30 September 2016
Obtala Limited
("Obtala", the "Group" or the "Company")
(AIM: OBT)
Interim Results for the six months to 30 June 2016
CHAIRMAN'S STATEMENT
I am pleased to present the interim report and consolidated financial statements for Obtala Limited (the "Company" or the "Group") for the half year ended 30 June 2016.
The Company continued to make progress in its transition to becoming a highly focussed African agriculture and forestry company through the half year ended 30 June 2016. We continued to develop the asset platform with improvements to production facilities and processes in both Tanzania and Mozambique. Development of, and access to both a local and global customer base has been thoroughly reviewed and analysed with encouraging results.
The focus for the agribusiness has been on our farms in the Morogoro district of Tanzania, which over the last three years have created an aspiring horticultural farming enterprise for fresh produce to supply domestic and international markets. This is complemented with an on-site processing facility, to produce a range of high-quality dried fruits, which are packaged and branded under our own "Mama Jo's" label. Having gained Global GAP and BRC certification in late 2015, attention has turned towards development of an export model, with our competitive advantage of close proximity to Middle Eastern markets being of particular focus.
Investment in the farms in Tanzania has not to date been rewarded by any substantial increase in output, including in the first half of 2016, although it must be noted that the traditionally rainy season of February to May is not expected to be one of high output. In April 2016 we welcomed a new, highly experienced farm manager, Graham Impey, who has spent the majority of his 28 year farming career in Zimbabwe and Angola. Graham has exhibited first class planning, communication and execution skills and we are confident that under his stewardship the farms will start to deliver significant returns on previous and future investment. As noted in my statement of June 30th 2016, the investment required to establish the necessary infrastructure for the agri business was executed without the need to secure external investment or dilute shareholders at the holding company level.
The focus for our forestry business remains the operations in Mozambique. We continue, as in previous years, to supply timber products for national infrastructure upgrade programmes and for the domestic market. We also continue to develop export market opportunities for our timber.
We are aiming to capitalise on the market dynamic of increasing global demand for high quality timber products, whilst supply is becoming more constrained as sustainable harvesting practices cannot meet either current or predicted demand. We now have over 312,000 hectares of forestry concessions all with required management plans either agreed on or in advanced stages of being agreed upon with Mozambican government and local authorities. Our international "cut to order" pipeline continues to grow, with initial orders received from South Africa, Asia and the Middle East. These orders suggest healthy margins, and we are confident that the international market that has been opened via our Joint Venture with Basic Materials of Hong Kong will lead to a significant acceleration in the growth of our forestry business. Global appetite for high quality and high value timber products is buoyant and we are well positioned through our access to significant, environmentally sustainable supplies of desirable timber species.
Our conviction remains that the equity market has not recognised the value of the Company's assets, which is true of many companies, particularly on the AIM market. We believe that the Company's strong focus on the two synergistic business platforms of agriculture and forestry will deliver strong growth, high margins and significantly increased, long-term, shareholder value. The businesses we are building are based on long-term investment programmes which, as we move from development to execution phase, will provide a platform to deliver profitability and growth, generating revenues with a focus on strong margins. Over the reporting period to 30th June 2016 we have continued to make capital investment into operations within Mozambique.
Financial results
The Group generated revenues of £264,000 ($382,000) (June 2015: £2.26m/$3.6m) during the six-month period, across the Group.
The six-month period generated a loss of £2.63m ($3.8m) (June 2015: profit £3.0m/$4.7m, which included the independent valuation of forestry assets).
Group net assets increased by £1.62m ($2.35m) from December 2015 Year end at £83.2m ($120.7m) with a net cash and equivalent position of £547,000 ($793,000) (December 2015 £660,000/$1.02m) including non-controlling interests of £18.5m (December 2015 £18.9m).
With the natural tendency to earn more after the rainy season and an increase of activity in our forestry and agricultural divisions, we anticipate revenues will increase significantly for the remainder of 2016.
Directorate changes
I joined the Board as a Non-Executive Director in August 2015, becoming Chairman in April this year in place of Francesco Scolaro who relinquished that role but remains on the Board as a Non-Executive Director. In July 2016, Paul Dolan was appointed to the board as Chief Executive Officer and Kevin Milne who joined in August 2015 as Deputy Chairman stepped down to the role of Non-Executive Director. In June we announced our intention to appoint Warren Deats as Chief Operating Officer and Warren took up this role effective 1st August 2016. Emma Priestley, who was appointed to the Board in March 2015 relinquished her position in April this year due to other commitments. Simon Rollason, Philippe Cohen and Jean du Lac remain on the board in their roles as Managing Director, Finance Director and Non-Executive Director respectively.
Corporate social responsibility
The Group's approach to the continued development of its business units directly and indirectly generate a wide range of benefits to the host community and host country as a whole. In addition to the community participation benefits, development of the project areas provides a number of core benefits such as employment generation, training and skills transference, infrastructure improvement, support for localised industries and improved food security. The Group is also committed, where possible, to provide educational and vocational training facilities and programmes in the communities in which we operate.
We are proud of our listing on the Social Stock Exchange in London, to which we were accepted after a rigorous application process that included an independent assessment of our social impact activities and commitment, and an independent admissions panel hearing. This gives the Company a high profile within the social impact investment community as well as being a great endorsement of our business practices and commitment to working with local communities. As our businesses expand, we expect the reach of our social impact programmes to grow in tandem to the benefit of our employees and their communities.
Outlook
As a long term shareholder in your company, I have a keen appreciation of the deep value embedded within its asset base. I became non-executive Chairman midway through this period with an open mind regarding the correct strategy to begin to release this value. A thorough review of all operations beneath the Obtala umbrella was initiated immediately upon my appointment in April 2016, with detailed analysis conducted within every business line. H2 will see the execution of decisions made as a result of this substantial body of work. There is no question however that there will be relentless focus on delivering sustainable, profitable production from the valuable assets within our core businesses.
In the three months since I signed off my last Chairman's statement the pace of change within the company has been frenetic and I look forward to updating you with a quarterly progress report and outlook for the remainder of 2016 shortly.
It only remains for me to thank the board of directors and all of our employees for their dedication and diligence during this transitional period.
Miles Pelham
Chairman
Obtala Limited Miles Pelham - Chairman
Paul Dolan - CEO www.obtala.com |
+44 (0)20 7099 1940 |
ZAI Corporate Finance Limited (Nomad) Peter Trevelyan-Clark/John Treacy/Jamie Spotswood |
+44 (0)20 7060 2220 |
Brandon Hill Capital (Broker) Jonathan Evans |
+44 (0)20 3463 5000 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The interim financial statements of Obtala Limited are unaudited condensed consolidated financial statements for the six months to 30 June 2016. These include unaudited comparatives for the six-month period to 30 June 2015 together with audited comparatives for the year to 31 December 2015.
2. SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared under the historical cost convention except for the revaluation of certain financial investments, available for sale investments and financial assets and liabilities which are included at fair value.
The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the period ended 31 December 2015.
The financial information contained in this announcement does not constitute statutory accounts as defined under section 244 of the Companies (Guernsey) Law 2008. The auditors have reported on the 2015 financial statements which have been delivered to the Guernsey Registrar of Companies; their report was unqualified but did contain an emphasis of matter paragraph on the fair value of biological assets and in respect of going concern. It contained no statement under sections 263(2) or 263(3) of the Companies (Guernsey) Law 2008.
3. GAINs/(Loss) ON INVESTMENTS
|
Six months to 30 June 2016 |
Six months to 30 June 2015 |
Year to 31 December 2015 |
|
|
|
£000 |
£000 |
£000 |
|
Gain/(loss) on disposal of investments |
- |
(1,601) |
(1,083) |
|
(Decrease)/increase in fair value of financial investments |
- |
- |
- |
|
Gain/(loss) from investing activities |
- |
(1,601) |
(1,083) |
|
4. SEGMENTAL REPORTING
The Group is currently in agriculture and forestry as well as retail. In addition, the Group undertakes investing activities, which are based in Guernsey. These are the Group's primary reporting segments.
5. TAXATION
The accrued tax charge for the six-month interim period is based on an estimated worldwide average effective tax rate of nil per cent, after allowance for utilisation of tax losses brought forward in UK based subsidiaries (six months to 31 June 2015: nil%)
The Group has recognised a deferred tax liability of £38,722,000 at 30 June 2016 (30 June 2015: £35,978,000, 31 December 2015: £37,830,000) which arose on the difference between the book value and the fair value of assets acquired on the acquisition of a subsidiary and the revaluation of a biological asset.
6. EARNINGS PER SHARE
Basic earnings per share is based on the loss for the six months of £2,196,000 attributable to equity holders of the parent divided by the number of ordinary shares in issue during the period of 263,260,664 exclusive of ordinary shares purchased by the Obtala Resources Employee Share Trust and held jointly by the Trust and certain employees. No shares were issued during the period