Final Results

RNS Number : 5661C

Obtala Resources Limited

29 June 2016

 

29 June 2016

Obtala Resources Limited

("Obtala" or the "Company")

 (AIM: OBT)

Final Results FY2015

Obtala Resources Limited (AIM:OBT), the African focused agriculture and forestry company, announces the publication of the audited final results for the year ended 31^st December 2015.

The full version of the Annual Report and the Notice of the AGM are being posted to shareholders today and are available from the Company's head office in London and can be downloaded from Obtala's website www.obtalaresources.com.

Highlights:

                                         Financial

·     Sales revenues increase by 118% to US$5.46m/£3.69m (2014:US$2.5m/£1.69)

·     Net Assets US$120.5m/£81.7m (2014: US$138.08m/£93.3m)

·     Cash position US$1.02m/£0.66m (2014: US$5.06m/£3.27m)

·     Net (loss)/profit of US$(25.1m) /£(16.8)m (2014: US$(19.8m)/£(13.4m).

·     Before the impairment of the mineral assets, the group made a (loss)/profit before tax of US$6.9m/£5.7m (2014: loss before tax US$(4.6m)/£(3.14m)) before loss on disposal of subsidiary.

Operational highlights:

Agriculture

·     GLOBALG.A.P and BRC certification awarded

·     Secured additional 1,200 hectares for increase security of supply

·     Off-take partner identified with trial orders being grown for longer term plant-to-order programme

·     Domestic sales and distribution network being created

·     New fresh produce packing house built

Forestry

·     JV for increased timber sales agreed

·     Additional equipment sourced for increased production capacity

·     Strong portfolio of 314,965 hectares

·     2014 valuation uplifted by $12.7m/£8.6m in 2015 with new concessions

·     Strong interest in asset level investment

"2015 was a year of heightened focus for the Group as we continued to direct investment and activity into completing the development of our agricultural and forestry platforms. The benefits of this groundwork and further investment is being realised through new orders for our produce from new markets from new customers. To date, we have created a highly focused, multi-country African based business which provides an exciting and tangible platform for sustainable growth.

The valuation and expansion of the timber assets not only underpins the potential of the business but also demonstrates a great opportunity to expand our revenue potential with important initial orders received for key export markets where demand for high value timber products is strong. We believe that it provides the company significant sustainable growth opportunities in both the near and longer term. With the required food and safety certification, as well as working with strategic distribution partners, we expect that the agribusiness will also grow significantly. The land available to us on the agribusiness and timber operation will provide security of supply as new products are developed and sold and the Group has significant expansion capacity.

We continue to review and manage costs with a view to ensure that optimised margins are achieved. The Board manages Obtala in a diligent and controlled manner whilst focusing investment into our two key business lines of agriculture and forestry to maximise shareholder value.

I am confident 2016 will prove to be exciting and look forward to reporting on the further development of our farming and timber operations.

Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year and look forward to a successful and eventful 2016."

Obtala Resources Miles Pelham - Chairman Simon Rollason - Managing Director www.obtalaresources.com	[phone]
ZAI Corporate Finance Limited (Nomad)	[phone]
Ray Zimmerman Peter Trevelyan-Clark Jamie Spotswood
Brandon Hill Capital  (Broker)	[phone]
Jonathan Evans

The financial information contained in this announcement does not constitute statutory accounts as defined under section 244 of the Companies (Guernsey) Law 2008 but has been extracted from the Group's 2015 statutory financial statements. The auditors have reported on the 2015 financial statements; their report was unqualified but did contain an emphasis of matter paragraph on the fair value of biological assets and in respect of going concern. It contained no statement under sections 263(2) or 263(3) of the Companies (Guernsey) Law 2008. The financial statements for 2015 will be delivered to the Registrar of Companies after adoption at the Company's Annual General Meeting.

Chairman's Statement

I am pleased to present the Annual Report and consolidated financial statements for Obtala Resources Limited (the "Company" or the "Group") for the year ended 31 December 2015.

The Company continued to make good progress in its transition to become a highly focused African agriculture and forestry company through the year ended 31 December 2015. The production and supply chain development continues to advance, resulting in the successful creation of an asset platform from which we can expect significant growth.

The focus for the agribusiness has been the Tanzanian operations, which over the last three years have created an aspiring horticultural farming enterprise for fresh produce to supply the domestic market. This is complemented with an on-site processing facility, to produce a range of high quality dried fruits, which are packaged and branded under our own "Mama Jo's" label. During the year, considerable effort and investment was undertaken to successfully secure the two key farm and food safety certifications which are required to allow the Company to export fresh produce to higher margin export markets. The Global G.A.P. certification; the internationally accepted benchmark standard for farm production and BRC certification; focusing on food safety and quality, are pre-requisites for all international retailers.

With these certifications in place our attention has turned to developing the international distribution chain, and in November 2015 we announced a Memorandum of Understanding with Grupo Cabal, an established international fruit trading company to provide them with fresh produce for distribution through their supply and distribution chain, as well as working together for the planned creation of a banana plantation on our land. We look forward to reporting further progress in the coming year as our "plant to order" program is implemented. As we currently utilise less than 5% of our land bank, there is significant existing capacity to increase production and output. It is also very pleasing to report that the required investment to get the necessary infrastructure in place for our agribusiness was executed without the need to secure any external investment or shareholder dilution.

The focus for our forestry business remains the operations in Mozambique. We continue, as in previous years, to supply timber products for national infrastructure upgrade programs and for the domestic market. We also continue to develop the export market opportunities for our timber. We are aiming to capitalise on the market dynamic of increasing global demand for high quality timber products, whilst supply is becoming more constrained as sustainable harvesting practices cannot meet either current or predicted demand. We now have over 314,000 hectares of forestry concessions all with required management plans either agreed or advanced stages of being agreed with Mozambique government and authorities. Our "cut to order" program is well advanced with initial orders received from South Africa, Asia and the Middle East. These orders are very encouraging and should lead to a significant acceleration of the growth of our forestry business. Global appetite for high quality and high value timber products is buoyant and we are well positioned by having access to large and environmentally sustainable supply of desirable timber species.

During the year we considered in depth a number of strategic options to optimise shareholder value relating to our forestry assets, including spinning them out into a separate listed entity. After much consideration, it was concluded that, whilst the value, as evidenced by the 2014 independent valuation of the forestry assets, to which a further uplift of £8.6m was added in 2015 relating to further concession grants, was not fully reflected in the company's valuation, shareholder interest would be better served by the rollout of an in-house "cut to order" export program. It is pleasing to report that the export program is progressing well and results are promising.

Overall we feel the equity market has not recognised the value of the Company's assets, which is true of many companies, particularly on the AIM market. We believe that the company's strong focus on the two synergistic business platforms of agriculture and forestry will deliver strong growth, high margins and significantly increased, long-term, shareholder value. The business we are building is based on long-term investment programs which, as we move from development to execution phase will provide a platform to deliver future sustainable profitability and growth, generating revenues with the focus on strong margins. Over the reporting period in 2015 we have made substantial capital investments into the projects without any dilution to shareholders.

Mineral exploration in Tanzania

The Board has taken the considered decision to relinquish these non-core licences to maintain our focus on our farming and timber projects. Given the limited interest in grassroots mineral exploration coupled with the sharp fall in commodity prices, and absence of funding opportunities for early stage mining exploration the Board unanimously agreed to relinquish these licences resulting an impairment charge of £16.08 million (US$23.8m) during the year.

Financial results

The Group remained largely development focused in the year ended 31 December 2015 and generated £3.69m (US$5.46m) of revenue versus 2014 of £1.69m (US$2.50m). The loss after tax attributable to shareholders for the year amounted to £16.8m (US$25.1m) versus the 2014 loss of £13.4m (US$19.8m). Before the impairment of the mineral assets, the group made a profit before tax of £5.7m (US$6.9m) (2014: loss before tax £3.14m (US$4.6m)) before loss on disposal of subsidiary.

The Group has a strong balance sheet with net equity attributable to shareholders of Obtala at 31 December 2015 amounting to £81.7m (US$120.5m) versus 2014 at £93.3m (US$138.08m). Total assets amounted to £121.7m (US$174.5m) versus 2014 at £131.9m (US$194.6m). Intangible exploration assets are now carried at nil value versus 2014 at £16.1m (US$23.82m).

Directorate changes

I joined the Board as a Non-Executive director in August 2015, becoming Chairman in April this year in place of Francesco Scolaro who relinquished that role but remains on the Board as a Non-Executive director. Kevin Milne also joined the Board in August 2015 as Deputy Chairman. Emma Priestley, who was appointed to the Board in March 2015 as Executive Director relinquished her position in April this year due to other commitments. Timothy Walker and Grahame Vetch resigned from the Company Board in April 2015 to concentrate on managing the African Home Stores subsidiaries and the agriculture projects, respectively. Likewise Stephen Murphy, who joined us in April 2015, resigned from the Company Board in May 2015 to concentrate on African Home Stores and its subsidiaries.

Corporate Social Responsibility

The Group's approach to the continued development of its business units directly and indirectly generate a wide range of benefits to the host community and host country as a whole. In addition to the community participation benefits, development of the project areas provides a number of core benefits such as employment generation, training and skills transference, infrastructure improvement, support for localised industries and improved food security. The Group is also committed, where possible, to provide educational and vocational training facilities and programs in the communities in which we operate. In Mozambique the Group has completed the construction of a primary school, close to our operational centre. The school will accommodate up to 250 children from neighbouring villages and has two classrooms and one administration office. We have also provided desks, chairs and blackboards for the children. We are also in discussion with the local government to establish a carpentry school.

I am pleased to report that in the summer of 2015 we applied to be listed on the Social Stock Exchange in London and were accepted after a rigorous application process that included an independent assessment of our social impact activities and commitment, and an independent admissions panel hearing. This gives the company a high profile within the Social Impact investment community as well as being a great endorsement of our business practices and commitment to working with local communities.

Outlook

2015 was a year of heightened focus for the Group as we continued to direct investment and activity into completing the development of our agricultural and forestry platforms. The benefits of this groundwork and further investment is being realised through new orders for our produce from new markets from new customers. To date, we have created a highly focused, multi-country African based business which provides an exciting and tangible platform for sustainable growth.

The valuation and expansion of the timber assets not only underpins the potential of the business but also demonstrates a great opportunity to expand our revenue potential with important initial orders received for key export markets where demand for high value timber products is strong. We believe that it provides the company significant sustainable growth opportunities in both the near and longer term. With the required food and safety certification, as well as working with strategic distribution partners, we expect that the agribusiness will also grow significantly. The land available to us on the agribusiness and timber operation will provide security of supply as new products are developed and sold and the Group has significant expansion capacity.

We continue to review and manage costs with a view to ensure that optimised margins are achieved. The Board manages Obtala in a diligent and controlled manner whilst focusing investment into our two key business lines of agriculture and forestry to maximise shareholder value.

I am confident 2016 will prove to be exciting and look forward to reporting on the further development of our farming and timber operations.

Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year and look forward to a successful and eventful 2016.

Miles Pelham

Chairman

29 June 2016

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

	2015	2014
Continuing operations	£000	£000
TURNOVER	3,692	1,690
Cost of sales	(2,614)	(855)
Gross Profit	1,078	835
Loss on derivative financial instruments	(1,083)	(736)
Operating costs	(675)	(1,191)
Administrative expenses	(2,905)	(2,616)
Depreciation	(340)	(294)
Impairment of intangible assets	(16,080)	-
OPERATING LOSS	(20,005)	(4,002)
Gain on fair value of Biological assets	8,600	-
Gain on fair value of investment	1,046	749
Loss on disposal of subsidiary	-	(20,987)
Finance income	6	109
Finance costs	(39)	-
(Loss)  BEFORE TAXATION	(10,392)	(24,131)
Taxation	(4,504)	10,198
(LOSS)  FOR THE YEAR	(14,896)	(13,933)
ATTRIBUTABLE TO:
Owners of the parent	(16,805)	(13,392)
Non-controlling interests	1,909	(541)
	(14,896)	(13,933)
Items that may be subsequently released to profit or loss:
Exchange differences on translation of foreign operations	3,242	(752)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	(11,654)	(14,685)
ATTRIBUTABLE TO:
Owners of the parent	(13,563)	(14,144)
Non-controlling interests	1,909	(541)
	(11,654)	(14,685)
EARNINGS PER SHARE
From operations attributable to the owners of the parent
Basic and diluted (pence)	(5.44)	(5.09)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Attributable to the owners of the parent
	Share capital	Share premium	Merger reserve	Foreign exchange reserve	Share based payment reserve	Revenue reserve	Total	Non-controlling interests	Total equity
	£000	£000	£000	£000	£000	£000	£000	£000	£000
At 1 JANUARY 2014	2,633	11,528	28,543	439	1,898	35,918	80,959	41,436	122,395
Loss for the year	-	-	-	-	-	(13,392)	(13,392)	(541)	(13,933)
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	(752)	-	-	(752)	-	(752)
Total comprehensive income for the year	-	-	-	(752)	-	(13,392)	(14,144)	(541)	(14,685)
Share based payment	-	-	-	-	(220)	220	-	-	-
Dilution of interest in subsidiary	-	-	-	1,828	(664)	8,326	9,490	(23,858)	(14,368)
At 31 December 2014	2,633	11,528	28,543	1,515	1,014	31,072	76,305	17,037	93,342
Loss for the year	-	-	-	-	-	(16,805)	(16,805)	1,909	(14,896)
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	3,242	-	-	3,242	-	3,242
Total comprehensive income for the year	-	-	-	3,242	-	(16,805)	(13,563)	1,909	(11,654)
Transactions with owners:
Reserve transfer	-	-	-	(2,740)	-	2,740	-	-	-
At 31 December 2015	2,633	11,528	28,543	2,017	1,014	17,007	62,742	18,946	81,688

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	2015	2014
	£000	£000
ASSETS
Non-current assets
Available for sale investments	90	90
Intangible exploration and evaluation assets	-	16,080
Biological asset	118,220	103,832
Property, plant and equipment	1,902	2,555
Total non-current assets	120,212	122,557
Current assets
Trade and other receivables	275	830
Inventory	579	1,351
Short term investments	-	3,938
Cash and cash equivalents	660	3,269
Total current assets	1,514	9,388
TOTAL ASSETS	121,726	131,945
LIABILITIES
Current liabilities
Trade and other payables	(2,228)	(2,260)
Financial investment liabilities	-	(2,960)
Current tax liabilities	20	(2)
TOTAL CURRENT LIABILITIES	(2,208)	(5,222)
NON-CURRENT LIABILITIES
Borrowings	-	(155)
Deferred tax	(37,830)	(33,226)
Total non-current liabilities	(37,830)	(33,381)
TOTAL LIABILITIES	(40,058)	(38,603)
NET ASSETS	81,688	93,342
EQUITY
Share capital	2,633	2,633
Share premium	11,528	11,528
Merger reserve	28,543	28,543
Foreign exchange reserve	2,017	1,515
Share based payment reserve	1,014	1,014
Retained earnings	17,007	31,072
Equity attributable to the owners of the parent	62,742	76,305
Non-controlling interests	18,946	17,037
TOTAL EQUITY	81,688	93,342

CONSOLIDATED STATEMENT OF CASH FLOWS

	2015	2014
	£000	£000
(Loss)/ before taxation	(10,392)	(24,131)
Adjustment for:
Depreciation of property, plant and equipment	340	294
Fair value adjustment of biological asset	(8,600)	-
Impairment of intangible assets	16,080	-
Foreign exchange losses/(gains)	(2,500)	2,402
Loss on derivative financial instruments	1,083	736
Finance costs	(39)	(109)
Loss on disposal of subsidiary	-	20,987
Gain on fair value of investments	(1,046)	(749)
Decrease in trade and other receivables	555	-
(Decrease)/Increase in trade and other payables	(209)	332
Decrease/(increase)  in inventory	772	387
CASH OUTFLOW FROM OPERATIONS	(3,956)	149
Income taxes received	-	-
Net cash OUTFLOW from CONTINUING operations	(3,956)	149
INVESTING ACTIVITIES
Expenditure on property, plant and equipment	(10)	(40)
Net cash (OUTFLOW)/INFLOW from investing activities	(10)	(40)
FINANCING ACTIVITIES
Proceeds from sale of subsidiary (net of cash acquired)	-	1,022
Proceeds from sale of investments Finance costs	1,357	-
Net cash inflow from financing activities	1,357	1,022
INCREASE IN CASH AND CASH EQUIVALENTS	(2,609)	1,131
Cash and cash equivalents at beginning of year	3,269	2,138
Effect of foreign exchange rate variation	-	-
CASH AND CASH EQUIVALENTS AT end of YEAR	660	3,269

 

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