TIDMWBI
RNS Number : 4006L
Woodbois Limited
30 April 2020
30 April 2020
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the
publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
Woodbois Limited
("Woodbois", the "Group" or the "Company")
(AIM: WBI)
Audited results for the year ended 31 December 2019
2019 highlights:
-- 45% year on year revenue increased to $19.5m (2018: $13.4m)
-- 60% year on year increase in Trading revenues to $12.6m (2018: $7.9m)
-- $2.8m gross profit for 2019 year up from $2.1m in 2018
-- EBITDA improvement to negative US$1.9m for 2019 (2018: negative US$3.8m)
-- Capex delivered significant upgrade to sawmill in Gabon and
recovery rate up to 40% (2018: 33%)
-- Ranked 7th worldwide in Zoological Society of London SPOTT transparency report
-- 5% subsidiary Preference Shares swapped into 4% Convertible
Bonds with an 8p exercise price
Post year-end:
-- 2020-21 working capital enhancement measures announced
-- Recommencement of operations in Mozambique after more than two years
-- Gabon activities temporarily halted mid-April as country entered lockdown
-- Q1 revenues up 10% year-over-year and resilience plans
enacted in response to COVID-19
-- Paul Dolan becomes Executive Chairman and CEO
Annual Report and Accounts
The Company's 2019 Annual Report will be dispatched to
shareholders shortly and will be available to be viewed or
downloaded from the Company's website www.woodbois.com/investors
.
Enquiries:
Woodbois Limited
Paul Dolan - Chairman and CEO
www.woodbois.com
+44 (0)20 7099 1940
Arden Partners Plc (Nominated adviser and broker)
Richard Johnson
Benjamin Cryer
+44 (0)20 7614 5900
STRATEGIC REPORT
CHAIRMAN AND CHIEF EXECUTIVE OFFICERS' REVIEW
I am pleased to present the Annual Report and consolidated
financial statements for Woodbois Limited (the "Company" and its
subsidiaries (the "Group")) for the year ended 31 December
2019.
Since joining the Company as CEO in 2016, much time and energy
has been spent devising and implementing a strategy to capitalise
on the Group's substantial asset base via a sustainable operating
model while reforming the corporate structure and improving the
capital structure to align the interest of all stakeholders. At the
dawn of a new decade, investments made during 2019 in our
personnel, facilities and infrastructure positioned the Company
with a stronger brand and the ability to consistently deliver high
quality products at competitive prices, the capacity to increase
profit margins and to position the Group in sight of positive
operating cash flow.
Our strategic goal of achieving sector leadership is clear and I
look forward to playing an active part in making that ambition a
reality in my new role as Executive Chairman and CEO. It is
comforting to do so in the knowledge that such a substantial body
of work was completed in 2019, and that the settled management team
now has a solid corporate platform from which to ultimately drive
improvement to the bottom line.
COVID-19
However, at the time of writing, the world is in the grip of
coronavirus, COVID-19. Global supply chains are experiencing severe
disruption and it would be foolish to hazard-a-guess as to when the
pandemic will come under control and when life and business will
return to normal. The Board is monitoring the global health crisis
and its effects on an on-going basis and is enhancing the Group's
resilience against the associated risks and impact on the position
of the Group from both an operational and financial perspective in
various scenarios. Our priority is the health and wellbeing of our
employees and their families, and we will take all available steps
to protect them.
Production at the Mouila veneer factory and sawmill in Gabon was
tapered down from the beginning of April due to government measures
restricting the numbers of people in working environments, intended
to limit the spread of COVID-19. On 10 April 2020, the Government
of Gabon announced, amongst other measures, that the country would
enter lockdown for a minimum of two weeks commencing on 13 April
2020, meaning that our veneer factory and sawmill in Mouila had to
close. On 27 April 2020, a partial lifting of the lockdown was
announced, but as part of cash-flow management measures and due to
global economic uncertainty, it is our current intention to delay
the re-commencement of production until evidence of an upswing in
demand is present.
With restrictions on movement and limits to the number of
workers in factories in force as a result of COVID-19, there can be
no assurance that the Group will be able to perform its intended
workflows. Given similar restrictions in many of the countries to
which we export, there can also be no guarantee that we will
continue to receive timely payments from customers. While our
credit policies ensure that we retain ownership of goods, such
situations would put a strain on our cash position. Given the high
levels of uncertainty created by the COVID-19 pandemic, the Group
will need to raise funds or defer liabilities during 2020-21, the
quantum of which will be dictated by the potential impact of
COVID-19 on our budget and cash flows for the current year. While
there is no guarantee that the Group will be able to raise such
equity or loans, the track record of management lends assurance to
the possibility of successfully doing so should the need arise and
hence the going concern basis has been adopted in these financial
statements.
At this time, a global recession appears inevitable, but whether
it will be short lived or more protracted is unclear. Your Board is
putting in place the necessary measures for Woodbois to weather
either scenario. Whether economies emerge from this pandemic with a
slow recovery or with stimulus-driven strong rebounds, demand for
sustainably sourced tropical timber as a construction material
across the globe is expected and Woodbois will be positioned to
deliver. Resilience and flexibility are integral within the
Woodbois psyche and culture, and at challenging times like these,
organisations and individuals with such characteristics
differentiate themselves.
The auditors make reference to the existence of a material
uncertainty in relation to going concern within the audit report,
to which we draw your attention. While paying close attention to
our working capital requirements in the months ahead, we will do
everything in our power to support our staff, our suppliers and our
customers to ensure that we emerge from this difficult period
stronger and more united.
Business Performance and Strategy
The Group continued its rapid and consistent growth path
throughout 2019 with revenues once again rebased year-on-year.
Revenues increased by 45% year-on-year from $13.4m to $19.5m with
gross profit for the 2019 year increasing to $2.8m from $2.1m in
2018, and loss for the 2019 year from continuing operations of
$1.9m, down from a loss of $6.5m in 2018.
Management executed effectively on the Group's capital
expenditure led strategic plans, building Woodbois' brand value and
positioning the Group to achieve significant levels of growth and
profitability in the decade ahead. While aiming to continue the
delivery of top-line growth, the Group has also implemented
measures to strengthen its cash balance and improve margins, while
further leveraging the fixed cost base to improve overall
profitability, subject to the COVID-19 effects.
The high-level objective for 2019 was to maintain the rapid
growth of the business while upgrading facilities in order to drive
growth and improve margins. Further objectives included sourcing
additional trade finance funding, reducing administration costs and
generating improved performance at an operating level.
As announced on 16 April 2020, the first full quarter of
production at the newly re-tooled sawmill in Gabon saw production
increase by more than 100% over the previous quarter, with recovery
levels of 40%, up from an average of 33% for 2019. Revenues from
production are typically captured upon shipment in the following
quarter while higher levels of recovery are a direct driver of
margin increase. Volume and recovery levels are carefully tracked
and scope remains to improve both measures as staff become more
familiar with operating the new equipment. At the end of March, a
new Mebor sawmill line arrived from Slovenia. This new line will be
assembled and tested as soon as travel restrictions into Gabon are
relaxed. The additional capacity from this new line, in combination
with the new equipment that recently became operational will enable
us to provide higher volumes of premium quality sawn timber to our
customers as soon as demand recovers.
2019 financial performance overview
Year-on-year revenue grew by 45% in 2019, driven by 23% growth
in Forestry division revenues from our own production assets, and
60% growth in trading revenues. 2019 gross profit margin declined
marginally to 14.3%, from 15.8% in 2018 due to costs associated
with attracting new suppliers while expanding the trading division
and some production dislocation whilst the capital expenditure
works were carried out in Gabon. EBITDA from continuing operations
improved to negative US$1.9m in 2019 from negative US$3.9m in 2018.
Aggressive cost management allowed the increase in revenues to be
achieved with an accompanying year-on-year decrease of 12% in
operating expenses and 32% reduction in administration
expenses.
Current assets remained in line with the previous year at
US$14.3m while current liabilities declined by 32% to US$11.6m in
2019 from US$17m the previous year. Net assets were US$117.2m at
the end of 2019 (2018: US$129.6m) after deducting total liabilities
which increased by 13% from US$98.7m to US$112.2m largely
influenced by the additional US$8m ITF inflows and accounting
difference between the treatment of the now retired preference
shares which were previously included in equity and which were
swapped into the newly issued convertible bond which is split
between a non-current liability and equity. A deferred tax
liability of US$62.5m at both year-ends is largely provided against
the value of our biological assets (i.e. forest concessions) of
US$194.7m at 31 December 2018 and 2019.
Trade and other receivables grew by 3% to US$6.1m while trade
and other payables fell by 17% to US$4.8m. Inventory levels
remained broadly in line with the previous year at $6.4m but
inventory as a percentage of turnover fell encouragingly from 50%
to 33%, a ratio management will continue to focus on decreasing
further.
In driving the Group's growth agenda, the Group's working
capital requirement increased in 2019 when compared to the 2018
financial year. The growth in working capital of $0.82m (12%) is
however modest when compared to the 45% increase in turnover
achieved over the period. This was achieved through careful
monitoring of trade completion dates, logistics and minimising
delivery time to customers.
Forestry division
-- 2019 Revenue of $6.9m v $5.6m in 2018
-- Gross profit of $1.6m v $1.2m in 2018
-- Gross profit of 24% v 21% in 2018
-- Operating cost of $3.4m v $3.4m in 2018
-- Segment operating loss of $2.5m v $3.1m in 2018 (excluding
gain on fair value of Biological assets in 2018)
-- Segment loss after tax of $3.5m v $3.7m in 2018 (excluding
gain on fair value of Biological assets in 2018)
-- 2019 capex benefits expected in profit margins and recovery rates in 2020 onwards
Perhaps the most exciting development for the Group during 2019
was the metamorphosis of our sawmill plant in Mouila, Gabon. The
ten-hectare site experienced a comprehensive upgrade with the
installation and commissioning of industrial standard kilns with
2000m3 monthly capacity, and the installation and commissioning of
high quality sawmilling equipment from China and Slovenia.
Despite often challenging conditions including unprecedented
levels of rainfall, the full civil works required to house and
connect this additional equipment was completed on time and within
budget. A surface area of almost 7000m2 of concrete was mixed on
site and laid by hand. I truly appreciate the hard work done by our
in-house construction team to lay these foundations.
Gross profit margin from our own production increased to 24%
from 21% in 2018 driven largely by veneer production entering our
product mix. Yield from raw material to finished product of veneer
or sawn lumber is a critical KPI since improved yields imply higher
levels of output, and therefore revenue, for the same unit cost of
input. In 2019, veneer yield averaged 60% while sawn timber yield
averaged 34%. The target for veneer yield in 2020 is 62-65% and
having re-tooled the sawmill we are aiming for a step change in
recovery to 42-45% for sawn timber. At both facilities this will
involve a process of continually up-skilling staff on processing
techniques and maintenance of machinery as well as evolving and
implementing management driven efficiencies.
Data gathered during the testing of the new production lines,
whilst our staff were trained during November and December, showed
an improvement in yield from 33% to 41%. As the team becomes more
familiar with operating the new equipment, further improvement will
arise.
The transformation of our sawmill in Mouila during the course of
2019 enables Woodbois to produce superior, premium-grade product,
enhancing the Woodbois brand while extracting improved levels of
recovery from our raw material. Taken in combination with the kiln
drying of our sawn timber being brought in-house, once normal
operations resume post-COVID-19 we expect the division to deliver
both an increase in revenues and an improvement in margins,
providing a solid and fundamental pillar to future Group
profitability.
The strategy for the forestry division is to achieve 100%
utilisation of our assets in Gabon while increasing gross profit
margins to a minimum of 30% from 24% in 2019.
Trading
-- Revenue of $12.6m v $7.9m in 2018
-- Gross profit of $1.2m v $0.9m in 2018
-- Gross profit of 9% v 12% in 2018
-- Operating cost of $1.3m v $1.3m in 2018
-- Segment operating loss of $2.0m v $2.2m in 2018
-- Segment loss after tax of $2.0m v $2.7m in 2018
As anticipated, the increased utilization of the Internal
Trading Fund facility helped drive 60% year over year growth in
trading revenues. With a proven record of attracting and utilising
trade finance, the trading team has continued to focus on expanding
the supplier network to meet the global demand for traceable,
sustainable hardwood products generated by our sales team. Gross
profit margin of 9% reflected the investment cost of securing new
long-term suppliers, and while lower than the previous year, was
within the range of management expectations. 2019 total trading
revenues of $12.6m are equivalent to approximately 0.3% of the
total African timber export market, leaving significant room for
the Group to increase market share as we strive for a position of
market leadership.
The strategy for the trading division is to deliver exponential
growth while maintaining high single digit to low double-digit
margins and minimising the average duration of each trade.
Financing, corporate restructuring and improving capital
structure
2019 was notable for the significant levels of corporate
restructuring achieved and the level of new financing attracted. At
the start 2019, the Company announced the purchase of the minority
25% stake of Montara Continental Limited that it did not own (from
Africa Resource Investment Limited ("ARI")) for the consideration
of US$5m. ARI committed to the provision of a loan of the full $5m
proceeds, for the purposes of trade finance through the ITF.
At that time, the directors expressed their belief that
simplifying the corporate structure and narrowing the Group's focus
to timber trading and production, would make the Group more
attractive to potential investors and trade finance providers.
During the first quarter, the 1798 Volantis Fund ("Volantis") ,
a fund managed on a discretionary basis by Lombard Odier Asset
Management group, invested approximately US$5m in new ordinary
shares as well as committing to the provision of a loan of $5m for
the purposes of trade finance through the ITF. The ITF amounted to
$12.1m at the year-end, up from $3.8m at the 2018 year end. This
increase was instrumental in increasing trade volumes, but comes at
an interest cost of 11.5%pa. The ITF interest charge included in
the group's results for 2019 is $1.2m versus $0.2m in 2018.
Having rationalised the corporate structure, eliminating 27
subsidiary companies over the previous 18 months in the process,
one of the Board's aims in 2019 was to simplify the Group's capital
structure with the intention of aligning the interest of all
investors.
The 5% perpetual preference share class in Woodbois' subsidiary
Argento was repurchased and its holders issued instead with a
convertible bond issued by Woodbois. The Woodbois convertible bond
has a tenure to 30 June 2024, a 4% coupon and conversion price of
8p (a maximum of 300 million ordinary shares on full conversion).
100% of the preference shareholders accepted the switch from a
preference share with variable conversion terms linked to a
subsidiary company, to a bond convertible into Woodbois common
stock at a fixed rate. As well as simplifying the capital
structure, the switch to convertible bond served to more closely
align management, bondholders and shareholders' interest, as well
as making the Group more investible and easier to value for
institutional investors. The restructure resulted in the group
realising a gain of $4.6m, which is included in the 2019 loss
before tax. The liability portion of the convertible bond is
carried at amortised cost and as such it adds a significant
interest charge to the Group's bottom line while the preference
dividends were recognised through the Statement of Changes in
Equity. Interest recognised on the convertible bonds in 2019
amounts to $0.5m, but the charge will increase to $2.9m for the
2020 financial year, of which $1.7m is a non-cash component.
Cash conservation measures
In January 2020 the Company announced it had instigated a range
of important cash-management measures designed to allow the Company
to enter the new decade in a strong position while moving towards
generating sustainable positive cash flow. The deferral by a year
of the 2020 acquisition purchase payments totalling $1.25m by our
senior management team was a very clear statement of support for,
and confidence in, the fundamental strength of our business.
Volantis agreed to provide an additional $1.0m through
investment into the Group's ITF ("Additional Loan") by way of an
additional loan agreement with Woodbois Trading Limited, a wholly
owned subsidiary of the Group. $0.5m of the Additional Loan has
been drawn down to date. Further drawdowns are by mutual
agreement.
In addition, Volantis indicated their intention to receive
Woodbois ordinary shares in lieu of interest for the period from 1
July 2019 to 31 December 2020 in respect of their ITF loans, a
gesture that I was happy to match for my ITF loan of $0.3m. Africa
Resource Investment Limited agreed that, in respect of its existing
$5.0m ITF loan, it would not request any withdrawal prior to 31
December 2020.
In connection with the Company's 4% convertible bonds 2024,
issued on 21 October 2019, Pelham Limited (a company controlled by
Miles Pelham, former Chairman) agreed to roll-up interest payments
due for the period from issue until 31 December 2020 on an
aggregate $20m of Bonds. Again, I was happy to match this
significant gesture by Mr Pelham for the $0.4m of bonds that I
own.
I am grateful to the team, and to our largest stakeholders for
agreeing to the measures detailed above for demonstrating their
commitment to strengthening the Company's working capital
position.
Mozambique
Our business in Mozambique has largely been on a care and
maintenance basis for two years, partly due to an industry export
ban in 2018 but also due to the quantum of investment required to
restart and to enlarge the operations to be able to earn an
acceptable return on capital comparable to the Group's other
business segments. Management had been seeking the optimum way to
recommence operations and on 19 March 2020 announced the signing of
a management agreement with Future Earth II LLC ("Future Earth"), a
US company with substantial forestry concessions in Mozambique,
creating a relationship under which Future Earth will fund, manage
and operate Woodbois' Mozambique concessions, employees and
equipment, in order to produce sawn lumber and veneers to be sold
by Future Earth on a profit share basis. We believe the agreement
with Future Earth provides material benefits to both parties, not
least from the economies of scale arising from Woodbois'
approximately 300,000 hectares and Future Earth's approximately
620,000 hectares of concessions.
Since 2006, Future Earth has built sustainable industry
programmes in Mozambique. EAFP, its local subsidiary, processes
timber into lumber and finished products through its sawmill and
veneer manufacturing facilities in Mozambique. By operating these
facilities in-country rather than shipping semi-finished timbers,
the business captures a greater portion of the value chain locally,
creating more employment and reducing the carbon footprint of
finished goods. The business has multiple times received the
Presidential Award for "Best Exporter of Value-added Timber
Products" as well as the award for "Best Rural Industrialization
Project in Mozambique".
The Agreement is for 3 years, with optional breaks after 12 and
24 months at Future Earth's discretion. All costs during the term
of the Agreement will be funded by Future Earth, with a 50:50
post-cost profit share from products sold from Woodbois'
concessions. Should Future Earth proceed with years 2 and 3 they
will pre-pay Woodbois US$1 million each year, to be deducted from
the Woodbois share of profits for each respective year. Profits
will be distributed quarterly.
The agreement will allow Woodbois to start realising value from
our substantial assets in Mozambique without diluting management
focus or financial resources, which can now be fully concentrated
on bringing our operations in Gabon to optimal capacity, and on our
international timber trading business.
Tanzania
Envision, the Tanzanian entity which purchased the Tanzanian
agriculture business from us, has so far failed to pay the initial
proceeds in accordance with the payment schedule agreed in the Sale
and Purchase Agreement ("SPA") announced at the end of 2018. Under
the SPA the consideration is payable by Envision in 12 quarterly
instalments. The first instalment of $0.25m was payable on 30 April
2019, with 11 subsequent payments of $0.16m each and the assumption
of a debt of $0.5m.
The Group is in discussion with Envision to recover the amounts
due and reserves it's right to use legal recourse to recover such
amounts: however, given the material uncertainty as to
recoverability of the amounts due, a full provision has been made
in the accounts. This provision ($2.5m) is included in the 2019
loss from discontinued operations.
Apart from minimal administrative expenses the Group has no
on-going cost commitment in Tanzania.
Social impact and sustainability
Conservation Goals and Transparency
A significant contributor to deforestation in Africa is the
industry's largely informal nature. Much of the deforestation
caused by logging is the result of unsanctioned clearing of forests
outside of regulated concession areas. Even within the formal
market, logging in Africa is dominated by small-scale producers
that are largely isolated from global end markets. The supply side
of the market consists of thousands of companies, the majority of
which are micro or small operators employing fewer than 50 workers.
By and large, these are local actors that view the forest as a
short-term means to support their immediate needs rather than as a
long-term economic asset. And as a result of their isolation, they
often face little economic incentive to preserve the forests in
which they operate or adhere to best-practice sustainability and
conservation efforts.
The lack of economic incentive to develop sustainable practices
is compounded by the challenge of securing financing in Africa,
which limits operators' ability to invest in the types of reporting
and management systems that would enable them to comply with global
standards, such as certification from the Forestry Sustainability
Council ("FSC"). For local timber suppliers, the high cost of
certification - both financially and in terms of management
capacity, poses a challenge in complying with
sustainability-related requirements from regulators in markets like
Gabon, where the President has mandated FSC certification for all
forestry concessions by 2022. For investors and end users alike,
the African natural timber market's opacity and the scarcity of
certified suppliers creates an obstacle to identifying companies
that meet their sustainability requirements.
The fragmented nature of the market compounds further down the
supply chain. As timber changes hands, it can become increasingly
difficult to identify whether the timber was sourced sustainably.
This traceability problem can ultimately result in the
manufacturing of end products sourced from forestry operations
contributing to deforestation. While deforestation ultimately
results from land use practices, actors across the supply chain -
including investors and end customers - play important roles in
influencing and monitoring environmental impact.
Leadership in Sustainable Production and Trade of African
Natural Hardwoods
We seek to solve these challenges by leveraging on-the-ground
experience as a producer in West Africa and our global timber
trading expertise to expand sustainable forestry practices across
the region.
We have first-hand experience as a hardwood timber producer in
Gabon, controlling almost 100,000 hectares of concessions on
20-year renewable leases, and in Mozambique, where we control more
than 300,000 hectares of concessions on 25-50 year leases. Across
our concessions, we have implemented best-practice sustainable
forestry practices, such as carefully planning and spacing-out
harvests to avoid disrupting natural canopies and groundcover,
thereby protecting biodiversity and natural habitats. Our
commitment to sustainable and transparent forestry practices is
borne out by our ranking in the London Zoological Society's SPOTT
survey, which ranked the Company 7th among 97 companies globally
with a score of 69% compared to the 20.4% average. SPOTT,
Sustainability Policy Transparency Toolkit, is an online platform
created by the Zoological Society of London to assess commodity
producers and traders on the public disclosure of each company's
policies and operations, as well as their commitments to
environmental, social and governance (ESG) best practice.
While we are also planning to pursue formal FSC certification in
the coming year, involving a meaningful investment of time and
resources, we already operate our concessions and timber sourcing
practices in a manner consistent with FSC guidelines.
Through our trading arm in Copenhagen, Woodbois has considerable
experience identifying buyers and negotiating purchase terms for
African hardwood timber products globally. The Company's trading
network is considerable, comprising almost 300 customers across
more than 60 countries, anchored by our team's deep global
relationships with buyers and fuelled by investments in technology,
including plans to develop timber pricing software and a
blockchain-based traceability tool. Our investment in technology,
combined with deep relationships with a diverse customer mix of
buyers across the globe, allow us to not only locate the optimal
trade partners to maximise the price received for products, but
also to trace third-party supply from the forest through
manufacturing and to the final exported product. Through these
investments, the Company ensures that 100% of our third-party
timber supply is traceable to sustainable operators in the country
of origin.
We are well positioned to leverage our global trading platform
and on-the-ground experience as a sustainable producer to scale our
model through long-term partnerships with local producers across
the African region. We believe that our deep access to markets
makes us an attractive partner for local operators who lack the
scale, experience and technology to navigate the complex global
marketplace. Through such partnerships, we plan to extend our
sustainability and transparency practices to local partners across
the timber-producing African region.
Board changes
Miles Pelham stepped down as Non-Executive Chairman in July 2019
in the expectation of listing Diginex Limited, a blockchain company
that he founded, on NASDAQ. He remains fully committed to Woodbois'
future success but acknowledged that he could not adequately
service the needs of the Group with another Chairmanship of a
listed entity. We offer sincere thanks to Miles for his leadership,
energy and direction throughout his three-year tenure. The Group is
unrecognisable from the organization that he took Chairmanship of
in 2016, and the changes in that time have been overwhelmingly
positive. As the largest individual stakeholder, we anticipate that
Miles will continue to monitor the Group with keen interest while
remaining a strong supporter of its management team.
Kevin Milne, has been our longest-standing non-executive Board
member since August 2015 and was appointed interim-Chairman upon
Miles Pelham's departure. He has been Chairman of the Remuneration
Committee and a member of the Audit Committee. As part of our
COVID-19 cost savings Kevin has agreed to step down as
interim-Chairman and from the Board with immediate effect. We are
very grateful to Kevin for his dedication to the Company over the
last five years. As a result of this change, I am taking on the
role of Executive Chairman and CEO.
In May 2019, Henry Turcan joined the Board as Non-Executive
Director. Henry has worked in financial services since 1996, with a
focus on equity capital markets. Having spent the majority of his
career advising growth companies within investment banking, he
joined the Volantis team at Henderson Global Investors in 2015,
which subsequently transferred to Lombard Odier Investment
Management in 2017 becoming known as 1798 Volantis. Henry is a
representative of the funds managed or sub-advised by Lombard Odier
Investments Manager group entities, collectively the Company's
largest shareholder. He is a member of the Audit and Remuneration
Committees.
Also in May 2019, Graeme Thomson became Senior Independent
Non-Executive Director and Chairman of the Audit Committee and will
become Chairman of the Remuneration Committee forthwith. Graeme is
a Fellow of the Institute of Chartered Accountants in England and
Wales and has been a public company director for many decades, as a
CEO, CFO/Company Secretary and as a Non-Executive.
Graeme and Henry's varied commercial experience, including of
Audit and Remuneration Committees, as well as internationally and
of financial matters has already proved to be of considerable
benefit to the Group.
Looking forward
The capex committed during 2019 has ensured that the Group is
well positioned to deliver higher levels of revenue and margins
when global economic activity resumes post-coronavirus. We have a
strong, committed team and innovative technology in place to
leverage the Woodbois trading business via the trade finance raised
to date. The $19.5m in revenues achieved in 2019 constitutes less
than half of one percent of the $4bln African export timber market.
The immediate target is 2% market share but I see no reason to
believe that 5% is an unrealistic ambition. The dislocation caused
by COVID-19 will likely lead to growth opportunities for organised,
well-financed market participants. With our geographically
diversified customer base we intend to be among this group.
Woodbois has an increasingly important role to play in the
sustainable timber space as an example of a sustainable,
commercially successful African forest manager. We are well
positioned to partner with large corporates (e.g. oil and gas
majors) to provide climate change mitigation opportunities such as
large-scale tree planting schemes. We are also committed to
providing support and advice to small-scale suppliers across the
Congo basin to help them comply with the sustainability standards
required to access global markets.
I take this opportunity to thank all of our staff for their care
and commitment to the Company and to each other, and for all of
their hard work dedication in 2019. I sincerely hope that they and
their families, and you, our shareholders, emerge from this
distressing period safe and well. I believe we are ready to embrace
the challenges and benefit from the opportunities that lie
ahead.
For and on behalf of the Board
Paul Dolan
Chairman and Chief Executive Officer
29 April 2020
THE DIRECTORS' REPORT
The Directors submit their report on the affairs of the Group,
together with the financial statements and auditor's report for the
year ended 31 December 2019.
PRINCIPAL ACTIVITIES AND CORPORATE DEVELOPMENT
The principal activities of Woodbois Limited ("Woodbois") during
2019, together with its subsidiaries (the "Group") were forestry
and timber trading. These activities were undertaken through both
the Company and its subsidiaries. The Company is quoted on AIM and
is incorporated and domiciled in Guernsey.
BUSINESS REVIEW
A review of the Group's performance and prospects is included in
the Strategic Report.
RESULTS AND DIVIDS
The consolidated loss for the year after taxation from
continuing operations attributable to shareholders was $1.951m
(2018: $6.525m).
The Directors do not recommend payment of an ordinary dividend
(2018: $Nil).
SHARE CAPITAL AND FUNDING
Full details of the authorised and issued share capital,
together with details of the movements in the Company's issued
share capital during the year are shown in Note 19. The Company has
one class of ordinary shares, which carry no right to fixed income.
Each share carries the right to one vote at general meetings of the
Company.
The Company has unlimited authorised share capital divided into
ordinary shares of 1p each, of which 465,451,931 had been issued as
at 31 December 2019. The Company also holds 99,378 Shares in
Treasury.
POST BALANCE SHEET EVENTS
Please refer to Note 27 of the financial statements and the
Strategic Report for details.
DIRECTORS
The Directors, who served during the year and to the date of
this report were as follows:
Paul Dolan (Chairman & Chief Executive Officer)
Carnel Geddes (Chief Financial Officer)
Jacob Hansen (appointed 11 January 2019) (Executive Director)
Hadi Ghossein (appointed 11 January 2019) (Executive Director)
Zahid Abbas (appointed 11 January 2019) (Executive Director)
Henry Turcan (appointed 13 May 2019) (Non-executive Director)
Graeme Thompson (appointed 11 July 2019) (Non-executive Director)
Jessica Camus-Demarche (resigned 11 January 2019) (Non-executive Director)
Miles Pelham (resigned 11 July 2019) (Non-executive Director)
Kevin Milne (resigned 29 April 2020) (Non-executive Director)
Directors' indemnity insurance
The Group has maintained insurance throughout the year for its
Directors and Officers against the consequences of actions brought
against them in relation to their duties for the Group.
Directors' interests
Directors' interests in the shares of the Company, including
family interests at 31 December 2019 were:
Shareholdings Ordinary shares of 1p each Ordinary shares of 1p each
2019 2018
--------------------- --------------------------- ---------------------------
Paul Dolan(1) 46,128,571 16,128,571
Kevin Milne(2) 199,793 199,793
Hadi Ghossein(3) 5,213,883 5,213,883
Jacob Hansen(3) 5,213,883 5,123,883
Zahid Abbas(3) 5,213,883 5,123,883
--------------------- --------------------------- ---------------------------
1 Paul Dolan, Chairman and Chief Executive Officer of Woodbois
Limited, held 46,373,275 shares (9.87%) as at 29 April 2020. At 31
December 2019 and 29 April 2020, 13,300,000 of his shares in the
Company are held through HSBC Client Holdings Nominee (UK) Limited
with the remainder being held through other nominee companies as of
31 December 2019. At 31 December 2018 he held 1,001 Argento 5%
Preference shares and at 31 December 2019 and 29 April 2020 he held
400,400 $1 Convertible Bonds.
2 Kevin Milne, Non-executive Director of Woodbois Limited,
together with his wife held 199,793 shares in the Company.
3 Hadi Ghossein, Jacob Hansen and Zahid Abbas, or companies
controlled by them were issued 5,213,883 shares each on 4 July 2017
as part of the Woodbois International ApS purchase agreement.
Options
On 5 July and 3 October 2017, the Board proposed and approved
the issue of long-dated, highly out-of-the-money share option
awards to current and proposed management.
Share option awards were made on the following structure within
the Company's existing share scheme, the terms of which are
detailed in Note 24:
Vesting Date Award Amounts Outstanding
at 31 December 2019
June 2018 3.125m options
------------- --------------------------
June 2019 3.125m options
------------- --------------------------
June 2020 3.125m options
------------- --------------------------
June 2021 3.125m options
------------- --------------------------
The awards will be distributed to the Board as follows and the
awardee must accept the option granted for it to be valid:
Number of options
Paul Dolan Chairman and CEO 1m per tranche (4m
total)
Carnel Geddes CFO 250k per tranche (1m
total)
------------------------ -----------------------
Jacob Hansen Chief Operating Officer 625k per tranche (2.5m
total)
------------------------ -----------------------
Hadi Ghossein Deputy Chairman 625k per tranche (2.5m
total)
------------------------ -----------------------
Zahid Abbas Head of Trading 625k per tranche (2.5m
total)
------------------------ -----------------------
Miles Pelham forfeited his 4m share options upon resignation on
11 July 2019. Jessica Camus-Demarche forfeited her 1m share options
upon resignation as a director on 11 January 2019.
Directors' remuneration
The audited remuneration of the individual Directors who served
in the year to 31 December 2019 was:
Deferred acquisition payment***
Total
Salary & fees Benefits 2019 Total 2018
$000 $000 $000 $000 $000
------------------------ -------------- --------- -------------------------------- -------- -----------
Paul Dolan 200 - - 200 200
Carnel Geddes ** 183 - - 183 150
Jacob Hansen * 236 7 478 721 682
Hadi Ghossein 188 6 - 194 215
Zahid Abbas 234 8 478 720 672
Henry Turcan 16 - - 16 -
Graeme Thomson 11 - - 11 -
Jessica Camus-Demarche 3 - - 3 50
Miles Pelham 107 - - 107 200
Kevin Milne 30 - - 30 30
Total 1,208 21 956 2,185 2,199
------------------------ -------------- --------- -------------------------------- -------- -----------
All of the above Directors' remunerations are considered short
term in nature.
It is the Company's policy that executive Directors should have
contracts with an indefinite term providing for a maximum of 3-6
months' notice. In the event of a take-over, the Directors'
contracts provide for compensation of 2 years salary as a bonus on
the take-over in the event that the Executive loses his
position.
*Jacob Hansen and Zahid Abbas were paid $17,495 of fees each
through service companies, Barsik Holdings ApS and AKA Holding
ApS.
**Carnel Geddes is paid in full through a service company,
Pomona Trust.
***Conditional payments arising on the purchase of Woodbois
International ApS in 2017.
Non-executive Directors are employed on letters of appointment
which may be terminated on not less than 3 months' notice. The
basic fees payable to Kevin Milne and Graeme Thomson were $30,000
and $25,500 per annum, respectively. No fees are paid directly to
Henry Turcan, however, fees of $25,000 per annum, are paid to
Lombard Odier, for his services.
ProfileS of the CURRENT Directors
PAUL DOLAN, AGED 55, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Based in the UK, Paul held senior management positions within
banking and hedge funds prior to joining Woodbois. Paul has
consistently built award winning, world-class teams employing
custom-built technology to manage substantial pools of human and
financial capital across a diversified group of asset classes
ranging from fixed income and equity derivatives to soft
commodities and forestry.
CARNEL GEDDES, AGED 41, CHIEF FINANCIAL OFFICER
Based in South Africa, Carnel is a Fellow of the Institute of
Chartered Accountants in England and Wales, a member of the South
African Institute of Chartered Accountants and a Certified Fraud
Examiner. During a 15-year career at BDO, the global audit, tax and
advisory group, Carnel served as director, forensic services, of
BDO London and partner of BDO Cape Town. She has been a director
and Board member of the largest South African pomegranate farming
and export company, Pomona, since 2008. She is also the Chair of
POMASA, the Pomegranate Growers Association of South Africa.
JACOB HANSEN, AGED 52, CHIEF OPERATING OFFICER
Based between Denmark and Africa, Jacob co-founded Woodbois in
2005 and has spent more than 30 years in the timber business.
Jacob's early career involved managing sawmills in Sweden, Canada,
and the UK before moving to hardwood procurement in the
Philippines. Subsequently, Jacob held various international sales
and procurement roles for DLH Group based in France, the Middle
East and the Congo basin.
HADI GHOSSEIN, AGED 59, DEPUTY CHARIMAN
Based in Gabon, Hadi has 25 years of experience managing
forestry operations, including full ownership of a forestry
business. Hadi previously served as a diplomat, travelling
extensively across Africa, as well as owning various trading and
real estate companies. Hadi is fluent in Arabic, French, Portuguese
and English and holds Gabonese citizenship.
ZAHID ABBAS, AGED 46, HEAD OF TRADING
Based between Demark and Africa, Zahid co-founded Woodbois in
2005. He started his career at DLH Group and his roles have
included procurement in Africa and Brazil for European
manufacturers as well as implementing the Group's environmental
policy. Fluent in seven languages, Zahid is well known and highly
respected within the timber industry globally.
HENRY TURCAN, AGED 46, NON-EXECUTIVE DIRECTOR
Henry has worked in financial services since 1996, with a focus
on equity capital markets. Having spent the majority of his career
advising growth companies within investment banking he joined the
Volantis team at Henderson Global Investors in 2015 which
subsequently transferred to Lombard Odier Investment Management in
2017 becoming known as 1798 Volantis. Henry graduated with an MA
(Hons) in Modern Languages from Edinburgh University and is a
Member of the Securities Institute. Henry is a representative of
the funds managed or sub-advised by Lombard Odier Investments
Manager group entities, collectively the Company's largest
shareholder.
GRAEME THOMSON, AGED 63, NON-EXECUTIVE DIRECTOR (INDEPENT)
Graeme is a Fellow of the Institute of Chartered Accountants in
England and Wales and has been a public company director for many
decades, as a CEO, CFO/Company Secretary and as a Non-Executive. He
has varied commercial UK and international experience, including of
Audit and Remuneration Committees.
SUBSTANTIAL SHAREHOLDERS
The Company has been notified that the following have, at 29
April 2020, an interest in three percent or more of the issued
ordinary share capital of the Company:
Percentage
Number of 1p of the issued
Name ordinary shares share capital
----------------------------------- ----------------- ---------------
Lombard Odier Asset Mgmt 120,540,230 25.66%
----------------------------------- ----------------- ---------------
Grandinex International Corp 70,000,000 14.90%
----------------------------------- ----------------- ---------------
Pelham Limited 54,500,000 11.60%
----------------------------------- ----------------- ---------------
Paul Dolan (Chairman and CEO) 46,373,275 9.87%
----------------------------------- ----------------- ---------------
Spreadex Limited 32,362,000 6.89%
----------------------------------- ----------------- ---------------
HSBC Client Holdings Nominee (UK)
Limited** 15,295,657 3.28%
----------------------------------- ----------------- ---------------
Miles Pelham, former Chairman, has a non-beneficial interest in
30,000,000 of the shares in which Paul Dolan has a beneficial
interest, as Miles Pelham holds these shares in trust for Paul
Dolan under the terms of the Long-Term Incentive Plan as announced
on the 21 January 2019.
CORPORATE GOVERNANCE
The Board is committed to achieving the highest standards of
corporate governance, integrity and business ethics and as Chairman
and CEO, I am responsible for oversight of this. The Board has
adopted the Corporate Governance Code produced by the Quoted
Companies Alliance and has taken steps to apply the principles of
the QCA Code in so far as they can be applied practically and with
the exception set out below, given the size of the Group and the
nature of its operations. We set out below how the Group complies
with the QCA Code.
1. Establish a strategy and business model which promotes
long-term value for shareholders
The strategy and business operations of the Group are set out in
the Strategic Report.
The Group has two divisions, Trading and Forestry, and a clear
strategy had been devised for each. The Board continually impresses
upon the leadership teams of each division that capital allocation
must be both performance and potential driven. Investment, either
opex or capex, will only be forthcoming for strategies that can
demonstrate significant return to shareholders over time. Running
loss-making business lines is not a sustainable business strategy
and simply not an option. We will leave no stone unturned in our
quest to support and fund businesses where our combination of
skills and experience give us an edge. Conversely, if we cannot
source the requisite expertise to participate profitably in
particular business lines or geographies, we will not waste
shareholder money by trying.
2. Seek to understand and meet shareholder needs and
expectations
Shareholders play a key role in corporate governance, with our
Annual General Meeting for shareholders offering an opportunity to
exercise their decision-making power in the Company. Shareholders
are encouraged to attend the AGM and any other General Meetings
which are convened throughout the year. Our Company Secretary,
William Place Secretaries Limited, is the contact point for
shareholder liaison and their contact details are set out in these
financial statements.
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success
The Board recognises that the long-term success of the Group is
reliant upon the efforts of the employees of the Group and its
contractors and suppliers. We continuously engage with our
stakeholders ranging from customers, investors, international
development banks, governments, not for profit organisations and
academia, to identify and address issues of materiality and to
gather feedback from each of them. The Board ensures that all key
relationships are the responsibility of, or are closely supervised
by, one of the Directors.
Woodbois is in a unique position to bring vital positive impact
to Africa's economic transformation, social development and
environmental management through our operations. In this regard we
have set out to align our sustainability strategy with the United
Nations Sustainable Development Goals (SDGs) which provide a vision
for ending poverty, hunger, inequality and protecting the earth's
natural resources.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The business of forestry and timber trading involves a high
degree of risk, in addition to technical, political and regulatory
risk; the Group is exposed to weather, nutrient and pest risks.
Furthermore, the Group is exposed to a number of financial risks
which the Board seeks to minimise by adopting a prudent approach
which is consistent with the corporate objectives of the Group. Our
approach to these risk factors is set out in the Financial
Statements for the year ended 31 December 2019.
A comprehensive budgeting process is completed once a year and
is reviewed and approved by the Board. Budgets are subsequently
updated when there is a significant change in any of the key
assumptions to the budget. The Group's actual results, compared
with the budget, are reported to the Executive Board on a weekly
basis. Any material deviations from budget are followed up by a
member of the Executive Board.
The Group maintains appropriate insurance cover in respect of
actions taken against the Directors because of their roles, as well
as against material loss or claims against the Group. The insured
values and type of cover are comprehensively reviewed on a periodic
basis.
5. Maintain the Board as a well-functioning, balanced team led
by the Chair
The Board is responsible for establishing the strategic
direction of the Group, monitoring the Group's trading performance
and appraising and executing development and acquisition
opportunities. The Company holds a minimum of six Board meetings
per year at which financial and other reports are considered and,
where appropriate, voted on. It also holds ad hoc meetings as
required to deal with specific issues. Board and Committee meetings
are convened at times convenient to eligible members to ensure 100%
attendance.
Details of the Directors' beneficial interests in Ordinary
Shares are available on our website and are set out in the
Directors' Report. The Directors comply with Rule 21 of the AIM
Rules and the Market Abuse Regulations 2014 relating to directors'
dealings and will take all reasonable steps to ensure compliance by
any employees of the Company to whom regulations apply. The Company
has, in addition, adopted the Share Dealing Code for dealings in
its Ordinary Shares by directors and senior employees.
As of 29 April 2020, the Board comprised of five Executive
Directors, one Non-Independent Non-Executive Director and one
Independent Non-Executive Director. The Chairman and Chief
Executive Officer roles were combined on 29 April 2020 and one
Independent Non-Executive Director left as part of the cost cutting
in response to the effects of COVID-19. It is intended in due
course to comply with the Code by separating the roles of Chairman
and Chief Executive Officer and to appoint a further Independent
Non-Executive Director. Executive Board members are considered full
time employees, while Non-Executives are required to commit between
20 and 40 days per annum to their roles.
The Board is supported by the Audit and the Remuneration
Committees which comprised of Non-Executive Directors only, and the
Nominations Committee which includes the Chairman and CEO.
6. Ensure that between them, the Directors have the necessary
up-to-date experience, skills and capabilities
The Directors' biographies can be found in this Directors'
Report and on the Company's website. The Board believes that their
mix of significant senior financial and commercial experience gives
a strong and appropriate background to formulate and deliver long
term shareholder value.
The Nominations Committee oversees the requirements for and
recommendations of any new Board appointments to ensure that it has
the necessary mix of skills and experience to support the ongoing
development of the Company. Any appointments made will be on merit,
against objective criteria and with due regard for the benefits of
diversity on the Board, including gender. The Nomination Committee
will also be responsible for succession planning.
In addition to bringing considerable skills to the table,
appointments to the Board aim to provide a healthy balance of both
experience and gender.
7. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement
Internal evaluation of the Board, the Committees and individual
Directors is seen as an important next step in the development of
the Board and one that is addressed. An annual operational review
of all members of the Board is undertaken, in which their
performance is evaluated, and development needs identified and
actions to be taken agreed. Executive and Non-executive Directors
are subject to re-election intervals as prescribed in the Company's
Articles of Incorporation. At each Annual General Meeting one-third
of the Directors who are subject to retirement by rotation shall
retire from office. They can then offer themselves for
re-election.
8. Promote a corporate culture that is based on ethical values
and behaviours
The Company is committed to complying with all applicable laws
and best corporate governance practices, wherever we operate. It is
a core aspect of our mission to act with integrity in all of our
operations. The Board expects all employees to comply with both the
letter and spirit of the law and governance codes.
The Company fosters a culture where our businesses directly and
indirectly promote a range of benefits for the host community and
host country on social and environmental levels. One of the most
fundamental and positive social impacts associated with our
Company's strategic growth objective is the skills development and
employment opportunity we bring to the region. The Group also
commits to providing a safe environment for its staff and all other
parties for which the Company has responsibility. The Company is
committed to protecting the environment, contributing to
sustainable management of natural resources by strictly following
guidelines set out by host Governments and actively engaging with
local communities. The Company clearly articulates objectives and
has put in place an internal accountability mechanism to
effectively implement commitments, as well as ensuring that
outcomes are measured and communicated transparently.
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
The following matters are reserved for the Board:
-- Overall Group strategy
-- Approval of major capital expenditure projects
-- Approval of the annual and interim results
-- Annual budgets and revisions thereto.
The Company is committed to high standards of corporate
governance. Both Management and the Board are dedicated to
implementing best practice as the Company grows.
A clear organisation structure exists detailing lines of
authority and control responsibilities.
The Board monitors the exposure to key business risks and
reviews the strategic direction of all trading subsidiaries, their
annual budgets, their performance in relation to those budgets and
their capital expenditure.
The agenda of the overall business is determined by a Management
Committee setting out agreed targets that will maximise financial
return. Opportunities and improvements are identified and
prioritised depending on analysis carried out by Management. These
projects are supported by detailed financial planning.
Internal controls and systems have been introduced to manage
business objectives. As well as Board discussions, regular meetings
are held by Management to discuss performance. Detailed information
packs are prepared bi-weekly to cover each major area of the
business. Variances from the budget and previous forecasts are
analysed, explained and acted on. Important capital investments are
regularly discussed both at a Board and at a Management level where
analysis of budget versus actual spend is carried out.
Effective corporate governance remains key to the business as it
grows rapidly. The Company has a structure and process in place to
help identify areas in which corporate governance can be improved.
The Company is currently implementing technology that will allow
both the Board and Management to oversee key performance indicators
across the business in real time.
Within the Trading division, the Company has mandated a
technology firm to create a custom-built tool to allow for
real-time tracking of all trades, which has been implemented in
2020.
The Company is in discussion with several organisations to
implement innovative blockchain based technology to manage both the
traceability of the timber that the Company produces as well as
providing real-time oversight of the business's supply chain.
The Audit Committee, Remuneration Committee and Nominations
Committee have formally delegated duties and responsibilities.
Audit Committee:
The Board has established an Audit Committee with formally
delegated duties and responsibilities. During the year the Audit
Committee comprised of Non-executive Directors with Graeme Thomson
as Chairman from his appointment in July 2019, together with Henry
Turcan and Kevin Milne. It meets at least three times in the
financial year.
The terms of reference for the Audit Committee include
requirements:
-- To monitor the integrity of the financial statements of the
Group and any formal announcements relating to the Group's
financial performance, reviewing significant financial reporting
judgements contained in them;
-- To review the Group's internal financial controls together
with the Group's internal control and risk management systems.
-- To monitor and review the external auditor's independence and
objectivity and to make recommendations in relation to the
appointment, re-appointment and removal of the external
auditor.
Remuneration Committee:
The Remuneration Committee meets as and when required. During
the year the Remuneration Committee comprised of Non-executive
Directors with Kevin Milne as the Chairman, together with Henry
Turcan and Graeme Thomson. It meets at least twice a year. Graeme
Thomson became Chairman on 29 April 2020.
The policy of the committee is to reward executive Directors in
line with the current remuneration of Directors in comparable
businesses in order to recruit, motivate and retain high quality
executives within a competitive market place.
There are three main elements of the remuneration packages for
executive Directors and senior management:
- Basic annual salary (including directors' fees) and benefits;
- Discretionary annual bonus to be paid in accordance with a
bonus scheme developed by the Remuneration Committee. This takes
into account individual contribution, business performance and
commercial progress; and
- Equity Option incentive scheme which takes into account the
need to motivate and retain key individuals.
The Committee intends to issue Options in due course following
the publication of the 2019 Annual Report and to cancel existing
options. The total number of Options in issue at any time will not
exceed 10% of the issued share capital.
Nominations Committee:
The Nomination Committee which comprises of the Non-executive
Directors and the Chairman & CEO meets at least once a year and
is responsible for the process of reviewing replacement or
additional Directors, the monitoring of compliance with applicable
laws, regulations and corporate governance guidance and making
appropriate recommendations to the Board.
10. Communicate how the Company is governed and is performing,
by maintaining a dialogue with shareholders and other relevant
stakeholders
The Company encourages regular communications with its various
stakeholder groups and aims to ensure that all communications
concerning the Group's activities are clear, fair and accurate.
Quarterly updates are announced via RNS and are available on our
website and users can register to be alerted when announcements or
details of presentations and events are posted onto the
website.
We aim to release our half and full year results to the market
well in advance of reporting deadlines and offer visibility for
shareholders by including segmental reporting. The Company's
financial statements and Notices of General Meetings of the Company
can be found on the website.
The results of voting on all resolutions are announced via RNS
immediately following completion of General Meetings and are
available on the website. Any actions that are required to be taken
as a result of resolutions for which votes against have been
received from at least 20 per cent of independent shareholders will
be detailed on the RNS.
RISK MANAGEMENT
The business of forestry and timber trading involves a high
degree of risk, in addition to technical, political and regulatory
risk; the Group is exposed to weather, nutrient and pest risks.
Furthermore, the Group is exposed to a number of financial risks
which the Board seeks to minimise by adopting a prudent approach
which is consistent with the corporate objectives of the Group.
Technical Risk
The Company operates large scale machinery in the forms of
harvesting, sawmill and veneer equipment. All three are key revenue
contributors and as such, any significant interruption to these
assets could have an adverse effect on our financial performance. A
number of procedures and programmes have been implemented to
mitigate these technical risks. Capital investment programmes have
replaced older equipment to improve both reliability and overall
efficiency of our machinery, also reducing overall breakdown risk.
The Group has actively sought best-in-class hires that have
significant experience with the machinery that is currently being
utilised, this has also allowed the Group to adopt best practice.
Additionally, performance metrics for operating assets are
monitored by Management on a weekly basis to quickly identify and
resolve any issues.
COVID-19
The Board is monitoring the global health crisis and is
considering the associated risks and impact on the position of the
Group from both an operational and financial perspective. With the
extreme travel restrictions in force as a result of COVID-19 and
the implications mean that there can be no assurance that the Group
will be able to perform its intended workflows or generate cash
from fund raising activities. The Board continues to monitor the
effect of COVID-19 on an on-going basis.
Political and Regulatory Risk
The Board observes any political developments across the
geographies that Woodbois operates in closely. Gabon, Ivory Coast
and Mozambique had local and regional election programs in 2018
that were successfully completed with minor instances of unrest.
The political environment across all the countries that Woodbois
operates in will remain an evolving discussion point for the Board,
however the risk of political unrest disruptive to the Group's
operations remains low.
The regulatory frameworks in place across the countries that
Woodbois operates in support the development of forestry. However,
the forestry sector in Mozambique has been subject to frequent
policy changes with regard to exports and delays in issuing of
annual licenses, which has created uncertainty. Furthermore, there
is no assurance that future political and economic conditions in
these countries will not result in the Governments changing their
political attitude towards forestry. Any changes in policy may
result in changes in laws affecting ownership of assets, land
tenure, ability to export, taxation, environmental protection and
repatriation of income and capital, which may adversely impact the
Group's ability to carry out its activities.
OTHER RISKS
The Company carefully monitors the UK government's progress in
respect of its Brexit discussions with the European Union. Given
the location of the Company's trading operations and key assets it
considers the key areas of Brexit risk to focus on any potential
changes to the Company's UK listing requirements and its ability to
raise funds on a UK listed market. The Board maintains close
dialogue with its advisors to ensure that any proposed regulatory
changes are identified and actioned accordingly. The Board is in
discussion with its investors to identify any known issues with
regards to the raising of finance.
As outlined elsewhere in this Report, the effects of COVID-19
are not yet clear and resilience plans are being enacted.
ENVIRONMENTAL RISK
The Group is exposed to climate, weather and the risk of pests
affecting its forestry operations. The availability of water for
its irrigation as well as the abundance of too much water also pose
a risk to the biological assets. These risks are managed by ongoing
assessment of local pests and the adoption of irrigation methods.
Adverse weather conditions may impact transport routes both within
the Group's countries of operation and when exporting finished
product.
Financial Risk
This comprises of a number of risks explained below.
Market risk
Price risk
The Group is exposed to market risk in respect of its equity
investments as well as any potential market price fluctuations that
may affect the revenues of the agriculture, forestry and timber
trading operations. The Group mitigates this risk by having
established investment appraisal processes and asset monitoring
procedures which are subject to overall review by the Board.
Liquidity risk
The Group seeks to manage liquidity by regularly reviewing cash
levels and expenditure budgets to ensure that sufficient liquidity
is available to meet foreseeable needs and to invest cash assets
safely and profitably. The Group had net cash balances of $1.490
million as at 31 December 2019 (2018: $1.910m).
INTEREST RATE RISK
The Group has limited its exposure to the risk of being
negatively affected by variable interest rates by predominantly
borrowing using fixed interest instruments. Refer to note 16 for a
detailed assessment
Credit risk
The Group's principal financial asset is cash. The credit risk
associated with cash is considered to be limited. The Group
receives payment immediately upon delivery of its agriculture and
forestry products. The credit risk is considered to be minimal as
no credit terms are offered and funds are received prior to the
risk of ownership being transferred to the purchaser. From time to
time cash is placed with certain institutions in support of trading
positions. The credit risk is considered minimal as the Group only
undertakes this with large reputable institutions.
DONATIONS
No political donations were made during the year (2018: nil). No
charitable donations were made during the year (2018: $2,400).
POLICY ON PAYMENT OF SUPPLIERS
It is Group and Company policy to agree and clearly communicate
the terms of payment as part of the commercial arrangements
negotiated with suppliers and then to pay according to those terms
based on the timely receipt of an accurate invoice.
EMPLOYMENT POLICIES
The Group supports employment of disabled people wherever
possible through recruitment, by retention of those who become
disabled and generally through training, career development and
promotion.
The Group is committed to keeping employees as fully-informed as
possible with regard to the Group's performance and prospects and
seeks their views, wherever possible, on matters which affect them
as employees.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation. Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU). Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group and Company for
that period. In preparing the financial statements, the directors
are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRS adopted by the EU; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies (Guernsey) Law 2008.
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Woodbois
Limited website. The Company is compliant with AIM Rule 26
regarding the Woodbois Limited website. Legislation in Guernsey
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Going concern
An assessment of going concern is made by the Directors at the
date the Directors approve the annual financial statements, taking
into account the relevant facts and circumstances at that date
including:
-- Review of profit and cash flow forecasts;
-- Review of actual results against forecast;
-- Timing of cash flows; and
-- Financial or operational risks.
As at 31 December 2019 the Group had a cash balance of circa
$1.49 million (GBP1.14 million). In January 2020, the Group's
forecast for the financial year showed a movement towards positive
operational cash flow around mid-year, having taken account of the
cash flow enhancement measures announced by it then. However, on 27
March 2020 the Company announced that the rapid pace of
developments in connection with COVID-19 had caused such
fundamental levels of uncertainty that, in common with many other
companies, the Board withdrew any guidance on the financial outcome
for 2020 until its implications can be reliably assessed. Further
developments since then are outlined in the Chairman and CEO's
Statement.
Current internal forecasts based on information available at the
date of approval of these financial statements and using a variety
of scenarios, indicate that the Company will need to secure further
funds, including from issues of equity, debt or asset sales, or the
deferral of liabilities, in order to meet its liabilities as they
fall due in the next 12 months. The timing and amounts will be
highly dependent on the market conditions and in particular on the
impact of COVID-19. In the light of enquiries made, as well as
bearing in mind the proven ability of the Company to raise funds
previously, the Directors' have a reasonable expectation that the
Group has or will have access to adequate resources to continue in
operational existence for the foreseeable future, being 12 months
to the end of April 2021, and have therefore adopted the going
concern basis of preparation in the financial statements.
Further details on the assumptions and their conclusion thereon
are included in the statement on going concern included in Note 1
to the Financial Statements. The auditors have made reference to a
material uncertainty in relation to going concern in their audit
report.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of
these financial statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the auditor
is unaware. Each of the Directors have confirmed that they have
taken all the steps that they ought to have taken as Directors in
order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
AUDITOR
PKF Littlejohn LLP were reappointed as auditors for 2019 and a
resolution to reappoint then will be proposed at the 2020 AGM.
On behalf of the Board
Paul Dolan
Chairman and Chief Executive Officer
29 April 2020
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF WOODBOIS LIMITED
Opinion
We have audited the group financial statements of Woodbois
Limited for the year ended 31 December 2019 which comprise the
Consolidated Company Statement of Financial Position, the
Consolidated Company Statement of Changes in Equity, the
Consolidated Company Statement of Cash Flows and notes to the
financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied
in their preparation is Companies (Guernsey) Law, 2008 and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the group financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2019 and of its loss for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty relating to going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made in
notes to the financial statements concerning the Group's ability to
continue as a going concern. With the current global outbreak of
COVID-19 there continues to be far reaching uncertainty over the
effect this may have on the timber industries and other industries
which requires the supply of timber, and therefore on the revenues
and cash flows of the Group. The Group will also be required to
raise funds during period the outcome of which is uncertain. As
noted in the Group's going concern policy within the Annual Report,
these events or conditions indicate that a material uncertainty
exists that casts doubt on the Group's ability to continue as a
going concern.
In response to this, the scope of our audit work on going
concern was increased. We carried out the following additional
audit procedures:
-- We obtained management's forecast cash flows covering the
period from the date of signing to 31 December 2021. We assessed
the assumptions within the forecast with regards to revenue
generation, capital funding and cash flows.
-- We challenged the Board of Directors in respect of the
assumptions used in their going concern assessment and stress
tested the potential impact of COVID-19 to determine the magnitude
of decline in revenue and cash flow that would give rise to the
elimination of the cash headroom, use of the additional borrowing
facilities available and the possible breach of financial
covenants.
-- We reviewed and challenged the Board's controllable
mitigation plans and their forecast impact on the ability of the
business to continue to operate. We obtained supporting
documentation to evaluate the plausibility and achievability of
management's mitigation plans, including sensitised scenario
forecasts.
-- We performed sensitivity analysis on management's forecast cash flows.
-- We agreed available borrowing facilities to underlying
agreements and the extent to which additional facilities could be
utilised and funds raised from other sources.
-- We have assessed the adequacy of COVID-19 disclosures within the Annual Report and Accounts.
We draw attention to the going concern policy which lays out the
Group's plans to both prepare for and mitigate the effect of the
current outbreak. Our opinion is not modified in respect of this
matter.
Our application of materiality
Materiality is a key concept in the context of an audit. In
providing an opinion on whether the financial statements provide a
'true and fair' view, we are providing an opinion on whether the
financial statements as a whole are free from material misstatement
whether due to fraud or error.
Materiality is an expression of the relative significance of a
particular matter in the context of the financial statements as a
whole. An item, either individually or in aggregate, is considered
material if omitting it or misstating it could reasonably be
expected to influence decisions that users make on the basis of an
entity's financial statements. Materiality has both quantitative
and qualitative characteristics. It depends on the size or nature
of the item or error judged in the particular circumstances of its
omission or misstatement.
We used 7.5% adjusted loss before tax as a basis for determining
planning materiality. We have determined our Overall Financial
Statement Materiality to be US$460,000. The adjusted loss before
tax is calculated by removing all items deemed to be outside the
normal course of business, such as the contingent acquisition
expense as this is an area which involves management
estimation.
We consider adjusted loss before tax to be the performance
measure used by shareholders as Woodbois Limited is a trading
entity and its profit-making ability is a significant point of
interest for investors.
We set performance materiality at 60% of Overall Financial
Statement Materiality to reflect the risk associated with the
judgemental and key areas of management estimation within the
financial statements. We apply the concept of materiality both in
planning and performing our audit, and in evaluating the effect of
misstatements. At the planning stage, materiality is used to
determine the financial statement areas that are included within
the scope of our audit and the extent of sample sizes during the
audit. No significant changes have come to light through the audit
fieldwork which has caused us to revise our materiality figure.
An overview of the scope of our audit
In designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements. In
particular we looked at areas involving significant accounting
estimates and judgements by the Directors and considered future
events that are inherently uncertain. We also addressed the risk of
management override of internal controls, including among other
matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
Our Group audit scope focused on the principal area of
operation, being Africa. The head office in South Africa oversees
the accounting function of the Group and its subsidiaries, however,
regional offices maintain the accounting records for many of the
components. The components are based in Mauritius, Gabon,
Mozambique, Denmark and London therefore, given the nature of the
accounting function, our audit was conducted by local component
auditors within Gabon, Mozambique, Denmark and Mauritius.
Each component was assessed as to whether they were significant
or not significant to the group by either their size or risk. The
parent Company and ten components were considered to be significant
due to identified risk and size. These components have been subject
to full scope audits by component auditors and reviewed by us. Two
components were not subject to full scope audits and we performed
specific audit procedures due to the risk identified with the sale
of these entities in the year.
The audit was overseen and concluded in London where we acted as
Group auditor. As Group auditors we maintained regular contact with
the component auditors throughout all stage of the audit and we
were responsible for the scope and direction of their work. We
ensured that we challenged their findings in order to form an
opinion on the Group.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded
to the key audit matter
Valuation of Biological assets
The Group's principal non-current Our work included:
assets relate to standing timber * Reviewing the biological asset valuation models
within the forestry concessions. prepared by management for accuracy and challenging
These biological assets represent the estimates/assumptions made in the inputs;
the most material balance in
financial statements at US$194.7m
as at 31 December 2019. Management * Reviewing the discount rate used and challenging the
assess at each reporting date key inputs involved in arriving at the rate applied;
the fair value of the standing
timber on a discounted cash
flow basis which involves significant * Obtaining third party valuations and assessing their
Management judgement and estimates. competence and independence in order to place
There is a risk that the biological reliance on management's expert as well as ensuring
assets are misstated due to accuracy and reasonableness of the inputs used;
complex accounting treatment
required by IAS 41 Biological
assets and a high degree of * Reviewing the sensitivity analysis of the key inputs,
estimation and judgement required together with a combination of sensitivities of such
by management in their valuation. inputs.
We therefore considered the
valuation of biological assets
and the related disclosures * Considering if there are any indications of
to be a key audit matter. impairment; and
* Reviewing the disclosures in the financial statements
to ensure they are in accordance with IAS 41,
particularly the disclosures of key estimates and
assumptions which impact the fair values, and the
sensitivity analysis.
==================================================================
Revenue recognition
==================================================================
Revenue is a material figure Our work included:
within the financial statements * Gaining an understanding of the internal control
at US$19.459m and the Group environment in operation for the significant revenue
has seen an increase in revenues streams and undertaking a walk-through to ensure that
within the timber market since the key controls within those systems have been
the acquisition of WoodBois operating effectively;
International ApS
Given the increase in revenues
since the prior year and the * Substantive transactional testing of revenue
expected growth year on year, recognised in the financial statements across the
revenue is considered to be different streams to ensure accuracy of revenue;
a key balance within the financial
statements and a key focus of
the shareholders. * Reviewing the key contractual terms and terms of
We therefore consider revenue business with customers to identify the material
recognition a key audit matter. performance obligations;
* Reviewing post-year end invoices, credit notes and
cash receipts to ensure completeness of income
recorded in the accounting period; and
* Consideration and assessment of the Group's
application of IFRS 15.
==================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information. Our opinion on the group financial statements
does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. In connection with our audit
of the financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the parent
company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report
or the directors' report.
-- We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion: proper accounting records have not been
kept by the parent company; or
-- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for
the purposes of our audit.
Responsibilities of Directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the parent company financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the group financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Group's members, as a body, in
accordance with our engagement letter dated 30 October 2019. Our
audit work has been undertaken so that we might state to the
Group's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the Group and the Group's members as a body, for
our audit work, for this report, or for the opinions we have
formed.
Joseph Archer (Engagement Partner) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory Auditor London E14 4HD
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND TOTAL COMPREHENSIVE
INCOME
Notes 2019 2018
Continuing operations $000 $000
Turnover 2 19,459 13,448
Cost of sales 2 (16,696) (11,334)
------------------------------------------------------------ ----- -------------------- ---------------------------
Gross profit 2,763 2,114
------------------------------------------------------------ ----- -------------------- ---------------------------
Other income 5 110 160
Gain on fair value of Biological assets 11 - 1,611
Operating costs (4,726) (5,356)
Administrative expenses (1,415) (2,106)
Depreciation (306) (474)
Share based payment expense 24 (231) (658)
Operating loss 3 (3,805) (4,709)
Contingent acquisition expense 26 (956) (860)
Fair value gain 23 4,602 -
Gain on disposal of Tanzanian business 9 - 176
Foreign exchange gain 271 263
Finance costs 6 (2,009) (444)
------------------------------------------------------------ ----- -------------------- ---------------------------
Loss before taxation (1,897) (5,574)
------------------------------------------------------------ ----- -------------------- ---------------------------
Taxation 7 (54) (951)
------------------------------------------------------------ ----- -------------------- ---------------------------
Loss for the year from continuing operations (1,951) (6,525)
------------------------------------------------------------ ----- -------------------- ---------------------------
Discontinued operations
Loss from discontinued operations, net of tax:
- Owners of the parent (2,893) (1,446)
- Non-controlling interests 9 - -
------------------------------------------------------------ ----- -------------------- ---------------------------
Loss for the year (4,844) (7,971)
Loss attributable to:
- Owners of the parent 8 (4,844) (6,736)
- Non-controlling interests 22 - (1,235)
------------------------------------------------------------ ----- -------------------- ---------------------------
(4,844) (7,971)
------------------------------------------------------------ ----- -------------------- ---------------------------
Other comprehensive income:
Gain on buy-out of minorities 25 - 14,373
Currency translation differences, net of tax (155) (798)
------------------------------------------------------------ ----- -------------------- ---------------------------
Total comprehensive income for the year (4,999) 5,604
------------------------------------------------------------ ----- -------------------- ---------------------------
Total comprehensive income attributable to:
Owners of the parent (4,999) 6,839
Non-controlling interests 25 - (1,235)
------------------------------------------------------------ ----- -------------------- ---------------------------
Total comprehensive loss for the year (4,999) 5,604
------------------------------------------------------------ ----- -------------------- ---------------------------
Total comprehensive (loss) / income attributable to equity
shareholders arises from:
- Continuing operations (2,106) 8,285
- Discontinued operations 9 (2,893) (1,446)
------------------------------------------------------------ ----- -------------------- ---------------------------
(4,999) 6,839
------------------------------------------------------------ ----- -------------------- ---------------------------
Earnings per share from continuing and discontinued
operations attributable to the owners
of the parent during the year (cents per share)
------------------------------------------------------------ ----- -------------------- ---------------------------
Basic earnings per share
From continuing operations (cents) 8 (0.67) (2.03)
From discontinued operations (cents) (0.64) (0.44)
------------------------------------------------------------ ----- -------------------- ---------------------------
From (loss) / profit for the year (1.31) (2.47)
------------------------------------------------------------ ----- -------------------- ---------------------------
The notes on pages 27 to 58 form an integral part of the
consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the owners
of the parent
Share
Merger Preference Convertible Foreign based
reserve share bonds exchange payment
Share Share (note capital reserve reserve Retained Non-controlling Total
capital premium 22) * (note 25) earnings Total interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
--------------- -------- -------- --------- ------------ ------------- --------- ---------- --------- --------- ---------------- ---------
At 1 JANUARY
2018 4,500 22,340 44,487 14,318 - (3,918) 979 31,841 114,547 20,608 135,155
Profit /
(Loss)
for the year - - - - - (6,736) (6,736) (1,235) (7,971)
Other
comprehensive
income:
Gain on
minority
buy-out - - - - - - 14,373 14,373 (19,373) (5,000)
Currency
translation
differences - - - - (798) - - (798) - (798)
Total
comprehensive
income for
the year - - - - (798) - 7,637 6,839 (20,608) (13,769)
Transactions
with
owners:
Issue of
ordinary
shares 1,117 7,614 - - - - - 8,731 - 8,731
Share based
payment
expense - - - - - 712 - 712 - 712
Share options
forfeited - - - - - (679) 679 - - -
Preference
share
dividend - - - - - - (1,313) (1,313) - (1,313)
At 31 December
2018 5,617 29,954 44,487 14,318 - (4,716) 1,012 38,844 129,516 - 129,516
--------------- -------- -------- --------- ------------ ------------- --------- ---------- --------- --------- ---------------- ---------
Profit /
(Loss)
for the year - - - - - - - (4,844) (4,844) - (4,844)
Other
comprehensive
income:
Currency
translation
differences - - - - - (155) - - (155) - (155)
Total
comprehensive
income for
the year - - - - - (155) - (4,844) (4,999) - (4,999)
Transactions
with
owners:
Issue of
ordinary
shares 1,140 5,176 - - - - - - 6,316 - 6,316
Convertible
Bonds
issued - - - - 1,495 - - - 1,495 1,495
Preference
share
swap - - - (14,318) - - - - (14,318) - (14,318)
Share based
payment
expense - - - - - - 231 - 231 - 231
Share options
forfeited - - - - - - (275) 275 - - -
Reserve
transfer - - (44,487) 44,487 - -
Preference
share
dividend - - - - - - - (1,054) (1,054) (1,054)
At 31 December
2019 6,757 35,130 - - 1,495 (4,871) 968 77,708 117,187 - 117,187
--------------- -------- -------- --------- ------------ ------------- --------- ---------- --------- --------- ---------------- ---------
* Exchange differences arising on translation of the foreign
controlled entities are recognised in other comprehensive income
and accumulated in a separate reserve within equity.
The notes on pages 27 to 58 form an integral part of the
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2019 2018
------------------------------------------------ ----- ------------ ------------
Notes $000 $000
------------------------------------------------ ----- ------------ ------------
ASSETS
Non-current assets
Consideration receivable 9 - 1,841
Biological assets 11 194,708 194,708
Property, plant and equipment 10 20,323 17,081
------------------------------------------------ ----- ------------ ------------
Total non-current assets 215,031 213,630
Current assets
Trade and other receivables 12 6,123 5,924
Inventory 13 6,409 6,738
Cash and cash equivalents 14 1,490 1,910
------------------------------------------------ ----- ------------ ------------
Total current assets 14,022 14,572
------------------------------------------------ ----- ------------ ------------
TOTAL ASSETS 229,053 228,202
------------------------------------------------ ----- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 15 (4,801) (5,751)
Borrowings 16 (6,343) (5,024)
Consideration payable 22 - (5,000)
Contingent acquisition liability 26 - (1,269)
TOTAL CURRENT LIABILITIES (11,144) (17,044)
NON-CURRENT LIABILITIES
Borrowings 16 (13,545) (5,086)
Deferred tax 7 (62,655) (62,655)
Preference share liability 18 - (13,901)
Convertible bonds - host liability 17 (23,547) -
Contingent acquisition liability 26 (975) -
Total non-current liabilities (100,722) (81,642)
TOTAL LIABILITIES (111,866) (98,686)
------------------------------------------------ ----- ------------ ------------
NET ASSETS 117,187 129,516
------------------------------------------------ ----- ------------ ------------
EQUITY
Share capital 18 6,757 5,617
Share premium 19 35,130 29,954
Merger reserve 20 - 44,487
Preference share capital 18 - 14,318
Convertible bonds - equity component 17 1,495 -
Foreign exchange reserve (4,871) (4,716)
Share based payment reserve 24 968 1,012
Retained earnings 77,708 38,844
------------------------------------------------ ----- ------------ ------------
Equity attributable to the owners of the parent 117,187 129,516
Non-controlling interests 25 - -
TOTAL EQUITY 117,187 129,516
------------------------------------------------ ----- ------------ ------------
The notes on pages 27 to 58 form an integral part of the
consolidated financial statements. The financial statements on
pages 23 to 58 were authorised for issue by the Board of Directors
on 29 April 2020 and were signed on its behalf.
Paul Dolan
Chairman & CEO
CONSOLIDATED STATEMENT OF CASH FLOWS
2019 2018
---------------------------------------------------------------- ----- --------------- -------
Notes $000 $000
---------------------------------------------------------------- ----- --------------- -------
CASH USED IN OPERATIONS
Loss before taxation - continuing operations (1,897) (5,574)
Loss before taxation - discontinued operations 9 (2,893) (1,446)
---------------------------------------------------------------- ----- --------------- -------
Loss before taxation (4,790) (7,020)
Adjustment for:
Depreciation of property, plant and equipment 10 1,393 1,625
Fair value adjustment of biological asset 11 - (1,611)
Discount received from supplier 74 -
Transaction costs deducted from Convertible bond host liability (94) -
Inventory losses (244) 295
Shares issued in lieu of ITF Interest (335) -
Foreign exchange (271) (263)
Non-cash items in discontinued operations 9 221 -
Contingent acquisition expense 26 956 695
Impairment of amounts due on sale of discontinued operations 2,502 -
Fair Value gain 23 (4,602) -
Share based payments 24 231 658
Finance costs 6 2,009 444
Gain on disposal of Tanzanian assets 9 - (176)
Increase in trade and other receivables (838) (1,852)
(Decrease) / increase in trade and other payables (7,247) 1,708
Decrease / (increase) in inventory 817 (1,764)
CASH FLOWS FROM OPERATIONS (10,218) (7,261)
Finance costs paid (331) (257)
Income taxes paid 7 (47) (52)
---------------------------------------------------------------- ----- --------------- -------
cash FLOWS from operatiNG ACTIVITIES (10,596) (7,570)
---------------------------------------------------------------- ----- --------------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditure on property, plant and equipment 10 (5,016) (3,245)
cash FLOWS from investing activities (5,016) (3,245)
---------------------------------------------------------------- ----- --------------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from receipts / (repayments of) loans and borrowings 1,271 (1,771)
Proceeds from ITF 7,605 3,676
Proceeds from the issue of ordinary shares 6,316 8,731
cash fLOWS from financing activities 15,192 10,636
---------------------------------------------------------------- ----- --------------- -------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (420) (179)
Cash and cash equivalents at beginning of year 1,910 2,089
---------------------------------------------------------------- ----- --------------- -------
CASH AND CASH EQUIVALENTS AT end of YEAR 1,490 1,910
---------------------------------------------------------------- ----- --------------- -------
Net debt reconciliation
2018 Cash flow Non-cash 2019
changes
$000 $000 $000 $000
------------------- ------- ---------- --------- -------
Borrowings 6,306 1,271 - 7,577
ITF 3,804 7,605 902 12,311
Ordinary shares 35,571 6,316 - 41,887
Preference shares 14,318 - (14,318) -
Convertible Bonds - 23,547 23,547
------------------- ------- ---------- --------- -------
59,999 15,192 10,131 85,322
------------------- ------- ---------- --------- -------
The notes on pages 27 to 58 form an integral part of the
consolidated financial statements.
notes to the financial statements
1. ACCOUNTING POLICIES
GENERAL INFORMATION
Woodbois Limited ("the Company" or "Woodbois") is an AIM-quoted
forestry and timber trading company limited by shares. The Company
is incorporated and domiciled in Guernsey, the Channel Islands,
with registered number 52184. Its registered office is Dixcart
House, Sir William Place, St Peter Port, Guernsey, GY1 1GX.
The nature of the Group's operations and its principal
activities are set out in the Directors' Report.
The accounting policies set out herein, in pages 27 to 36, have
been consistently applied.
The principal activities and nature of the business are included
on pages 1 to 18.
BASIs OF ACCOUNTING
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union ("IFRS"), IFRIC interpretations and
those parts of the Companies (Guernsey) Law 2008 applicable to
Companies reporting under IFRS. The financial statements have been
prepared under the historical cost convention except for biological
assets and certain financial assets and liabilities, which have
been measured at fair value.
FUNCTIONAL AND PRESENTATION CURRENCY
These consolidated financial statements are presented in United
States Dollar (USD), which is the Group's functional currency. All
amounts have been rounded to the nearest thousand, unless otherwise
indicated.
BASIS OF CONSOLIDATION
Subsidiaries are entities controlled by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the
Group has:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee).
-- Exposure, or rights, to variable returns from its involvement with the investee
-- The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee.
-- Rights arising from other contractual arrangements.
-- The Group's voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.
The acquisition method is used to account for the acquisition of
subsidiaries.
Any contingent consideration is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the
contingent consideration that is deemed to be an asset or a
liability is recognised in accordance with IFRS 9 either in profit
or loss or as a change in other comprehensive income. The unwinding
of the discount on contingent consideration liabilities is
recognised as a finance charge within profit or loss.
Acquisition related costs are expensed as incurred.
The Group measures goodwill at the acquisition date as the
excess of the fair value of the consideration transferred, plus the
recognised amount of any non-controlling interests, less the
recognised amount of the identifiable assets acquired, and
liabilities assumed. If this consideration is lower than the fair
value of the net assets of the subsidiary acquired, the difference
is recognised in profit or loss as a bargain purchase. Before
recognizing a gain on a bargain purchase, an assessment is made as
to whether all assets acquired, and liabilities assumed have been
correctly identified. The fair value measurement of the
identifiable net assets and cost of acquisition is also reviewed to
evaluate whether all available information at the acquisition date
has been considered.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by other members of the Group. All
significant intercompany transactions and balances between group
entities are eliminated on consolidation.
When the Group ceases to consolidate a subsidiary as a result of
losing control and the Group retains an interest in the subsidiary
and the retained interest is an associate, the Group measures the
retained interest at fair value at that date and the fair value is
regarded as its cost on initial recognition. The difference between
the net assets de-consolidated and the fair value of any retained
interest and any proceeds from disposing of a part interest in the
subsidiary is included in the determination of the gain or loss on
disposal. In addition, the Group accounts for all amounts
previously recognised in other comprehensive income in relation to
that associate on the same basis as would be required if that
subsidiary had directly disposed of the related assets or
liabilities.
Investments in associates and jointly controlled entities are
accounted for using the equity method of accounting and are
initially recognised at cost. The Group's share of its associates'
post-acquisition profits or losses is recognised in profit or loss,
and its share of post-acquisition movements in reserves is
recognised in other comprehensive income. The cumulative
post-acquisition movements are adjusted against the carrying amount
of the investment.
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions. Gains
or losses on disposals to non-controlling interests are recorded in
equity.
As at 31 December 2019, the Group held equity interests in the
following undertakings:
Proportion held of voting
Subsidiary undertakings rights Country of incorporation Nature of business
----------------------------- ----------------------------- ------------------------- -----------------------------
Direct investments
----------------------------- ----------------------------- ------------------------- -----------------------------
Woodbois Services Limited 100% United Kingdom Shared services
----------------------------- ----------------------------- ------------------------- -----------------------------
Woodbois Trading Limited 100% Hong Kong Financier
----------------------------- ----------------------------- ------------------------- -----------------------------
Argento Limited 100% Mauritius Holding / treasury company -
Forestry and Trading
----------------------------- ----------------------------- ------------------------- -----------------------------
Woodbois International 100% Mauritius Dormant
Limited
----------------------------- ----------------------------- ------------------------- -----------------------------
Montara Limited 100% Mauritius Dormant
----------------------------- ----------------------------- ------------------------- -----------------------------
Woodbois Liberia Inc. 100% Liberia Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Indirect investments of Argento Limited
--------------------------------------------------------------------------------------- -----------------------------
Argento Mozambique Limitada 100% Mozambique Holding company & Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Madeiras SL Limitada 100% Mozambique Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Jardim Zambezia Limitada 100% Mozambique Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Baia Branca Limitada 100% Mozambique Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Ligohna Timber Products Mozambique Forestry
Limitada 100%
----------------------------- ----------------------------- ------------------------- -----------------------------
Montara Forest Lda 100% Mozambique Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
Petroforge Mozambique Lda 100% Mozambique Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
WoodBois International ApS 100% Denmark Timber Trading
----------------------------- ----------------------------- ------------------------- -----------------------------
WoodGroup ApS 100% Denmark Timber Trading
----------------------------- ----------------------------- ------------------------- -----------------------------
Woodbois Gabon 100% Gabon Forestry
----------------------------- ----------------------------- ------------------------- -----------------------------
SCI Yarim 100% Gabon Property holding
----------------------------- ----------------------------- ------------------------- -----------------------------
Intra-group transactions
All intra-group transactions, balances, and unrealised gains on
transactions between Group companies are eliminated on
consolidation. Subsidiaries' accounting policies are amended where
necessary to ensure consistency with the policies adopted by the
Group. All financial statements are made up to 31 December each
year.
Changes in Accounting policies
a) New and amended standards adopted by the Group
The following IFRS or IFRIC interpretations were effective for
the first time for the financial year beginning 1 January 2019.
Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements:
Standards /interpretations Application
--------------------------- -----------------------------------------------
IFRS 16 Leases
Annual Improvements 2015 - 2017 Cycle
IFRIC 23 - interpretation Uncertainty over Income Tax Treatments
23
IFRS 9 amendments Prepayment Features with Negative Compensation
IFRS 19 amendments Plan Amendment, Curtailment or Settlement
IFRS 28 amendments Long-term Interests in Associates and
Joint Ventures
The effects of the first year adoption of IFRS 16 has been
assessed by management and summarised within the Leases accounting
policy.
The Group has also elected to adopt the following amendment
early:
IAS 1 and IAS 8 Definition of Material
Amendments
b) New and amended standards not yet adopted by the Group
Standards /interpretations Application
IFRS 3 amendments Business Combinations: Effective 1 January
2020*
*Subject to EU endorsement
There are no IFRS's or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Company or Group.
SEGMENTAL REPORTING
The reportable segments are identified by the Executive Board
(which is considered to be the Chief Operating Decision Maker) by
the way management has organised the Group. The Group operates
within four separate operational divisions comprising forestry,
trading and head office.
The Directors review the performance of the Group based on total
revenues and costs, for these four divisions and not by any other
segmental reporting.
Revenue recognition
Under IFRS 15, Revenue from Contracts with Customers, five key
points to recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the
contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance
obligations in the contract; and
Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity, and specific criteria have been met for
each of the Group's activities, as described below.
The Group bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the
specifics of each arrangement. Where the Group makes sales relating
to a future financial period, these are deferred and recognised
under 'deferred revenue' on the Statement of Financial
Position.
The Group currently has the following revenue streams:
-- Timber and veneer sales are recognised following the
five-step approach outlined above. The performance obligation set
out in step two is when the risk and reward of the goods is
transferred to the customer, and is transferred at the earlier
of:
o when goods are sold subject to a letter of credit, on the date
that the buyer's bank approves the transfer; or
o when goods are prepaid in full by the buyer, based on the
incoterm specified in the contract/invoice; or
o when the bill of lading is exchanged with the buyer.
-- Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable.
-- Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established
(provided that it is probable that the economic benefits will flow
to the Group and the amount of revenue can be measured
reliably).
FOREIGN CURRENCIES
The presentation currency of the Group is US Dollars (US$).
Items included in the Group's financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The functional currency of the majority of the Group's
subsidiaries is USD as this is the currency in which they trade on
a local basis. The consolidated financial statements are presented
in USD ("the presentation currency") because this is the currency
better understood by the principal users of the financial
statements.
Foreign currency translation rates (against US$) for the
significant currencies used by the Group were:
At 31 December Annual average At 31 December Annual average
2019 for 2019 2018 for 2018
------------------------ --------------- --------------- --------------- ---------------
UK Pound 1.31 1.28 1.27 1.33
Mozambique Metical 61.46 62.49 60.67 59.87
Danish Krone 6.67 6.68 6.52 6.232
West African CFA franc 585.68 586.78 573.02 556.55
------------------------ --------------- --------------- --------------- ---------------
Transactions in foreign currencies are initially recorded at the
rates of exchange prevailing on the dates of the transaction. At
each reporting date, monetary assets and liabilities that are
denominated in foreign currency are translated into the functional
currency at the rate prevailing on that date. Non-monetary assets
and liabilities are measured at fair value and are translated into
the functional currency at the rate prevailing on the reporting
date. Gains and losses arising on retranslation are included in
profit or loss for the year, except for exchange differences on
non-monetary assets and liabilities, which are recognised directly
in other comprehensive income when the changes in fair value are
recognised directly in other comprehensive income.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated into the Group's presentational
currency at exchange rates prevailing at the reporting date. Income
and expense items are translated at the average exchange rates for
the year unless exchange rates have fluctuated significantly during
the year, in which case the exchange rate at the date of the
transaction is used. Exchange differences arising, if any, are
taken to other comprehensive income and the Group's translation
reserve. Such translation differences are recognised as income or
as expenses in the year in which the operation is disposed of.
LEASES
The Group adopted IFRS 16 using the modified retrospective
method of adoption with the date of initial application of 1
January 2019. Under this method, the standard is applied
retrospectively with the cumulative effect of initially applying
the standard recognized at the date of initial application. The
Group elected to use the transition practical expedient allowing
the standard to be applied only to contracts that were previously
identified as leases applying IAS 17 and IFRIC 4 at the date of
initial application. The Group also elected to use the recognition
exemptions for lease contracts that, at the commencement date, have
a remaining lease term of 12 months or less and do not contain a
purchase option ("short--term leases"), and lease contracts for
which the underlying asset is of low value ("low--value
assets").
a) Nature of the effect of adoption of IFRS 16
Under the adoption of IFRS 16, the Group applied a single
recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The standard
provides specific transition requirements and practical expedients,
which have been applied by the Group.
Lease previously classified as finance leases
The Group did not change the initial carrying amounts of
recognised assets and liabilities as the date of initial
application for leases previously classified as finance leases
(i.e., the right-of-use assets and lease liabilities equal the
leased assets and liabilities recognized under IAS 17). The
requirements of IFRS 16 were applied to these leases from 1 January
2019.
Leases previously classified as operating leases
The Group leases various offices. Rental contracts are typically
for fixed periods of one month to six months with no right to
purchase. Based on the nature of such leases and the qualitive
impact on the Group, these leases have not been recognised as
right-of-use assets.
The Board has evaluated the effect of adopting IFRS 16 on the
Group's consolidated balance sheet and consolidated statement of
comprehensive income (loss) as at 1 January 2019 and has concluded
that the impact is not material.
b) Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16:
Short--term leases and leases of low--value assets
The Group applies the short--term lease recognition exemption to
its short--term leases (i.e., those leases that have a lease term
of 12 months or less from commencement date and do not contain a
purchase option). It also applies the lease of low--value assets
recognition exemption to leases of equipment that are considered of
low value (i.e., below $5,000). Lease payments on short--term
leases and leases of low--value assets are recognized as occupancy
expense on a straight--line basis over the lease term.
DISCONTINUED OPERATIONS
A discontinued operation is a component of the Group's business,
the operations and cash flows of which can be clearly distinguished
from the rest of the Group and which:
-- represents a separate major line of business or geographic area of operations;
-- is part of a single co-ordinated plan to dispose of a
separate major line of business or geographic area of operations;
or
-- is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets the criteria to be
classified as held-for-sale.
When an operation is classified as a discontinued operation, the
comparative statement of profit or loss and OCI is re-presented as
if the operation had been discontinued from the start of the
comparative year.
Property, PLANT AND EQUIPMENT
Land and Buildings are recognised at fair value based on
periodic, but at least triennial, valuations by external
independent valuers. Any revaluation gains are recognised in other
comprehensive income. Revaluation losses are recognised with other
comprehensive income, against any pre-existing gains, with anything
over and above pre-existing gains being recognised as an expense in
profit and loss.
All other Property, plant and equipment is stated at historical
cost less subsequent accumulated depreciation and any accumulated
impairment losses. If significant parts of property, plant and
equipment have different useful lives, then they are accounted for
as separate items (major components) of property, plant and
equipment.
Any gain or loss on disposal of an item of property, plant and
equipment is recognised in profit or loss.
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the expenditure
will flow to the Group.
Leased assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that the
group will obtain ownership by the end of the lease term.
Land has an indefinite useful life and therefore is not
depreciated.
Depreciation is calculated on a straight-line basis at rates
calculated to write each asset down to its estimated residual
value, which in most cases is assumed to be zero, evenly over its
expected useful life, as follows:
Motor Vehicles over 3 years
Fixtures and IT equipment over 3 years
Plant and equipment over 2 - 5 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
At each statement of financial position date, the Group reviews
the carrying amounts of its tangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Where there has been a change in economic conditions that
indicate a possible impairment in a cash-generating unit, the
recoverability of the net book value relating to that field is
assessed by comparison with the estimated discounted future cash
flows based on management's expectations of future costs.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where conditions giving rise to impairment subsequently reverse,
the effect of the impairment charge is also reversed as a credit to
the income statement, net of any depreciation that would have been
charged since the impairment.
biological assets
A biological asset is defined as a living animal or plant. The
Group's biological assets comprise standing timber. The fair value
of the standing timber is determined using models based on expected
yields, market prices for the saleable produce, over 20 years,
after allowing for harvesting costs and other costs yet to be
incurred in getting the produce to maturity. Any changes in fair
value are recognised in the income statement in the year in which
they arise.
Forestry
IAS 41 requires biological assets to be measured at fair value
less costs to sell. The fair value of standing timber is estimated
based on the present value of the net future cash flows from the
asset, discounted at a current market-based rate. In determining
the present value of expected net cash flows, the Group includes
the net cash flows that market participants would expect the asset
to generate in its most relevant market. Increases or decreases in
value are recognised in profit or loss. When the fair value
estimates are determined to be clearly unreliable due to
insufficient information being available to the Directors, the
biological asset is held at cost less any accumulated depreciation
and any accumulated losses.
All expenses incurred in maintaining and protecting the assets
are recognised in profit or loss. All costs incurred in acquiring
additional planted areas are capitalised.
Where fair value of a biological asset cannot be measured
reliably, the biological asset shall be measured at its cost less
any accumulated depreciation and any accumulated impairment
losses.
Costs incurred prior to the demonstration of commercial
feasibility of forestry and agriculture in a particular area are
written-off to profit and loss as incurred.
CONVERTIBLE BONDS
The net proceeds received from the issue of convertible bonds
are split between a liability element and an equity component at
the date of issue. The fair value of the liability component is
estimated using the prevailing market interest rate for similar
nonconvertible debt. The portion which represents the embedded
option to convert the liability into equity of the Company is
included in equity and its fair value at initial recognition was
estimated using the Monte Carlo method of valuing such instruments.
The equity portion is not remeasured subsequent to initial
recognition and the liability component is carried at amortised
cost. Issue costs are apportioned between the liability and equity
components of the convertible bonds based on their relative
carrying amounts at the date of issue. The portion relating to the
equity component is charged directly against equity. The interest
expense on the liability component is calculated by applying the
prevailing market interest rate, at the time of issue, for similar
non-convertible debt to the liability component of the instrument.
The difference between this amount and the interest paid is added
to the carrying amount of the convertible bonds.
FINANCIAL INSTRUMENTS
(a) Classification
The Group classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss); and
-- those to be measured at amortised cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will be
recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election at the time
of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI). See Note 16 for
further details.
(b) Recognition
Purchases and sales of financial assets are recognised on trade
date (that is, the date on which the Group commits to purchase or
sell the asset). Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed
in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly
in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. Impairment losses are
presented as a separate line item in the statement of profit or
loss.
(d) Impairment
From 1 January 2018, the Group assesses, on a forward-looking
basis, the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in
credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
INVENTORIES
Inventories are measured at the lower of cost-of-production or
estimated net realisable value. Cost of production includes direct
labour, all costs of purchase, conversion and other costs incurred
in bringing the inventories to their present location and
condition. Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated selling
expenses. The cost of inventories is based on the weighted average
cost method.
Product that has been containerised and shipped or remains in
storage at the port of departure, and where ownership has not yet
passed to the customer, is accounted for as stock in transit and
stated at the lower of cost of production or estimated net
realisable value.
eMPLOYEE benefits
short-term employee benefits
The costs of all short-term employee benefits are recognised in
the period in which the employee renders the related service.
The accrual/liability for employee entitlements to wages,
salaries and annual leave represent the amount which the Group has
a present obligation to pay as a result of employees' services
provided up to the reporting date. The accruals have been
calculated at undiscounted amounts based on expected wage and
salary rates.
SHARE-BASED PAYMENT ARRANGEMENTS
The grant-date fair value of equity-settled share-based payment
arrangements granted to employees is generally recognised as an
expense, with a corresponding increase in equity. The amount
recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately
recognised is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the
grant-date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
The fair value of the options granted is measured using a
modified Black Scholes valuation model for options, taking into
account the terms and conditions under which the options were
granted. The amount recognised as an expense is adjusted to reflect
the actual number of share options that vest.
PROVISIONS
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The
unwinding of discount is recognised as a finance cost.
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group from a contract are
lower than the unavoidable cost of meeting its obligations under
the contract. The provision is measured at the present value of the
lower of the expected cost of terminating the contract and the
expected net cost of continuing with that contract.
In accordance with the Group's environment policy and applicable
legal requirements, a provision for site restoration in respect of
contaminated land, and the related expense, is recognised when the
land is contaminated.
TAXATION
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in OCI.
CURRENT TAX
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
DEFERRED TAX
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is
able to control the timing of the reversal of the temporary
differences and it is probable that they will not reverse in the
foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Future taxable profits are
determined based on the reversal of relevant taxable temporary
differences. If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then future
taxable profits, adjusted for reversals of existing temporary
differences, are considered, based on the business plans for
individual subsidiaries in the Group. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of
future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each
reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against
which they can be used.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences
that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its
assets and liabilities. For this purpose, the carrying amount of
investment property measured at fair value is presumed to be
recovered through sale, and the Group has not rebutted this
presumption.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
BORROWINGS
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down
occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
EARNINGS PER SHARE
(i) Basic earnings per share is calculated by dividing the
profit attributable to the owners of the Company by the weighted
average number of ordinary shares outstanding during the financial
year.
(ii) Diluted earnings per share adjusts the figures used in
determining basic earnings per share to take into account the after
tax effects of interest and other financing costs associated with
dilutive potential ordinary shares and the weighted average number
of ordinary shares that would have been outstanding assuming the
conversion of all diluted potential ordinary shares.
Where there is a loss attributable to the owners of the company,
it is not necessary to disclose the diluted earnings per share.
GOING CONCERN
The financial statements have been prepared assuming that the
Group will continue as a going concern. Under this assumption, an
entity is ordinarily viewed as continuing in business for the
foreseeable future with neither the intention nor necessity of
liquidation, ceasing trading or seeking protection from creditors
for at least 12 months from the date of the signing of the
financial statements.
The assessment has been made of the Group's prospects, which
have been included in the financial budget, and from managing
working capital. Consideration has been given inter alia, to the
current stage of the Group's life cycle, its losses and cash
outflows, the expected timing of revenues and the ability of the
Directors to raise further funds either through debt, equity, or
asset sales, or deferral of liabilities, their current assessment
of financial and operational risk and their best estimate of the
impact of COVID-19 on operations and the material uncertainties
arising therefrom.
In January 2020 the Group's forecast for the financial year
showed a movement into positive operational cash flow around
mid-year, having taken account of the effects of the cash flow
enhancement measures announced. However, on 27 March 2020 it
announced that the rapid pace of developments in connection with
COVID-19 had caused such fundamental levels of uncertainty that, in
common with many other companies, the Board withdrew any guidance
on the financial outcome for 2020 until its implications could be
assessed reliably.
Current internal forecasts based on information available at the
date of the approval of these financial statements and using a
variety of scenarios indicate that the Company will need to secure
further funds, including from issuing equity, debt or asset sales,
or the deferral of liabilities, in order to meet its liabilities as
they fall due in the next 12 months. In the light of enquiries
made, as well as bearing in mind the proven ability of the Company
to raise funds previously, the Directors have a reasonable
expectation that the Group has or will have access to adequate
resources to continue in operational existence for the foreseeable
future and therefore have adopted the going concern basis of
preparation in the financial statements.
The auditors make reference to a material uncertainty in
relation to going concern within the audit report.
CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
The preparation of the consolidated financial statements
requires management to make estimates and judgements and form
assumptions that affect the reported amounts of the assets,
liabilities, revenue and costs during the periods presented
therein, and the disclosure of contingent liabilities at the date
of the financial statements. Estimates and judgements are
continually evaluated and based on management's historical
experience and other factors, including future expectations and
events that are believed to be reasonable. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the financial results of the Group in future
reporting periods are discussed below.
Information about assumptions and estimation uncertainties at 31
December that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities in the
next financial year is included in the following notes:
-- Residual values and useful lives of property, plant and equipment: refer to note 10
-- Fair value of biological assets: refer to note 11
-- Provision for doubtful debts: Refer to note 14
-- Convertible bond liability: refer to note 17
-- Fair value of assets on business combination: refer to note 23
-- Impairment- consideration receivable: refer to note 24
-- Share Based Payments: refer to note 25
-- The impact of COVID-19; refer to note 28 and Going Concern above.
2. SEGMENTAL REPORTING
Segmental information is presented on the basis of the
information provided to the Chief Operating Decision Maker
("CODM"), which is the Executive Board.
The Group is currently focused on forestry and timber trading.
These are the Group's primary reporting segments, operating in
Gabon, Mozambique, Denmark and head office operating from Mauritius
and UK.
As on 31 December 2019 sales made to one customer during the
year accounted for 12% (2018:12%) of the total turnover. Sales made
to a second customer during the year accounted for 11% (2018:11%)
of the total turnover.
The Group's Chairman and Chief Executive Officer reviews the
internal management reports of each division at least monthly.
There are varying levels of integration between the Forestry and
Trading segments. This integration includes transfers of sawn
timber and veneer, respectively. Inter-segment pricing is
determined on an arm's length basis.
Information relating to each reportable segment is set out
below. Segment profit / (loss) before tax is used to measure
performance because management believes that this information is
the most relevant in evaluating the results of the respective
segments relative to other entities that operate in the same
industry. All amounts are disclosed after taking into account any
intra-segment and intra-group eliminations:
Forestry Trading Unallocated head office costs Total
$000 $000 $000 $000
---------------------------------------------- --------- --------- ------------------------------ ---------
Income statement
Turnover 6,850 12,609 - 19,459
Cost of Sales (5,237) (11,459) - (16,696)
---------------------------------------------- --------- --------- ------------------------------ ---------
Gross profit 1,613 1,150 - 2,763
---------------------------------------------- --------- --------- ------------------------------ ---------
Other income 75 21 14 110
Operating costs (3,396) (1,330) - (4,726)
Administrative expenses (22) (391) (1,002) (1,415)
Depreciation (230) (63) (13) (306)
Share based payment expense (98) (124) (9) (231)
Foreign exchange (loss) / gain 6 267 (2) 271
Contingent acquisition expense (478) (478) - (956)
Fair value gain - - 4,602 4,602
Segment operating profit / (loss) (2,530) (948) 3,590 112
---------------------------------------------- --------- --------- ------------------------------ ---------
Finance costs (913) (1,088) (8) (2,009)
---------------------------------------------- --------- --------- ------------------------------ ---------
Loss before taxation (3,443) (2,036) 3,582 (1,897)
---------------------------------------------- --------- --------- ------------------------------ ---------
Taxation (58) 4 - (54)
---------------------------------------------- --------- --------- ------------------------------ ---------
Loss for the year from Continuing Operations (3,501) (2,032) 3,582 (1,951)
---------------------------------------------- --------- --------- ------------------------------ ---------
NET ASSETS
Assets: 216,360 12,380 313 229,053
Liabilities: (3,048) (22,557) (23,606) (49,211)
Deferred tax liability (62,655) - - (62,655)
Net assets 150,657 (10,177) (23,293) 117,187
---------------------------------------------- --------- --------- ------------------------------ ---------
OTHER SEGMENT ITEMS
Capital expenditure:
Biological assets 194,708 - - 194,708
Property, plant and equipment 20,253 48 22 20,323
---------------------------------------------- --------- --------- ------------------------------ ---------
The following table shows the segment analysis of the Group's
loss before tax for the year and net assets at 31 December 2018.
All amounts are disclosed after taking into account any
intra-segment and intra-group eliminations:
Forestry Trading Unallocated head office costs Total
$000 $000 $000 $000
---------------------------------------------- --------- --------- ------------------------------ ---------
Income statement
Turnover 5,579 7,869 - 13,448
Cost of Sales (4,397) (6,937) - (11,334)
---------------------------------------------- --------- --------- ------------------------------ ---------
Gross profit 1,182 932 - 2,114
---------------------------------------------- --------- --------- ------------------------------ ---------
Other income 5 - 155 160
Operating costs (3,443) (1,330) (583) (5,356)
Administrative expenses - (290) (1,816) (2,106)
Depreciation (408) (66) - (474)
Share based payment expense (422) (151) (85) (658)
Foreign exchange loss / (gain) (38) (411) 712 263
Contingent acquisition expense - (860) - (860)
Gain on disposal of Tanzanian business - - 176 176
Gain on fair value of Biological assets 1,611 - - 1,611
Segment operating loss (1,513) (2,176) (1,441) (5,130)
---------------------------------------------- --------- --------- ------------------------------ ---------
Finance costs - (201) (243) (444)
---------------------------------------------- --------- --------- ------------------------------ ---------
Loss before taxation (1,513) (2,377) (1,684) (5,574)
Taxation (585) (366) - (951)
---------------------------------------------- --------- --------- ------------------------------ ---------
Loss for the year from Continuing Operations (2,098) (2,743) (1,684) (6,525)
---------------------------------------------- --------- --------- ------------------------------ ---------
NET ASSETS
Assets: 159,944 56,572 11,686 228,202
Liabilities: (16,606) (28,532) 9,107 (36,031)
Deferred tax liability (62,655) - - (62,655)
---------------------------------------------- --------- --------- ------------------------------ ---------
Net assets 80,683 28,040 20,793 129,516
---------------------------------------------- --------- --------- ------------------------------ ---------
OTHER SEGMENT ITEMS
Capital expenditure
Biological assets 194,708 - - 194,708
Property, plant and equipment 16,958 113 10 17,081
---------------------------------------------- --------- --------- ------------------------------ ---------
3. OPERATING LOSS
2019 2018
$000 $000
--------------------------------------------------------------------------------- ------ --------
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment 1,393 1,625
Staff costs (see note 4) 3,508 4,987
Share based payment reserve expense (see note 26) 231 712
Operating lease costs 69 73
Gain on fair value of Biological assets (see note 13) - (1,611)
Inventory provisions (244) 295
--------------------------------------------------------------------------------- ------ --------
Auditor's remuneration:
Audit services
- fees payable to the Company auditor for the audit of the consolidated accounts 53 50
Fees payable to associates of the Company auditor
- auditing the accounts of subsidiaries pursuant to legislation 76 65
--------------------------------------------------------------------------------- ------ --------
4. EMPLOYEE INFORMATION
2019 2018
Number Number
--------------------------------------------------------------------------------- ------------------------------- ------
The average monthly number of persons (including Directors) employed by the Group
during the
year was:
Administration and management 4 4
Agriculture 1 247
Forestry 257 192
Trading 10 6
272 449
--------------------------------------------------------------------------------- ------------------------------- ------
2019 2018
$000 $000
The aggregate remuneration comprised:
Wages and salaries 3,239 4,236
Social security costs 38 39
Share based payments 231 712
--------------------------------------------------------------------------------- ------------------------------- ------
3,508 4,987
--------------------------------------------------------------------------------- ------------------------------- ------
Directors' remuneration included in the aggregate remuneration above comprised: 2019 2018
$000 $000
Emoluments for qualifying services 1,229 1,513
--------------------------------------------------------------------------------- ------------------------------- ------
Included above are emoluments of $243,000 (2018: $252,000) in
respect of the highest paid Director. Deferred acquisition payments
arising from the acquisition of Woodbois International ApS are
excluded in both periods. Full details of directors' remuneration
are included in the Directors' Report.
Pension contributions of $17,894 (2018: $17,769) were made on
behalf of the Directors and other staff members.
5. Other INCOME
2019 2018
$000 $000
-------------------- ----- -----
Bad debt recovered 3 154
Discount received 74 -
Administrative fees 22 -
Other 11 6
110 160
-------------------- ----- -----
6. FINANCE COSTS
2019 2018
$000 $000
-------------------------------------- ------ -----
Bank interest 335 202
-------------------------------------- ------ -----
ITF interest 1,197 242
Interest accrued on convertible bonds 477 -
2,009 444
-------------------------------------- ------ -----
7. TAXATION
2019 2018
$000 $000
-------------------------------------------------------------------------- -------------------- --------------------
Current tax:
Corporation tax on profit for the year (54) (79)
Deferred tax:
Origination and reversal of temporary differences - (872)
-------------------------------------------------------------------------- -------------------- --------------------
Tax on PROFIT / (loss) on ordinary activities (54) (951)
-------------------------------------------------------------------------- -------------------- --------------------
Group $000 $000
Loss on ordinary activities before tax (4,790) (6,872)
Loss on ordinary activities multiplied by the average rate of corporation
tax of 20% (2018:
22%) (958) (1,512)
Effects of:
Losses not recognised for deferred tax 955 853
Losses recognised for deferred tax - 99
Fair value gain (920) -
Differences in overseas tax rates 156 -
Loss allowance (4) 18
Gain on disposal of Tanzanian business - (39)
Share based payment expense 46 157
Unutilised losses from prior years -
Non-deductible expenses 671 -
Effect of movement in fair value of biological assets - (527)
GROUP Tax CREDIT for the year (54) (951)
-------------------------------------------------------------------------- -------------------- --------------------
The prevailing tax rates of the operations of the Group range
between 3% and 32%. Therefore, a rate of 20% has been used as it
best represents the weighted average tax rate experienced by the
Group. The Group has estimated losses of $17.6 million (2018: $11.2
million) available for carry forward against future taxable
profits. Tax losses utilized during the year related principally to
profits realised by subsidiaries in certain jurisdictions and tax
gains realised on liquidation of various subsidiaries. No deferred
tax assets have been recognised in respect of losses due to the
unpredictability of future taxable profit. All unused tax losses
may be carried forward indefinitely.
The movement in the year in the Group's recognised net deferred
tax position was as follows:
2019 2018
Deferred tax liabilities $000 $000
----------------------------------- ------- -------
At 1 January 62,655 61,728
Increase in deferred tax liability - 527
Decrease in deferred tax asset - 400
At 31 December 62,655 62,655
----------------------------------- ------- -------
Deferred tax reconciliation
2019 2018
Deferred tax assets / liabilities $000 $000
------------------------------------------------------------------------------------- ---------- ----------
Deferred tax liability on the fair value adjustment of Biological Assets (60,601) (60,601)
Deferred tax liability on the fair value adjustment on property, plant and equipment (2,054) (2,054)
At 31 December (62,655) (62,655)
------------------------------------------------------------------------------------- ---------- ----------
8. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year
excluding own shares held jointly by the Woodbois Employee Share
Trust, "The Trust", and certain employees.
There is no diluted earnings per share due to the Group being in
a loss-making position in the period and the prior period.
2019 2018
$000 $000
Loss from continuing operations attributable to owners of the parent (3,005) (6,603)
Loss from discontinued operations attributable to owners of the parent (2,893) (1,446)
---------------------------------------------------------------------------------- ------------ ------------
Total loss attributable to owners of the parent (5,898) (8,049)
---------------------------------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
Weighted average number of ordinary shares in issue 450,019,220 326,021,863
Weighted average number of ordinary shares used in calculating earnings per share 450,019,220 326,021,863
---------------------------------------------------------------------------------- ------------ ------------
Earnings per share from continuing operations
Basic (cents) (0.67) (2.03)
Earnings per share from discontinued operations
Basic (cents) (0.64) (0.44)
---------------------------------------------------------------------------------- ------------ ------------
9. Discontinued operations
During the previous financial year, the Group announced its
intention to dispose of its Tanzanian assets. The agricultural
operation has been accounted for as a discontinued operation from
31 October 2018.
At 31 December 2018 the Group disposed of the agricultural
business and assets in Tanzania, namely Magole Agriculture Limited,
Milama Processing Company Limited, Magole Land Limited and Wami
Agriculture Co. Limited. Mama Jo's Fresh Limited was deregistered
on 21 July 2018.
Results of disposal Group:
2019 2018
$000 $000
-------------------------------------------------------------- -------- --------
Turnover - 109
Cost of sales 79 (931)
-------------------------------------------------------------- -------- --------
Gross profit / (loss) 79 (822)
Other income - 116
Operating costs (167) (533)
Administrative expenses (82) (146)
Share based payments - (54)
Impairment of amounts due on sale of Discontinued Operations (2,502) -
Foreign exchange gain / (loss) (221) (7)
Loss before tax (2,893) (1,446)
Taxation - -
-------------------------------------------------------------- -------- --------
Loss after tax (2,893) (1,446)
-------------------------------------------------------------- -------- --------
2019 2018
$000 $000
------------------------------------------------------ ------ ------
Net cash inflows from operating activities 87 575
Net cash inflows from investing activities - 2
Net cash outflows from financing activities (90) (760)
------------------------------------------------------ ------ ------
Net decrease in cash used in Discontinued Operations (3) (183)
------------------------------------------------------ ------ ------
The Group continued to account for non-cancellable leases
amounting to $12,945 relating to African Home Stores business,
which was discontinued in 2016. This lease expired as at 30
November 2019.
The following table summarises the recognised amounts of assets
disposed measured at fair value:
2019 2018
$000 $000
Fixed Assets - 2,109
Inventory - 215
------------------------------------ ----- --------
Total identifiable assets disposed - 2,324
Cash flows on disposal
Consideration - cash - (2,015)
Consideration - buyer assumed loan - (485)
Total consideration - (2,500)
------------------------------------ ----- --------
Gain on disposal - 176
------------------------------------ ----- --------
The cash consideration was payable by the buyer in 12 quarterly
instalments. The first instalment of $250,000 was payable on 30
April 2019. The 11 subsequent instalments shall be equal amounts of
$160,455.
As at 31 December 2019, the cash consideration has not been
received and whilst the Group remains in discussions with the
purchaser and reserves all its legal rights it has been deemed
prudent to fully impair this amount.
The non-cash consideration relates to a loan amounting to
$484,902 which was assumed by the buyer.
Total assets and liabilities held by the Group at the year-end
in relation to the discontinued operations amounted to $49,000
(2018 - $195,000) and $9,000 (2018 - $306,000) respectively.
10. PROPERTY, plant and equipment
Fixtures & IT
Land & buildings Motor vehicles Plant & equipment equipment Total
$000 $000 $000 $000 $000
Cost
At 1 JANUARY 2018 9,405 2,505 7,488 272 19,670
Additions 1,066 1,116 1,619 6 3,807
Disposal of
subsidiary (1,180) (65) (1,081) (10) (2,336)
Disposals (other) - (63) (116) (131) (310)
Effects of foreign
exchange (502) (260) (1,926) (2) (2,690)
---------------------- ----------------- --------------- ------------------ ---------------------- --------
At 31 December 2018 8,789 3,233 5,984 135 18,141
---------------------- ----------------- --------------- ------------------ ---------------------- --------
Additions - 1,097 3,897 22 5,016
Reclassification (337) - 337 - -
Disposals - (13) (47) (16) (76)
Effects of foreign
exchange (171) (43) 215 (1) -
---------------------- ----------------- --------------- ------------------ ---------------------- --------
At 31 December 2019 8,281 4,274 10,386 140 23,081
---------------------- ----------------- --------------- ------------------ ---------------------- --------
Depreciation
At 1 JANUARY 2018 208 205 1,502 14 1,929
Charge for the year 144 524 935 22 1,625
Disposal of
subsidiary (78) (22) (124) (3) (227)
Disposals (other) - (20) - - (20)
Effects of foreign
exchange 87 (167) (2,165) (2) (2,247)
---------------------- ----------------- --------------- ------------------ ---------------------- --------
At 31 December 2018 361 520 148 31 1,060
---------------------- ----------------- --------------- ------------------ ---------------------- --------
Charge for the year 47 555 763 28 1,393
Disposals - (7) (18) (8) (33)
Effects of foreign
exchange (337) 55 620 - 338
---------------------- ----------------- --------------- ------------------ ---------------------- --------
At 31 December 2019 71 1,123 1,513 51 2,758
---------------------- ----------------- --------------- ------------------ ---------------------- --------
Net book value
At 31 December 2019 8,210 3,151 8,873 89 20,323
---------------------- ----------------- --------------- ------------------ ---------------------- --------
At 31 December 2018 8,428 2,713 5,836 104 17,081
---------------------- ----------------- --------------- ------------------ ---------------------- --------
Motor vehicles having a net book value of USD 262,732 (2018: USD
397,583) are pledged as security on car loans (see also note
16).
On acquisition of an asset, the estimated useful life is
determined. The residual values for the majority of assets are
assumed to be zero.
11. biological assets
2019 2018
Standing timber $000 $000
----------------------------------------------------- -------- --------
Carrying value at beginning of year 194,708 192,501
Increases due to purchases - 596
Gains / (losses) arising from changes in fair value - 1,611
----------------------------------------------------- -------- --------
Carrying value at end of year 194,708 194,708
----------------------------------------------------- -------- --------
The methods and assumptions used in determining the fair value
of standing timber within the forestry concessions held has been
based on IAS 41 Agriculture which uses discounted cash flow models
and which require a number of significant judgements to be made by
the Directors in respect of sales price, operational cost, discount
rates, legislative rulings and operating effectiveness. Following
the fair value assessment in 2019 the value has not materially
changed.
The discounted cash flow models cover the concession areas in
Mozambique and Gabon to which the group has secured the rights.
Management prepare separate models for each country.
Harvesting levels are regulated by the Annual Permitted Cut
("APC") (total m3 per species) set in each management plan and
approved at federal and provincial government level and can be
reviewed and increased periodically, while continued sustainability
is ensured. The level of assumed APC varies between 89,525m3 and
200,000m3 and at a maximum represents 100% of the APC. This is
based on the current APC which may be subject to change depending
on legislative changes both with regards to the size of the area
and species. Such changes may impact the carrying value of the
biological assets held.
The valuation models assume pre-tax discount rates between 10%
and 12% depending on geography. The discount rates have been
calculated using a weighted average cost of capital ("WACC")
methodology. Our comparable company base is made up of
Africa-focused and global forestry companies which management
consider would be categorized in the same sector as Woodbois.
Relevant country and equity risk premiums have been used for Gabon
and Mozambique. Management have determined that, the discount rates
are in line with the overall industry consensus for timberland
assets within Africa.
The Group's main class of biological assets comprise of standing
timber held through forestry concessions of between 20 and 50
years. Biological assets are carried at fair value less estimated
costs to sell.
The brought forward biological assets are located in Gabon in
Mouila and Northern Mozambique in the states of Cabo Delgado,
Nyassa and Zambezia and are managed from a central point in Mouila
and Nampula.
Fair value has been determined internally by discounting a
20-year pre-tax cash flow projection (Level 3 of the fair value
hierarchy) based on a mix of wood species within the concession
areas. Real cost of production has been factored in going
forward.
The following sensitivity analysis shows the effect of an
increase or decrease in significant assumptions used:
Impact on fair value of biological asset
2019 2018
$ 000 $ 000
Effect of increase in discount rate by 1% (15,501) (15,501)
Effect of decrease in discount rate by 1% 18,636 18,636
Effect of 10% increase in volume of APC 18,423 18,730
Effect of 10% decrease in volume of APC (18,423) (18,730)
Effect of 10% increase in sales price 38,219 38,979
Effect of 10% decrease in sales price (38,219) (38,979)
12. TRADE AND OTHER RECEIVABLES
2019 2018
$000 $000
--------------------------------------------------------------------------- ------ ------
Trade receivables 2,229 2,874
Other receivables 213 824
Deposits 40 35
Consideration due - sale of Tanzanian business - current portion (note 10) - 659
Current tax receivable 20 -
VAT receivable 445 242
Prepayments 3,176 1,290
6,123 5,924
--------------------------------------------------------------------------- ------ ------
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value. Refer to Note 14
for details of the trade debt aging profile and Note 16 for the
Group's impairment policy.
13. INVENTORY
2019 2018
$000 $000
------------------ ------ ------
Timber and veneer 3,879 5,216
Stock in transit 2,530 1,522
------------------ ------ ------
6,409 6,738
------------------ ------ ------
Write-back of provisions for net realisable value amounted to
$244,000 (2018 - write downs of $295,000). These were recognised as
income during the year ended 31 December 2019 and included in 'cost
of sales' in profit or loss.
14. financial INSTRUMENTS
Capital risk management
The Company manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders. The overall strategy of the Company and
Group is to minimise costs and liquidity risk.
The capital structure of the Group consists of equity
attributable to equity holders of the parent, comprising issued
share capital, share premium, reserves (merger reserve, foreign
exchange reserve and share based payment reserve) and retained
earnings as disclosed in the Consolidated Statement of Changes in
Equity.
The Group is exposed to a number of risks through its normal
operations, the most significant of which are interest, credit,
foreign exchange and liquidity risks. The management of these risks
is vested in the Board of Directors.
The sensitivity has been prepared assuming the liability
outstanding at the balance sheet date was outstanding for the whole
period. In all cases presented, a negative number in profit and
loss represents an increase in finance expense / decrease in
interest income.
Categorisation of financial instruments
Financial Financial Financial Financial
2019 assets at assets liabilities liabilities
amortised at fair at amortised at fair
Financial assets/(liabilities) cost value cost value Total
$000 $000 $000 $000 $000
--------------------------------- ----------- ---------- -------------- ------------- ---------
Trade and other
receivables 6,123 - - - 6,123
Cash and cash equivalents 1,490 - - - 1,490
Trade and other
payables - - (4,801) - (4,801)
Borrowings - - (19,888) - (19,888)
Convertible bond
liability - - (23,547) - (23,547)
Contingent acquisition
liability - - (975) - (975)
7,613 - (49,211) - (41,598)
--------------------------------- ----------- ---------- -------------- ------------- ---------
Financial Financial Financial Financial
2018 assets at assets liabilities liabilities
amortised at fair at amortised at fair
Financial assets/(liabilities) cost value cost value Total
$000 $000 $000 $000 $000
--------------------------------- ----------- ---------- -------------- ------------- ---------
Trade and other
receivables 5,924 - - - 5,924
Cash and cash equivalents 1,910 - - - 1,910
Trade and other
payables - - (5,571) - (5,751)
Borrowings - - (10,110) - (10,110)
Preference share
liability - - (13,901) - (13,901)
Contingent acquisition
liability - - (1,269) - (1,269)
7,834 - (30,851) - (23,017)
--------------------------------- ----------- ---------- -------------- ------------- ---------
Fair value measurements recognised in the statement of financial
position
The following provides an analysis of the Group's financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 & 2 based on the degree to
which the fair value is observable.
-- Level 1 fair value measurements are those derived from inputs
other than quoted prices that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
-- Level 2 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
-- Level 3 assets are assets whose fair value cannot be
determined by using observable inputs or measures, such as market
prices or models. Level 3 assets are typically very illiquid, and
fair values can only be calculated using estimates or risk-adjusted
value ranges
At the year end, included in property, plant and equipment,
there is land and buildings held at fair value of $7.2m (2018:
$7.2m) measured in accordance with level 1 and Biological Assets of
$194.7m (2018: $194.7m) measured in accordance with level 2 of the
fair value hierarchy.
Equity price Risk
The Group is exposed to equity price risks arising from equity
investments. Equity investments are held for both strategic and
trading purposes.
Management of market risk
The most significant area of market risk to which the Group is
exposed is interest rate risk.
The risk is limited to the reduction of interest received on
cash surpluses held and the increase in the interest on
borrowings.
The majority of the Company's debt is based on fixed interest
rates with no link or exposure to movements in LIBOR. The trade
finance facility that the Company raised over the course of 2018
and 2019 is priced below all of the quotes received for a trade
finance facility from institutions active in Africa.
Woodbois also has the option to wind up the trade finance
facility within a 4-month timeframe, after an initial 12-month
period should more attractive financing rates be secured.
The following table details the group's exposure to interest
rate changes, all of which affect profit and loss only with a
corresponding effect on accumulated losses.
2019 2018
$000 $000
------------------------------------- ------ ------
+ 20 bp increase in interest rates (48) (20)
+ 50 bp increase in interest rates (123) (51)
+ 100 bp increase in interest rates (248) (101)
The table above is prepared on the basis of an increase in
rates. A decrease in rates would have the opposite effect.
2019 2018 2019 2018 2019 2018
Fixed Fixed Floating Floating
rate rate rate rate Total Total
Group $000 $000 $000 $000 $000 $000
---------------------------- --------- --------- --------- --------- --------- ---------
Cash and cash equivalents - - 1,490 1,910 1,490 1,910
Borrowings (19,888) (10,110) - - (19,888) (10,110)
Preference share liability - (13,901) - - - (13,901)
Convertible bond liability (23,547) - (23,547) -
---------------------------- --------- --------- --------- --------- --------- ---------
Total (43,435) (24,011) 1,490 1,910 (41,945) (22,101)
---------------------------- --------- --------- --------- --------- --------- ---------
The impact of a 10% increase/decrease in the average base rates
would be $1 million (2017: $0.7 million) on total cash and cash
equivalents balances, borrowings and on equity.
Management of credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers and investments in debt securities.
The carrying amount of financial assets represents the maximum
credit exposure.
The principal financial assets of the Company and Group are bank
balances and receivables. The Group deposits surplus liquid funds
with counterparty banks that have high credit ratings. Cash is
sometimes placed with certain institutions in support of trading
positions. The Group deposits such funds with large well-known
institutions and the Directors consider the credit risk to be
minimal.
The Group's maximum exposure to credit by class of individual
financial instrument is shown in the table below:
2018
2019 2019 2018 Maximum
Carrying Value Maximum Exposure Carrying Value Exposure
$000 $000 $000 $000
----------------------------- ---------------- ------------------ ---------------- ----------
Cash and cash equivalents 1,490 1,490 1,910 1,910
Trade and other receivables 6,407 6,407 3,975 3,975
-------------------------------- ---------------- ------------------ ---------------- ----------
Total 7,897 7,897 5,885 5,885
-------------------------------- ---------------- ------------------ ---------------- ----------
Trade receivables
Trade receivables are recognised initially at the amount of
consideration that is unconditional, unless they contain
significant financing components when they are recognised at fair
value. They are subsequently measured at amortised cost using the
effective interest method, less loss allowance.
The only impact on the Group is in relation to the impairment of
trade receivables as detailed below.
The expected loss rates are based on the payment profiles of
sales over a period of 36 month before 31 December 2019 or 1
January 2020 respectively and the corresponding historical credit
losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to
settle the receivables. The group has identified the GDP, COVID-19
and the unemployment rate of the countries in which it sells its
goods to be the most relevant factors, and accordingly adjusts the
historical loss rates based on expected changes in these
factors.
On that basis, the loss allowance as at 31 December 2019 and 31
December 2018 were determined as follows for both trade receivables
and contract assets:
More than More More than More Current Total
120 days than 60 days than
past due 90 days past due 30 days
past past
due due
31 December 2019
----------------------- ---------- --------- ---------- --------- -------- ------
Expected loss rate 12.28% 0% 0% 0% 0% 2.70%
----------------------- ---------- --------- ---------- --------- -------- ------
Gross carrying amount
- trade receivables 490 74 118 582 965 2,229
----------------------- ---------- --------- ---------- --------- -------- ------
Loss allowance (60) - - - - (60)
----------------------- ---------- --------- ---------- --------- -------- ------
31 December 2018
----------------------- ---------- --------- ---------- --------- -------- ------
Expected loss rate 1.96% 4.86% 0% 0% 0% 2.5%
Gross carrying amount
- trade receivables 2,197 803 89 (43) 203 3,249
----------------------- ---------- --------- ---------- --------- -------- ------
Loss allowance (43) (39) - - - (82)
----------------------- ---------- --------- ---------- --------- -------- ------
The closing loss allowances for trade receivables and contract
assets as at 31 December reconcile to the opening loss allowances
as follows:
2019 2018
$000 $000
Opening loss allowance at 1 January 82 -
Increase in loss allowance recognised
in profit / (loss) during the year 1 82
Receivables written off during the year (23) -
as uncollectible
----------------------------------------- ----- -----
Closing loss allowance at 31 December 60 82
----------------------------------------- ----- -----
Management of foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from commercial transactions, translation of
assets and liabilities and net investments in foreign operations.
Exposure to commercial transactions arises from sales or purchases
by operating companies in currencies other than the companies'
functional currency. Currency exposures are reviewed regularly.
The Group has a limited level of exposure to foreign exchange
rate risk through their foreign currency denominated cash
balances:
2019 2018
$000 $000
--------------------------- ------ ------
Cash and cash equivalents
GBP 5 55
EUR 1,340 27
DKK 4 -
CFA 104 59
MUR 1 -
MZN 33 16
HKD - -
USD 3 1,753
Total 1,490 1,910
----------------------------- ------ ------
The table below summarises the impact of a 10% increase/decrease
in the relevant foreign exchange rates versus the US Dollar rate,
on the Group's pre-tax profit for the year and on equity:
2019 2018 2019 2018
Income Statement Income Statement Equity Equity
--------------------------- ----------------- ----------------- ------- -------
Impact of 10% rate change $000 $000 $000 $000
--------------------------- ----------------- ----------------- ------- -------
Cash and cash equivalents 104 9 104 9
--------------------------- ----------------- ----------------- ------- -------
The table above is prepared on the basis of an increase in
rates. A decrease in rates would have the opposite effect.
Management of liquidity risk
Liquidity risk is the risk that the group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The group's approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient liquidity
to meet its liabilities when they are due, under both normal and
stressed conditions, without incurring unacceptable losses or
risking damage to the group's reputation.
The Group seeks to manage liquidity risk by regularly reviewing
cash flow budgets and forecasts to ensure that sufficient liquidity
is available to meet foreseeable needs and to invest cash assets
safely and profitably. The Group deems there is sufficient
liquidity for the foreseeable future.
The Group had cash and cash equivalents at 31 December as set
out below.
2019 2018
$000 $000
-------------- ------ ------
Cash at bank 1,490 1,910
1,490 1,910
-------------- ------ ------
ContracTual maturity analysis
The Group has assessed the contractual maturity analysis as
follows:
2019 0-3 months 3-12 months 1 - 5 years Total
$000 $000 $000 $000
------------------------------ ------------- -------------- -------------- ---------
Assets by contractual
maturity
t rade and other receivables 1,739 4,384 - 6,123
C ash and cash equivalents 1,490 - - 1,490
------------------------------ ------------- -------------- -------------- ---------
3,229 4,384 - 7,613
Liabilities by contractual maturity
Trade and other payables (4,894) (185) - (5,079)
Borrowings - - (19,888) (19,888)
Convertible bond liability - - (23,301) (23,301)
Contingent acquisition
liability - - (975) (975)
(4,894) (185) (44,164) (49,243)
Net liabilities by
contractual maturity (1,665) 4,199 (44,164) (41,630)
------------------------------ ------------- -------------- -------------- ---------
2018 0-3 months 3-12 months 1 - 5 years Total
$000 $000 $000 $000
------------------------------- ----------- ------------ ------------ ---------
Assets by contractual
maturity
t rade and other receivables 2,290 3,634 - 5,924
C ash and cash equivalents 1,910 - - 1,910
------------------------------- ----------- ------------ ------------ ---------
4,200 3,634 - 7,834
Liabilities by contractual maturity
Trade and other payables (5,390) (361) - (5,751)
Borrowings - - (10,110) (10,110)
Preference share liability - - (13,901) (13,901)
Contingent acquisition
liability - - (1,269) (1,269)
Other related party - -
payables - -
------------------------------- ----------- ------------ ------------ ---------
(5,390) (361) (25,280) (31,031)
Net liabilities by
contractual maturity (1,190) 3,273 (25,280) (23,197)
------------------------------- ----------- ------------ ------------ ---------
15. TRADE AND OTHER PAYABLES
2019 2018
$000 $000
-------------------------------- ------ ------
Trade payables 1,256 2,621
Accruals 1,498 588
Contract liabilities 1,139 1,249
Current tax payable 55 27
Other payables 383 905
Related party loan (Note 27) 285 -
Debt due to concession holders 185 361
--------------------------------- ------ ------
4,801 5,751
-------------------------------- ------ ------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
16. BORROWINGS
2019 2018
$000 $000
----------------------------- ------- -------
Non-Current liabilities
Business loans 1,227 1,256
Internal Trade Finance Fund
("ITF") 12,311 3,804
Car loans 7 26
------------------------------ ------- -------
13,545 5,086
Current liabilities
Business loans 1,391 613
Bank overdraft 2,988 4,394
Working capital facility 1,944 -
Car loans 20 17
------------------------------ ------- -------
6,343 5,024
----------------------------- ------- -------
Total 19,888 10,110
------------------------------ ------- -------
As at 31 December the Trading division had the following
outstanding borrowings:
Business loan with a Danish bank that amounted to $1.2 million
(2018: $1.2 million). The business loan carries an interest rate of
2.64%. The purpose of the loan is for financing timber trades.
Car Loans with a Danish bank that amounted to $27k (2018: $44k).
The car loans carry an interest rate of 2.25% and 2.5%.
Bank overdraft facilities with a Danish bank that amounted to
$3.0 million (2018: $3.8 million). The Bank overdraft facilities
carry interest rates of 2.205% and 5.859%.
Working capital facilities with a Danish bank that amount to
$1.9 million (2018: nil). This facility carries interest rates of
2% (Euro and DKK) and 3.75% (USD).
As on 31 December the Forestry division had the following
outstanding borrowings:
Business loans with a Gabonese bank that amounted to $1.4
million (2018: nil). These loans carry an interest rate of 10%. The
purpose of the loans is for financing capital expansion.
The Group signed a combined security to the value of $2.7
million, which includes securities over the property, plant and
equipment, the total inventories and total trade receivables.
The Group has also signed a security in favour of a Danish bank
to the value of $0.7 million.
As at 31 December 2019 the Group had raised $12.3 million (2018:
$3.8 million) in the form of an Internal Trade Finance Fund. The
ITF is covered by selected stock, debtors and group loans and it
bears interest at 11.5%, calculated daily, compounded
semi-annually. A notice period of 3 months applies to all fund
withdrawals.
The contractual maturity of borrowings has been assessed in Note
14.
The Group had undrawn facilities available at 31 December 2019
amount to $0.6m (2018: $5k).
17. CONVERTIBLE BONDS
2019 2018
$000 $000
------------------------------------- ------- -----
Convertible bonds: Liability
component 23,547 -
Convertible bonds: Equity component 1,495 -
-------------------------------------- ------- -----
Total 25,042 -
-------------------------------------- ------- -----
Convertible bond liability 23,070 -
Interest accrued 477 -
-------------------------------------- ------- -----
Total 23,547 -
-------------------------------------- ------- -----
During the year the Company restructured the 5% perpetual
preference shares in Woodbois subsidiary, Argento Limited, by
buying it back and issuing the holders instead with Convertible
Bonds in Woodbois Limited ("Bonds"). The Woodbois Convertible Bond
has a maturity of not later than 30 June 2024, 4% coupon and
conversion price of 8p per share, being a maximum total of all the
Bonds on conversion of 300 million ordinary shares. 100% of
preference shareholders accepted the switch terms. The switch is
from a preference share with variable conversion terms linked to a
subsidiary company, to a bond convertible into Woodbois Limited
Ordinary Shares at a fixed rate.
On 21 October 2019, the Company completed the purchase of the
full 75,000 preference shares in issue and Neville Registrars
Limited, who were appointed by the Company to act as transfer
agent, issued 4% convertible bonds, convertible no later than 30
June 2024. The Bonds have been issued in registered form with a
nominal value of USD 1 each. The Bonds are freely transferable and
rank as senior debt of the Company but are not secured.
The Company may redeem all but not some only of the Bonds at
their principal amount, together with accrued but unpaid interest
in the following circumstances: (i) if after 30 January 2020, the
volume weighted average price of an ordinary share on 10 dealing
days in any period of 30 consecutive days is greater than GBP0.12;
or (ii) not less than 90% by principal amount of Bonds have been
redeemed or converted.
The Takeover Panel deems that the holders of the Preference
Shares/Bonds to be a 'concert party' for the purposes of the
Takeover Code. Upon conversion of all the Bonds, the new ordinary
shares so issued would account for 39.2% of then enlarged issued
Ordinary Share Capital at 31 December 2019.
Under Rule 9 of the Takeover Code, where any person acquires
interests in securities which carry 30 per cent, or more of the
voting fights of the Company, that person is normally required by
the Takeover Panel to make a general offer to the shareholders of
the Company to acquire their shares.
In order to avoid an inadvertent breach of Rule 9 of the
Takeover Code, Pelham Limited (a company controlled by Miles
Pelham, the former chairman of the Company), the owner of
approximately $20.0m of the face value of the Bonds, has undertaken
to the Company that its interest when aggregated with shares issued
to and retained by all other bondholders or owned by any of the
parties, will not at any time exceed 28.0% of the enlarged issued
Ordinary Share capital of the Company. Paul Dolan, Chairman and
CEO, owns $0.4m of the Bonds and is a member of the Concert
Party.
18. PREFERENCE SHARES
2019 2018
$000 $000
------------------------------------- ----- -------
Preference shares: Liability
component - 13,901
Preference shares: Equity component - 14,318
-------------------------------------- ----- -------
Total - 28,219
-------------------------------------- ----- -------
Preference share liability - 11,932
Interest accrued - 1,969
-------------------------------------- ----- -------
Total - 13,901
-------------------------------------- ----- -------
As explained in note 17, during the year the Company
restructured the 5% perpetual preference shares in Woodbois
subsidiary, Argento Limited, by buying it back and issuing the
holders instead with a convertible bond issued in Woodbois
Limited.
19. SHARE CAPITAL
Number $000
---------------------------------- ------------ ----------
Authorised:
Ordinary shares of 1p each Unlimited Unlimited
Allotted, issued and fully paid:
Ordinary shares of 1p each
----------------------------------- ------------ ----------
AT 1 JANUARY 2018 293,279,267 4,500
Shares issued 84,172,664 1,117
----------------------------------- ------------ ----------
AT 31 DECEMBER 2018 377,451,931 5,617
Shares issued 88,000,000 1,140
AT 31 DECEMBER 2019 465,451,931 6,757
----------------------------------- ------------ ----------
Balances classified as share capital include the nominal value
on issue of the Company's equity share capital, comprising ordinary
shares of 1p each.
During the year, 888,000,000 (2018: 84,172,664) ordinary shares
with a nominal value of $1,140,379 (2018: $1,117,000) were issued
for a cash consideration of $ 6,432,506 (2018: $9,598,431).
On 15 January 2019 40,000,000 ordinary shares with a nominal
value of $514,216 (GBP0.01) were issued for a cash consideration of
$ 2,571,080.
On 12 March 2019 32,000,000 ordinary shares with a nominal value
of $417,789 (GBP0.01) were issued for a cash consideration of $
2,611,180.
On 1 April 2019 16,000,000 ordinary shares with a nominal value
of $208,374 (GBP0.01) were issued for a cash consideration of $
1,250,246.
In January 2019 the Company accepted subscription to 40,000,000
new Woodbois Limited warrants at 10p, from Volantis, acting through
its discretionary investment manager Lombard Odier Asset Management
(USA) Corp. In July 2019, a deed of variation amended the
subscription price to 8p.
Volantis will be entitled to exercise 50% of the warrants at any
time during the period commencing on the first anniversary of the
drawdown date of the trade finance loan being 1 April 2020 and
expiring on the third anniversary of the drawdown date of the Loan
Agreement. Up to 50% of the warrants will also be exercisable at
any time following the initial drawdown date provided that Volantis
has owned 10% or more of the issued share capital of Woodbois prior
to exercise.
20. SHARE PREMIUM ACCOUNT
2019 2018
$000 $000
---------------- ------- -------
AT 1 JANUARY 29,954 22,340
---------------- ------- -------
Shares issued 5,176 7,614
---------------- ------- -------
AT 31 DECEMBER 35,130 29,954
---------------- ------- -------
Balances classified as share premium include the net proceeds in
excess of the nominal share capital on issue of the Company's
equity share capital.
21. MERGER RESERVE
2019 2018
$000 $000
---------------- ----- -------
At 31 December - 44,487
---------------- ----- -------
The merger reserve arose on shares issued by Woodbois Limited
(formerly known as Obtala Limited) to the previous owners of
Woodbois Services Limited (formerly known as Obtala Services
Limited) under a scheme of arrangement concluded in August 2010. At
the AGM of the Company held on 19 June 2019, in accordance with
Guernsey Company Law, shareholders approved the transfer of the
Merger reserve to retained earnings.
22. ACQUISITIONS
On 31 December 2018, the Group acquired the remaining 25%
minority shares and voting interests in Montara Continental
Limited. Since 1 January 2019, the Group has owned 100% of the
issued share capital. Montara Continental Limited was liquidated as
at 22 January 2020 and its assets transferred to other Group
Companies.
The purchase price for the sale of shares was made up of the
following:
- Initial consideration in cash of $2,500,000
- Deferred consideration of $2,500,000 or the issue of
40,000,000 ordinary shares of par value 1p each in the capital of
Woodbois Limited
The consideration of $5,000,000 outstanding at 31 December 2018
was paid during 2019.
Gain from buy-out of minorities
Gain from buy-out of minorities arising from the acquisition has
been recognised as follows:
2019 2018
$000 $000
------------------------------------ ----- ---------
Consideration - 5,000
Value of non-controlling interests - (19,508)
Gain from buy-out of minorities - 14,508
------------------------------------- ----- ---------
The minority interest was held by a single entity. There was no
obligation for Woodbois to acquire the outstanding shares and
therefore the ability for the individual shareholder to liquidate
its shares was restricted. As a result, Woodbois was able to
acquire the shares at a discount to the net asset value resulting
in the gain noted.
The value of non-controlling interests was valued at the
non-controlling interest's proportionate share of the net assets of
Montara Continental Limited and its subsidiaries, in accordance
with IFRS 10.
23. FAIR VALUE GAIN
2019 2018
$000 $000
--------------------------------------------------- -------- -----
Fair value gain on conversion of preference shares (4,602) -
--------------------------------------------------- -------- -----
The fair value of the preference shares and the convertible
bonds was determined by an independent valuer as at 30 June 2019
and adjusted for the effective completion date of 21 October 2019.
The host debt and conversion option were valued separately. The
host debt was valued using the discounted cashflow method. The
conversion option was valued using the Black-Scholes option pricing
method (preference shares) and the Monte Carlo simulation
(convertible bonds).
The fair value of the host liability component was determined
first by discounting the host debt component at the market rate
that would apply to an identical financial instrument without the
conversion option. The conversion option provides an upside for the
investors and hence they would require a higher rate of return in
the absence of the conversion option. The discount rate for
calculating the present value of the host liability was determined
with comparison to yields on corporate bonds with similar maturity
issued by companies operating in the Paper and Forest Product
Industry in developed markets adjusted by adding a risk premium for
Africa (source: Aswath Damodaran).
Number of Convertible bonds 75,000
Price per Convertible bond $400
Face Value $30,000,000
Coupon per annum % 4%
The fair value of the host liability was concluded to be
$22,663,600.
The fair value of the conversion option was concluded to be
$1,478,839; this was calculated as the present value of the average
gain from conversion over 5,000 simulations of the Company's share
price using the following assumptions:
Market rate 10.0%
Volatility 50.0%
Share price GBP0.0625
Risk-free rate 0.61%
Time period 5 years
24. SHARE BASED PAYMENTS
The share-based payments reserve is used to recognise the grant
date fair value of options issued to employees but not exercised,
the grant date fair value of shares issued to employees and the
fair value of share options forfeited by employees.
The Group operates a share option plan, under which certain
Directors and employees have been granted options to subscribe for
ordinary shares. All options are equity settled. The options have
an exercise price, that ranges from 8.75p to 18p, which was based
upon the average value of the Group's ordinary shares for the ten
days prior to the date of grant and trigger prices of between 15p
and 35p per share. The Group has no legal or constructive
obligation to repurchase or settle the options in cash. The number
and weighted average exercise prices of share options are as
follows:
Vesting Date Outstanding Award
Amounts at 31 December
2019
June 2018 3.625m options
June 2019 3.625m options
June 2020 3.625m options
June 2021 3.625m options
The awards were distributed to the Board as follows and the
awardee must accept the option granted for it to be valid:
Number of options
Paul Dolan Chairman and CEO 1m per tranche (4m
total)
Carnel Geddes CFO 250k per tranche (1m
total)
Jacob Hansen COO 625k per tranche (2.5m
total)
Hadi Ghossein Deputy Chairman 625k per tranche (2.5m
total)
Zahid Abbas Head of Trading 625k per tranche (2.5m
total)
In respect of each tranche, the options are exercisable if at
the first possible vesting date for that tranche or any subsequent
date, the Woodbois Limited monthly volume weighted for the three
consecutive months to such date is greater than the trigger price
for that tranche, the first such date being the vesting date in
respect of that tranche. The Option holder may acquire the Option
Shares in respect of a tranche following the vesting date in
respect of that tranche if they remain an employee of the Group at
that vesting date. If the awardee is not in the employ at the time
of vesting, then the awards are forfeit.
The options belong to a class of exotic options called partial
time knock-in options and the valuations are based on Black and
Scholes model modified to account for the properties of the exotic
option. The model uses the grant date, exercise price, vesting
date, share price volatility and risk-free rate to calculate the
option fair value. The options are accounted for over the vesting
period. The fair value of the options is not subsequently adjusted
for changes in the market conditions.
The table below shows the input ranges for the assumptions used
in the valuation model:
Exercise price 8.75p - 18.00p
Share price volatility 37.47% - 57.58%
Risk free rate 0.25% - 0.50%
Reconciliation of the share options in issue:
Weighted
average strike
Total options price
------------------------------------ ------------- ---------------
As on 1 January 2018 28,500,000 13.85p
Issued during the financial year 1,000,000 17.62p
Forfeited during the financial year (9,000,000) (15.82p)
------------------------------------ ------------- ---------------
As on 31 December 2018 20,500,000 13.78p
Issued during the financial year - -
Forfeited during the financial year (6,000,000) (10.29p)
------------------------------------ ------------- ---------------
As on 31 December 2019 14,500,000 15.23p
------------------------------------ ------------- ---------------
The following charge has been recognised in the current
financial year:
2019 2018
$000 $000
--------------------------------- ----- -----
AT 1 JANUARY 1,012 979
Reserve transfer for forfeitures (275) (679)
Share based payment expense 231 712
--------------------------------- ----- -----
AT 31 DECEMBER 968 1,012
--------------------------------- ----- -----
There were no options exercisable at the reporting date.
25. NON-CONTROLLING INTERESTS
$000
------------------------------------------ -------
AT 1 JANUARY 2018 20,608
-------
Non-controlling interests share of losses
in the year (1,235)
Buy-out of minorities 19,373
AT 31 DECEMBER 2018 and 2019 -
------------------------------------------- -------
The share of losses in the year represents the losses
attributable to non-controlling interests for the year. As at 31
December 2018, the Group bought out the non-controlling interests
in full.
26. RELATED PARTY TRANSACTIONS
Related party balances
2019 2018
$000 $000
------------------------------------------------- ------- -------
Amount due from shareholder of discontinued
operations 49 -
Amount due to H. Ghossein, a Director (285) (6)
Funding raised for internal trade finance
(see below) (7,290) (3,731)
Contingent acquisition liability due to Director
vendors re purchase of Woodbois International
ApS in 2017 (see note 27) (975) (1,269)
AT 31 DECEMBER (8,501) (5,000)
------------------------------------------------- ------- -------
As at 31 December 2019, the Group had raised $12.3 million
(2018: $3.8 million) into the ITF. The amount due to related
parties in respect of the ITF is as follows:
Name Relationship 2019 2018
$000 $000
1798 Volantis Fund Limited Shareholder (5,000) -
Richard Byworth Consultancy Shareholder - (417)
Paul Dolan Shareholder and Director (250) (250)
Jessica Camus-Demarche Former Director - (211)
Moghle Ltd (representing
Martin Collins, former Other key management
Director) personnel (296) (264)
Other key management
Adam Barker personnel - (1,000)
----------------------------- -------------------------- -------- --------
(5,546) (2,142)
-------------------------------------------------------- -------- --------
Interest expense during the year on the ITF was $1.2 million
(2018: $0.1 million).
The following Directors are paid salaries and fees through
service companies as follows:
Director Service Company name 2019 2018
$000 $000
Carnel Geddes Pomona Trust 183 150
Jacob Hansen Barsik Holding 17 233
Zahid Abbas Aka Holding 17 246
Management fees of $16k were paid during 2019 to Lombard Odier
Investment Managers in respect of Henry Turcan.
Trading transactions
During the year the Group companies entered into the following
transactions with related parties:
2019 2019 2018 2018
Transactions Transactions
in year Balance at 31 December in year Balance at 31 December
$000 $000 $000 $000
-------------------------------------- ------------------------ ------------------- ------------------------
Loans to subsidiary undertakings (4,356) 30,877 (7,209) 26,521
Amount owing to African Resource
Investment Limited (refer Note 22) - - (5,000) (5,000)
Contingent acquisition expense 956 - 860 -
--------------------------------------- ------------------------ ------- ---------- ------------------------
Transactions with key management personnel
The Group's key management personnel comprised the
following:
2019 Short-term employment benefits
Salaries, fees
& national Deferred
insurance acquisition Share based
contributions Benefits payments payments Total
$000 $000 $000 $000 $000
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
Directors
Kevin Milne 30 - - - 30
Paul Dolan 200 - - 33 233
Jacob Hansen 236 7 478 48 769
Hadi Ghossein 188 6 - 48 242
Zahid Abbas 234 8 478 48 768
Carnel Geddes 183 - - 21 204
Graeme Thomson 11 - - - 11
Henry Turcan 16 - - - 16
Miles Pelham 107 - - - 107
Jessica
Camus-Demarche 3 - - - 3
Other key management personnel
Graham Impey 23 - - - 23
Sophie Hunter 19 - - - 19
Sassine Bouchebel 94 19 - - 113
Martin Collins 36 - - - 36
Claus Wellov 64 4 - - 68
Ivan Muir 75 4 - - 79
Henning Visser 12 - - - 12
Tim Costin 76 - - - 76
Ulrica Marshall 18 - - 21 39
Ashkan Rahmati 91 - - 12 103
Ilene Hardy 91 - - - 91
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
1,807 48 956 231 3,042
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
2018 Short-term employment benefits
Salaries, fees
& national Deferred
insurance acquisition Share based
contributions Benefits payments payments Total
$000 $000 $000 $000 $000
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
Directors
Kevin Milne 30 - - - 30
Paul Dolan 200 - - 57 257
Jacob Hansen 246 7 430 103 786
Hadi Ghossein 215 - - 103 318
Zahid Abbas 233 9 430 103 775
Carnel Geddes 150 - - 40 190
Miles Pelham 200 - - 57 257
Martin Collins 173 - - 111 284
Jessica Camus 50 - - 40 90
Other key management personnel
Graham Impey 98 - - 9 107
Sophie Hunter 161 - - 15 176
Warren Deats 32 - - - 32
Sassine Bouchebel 99 20 - - 119
Patrick Greene 78 - - 9 87
Claus Wellov 72 - - - 72
Ivan Muir 136 - - - 136
Henning Visser 95 - - - 95
Tim Costin 178 - - - 178
Adam Barker 38 - - - 38
Tom Holroyd 50 - - - 50
Ben Salter 58 - - - 58
Ulrica Marshall 20 - - 40 60
Ashkan Rahmati 59 - - 25 84
Ilene Hardy 90 - - - 90
Maria Stoica 15 - - - 15
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
2,776 36 860 712 4,384
------------------ ---------------- ------------------------ ---------------- ----------------- ---------------
27. Events occurring after the reporting date
a. On 16 January 2020, the Group announced a number of cash flow
enhancement measures and additional funding:
1) Deferred Consideration re Acquisition of Woodbois in 2017
On 24 May 2017, the Company (previously known as Obtala Limited)
announced the acquisition of Woodbois International ApS (and
subsequently changed the Company name to Woodbois Limited). The
terms of the acquisition provided for deferred cash consideration
of US$5.0m, payable in equal quarterly payments over 5 years,
commencing 30 September 2017. The Company agreed with the vendors,
Zahid Abbas, Jacob Hansen and Hadi Ghossein or companies wholly
owned and controlled by them, each a Director of the Company, to
defer revised payments totalling $1.25m by a year, being the
quarterly payments for the period from 1 January 2020 to 31
December 2020, following which quarterly payments will resume on 31
March 2021.
2) Internal Trading Fund ("ITF")
The Company announced that 1798 Volantis Fund Limited
("Volantis"), a fund managed on a discretionary basis by Lombard
Odier Asset Management group ("Lombard"), agreed to provide up to
an additional US$1.0m through investment into the Group's ITF
("Additional Loan") by way of an additional conditional loan
agreement with Woodbois Trading Limited, a wholly owned subsidiary
of the Group. Of this loan, US$0.5m was received on 22 January
2020. Further drawings are by mutual agreement.
3) Convertible Bond interest
In connection with the Company's 4% convertible bonds 2024
("Bonds"), issued on 21 October 2019, Pelham Limited (a company
controlled by Miles Pelham) and Paul Dolan agreed to roll-up
interest payments due for the period from issue until 31 December
2020 on an aggregate $20.4m of Bonds. These agreements (the "Bond
Interest Agreements") are for $20.0m of Bonds held by Miles Pelham
and $0.40m of Bonds held by Paul Dolan. In the event such Bonds
remain unconverted as at 31 December 2020, the rolled-up interest
would result in the issue of approximately $0.98m of additional
Bonds at that time. See Note 17.
Furthermore, Africa Resource Investment Limited ("ARI") agreed
that, in respect of its existing $5.0m ITF loan, it would not
request any withdrawal prior to 31 December 2020.
Further to the above matters, each of 1798 Volantis Fund Limited
("Volantis"), a fund managed on a discretionary basis by Lombard
Odier Asset Management group ("Lombard"), and Paul Dolan, Chairman
and Chief Executive of the Company, agreed to receive Woodbois
ordinary shares ("Shares") in lieu of interest (at 11.5%) for the
period from 1 July 2019 to 31 December 2020 on their Internal
Trading Fund ("ITF") loans, in respect of $5.0m for Volantis (which
excludes the $1.0m Additional Loan mentioned above) and $295,520
for Paul Dolan. On 21 January 2020, 4,140,230 new Shares have been
issued to Volantis and 244,704 new Shares have been issued to Paul
Dolan. The Company now has 469,737,487 Shares in issue, each with
voting rights.
b. Recommencement of operations in Mozambique
On 19 March 2020, Woodbois Limited announced the signing of a
management agreement with Future Earth II LLC, a US Company with
substantial concessions in Mozambique, creating a relationship
under which Future Earth will fund, manage and operate Woodbois's
Mozambique concessions, employees and equipment, in order to
produce sawn lumber and veneers to be sold by Future Earth on a
profit share basis.
The Agreement is for 3 years, with optional breaks after 12 and
24 months at Future Earth's discretion. All costs during the term
of the Agreement will be funded by Future Earth with a 50:50
post-cost profit share from products sold from Woodbois'
concessions. Should Future Earth proceed with years 2 and 3 they
will pre-pay Woodbois $1 million each year, to be deducted from the
Woodbois share of profits for each respective year. Profits will be
distributed quarterly.
c. First Quarter Performance and COVID-19 Update
On 27 March 2020, the Company issued an update re the impact of
COVID-19 and included further information in its Quarterly Update
on 16 April 2020. The Government of Gabon had introduced a lockdown
on 13 April 2020 and operations there had been paused. There had
been limited impact on performance in the first quarter of 2020,
when revenues of $4.9 million had been up 10% over the prior period
in 2019. The Group noted that the rapid pace of developments in
connection with COVID-19 had caused a fundamental level of
uncertainty and it withdrew any guidance on its financial outcome
for 2020 until the implications for the business could be assessed
reliably. Resilience plans are being enacted.
28. ULTIMATE PARENT COMPANY
At 31 December 2019, the Directors do not believe that there was
an ultimate controlling party.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAELNAFXEEAA
(END) Dow Jones Newswires
April 30, 2020 02:00 ET (06:00 GMT)
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