Obtala Resources Limited Final Results (5814R)

TIDMOBT

RNS Number : 5814R

Obtala Resources Limited

30 June 2015

30(th) June 2015

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Final Results

Obtala Resources Limited (AIM:OBT), the African focused, vertically integrated agribusiness, timber and retail company, announces the publication of the audits final results for the year ended 31(st) December 2014.

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

Highlights:

Financial

   --     Sales revenues increase by 271% to $2.63m/GBP1.69m (2013:$705,000/GBP455,000) 

-- Gross margin on sales averaging 49.4% totaling sales of $1.29m/GBP835,000 (2013: $470,000/GBP304,000)

   --     Net Assets $144.7m/GBP93.3m (2013: $189.7m/$122.4m) 
   --     Cash position $5.06m/GBP3.27m (2013: $3.31m/GBP2.1m) 

-- Net (loss)/profit of $(21.6)m /GBP(13.9)m (2013: +$62.7m/+$40.4m). Paper loss incurred from the disposal of the Paragon holding)

Operational highlights:

Agribusiness

   --     Export Processing Zone award to Tanzania farm 

-- GLOBALG.A.P and BRC site audits completed with certification award expected within next 3 months

   --     Secured additional 204 hectares on a neighbouring plot for increase security of supply 
   --     Establishing Fruit tree orchard for sustainable supply of raw material 

Timber

-- Independent report valued the timber concessions on an NPV 10-year cash flow basis at US$161m using a 12% discount rate.

   --     Increased portfolio by 35,000 hectares, which now stands at 314,965 hectares 

-- Timber plan: reorganise and divest the forestry division, assess the viability of a stock allocation in part via a dividend in-Specie to existing Obtala shareholders

Retail

   --     New business acquisition for improved route to market 

-- Opened a new branch for a total of 6 branches, and opening additional outlets planned in H2 2015

-- Focus on improving margins and sales: implementing improved management controls, stock control and ordering, improved buying power and identified new products and suppliers.

   --     Investment to date $500,000 for the reduction of creditors and liabilities on acquisition 

"2014 was a year of steady growth for the Group as we continued to strengthen all business sectors and initiated the African Home Stores concept with the acquisition of retail stores in Lesotho. The benefits of this groundwork and further investment will be realised through 2015 and beyond. To date, we have created a diversified African focused business which remains debt free, multi-country and multi-industry with a tangible platform for sustainable growth. Country risk is offset by operating in three nations where macro trends remain highly favourable.

The valuation of the timber assets not only underpins the potential of the business but also demonstrates a great opportunity to expand our revenue potential with increased sales expected in Mozambique. The strategy in 2015 is to reorganise and divest the forestry division to recognise its true value and to grow the business in Mozambique more expeditiously. This will benefit Obtala shareholders directly as we assess the viability of a stock allocation via a dividend in-Specie in part to existing Obtala shareholders. We will continue to look at new opportunities while we consolidate and grow the current business. With the required food and safety certification and working with our strategic partner we expect that the agribusiness will grow significantly. The land available to us on the agribusiness and timber operation will provide security of supply as new products are developed and sold into the market.

We continue to review and manage costs within the growing businesses to ensure optimised margins are achieved; furthering our international relationships by planning synergies for the individual businesses for future growth. The board continues to manage Obtala in a diligent and controlled manner seeking partners to continue the growth at the rate that the Board has commenced.

I am confident 2015 will prove equally as exciting and look forward to reporting on the further development of our agri-processing, farming and timber operations.

Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year and look forward to a successful and eventful 2015."

 
 Obtala Resources 
  Francesco Scolaro - Chairman 
  Simon Rollason - Managing 
  Director 
 
  www.obtalaresources.com         [phone] 
 
 ZAI Corporate Finance Limited 
  (Nomad)                         [phone] 
 Ray Zimmerman 
  Richard Morrison 
 
 Brandon Hill Capital (Broker)    [phone] 
 Jonathan Evans 
 
 Square 1 Consulting (Public 
  Relations)                      [phone] 
 David Bick 
  Mark Longson 
 

Chairman's Statement

I am pleased to present the annual report and consolidated financial statements for Obtala Resources Limited (the "Company" or the "Group") for the year ended 31 December 2014.

The Company continues to progress in its transition to a diversified African Company through the year ended 31 December 2014. The business development continues to advance, resulting in a platform from which significant growth will be established.

The focus for the agribusiness has been the Tanzanian operations, which over the last two years has created an aspiring horticultural farming enterprise for fresh produce. This is complemented with a processing facility at site, to produce a range of high quality dried fruits which are packaged and branded under our own label, "Mama Jo's". The process of gaining international food safety standards and certification on both the farm and the processing facility is well advanced.

In Mozambique, timber operations continue to supply products for national infrastructure upgrade programmes. Going forwards we will explore and develop other processed timber products for the local market, which is experiencing strong GDP growth. In June 2014 an independent report valued the timber concessions on an NPV 10-year cash flow basis at US$161m using a 12% discount rate.

In late 2014 we acquired a chain of retail outlets in Lesotho. This will provide an additional route to market for our products and presents an ideal opportunity to roll-out an African Home Stores concept in other countries in the Southern and East African region where Obtala has expertise.

Overall the equity market has not recognised the value of the Company's assets, which is true of many diversified companies. However, the business we are building is based on long--term investment programmes particularly whilst advancing the development phase, which will provide a platform to deliver future profitability and growth, generating revenues with the focus on strong margins. Over the reporting period we have made substantial capital investments into the projects using our own funds without any dilution to shareholders.

Montara Continental Ltd

During 2014, the Group continued to expand and grow its agribusiness and timber operations with the objective of being revenue generating, profitable and sustainable. We believe these sectors located in regions experiencing positive economic growth to be highly attractive investments for the future. There is a strong local market for our products in each of the countries they are situated, as well as export opportunities. The business model we have developed creates control of the value chain, positioning the Company to produce value-added products which are marketed under our Mama Jo's label and to complete the concept of being a vertically integrated "Farm to Fork" producer the Group acquired a chain of retail outlets in Lesotho, which facilitates new routes to market.

Agriculture and Processing

The focus in 2014 has been the on-going development of the Morogoro fruit and vegetable farm and processing facility in Tanzania. The key criteria for any food producer is to achieve certain levels of international food and safety accreditation and certification which we are in the process of attaining. The findings from a recently conducted audit by the certifying body suggests that this process will be completed within the next three months. However we will be able to re-commence production of dried products ready for export sales. Importantly GLOBALG.A.P and BRC recognition will open up greater access to new markets, both locally and internationally. To increase the product range and overcome the risks associated with mono-cropping we have successfully trialled a range of dried fruit products which we are marketing in small, re-sealable Mama Jo's branded bags suitable for the retail and hospitality industry. While the factory undergoes accreditation we have begun to create a fresh fruit and vegetable business supplying consumers in Dar es Salaam and neighbouring towns.

In 2014 we were awarded an Export Processing Zone ("EPZ") Certificate from the Government of Tanzania. The EPZ provides a range of fiscal incentives and allows duty free imports of capital goods for facilitating future growth plans which will ultimately improve margins. The recent appointment of a strategic partner and consultant to the agribusiness is significant, bringing a wealth of experience and expertise from the food industry to the project which will open up a range of new market and product development opportunities.

Forestry

The timber business made steady progress building up the portfolio which now stands at 314,965 hectares. Mozambique's economy remains one of the most dynamic on the African continent with a 7% rate of real gross domestic product (GDP) growth, which is predicted to continue. The outlook looks positive with a number of contracts and orders in place and the Group believes that this is the right location and time to start increasing the production capacity.

In June 2014 an independent valuation report on the Mozambican timber concessions was undertaken. The valuation is based on a 10 year cash flow with a capital expenditure requirement of $15m over the period, which after year one is projected to be self-funding out of profits. This valuation underpins the confidence we have in our timber business and we will now look to focus on realising the potential value outlined in the recent report.

Retail

In late 2014 we developed a concept to enter the retail market under the African Home Stores banner with the intention to open another route to market for our products. The Company acquired a 72.69% controlling interest in Lifes' Comfort Solutions (Pty) Limited ("LCS"), a private Lesotho registered company, which operated five departmental home solution retail outlets within Lesotho. We have since opened an additional branch with 3 more potential sites being evaluated. This will create a national footprint and a company with strong brand recognition for being "Proudly Basotho" and providing high quality goods and support services. Since assuming control over the business we have implemented a number of measures to improve management control, stock control and ordering, improved buying power and identified new products and suppliers, which together with an implementation plan to improve margins through improved cost efficiencies should make this an attractive business. We have invested $500,000 for the reduction of creditors and liabilities on acquisition.

Paragon Diamonds

In 2014 we took the decision to divest our mining interest in Paragon Diamonds Limited ("Paragon") so that we could concentrate our efforts on building the emerging agribusiness and timber operations. In August 2014 the Group signed an agreement with Titanium Capital Investments Limited ("Titanium") for the sale of the outstanding loan note ("Loan Note") held with Paragon at a 50% discount to realize GBP998,000. It was further agreed that we would grant Titanium a call option for 60 million shares held in Paragon by the Company for a considerations of GBP1,950,000.

Mineral exploration in Tanzania

The group continues to hold several mineral licences in Tanzania carried at a value of GBP16.1 million. Minimal work has been undertaken on these licences during the year as the Group has been focused on its agribusiness and timber operation. We will continue the refocusing of the Group in 2015 by seeking to identify potential corporate deals in order extract the underlying value of these licences without actively pursuing significant exploration work ourselves. This may take the form of joint ventures, disposals or other corporate restructuring.

Financial results

The Group remained development focused in the year ended 31 December 2014 and generated GBP1.69 million of sales (2013: GBP0.45 million of sales). The loss after tax for the year amounted to GBP13.9 million (2013: profit GBP40.4 million) including revaluation of Forestry assets at GBPnil (2013: GBP107,379 million).

The paper loss incurred from the disposal of the Paragon holding, GBP20,987 million as reflected in the income statement, is a direct reflection of the Groups' strategic plan to divest its mining interests to provide a clear focus on the developing agri-business and timber operations.

The Group has a strong balance sheet with net equity attributable to shareholders of Obtala at 31 December 2014 amounting to GBP93.3 million (2013: GBP122.4 million). Total assets amounted to GBP131.9 million (2013: GBP170.2 million). Intangible exploration assets are carried at GBP16.1 million (2013: GBP55.9 million).

Directorate changes

There were no changes to the board during the reporting period. Subsequent to the year end, Messrs Grahame Vetch and Tim Walker have both stepped down from the Board to assume operational management roles and Ms Emma Priestley was appointed to the board.

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, infrastructure improvement, support for localised industries and food security. The Group is also committed, where possible, to employment generation and utilising the human resources of the host community.

In June 2014 the Group announced a partnership with Sentebale, a children's charity founded in 2006 by HRH Prince Harry and Prince Seeiso of Lesotho. Sentebale, which means 'Forget me not' in Sesotho, works in partnership with local grassroots organisations and government ministers to provide healthcare and education to some of the most vulnerable children in the world - the victims of extreme poverty and Lesotho's HIV/AIDS epidemic. In Mozambique the Group has completed the construction of a school in the Zambezia Province, close to our operational centre. The school will accommodate up to 250 children from neighbouring villages and has two classrooms and one administration office. We have also provided desks, chairs and blackboards for the children.

Outlook

2014 was a year of steady growth for the Group as we continued to strengthen all business sectors and initiated the African Home Stores concept with the acquisition of retail stores in Lesotho. The benefits of this groundwork and further investment will be realised through 2015 and beyond. To date, we have created a diversified African focused business which remains debt free, multi-country and multi-industry with a tangible platform for sustainable growth. Country risk is offset by operating in three nations where macro trends remain highly favourable.

The valuation of the timber assets not only underpins the potential of the business but also demonstrates a great opportunity to expand our revenue potential with increased sales expected in Mozambique. The strategy in 2015 is to reorganise and divest the forestry division to recognise its true value and to grow the business in Mozambique more expeditiously. This will benefit Obtala shareholders directly as we assess the viability of a stock allocation via a dividend in-Specie in part to existing Obtala shareholders. We will continue to look at new opportunities while we consolidate and grow the current business. With the required food and safety certification and working with our strategic partner we expect that the agribusiness will grow significantly. The land available to us on the agribusiness and timber operation will provide security of supply as new products are developed and sold into the market.

We continue to review and manage costs within the growing businesses to ensure optimised margins are achieved; furthering our international relationships by planning synergies for the individual businesses for future growth. The board continues to manage Obtala in a diligent and controlled manner seeking partners to continue the growth at the rate that the Board has commenced.

I am confident 2015 will prove equally as exciting and look forward to reporting on the further development of our agri-processing, farming and timber operations.

Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year and look forward to a successful and eventful 2015.

Francesco Scolaro

Executive Chairman

30 June 2015

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

 
 
                                           2014       2013 
Continuing operations                    GBP000     GBP000 
TURNOVER                                  1,690        455 
Cost of sales                             (855)      (155) 
-------------------------------------  --------  --------- 
Gross Profit                                835        304 
-------------------------------------  --------  --------- 
Loss on derivative financial 
 instruments                              (736)    (3,125) 
Operating costs                         (1,191)    (1,323) 
Administrative expenses                 (2,616)    (2,608) 
Depreciation                              (294)      (615) 
Share based payments                          -      (751) 
Impairment of assets                          -    (2,323) 
-------------------------------------  --------  --------- 
OPERATING LOSS                          (4,002)   (10,441) 
Share of losses of associate                  -      (570) 
Loss on disposal of associate                 -   (21,170) 
Gain on fair value of investment            749          - 
Fair value adjustment of biological 
 asset                                        -    107,379 
Loss on disposal of subsidiary         (20,987)          - 
Finance income                              109          - 
Finance costs                                        (389) 
-------------------------------------  --------  --------- 
(Loss)/PROFIT BEFORE TAXATION          (24,131)     74,809 
-------------------------------------  --------  --------- 
Taxation                                 10,198   (34,361) 
-------------------------------------  --------  --------- 
(LOSS)/PROFIT FOR THE YEAR             (13,933)     40,448 
-------------------------------------  --------  --------- 
 
 
ATTRIBUTABLE TO: 
Owners of the parent                   (13,392)     22,975 
Non-controlling interests                 (541)     17,473 
-------------------------------------  --------  --------- 
                                       (13,933)     40,448 
 ------------------------------------  --------  --------- 
Items that may be subsequently 
 released to profit or loss: 
Exchange differences on translation 
 of 
 foreign operations                       (752)    (2,001) 
-------------------------------------  --------  --------- 
TOTAL COMPREHENSIVE INCOME 
 FOR THE YEAR                          (14,685)     38,447 
-------------------------------------  --------  --------- 
ATTRIBUTABLE TO: 
Owners of the parent                   (14,144)     21,487 
Non-controlling interests                 (541)     16,960 
-------------------------------------  --------  --------- 
                                       (14,685)     38,447 
 ------------------------------------  --------  --------- 
 
 
EARNINGS PER SHARE 
------------------------------------   --------  --------- 
From operations attributable 
 to the owners of the parent 
Basic and diluted (pence)                (5.09)       9.44 
-------------------------------------  --------  --------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                                                    Attributable to the owners 
                                                                 of the parent 
                                                              Share 
                                                 Foreign      based 
                    Share     Share    Merger   exchange    payment    Revenue              Non-controlling      Total 
                  capital   premium   reserve    reserve    reserve    reserve      Total         interests     equity 
                   GBP000    GBP000    GBP000     GBP000     GBP000     GBP000     GBP000            GBP000     GBP000 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 At 1 JANUARY 
  2013              2,501    10,441    28,543      3,867        969     15,593     61,914            17,546     79,460 
 Profit for 
  the year              -         -         -          -          -     22,975     22,975            17,473     40,448 
 Other 
 comprehensive 
 income: 
 Exchange 
  differences 
  on 
  translation 
  of foreign 
  operations            -         -         -    (1,488)          -          -    (1,488)             (513)     (2001) 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Total 
  comprehensive 
  income for 
  the year              -         -         -    (1,488)          -     22,975     21,487            16,960     38,447 
 Issue of 
  shares              132     1,087         -          -          -          -      1,219                 -      1,219 
 Share based 
  payment               -         -         -          -        929          -        929                 -        929 
 Purchase of 
  own shares            -         -         -          -          -      (881)      (881)                 -      (881) 
 Dilution of 
  interest in 
  subsidiary            -         -         -          -          -    (3,709)    (3,709)             6,930      3,221 
 Impairment 
  of foreign 
  exchange              -         -         -    (1,940)          -      1,940          -                 -          - 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 At 31 December 
  2013              2,633    11,528    28,543        439      1,898     35,918     80,959            41,436    122,395 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Loss for the 
  year                  -         -         -          -          -   (13,392)   (13,392)             (541)   (13,933) 
 Other 
 comprehensive 
 income: 
 Exchange 
  differences 
  on 
  translation 
  of foreign 
  operations            -         -         -      (752)          -          -      (752)                 -      (752) 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 Total 
  comprehensive 
  income for 
  the year              -         -         -      (752)          -   (13,392)   (14,144)             (541)   (14,685) 
 Transactions 
  with owners: 
 Share based 
  payment and 
  warrants              -         -         -          -      (220)          -      (220)                 -      (220) 
 Disposal of 
  interest in 
  subsidiary            -         -         -      1,828      (664)      8,546      9,710          (23,858)   (14,148) 
 At 31 December 
  2014              2,633    11,528    28,543      1,515      1,014     31,072     76,305            17,037     93,342 
---------------  --------  --------  --------  ---------  ---------  ---------  ---------  ----------------  --------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
                                        2014      2013 
                                      GBP000    GBP000 
---------------------------------   --------  -------- 
ASSETS 
Non-current assets 
Investments in associates                  -         - 
Available for sale investments            90       261 
Intangible exploration and 
 evaluation assets                    16,080    55,891 
Biological asset                     103,832   107,379 
Derivative financial instrument            -       607 
Property, plant and equipment          2,555     2,906 
----------------------------------  --------  -------- 
Total non-current assets             122,557   167,044 
 
Current assets 
Trade and other receivables              830       193 
Inventory                              1,351        77 
Short term investments                 3,938         - 
Derivative financial instrument            -       751 
Cash and cash equivalents              3,269     2,138 
----------------------------------  --------  -------- 
Total current assets                   9,388     3,159 
----------------------------------  --------  -------- 
TOTAL ASSETS                         131,945   170,203 
----------------------------------  --------  -------- 
 
LIABILITIES 
Current liabilities 
Trade and other payables             (2,260)   (1,186) 
Financial investment liabilities     (2,960)   (2,578) 
Current tax liabilities                  (2)       (2) 
TOTAL CURRENT LIABILITIES            (5,222)   (3,766) 
 
NON-CURRENT LIABILITIES 
Site restoration provision                 -     (118) 
Borrowings                             (155)     (614) 
Deferred tax                        (33,226)  (43,310) 
----------------------------------  --------  -------- 
Total non-current liabilities       (33,381)  (44,042) 
TOTAL LIABILITIES                   (38,603)  (47,808) 
----------------------------------  --------  -------- 
 
NET ASSETS                            93,342   122,395 
----------------------------------  --------  -------- 
 
EQUITY 
Share capital                          2,633     2,633 
Share premium                         11,528    11,528 
Merger reserve                        28,543    28,543 
Foreign exchange reserve               1,515       439 
Share based payment reserve            1,014     1,898 
Retained earnings                     31,072    35,918 
----------------------------------  --------  -------- 
Equity attributable to the 
 owners of the parent                 76,305    80,959 
Non-controlling interests             17,037    41,436 
TOTAL EQUITY                          93,342   122,395 
----------------------------------  --------  -------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

 
 
                                                           2014       2013 
                                                         GBP000     GBP000 
-----------------------------------------------------  --------  --------- 
 
(Loss)/Profit before taxation                          (24,131)     74,809 
Adjustment for: 
Depreciation of property, plant and equipment               294        615 
Fair value adjustment of biological asset                     -  (107,379) 
Loss on disposal of associate                                 -     21,170 
Foreign exchange losses/(gains)                           2,538      (294) 
Share based payments                                          -        751 
Losses on investments                                       736      3,125 
Impairment of assets                                          -      2,323 
Finance costs                                             (109)        389 
Loss on disposal of subsidiary                           20,987          - 
Share of losses of associate                                  -        570 
Gain on fair value of investments                         (578)          - 
(Increase)/decrease in trade and other receivables        (637)        284 
Increase in trade and other payables                        615        796 
Increase in inventory                                   (1,274)       (22) 
CASH OUTFLOW FROM OPERATIONS                            (1,559)    (2,863) 
Income taxes received                                         -        155 
-----------------------------------------------------  --------  --------- 
Net cash OUTFLOW from CONTINUING operations             (1,559)    (2,708) 
-----------------------------------------------------  --------  --------- 
 
INVESTING ACTIVITIES 
Expenditure on property, plant and equipment              (311)    (1,139) 
Expenditure on intangible exploration and evaluation 
 assets                                                       -      (972) 
Proceeds from disposal of financial investment 
 assets                                                       -      2,754 
Net cash (OUTFLOW)/INFLOW from investing activities       (311)        643 
-----------------------------------------------------  --------  --------- 
 
FINANCING ACTIVITIES 
Proceeds from issue of share capital                          -      1,215 
Proceeds from sale of subsidiary                          1,248          - 
Funds raised by subsidiary                                    -      1,371 
Expenses of issue of subsidiary shares                        -       (66) 
Finance costs                                                 -      (211) 
Net cash inflow from financing activities                 1,248      2,209 
-----------------------------------------------------  --------  --------- 
 
INCREASE IN CASH AND CASH EQUIVALENTS                     1,131        144 
Cash and cash equivalents at beginning of year            2,138      1,994 
Effect of foreign exchange rate variation                     -          - 
-----------------------------------------------------  --------  --------- 
CASH AND CASH EQUIVALENTS AT end of YEAR                  3,269      2,138 
-----------------------------------------------------  --------  --------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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