified as operating leases applying IAS 17.

• The Group has applied a single discount rate to a portfolio of leases with reasonably similar characteristics.

• The Group has elected not to recognise right-of-use assets and lease liabilities to leases for which the lease term ends within 12 months of the date of initial application.

• The Group has excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application.

• The Group has used hindsight when determining the lease term when the contract contains options to extend or terminate the lease.

(ii) Former finance leases

For leases that were classified as finance leases applying IAS 17, the carrying amount of the leased assets and obligations under finance leases measured applying IAS 17 immediately before the date of initial application is reclassified to right-of-use assets and lease liabilities respectively without any adjustments, except in cases where the Group has elected to apply the low-value lease recognition exemption.

The right-of-use asset and the lease liability are accounted for applying IFRS 16 from 1 January 2019.

(c) Impact on Lessor Accounting

The Group is not a Lessor

(d) Financial impact of initial application of IFRS 16

Other than short term leases, the Company does not have any operating leases. The weighted average incremental borrowing rate applied to lease liabilities previously categorised as finance leases is 18.5%.

In the current year, the Group has applied a number of amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after 1 January 2019. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

New and revised IFRS Standards in issue but not yet effective

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective [and [in some cases] have not yet been adopted by the EU]:

The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods

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 Company'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 with active management of working capital and the timing of capital expenditure, there is sufficient headroom under the banking facilities currently available to the Company. Certain short-term overdraft facilities fall due for renewal in May 2021. Whilst there are no contractual obligations, the Company will continue to rely on the bank guarantee currently provided by its majority shareholder.

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

Over the last 12 months, the Grain division has made significant progress in meeting the operating challenges to increase volumes and margins in order to move into profitability. More importantly this has been achieved whilst having to live within its means. New products and improved quality have been a significant factor in this performance and underpin the continued improvement in volumes in the FY21 forecast, together with the start-up phase of the DECA Snax project.

The Beef division is starting to show a recovery in profitability as a result of the actions taken by management over the last 12 months and is expected to generate positive operational cash flows over the next 18 months.

COVID-19: As set out in the strategic report, the actions taken by the Government of Mozambique to limit the spread of COVID-19, has impacted the availability of local maize and demand for Beef form the Oil and Gas sector. The Key focus of the Company has been to maintain the health of its workforce with stringent hygiene measures implemented at all our operations. To date there has been no site closures or cessation of operations. However, the future evolution of COVID-19 is not currently known and therefore a sensitised version of the Company's forecasts has been prepared.

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

The divisional forecasts for FY-21 show a significant improvement in operating performance as compared to that reported for the year ended 31 March 2020. However, there can be no certainty that the turnaround 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 20 the Company is funded by a combination of short and long-term borrowing facilities. $2.7m of overdraft facilities are due for renewal within the next 12 months and the Company is required to make $0.7m of repayments in respect of the bank loan instalments amount together with principal on finance leases of $167,000. The forecasts show that the Company will require the renewal of its overdraft facilities in the review period.

The Company has also received correspondence from the banks providing overdraft facilities indicating that they do not presently see any reason why the current overdraft facilities would not be extended at their respective renewal dates. Consequently, the forecasts include all contractual interest and capital repayments and assume that both the term loan and overdraft facilities will continue to be available and will be renewed for a further year when they are reviewed in 2021.

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

The forecasts show that the Company needs to achieve its operating targets and renew its existing overdraft facilities 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 Company's ability to continue as a going concern and the Company 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 Company were unable to continue as a going concern.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March 2020. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

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

As at 31 March 2020, the Company held equity interests in the following undertakings:

Direct investments

Indirect investments of Agriterra (Mozambique) Limited

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

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

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 Company'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 or delivered to the customer. There is limited judgment needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Company 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 Company'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 judgment 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 Company 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 Company. 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 Company 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 Company 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 has applied IFRS 16 using the cumulative catch-up approach and therefore comparative information has not been restated and is presented under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are presented separately below.

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 re-measures 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 re-measured 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 re-measured 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 re-measured 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 Company'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 Company 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

All items of property, plant and equipment are stated at historical cost less accumulated depreciation (see below) and impairment. Historical cost includes expenditure that is directly attributable to the acquisition. Subsequent costs are included in the asset's carrying value when it is considered probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

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

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 immediately in profit and loss because the Company does not record any assets at a revalued amount.

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

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 Company's balance sheet when the Company 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 Company 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 Company 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 Company 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 Company derecognises financial liabilities when the Company'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 Company becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Company's financial liabilities approximate to their fair values.

The Company'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 Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on de-recognition is taken to the statement of comprehensive income.

Borrowings

Borrowings are included as financial liabilities on the Company 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 Company'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.

Impairment

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.

The impairment reviews are sensitive to various assumptions, including the expected sales forecasts, cost assumptions, capital requirements, and discount rates among others. 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.

Discount rate: Current central bank prime MIMO benchmark rate is 10.25% and with inflation at around 3.2%, the benchmark real interest rate is around 7.05%. The real rate assumed in these forecasts is 12.5%, consistent with prior years. Current nominal bank borrowing rates are 15.9%, but these are expected to fall further as the economy recovers from the COVID-19 Pandemic and inflation remains stable. Neither division is sensitive to an increase in the discount rate to 25%

Grain division:  The forecasts for the Grain division show a return towards the 10 year moving average with meal sales increasing to 31,000 tonnes in FY-21 (Year ending 31 March 2020: 19,926). A shortfall in the projected volumes of 18% or a reduction in the gross margin of more than 16% would lead to an indication of impairment.

Beef division: The forecasts for the Beef division show volumes of all meat products improving to 1,193 tonnes in FY-21 (Year ending 31 March 2020: 1,094 tonnes) and to 1,797 tonnes in FY-22. A fall in forecasted sales volumes of 4% or a reduction in budgeted gross margin of 2% would be required to indicate possible further impairment. The assets of the Beef division were impaired by $ 3.1m in the year ended 31 May 2016 following the decision to destock the ranches. The Board continues to evaluate the development of these assets, however it is too early to consider whether or not the previous impairment charge should be reversed.

No impairments were recorded in the year ended 31 March 2020 or the year ended 31 March 2019.

Non-current assets

During the year, the Company implemented the new asset module in the Mozambique operations. The project included the compilation of a new register of assets from a review of all existing assets. In addition, it was decided to bring the accounting values for these assets into line with the written down values in accordance with tax legislation in Mozambique. As a result, there was an overall uplift in the value of fixed assets of $793,000 at 1 April 2018. This has been accounted for as a prior year adjustment. There was a fall in the value of intangible assets of $59,000 at 1 April 2019. Further details are given in notes 13 and 14.

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. At 31 March 2020 the value of the breeding herd disclosed as a non-current asset was $nil (31 March 2019: $nil). The value of the herd held for slaughter disclosed as a current asset was $ 0.7m (31 March 2019: $ 0.8m).

Recoverability of input Value Added Tax

Mozambique Value Added Tax ('IVA') operates in a similar manner to UK Value Added Tax ('VAT'). The Company is exempt from IVA on its sales of maize products under the terms of Mozambique tax law. The Company is able to recover input sales tax on substantially all of the purchases of the Grain division. The Company is always therefore in a net recovery position of IVA in respect of its Grain operations. To date the Company has succeeded in recovering a portion of the IVA balance from prior years from the Mozambique Government amounting to $0.8m, while the remaining historical IVA balance has been fully provided for. As at 31 March 2020, the gross and net IVA recoverable assets are respectively $ 0.1 million (31 March 2019: $1,046,000) and $nil (31 March 2019: $nil) at the US$ to Metical exchange rate of 67.45 (31 March 2019: 63.73) at that date.

5. Segment reporting

The Board considers that the Company's operating activities comprise the segments of Grain and Beef and which are undertaken in Africa. In addition, the Company 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 Company's revenue and results by operating segment:

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

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 2020 and capital expenditure for the year then ended are as follows:

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

The segment assets and liabilities at 31 March 2019 and capital expenditure for the year then ended are as follows:

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

Key performance Indicator

The Board considers that earnings before interest, tax, depreciation and amortisation ("EBITDA") is a key performance indicator in measuring operational performance. It is calculated as follows: