Agriterra lay out interim results

As mentioned above, during the period under review the beef division further distinguished itself as being a primary revenue contributor within the Group, as confirmed by a 28% increase in revenues to US$2,657,000 against the comparative period (6 months ended 30 November 2013 (‘H1-2014’): US$2,068,000). This notable improvement in revenue serves as a “proof of concept” and reflects the increasing volumes moved through our retail units, which represent the final link in Agriterra’s beef value chain, from field to fork. This is a pivotal aspect to our beef business model, and in line with this we are actively pursuing new opportunities to increase our sales presence and market penetration by building on our current portfolio of retail units (which includes full butcheries in the towns of Chimoio, Beira and Tete, together with two satellite units in Manica and Moatize).

We have identified Northern Mozambique as an important area for expansion, through a combination of the presence of major population centres in the area and the increasing activities of international resource development companies. To service this growing market, we are in the process of establishing a butchery and distribution centre in Nampula, Mozambique’s third largest city and capital of the northern province of Nampula. We have leased a suitable site for this operation which is currently being refurbished (a process which has unfortunately been delayed due to flooding and the consequent damage caused to the bridge at Mocuba over the river Licungo, which is hampering deliveries to site). We expect to be in a position to open this new site during Q2 2015 and we will provide updates to the market regarding this in due course. We are also looking at retail possibilities in Nacala and Pemba, both of which are thriving towns in the North, benefitting from significant inward investment into the region.

Overall, we feel that the beef division has now established a solid and demonstrable base from which to expand significantly both in terms of wholesale and retail sales, as well as by exploring the significant potential in the export market.

Elsewhere across our portfolio, our Sierra Leonean cocoa division remains an important component of the Group’s NAV. In line with the Group’s strategy to develop its 3,200 hectare landholding in the south-east of Sierra Leone, 40km from the town of Kenema, we have established many aspects of the critical infrastructure (including roads, offices and a state-of-the-art irrigated nursery) which will be required to support an operation which has the potential to become one of West Africa’s largest cocoa plantations. The intended acceleration of development at the plantation has however been curtailed at present as a precautionary measure to protect staff in response to the outbreak of Ebola in the country. During this time of reduced activity, our assets in the country are being rigorously maintained and we are also leasing our fleet of vehicles and some of our warehousing infrastructure to international aid companies. Importantly, this provides the Company with an opportunity to proactively participate in the relief effort, maintain a presence in the country during this challenging time in Sierra Leone’s history and provides a revenue stream to the Group which currently offsets the full cash costs of the cocoa division.

Finally, I turn to our third division, the Group’s maize purchasing and processing business in Mozambique. As highlighted in my statement to shareholders in October 2014, maize meal sales were impacted by the political instability during 2014, as well as a particularly plentiful harvest; this has reduced revenues to US$2,043,000 (H1-2014: US$4,669,000 ). The Board is monitoring the performance of this division to gauge opportunities to improve efficiencies, revenues and margins and will report further on this assessment in due course.

Financial results:

The Group’s profit for the period was US$0.94 million (H1-2014: loss of US$2.26 million). The result reflects the final settlement of claims arising from the Group’s legacy oil interests in South Sudan amounting to income of US$5.66 million (H1-2014: US$nil), which is reported within discontinued operations along with the results of the Group’s discontinued cocoa trading operations.

The Group’s operating loss for the period was US$4.03 million (H1-2014: loss of US$2.31 million), the increase reflecting in the main the decrease in contribution arising from the maize division (loss of US$0.96 million compared to a profit of US$0.07 million in H1-2014) arising from lower sales volumes, and the increase in operating loss for the cocoa division from US$0.09 million to US$0.46 million principally reflecting the temporary cessation of capitalisation of expenditure incurred in respect of the cocoa plantation while the activities on site remain curtailed as a result of the Ebola crisis.

The beef division delivered a significant 28% increase in revenues from US$2.07 million in H1-2014 to US$2.66 million, a very encouraging rate of increase which underpins the Board’s belief in the significant future potential of this division.

In terms of the Group’s balance sheet, net assets are reported at US$50.2 million (being US$0.047 per share), which is a significant premium to our market capitalisation of approximately US$11.1 million (being US$0.010 per share).