Director's Report and Financial Statements
| 28 February 2020 |
Anglo African Agriculture plc
(“AAAP” or the “Company”)
DIRECTORS’ REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2019
Company Registration No. 07913053 (England and Wales)
Overview
The results today do not reflect the overall direction that AAA is heading in. It has been known over the last few years that AAA could operationally improve Dynamic Intertrade, despite this, Dynamic Intertrade on its own could not sustain a Plc listing. In order to diversify its revenue stream, 18 months ago in 2018, AAA announced a $1 million loan to Comarco Group and the subsequent intended acquisition of Comarco Group by means of a Reverse Takeover. During 2019, a large amount of work was expended to finalise the acquisition. AAA has assisted the management team of Comarco Group to re-organise and prepare themselves to have suitable controls and processes for a listed Company having been a family owned business for 38 years. This included the valuations of all Comarco Group assets, audited review of all the financial accounts and the preparation and publication of a Share Registration Document in anticipation of the finalisation of the transaction and the associated equity fundraise.
A combination of macroeconomic uncertainty resulting from the UK General Election and Brexit as well as institutional capital flight from the small cap market resulting from the demise of Woodford Investment Management together created difficult capital market conditions to raise the capital required to complete the RTO. During the course of marketing Comarco Group globally, significant interest was raised from major Private Equity firms and Strategic Port operators. Conversations are currently underway and I am pleased on the ongoing progress. The impact of such a structure would mean less dilution for AAA shareholders and yet still provide material exposure to the growth of the port and marine logistic businesses.
However, this does mean that the transaction will follow a different structure than originally anticipated and will require further time for due diligence to be conducted by the interested parties but to re-iterate, I believe ultimately, the future of AAA is aligned to the Comarco Group. AAA and the management of Comarco Group continue to believe that a listing is strategically important and also wishes to deliver the value of the Port and its associated operations to the AAA shareholders. The intention is thus to simultaneously continue with the originally intended acquisition by way of a traditional public equity raise but also consider expanded structures where private equity or strategic investors may invest in the Comarco Group assets at an asset level alongside AAA.
The transaction long stop date was initially 31 December 2019, however AAA and Comarco Group have agreed to extend the long stop date to 31 March 2020 and this demonstrates the commitment from both sides to work together to consummate this alignment. During the course of AAA’s assistance to Comarco Group, the Comarco Port has achieved a major milestone of being gazetted which is the authorisation by the Kenyan Port Authority to import and export goods that it previously did not have the authority for. In Mozambique, a world class Liquefied Natural Gas project has at long last been initiated and the project has an exceptionally strong necessity for barges and landing craft. Project mobilization has started to take place and the large scale on-shore and off-shore construction work should provide a huge boost to the marine logistics revenue of Comarco Group for the coming 10 years.
As we stand today, AAA’s primary operations and source of revenue remains Dynamic Intertrade, our Cape Town based spice trader.. The objectives of the past financial year remained focussed on value-added products and the expanded market opportunities that arose, in conjunction with targeted approaches to specific major food manufacturers who would be able to provide long term stability for our product lines. Group turnover for the year improved by 4.3% in Pound Sterling (8.2% in local currency). Group operating losses reduced from £558,417 in 2018 to £271,339 for the current year. This has been achieved despite a very difficult economy in South Africa.
The primary contributors to the group loss for 2019 were the transaction fees associated with the Comarco Group transaction, which amounted to £224,798 for the year, this is an investment for the future of AAA.
George Roach resigned during the course of the year. I would like to thank George for his service to AAA. I would also like to take this opportunity to thank our shareholders, directors, staff and consultants and customers for their continued support.
David Lenigas
Non-Executive Chairman
Directors and Advisors
Directors: David Lenigas
Robert Scott
Andrew Monk
Matthew Bonner
Secretary: Stephen Clow
Company Number: 07913053
Registered Address: New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Head Office New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Financial Advisor and Broker VSA Capital Limited
New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Auditors Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
Solicitors to the Company Keystone Law
48 Chancery Lane
London
WC2A 1JF
Registrars Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
West Midlands
B62 8HD
Overview
The primary objective of the strategic report is to provide information for the shareholders and help them to assess how the directors have performed their duty, under section 172 of the Act, to promote the success of the company and to provide context for the related financial statements.
The duty of a director, as set out in section 172 of the Act, is to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with suppliers, customers and others;
(d) the impact of the company's operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly as between members of the company'.
Review of the Group’s Business
Dynamic Intertrade (Pty) Ltd (“Dynamic”) is based in Cape Town, South Africa and is involved in the importation, milling, blending and packaging of products that include herbs, spices, seasonings and confectionary for both the domestic and export markets.
Dynamic recorded an increase in top line revenue of 4.34% to £1.8 million (2018: a decrease of 18% to £1.7 million) This increase was partly due to a general price increase to our customers for our core spice lines of commodity paprika and chilli-based products as well as our value-added blended products.
Gross profits decreased by 3.41% to £598,894 (2018: increase of 19.8% to £620,048) (ZAR10,95 million (2018: ZAR10,93 million)) and represents a 32.9% gross margin (2018: 35.6%) mainly as a result of an exchange rate that averaged ZAR18.28: £1.00 for the year (2018: ZAR17.68: £1.00) together with increased economic and market pressures that the South African economy faces.
Underlying losses for the year decreased to £271,339 (2018: £558,417). This was primarily due to cost cutting initiatives implemented in prior years in both the Dynamic Intertrade and the holding company. Admission and regulatory expenses of £249,798 (2018: £276,306) were incurred during the year. These charges primarily related to the Comarco transaction.
During the year, as part of the Comarco transaction, the company consolidated its issued share capital on a 20:1 basis, whereby every 20 shares held were consolidated into 1 new share. Basic and diluted loss per share from continuing operations for the year was (1.94p).
Financing
During the year, the company consolidated the number of shares in issue on the basis of 20 existing shares for 1 new share. No new convertible loan notes were issued. There were no other changes to the capital structure of the holding company.
During the course of the year Dynamic Intertrade signed agreements for new working capital loans. This was done as their existing funders decided to wind their lending down. The new facility is R2.5m larger than the old facility and should give it the opportunity to increase its stock holding holding and improve working capital management.
Acquisition Strategy
The Directors’ strategy is to develop the business of the Group both organically and by acquisition. It is intended that the Company completes the Comarco Group acquisition before embarking on any other future acquisitions.
Key Performance Indicators
| 31 October | 31 October | |||
| 2019 | 2018 | |||
| £ | £ | |||
| Turnover | 1,819,552 | 1,743,772 | ||
| Gross Profit | 598,894 | 620,048 | ||
| Cash on hand and in bank | 5,218 | 945,823 | ||
| Underlying operating loss | (271,467) | (558,416) |
Principal Risks and Uncertainties
The Directors consider the following risk factors to be of relevance to the Group’s activities. It should be noted that the list is not exhaustive and that other risk factors not presently known or currently deemed immaterial may apply. The risk factors are summarised below:
i. Development Risk
The Group’s development will be, in part, dependent on the ability of the Directors to continue to improve the current business, to complete the Comarco transaction and to identify suitable investment opportunities and to implement the Group’s strategy. There is no assurance that the Group will be successful in acquiring suitable investments.
ii. Sector Risk
The agriculture sector is a highly competitive market and many of the competitors will have greater financial and other resources than the Company and as a result may be in a better position to compete for opportunities.
The development of agricultural enterprises involves significant uncertainties and risks including unusual climatic conditions such as drought, improper use of pesticides, availability of labour and seasonality of produce, any one of which could result in damage to, or destruction of crops, environmental damage or pollution. Each of these could have a material adverse impact on the business, operations and financial performance of the Group.
The market price of agricultural products and crops is volatile and affected by numerous factors which are beyond the Group’s control. These include international supply and demand, the level of consumer product demand, international economic trends, currency exchange rate fluctuations, the level of interest rates, the rate of inflation, global or regional political events, as well as a range of other market forces. Sustained downward movements in agricultural prices could render less economic, or un-economic, any development or investing activities to be undertaken by the Group. Certain agricultural projects involve high capital costs and associated risks. Unless such projects enjoy long term returns, their profitability will be uncertain resulting in potentially high investment risk.
The marine industry in east Africa has proved to be quite cyclical and although there appears to be an improvement in the prospects it is possible that the cycle could turn negative.
iii. Political and Regulatory Risk
African countries experience varying degrees of political instability. There can be no assurance that political stability will persist in those countries where the Group may have operations going forward. In the event of political instability or changes in government policies in those countries where the Group may operate, the operations and financial condition of the Group could be adversely affected.
iv. Environmental Risks and Hazards
All phases of the Group’s operations are subject to environmental regulation in the areas in which it operates. Environmental legislation is evolving in a manner that may require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees.
There is no assurance that existing or future environmental regulation will not materially adversely affect the Group’s business, financial condition and results of operations. Environmental hazards may exist on the properties on which the Group holds interests that are unknown to the Group at present. The Board manages this risk by working with environmental consultants and by engaging with the relevant governmental departments and other concerned stakeholders.
v. Internal Control and Financial Risk Management
The Board has overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness. The Group maintains systems which are designed to provide reasonable but not absolute assurance against material loss and to manage rather than eliminate risk.
- The key features of the Group’s systems of internal control are as follows:
- Management structure with clearly identified responsibilities;
- Production of timely and comprehensive historical management information presented to the Board;
- Detailed budgeting and forecasting;
- Day to day hands on involvement of the Executive Director and Senior Management; and
- Regular board meetings and discussions with the Non-executive directors.
The Group’s activities expose it to several financial risks including cash flow risk, liquidity risk and foreign currency risk.
vi. Environmental Policy
The Group is aware of the potential impact that its subsidiary and associate companies may have on the environment. The Group ensures that it complies with all local regulatory requirements and seeks to implement a best practice approach to managing environmental aspects.
The wholly owned subsidiary, Dynamic Intertrade operates a Food Safety System Certification (“FSSC”) compliant facility in Cape Town. The FSSC provides a framework for effectively managing the organization's food safety responsibilities and is fully recognized by the Global Food Safety Initiative (GFSI) and is based on existing ISO Standards.
vii.Health and Safety
The Group’s aim is to achieve and maintain a high standard of workplace safety. In order to achieve this objective, the Group provides ongoing training and support to employees and sets demanding standards for workplace safety.
viii. Financing Risk
The development of the Group’s business may depend upon the Group’s ability to obtain financing primarily through the raising of new equity capital or debt. The Group’s ability to raise further funds may be affected by the success of existing and acquired investments. The Group may not be successful in procuring the requisite funds on terms which are acceptable to it (or at all) and, if such funding is unavailable, the Group may be required to reduce the scope of its investments or the anticipated expansion. Further, Shareholders’ holdings of Ordinary Shares may be materially diluted if debt financing is not available.
ix. Credit Risk
The directors' have reviewed the forecasts prepared by both AAA and Dynamic and believe that Dynamic has adequate resources available to meet its obligations to make capital repayments of the loan to AAA.
If Dynamics’ trading performance is below that forecast, AAA will exercise a degree of flexibility on the repayment timetable. With the Dynamic turnover increasing and the Group forecasting profitability there is no requirement for any impairment charge.
x. Liquidity Risk
The Directors have reviewed the working capital requirements of AAA, Dynamic Intertrade and DIA and believe that, following stress tests and variance analysis on the forecasts, there is sufficient working capital to fund the business while expanding turnover and achieving sustainable profitability. The directors further highlight the inherent uncertainties involved in making the assessment that the entity is a going concern.
xi.Market Risk
The group’s investments in an associate company comprise a non-controlling shareholding in an unlisted company. The shares are not readily tradable, and any monetisation of the shares is dependent on finding a willing buyer.
xii.Capital Risk
The Group manages its capital resources to ensure that entities in the Group will be able to continue as a going concern, while maximising shareholder return.
The capital structure of the Group consists of equity attributable to shareholders, comprising issued share capital and reserves. The availability of new capital will depend on many factors including a positive operating environment, positive stock market conditions, the Group’s track record, and the experience of management. There are no externally imposed capital requirements. The Directors are confident that adequate cash resources exist or will be made available to finance operations and controls over expenditure are carefully managed.
Going Concern
These consolidated financial statements are prepared on the going concern basis. The going concern basis assumes that the Group will continue in operation for the foreseeable future and will be able to realise its assets and discharge its liabilities and commitments in the normal course of business. The Group has incurred significant operating losses and negative cash flows from operations as the Group continued to improve its operations during the year under review.
During the year, the Group raised no additional equity funding. In the prior year the group raised £935,374 in gross funding through share subscriptions to fund working capital and in the latter part of the previous year, as announced, to fund a loan to Comarco.
The Directors have prepared cash flow forecasts for the period ended 28 February 2021, considering forecast operating cash flows and capital expenditure requirements for the Company and Dynamic Intertrade, available working capital and forecast expenditure for the rest of the Group including overheads and other costs. The forecasts include additional funding requirements which the directors believe will be met.
If Dynamic Intertrade fails to meet revenue predictions and any other relevant risk factors arise, the Group will need to obtain additional debt finance or equity to fund its operations for the period to 28 February 2021. The cash flow forecast is dependent on production targets being met at Dynamic Intertrade, maintaining the invoice financing arrangements, generating future sales and the selling prices remaining stable during the period to 28 February 2021.
After careful consideration of the matters set out above, the Directors are of the opinion that the Group will be able to undertake its planned activities for the period to 28 February 2021 from production and from additional fund raising and have prepared the consolidated financial statements on the going concern basis. Nevertheless, due to the uncertainties inherent in meeting its revenue predictions and obtaining additional fund raising there can be no certainty in these respects. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.
On behalf of the Board
David Lenigas, Chairman
The Directors present their Report and Financial Statements for the year ended 31 October 2019.
Principal Activities
The principal activity of the Group in the year was investing and trading in the agriculture and ancillary sectors in Africa.
Emissions
The group is not an intensive user of fossil fuels or electricity. As a result, it is impractical to determine the carbon emissions with any degree of accuracy.
Investing Policy
AAA was established to invest in or acquire companies engaged in the agriculture and ancillary sectors in Africa. The Directors intend to use their collective experience to identify appropriate investment opportunities in the production, transportation and trading of food products.
Directors
The following Directors have held office in the year:
David Lenigas
Andrew Monk
George Roach (resigned 29 August 2019)
Robert Scott
Matthew Bonner
David Lenigas, Non-Executive Chairman
David Lenigas is an experienced executive and entrepreneur with a wide range of board experience in both public and private companies. He has an extensive knowledge of the African food manufacturing, processing and marketing sector having previously served as the Executive Chairman of Lonrho Plc and is currently the Executive Chairman of food logistics and marketing group AfriAg Global Plc.
Andrew Monk, Non- Executive Director
Andrew has a successful stock broking career spanning 33 years. In that time, he has built up strong relationships with many major UK institutions. He was employed by Hoare Govett ABN AMRO for 11 years before founding Oriel Securities as Joint CEO. Andrew later became CEO of Blue Oar Plc, and Chief Executive of VSA Capital, an investment banking and institutional broking firm.
Robert Scott, Executive Director
Rob has over 20 years of finance experience, with the last ten years specifically focused in Africa within the mining industry and general investments. He has held executive and senior positions with several companies, as well as having served on both public and private company boards. He has been involved in companies with locations in South Africa, Angola, Mozambique, Zimbabwe, DRC, CAR, Tanzania, Kenya and Namibia amongst others. Rob has also previously been involved in mining, hotels, agriculture and construction industries.
Matthew Bonner, Non-Executive Director
Matthew Bonner has significant financial leadership experience within the mining, energy and agriculture sectors. He is currently Chief Operating Officer at EAS Advisors LLC, a New York based corporate advisory firm focused on supporting public and private companies operating in the natural resource and commodity sectors in emerging markets.
Directors’ remuneration, shareholding and options
The Directors’ remuneration in the year ended 31 October 2019 is set out in note 8 of the accounts.
Shareholding
As at 17 February 2020, the Directors of the Company held the following shares:
| Shareholding | ||||
| 2019 | 2019 | 2018 | 2018 | |
| Director | Shareholding | Percentage of the Company’s Ordinary Share Capital | Shareholding | Percentage of the Company’s Ordinary Share Capital |
| George Roach (resigned)* | 1,687,567 | 8.7% | 33,751,333 | 8.7% |
| David Lenigas | 1,119,400 | 5.8% | 22,388,000 | 5.8% |
| Andrew Monk** | 606,338 | 3.1% | 12,126,761 | 3.1% |
| Robert Scott | 84,654 | 0.4% | 1,693,078 | 0.4% |
| Matthew Bonner | 37,331 | 0.2% | 746,629 | 0.2% |
* 814,432 of these shares are held by or on behalf of Corestar Holdings Ltd and 250,000 of these shares are held by or on behalf of Coc’Roach Limited. Corestar Holdings Ltd is a BVI company which is wholly-owned by the Corestar Trust, a trust established for the furtherance of certain purposes which could include the provision of benefits to George Roach and his family, at the discretion of the trustees of the trust. Coc’roach Limited is owned by the Coc’roach Trust. The Coc’roach Trust is a partial discretionary trust pursuant to the terms of which George Roach and his family may fall within the class of potential beneficiaries.
** Andrew Monk’s entire shareholding is held within his SIPP (Fitel Nominees Limited) and Hargreave Hale Limited
Share options
As at 17 February 2020 the Directors share options were:
| 2019 | 2019 | 2018 | 2018 | |
| Options at 20p | Options @ 11p | Options at 1p | Options @ 0.55p | |
| Director | (expiring 5 September 2022) |
(expiring 5 September 2022) |
(expiring 5 September 2022) |
(expiring 5 September 2022) |
| George Roach (resigned) | 91,952 | 100,000 | 1,839,046 | 2,000,000 |
| Andrew Monk | 91,952 | 100,000 | 1,839,046 | 2,000,000 |
| Robert Scott | 50,000 | - | 1,000,000 | - |
| Matthew Bonner | 180,000 | - | 3,600,000 | - |
| Total | 413,904 | 200,000 | 8,278,092 | 4,000,000 |
The total warrants and share options outstanding at 31 October 2019 were 9,235,875 (2018 – 184,717,514). Refer to note 25 for more detail.
Dividends
No dividends will be distributed for the current year (2018 - nil).
Supplier Payment Policy
It is the Group’s payment policy to pay its suppliers in conformance with industry norms. Trade payables are paid in a timely manner within contractual terms, which is generally 30 to 45 days from the date an invoice is received.
Substantial Interests
The Group has been informed of the following shareholdings that represent 3% or more of the issued Ordinary Shares of the Company as at 31 October 2019:
| 2019 | 2019 | 2018 | 2018 | |
| Shareholder | Shareholding | Percentage of the Company’s Ordinary Share Capital | Shareholding | Percentage of the Company’s Ordinary Share Capital |
| Lynchwood Nominees Limited | 5,468,567 | 28.2% | - | - |
| Vidacos Nominees Limited | 1,540,448 | 7.9% | - | - |
| Pershing Nominees Limited | 1,526,172 | 7.9% | 25,000,000 | 6.4% |
| HSBC Global Custody Nominee | 1,469,403 | 7.6% | 22,388,060 | 5.8% |
| Mike Joseph | - | - | 100,000,000 | 25.8% |
| JIM Nominees Limited | 1,081,196 | 5.6% | 20,774,839 | 5.4% |
| Interactive Investor Services Nominees Limited | 925,058 | 4.8% | - | - |
| CGWL Nominees Limited | 756,338 | 3.9% | - | - |
| Hargreaves Lansdown (Nominees) Limited | 691,716 | 3.6% | - | - |
| Barclays Direct Investing Nominees Limited | 639,447 | 3.3% | - | - |
| Hargreave Hale Nominees Limited | - | - | 15,126,761 | 3.9% |
The Group has been informed of the following shareholdings that represent 3% or more of the issued Ordinary Shares of the Company as at 17 February 2020:
| Shareholder | Shareholding | Percentage of the Company’s Ordinary Share Capital |
| Lynchwood Nominees Limited | 5,468,567 | 28.2% |
| Vidacos Nominees Limited | 1,532,671 | 7.9% |
| Pershing Nominees Limited | 1,526,172 | 7.9% |
| HSBC Global Custody Nominee (Uk) Limited | 1,469,403 | 7.6% |
| JIM Nominees Limited | 1,082,397 | 5.6% |
| Interactive Investor Services Nominees Limited | 885,201 | 4.6% |
| Barclays Direct Investing Nominees Limited | 779,480 | 4.0% |
| CGWL Nominees Limited | 756,338 | 3.9% |
| Hargreaves Lansdown (Nominees) Limited | 683,202 | 3.5% |
Auditors
Jeffreys Henry LLP has expressed its willingness to continue in office and a resolution to reappoint them will be proposed at the Annual General Meeting.
Post Balance Sheet Events
Further information on events after the reporting date is set out in note 32.
The Directors’ have chosen to produce a Strategic Report that discloses a fair review of the Group’s business, the key performances metrics that the Directors review along with a review of the key risks to the business.
Strategic Report
In accordance with Section 414C (1) of the Companies Act 2006, the group chooses to report the review of the business, the outlook and the risk and uncertainties faced by the Company in The Strategic report on page 6 to 10.
On Behalf of the Board
David Lenigas, Chairman
Remuneration Committee
The remuneration committee consists of Andrew Monk and George Roach, prior to his resignation on 29 August 2019. This committee's primary function is to review the performance of executive directors and senior employees and set their remuneration and other terms of employment.
The committee is also responsible for administering any share option schemes. The table indicates share options held by the current directors, directors of the subsidiary and former directors of the company.
| 2019 | 2019 | 2018 | 2018 | |
| Director | Warrants | Options | Warrants | Options |
| George Roach | - | 191,952 | - | 3,839,046 |
| Andrew Monk | - | 191,952 | - | 3,839,046 |
| Robert Scott | - | 50,000 | - | 1,000,000 |
| Mark Nielsen | - | - | - | 3,000,000 |
| Matthew Bonner | - | 180,000 | - | 3,600,000 |
| Totals | - | 613,904 | - | 15,278,092 |
The above options have been consolidated on the basis of 1 new option for 20 existing options in line with the share consolidation.
The Company has one executive director.
The remuneration policy
It is the aim of the committee to remunerate executive directors competitively and to reward performance. The remuneration committee determines the company's policy for the remuneration of executive directors, having regard to the UK Corporate Governance Code 2018.
Service agreements and terms of appointment
The directors have service contracts with the company.
Directors' interests
The directors' interests in the share capital of the company are set out in the Directors’ report.
Directors' emoluments
| Salaries and Fees | Group | Group | Company | Company |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| David Lenigas | 12,000 | 12,000 | 12,000 | 12,000 |
| George Roach (resigned) | 10,000 | 12,000 | 10,000 | 12,000 |
| Robert Scott | 12,000 | 12,000 | 12,000 | 12,000 |
| Andrew Monk * | 13,896 | 13,696 | 13,896 | 13,696 |
| Matt Bonner | 12,000 | 12,000 | 12,000 | 12,000 |
| 59,896 | 61,696 | 59,896 | 61,696 |
* Included in Andrew Monk’s remuneration is £1,896 for National Insurance.
No pension contributions were made by the company on behalf of its directors.
At the year-end a total of £158,006 (2018: £98,110) was outstanding in respect of directors’ emoluments.
Statement of Comprehensive Income
| Group | Group | Company | Company | ||
| Year ended | Year ended | Year ended | Year ended | ||
| 31 October | 31 October | 31 October | 31 October | ||
| Notes | 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | ||
| Revenue from Contracts with Customers | 6 | 1,819,552 | 1,743,772 | - | - |
| Cost of Sales | (1,220,658) | (1,123,724) | - | - | |
| Gross Profit | 598,894 | 620,048 | - | - | |
| Other Income | 7 | 848 | 54 | - | - |
| Share of profit/(loss) of associate | - | 6,933 | - | 6,933 | |
| Administrative expenses | 10 | (621,411) | (909,145) | (178,778) | (250,629) |
| Admission expenses | 10 | (249,798) | (276,306) | (249,798) | (276,306) |
| Operating loss | (271,467) | (558,416) | (428,576) | (520,002) | |
| Finance costs | 11 | (114,034) | (14,958) | (30,000) | (3,863) |
| Finance income | 12 | 100,836 | - | 111,807 | - |
| Loss for the year from continuing operations | (284,665) | (573,374) | (346,769) | (523,865) | |
| Tax on loss on ordinary activities | 13 | - | - | - | - |
| Loss for the year from continuing operations | (284,665) | (573,374) | (346,769) | (523,865) | |
| Other Comprehensive Income impairment of investment in associate | 15 | (90,825) | - | (90,825) | - |
| Total comprehensive loss for the year from continuing operations | (375,490) | (573,374) | (437,594) | (523,865) | |
| Loss attributable to ordinary shareholders | (284,665) | (573,374) | (346,769) | (523,865) | |
| Total comprehensive loss attributable to ordinary shareholders | (375,490) | (573,374) | (437,594) | (523,865) | |
| Basic and diluted earnings per share | 14 | (1.47p) | (0.26p) |
All amounts relate to continuing operations.
Company Statement of Changes in Equity
| Group | Share Capital | Share Premium | Share Based Payments Reserve | Retained Earnings | Total Equity |
| £ | £ | £ | £ | £ | |
| Balance at 1 November 2017 | 206,984 | 1,765,535 | 16,445 | (1,847,545) | 141,419 |
| Share Issue | 181,000 | 754,374 | - | - | 935,374 |
| Share based payments reserve | - | - | 66,932 | - | 66,932 |
| Loss for the year | - | - | - | (573,374) | (573,374) |
| Balance at 31 October 2018 | 387,984 | 2,519,909 | 83,377 | (2,420,919) | 570,351 |
| Loss for the year | - | - | - | (284,665) | (284,665) |
| Other comprehensive loss | - | - | - | (90,825) | (90,825) |
| Balance at 31 October 2019 | 387,984 | 2,519,909 | 83,377 | (2,796,409) | 194,861 |
Share capital is the amount subscribed for shares at nominal value.
The share premium has arisen on the issue of shares at a premium to their nominal value.
Share-based payments reserve relate to the charge for share-based payments in accordance with IFRS 2.
Retained earnings represent the cumulative loss of the Group attributable to equity shareholders.
| Company | Share Capital | Share Premium | Share Based Payments Reserve | Retained Earnings | Total Equity |
| £ | £ | £ | £ | £ | |
| Balance at 1 November 2017 | 206,984 | 1,765,535 | 16,445 | (887,763) | 1,101,201 |
| Share based payments reserve | - | - | 66,932 | - | 66,932 |
| Share Issue | 181,000 | 754,374 | - | - | 935,374 |
| Loss for the year | - | - | - | (523,865) | (523,865) |
| Balance at 31 October 2018 | 387,984 | 2,519,909 | 83,377 | (1,411,628) | 1,579,642 |
| Loss for the year | - | - | - | (346,769) | (346,769) |
| Other comprehensive loss | - | - | - | (90,825) | (90,825) |
| Balance at 31 October 2019 | 387,984 | 2,519,909 | 83,377 | (1,849,222) | 1,142,048 |
Statement of Financial Position
| Group | Group | Company | Company | ||
| Notes | 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | ||
| Assets | |||||
| Non-Current Assets | |||||
| Investment in Subsidiaries | 15 | - | - | 297,915 | 297,915 |
| Investment in Associate | 15 | - | 96,979 | - | 96,979 |
| Long Term Intercompany Loans | 16 | - | - | 842,437 | 831,338 |
| Property, Plant and Equipment | 17 | 30,838 | 53,555 | - | - |
| Goodwill | 18 | 226,644 | 226,644 | - | - |
| Loan receivable | 19 | 871,579 | - | 871,579 | - |
| Total Non-Current Assets | 1,129,061 | 377,178 | 2,011,931 | 1,226,232 | |
| Current Assets | |||||
| Investment in Associate (held for sale) |
15 | 6,154 | - | 6,154 | - |
| Inventories | 20 | 67,359 | 118,978 | - | - |
| Trade and Other Receivables | 21 | 422,775 | 468,679 | 25,662 | 41,915 |
| Cash and Cash Equivalents | 22 | 5,218 | 945,823 | 4,383 | 944,094 |
| Total Current Assets | 501,506 | 1,533,480 | 36,199 | 986,009 | |
| Total Assets | 1,630,567 | 1,910,658 | 2,048,130 | 2,212,241 | |
| Equity and Liabilities | |||||
| Share Capital | 24 | 387,984 | 387,984 | 387,984 | 387,984 |
| Share Premium Account | 24 | 2,519,909 | 2,519,909 | 2,519,909 | 2,519,909 |
| Share-Based Payments Reserve | 25 | 83,377 | 83,377 | 83,377 | 83,377 |
| Retained Earnings | (2,796,409) | (2,420,919) | (1,849,222) | (1,411,628) | |
| Total Equity | 194,861 | 570,351 | 1,142,048 | 1,579,642 | |
| Non-Current Liabilities | |||||
| Borrowings | 26 | 363,091 | 91,898 | 10,000 | - |
| Convertible Loan Notes | 27 | 250,000 | 253,863 | 250,000 | 253,863 |
| Total Non-Current Liabilities | 613,091 | 345,761 | 260,000 | 253,863 | |
| Current Liabilities | |||||
| Trade and Other Payables | 23 | 822,615 | 994,546 | 646,082 | 378,736 |
| Total Current Liabilities | 822,615 | 994,546 | 646,082 | 378,736 | |
| Total Equity and Liabilities | 1,630,567 | 1,910,658 | 2,048,130 | 2,212,241 | |
Approved by the Board and authorised for issue on 27 February 2020.
Statement of Cash Flow
| Group | Group | Company | Company | ||
| Year ended | Year ended | Year ended | Year ended | ||
| 31 October | 31 October | 31 October | 31 October | ||
| Notes | 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | ||
| Cash flows from operating activities | |||||
| Operating loss | (271,467) | (558,416) | (428,576) | (520,002) | |
| Add: Depreciation | 17 | 24,245 | 48,993 | - | - |
| Add: Foreign exchange movements | 17 | 830 | 14,347 | - | - |
| Add: Share Based Payments Reserve | - | 66,932 | - | 66,932 | |
| Add: (Profit)/loss on disposal of property, plant and equipment | (128) | 32,194 | - | - | |
| Add: (Loss) from equity accounted investment | - | (6,933) | - | (6,933) | |
| Finance costs | (114,034) | (14,958) | (30,000) | - | |
| Interest received | 100,836 | 1 | 111,807 | - | |
| Changes in working capital | |||||
| Decrease in inventories | 51,619 | 84,804 | - | - | |
| (Increase) / decrease in receivables | 45,904 | (88,264) | 16,253 | (23,445) | |
| (Decrease) / increase in payables | (175,794) | 22,848 | 263,483 | 234,133 | |
| Net cash flow from operating activities | (337,989) | (398,452) | (67,033) | (249,315) | |
| Investing Activities | |||||
| Acquisition of property, plant and equipment | 17 | (2,411) | (8,949) | - | - |
| Disposal of property, plant and equipment | 17 | 181 | - | - | - |
| Increase in Intercompany Loans Receivable | - | - | (11,099) | (36,499) | |
| Loans Receivable advanced | 19 | (871,579) | - | (871,579) | - |
| Net cash flow from investing activities | (873,809) | (8,949) | (882,678) | (36,499) | |
| Cash flows from financing activities: | |||||
| Net proceeds from issue of shares | - | 935,374 | - | 935,374 | |
| Convertible loan notes issued | 27 | - | 250,000 | - | 250,000 |
| Increase in borrowings | 271,193 | 91,898 | 10,000 | 1,235 | |
| Net cash flow from financing activities | 271,193 | 1,277,272 | 10,000 | 1,186,609 | |
| Net cash flow for the period | (940,605) | 869,871 | (939,711) | 900,795 | |
| Opening Cash and cash equivalents | 945,823 | 75,952 | 944,094 | 43,299 | |
| Closing Cash and cash equivalents | 5,218 | 945,823 | 4,383 | 944,094 | |
General Information
Anglo African Agriculture plc is a company incorporated in the United Kingdom. Details of the registered office, the officers and advisors to the Company are presented on the Directors and Advisors page at the beginning of this report. The Company has a standard listing on the London Stock Exchange main market. The information within these financial statements and accompanying notes have been prepared for the year ended 31 October 2019 with comparatives for the year ended 31 October 2018.
1.Changes in significant accounting policies
The Group has initially applied IFRS 15 (see 2.a below) and IFRS 9 (see 2.b below) from 1 January 2018. A number of other new standards are also effective from 1 January 2018, but they do not have a material effect on the Group’s financial statements.
Due to the transition methods chosen by the Group in applying these standards, comparative information throughout these financial statements has not been restated to reflect the requirements of the new standards. There is no effect of initially applying these standards.
a. IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. Under IFRS 15, revenue will be recognised when a customer obtains control of the goods. Determining the timing of the transfer of control, at a point in time or over time, requires judgement.
The Group has adopted IFRS 15 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly, the information presented for 2018 has not been restated, i.e. it is presented as previously reported under IAS 18, IAS 11 and related interpretations. Additionally, the disclosure requirements in IFRS 15 have been applied to the comparative information.
Sales of goods
For the sale of goods, revenue was previously recognised when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue was recognised at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods.
Under IFRS 15, revenue will be recognised when a customer obtains control of the goods, which for the sale of goods is when the goods is delivered to the customer’s premises. Accordingly there is no impact of IFRS 15 on the prior year figures, as all contracts are concluded once the customer takes delivery of the products sold.
IFRS 15 had no impact on the consolidated statements of financial position nor the consolidated statement of profit and loss and other comprehensive income for the year ended 31 October 2018 or 31 October 2019.
IFRS 15 requires additional disclosure in terms of the sources of revenue as follows:
| 2018 | 2017 | |||
| £ | £ | |||
| Major product/service lines | ||||
| Sale of goods | 1,743,772 | 2,126,797 | ||
| Total revenue | 1,743,772 | 2,126,797 | ||
| Primary Geographical Markets | ||||
| Africa | 1,743,772 | 2,126,797 | ||
| 1,743,772 | 2,126,797 | |||
| Timing of revenue recognition | ||||
| Products transferred at a point in time | 1,743,772 | 2,126,797 | ||
| 1,743,772 | 2,126,797 |
Sale of goods: Under IAS 18, revenue was recognised when the significant risks and rewards of ownership had been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods and the amount of revenue could be measured reliably. Revenue was measured net of returns, trade discounts and volume rebates. The timing of the transfer of risks and rewards varied depending on the individual terms of the sales agreement.
b. IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement.
As a result of the adoption of IFRS 9, the Group has adopted consequential amendments to IAS 1 Presentation of Financial Statements, which require impairment of financial assets to be presented in a separate line item in the statement of profit or loss and other comprehensive income. Previously, the Group’s approach was to include the impairment of trade receivables in other expenses. Impairment losses on other financial assets are presented under “finance costs”, similar to the presentation under IAS 39, and not presented separately in the statement of profit or loss and other comprehensive income due to materiality considerations.
Additionally, the Group has adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but have not been generally applied to comparative information.
- Classification and measurement of financial assets and financial liabilities
IFRS 9 contains three principle classifications of financial assets, namely 1) measured at amortised costs; 2) Fair value through other comprehensive income (FVOCI) and 3) fair value through profit and loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale. Under IFRS 9 derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the financial instrument as a whole is assessed for classification.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.
The adoption of IFRS 9 has not had a significant effect on the Group’s accounting policies related to financial liabilities and derivative financial instruments. The adoption by the Group of IFRS 9 did not require any changes to the amount or classification of any financial instruments.
For an explanation of how the Group classifies and measures financial instruments and accounts for related gains and losses under IFRS 9, see Note 29.
The Group did not restate the carrying amounts of any financial assets or financial liabilities on 1 November 2017.
ii. Impairment of financial assets
IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected credit loss (ECL)” model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39, see Note 29.
For assets in the scope of the IFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile. The Group has determined that the application of IFRS 9’s impairment requirements at 1 November 2018 results in no additional impairment.
2.Basis of Preparation and Significant Accounting Policies
The consolidated financial statements of Anglo African Agriculture plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretations Committee and the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. This is the first set of the Group’s financial statements in which IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments have been applied. Changes to significant accounting policies are described in Note 2 above. The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Although these estimates are based on management’s experience and knowledge of current events and actions, actual results may ultimately differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised if the revision affects only that year or in the year of the revision and future year if the revision affects both current and future year.
a. Going Concern
These consolidated financial statements are prepared on the going concern basis. The going concern basis assumes that the Group will continue in operation for the foreseeable future and will be able to realise its assets and discharge its liabilities and commitments in the normal course of business. The Group has incurred significant operating losses and negative cash flows from operations as the Group continued to expand its operations during the year under review.
During the year, the Group raised £nil in gross funding through share subscriptions. In 2018, £1,055,000 was raised through share subscriptions to fund working capital and in the latter part of the prior year, as announced, to fund a loan to Comarco.
There remains an active and liquid market for the Group’s shares.
As at 31 October 2019 the Group held £5,218 (2018: £945,823) in cash and cash equivalents.
The Directors have prepared cash flow forecasts for the period ended 28 February 2021, considering forecast operating cash flows and capital expenditure requirements for Dynamic Intertrade, available working capital and forecast expenditure for the rest of the Group including overheads and other costs. The forecasts include additional funding requirements, which the directors believe will be met.
In the event that Dynamic Intertrade fails to meet revenue predictions and any other relevant risk factors arise, the Group will need to obtain additional debt finance or equity to fund its operations for the period to 28 February 2021. The cash flow forecast is dependent on production targets being met at Dynamic Intertrade, maintaining the invoice financing arrangements, generating future sales and the selling prices remaining stable during the period to 28 February 2021.
After careful consideration of the matters set out above, the Directors are of the opinion that the Group will be able to undertake its planned activities for the period to 28 February 2021 from production and from additional fund raising and have prepared the consolidated financial statements on the going concern basis. Nevertheless, due to the uncertainties inherent in meeting its revenue predictions and obtaining additional fund raising there can be no certainty in these respects. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.
b. New and Amended Standards Adopted by the Company
There are no IFRS and IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 November 2019 that would be expected to have a material impact on the Group.
Standards, Interpretations and Amendments to Published Standards which Are Not Yet Effective
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 November 2019 and have not been early adopted:
| Reference | Title | Summary | Application date of standard (Periods commencing on or after) |
| IFRS 16 | Leases | Original Issue | 1 November 2019 |
| IFRS 17 | Insurance Contracts | Establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. |
1 November 2021 |
The Directors anticipate that the adoption of these standards and the interpretations in future periods will not have a material impact on the financial statements of the Group.
c. 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 October each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 “Financial Instruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their fair value at the acquisition date, except that:
- Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
- Liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the Group are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and
- Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Joint Ventures and Associates
A joint venture is a contractual agreement under which two or more parties conduct an economic activity and unanimous approval is required for the financial and operating policies. Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding between 20% and 50% of the voting rights. Joint ventures and associates are accounted for using the equity method, which involves recognition in the consolidated income statement of AAA’s share of the net result of the joint ventures and associates for the year. Accounting policies of joint ventures and associates have been changed where necessary to ensure consistency with the policies adopted by the Group. AAA’s interest in a joint venture or associate is carried in the statement of financial position at its share in the net assets of the joint venture or associate together with goodwill paid on acquisition, less any impairment loss. When the share in the losses exceeds the carrying amount of an equity-accounted company (including any other receivables forming part of the net investment in the company), the carrying amount is written down to nil and recognition of further losses is discontinued, unless we have incurred legal or constructive obligations relating to the company in question.
d. Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to write off their cost over their estimated useful lives at the following annual rates:
| Leasehold improvements | 33.3% |
| Furniture, fixtures and equipment | 17% |
| Plant and machinery | 20% and 33.3% |
Useful lives and depreciation method are reviewed and adjusted if appropriate, at the end of each reporting year.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the relevant asset and is recognised in profit or loss in the year in which the asset is derecognised.
e. Investments in Subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
f. Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using specific identification and in the case of work in progress and finished goods, comprises the cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and applicable selling expenses.
When the inventories are sold, the carrying amount of those inventories is recognised as an expense in the year in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the year in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as an expense in the year in which the reversal occurs.
g. Impairment
Policy applicable after 1 November 2018
Non-derivative financial assets
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is “credit-impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial assets have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or being more than 90 days past due;
• the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
• it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.
A 12 months approach is followed in determining the Expected Credit Loss (“ECL”).
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures of recovery of the amounts due.
h. Financial Instruments
The Group classifies non-derivative financial assets into the following categories: loans and receivables and FVTPL and FVTOCI financial assets.
The Group classifies non-derivative financial liabilities into the following category: other financial liabilities.
i. Non-derivative financial assets and financial liabilities – Recognition and derecognition
The Group initially recognises loans and receivables on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Gains or losses on derecognition of financial liabilities are recognised in profit or loss as a finance charge.
Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
ii. Loans and receivables- Measurement
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.
iii. Assets at FVOCI - Measurement
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in OCI and accumulated in the revaluation reserve.
When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
iv. Non-derivative financial liabilities – Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
v. Convertible loan notes and derivative financial instruments
The presentation and measurement of loan notes for accounting purposes is governed by IAS 32 and IAS 39. These standards require the loan notes to be separated into two components:
• A derivative liability, and
• A debt host liability.
This is because the loan notes are convertible into an unknown number of shares, therefore failing the ‘fixed-for-fixed’ criterion under IAS 32. This requires the ‘underlying option component’ of the loan note to be valued first (as an embedded derivative), with the residual of the face value being allocated to the debt host liability (refer financial liabilities policy above).
Compound financial instruments issued by the Group comprise convertible notes denominated in British pounds that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.
The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured.
Interest related to the financial liability is recognised in profit or loss. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised.
The Group’s financial liabilities include amounts due to a director, trade payables and accrued liabilities. These financial liabilities are classified as FVTPL are stated at fair value with any gains or losses arising on re-measurement recognised in profit or loss. Other financial liabilities, including borrowings are initially measured at fair value, net of transaction costs.
i. Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date, in which case they are presented as non-current liabilities.
Borrowings are initially recorded at fair value, net of transaction costs and subsequently carried for at amortised costs using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the year of the borrowings using the effective interest method. Borrowings which are due to be settled within twelve months after the balance sheet date are included in current borrowings in the balance sheet even though the original term was for a period longer than twelve months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the balance sheet date and before the financial statements are authorised for issue.
j. Revenue Recognition
Performance obligations and service recognition policies
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over of goods or services to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.
| Type of product/ service | Nature and timing of satisfaction of performance obligations, including significant payment terms | Revenue recognition under IFRS 15 (applicable from 1 November 2018) |
|---|---|---|
| Sale of goods | Customers obtain control of the goods when the goods have been delivered top them and have been accepted at their premises or the agreed point of delivery. Invoices are generated at that point in time net of rebates and discounts. Invoices are generally payable within 30 days. No settlement discounts are provided for. The sale of the goods are not subject to a return policy. |
Revenue is recognised when the goods are delivered and have been accepted by the customers at their premises or the agreed point of delivery. |
| Interest revenue | Interest income is recognised in the income statement for all interest-bearing instruments (whether classified as held-to-maturity, FVTOCI, FVTPL, derivatives or other assets) on an accrual basis using the effective interest method based on the actual purchase price including direct transaction costs. | Once a financial asset has been written down to its estimated recoverable amount, interest income is thereafter recognised based on the effective interest rate that was used to discount the future cash flows for the purpose of measuring the recoverable amount. |
k. Cost of Sales
Cost of sales consists of all costs of purchase and other directly incurred costs.
Cost of purchase comprises the purchase price, import duties and other taxes (other than those subsequently recoverable by the Group from the taxing authorities), if any, and transport, handling and other costs directly attributable to the acquisition of goods. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Cost of conversion primarily consists of hiring charges of subcontractors incurred during conversion.
l. Finance Income and Finance Costs
The Group’s finance income and finance costs include:
• Interest income;
• Interest expense;
• Dividend income;
Interest income and expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.
The “effective interest rate” is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
• the gross carrying amount of the financial asset; or
• the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset, if the asset is no-longer credit-impaired, then the calculation of interest income reverts to the gross basis.
m. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting year.
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset realised. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting year, to recover or settle the carrying amount of its assets and liabilities.
Current or deferred tax for the year is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
n. Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.
o. Provisions and Contingencies
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the statement of financial position date and are discounted to present value where the effect is material. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
When the effect of discounting is material, the amount recognised for a provision is the present value at the reporting date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of comprehensive income.
Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable.
p. Share Capital
Ordinary shares are classified as equity. Proceeds from issuance of ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against share capital.
q. Foreign Currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting year, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical costs in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on translation of monetary items, are recognised in profit or loss in the year in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the year except for differences arising on the retranslation of non-monetary items in respect of which gains, and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.
For the purposes of presenting the consolidated financial statements, assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. South African Rand) at the rate of exchange prevailing at the end of the reporting year, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
The principal exchange rates during the year are set out in the table below:
| Rate compared to £ | Year End Rate 2019 | Year End Rate 2018 |
| South African Rand | 19.53 | 18.66 |
| US Dollar | 1.29 | 1.28 |
r. Finance Leases
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are treated as a reduction of the lease obligation on the remaining balance of the liability.
Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised. Contingent rentals are recognised as expenses in the years in which they are incurred.
s. Operating Leases
Where the Group has the use of assets held under operating leases, payment made under the leases are charged to profit or loss over the accounting years covered by the lease term except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting years in which they are incurred.
t. Employee Benefits
Salaries, annual bonuses, paid annual leave and the cost to the Group of non-monetary benefits are accrued in the year in which employees of the Group render the associated services. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.
u. Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive Director who makes strategic decisions.
3.Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the application of the Group’s accounting policies, which are described above, management is required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and assumptions that had a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below.
a. Inventory Valuation
Inventory is valued at the lower of cost and net realisable value. Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market conditions and the historical experience of selling products of a similar nature. It could change significantly as a result of competitors’ actions in response to severe industry cycles. The Group reviews its inventories in order to identify slow-moving merchandise and uses markdowns to clear merchandise. Inventory value is reduced when the decision to markdown below cost is made.
b. Impairment of Receivables
The Group’s management reviews receivables on a regular basis to determine if any provision for impairment is necessary. The policy for the impairment of receivables of the Group is based on, where appropriate, the evaluation of collectability and ageing analysis of the receivables and on management’s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these outstanding amounts, including the current creditworthiness and the past collection history of each debtor. If the financial conditions of debtors of the Group were to deteriorate, resulting in an impairment of their ability to make payments, provision for impairment may be required.
c. Income Taxes
The Group is subject to income taxes in South Africa and the UK. The South African income taxes are administered by South African accountants. Significant judgement is required in determining the provision for income taxes and the timing of payment of the related tax. There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax provision in the year in which such determination is made.
d. Share Based Payments
The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which considers conditions attached to the vesting and exercise of the equity instruments. 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. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future share price behaviour based on past experience, future expectations and benchmarked against peer companies in the industry.
e. Depreciation and Amortisation
The Group depreciates property, plant and equipment and amortises the leasehold land and land use rights on a straight-line method over the estimated useful lives. The estimated useful lives reflect the Directors’ estimate of the years that the Group intends to derive future economic benefits from the use of the Group’s property, plant and equipment.
4.Segmental Reporting
In the opinion of the Directors, the Group has one class of business, being the trading of agricultural materials. The Group’s primary reporting format is determined by the geographical segment according to the location of its establishments. There is currently only one geographic reporting segment, which is South Africa. All revenues and costs are derived from the single segment.
5.Revenue
| Group | Group | ||
| For the year | For the year | ||
| ending | ending | ||
| 31 October | 31 October | ||
| 2019 | 2018 | ||
| £ | £ | ||
| Major product/service lines | |||
| Sale of agricultural materials | 1,819,552 | 1,743,772 | |
| Primary geographic markets | |||
| South Africa | 1,819,552 | 1,743,772 | |
| Timing of revenue recognition | |||
| Products transferred at a point in time | 1,819,552 | 1,743,772 |
6.Other Income
| Group | Group | ||
| For the year | For the year | ||
| ending | ending | ||
| 31 October | 31 October | ||
| 2019 | 2018 | ||
| £ | £ | ||
| Sundry income | 720 | 54 | |
| Profit on disposal of Property Plant and Equipment | 128 | - | |
| 848 | 54 |
Other Income represents the bad debts recovered and sundry income.
7.Personnel Expenses and Staff Numbers (Including Directors)
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| Number | 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | ||
| The average number of employees in the year were: | |||||
| Directors | 5 | 5 | 5 | 5 | |
| Management | 2 | 3 | - | - | |
| Accounts and Administration | 2 | 2 | - | - | |
| Sales | 3 | 3 | - | - | |
| Manufacturing/Warehouse | 13 | 18 | - | - | |
| Total | 25 | 31 | 5 | 5 | |
| £ | £ | £ | £ | ||
| The aggregate payroll costs for these | |||||
| persons were: | 321,365 | 332,596 | 68,183 | 61,696 | |
| Average ratio of executive pay verses average employee pay | 0.71 | 0.78 |
8.Directors’ Remuneration
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| 31 October | 31 October | 31 October | 31 October | ||
| Salaries and Fees | 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | ||
| David Lenigas | 12,000 | 12,000 | 12,000 | 12,000 | |
| George Roach | 10,000 | 12,000 | 10,000 | 12,000 | |
| Robert Scott | 12,000 | 12,000 | 12,000 | 12,000 | |
| Andrew Monk * | 13,896 | 13,696 | 13,896 | 13,696 | |
| Matt Bonner | 12,000 | 12,000 | 12,000 | 12,000 | |
| 59,896 | 61,696 | 59,896 | 61,696 |
* Included in Andrew Monk’s remuneration is £1,896 for National Insurance.
No pension contributions were made by the Company on behalf of its directors.
At the year-end a total of £158,006 (2018: £98,110) was outstanding in respect of directors’ emoluments.
9.Expenses - Analysis by Nature
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| 31 October | 31 October | 31 October | 31 October | ||
| 2019 | 2018 | 2019 | 2018 | ||
| £ | £ | £ | £ | ||
| Auditor's remuneration for audit services: Parent | 11,000 | 11,000 | 11,000 | 11,000 | |
| Auditor's remuneration for other services: Parent | 16,500 | 7,050 | 16,500 | 7,050 | |
| Auditor's remuneration for audit services: Subsidiary | 3,016 | 3,373 | - | - | |
| Brokership fees | 20,115 | 31,200 | 20,116 | 31,200 | |
| Legal and professional fees | 13,099 | 12,145 | 12,842 | 9,338 | |
| Registrar fees | 15,946 | 13,659 | 15,947 | 13,659 | |
| Depreciation on property, plant and equipment | 24,245 | 48,993 | - | - | |
| (Gain) /loss on exchange | (128,675) | 12,190 | 2 | - | |
| Personnel expenses (Note 8) | 321,365 | 332,596 | 59,896 | 61,696 | |
| Share based payments | - | 66,932 | - | 66,932 | |
| Other administrative expenses | 324,800 | 370,007 | 42,475 | 49,754 | |
| Subtotal | 621,411 | 909,145 | 178,778 | 250,629 | |
| Admission and regulatory expenses | 249,798 | 276,306 | 249,798 | 276,306 | |
| Profit from Associated entity | - | (6,933) | - | (6,933) | |
| Total administrative expenses | 871,209 | 1,178,518 | 428,576 | 520,002 | |
10.Finance Costs
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| 31 October | 31 October | 31 October | 31 October | ||
| 2019 | 2018 | 2019 | 2018 | ||
| £ | £ | £ | £ | ||
| Interest paid on borrowings | 84,034 | 11,095 | - | - | |
| Interest accrued on Convertible Loan Notes | 30,000 | 3,863 | 30,000 | 3,863 | |
| 114,034 | 14,958 | 30,000 | 3,863 | ||
Finance costs represent interest and charges in respect of the discounting of invoices and the interest accrual for the Convertible Loan Notes issued.
11.Finance Income
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| 31 October | 31 October | 31 October | 31 October | ||
| 2019 | 2018 | 2019 | 2018 | ||
| £ | £ | £ | £ | ||
| Interest earned on loan receivable | 100,708 | - | 100,708 | - | |
| Interest earned on intercompany loan receiveable | - | - | 11,099 | - | |
| Interest earned on favourable bank balances | 128 | - | - | - | |
| 100,836 | - | 111,807 | - |
12.Taxation
The charge for the year can be reconciled to the profit before taxation per the consolidated statement of comprehensive income as follows:
| Group | Group | Company | Company | ||
| For the year | For the year | For the year | For the year | ||
| ending | ending | ending | ending | ||
| 31 October | 31 October | 31 October | 31 October | ||
| 2019 | 2018 | 2019 | 2018 | ||
| £ | £ | £ | £ | ||
| Tax Charge | - | - | - | - | |
| Factors affecting the tax charge | |||||
| Loss on ordinary activities before taxation | (284,665) | (573,374) | (346,769) | (523,865) | |
| Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 19.00% (2018: 19.00%) | (54,086) | (108,941) | (65,886) | (99,534) | |
| Tax effect of expense not deductible for tax | - | - | - | 68,169 | |
| Overseas tax rate differences from the UK rate (26%) | 8,471 | 17,483 | - | - | |
| Tax effect of utilisation of tax losses | 45,615 | 91,458 | 65,886 | 31,365 | |
| Tax Charge | - | - | - | - | |
The Company has excess management expenses of £507,518 (2018 - £392,764) available for carry forward against future trading profits. The deferred tax asset in these tax losses at 17.0% of £86,278 (2018 -19.00%, £74,625) has not been recognised due to the uncertainty of recovery.
13.Loss Per Share
Loss per share data is based on the Group result for the year and the weighted average number of shares in issue.
Basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year:
| Year ended | Year ended | |
| 31 October | 31 October | |
| 2019 | 2018 | |
| £ | £ | |
| Loss after tax | (284,665) | (573,374) |
| Weighted average number of ordinary shares in issue | 19,399,198 | 220,465,924 |
| Basic and diluted loss per share (pence) | (1.47p) | (0.26p) |
Basic and diluted loss per share are the same, since where a loss is incurred the effect of outstanding share options and warrants is considered anti-dilutive and is ignored for the purpose of the loss per share calculation. As at 31 October 2019 there were 19,399,198 (31 October 2018 - 197,094,655) outstanding share warrants and 1,074,809 (2018 – 20,956,184) outstanding options, both are potentially dilutive.
14.Investments
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Investment in Subsidiary | - | - | 297,915 | 297,915 |
| Equity accounted profit for the period | 6,154 | 96,979 | 6,154 | 96,979 |
| Carrying value | 6,154 | 96,979 | 304,069 | 394,894 |
15.1. Investment in Associate
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Investment in Dynamic Intertrade Agri (Pty) Ltd | 96,979 | 90,046 | 96,979 | 90,046 |
| Equity accounted profit for the period | - | 6,933 | - | 6,933 |
| Impairment of investment | (90,825) | - | (90,825) | - |
| Carrying value | 6,154 | 96,979 | 6,154 | 96,979 |
Management have committed to selling it’s investment in the associate, Dynamic Intertrade Agri (Pty) Ltd. The asset is available for immediate sale to a willing buyer. A buyer for the asset has been identified and a preliminary price of £6,154 has been discussed. It is anticipated that the sale will be concluded within the current financial year ending 31 October 2020. Accordingly, for the current year the investment is reflected under current assets as held for sale.
As part of the process of selling the group’s investment in the associate a fair value exercise was undertaken. Management considered the financial performance of the company, the price that a willing buyer was prepared to pay for the investment as well as the prevailing market conditions. Based on the above, the directors are of the opinion that the fair value of the company is £6,154. Accordingly, the investment was impaired to reflect the fair value.
As at 31 October 2019, the Company directly and indirectly held the following subsidiary and associate:
| Name of company | Principal activities | Country of incorporation and place of business | Proportion (%) of equity interest 2019 |
Proportion (%) of equity interest 2018 |
| Dynamic Intertrade (Pty) Limited | Trading in Agricultural Products | South Africa | 100% | 100% |
| Dynamic Intertrade Agri (Pty) Limited | Agricultural commodity trading and distribution | South Africa | 46.8% Designated as Held for Sale |
46.8% |
Summarised financial information of the associate company
| £ | £ | ||
| Non-current assets | - | 4,600 | |
| Current assets | - | 188,544 | |
| Cash and cash equivalents | - | 10,404 | |
| Total assets | - | 203,548 | |
| Non-current liabilities | - | 44,982 | |
| Current liabilities | - | 107,118 | |
| Total liabilities | - | 152,100 | |
| Turnover | - | 2,314,269 | |
| Profit/ (Loss) before taxation | - | 20,576 | |
| Total comprehensive income | - | 14,815 | |
| Depreciation | - | 3,473 | |
| Interest income | - | 264 | |
| Interest expense | - | - | |
| Income tax (income) expense | - | (4,082) | |
15.Long Term Intercompany Loans
| Group | Group | Company | Company | |
| Year ended | Year ended | Year ended | Year ended | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Loan to Dynamic Intertrade (Pty) Ltd | - | - | 842,437 | 831,338 |
| Carrying value | - | - | 842,437 | 831,338 |
The loan is unsecured and bears interest at 7% p.a.
16.Property, Plant and Equipment
| Group | Leasehold Improve-ments | Furniture and fixtures | Plant and machinery | Total |
| £ | £ | £ | £ | |
| Cost | ||||
| As at 31 October 2018 | 21,845 | 4,746 | 298,800 | 325,391 |
| Additions | 193 | 111 | 2,107 | 2,411 |
| Disposals | - | - | (2,339) | (2,339) |
| Exchange difference | (971) | (210) | (13,221) | (14,402) |
| As at 31 October 2019 | 21,067 | 4,647 | 285,347 | 311,061 |
| Accumulated depreciation | ||||
| As at 31 October 2018 | 17,378 | 3,165 | 251,293 | 271,836 |
| Charge for the year | 2,813 | 528 | 20,904 | 24,245 |
| Released on disposal | - | - | (2,286) | (2,286) |
| Exchange difference | (948) | (174) | (12,450) | (13,572) |
| As at 31 October 2019 | 19,243 | 3,519 | 257,461 | 280,223 |
| Net Book Value | ||||
| As at 31 October 2018 | 4,467 | 1,581 | 47,507 | 53,555 |
| As at 31 October 2019 | 1,824 | 1,128 | 27,886 | 30,838 |
The holding company held no tangible fixed assets at 31 October 2019 and 2018.
17.Goodwill
Goodwill has been calculated as £226,644 (2018: £226,644) and is measured as the excess of the sum of the consideration paid and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Goodwill has been tested for impairment as at the balance sheet date. The recoverable amount of goodwill at 31 October 2019 and 2018 was assessed on the basis of value in use. As this exceeded the carrying values no impairment loss was recognised. The key assumptions in the calculation to assess value in use are future revenues and the ability to generate future cash flows.
The most recent financial results and forecasts for the next year were used, followed by an extrapolation of future cash flows using a price earnings ratio. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and risks specific to the cash-generating unit.
The key assumptions used in the value in use calculations in 2018 and 2019 were as follows:
- A discount rate of 10%
- Sales growth of 18%
- Weighting of probabilities assigned to potential earnings.
The Directors believe the significance of the earning potential identified mean that the goodwill does not require impairment at this early stage.
18.Loan Receivable
| Group | Group | Company | Company | |
| Year ended | Year ended | Year ended | Year ended | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Loan to Touchwood Investments Ltd | 871,579 | - | 871,579 | - |
| Carrying value | 871,579 | - | 871,579 | - |
The loan was advanced to Touchwood Investments Ltd, also known as the Comarco Group, which operates a port in Mombasa. This loan bears interest at 12% for the first 9 months, where after the rate increased to 15%. The loan is for a period 24 months and is repayable in full on 12 November 2020. The Comarco Group has provided the land of its port operations, which is valued at $12,000,000, as security for the above loan.
19.Inventories
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Raw materials | 62,253 | 93,776 | - | - |
| Finished goods | 5,106 | 25,202 | - | - |
| Carrying value | 67,359 | 118,978 | - | - |
20.Trade and other receivables
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Financial instruments | ||||
| Trade receivables | 381,112 | 409,806 | - | - |
| Deposits | 26,602 | 13,028 | 13,381 | - |
| Other receivables | 12,281 | 44,168 | 12,281 | 41,915 |
| Non-financial instruments | ||||
| Prepayments | 2,780 | 1,677 | - | - |
| Carrying value | 422,775 | 468,679 | 25,662 | 41,915 |
| Current | 422,775 | 468,679 | 25,662 | 41,915 |
| Non-Current | - | - | - | - |
| 422,775 | 468,679 | 25,662 | 41,915 |
The receivables are considered to be held within a held-to-collect business model consistent with the Group’s continuing recognition of the receivables.
As at 31 October 2019 the Group does not have any contract assets nor any contract liabilities arising out of contracts with customers relating to the Group’s right to receive consideration for agricultural products sold but not billed. Group Trade receivables represent amounts receivable on the sale of agricultural products and are included after provisions for doubtful debts.
Credit and market risks, and impairment losses
The Group did not impair any of its trade receivables as at 31 October 2019, as all trade receivables generated during the financial year were settled in full prior to the year-end.
Information about the Group’s exposure to credit and market risks and impairment losses for trade receivables is included in Note 28.
The Directors consider that the carrying amount of trade receivables and other receivables approximates their fair value.
21.Cash and Cash Equivalents
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Cash on hand | 5,218 | 947,058 | 4,383 | 945,329 |
| Bank overdraft | - | (1,235) | - | (1,235) |
| 5,218 | 945,823 | 4,383 | 944,094 |
22.Trade and Other Payables
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Trade Payables | 768,246 | 913,690 | 640,263 | 378,736 |
| Other Payables | 5,819 | 30,103 | 5,819 | - |
| Related Party Payables | 48,550 | 50,753 | - | - |
| 822,615 | 994,546 | 646,082 | 378,736 |
Trade payables represent amounts due for the purchase of agriculture materials and administrative expenses. The Directors consider that the carrying amount of trade payables approximates to their fair value.
The related party financial liabilities comprise:
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| G Roach | 22,214 | 23,242 | - | - |
| M Bonner | 26,336 | 27,511 | - | - |
| 48,550 | 50,753 | - | - |
Terms:
G Roach: The loan bears interest at the South African prime overdraft rate. The interest will be calculated and paid when the loan is repaid. The loan is repayable as decided upon from time to time.
M Bonner: The loan bears interest at the South African prime overdraft rate. The interest is calculated and paid quarterly. The loan is repayable as decided upon from time to time.
23.Share Capital and Share Premium
| Allotted, called up and fully paid share capital and share premium | Number of shares | Nominal Value | Share Premium | Total |
| £ | £ | £ | ||
| Balance at 31 October 2017 | 206,983,954 | 206,984 | 1,765,535 | 1,972,519 |
| Issued during the year | 181,000,000 | 181,000 | 754,374 | 935,374 |
| Balance at 31 October 2018 | 387,983,954 | 387,984 | 2,519,909 | 2,907,893 |
| Issued during the year | - | - | - | - |
| Share consolidation at 20:1 | (368,584,756) | - | - | - |
| Balance at 31 October 2019 | 19,399,198 | 387,984 | 2,519,909 | 2,907,893 |
Share capital is the amount subscribed for shares at nominal value.
During the financial year the company consolidated all existing and issued shares and share options on the basis of 20 existing shares/options for 1 new share/option.
Retained losses represent the cumulative loss of the Group attributable to equity shareholders.
Share-based payments reserve relate to the charge for share-based payments in accordance with IFRS 2.
During the prior year the company placed these shares and as the number of placing shares comprised more than 10% of the companies issued share capital, and although the placing shares has been allotted, admission of the placing shares required publication of a Prospectus within a twelve-month period.
24.Share Based Payments Reserve
The Company has a share-ownership compensation scheme for senior executives of the Company whereby senior executives may be granted options to purchase Ordinary Shares in the Company.
Warrants
During the financial year the company consolidated all existing and issued shares and share options on the basis of 20 existing shares/options for 1 new share/option.
There are 8,188,066 warrants to subscribe for ordinary shares at 31 October 2019 (31 October 2018: 197,064,095).
| Exercised / | ||||||
| As at 1 | Vested / | As at 31 | ||||
| Date of Grant | November | Share | October | Exercise | Exercise/Vesting Date | |
| 2018 | Consolidation | 2019 | Price | From | To | |
| Warrants | ||||||
| 09/05/2012 | 2,761,330 | (2,623,264) | 138,066 | 20p | 09/05/2012 | 05/09/2022 |
| 27/11/2018 | 161,000,000 | (152,950,000) | 8,050,000 | 20p | 27/11/2018 | 30/09/2020 |
| 163,761,330 | (155,573,264) | 8,188,066 | ||||
Warrants were attached to the Subscription Shares on 14 September 2018 a 1-for-1 basis, with an exercise price of 20.0p per ordinary share and expire 12 months from allotment of the Subscription Shares. Further warrants were attached to any new ordinary shares that are issued as a result of conversion of any Loan Notes, on a 1-for-1 basis on the same terms as the Subscription Warrants. A maximum of 9,716,666 new ordinary shares could potentially be issued in the event that all Subscription Warrants and Loan Note warrants are exercised.
Options
At 1 November 2018 there were 20,956,144 share options issued to the directors and past directors of the Company. During the current year no share options were granted (2018: Nil). During the financial year the Company consolidated all existing and issued shares and share options on the basis of 20 existing shares/options for 1 new share/option.
The movement on the share-based payment charge for the year was £nil (2018 - £63,932) in respect of the issued options. The details of warrants and options are as follows:
| Exercised / | ||||||
| As at 1 | Vested / | As at 31 | ||||
| Date of Grant | November | Share | October | Exercise | Exercise/Vesting Date | |
| 2018 | Consolidation | 2019 | Price | From | To | |
| Options | ||||||
| 09/05/2012 | 20,956,184 | (19,908,375) | 1,047,809 | 20p | 09/05/2012 | 05/09/2022 |
| 20,956,184 | (19,908,375) | 1,047,809 | ||||
The remuneration committee’s aim is to remunerate executive directors competitively and to reward performance. The remuneration committee determines the company's policy for the remuneration of executive directors, having regard to the UK Corporate Governance Code and its provisions on directors' remuneration.
The number of options outstanding to the Directors that served in the year, as at 31 October 2019 were as follows:
| 2019 | 2018 | |||
| Director | Options | Options | ||
| Andrew Monk | 191,952 | 3,839,046 | ||
| George Roach (resigned) | 191,952 | 3,839,046 | ||
| Robert Scott | 50,000 | 1,000,000 | ||
| Matthew Bonner | 180,000 | 3,600,000 | ||
| Total | 613,905 | 12,278,092 |
The estimated fair value of the options in issue was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:
| Share price at date of grant | £0.0050 |
| Exercise price | £0.0075 to £0.01 |
| Expected volatility | 65% |
| Expected dividend | 0% |
| Contractual life | 1.1 years |
| Risk free rate | 1.63% |
| Estimated fair value of each option | £0.003764 – £0.0378 |
The share options outstanding at the year-end had a weighted average remaining contractual life of 2.5 years (2018: 3.5 years).
25.Borrowings
| Group | Group | Company | Company | |
| Year ended | Year ended | Year ended | Year ended | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Loan from director M. Bonner | 5,000 | - | 5,000 | - |
| Loan from director R. Scott | 5,000 | - | 5,000 | - |
| Bibby Apex Financial services (Pty) Ltd | ||||
| - Inventory Financing | 61,077 | 91,898 | - | - |
| - Accounts receivable financing | 251,450 | - | - | - |
| Euro Middle East Trading (PTY) LTD | ||||
| - Inventory Financing | 40,564 | - | - | - |
| Carrying value | 363,091 | 91,898 | 10,000 | - |
The Group wholly owned subsidiary Dynamic Intertrade has entered into a funding agreement with Bibby Apex Financial services (Pty) Ltd whereby Bibby pay the suppliers directly and this is then repaid by Dynamic Intertrade to purchase stock from suppliers where deposits are required.
The borrowings are secured by a Security Agreement from the Company. The loans bear interest at 14% per annum.
26.Convertible loan notes
| Group | Company | |||
| Year ended | Year ended | Year ended | Year ended | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| Convertible loan notes | 250,000 | 253,863 | 250,000 | 253,863 |
| Carrying value | 250,000 | 253,863 | 250,000 | 253,863 |
The Loan Notes holder will be paid an annual interest rate of 12 per cent in cash, semi-annually, with a term of 24 months. The Loan Notes will not be admitted to trading on any exchange.
After the 20:1 share consolidation, the new ordinary shares issued as a result of conversion of all Loan Notes would represent 1,666,667 (2018: 33,333,333) ordinary shares, or 7.9 per cent of the issued share capital of the Company, as enlarged by the 2018 Fundraising. On 14 September 2018 issued £250,000 of convertible loan notes for 50,000,000 loan notes of 0.50p (the “Loan Notes”) with a conversion price of 0.75p (the “Conversion Price”). The Subscription Price was at the last closing price of 0.50p per ordinary share as at 13 September 2018. Further, the Conversion Price represents a premium of 50.0 per cent to this same closing price. The Subscription included the issue of 50,000,000 Convertible Loan Notes of 0.50p with a conversion price of 0.75p. After the 20:1 share consolidation there are 2,500,000 Convertible Loan Notes of 10.0p with a conversion price of 15.0p.
If the Convertible Loan Notes were converted, up to 1,666,667 (2018: 33,333,335) new Ordinary Shares will be issued (“Loan Conversion Shares”). Further, Warrants will be attached to any Loan Conversion Shares that are issued on a 1-for-1 basis on the same terms as the Warrants attached to the New Ordinary Shares (“Loan Conversion Warrants”). A maximum of 9,716,667 (2018: 194,333,335) New Ordinary Shares could potentially be issued in the event that all New Ordinary Shares Warrants and Loan Conversion Warrants are exercised.
However, under the terms of the Loan Note Instrument, the maximum number of Loan Notes that can be converted into ordinary shares at any one time will be restricted such that Mike Joseph’s total voting rights cannot exceed 29.9 per cent. of the shares in issue of the Company.
27.Operating lease
| Group | Group | Company | Company | ||
| Year ended | Year ended | Year ended | Year ended | ||
| 31 October | 31 October | 31 October | 31 October | ||
| 2019 | 2018 | 2019 | 2018 | ||
| £ | £ | £ | £ | ||
| Premises | 100,285 | 96,948 | - | - | |
| Equipment | 5,108 | 5,022 | - | - | |
| 105,393 | 101,970 | - | - | ||
| Minimum lease payments | |||||
| Not later than one year | 68,732 | 103,118 | - | - | |
| Between one and five years | - | 71,914 | - | - | |
| Later than five years | - | - | - | - | |
| 68,732 | 175,032 | - | - |
28. Financial Instruments – Fair values and risk management
The effect of initially applying IFRS 9 on the Group’s financial instruments is described in Note 2. Due to the transition method chosen, comparative information has not been restated to reflect the new requirements.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Trade and other receivables and trade and other payables classified as held-for-sale are not included in the table below. As at 31 October 2019 the Group did not have any trade and other receivables nor any trade and other payables that were classified as held-for-sale.
The Group has not disclosed the fair values of financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of their fair value.
| Carrying value | Fair value | |||||||||
| Group as at 31 October 2019 | Note | FVOCI - equity instruments | Financial assets at amortised cost | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |||
| Financial assets measured at fair value | ||||||||||
| Investment in associate | 6,154 | - | - | 6,154 | - | - | 6,154 | 6,154 | ||
| Loan receivable | 871,579 | - | - | 871,579 | - | - | 871,579 | 871,579 | ||
| 877,733 | - | - | 877,733 | |||||||
| Financial assets not measured at fair value | ||||||||||
| Trade and other receivables | - | 422,775 | - | 422,775 | ||||||
| Cash and cash equivalents | - | 5,218 | - | 5,218 | ||||||
| - | 427,993 | - | 427,993 | |||||||
| Financial liabilities measured at fair value | ||||||||||
| - | - | - | - | |||||||
| - | - | - | - | |||||||
| Financial liabilities not measured at fair value | ||||||||||
| Unsecured borrowings | - | - | (363,091) | (363,091) | ||||||
| Convertible loan notes | - | - | (250,000) | (250,000) | ||||||
| Trade and other payables | - | - | (822,615) | (822,615) | ||||||
| - | - | (1,435,706) | (1,435,706) | |||||||
| Carrying value | Fair value | |||||||||
| Group as at 31 October 2018 | Note | FVOCI - equity instruments | Financial assets at amortised cost | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |||
| Financial assets measured at fair value | ||||||||||
| Investment in associate | 96,979 | - | - | 96,979 | - | - | 96,979 | 96,979 | ||
| Loan receivable | - | - | - | - | - | - | - | - | ||
| 96,979 | - | - | 96,979 | |||||||
| Financial assets not measured at fair value | ||||||||||
| Trade and other receivables | - | 468,678 | - | 468,678 | ||||||
| Cash and cash equivalents | - | 945,823 | - | 945,823 | ||||||
| - | 1,414,501 | - | 1,414,501 | |||||||
| Financial liabilities measured at fair value | ||||||||||
| - | - | - | - | |||||||
| - | - | - | - | |||||||
| Financial liabilities not measured at fair value | ||||||||||
| Unsecured borrowings | - | - | (91,898) | (91,898) | ||||||
| Convertible loan notes | - | - | (253,863) | (253,863) | ||||||
| Trade and other payables | - | - | (994,546) | (994,546) | ||||||
| - | - | (1,340,307) | (1,340,307) | |||||||
| Carrying value | Fair value | |||||||||
| Company as at 31 October 2019 | Note | FVOCI - equity instruments | Financial assets at amortised cost | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |||
| Financial assets measured at fair value | ||||||||||
| Investment in associate | 6,154 | - | - | 6,154 | - | - | 6,154 | 6,154 | ||
| Loan receivable | 871,579 | - | - | 871,579 | - | - | 871,579 | 871,579 | ||
| 877,733 | - | - | 877,733 | |||||||
| Financial assets not measured at fair value | ||||||||||
| Intercompany loans receivable | - | 842,437 | - | 842,437 | ||||||
| Trade and other receivables | - | 25,662 | - | 25,662 | ||||||
| Cash and cash equivalents | - | 4,383 | - | 4,383 | ||||||
| - | 872,482 | - | 872,482 | |||||||
| Financial liabilities measured at fair value | ||||||||||
| - | - | - | - | |||||||
| - | - | - | - | |||||||
| Financial liabilities not measured at fair value | ||||||||||
| Unsecured borrowings | - | - | 10,000 | 10,000 | ||||||
| Convertible loan notes | - | - | 250,000 | 250,000 | ||||||
| Trade and other payables | - | - | 646,082 | 646,082 | ||||||
| - | - | 906,082 | 906,082 | |||||||
| Carrying value | Fair value | |||||||||
| Company as at 31 October 2018 | Note | FVOCI - equity instruments | Financial assets at amortised cost | Other financial liabilities | Total | Level 1 | Level 2 | Level 3 | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |||
| Financial assets measured at fair value | ||||||||||
| Investment in associate | 96,979 | - | - | 96,979 | - | - | 96,979 | 96,979 | ||
| Loan receivable | - | - | - | - | - | - | - | - | ||
| 96,979 | - | - | 96,979 | |||||||
| Financial assets not measured at fair value | ||||||||||
| Intercompany loans receivable | - | 831,338 | - | 831,338 | ||||||
| Trade and other receivables | 41,915 | - | 41,915 | |||||||
| Cash and cash equivalents | - | 944,094 | - | 944,094 | ||||||
| - | 1,817,347 | - | 1,817,347 | |||||||
| Financial liabilities measured at fair value | ||||||||||
| - | - | - | - | |||||||
| - | - | - | - | |||||||
| Financial liabilities not measured at fair value | ||||||||||
| Unsecured borrowings | - | - | - | - | ||||||
| Convertible loan notes | - | - | 253,863 | 253,863 | ||||||
| Trade and other payables | - | - | 378,736 | 378,736 | ||||||
| - | - | 632,599 | 632,599 | |||||||
Financial instruments – Fair values and risk management
B. Measurement of fair values
i. Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used. Related valuation processes are described in Note 3.h.
Financial instruments measured at fair value
| Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
| Investment in Associate | The value of the investment is adjusted annually based upon the group’s share of the associates profit or loss. | None | None |
| Investment in Treasury Shares | The value of the investment is adjusted annually based upon the market price of the shares as at 31 October each year. | None | None |
ii. Transfers between Levels 1 and 2
There were no transfers between Levels 1 and 2 in either the current financial year or in the prior financial year.
C. Financial Risk Management
The Group has exposure to the following risks arising from financial instruments:
- credit risk;
- liquidity risk; and
- market risk.
Risk management framework
The Company’s board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.
The Group’s audit committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group’s audit committee undertake ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and investments in debt securities.
The carrying amounts of financial assets represent the maximum credit exposure. There was no impairment loss in the current year nor in the prior year.
Trade receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which its customers operate. Details of concentration of revenue are included in Note 6.
The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment terms and conditions are offered. The Group’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references. Sales limits are established for each customer and are reviewed regularly.
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period of one month.
The Group does not require collateral in respect of trade and other receivables. The Group does not have trade receivables for which a no allowance is recognised because of collateral.
| Group | Group | Company | Company | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| As at 31 October the exposure to credit | ||||
| risk for trade receivables by geographic | ||||
| region was follows: | ||||
| South Africa | 381,112 | 409,806 | - | - |
| Other | - | - | - | - |
| 381,112 | 409,806 | - | - | |
| As at 31 October the exposure to credit | ||||
| risk for trade receivables by | ||||
| counterparty was follows: | ||||
| Other | - | - | - | - |
| - | - | - | - | |
| As at 31 October the exposure to credit | ||||
| risk for trade receivables by credit | ||||
| rating was follows: | ||||
| External credit ratings | - | - | - | - |
| Other | 381,112 | 409,806 | - | - |
| 381,112 | 409,806 | - | - | |
Expected credit loss assessment for corporate customers as at 1 November 2018 and 31 October 2019
The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited to external ratings, audited financial statements, management accounts and cash flow projections and available press information about customers) and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default.
The company had no exposure to credit risk for the year ended 31 October 2019.
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables during the year amounted to nil.
Cash and cash equivalents
As at 31 October 2019, the Group held £5,218 in cash and cash equivalents (2018: £947,058) and had a bank overdraft of £nil (2018: £1,235). The cash and cash equivalents are held with bank and financial institution counterparties which are rated Baa3 to A1+ by Moody’s.
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. On the implementation of IFRS 9 the Group did not impair any of its cash and cash equivalents.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Exposure to liquidity risk
The following tables present the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments and exclude the impact of netting agreements.
| Contractual cash flows | |||||||
|
Group as at 31 October 2018 |
Carrying value | Total | 2 Months or less | 2 to 12 Months | 1 to 2 Years | 2 to 5 Years | More than 5 years |
| £ | £ | £ | £ | £ | £ | £ | |
| Non- derivative financial | |||||||
| liabilities | |||||||
| Bank overdrafts | 1,235 | - | - | - | - | - | - |
| Unsecured shareholders' | |||||||
| loans | - | - | - | - | - | - | - |
| Convertible loan | |||||||
| notes | 253,863 | (253,863) | - | (3,863) | - | (250,000) | - |
| Secured loans | 91,898 | (91,898) | - | (91,898) | - | - | - |
| Trade Payables | 913,690 | (913,690) | (913,690) | - | - | - | - |
| Other Payables | 30,103 | (30,103) | - | (30,103) | - | - | - |
| Related Party | |||||||
| Payables | - | - | - | - | - | - | - |
| 1,290,789 | (1,289,554) | (913,690) | (125,864) | - | (250,000) | - | |
| Derivative financial | |||||||
| liabilities | - | - | - | - | - | - | - |
| - | - | - | - | - | - | - | |
| Contractual cash flows | |||||||
|
Company as at 31 October 2019 |
Carrying value | Total | 2 Months or less | 2 to 12 Months | 1 to 2 Years | 2 to 5 Years | More than 5 years |
| £ | £ | £ | £ | £ | £ | £ | |
| Non- derivative financial | |||||||
| liabilities | |||||||
| Bank overdrafts | - | - | - | - | - | - | - |
| Unsecured shareholders' | |||||||
| loans | 10,000 | (10,000) | - | (10,000) | - | - | - |
| Convertible loan | |||||||
| notes | 250,000 | (250,000) | - | - | (250,000) | - | - |
| Secured loans | - | - | - | - | - | - | - |
| Trade Payables | 640,263 | (640,263) | (640,263) | - | - | - | - |
| Other Payables | 5,819 | (5,819) | - | (5,819) | - | - | - |
| Related Party | |||||||
| Payables | - | - | - | - | - | - | - |
| 906,082 | (906,082) | (640,263) | (15,819) | (250,000) | - | - | |
| Derivative financial | |||||||
| liabilities | - | - | - | - | - | - | - |
| - | - | - | - | - | - | - | |
| Contractual cash flows | |||||||
|
Company as at 31 October 2018 |
Carrying value | Total | 2 Months or less | 2 to 12 Months | 1 to 2 Years | 2 to 5 Years | More than 5 years |
| £ | £ | £ | £ | £ | £ | £ | |
| Non- derivative financial | |||||||
| liabilities | |||||||
| Bank overdrafts | 1,235 | - | - | - | - | - | - |
| Unsecured shareholders' | |||||||
| loans | - | - | - | - | - | - | - |
| Convertible loan | |||||||
| notes | 253,863 | (253,863) | - | (3,863) | - | (250,000) | - |
| Secured loans | - | - | - | - | - | - | - |
| Trade Payables | 378,736 | (378,736) | (378,736) | - | - | - | - |
| Other Payables | - | - | - | - | - | - | - |
| Related Party | |||||||
| Payables | - | - | - | - | - | - | - |
| 633,834 | (632,599) | (378,736) | (3,863) | - | (250,000) | - | |
| Derivative financial | |||||||
| liabilities | - | - | - | - | - | - | - |
| - | - | - | - | - | - | - | |
The interest payments on the financial liabilities represent the fixed interest rates as per the respective contracts.
The Group aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities other than trade payables. The Group also monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables.
Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and equity prices – will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as follows:
| Group Foreign exchange | 31 October | 2019 | 31 October | 2018 | ||
| risk | GBP | USD | ZAR | GBP | USD | ZAR |
| Loan receivable | - | 1,127,997 | - | - | - | - |
| Trade and other | ||||||
| receivables | 11,448 | - | 7,441,976 | 28,045 | - | 7,648,257 |
| Cash and cash equivalents | 4,383 | - | 16,314 | 944,094 | - | 32,272 |
| Unsecured shareholders' | ||||||
| loans | (10,000) | - | - | - | - | - |
| Secured loans | - | - | (6,894,845) | - | - | (1,715,097) |
| Convertible loan notes | (250,000) | - | - | (253,863) | - | - |
| Trade payables | (646,083) | - | (5,111,050) | (369,109) | - | (10,725,393) |
| Net statement of financial | ||||||
| position exposure | (890,252) | 1,127,997 | (4,547,605) | 349,167 | - | (4,759,961) |
| Next 6 months sales | ||||||
| forecast | - | - | 18,559,430 | - | - | 17,675,648 |
| Next 6 months purchases | ||||||
| forecast | - | - | (17,001,391) | - | - | (16,191,801) |
| Net forecast transaction | ||||||
| exposure | - | - | 1,558,039 | - | - | 1,483,847 |
| Net exposure | (890,252) | 1,127,997 | (2,989,566) | 349,167 | - | (3,276,114) |
| Company Foreign | 31 October | 2019 | 31 October | 2018 | ||
| exchange risk | GBP | USD | ZAR | GBP | USD | ZAR |
| Loan receivable | - | 1,127,997 | - | - | - | - |
| Trade and other | ||||||
| receivables | 11,448 | - | - | 28,045 | - | - |
| Cash and cash equivalents | 4,383 | - | - | 944,094 | - | - |
| Unsecured shareholders' | ||||||
| loans | (10,000) | - | - | - | - | - |
| Secured loans | - | - | - | - | - | - |
| Convertible loan notes | (250,000) | - | - | (253,863) | - | - |
| Trade payables | (646,083) | - | - | - | - | - |
| Net statement of financial | ||||||
| position exposure | (890,252) | 1,127,997 | - | 718,276 | - | - |
| Next 6 months sales | ||||||
| forecast | - | - | - | - | - | - |
| Next 6 months purchases | ||||||
| forecast | (214,288) | - | - | (214,288) | - | - |
| Net forecast transaction | ||||||
| exposure | (214,288) | - | - | (214,288) | - | - |
| Net exposure | (1,104,540) | 1,127,997 | - | 503,988 | - | - |
The following significant exchange rates in relation to the reporting currency are applicable:
| Average for the year | Year end spot rate | |||
| 2019 | 2018 | 2019 | 2018 | |
| United States Dollar ($) | 1.1109 | 1.1714 | 1.2936 | 1.2771 |
| South African Rand (ZAR) | 18.2842 | 17.6588 | 19.5271 | 18.6759 |
The presentation currency of the Group is British Pound Sterling.
The Group is exposed primarily to movements in USD and ZAR, the currency in which the Group receives most of its funding, against other currencies in which the Group incurs liabilities and expenditure.
Sensitivity analysis
Financial instruments affected by foreign currency risk include cash and cash equivalents, trade other receivables and trade and other payables. The following analysis, required by IFRS 7 Financial Instruments: Disclosures, is intended to illustrate the sensitivity of the Group’s financial instruments (at year end) to changes in market variables, being exchange rates.
The following assumptions were made in calculating the sensitivity analysis:
- All income statement sensitivities also impact equity
- Translation of foreign subsidiaries and operations into the Group’s presentation currency have been excluded from this sensitivity as they have no monetary effect on the results
Income Statement / Equity
| 2019 | 2019 | 2018 | 2018 | |
| +10% | -10% | +10% | -10% | |
| Base currency of British pound Sterling: | ||||
| - United States Dollar ($) | 0.1294 | (0.1294) | 0.128 | (0.128) |
| - South African Rand (ZAR) | 1.9527 | (1.9527) | 1.868 | (1.868) |
The above sensitivities are calculated with reference to a single moment in time and will change due to a number of factors including:
- Fluctuating other receivable and trade payable balances
- Fluctuating cash balances
- Changes in currency mix
Interest rate risk
The Group has entered into fixed rate agreements for its finance leases and shareholders loans. The Group does not hedge its interest rate exposure by entering into variable interest rate swaps.
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the management of the Group is as per the table below.
| Group | Group | Company | Company | |
| 2,019 | 2,018 | 2,019 | 2,018 | |
| Fixed rate instruments | ||||
| Financial assets | 871,579 | - | 871,579 | - |
| Financial liabilities | (613,091) | (345,761) | (260,000) | (253,863) |
Fair value sensitivity analysis for fixed-rate instruments
The Group does not account for any fixed-rate financial assets of financial liabilities at FVTPL. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
Other market price risk
The Group is exposed to equity price risk, which arises from equity securities at FVOCI (2018 available-for-sale) are held as a long-term investment.
The Group’s investments in equity securities comprise small shareholdings in unlisted companies. The shares are not readily tradable and any monetisation of the shares is dependent on finding a willing buyer.
Valuation techniques and assumptions applied for the purposes of measuring fair value
The fair value of cash and receivables and liabilities approximates the carrying values disclosed in the financial statements.
Capital management
The Group manages its capital resources to ensure that entities in the Group will be able to continue as a going concern, while maximising shareholder return.
The capital structure of the Group consists of equity attributable to shareholders, comprising issued share capital and reserves. The availability of new capital will depend on many factors including a positive operating environment, positive stock market conditions, the Group’s track record, and the experience of management. There are no externally imposed capital requirements. The Directors are confident that adequate cash resources exist or will be made available to finance operations but controls over expenditure are carefully managed.
29.Related Party Transactions
Directors’ fees
The previous Chairman, Andrew Monk, is a director of VSA Capital Limited and that company provided services amounting to £118,389 (2018: £139,550) to the Company during the year.
During the year ended 31 October 2019 £61,896 was paid to Directors of the company (2018: £61,696). At the year-end a total of £168,772 (2018: £107,076) was outstanding in respect of directors’ emoluments.
Other related party transactions
Included in trade and other payables are the following related party financial liabilities:
| Group | Group | Company | Company | |
| As at | As at | As at | As at | |
| 31 October | 31 October | 31 October | 31 October | |
| 2019 | 2018 | 2019 | 2018 | |
| £ | £ | £ | £ | |
| G Roach | 22,214 | 23,242 | - | - |
| M Bonner | 26,336 | 27,511 | - | - |
| 48,550 | 50,753 | - | - |
Terms:
G Roach: The loan bears interest at prime overdraft rate. The interest will be calculated and paid when the loan is repaid. The loan is repayable as decided upon from time to time.
M Bonner: The loan bears interest at prime overdraft rate. The interest will be calculated and paid when the loan is repaid. The loan is repayable as decided upon from time to time.
30.Controlling Party Note
There is no single controlling party. Significant shareholders are listed in the Directors Report and Business Review.
31.Events Subsequent to 31 October 2019
Loan to Comarco
The agreement to acquire the Comarco Group expired on 31 December 2019 and both the vendors and the Company have agreed to extend the agreement to 31 March 2020.
Renewal of Dynamic Intertrade (Pty) Ltd’s lease Agreement
The directors have decided to renew Dynamic Intertrade (Pty) Ltd’s property lease agreement for its operating premises. This lease agreement will be signed after the date of these financial statements.
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