TIDMAAAP
The information contained within this announcement is deemed to constitute
inside information pursuant to the EU (Withdrawal) Act and amended pursuant to
Market Abuse (Amended) (EU Exit) Regulations 2019. Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.
23 March 2021
Anglo African Agriculture plc
("AAAP" or the "Company")
DIRECTORS' REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 OCTOBER 2020
Company Registration No. 07913053 (England and Wales)
Overview
As mentioned in the prior year the 100% subsidiary, Dynamic Intertrade, on its
own cannot sustain a Plc listing. In order to diversify its revenue stream, 30
months ago in 2018, AAA announced a $1 million loan to Comarco Group and the
subsequent intended acquisition of Comarco Group by means of a Reverse Takeover
("RTO"). Since then, a large amount of work has been expended to finalise the
acquisition. Unfortunately, the breakout of COVID-19 during 2020 and issues
resulting from the UK General Election and Brexit as well as institutional
capital flight from the small cap market during 2020 has delayed the RTO. Over
the last year we managed to secure a letter of intent for both an equity
placement of $4.5m in AAA and a loan facility of $41m for the Company and the
Comarco Group. These are subject to the usual due diligence and compliance
checks that are currently ongoing.
The transaction long stop date was initially 31 December 2019. This has now
been extended to 30 April 2021. This demonstrates the commitment from both
sides to work together to consummate this transaction. The world class
Liquefied Natural Gas project in Mozambique has at long last been initiated and
the project has a strong necessity for barges and landing craft. There has been
a small interruption in the project mobilization due to insurgent activity in
the area and the COVID-19 pandemic, however the project has had final approvals
and it is expected to commence on a large scale with both on-shore and
off-shore construction commencing during 2021. This is expected to provide a
substantial boost to the marine logistics revenue of the Comarco Group for the
coming 10 years.
AAA's primary operations and source of revenue remains Dynamic Intertrade, our
Cape Town based spice trader. DI's operation have been affected by COVID-19.
Although sales in local currency were marginally higher, the depreciation of
the ZAR to the GBP has impacted negatively the reported sales. In addition, the
product mix changed and price increases could not be passed on to the company's
customers, which had a material impact by a reduction in gross margin. Group
turnover for the year reduced by 2.5% in Pound Sterling (improved by 11.3% in
local currency). Group operating losses increased to £1,079,505 for the current
year from £271,467 in 2019. Included in the current year's group operating
losses is the impairment of the investment in subsidiary amounting to £226,644,
being a once off write off. Excluding the impairment, normal operating losses
for the year were £852,861 (2019: - £271,467).
The effects of COVID-19 on the Group's current and future operations will be
dealt with separately in Note 34.
David Lenigas
Non-Executive Chairman
Directors and Advisors
Directors:
David Lenigas
Robert Scott
Andrew Monk
Matthew Bonner
Secretary:
Stephen Clow
Company Number:
07913053
Registered Address:
New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Head Office:
New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Financial Advisor and Broker:
VSA Capital Limited
New Liverpool House
15-17 Eldon Street
London
EC2M 7LD
Auditors
Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
Solicitors to the Company
Keystone Law
48 Chancery Lane
London
WC2A 1JF
Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
West Midlands
B63 3DA
Overview
The primary objective of the strategic report is to provide information for the
shareholders and help them to assess how the directors have performed their
duty, under section 172 of the Act, to promote the success of the company and
to provide context for the related financial statements as well as assist them
in their decision making.
The duty of a director, as set out in section 172 of the Act, is to act in the
way he considers, in good faith, would be most likely to promote the success of
the company for the benefit of its members, and in doing so have regard
(amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with suppliers,
customers and others;
(d) the impact of the company's operations on the community and the
environment;
(e) the desirability of the company maintaining a reputation for high standards
of business conduct; and
(f) the need to act fairly as between members of the company.
As a Board, we must always seek and be open to feedback from anyone affected by
our activities. This enables the Board to understand the impact of its
decisions on key stakeholders, but also ensures that we are aware of any
significant changes in the market or the external environment, including the
identification of emerging risks, which can be fed into our strategy
discussions and our risk management process. The Board considers our strategic
stakeholders as follows:
Customers
We listened to our customers and endeavoured to supply them with relevant
product - this was particularly true throughout the crisis where not only did
we supply relevant products but also in line with safety protocols as
recommended by the Government Health Department.
Suppliers
We have worked with a number of our suppliers for many years, and any loss of
our sales or product mix impacts their business. We communicated to them where
possible to reduce the impact on their businesses.
Shareholders and Lenders
We have a clear responsibility to engage with shareholders and lenders of our
business and their views are an important driver of our strategy. We keep our
shareholders regularly informed while lenders receive quarterly updates on the
performance of the organisation.
Staff
During the year under review and in particular during the pandemic we
endeavoured to keep our staff fully employed although operating times were
erratic due to supply chain disruptions. We managed to do this however in order
to ensure we are competitive we are undergoing a s189 review of staffing
efficiencies at our subsidiary.
Review of the Group's Business
Dynamic Intertrade (Pty) Ltd ("Dynamic") is based in Cape Town, South Africa
and is involved in the importation, milling, blending and packaging of products
that include herbs, spices, seasonings and confectionary for the domestic
market.
Dynamic recorded a 2.5% reduction in top line revenue to £1.77 million (2019:
an increase of 4.34% to £1.8 million). This decrease was due to the
depreciation of the ZAR against the Pound Sterling, as revenue increased by
11.3% in ZAR. Due to COVID-19 the product mix changed and lower margin
commodities saw general price increases which could not be passed on to
customers for our core spice lines of commodity paprika and chilli-based
products as well as our value-added blended products.
Gross profits decreased by 29.3% for the current year (a decrease of 3.41% to £
598,894 for 2019 (ZAR8.8 million for 2020 down from ZAR10.95 million in 2019))
and represents a 23.9% gross margin (2019: 32.9%) mainly as a result of an
exchange rate that averaged ZAR20.87:£1.00 (2019: ZAR18.28: £1.00) for the year
together with increased economic and market pressures that the South African
economy faces.
Operating losses for the year increased to £1,079,505 from £271,467 in 2019.
Admission and regulatory expenses of £140,151 (2019: £249,798) were incurred
during the year. These charges primarily related to the Comarco transaction.
Additionally, the directors fully impaired the goodwill arising on the
consolidation of the subsidiary amounting to £226,644. Normal trading losses,
excluding the above mentioned non-recurring impairment, amount to £852,861
(2019: - £271,467).
Basic and diluted loss per share from continuing operations for the year was
5.16p (2019: 1.47p).
Financing
During the year under review, the company issued 2,566,889 new ordinary shares
at 4p per share (2019: nil) with a gross value of £102,676.
Acquisition Strategy
The Directors' strategy is to develop the business of the Group both
organically and by acquisition. It is intended that the Company completes the
Comarco Group acquisition before embarking on any other future acquisitions.
Key Performance Indicators
31 October 31 October
2020 2019
£ £
Turnover 1,773,710 1,819,552
Gross Profit 423,509 598,894
Cash on hand and in bank 45,251 5,218
Underlying operating loss (1,079,505) (271,467)
Principal Risks and Uncertainties
The Directors consider the following risk factors to be of relevance to the
Group's activities. It should be noted that the list is not exhaustive and that
other risk factors not presently known or currently deemed immaterial may
apply. The risk factors are summarised below:
i. Development Risk
The Group's development will be, in part, dependent on the ability of the
Directors to continue to improve the current business, to complete the Comarco
transaction and to identify suitable investment opportunities and to implement
the Group's strategy. There is no assurance that the Group will be successful
in acquiring suitable investments.
ii. Sector Risk
The agriculture and agri-processing sectors are highly competitive markets and
many of the competitors will have greater financial and other resources than
the Company and as a result may be in a better position to compete for
opportunities.
The development of these enterprises involves significant uncertainties and
risks including unusual climatic conditions such as drought, improper use of
pesticides, availability of labour and seasonality of produce, any one of which
could result in security of supply, damage to, or destruction of crops,
environmental damage or pollution. Each of these could have a material adverse
impact on the business, operations and financial performance of the Group.
The market price of agricultural products and crops is volatile and affected by
numerous factors which are beyond the Group's control. These include
international supply and demand, the level of consumer product demand,
international economic trends, currency exchange rate fluctuations, the level
of interest rates, the rate of inflation, global or regional political events,
as well as a range of other market forces. Sustained downward movements in
agricultural prices could render less economic, or un-economic, any development
or investing activities to be undertaken by the Group. Certain agricultural
projects involve high capital costs and associated risks. Unless such projects
enjoy long term returns, their profitability will be uncertain resulting in
potentially high investment risk.
The marine industry in East Africa has proved to be quite cyclical and although
there appears to be an improvement in the prospects it is possible that the
cycle could turn negative.
iii. Political and Regulatory Risk
African countries experience varying degrees of political instability. There
can be no assurance that political stability will persist in those countries
where the Group may have operations going forward. In the event of political
instability or changes in government policies in those countries where the
Group may operate, the operations and financial condition of the Group could be
adversely affected.
iv. Environmental Risks and Hazards
All phases of the Group's operations are subject to environmental regulation in
the areas in which it operates. Environmental legislation is evolving in a
manner that may require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees.
There is no assurance that existing or future environmental regulation will not
materially adversely affect the Group's business, financial condition and
results of operations. Environmental hazards may exist on the properties on
which the Group holds interests that are unknown to the Group at present. The
Board manages this risk by working with environmental consultants and by
engaging with the relevant governmental departments and other concerned
stakeholders.
v. Internal Control and Financial Risk Management
The Board has overall responsibility for the Group's systems of internal
control and for reviewing their effectiveness. The Group maintains systems
which are designed to provide reasonable but not absolute assurance against
material loss and to manage rather than eliminate risk.
* The key features of the Group's systems of internal control are as follows:
+ Management structure with clearly identified responsibilities;
+ Production of timely and comprehensive historical management
information presented to the Board;
+ Detailed budgeting and forecasting;
+ Day to day hands on involvement of the Executive Director and Senior
Management; and
+ Regular board meetings and discussions with the Non-executive
directors.
The Group's activities expose it to several financial risks including cash flow
risk, liquidity risk and foreign currency risk.
vi. Environmental Policy
The Group is aware of the potential impact that its subsidiary and associate
companies may have on the environment. The Group ensures that it complies with
all local regulatory requirements and seeks to implement a best practice
approach to managing environmental aspects.
The wholly owned subsidiary, Dynamic Intertrade operates a Food Safety System
Certification ("FSSC") compliant facility in Cape Town. The FSSC provides a
framework for effectively managing the organization's food safety
responsibilities and is fully recognized by the Global Food Safety Initiative
(GFSI) and is based on existing ISO Standards.
vii.Health and Safety
The Group's aim is to achieve and maintain a high standard of workplace safety.
In order to achieve this objective, the Group provides ongoing training and
support to employees and sets demanding standards for workplace safety.
viii. Financing Risk
The development of the Group's business may depend upon the Group's ability to
obtain financing primarily through the raising of new equity capital or debt.
The Group's ability to raise further funds may be affected by the success of
existing and acquired investments. The Group may not be successful in procuring
the requisite funds on terms which are acceptable to it (or at all) and, if
such funding is unavailable, the Group may be required to reduce the scope of
its investments or the anticipated expansion. Further, Shareholders' holdings
of Ordinary Shares may be materially diluted if debt financing is not
available.
ix. Credit Risk
The directors have reviewed the forecasts prepared by both AAA and Dynamic and
believe that Dynamic has adequate resources available to meet its obligations
to make capital repayments of the loan to AAA.
If Dynamics' trading performance is below that forecast, AAA will exercise a
degree of flexibility on the repayment timetable. With the Dynamic turnover
increasing and the Group forecasting profitability there is no requirement for
any impairment charge.
x. Liquidity Risk
The Directors have reviewed the working capital requirements of AAA and Dynamic
Intertrade and believe that, following stress tests and variance analysis on
the forecasts, there is sufficient working capital to fund the business while
expanding turnover and achieving sustainable profitability. The directors
further highlight the inherent uncertainties involved in making the assessment
that the entity is a going concern.
xi.Capital Risk
The Group manages its capital resources to ensure that entities in the Group
will be able to continue as a going concern, while maximising shareholder
return.
The capital structure of the Group consists of equity attributable to
shareholders, comprising issued share capital and reserves. The availability of
new capital will depend on many factors including a positive operating
environment, positive stock market conditions, the Group's track record, and
the experience of management. There are no externally imposed capital
requirements. The Directors are confident that adequate cash resources exist or
will be made available to finance operations and controls over expenditure are
carefully managed.
xii.COVID-19 Risk
The group has assessed the impact that the global COVID-19 pandemic has had on
its operations. As stated above, the group supplies spices and spice blends to
the food industry. The majority of its customers supply their products to the
lower end of the consumer spectrum. Based on the directors' assessment, the
products that it supplies form an essential component of the flavour profile
that the end consumers prefer to consume. Based on the group's assessment of
the associated risks, the risks associated with the pandemic are as follows: 1)
the risk that the gross margin will be squeezed, due to our customers'
inability to pass on or absorb price increases; and 2) the risk that the end
consumer will not be able to afford the prepacked flavoured food which could
lead to our customers having an over-supply of our spices and spice blends.
xiii.Brexit Risk
The Group's trading operations are located in South Africa. As such Brexit has
a negligible impact on the Group.
To manage the above risks, management are in regular contact with our customers
and are actively exploring new markets and customers in order to diversify
these risks.
The factory complies with FSSC requirements and as a result staff wear, as a
matter of course, masks and sanitise regularly, and hence the COVID
requirements have been adhered to.
Going Concern
These consolidated financial statements are prepared on the going concern
basis. The going concern basis assumes that the Group will continue in
operation for the foreseeable future and will be able to realise its assets and
discharge its liabilities and commitments in the normal course of business. The
Group has incurred significant operating losses and negative cash flows from
operations during the year under review.
During the year, the Group raised additional equity funding of £102,676 (2019:
£nil) in gross funding through share subscriptions to fund working capital.
The Directors have prepared cash flow forecasts for the period ended 31 March
2022, considering forecast operating cash flows and capital expenditure
requirements for the Company and Dynamic Intertrade, available working capital
and forecast expenditure for the rest of the Group including overheads and
other costs. The forecasts include additional funding in the form of £220,000
in equity and convertible loan notes which will be issued in the first quarter
of 2021. The directors believe that this funding will be raised in this period.
If Dynamic Intertrade fails to meet revenue predictions and any other relevant
risk factors arise, the Group will need to obtain additional debt finance or
equity to fund its operations for the period to 31 March 2022. The cash flow
forecast is dependent on production targets being met at Dynamic Intertrade,
maintaining the invoice financing arrangements, generating future sales and the
selling prices remaining stable during the period to 31 March 2022.
After careful consideration of the matters set out above, the Directors are of
the opinion that the Group will be able to undertake its planned activities for
the period to 31 March 2022 from production and from additional fund raising
and have prepared the consolidated financial statements on the going concern
basis. Nevertheless, due to the uncertainties inherent in meeting its revenue
predictions and obtaining additional fund raising there can be no certainty in
these respects. The financial statements do not include any adjustments that
would result if the Group was unable to continue as a going concern. For this
reason, the directors believe that there is a material uncertainty relating to
the group's going concern.
On behalf of the Board
David Lenigas, Chairman
22nd March 2021
The Directors present their Report and Financial Statements for the year ended
31 October 2020.
Principal Activities
The principal activity of the Group in the year was investing and trading in
the agriculture and ancillary sectors in Africa.
Emissions
The group is not an intensive user of fossil fuels or electricity. During the
year Dynamic Intertrade consumed an average of 19,432kwh per month based on
using actual charges levied by the Cape Town City Council. As per the
University of Cape Town's assessment of the South African average of 1.015kg/
kwh, the group contributed 236,682kg of carbon emissions during the financial
year. Due to the nature of the business, there is limited scope to reduce
emissions materially as all power is sourced from the Cape Town City Council.
There were no operations in the UK and as such no emissions in the UK.
Investing Policy
AAA was established to invest in or acquire companies engaged in the
agriculture and ancillary sectors in Africa. The Directors intend to use their
collective experience to identify appropriate investment opportunities in the
production, transportation and trading of food products as well as ports and
ancillary industries.
Directors
The following Directors have held office in the year:
David Lenigas
Andrew Monk
Robert Scott
Matthew Bonner
David Lenigas, Non-Executive Chairman
David Lenigas is an experienced executive and entrepreneur with a wide range of
board experience in both public and private companies. He has an extensive
knowledge of the African food manufacturing, processing and marketing sector
having previously served as the Executive Chairman of Lonrho Plc and is
currently the Executive Chairman of food logistics and marketing group AfriAg
Global Plc.
Andrew Monk, Non-Executive Director
Andrew has a successful stock broking career spanning 34 years. In that time,
he has built up strong relationships with many major UK institutions. He was
employed by Hoare Govett ABN AMRO for 12 years before founding Oriel Securities
as Joint CEO. Andrew later became CEO of Blue Oar Plc, and Chief Executive of
VSA Capital, an investment banking and institutional broking firm.
Robert Scott, Executive Director
Rob has over 20 years of finance experience, with the last eleven years
specifically focused in Africa within the mining industry and general
investments. He has held executive and senior positions with several companies,
as well as having served on both public and private company boards. He has been
involved in companies with locations in South Africa, Angola, Mozambique,
Zimbabwe, DRC, CAR, Tanzania, Kenya and Namibia amongst others. Rob has also
previously been involved in mining, hotels, agriculture and construction
industries.
Matthew Bonner, Non-Executive Director
Matthew Bonner has significant financial leadership experience within the
mining, energy and agriculture sectors. He is currently Chief Operating Officer
at EAS Advisors LLC, a New York based corporate advisory firm focused on
supporting public and private companies operating in the natural resource and
commodity sectors in emerging markets.
Directors' remuneration, shareholding and options
The Directors' remuneration in the year ended 31 October 2020 is set out in
note 8 of the accounts.
Shareholding
As at 13th March 2021, the Directors of the Company held the following shares:
2020 2020 2019 2019
Director Shareholding Percentage of Shareholding Percentage of
the Company's the Company's
Ordinary Ordinary
Share Capital Share Capital
David Lenigas 1,119,403 5.10% 1,119,400 5.8%
Andrew Monk** 1,106,338 5.04% 606,338 3.1%
George Roach - 0.00% 1,687,567 8.7%
(resigned)
Robert Scott 213,231 0.97% 84,654 0.4%
Matthew Bonner 165,891 0.76% 37,331 0.2%
** Andrew Monk's entire shareholding is held within his SIPP (Fitel Nominees
Limited) and Hargreaves Hale Limited.
Share options and warrants
As at 31 October 2020 the Directors share options and warrants were:
2020 2020 2020 2020
Options at 20p Options @ 11p Warrants @ 20p Warrants @ 5p
Director (expiring (expiring (expiring (expiring
5 September 5 September 5 September 24 July 2022)
2022) 2022) 2022)
Andrew Monk 91,952 100,000 69,033 622,233
Robert Scott 50,000 - 128,578
Matthew Bonner 180,000 - - 128,578
321,952 100,000 69,033 879,389
2019 2019 2019
Options at 20p Options @ 11p Warrants @ 20p
Director (expiring (expiring (expiring
5 September 5 September 5 September
2022) 2022) 2022)
Andrew Monk 91,952 100,000 69,033
Robert Scott 50,000 -
Matthew Bonner 180,000 - -
321,952 100,000 69,033
The total warrants and share options outstanding at 31 October 2020 were
13,319,430 (2019 - 9,235,875). Refer to note 25 for more detail.
Dividends
No dividends will be distributed for the current year (2019 - nil).
Supplier Payment Policy
It is the Group's payment policy to pay its suppliers in conformance with
industry norms. Trade payables are paid in a timely manner within contractual
terms, which is generally 30 to 45 days from the date an invoice is received.
Substantial Interests
The Group has been informed of the following shareholdings that represent 3% or
more of the issued Ordinary Shares of the Company as at 31 October 2020:
2020 2020 2019 2019
Shareholder Shareholding Percentage of Shareholding Percentage of
the Company's the Company's
Ordinary Ordinary
Share Capital Share Capital
Barclays Direct 1,073,634 4.9% 639,447 3.3%
Investing Nominees
Limited
CGWL Nominees 1,256,338 5.7% 756,338 3.9%
Limited
Hargreaves Lansdown 726,935 3.3% 691,716 3.6%
(Nominees) Limited
HSBC Global Custody 1,591,636 7.2% 1,469,403 7.6%
Nominee
Interactive 1,693,574 7.7% 925,058 4.8%
Investor Services
Nominees Limited
JIM Nominees 981,309 4.5% 1,081,196 5.6%
Limited
Lynchwood Nominees 5,150,000 23.4% 5,468,567 28.2%
Limited
Mike Joseph 750,000 3.4% - -
Pershing Nominees 1,026,172 4.7% 1,526,172 7.9%
Limited
Vidacos Nominees 2,413,845 11.0% 1,540,448 7.9%
Limited
The Group has been informed of the following shareholdings that represent 3% or
more of the issued Ordinary Shares of the Company as at 13th March 2021:
Substantial Interests @ 13 March 2021
2020 2020
Shareholder Shareholding Percentage of
the Company's
Ordinary Share
Capital
Lynchwood Nominees Limited 5,150,000 23.4%
Interactive Investor Services Nominees 3,077,058 14.0%
Limited
JIM Nominees Limited 1,926,072 8.8%
Vidacos Nominees Limited 1,753,488 8.0%
HSBC Global Custody Nominee (Uk) Limited 1,591,647 7.2%
CGWL Nominees Limited 1,256,338 5.7%
Hargreaves Lansdown (Nominees) Limited 1,049,330 4.8%
Pershing Nominees Limited 1,026,172 4.7%
Barclays Direct Investing Nominees Limited 707,154 3.2%
Auditors
Jeffreys Henry LLP has expressed its willingness to continue in office and a
resolution to reappoint them will be proposed at the Annual General Meeting.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the
financial statements in accordance with applicable law and regulations. Company
law requires the Directors to prepare financial statements for each financial
year. Under that law the Directors have elected to prepare the financial
statements in accordance with International Financial Reporting Standards
(IFRS) as adopted for use in the European Union. 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 Company and the Group and of the
profit or loss of the Company and the Group for that year. In preparing these
financial statements, the Directors are required to:
* Select suitable accounting policies and then apply them consistently;
* Make judgements and accounting estimates that are reasonable and prudent;
* State whether the Group and Parent Company financial statements have been
prepared in accordance with IFRS as adopted by the European Union, subject
to any material departures disclosed and explained in the Financial
Statements;
* Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
enough to show and explain the Group and Parent Company's transactions,
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements
comply with the Companies Act 2006.
The Directors are responsible for safeguarding the assets of the Group and
Parent 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 Group's website.
Statement of Disclosure to Auditors
Each person who is a Director at the date of approval of this Annual Report
confirms that:
* So far as the Directors are aware, there is no relevant audit information
of which the Group and Parent Company's auditors are unaware;
* Each Director has taken all the steps he ought as Director, in order to
make himself aware of any relevant audit information and to establish that
the Group and Parent Company's auditors are aware of that information, and
* Each Director is aware of and concurs with the information included in the
Strategic Report.
Branches Outside the UK
The Group head office is in London and Dynamic Intertrade (Pty) Limited's
office is located in South Africa.
Events after the Reporting Period
Further information on events after the reporting date is set out in note 33.
The Directors' have chosen to produce a Strategic Report that discloses a fair
review of the Group's business, the key performances metrics that the Directors
review along with a review of the key risks to the business.
Strategic Report
In accordance with Section 414C (1) of the Companies Act 2006, the group
chooses to report the review of the business, the outlook and the risk and
uncertainties faced by the Company in the Strategic Report on pages 5 to 10.
The directors' assessment of the risks faced by the Group are set out in the
Strategic Report and in Note 30 to the financial statements.
On Behalf of the Board
David Lenigas, Chairman
22nd March 2021
Introduction
The information included in this report is not subject to audit other than
where specifically indicated.
Remuneration Committee
The remuneration committee consists of Andrew Monk and David Lenigas. This
committee's primary function is to review the performance of executive
directors and senior employees and set their remuneration and other terms of
employment.
The committee is also responsible for administering any share option schemes.
The table indicates share options held by the current directors, directors of
the subsidiary and former directors of the company.
2020 2020 2019 2019
Director Warrants Options Warrants Options
Andrew Monk 691,266 191,952 69,033 191,952
Robert Scott 128,578 50,000 - 50,000
Matthew Bonner 128,578 180,000 - 180,000
George Roach - 191,952 - 191,952
(resigned)
Totals 948,422 613,904 69,033 613,904
The Company has one executive director.
The remuneration policy
It is the aim of the committee to remunerate executive directors competitively
and to reward performance. The remuneration committee determines the company's
policy for the remuneration of executive directors, having regard to the UK
Corporate Governance Code 2018.
Service agreements and terms of appointment
The directors have service contracts with the company.
Directors' interests
The directors' interests in the share capital of the company are set out in the
Directors' report.
Directors' emoluments (Audited)
Salaries and Group Group Company Company
Fees
2020 2019 2020 2019
£ £ £ £
David Lenigas 12,000 12,000 12,000 12,000
George Roach - 10,000 - 10,000
(resigned)
Robert Scott 16,600 12,000 12,000 12,000
Andrew Monk * 13,896 13,896 13,896 13,896
Matt Bonner 12,000 12,000 12,000 12,000
54,496 59,896 49,896 59,896
* Included in Andrew Monk's remuneration is £1,896 (2019: £1,896) for National
Insurance.
No pension contributions were made by the company on behalf of its directors.
At the year-end a total of £194,266 (2019: £144,370) was outstanding in respect
of directors' emoluments.
Approval by shareholders
At the next annual general meeting of the company a resolution approving this
report is to be proposed as an ordinary resolution.
This report was approved by the board on 22nd March 2021.
On Behalf of the Board
Andrew Monk - Committee Chairman
22nd March 2021
The Directors recognise the importance of sound corporate governance while
taking into account the Group's size and stage of development. We recognise
that we require the company to:
* provide details of a recognised corporate governance code that the board of
directors has decided to apply
* explain how the Company complies with that code, and where it departs from
its chosen corporate governance code provide an explanation of the reasons
for doing so.
The corporate governance disclosures need to be reviewed annually, and the
company is also required to state the date on which these disclosures were last
reviewed. This Chairman's Corporate Governance Statement sets out how Anglo
African Agriculture Plc seeks to comply with these requirements. The Directors
acknowledge that they have overall responsibility for the Company's system of
internal control and for reviewing its effectiveness. Such a system is designed
to manage rather than eliminate the risk of failure to achieve business
objectives and even the most effective system can provide only reasonable, and
not absolute, assurance with respect to the preparation of financial
information and the safeguarding of assets. The close involvement of the
Directors in all decisions and actions undertaken by the Company is intended to
ensure that the risks to the Company are minimised.
Overview
As Chairman of the Board of Directors it is my responsibility to ensure that
the company has both sound corporate governance and an effective Board. The
company is listed on the main board of the London Stock Exchange and its
principal activity is as an investor in the African continent. The Group is
currently focused on companies located in South Africa and Kenya.
The company's Board has adopted the principles of the Quoted Companies Alliance
Corporate Governance Code 2018 Edition (QCA Code) in accordance with the London
Stock Exchange. The QCA Code identifies ten principles to be followed in order
for companies to deliver growth in long term shareholder value, encompassing an
efficient, effective and dynamic management framework accompanied by
communication to promote confidence and trust. This report follows the
structure of these guidelines and explains how we have applied the guidance as
well as disclosing any areas of non-compliance. We will provide annual updates
on our compliance with the QCA Code. The Board considers that the Group
complies with the QCA Code so far as it is practicable having regard to the
size, nature and current stage of development of the Company, and will disclose
any areas of noncompliance in the text below.
The sections below set out the ways in which the Group applies the ten
principles of the QCA Code in support of the Group's medium to long-term
success.
Key governance changes during the year include the formal adoption of the QCA
Code.
QCA Principles
1. Establish a strategy and business model which promotes long-term value for
shareholders
Anglo African Agriculture Plc is an investment company focused on opportunities
principally in the African continent. The Company currently has an investment
in the food sector in South Africa and is finalising an investment in the ports
and marine sector in Kenya.
The Company may exploit a wide range of investment opportunities within the
target Sectors as they arise and, to this end, the Company has complete
flexibility in selecting the specific investment and trading strategies that it
sees fit in order to achieve its investment objective. In this regard, the
Company may seek to gain Board representation and/or managerial control in its
underlying investments if it deems to be the best way of generating value for
Shareholders. Opportunities will be chosen through a careful selection process
which will appraise both the fundamental factors specific to the opportunity as
well as wider economic considerations. Typical factors that will be considered
are the strength of management, the quality of the asset base, the investment's
scale and growth potential, the commodity price outlook, any geopolitical
concerns, the underlying financial position, future working capital
requirements as well as potential exit routes. Investments may be in the form
of buy-outs, controlling positions (whether initially or as a result of
additional or follow-on investments) or strategic minority investments. There
is no fixed limit on the number of projects or companies into which the Company
may invest, nor the proportion of the Company's gross assets that any
investment may represent at any time. No material change will be made to the
Company's investing policy without the approval of Shareholders.
Challenges to delivering strategy, long-term goals and capital appreciation are
uncertain in relation to organisational, operational, financial and strategic
risks, all of which are outlined in the Strategic Report on page 8, as well as
steps the Board takes to protect the Company by mitigating these risks and
secure a long-term future for the Company.
2. Seek to understand and meet shareholder needs and expectations
The Board recognises the importance of communication with its stakeholders and
is committed to establishing constructive relationships with investors and
potential investors in order to assist it in developing an understanding of the
views of its shareholders. The Company also maintains a dialogue with
shareholders through formal meetings such as the AGM, which provides an
opportunity to meet, listen and present to shareholders, and shareholders are
encouraged to attend in order to express their views on the Company's business
activities and performance. Members who have queries regarding the Company's
AGM can contact the Company's Registrars, Neville Registrars or the Company
Secretary. The Board welcomes feedback from key stakeholders and the Chairman
of the Board is the shareholder liaison, who meets shareholders regularly, and
informs other directors of their views and suggestions. Analysts provide the
Board with updates on the Company's business and how strategy is being
implemented, as well as to hear views and expectations from shareholders. The
views of the shareholders expressed during these meetings are reported to the
Board, ensuring that all members of the Board are fully aware of the thoughts
and opinions of shareholders. The Company maintains effective contact with its
principal shareholders and welcomes communications from its private investors.
Information on the Investor Relations section of the Company's website is kept
updated and contains details of relevant developments, Annual and Interim
Results, Regulatory News Service announcements, presentations and other key
information.
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 Company is reliant upon
the efforts of employees, regulators and many other stakeholders. The Board has
put in place a range of processes and systems to ensure that there is close
oversight and contact with its key resources and relationships. The Company
prepares and updates its strategic plan regularly together with a detailed
rolling budget and financial projections which consider a wide range of key
resources including staffing, consultants and utility providers. The Board is
kept updated on questions / issues raised by stakeholders and incorporates
information and feedback into future decision making. Anglo African Agriculture
Plc fully abides by the provisions of the 2015 Modern Slavery Act. In
accordance with its Code of Business Conduct and Ethics, the Company opposes
the crime of slavery in all of its forms, including child labour, servitude,
forced or compulsory labour and human trafficking.
All employees within the Group are valued members of the team, and the Board
seeks to implement provisions to retain and incentivise all its employees. The
Group offers equal opportunities regardless of race, gender, gender identity or
reassignment, age, disability, religion or sexual orientation. The directors
are in constant contact with employees and seek to provide continual
opportunities in which issues can be raised allowing for the provision of
feedback. This feedback process helps to ensure that new issues and
opportunities that arise may be used to further the success of the Company.
Share options and other equity incentives are offered to employees. The Company
complies fully with all employment legislation where it has operations.
4. Embedded effective risk management, considering both opportunities and
threats, throughout the organisation
The Board recognises the need for an effective and well-defined risk management
process and it oversees and regularly reviews the current risk management and
internal control mechanisms. The Board regularly reviews the risks facing the
Company as detailed in the Strategic Report and seeks to exploit, avoid or
mitigate those risks as appropriate. The Board is responsible for the
monitoring of financial performance against budget and forecast and the
formulation of the Company's risk appetite including the identification,
assessment and monitoring of the Company's principal risks. Additionally, the
Board reviews the mechanisms of internal control and risk management it has
implemented on an annual basis and assesses both for effectiveness. On the
wider aspects of internal control, relating to operational and compliance
controls and risk management, the Board, in setting the control environment,
identifies, reviews, and regularly reports on the key areas of business risk
facing the Group.
The Group Board and subsidiary Boards maintain close day to day involvement in
all of the Group's activities which enables control to be achieved and
maintained. This includes the comprehensive review of both management and
technical reports, the monitoring of interest rates, environmental
considerations, government and fiscal policy issues, employment and information
technology requirements and cash control procedures. In this way, the key risk
areas can be monitored effectively, and specialist expertise applied in a
timely and productive manner.
The effectiveness of the Group's system of internal financial controls, for the
year to 31 October 2020 and for the period to the date of approval of the
financial statements, has been reviewed by the Directors. Whilst they are aware
that although no system can provide for absolute assurance against material
misstatement or loss, they are satisfied that effective controls are in place.
5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Board recognises the QCA recommendation for a balance between Executive and
Non-Executive Directors and the recommendation that there be at least two
Independent Non-Executives. The Board currently comprises of one Executive
Director, two Non-Executive Directors and one Non-Executive Chairman. The Board
will take this into account when considering future appointments. However, all
Directors are encouraged to use their judgement and to challenge matters,
whether strategic or operational, enabling the Board to discharge its duties
and responsibilities effectively. The Board maintains that the Board's
composition will be frequently reviewed as the Company develops. The Company is
small and as a result has an audit and risk committee and a remuneration and
nominations committee. It is not deemed appropriate to have more committees.
The Group is controlled and led by the Board of Directors with an established
schedule of matters reserved for their specific approval. The Board meets
regularly throughout the year and is responsible for the overall Group
strategy, acquisition and divestment policy, approval of major capital
expenditure and consideration of significant financial matters. It reviews the
strategic direction of the Company and its individual subsidiaries, their
annual budgets, their progress towards achievement of these budgets and their
capital expenditure programmes. The role of the Chairman is to supervise the
Board and to ensure its effective control of the business, and that of the
Executive Director is to manage the Group on the Board's behalf. All Board
members have access, at all times, to sufficient information about the
business, to enable them to fully discharge their duties. Also, procedures
exist covering the circumstances under which the Directors may need to obtain
independent professional advice. The Board meets regularly and is responsible
for formulating, reviewing and approving the Group's strategy, budgets,
performance, major capital expenditure and corporate actions. Detailed
biographies of the Board members can be found on the website and summaries can
be found on page 10.
Throughout the year, there have been four Board meetings, with all meetings
being quorate. The Directors of the Company are committed to sound governance
of the business and each devotes enough time to ensure this happens.
Directors' conflict of interest
The Board is aware of the other commitments and interests of its Directors, and
changes to these commitments and interests are reported to and, where
appropriate, agreed with the rest of the Board.
6. Ensure that between them the Directors have the necessary up-to-date
experience, skills and capabilities
The Company believes that the current balance of skills in the Board as a whole
reflects a very broad range of personal, commercial and professional skills,
and notes the range of financial and managerial skills. The Non-Executive
Directors maintain ongoing communications with the Executive between formal
Board meetings. Biographical details of the Directors can be found on the
Company's website and in the Directors' Report of this report.
Stephen Clow is the Company Secretary and helps the Company comply with all
applicable rules, regulations and obligations governing its operation. The
company can also draw on the advice of its solicitors and corporate and
financial advisors - VSA Capital. The Directors have access to all advisors,
Company Secretary, lawyers and auditors as and when required and are able to
obtain advice from other external bodies when necessary. If required, the
Directors are entitled to take independent legal advice and if the Board is
informed in advance, the cost of the advice will be reimbursed by the Company.
Board composition is always a factor for consideration in relation to
succession planning. The Board will seek to consider any Board imbalances for
future nominations, with areas considered including board independence and
gender balance. The Group considers however that at this stage of its
development and given the current size of its Board, it is not necessary to
establish a formal Nominations Committee. Instead, the appointments to the
Board are made by the Board as a whole and this position is reviewed on a
regular basis by the Board.
7. Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement
The Directors consider that the Company and Board are not yet of a sufficient
size for a full Board evaluation to make commercial and practical sense. In the
frequent Board meetings/calls, the Directors can discuss any areas where they
feel a change would benefit the Company, and the Company Secretary remains on
hand to provide impartial advice. As the Company grows, it expects to expand
the Board and with the Board expansion, re-consider the need for Board
evaluation. The Board continues to conduct internal and external Board
evaluations which consider the balance of skills, experience, independence and
knowledge of the Company. The evaluation process, the Board refreshment, use of
third-party search companies and succession planning elements are discussed.
The Board evaluation of the Executives' performance is carried out on a regular
basis. Given the level of activity and size of the Company, no other evaluation
is seen as appropriate. In view of the size of the Board, the responsibility
for proposing and considering candidates for appointment to the Board as well
as succession planning is retained by the Board. All Directors submit
themselves for re-election at the AGM at regular intervals.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions regarding strategy and risk will impact
the corporate culture of the Company as a whole and that this will impact the
performance of the Company. The Board is aware that the tone and culture set by
the Board will greatly impact all aspects of the Company as a whole and the way
that employees behave. The corporate governance arrangements that the Board has
adopted are designed to ensure that the Company delivers long term value to its
shareholders, and that shareholders have the opportunity to express their views
and expectations for the Company in a manner that encourages open dialogue with
the Board. Therefore, the importance of sound ethical values and behaviours is
crucial to the ability of the Company to successfully achieve its corporate
objectives. The Board places great importance on their responsibility for
producing accurate financial statements. The Board also places great importance
on accuracy and honesty and seeks to ensure that this aspect of corporate life
flows through all that the Company does. A large part of the Company's
activities is centred upon an open and respectful dialogue with employees,
clients and other stakeholders. Therefore, the importance of sound ethical
values and behaviours is crucial to the ability of the Company to successfully
achieve its corporate objectives. The Directors consider that the Company has
an open culture facilitating comprehensive dialogue and feedback and enabling
positive and constructive challenge. Whilst the Company has a small number of
employees, the Board maintains that as the company grows it intends to maintain
and develop strong processes which promote ethical values and behaviours across
all hierarchies.
The Board has adopted an anti-corruption and bribery policy (Bribery Policy).
The Bribery Policy applies to all Directors and employees of the Group, and
sets out their responsibilities in observing and upholding a zero-tolerance
position on bribery and corruption, as well as providing guidance to those
working for the Company on how to recognise and deal with bribery and
corruption issues and the potential consequences.
The Board complies with Rules relating to dealings in the Company's securities
by the Directors and other Applicable Employees. To this end, the Company has
adopted a code for Directors' dealings appropriate for a company whose shares
are admitted to trading on LSE and takes all reasonable steps to ensure
compliance by the Directors and any relevant employees.
9. Maintain governance structures and processes that are fit for purpose and
support good decision-making by the Board
The Board is committed to, and ultimately responsible for, high standards of
corporate governance. The Board reviews the Company's corporate governance
arrangements regularly and expect to evolve this over time, in line with the
Company's growth.
The Board delegates responsibilities to Committees and individuals as it sees
fit.
The Chairman's principal responsibilities are to ensure that the Company and
its Board are acting in the best interests of shareholders.
His leadership of the Board is undertaken in a manner which ensures that the
Board retains integrity and effectiveness and includes creating the right Board
dynamic and ensuring that all important matters, in particular strategic
decisions, receive adequate time and attention at Board meetings.
The Chairman of Anglo African Agriculture is the key contact for shareholder
liaison and all other stakeholders.
The Executive Director is responsible for the general day-to-day running of the
business and developing corporate strategy.
The Executive Director has, through powers delegated by the Board, the
responsibility for leadership of the management team in the execution of the
Group's strategies and policies and for the day-to-day management of the
business. He is responsible for the general day-to-day running of the business
and developing corporate strategy while the Non-Executive Directors are tasked
with constructively challenging the decisions of executive management and
satisfying themselves that the systems of business risk management and internal
financial controls are robust.
All Directors participate in the key areas of decision-making, including the
following matters:
* Strategy
* Budgets
* Performance
* Major Capital Expenditure
* Corporate Actions
The Board would normally delegate authority to a number of specific Committees
to assist in meeting its business objectives, and the Committees, comprising of
at least two independent Non-Executive Directors, would meet independently of
Board meetings.
However, the current Board structure does not permit this, and the Directors
will seek to take this into account when considering future appointments. As a
result, matters that would normally be referred to the Nominations Committee
are dealt with by the Remuneration Committee.
The Chairman and the Board continue to monitor and evolve the Company's
corporate governance structures and processes, and maintain that these will
evolve over time, in line with the Company's growth and development.
10. Communicate how the company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
The Board is committed to maintaining effective communication and having
constructive dialogue with its stakeholders. The Company intends to have
ongoing relationships with both its private and institutional shareholders
(through meetings and presentations), and for them to have the opportunity to
discuss issues and provide feedback at meetings with the Company. In addition,
all shareholders are encouraged to attend the Company's Annual General Meeting.
The Board already discloses the result of General Meetings by way of
announcement and discloses the proxy voting numbers to those attending the
meetings. In order to improve transparency, the Board has committed to
publishing proxy voting results on its website in the future.
The Company communicates with shareholders through the Annual Report and
Accounts, full-year and half-year results announcements and the Annual General
Meeting (AGM). Information on the Investor Relations section of the Group's
website is kept updated and contains details of relevant developments,
regulatory announcements, financial reports and shareholder circulars. A range
of corporate information (including all Company announcements and
presentations) is also available to shareholders, investors and the public on
the Company's corporate website.
Shareholders with a specific enquiry can contact us on the website contact
page. The Company uses electronic communications with shareholders in order to
maximise efficiency.
On behalf of the Board
David Lenigas, Chairman
22nd March 2021
Introduction
The Board continues to recognise that an effective governance framework is
fundamental in ensuring that the Group's ability to deliver long term
shareholder value. The Group continues to apply the principles and is compliant
with the provisions of the UK Corporate Governance 2018.
Board composition
It is critical that the Board has the right composition, so it can provide the
best possible leadership for the Group and discharge its duties to
shareholders. This includes the right balance of skills and experience,
ensuring that all directors have a good working knowledge of the Group's
business and that the Board retains its independence and objectivity.
The board currently comprises of three non-executive directors and one
executive director. David Lenigas was appointed chairman on 5 September 2016.
The articles of association require a third, but not greater than a third, of
the directors to retire by rotation each year. However, due to the importance
of the ongoing Comarco transaction, the board is of the opinion that the
rotation of directors would have a detrimental effect on the transaction and
the group. Accordingly, the implementation of this provision of the articles of
association has been suspended until the transaction has been completed.
There are regular board meetings each year and other meetings are held as
required to direct the overall company strategy and operations. Board meetings
follow a formal agenda covering matters specifically reserved for decision by
the board. These cover key areas of the company's affairs including overall
strategy, acquisition policy, approval of budgets, major capital expenditure
and significant transactions and financing issues.
During the year there were four Board meetings that were held. The Chairman
excused himself for three meetings and other than this all meetings were
attended by the full Board. All meetings were quorate.
The Board has delegated certain responsibilities, within defined terms of
reference, to the audit committee and the remuneration committee as described
below. The appointment of new directors is made by the board as a whole. During
the year ended 31 October 2020, there were four Board meetings, one audit
committee meeting and one remuneration committee meeting. Not all meetings were
fully attended however each was quorate.
The Board undertakes a formal annual evaluation of its own performance and that
of its committees and individual directors, through discussions and one-to-one
reviews.
Board effectiveness
The Board is unanimous in its view that the Board appointments have a range of
experience, skills and strength of leadership. The Company's procedures for new
directors include undergoing a full induction process, and will continue with
ongoing training, tailored to their knowledge and previous experience. A short
biography of all Directors can be found in the Directors' Report herein.
Shareholder engagement
As Chairman, I am responsible for the effective communication between
shareholders and the Company and for ensuring the Board understands the views
of major shareholders.
I look forward to listening to the views of our shareholders at the Company's
2020 AGM. Directors regularly meet with a cross section of the Company
shareholders to ensure an ongoing dialogue is maintained and report to the
Board on feedback received from shareholders. I also make myself available to
meet any of our shareholders who wish to discuss matters regarding the Company.
An investor relations report is part of our regular Board meetings.
Audit committee
The audit committee is currently headed by David Lenigas, the Chairman, and
comprises Robert Scott and Andrew Monk. The committee's terms of reference are
in accordance with the UK Corporate Governance Code. The committee reviews the
company's financial and accounting policies, interim and final results and
annual report prior to their submission to the board, together with management
reports on accounting matters and internal control and risk management systems.
It reviews the auditor's management letter and considers any financial or other
matters raised by both the auditors and employees.
The committee considers the independence of the external auditors and ensures
that, before any non-audit services are provided by the external auditors, they
will not impair the auditor's objectivity and independence. During the year,
non-audit services totalled £800 (2019 - £16,500) which related to the
corporation tax for the year ended 31 October 2019. This covered normal
taxation and other related compliance work, which did not impact on the
auditor's objectivity or independence. There will be no such charges for the
current accounting period.
There is currently no internal audit function within the Group. The directors
consider that this is appropriate of a Group of this size.
The committee has primary responsibility for making recommendations to the
board in respect of the appointment, re-appointment and removal of the external
auditors.
On Behalf of the Board
David Lenigas, Chairman
22nd March 2021
Independent auditor's report to the members of Anglo African Agriculture Plc
Opinion
We have audited the financial statements of Anglo African Agriculture Plc (the
'parent Company') and its subsidiaries (the 'Group') for the year ended 31
October 2020 which comprise the Group and Company statements of comprehensive
income, Group statement of changes in equity, Company statement of changes in
equity, Group statement of financial position, Company statement of financial
position, Group statement of cash flows, 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
the preparation of the Group and Parent Company financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
In our opinion:
* the financial statements give a true and fair view of the state of the
Group's and of the parent Company's affairs as at 31 October 2020 and of
the Group's and parent Company's loss for the year then ended;
* the Group and Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union;
* the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
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 Company
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 related to going concern
We draw attention to note 2 a. in the financial statements, which explains that
the Group has incurred significant operating losses and negative cash flows
from operations. The Group forecasts include additional funding requirements
upon which the Group is dependent. The directors are satisfied that these
funding requirements will be met. Additionally, in the event that Dynamic
Intertrade fails to meet its revenue predictions, the Group will need to obtain
additional debt or equity financing in order to fund its operations for at
least the next twelve months. These events or conditions, along with other
matters as set out in note 2 a. indicate that a material uncertainty exists
that may cast doubt on the Group's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
Our audit approach
Overview
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. This is not a complete list of all risks identified by our
audit:
* Possible impairment of Goodwill
* Recoverability of long-term loans
* Possible impairment of the Long-term investment
These are explained in more detail below.
Audit scope
* We conducted audits of the complete financial information of Anglo African
Agriculture Plc, Dynamic Intertrade (Pty) Limited and Dynamic Intertrade
Agri (Pty) Limited;
* We performed specified procedures over certain account balances and
transaction classes at other Group companies.
* Taken together, the Group companies over which we performed our audit
procedures accounted for 100% of the absolute profit before tax (i.e. the
sum of the numerical values without regard to whether they were profits or
losses for the relevant reporting units) and 100% of revenue.
Key audit matters
Key audit matter How our audit addressed the key audit
matter
Possible impairment of goodwill
(Group) We considered whether the component
During the year the Group carried of the Group was still profit making
goodwill of £nil (31 October 2019: £ and had an ability to trade
226,644) in relation to the excess successfully into the future.
sum of consideration paid and the We reviewed the component auditor's
fair value of the acquirer's working papers and carried out
previously held equity interest in additional testing on high risk
the acquiree over the net of the areas.
acquisition date amounts of the As impairment indicators were
identifiable assets acquired and the apparent, management performed an
liabilities assumed. impairment review.
The directors have assessed whether We reviewed the latest management
the goodwill shows any indicators of accounts to gauge how trading was
impairment. carrying on in the 2021 financial
The adjusted Company profit before year.
tax, which is considered by We reviewed and agreed with
management to be a key metric and is management with the write down of
discussed in their discussion of Goodwill to £nil.
KPIs, is directly impacted by the
amount of costs capitalised and the
amounts included in the
reconciliation of the adjusted income
measures.
We focused on whether impairment was
required given the events in the
year.
Recoverability of long-term loans
(Group & Parent) The analysis work undertaken by the
The Company had long term loans owed directors shows that the subsidiary
of £884,651 at the year ended 31 has impairment indicators therefore
October 2020. (31 October 2019: £ upon impairment review, a full
842,437). impairment of the intercompany loans
The Directors have confirmed the has been made along with the
loans are all treated as long term, interest. We have understood and
with flexible repayment terms, with assessed the methodology used by the
interest all rolled up and included directors in this analysis and
in any repayment due. determined it to be reasonable.
The Company had a long-term loan to We reviewed the component auditor's
Dynamic Intertrade (Pty) Limited of £ working papers and carried out
415,000 and interest accrued of £ additional testing on high risk
76,830 (31 October 2019: £415,000 and areas.
interest accrued of £66,880) at the Touchwood Investments Limited, also
year ended 31 October 2020. known as the Comarco Group, operates
The Company had an inter-Company loan a port in Mombasa. The Company has
to Dynamic Intertrade (Pty) Limited security to cover the loan, being an
of £392,821 (31 October 2019: £ option to acquire, for a nominal
360,557) at the year ended 31 October consideration, the shares of
2020. Touchwood Investments Ltd.
Upon review, both intercompany loans Touchwood's major asset is the land
and interest has been impaired and a at the Comarco port which was valued
corresponding provision has been made at $12,000,000.
against these balances. We have confirmed the interest has
The Group and Company had a loan to been accrued correctly and agreed the
Touchwood Investments Limited of £ loan to the signed agreement.
994,729 (31 October 2019: £871,579)
at the year ended 31 October 2020.
Possible impairment of long-term
investment (Parent) We have reviewed the financials of
During the year the Company had the subsidiary and having reviewed
Investment in subsidiary of £71,271 the performance to date the
(31 October 2019: £297,915). subsidiary is loss making.
The directors have assessed whether We reviewed the latest management
the investment shows any indicators accounts post year end for the
of impairment. An impairment of £ subsidiary.
226,644 was made.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set
certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements
as a whole.
Based on our professional judgment, we determined materiality for the financial
statements as a whole as follows:
Group financial Company financial
statements statements
Overall materiality £83,000 (31 October 2019: £56,000 (31 October 2019:
£41,000). £35,000).
How we determined it Based on 10% of loss Based on 10% of loss
before tax before tax.
Rationale for We believe that loss We believe that loss
benchmark applied before tax is a primary before tax is a primary
measure used by measure used by
shareholders in assessing shareholders in assessing
the performance of the the performance of the
Group. Company.
For each component in the scope of our Group audit, we allocated a materiality
that is less than our overall Group materiality. The range of materiality
allocated across components was between £36,000 and £56,000.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £4,150 (Group audit) (31 October 2019: £
2,050) and £2,800 (Company audit) (31 October 2019: £1,750) as well as
misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgments, for example in respect
of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all of our
audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the financial statements as a whole, taking into
account the structure of the Group and the Company, the accounting processes
and controls, and the industry in which they operate.
The Group financial statements are a consolidation of 4 reporting units,
comprising the Group's operating businesses and holding companies.
We performed audits of the complete financial information of Anglo African
Agriculture Plc, Dynamic Intertrade (Pty) Limited and Dynamic Intertrade Agri
(Pty) Limited reporting units, which were individually financially significant
and accounted for 100% of the Group's revenue and 100% of the Group's absolute
profit before tax (i.e. the sum of the numerical values without regard to
whether they were profits or losses for the relevant reporting units). We also
performed specified audit procedures over goodwill and other intangible assets,
as well as certain account balances and transaction classes that we regarded as
material to the Group at the 3 reporting units, one based in the United Kingdom
and 2 more in South Africa.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
* the information given in the strategic report and the directors' report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
* the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and 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 in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
* adequate accounting records have not been kept by the parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
* the parent Company financial statements are not in agreement with the
accounting records and returns; or
* certain disclosures of directors' remuneration specified by law are not
made; or
* we have not received all the information and explanations we require for
our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on
page 14, the directors are responsible for the preparation of the 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 financial statements, the directors are responsible for
assessing the Group's and parent Company'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 the parent Company 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.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
The objectives of our audit, in respect to fraud are; to identify and assess
the risks of material misstatement of the financial statements due to fraud; to
obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatements due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or suspected fraud
identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance
of the entity and management.
Our approach was as follows:
* We obtained an understanding of the legal and regulatory framework that are
applicable to the Group and Company and determined that the most
significant are the Companies Act 2006 and the Listing Rules.
* We understood how the Group and Company is complying with those frameworks
through discussions with the Directors'.
* We assessed the susceptibility of the Group's and Company's financial
statement to material misstatement including how fraud might occur by
considering the key risks impacting the financial statements.
* We carried out a review of manual entries recorded in management accounting
records and assessed the appropriateness of such entries.
* We have assessed that the Group's and Company's control environment is
adequate for the size and operating model of such a listed Company.
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.
Other matters which we are required to address
We were appointed by the shareholders on 10 July 2013 to audit the financial
statements for the period ending 31 March 2013. Our total uninterrupted period
of engagement is 7 years, covering the periods ending 31 March 2013 to 31
October 2020.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group or the parent Company and we remain independent of the
Group and the parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of this report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company'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 Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Sudhir Rawal (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
22nd March 2021
Statement of Comprehensive Income
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
Notes 2020 2019 2020 2019
£ £ £ £
Revenue from Contracts with 5 1,773,710 1,819,552 - -
Customers
Cost of Sales (1,350,201) (1,220,658) - -
Gross Profit 423,509 598,894 - -
Other Income 6 3,000 848 3,000 -
Administrative expenses 9 (1,139,219) (621,411) (524,165) (178,778)
Admission expenses 9 (140,151) (249,798) (140,151) (249,798)
Impairments 10 (226,644) - (1,111,295) -
Operating loss (1,079,505) (271,467) (1,772,611) (428,576)
Finance costs 11 (96,943) (114,034) (30,082) (30,000)
Finance income 12 140,963 100,836 182,685 111,807
Loss for the year from (1,035,485) (284,665) (1,620,008) (346,769)
continuing operations
Tax on loss on ordinary 13 - - - -
activities
Loss for the year from (1,035,485) (284,665) (1,620,008) (346,769)
continuing operations
Other Comprehensive Income 15 - (90,825) - (90,825)
impairment of investment in
associate
Total comprehensive loss for (1,035,485) (375,490) (1,620,008) (437,594)
the year from continuing
operations
Loss attributable to ordinary (1,035,485) (284,665) (1,620,008) (346,769)
shareholders
Total comprehensive loss (1,035,485) (375,490) (1,620,008) (437,594)
attributable to ordinary
shareholders
Basic and diluted earnings 14 (5.16p) (1.47p)
per share
All amounts relate to continuing operations.
Company Statement of Changes in Equity
Group Share Share Share Retained Total
Capital Premium Based Earnings Equity
Payments
Reserve
£ £ £ £ £
Balance at 31 October 387,984 2,519,909 83,377 (2,420,919) 570,351
2018
Loss for the year - - - (284,665) (284,665)
Other comprehensive loss - - - (90,825) (90,825)
Balance at 31 October 387,984 2,519,909 83,377 (2,796,409) 194,861
2019
Share Issue 51,338 51,338 - - 102,676
Loss for the year - - - (1,035,485) (1,035,485)
Balance at 31 October 439,322 2,571,247 83,377 (3,831,894) (737,948)
2020
Share capital is the amount subscribed for shares at nominal value.
The share premium has arisen on the issue of shares at a premium to their
nominal value.
Share-based payments reserve relate to the charge for share-based payments in
accordance with IFRS 2.
Retained earnings represent the cumulative loss of the Group attributable to
equity shareholders.
Company Share Share Share Retained Total
Capital Premium Based Earnings Equity
Payments
Reserve
£ £ £ £ £
Balance at 31 October 387,984 2,519,909 83,377 (1,411,628) 1,579,642
2018
Loss for the year - - - (346,769) (346,769)
Other comprehensive loss - - - (90,825) (90,825)
Balance at 31 October 387,984 2,519,909 83,377 (1,849,222) 1,142,048
2019
Share Issue 51,338 51,338 - - 102,676
Loss for the year - - - (1,620,008) (1,620,008)
Balance at 31 October 439,322 2,571,247 83,377 (3,469,230) (375,284)
2020
Statement of Financial Position
Group Group Company Company
Notes 2020 2019 2020 2019
£ £ £ £
Assets
Non-Current Assets
Investment in Subsidiaries 15 - - 71,271 297,915
Long Term Intercompany Loans 16 - - - 842,437
Property, Plant and Equipment 17 15,298 30,838 - -
Right of Use Asset 28 409,424 - - -
Goodwill 18 - 226,644 - -
Loan receivable 19 994,729 871,579 994,729 871,579
Total Non-Current Assets 1,419,451 1,129,061 1,066,000 2,011,931
Current Assets
Investment in Associate 15 6,154 6,154 6,154 6,154
(held for sale)
Inventories 20 181,708 67,359 - -
Trade and Other Receivables 21 291,939 422,775 12,163 25,662
Cash and Cash Equivalents 22 45,251 5,218 25,624 4,383
Total Current Assets 525,052 501,506 43,941 36,199
Total Assets 1,944,503 1,630,567 1,109,941 2,048,130
Equity and Liabilities
Share Capital 24 439,322 387,984 439,322 387,984
Share Premium Account 24 2,571,247 2,519,909 2,571,247 2,519,909
Share-Based Payments Reserve 25 83,377 83,377 83,377 83,377
Retained Earnings (3,831,894) (2,796,409) (3,469,230) (1,849,222)
Total Equity (737,948) 194,861 (375,284) 1,142,048
Non-Current Liabilities
Non-Current Lease Liabilities 28 344,025 - - -
Borrowings 26 428,719 363,091 - 10,000
Convertible Loan Notes 27 250,000 250,000 250,000 250,000
Total Non-Current Liabilities 1,022,744 613,091 250,000 260,000
Current Liabilities
Current Lease Liabilities 28 66,477 - - -
Trade and Other Payables 23 1,593,230 822,615 1,235,225 646,082
Total Current Liabilities 1,659,707 822,615 1,235,225 646,082
Total Equity and Liabilities 1,944,503 1,630,567 1,109,941 2,048,130
The notes on pages 36 to 82 form part of these financial statements
Approved by the Board and authorised for issue on 22nd March 2021.
Statement of Cash Flow
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
Notes 2020 2019 2020 2019
£ £ £ £
Cash flows from operating
activities
Operating loss (1,079,505) (271,467) (1,772,611) (428,576)
Add: Depreciation 17,28 38,322 24,245 - -
Add: Impairment of investment 10 226,644 - 1,111,295 -
Add: (Profit)/loss on 17 - (128) - -
disposal of property, plant
and equipment
Add: unrealised foreign 74,572 7,118 17,321 7,102
exchange loss
Finance costs paid 11 (69,853) (112,079) (2,992) (28,045)
Interest received 12 492 128 - -
Changes in working capital
Decrease in inventories (119,133) 46,353 - -
Decrease in receivables 102,640 27,021 13,499 16,253
Increase / (decrease) in 719,314 (153,538) 562,053 261,528
payables
Net cash flow from operating (106,507) (432,347) (71,435) (171,738)
activities
Investing Activities
Acquisition of property, 17 (3,423) (3,952) - -
plant and equipment
Disposal of property, plant 17 - 181 - -
and equipment
Foreign exchange movements 17 2,190 2,371 - -
Increase in Intercompany - - - -
Loans Receivable
Loans Receivable advanced 19 - (777,973) - (777,973)
Net cash flow from investing (1,233) (779,373) - (777,973)
activities
Cash flows from financing
activities:
Net proceeds from issue of 24 102,676 - 102,676 -
shares
Increase / (Decrease) in 29 38,687 278,725 (10,000) 10,000
borrowings
Foreign exchange movements 29 26,941 (7,532) - -
Capital repayments of lease (20,471) - - -
liability
Net cash flow from financing 147,833 271,193 92,676 10,000
activities
Net cash flow for the period 29 40,093 (940,527) 21,241 (939,711)
Opening Cash and cash 5,218 945,823 4,383 944,094
equivalents
Foreign exchange movements 29 (60) (78) - -
Closing Cash and cash 22/29 45,251 5,218 25,624 4,383
equivalents
1.General Information
Anglo African Agriculture plc is a company incorporated in the United Kingdom.
Details of the registered office, the officers and advisors to the Company are
presented on the Directors and Advisors page at the beginning of this report.
The Company has a standard listing on the London Stock Exchange main market.
The information within these financial statements and accompanying notes have
been prepared for the year ended 31 October 2020 with comparatives for the year
ended 31 October 2019.
2.Basis of Preparation and Significant Accounting Policies
The consolidated financial statements of Anglo African Agriculture plc have
been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretations
Committee and the Companies Act 2006 applicable to companies reporting under
IFRS.
The consolidated financial statements have been prepared under the historical
cost convention in the Group's reporting currency of Pound Sterling.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 3. The preparation of financial
statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies
and reported amounts of assets, liabilities, income and expenses. Although
these estimates are based on management's experience and knowledge of current
events and actions, actual results may ultimately differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimates are revised if the revision affects only that year or in the year of
the revision and future year if the revision affects both current and future
year.
a. Going Concern
These consolidated financial statements are prepared on the going concern
basis. The going concern basis assumes that the Group will continue in
operation for the foreseeable future and will be able to realise its assets and
discharge its liabilities and commitments in the normal course of business. The
Group has incurred significant operating losses and negative cash flows from
operations as the Group continued to expand its operations during the year
under review.
During the year, the Group raised £102,676 (2019: £nil) in gross funding was
raised through share subscriptions to fund working capital.
There remains an active and liquid market for the Group's shares.
As at 31 October 2020 the Group held £45,251 (2019: £5,218) in cash and cash
equivalents.
The Directors have prepared cash flow forecasts for the period ended 31 March
2022, considering forecast operating cash flows and capital expenditure
requirements for Dynamic Intertrade, available working capital and forecast
expenditure for the rest of the Group including overheads and other costs. The
forecasts include additional funding requirements, which the directors believe
will be met.
In the event that Dynamic Intertrade fails to meet revenue predictions and any
other relevant risk factors arise, the Group will need to obtain additional
debt finance or equity to fund its operations for the period to 31 March 2022.
The cash flow forecast is dependent on production targets being met at Dynamic
Intertrade, maintaining the invoice financing arrangements, generating future
sales and the selling prices remaining stable during the period to
31 March 2022.
After careful consideration of the matters set out above, the Directors are of
the opinion that the Group will be able to undertake its planned activities for
the period to 31 March 2022 from production and from additional fund raising
and have prepared the consolidated financial statements on the going concern
basis. Nevertheless, due to the uncertainties inherent in meeting its revenue
predictions and obtaining additional fund raising there can be no certainty in
these respects. The financial statements do not include any adjustments that
would result if the Group was unable to continue as a going concern. For this
reason, the directors believe that there is a material uncertainty relating to
the group's going concern.
b. New and Amended Standards Adopted by the Company
This year, the IFRS 16 standard on leases came into effect, which did have a
material impact on the Group. The Group had to change the accounting policies
as a result of adopting the IFRS 16. The Group elected to apply the policy
prospectively as the previous lease agreement expired during the financial year
and a new three year lease agreement, with a two year optional extension, was
signed in March 2020.
Standards, Interpretations and Amendments to Published Standards which Are Not
Yet Effective
The following new standards, amendments to standards and interpretations have
been issued, but are not effective for the financial year beginning 1 November
2019 and have not been early adopted:
Application date
of standard
Reference Title Summary (Periods
commencing on or
after)
IFRS 3 Business Establishes principles and requirements
Combinations for how an acquirer in a business 1 January 2020
combination recognises and measures in
its financial statements the assets and
liabilities acquired, and any interest
in the acquiree held by other parties;
recognises and measures the goodwill
acquired in the business combination or
a gain from a bargain purchase; and
determines what information to
disclose.
IFRS 17 Insurance Establishes principles for the
Contracts recognition, measurement, presentation 1 November 2021
and disclosure of insurance contracts
issued.
IAS 1 Presentation It sets out the overall requirements
of Financial for the presentation of financial 1 January 2020
Statements statements, guidelines for their
structure and minimum requirements for
their content.
IAS 8 Accounting IAS 8 prescribes the criteria for
Policies, selecting and changing accounting 1 January 2020
Changes in policies, together with the accounting
Accounting treatment and disclosure of changes in
Estimates and accounting policies, changes in
Errors accounting estimates and corrections of
errors.
Improvements to IFRS Annual Improvements 2015 - 2017 Cycle
1: Amendments to 2 IFRSs and 2 IASs
Revised Conceptual Framework for
Financial Reporting
The Directors anticipate that the adoption of these standards and the
interpretations in future periods will not have a material impact on the
financial statements of the Group.
c. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 October each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with those used by
other members of the Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result
in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries.
When the Group loses control of a subsidiary, the profit or loss on disposal is
calculated as the difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), and liabilities of
the subsidiary and any non-controlling interests. Where certain assets of the
subsidiary are measured at revalued amounts or fair values and the related
cumulative gain or loss has been recognised in other comprehensive income and
accumulated in equity, the amounts previously recognised in other comprehensive
income and accumulated in equity are accounted for as if the Company had
directly disposed of the related assets (i.e. reclassified to profit or loss or
transferred directly to retained earnings). The fair value of any investment
retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under IAS 39
"Financial Instruments: Recognition and Measurement" or, when applicable, the
cost on initial recognition of an investment in an associate or a jointly
controlled entity.
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of the
assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interests issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised
in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired, and the liabilities
assumed are recognised at their fair value at the acquisition date, except
that:
* Deferred tax assets or liabilities and liabilities or assets related to
employee benefit arrangements are recognised and measured in accordance
with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
* Liabilities or equity instruments related to share-based payment
transactions of the acquiree or the replacement of an acquiree's
share-based payment transactions with share-based payment transactions of
the Group are measured in accordance with IFRS 2 Share-based Payment at the
acquisition date; and
* Assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations are measured in accordance with that standard.
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree, and the fair value
of the acquirer's previously held equity interest in the acquiree (if any) over
the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed. If, after assessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the
sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's previously held
interest in the acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
Joint Ventures and Associates
A joint venture is a contractual agreement under which two or more parties
conduct an economic activity and unanimous approval is required for the
financial and operating policies. Associates are all entities over which the
Group has significant influence but not control, generally accompanying a
shareholding between 20% and 50% of the voting rights. Joint ventures and
associates are accounted for using the equity method, which involves
recognition in the consolidated income statement of AAA's share of the net
result of the joint ventures and associates for the year. Accounting policies
of joint ventures and associates have been changed where necessary to ensure
consistency with the policies adopted by the Group. AAA's interest in a joint
venture or associate is carried in the statement of financial position at its
share in the net assets of the joint venture or associate together with
goodwill paid on acquisition, less any impairment loss. When the share in the
losses exceeds the carrying amount of an equity-accounted company (including
any other receivables forming part of the net investment in the company), the
carrying amount is written down to nil and recognition of further losses is
discontinued, unless we have incurred legal or constructive obligations
relating to the company in question.
d. Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less subsequent
accumulated depreciation and accumulated impairment losses, if any. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items. Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other repairs and
maintenance are charged to profit or loss during the financial year in which
they are incurred. Depreciation on property, plant and equipment is calculated
using the straight-line method to write off their cost over their estimated
useful lives at the following annual rates:
Leasehold improvements 33.3%
Furniture, fixtures and equipment 17%
Plant and machinery 20% and 33.3%
Useful lives and depreciation method are reviewed and adjusted if appropriate,
at the end of each reporting year.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on the disposal or retirement of an item of
property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the relevant asset and is recognised in
profit or loss in the year in which the asset is derecognised.
e. Leased assets
The group leases various offices and equipment. Rental contracts are typically
made for fixed periods of 3 years but may have extension options for an
additional 2 years. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease agreements do
not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Until the 2019 financial year, leases of property, plant and equipment were
classified as either finance or operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to profit
or loss over the period of the lease on a monthly basis as per the invoices
received.
From 1 November 2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for
use by the group. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of use asset is depreciated
over the shorter of the asset's useful life and the lease term as per the table
below:
1st year of the lease 15%
2nd year of the lease 17%
3rd year of the lease 20%
4th year of the lease 22%
5th year of the lease 26%
Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following
lease payments:
* fixed payments (including in-substance fixed payments), less any lease
incentives receivable.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the lessee's incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
* the amount of the initial measurement of lease liability
* any lease payments made at or before the commencement date less any lease
incentives received any initial direct costs, and
* restoration costs.
Payments associated with short term leases and leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less. Low-value assets
comprise moving equipment rented on a day to day basis.
f. Investments in Subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
g. Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is
determined using specific identification and in the case of work in progress
and finished goods, comprises the cost of purchase, cost of 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 cost of completion and applicable selling
expenses.
When the inventories are sold, the carrying amount of those inventories is
recognised as an expense in the year in which the related revenue is
recognised. The amount of any write-down of inventories to net realisable value
and all losses of inventories are recognised as an expense in the year in which
the write-down or loss occurs. The amount of any reversal of any write-down of
inventories is recognised as an expense in the year in which the reversal
occurs.
h. Impairment
Non-derivative financial assets
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at
amortised cost and debt securities at FVOCI are credit-impaired. A financial
asset is "credit-impaired" when one or more events that have a detrimental
impact on the estimated future cash flows of the financial assets have
occurred.
Evidence that a financial asset is credit-impaired includes the following
observable data:
. significant financial difficulty of the borrower or issuer;
. a breach of contract such as a default or being more than 90 days past
due;
. the restructuring of a loan or advance by the Group on terms that the
Group would not consider otherwise;
. it is probable that the borrower will enter bankruptcy or other
financial reorganisation; or
. the disappearance of an active market for a security because of
financial difficulties.
A 12 months approach is followed in determining the Expected Credit Loss
("ECL").
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss
and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof. For corporate customers, the Group individually makes an
assessment with respect to the timing and amount of write-off based on whether
there is a reasonable expectation of recovery from the amount written off.
However, financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group's procedures of
recovery of the amounts due.
i. Financial Instruments
The Group classifies non-derivative financial assets into the following
categories: loans and receivables and FVTPL and FVTOCI financial assets.
The Group classifies non-derivative financial liabilities into the following
category: other financial liabilities.
i. Non-derivative financial assets and financial liabilities -
Recognition and derecognition
The Group initially recognises loans and receivables on the date when they are
originated. All other financial assets and financial liabilities are initially
recognised on the trade date when the entity becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all of the risks
and rewards of ownership of the financial asset are transferred, or it neither
transfers nor retains substantially all of the risks and rewards of ownership
and does not retain control over the transferred asset. Any interest in such
derecognised financial assets that is created or retained by the Group is
recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations
are discharged or cancelled or expire. Gains or losses on derecognition of
financial liabilities are recognised in profit or loss as a finance charge.
Financial assets and financial liabilities are offset, and the net amount
presented in the statement of financial position when, and only when, the Group
currently has a legally enforceable right to offset the amounts and intends
either to settle them on a net basis or to realise the asset and settle the
liability simultaneously.
ii. Loans and receivables- Measurement
These assets are initially measured at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective interest method.
iii. Assets at FVOCI - Measurement
These assets are initially measured at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, they are
measured at fair value and changes therein, other than impairment losses, are
recognised in OCI and accumulated in the revaluation reserve.
When these assets are derecognised, the gain or loss accumulated in equity is
reclassified to profit or loss.
iv. Non-derivative financial liabilities - Measurement
Other non-derivative financial liabilities are initially measured at fair value
less any directly attributable transaction costs. Subsequent to initial
recognition, these liabilities are measured at amortised cost using the
effective interest method.
v. Convertible loan notes and derivative financial instruments
The presentation and measurement of loan notes for accounting purposes is
governed by IAS 32 and IAS 39. These standards require the loan notes to be
separated into two components:
. A derivative liability, and
. A debt host liability.
This is because the loan notes are convertible into an unknown number of
shares, therefore failing the 'fixed-for-fixed' criterion under IAS 32. This
requires the 'underlying option component' of the loan note to be valued first
(as an embedded derivative), with the residual of the face value being
allocated to the debt host liability (refer financial liabilities policy
above).
Compound financial instruments issued by the Group comprise convertible notes
denominated in British pounds that can be converted to ordinary shares at the
option of the holder, when the number of shares to be issued is fixed and does
not vary with changes in fair value.
The liability component of compound financial instruments is initially
recognised at the fair value of a similar liability that does not have an
equity conversion option. The equity component is initially recognised at the
difference between the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound
financial instrument is measured at amortised cost using the effective interest
method. The equity component of a compound financial instrument is not
remeasured.
Interest related to the financial liability is recognised in profit or loss. On
conversion at maturity, the financial liability is reclassified to equity and
no gain or loss is recognised.
The Group's financial liabilities include amounts due to a director, trade
payables and accrued liabilities. These financial liabilities are classified as
FVTPL are stated at fair value with any gains or losses arising on
re-measurement recognised in profit or loss. Other financial liabilities,
including borrowings are initially measured at fair value, net of transaction
costs.
j. Borrowings
Borrowings are presented as current liabilities unless the Group has an
unconditional right to defer settlement for at least 12 months after the
reporting period, in which case they are presented as non-current liabilities.
Borrowings are initially recorded at fair value, net of transaction costs and
subsequently carried for at amortised costs using the effective interest
method. Any difference between the proceeds (net of transaction costs) and the
redemption value is recognised in profit or loss over the year of the
borrowings using the effective interest method. Borrowings which are due to be
settled within twelve months after the reporting period are included in current
borrowings in the statement of financial position even though the original term
was for a period longer than twelve months and an agreement to refinance, or to
reschedule payments, on a long-term basis is completed after the reporting
period and before the financial statements are authorised for issue.
k. Revenue Recognition
Performance obligations and service recognition policies
Revenue is measured based on the consideration specified in a contract with a
customer. The Group recognises revenue when it transfers control over of goods
or services to a customer.
The following table provides information about the nature and timing of the
satisfaction of performance obligations in contracts with customers, including
significant payment terms, and the related revenue recognition policies.
Nature and timing of
Type of product/ satisfaction of performance Revenue recognition under
service obligations, including IFRS 15
significant payment terms
Sale of goods Customers obtain control of the Revenue is recognised when
goods when the goods have been the goods are delivered and
delivered to them and have been have been accepted by the
accepted at their premises or customers at their premises
the agreed point of delivery. or the agreed point of
Invoices are generated at that delivery.
point in time net of rebates
and discounts. Invoices are
generally payable within 30
days. No settlement discounts
are provided for.
The sale of the goods are not
subject to a return policy.
Interest revenue Interest income is recognised Once a financial asset has
in the income statement for all been written down to its
interest-bearing instruments estimated recoverable amount,
(whether classified as interest income is thereafter
held-to-maturity, FVTOCI, recognised based on the
FVTPL, derivatives or other effective interest rate that
assets) on an accrual basis was used to discount the
using the effective interest future cash flows for the
method based on the actual purpose of measuring the
purchase price including recoverable amount.
direct transaction costs.
l. Cost of Sales
Cost of sales consists of all costs of purchase and other directly incurred
costs.
Cost of purchase comprises the purchase price, import duties and other taxes
(other than those subsequently recoverable by the Group from the taxing
authorities), if any, and transport, handling and other costs directly
attributable to the acquisition of goods. Trade discounts, rebates and other
similar items are deducted in determining the costs of purchase. Cost of
conversion primarily consists of hiring charges of subcontractors incurred
during conversion.
m. Finance Income and Finance Costs
The Group's finance income and finance costs include:
. Interest income;
. Interest expense;
. Dividend income;
Interest income and expense is recognised using the effective interest method.
Dividend income is recognised in profit or loss on the date on which the
Group's right to receive payment is established.
The "effective interest rate" is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument to:
. the gross carrying amount of the financial asset; or
. the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is
applied to the gross carrying amount of the asset (when the asset is not
credit-impaired) or to the amortised cost of the liability. However, for
financial assets that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest
rate to the amortised cost of the financial asset, if the asset is no-longer
credit-impaired, then the calculation of interest income reverts to the gross
basis.
n. Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the statement of comprehensive
income because it excludes items of income and expense that are taxable or
deductible in other years, and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of the
reporting year.
Deferred tax is recognised on temporary differences between the carrying amount
of assets and liabilities in the consolidated financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition (other than in
a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
associated with investments in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax
assets arising from deductible temporary differences associated with such
investments are only recognised to the extent that it is probable that there
will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting year and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year in which the liability is settled or the asset
realised. The measurement of deferred tax assets and liabilities reflects the
tax consequences that would follow from the manner in which the Group expects,
at the end of the reporting year, to recover or settle the carrying amount of
its assets and liabilities.
Current or deferred tax for the year is recognised in profit or loss, except
when it relates to items that are recognised in other comprehensive income or
directly in equity, in which case the current and deferred tax is also
recognised in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the
business combination.
o. Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits
with banks and other financial institutions, and short-term, highly liquid
investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value, having been within
three months of maturity at acquisition. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are also
included as a component of cash and cash equivalents for the purpose of the
consolidated statement of cash flows.
p. Provisions and Contingencies
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
that obligation. Provisions are measured at the Directors' best estimate of the
expenditure required to settle the obligation at the statement of financial
position date and are discounted to present value where the effect is material.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations
may be small.
When the effect of discounting is material, the amount recognised for a
provision is the present value at the reporting date of the future expenditures
expected to be required to settle the obligation. The increase in the
discounted present value amount arising from the passage of time is included in
finance costs in the statement of comprehensive income.
Contingent liabilities are not recognised in the financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic
benefits is remote. A contingent asset is not recognised in the financial
statements but disclosed when an inflow of economic benefits is probable.
q. Share Capital
Ordinary shares are classified as equity. Proceeds from issuance of ordinary
shares are classified as equity. Incremental costs directly attributable to the
issuance of new ordinary shares are deducted against share capital and share
premium.
r. Foreign Currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e.
the currency of the primary economic environment in which the entity operates)
at the rates of exchanges prevailing on the dates of the transactions. At the
end of the reporting year, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items carried
at fair value that are denominated in foreign currencies are retranslated at
the rates prevailing on the date when the fair value was determined.
Non-monetary items that are measured in terms of historical costs in a foreign
currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on
translation of monetary items, are recognised in profit or loss in the year in
which they arise. Exchange differences arising on the retranslation of
non-monetary items carried at fair value are included in profit or loss for the
year except for differences arising on the retranslation of non-monetary items
in respect of which gains, and losses are recognised directly in other
comprehensive income, in which cases, the exchange differences are also
recognised directly in other comprehensive income.
For the purposes of presenting the consolidated financial statements, assets
and liabilities of the Group's foreign operations are translated from South
African Rand into the presentation currency of the Group of Pound Sterling at
the rate of exchange prevailing at the end of the reporting year, and their
income and expenses are translated at the average exchange rates for the year,
unless exchange rates fluctuate significantly during that year, in which case,
the exchange rates prevailing at the dates of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive income and
accumulated in equity.
The principal exchange rates during the year are set out in the table below:
Rate compared to £ Year End Rate Year End Rate
2020 2019
South African Rand 21.02 19.53
US Dollar 1.31 1.29
s. Finance Leases
Assets held under finance leases are initially recognised as assets of the
Group at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the
lessor is included in the statement of financial position as a finance lease
obligation. Lease payments are treated as a reduction of the lease obligation
on the remaining balance of the liability.
Finance expenses are recognised immediately in profit or loss, unless they are
directly attributable to qualifying assets, in which case they are capitalised.
Contingent rentals are recognised as expenses in the years in which they are
incurred.
t. Employee Benefits
Salaries, annual bonuses, paid annual leave and the cost to the Group of
non-monetary benefits are accrued in the year in which employees of the Group
render the associated services. Where payment or settlement is deferred and the
effect would be material, these amounts are stated at their present values.
u. Segmental Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the executive
Director who makes strategic decisions.
3.Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
In the application of the Group's accounting policies, which are described
above, management is required to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and assumptions that had a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities
are discussed below.
a. COVID-19 Pandemic and "lockdowns"
With the declaration that COVID-19 was a pandemic on 13 March 2020 and the
South African "lockdown" being announced on 23 March 2020 falling before the 31
October 2020, the Directors have adopted that the COVID-19 pandemic is a
current period event. As a result the Directors have considered the impact of
the COVID-19 pandemic (see note 34) on all areas of Judgment that impact the
current accounting period including all the areas of Judgment included in note
3. Where appropriate to do so the Directors have made adjustments to estimates
as a result of COVID-19 as a current period adjusting event and considered this
in all areas requiring review of impairment including property, plant and
equipment, intangible assets, trade receivables and inventory carrying values.
The impact of the pandemic has also been considered in the preparation of the
forecast for the review of the going concern assumptions.
b. Inventory Valuation
Inventory is valued at the lower of cost and net realisable value. Net
realisable value of inventories is the estimated selling price in the ordinary
course of business, less estimated costs of completion and selling expenses.
These estimates are based on the current market conditions and the historical
experience of selling products of a similar nature. It could change
significantly as a result of competitors' actions in response to severe
industry cycles. The Group reviews its inventories in order to identify
slow-moving merchandise and uses markdowns to clear merchandise. Inventory
value is reduced when the decision to markdown below cost is made.
c. Impairment of Goodwill
The Group's management reviews goodwill on consolidation arising on the
acquisition of subsidiaries on a regular basis to determine if any provision
for impairment is necessary. The policy for the impairment of goodwill of the
Group is based on, where appropriate, the evaluation of the trading performance
of the subsidiary and on management's judgement. A considerable amount of
judgement relating to the subsidiary's future trading performance and the
perception of the subsidiary in the market place is required in assessing
whether there is any goodwill in the relevant subsidiaries. If the financial
conditions of the subsidiary are judged to have deteriorated to the extent that
the goodwill may have been impaired, a provision for impairment may be
required.
d. Impairment of long term Inter-company Receivables
The Group's management reviews long-term inter-company receivables on a regular
basis to determine if any provision for impairment is necessary. The policy for
the impairment of long-term inter-company receivables of the Group is based on,
where appropriate, the evaluation of collectability, the trading performance of
the relevant subsidiary and on management's judgement. A considerable amount of
judgement is required in assessing the ultimate realisation of these
outstanding amounts, including the current and estimated future trading
performance of the relevant subsidiary. If the financial conditions of
inter-company debtors of the Group were to deteriorate, resulting in an
impairment of their ability to make payments, a provision for impairment may be
required.
e. Impairment of Receivables
The Group's management reviews receivables on a regular basis to determine if
any provision for impairment is necessary. The policy for the impairment of
receivables of the Group is based on, where appropriate, the evaluation of
collectability and ageing analysis of the receivables and on management's
judgement. A considerable amount of judgement is required in assessing the
ultimate realisation of these outstanding amounts, including the current
creditworthiness and the past collection history of each debtor. If the
financial conditions of debtors of the Group were to deteriorate, resulting in
an impairment of their ability to make payments, provision for impairment may
be required.
f Incremental borrowing cost of IFRS 16 Right of Use assets and
Liabilities
In assessing the Group's right of use assets and liabilities, the Group has to
assess its incremental borrowing costs. As an approximation of the Group's
incremental long term borrowing costs, the Group estimated the borrowing costs
associated with similar long term, asset based financing arrangements. The
Group based the implied incremental borrowing costs on the South African prime
lending rate applicable at the date of commencement of the agreement and added
an appropriate lending premium that would be typically applied by lenders. At
the year end the estimated incremental borrowing costs used amounted to 8.5%
(2019: - n/a).
g. Income Taxes
The Group is subject to income taxes in South Africa and the UK. The South
African income taxes are administered by South African accountants. Significant
judgement is required in determining the provision for income taxes and the
timing of payment of the related tax. There are certain transactions and
calculations for which the ultimate tax determination is uncertain during the
ordinary course of business. The Group recognises liabilities for anticipated
tax based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax provision in the year in
which such determination is made.
h. Share Based Payments
The fair value of share-based payments recognised in the income statement is
measured by use of the Black Scholes model, which considers conditions attached
to the vesting and exercise of the equity instruments. The expected life used
in the model is adjusted; based on management's best estimate, for the effects
of non-transferability, exercise restrictions and behavioural considerations.
The share price volatility percentage factor used in the calculation is based
on management's best estimate of future share price behaviour based on past
experience, future expectations and benchmarked against peer companies in the
industry.
i. Depreciation and Amortisation
The Group depreciates property, plant and equipment and amortises the leasehold
buildings and land use rights on a straight-line method over the estimated
useful lives. The estimated useful lives reflect the Directors' estimate of the
years that the Group intends to derive future economic benefits from the use of
the Group's property, plant and equipment.
4.Segmental Reporting
In the opinion of the Directors, the Group has one class of business, being the
trading of agricultural materials. The Group's primary reporting format is
determined by the geographical segment according to the location of its
establishments. There is currently only one geographic reporting segment, which
is South Africa. All revenues and costs are derived from the single segment.
5.Revenue
Group Group
For the year For the year
ending ending
31 October 31 October
2020 2019
£ £
Major product/service lines
Sale of agricultural materials 1,773,710 1,819,552
Primary geographic markets
South Africa 1,773,710 1,819,552
Timing of revenue recognition
Products transferred at a point in time 1,773,710 1,819,552
6.Other Income
Group Group
For the year For the year
ending ending
31 October 31 October
2020 2019
£ £
Sundry income 3,000 720
Profit on disposal of Property Plant and - 128
Equipment
3,000 848
7.Personnel Expenses and Staff Numbers (Including Directors)
Group Group Company Company
For the year For the year For the For the
year year
ending ending ending ending
Number 31 October 31 October 31 October 31 October
2020 2019 2020 2019
The average number of employees
in the year were:
Directors 4 5 4 5
Management 2 2 - -
Accounts and Administration 2 2 - -
Sales 3 3 - -
Manufacturing/Warehouse 13 13 - -
Total 24 25 4 5
£ £ £ £
The aggregate payroll costs for
these
persons were: 285,288 321,365 49,896 59,896
Average ratio of executive pay
verses average employee pay 1.18 0.71
Average Directors 13,624 11,979
Average of all employees 11,887 12,855
Average of non-director 11,540 13,073
employees
8.Directors' Remuneration
31 October 31 October 31 October 31 October
Salaries and Fees 2020 2019 2020 2019
£ £ £ £
David Lenigas 12,000 12,000 12,000 12,000
George Roach - 10,000 - 10,000
Robert Scott 16,600 12,000 12,000 12,000
Andrew Monk * 13,896 13,896 13,896 13,896
Matt Bonner 12,000 12,000 12,000 12,000
54,496 59,896 49,896 59,896
* Included in Andrew Monk's remuneration is £1,896 for National Insurance.
No pension contributions were made by the Company on behalf of its directors.
At the year-end a total of £194,266 (2019: £144,370) was outstanding in respect
of directors' emoluments.
9.Expenses - Analysis by Nature
Group Group Company Company
For the For the For the For the
year year year year
ending ending ending ending
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Auditor's remuneration for audit 27,070 25,200 27,070 25,200
services: Parent
Auditor's remuneration for - 800 - 800
corporate tax compliance
Auditor's remuneration for 1,500 1,500 1,500 1,500
audit related services
Auditor's remuneration for other - - -
services: Parent
Auditor's remuneration for audit 3,065 3,016 - -
services: Subsidiary
Brokership fees 66,494 20,115 66,494 20,116
Legal and professional fees 320,999 13,099 318,938 12,842
Registrar fees 1,783 15,946 1,783 15,947
Depreciation on property, 16,893 24,245 - -
plant and equipment (Note 17)
Depreciation on IFRS 16 Right 21,549 - - -
of Use Asset (Note 28)
(Gain) /loss on exchange 123,962 (128,675) 17,320 2
Personnel expenses (Note 7) 285,288 321,365 49,896 59,896
Other administrative expenses 270,616 324,800 41,164 42,475
Subtotal 1,139,219 621,411 524,165 178,778
Admission and regulatory 140,151 249,798 140,151 249,798
expenses
Total administrative expenses 1,279,370 871,209 664,316 428,576
10.Impairments
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Impairment of goodwill 226,644 - - -
Impairment of investment in - - 226,644 -
subsidiary
Impairment of inter-company loans - - 884,651 -
receivable
226,644 - 1,111,295 -
During the financial year, the recoverability of the investment was evaluated
and in, management's estimation, it was considered necessary to impair the
goodwill on consolidation, the investment in the subsidiary and the
intercompany loans receivable.
11.Finance Costs
Group Group Company Company
For the For the For the For the
year year year year
ending ending ending ending
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Interest paid on borrowings 55,309 84,034 - -
Interest accrued on Convertible 30,082 30,000 30,082 30,000
Loan Notes
IFRS 16 Right of Use Lease 11,552 - - -
Liability
96,943 114,034 30,082 30,000
Finance costs represent interest and charges in respect of the discounting of
invoices, the interest accrual for the Convertible Loan Notes issued and the
interest charged on capitalised right-of use lease liability.
12.Finance Income
Group Group Company Company
For the For the For the For the
year year year year
ending ending ending ending
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Interest earned on loan 140,471 100,708 140,471 100,708
receivable
Interest earned on - - 42,214 11,099
intercompany loan receivable
Interest earned on favourable 492 128 - -
bank balances
140,963 100,836 182,685 111,807
13.Taxation
The charge for the year can be reconciled to the profit before taxation per the
consolidated statement of comprehensive income as follows:
Group Group Company Company
For the For the For the For the
year year year year
ending ending ending ending
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Tax Charge - - - -
Factors affecting the tax
charge
Loss on ordinary activities (1,035,485) (284,665) (1,620,008) (346,769)
before taxation
Loss on ordinary activities before (196,742) (54,086) (307,802) (65,886)
taxation multiplied by standard
rate of UK corporation tax of
19,00% (2019: 19,00%)
Tax effect of expense not - - - -
deductible for tax
Overseas tax rate differences from 42,927 8,471 - -
the UK rate (26%)
Tax effect of utilisation of 153,815 45,615 307,802 65,886
tax losses
Tax Charge - - - -
The Company has excess management expenses of £868,259 (2019 - £507,518)
available for carry forward against future trading profits. The deferred tax
asset in these tax losses at 19.0% of £164,969 (2019 -17.00%, £86,278) has not
been recognised due to the uncertainty of recovery.
14.Loss Per Share
Loss per share data is based on the Group result for the year and the weighted
average number of shares in issue.
Basic loss per share is calculated by dividing the loss attributable to equity
shareholders by the weighted average number of ordinary shares in issue during
the year:
Year ended Year ended
31 October 31 October
2020 2019
£ £
Loss after tax (1,035,485) (284,665)
Weighted average number of ordinary shares in issue 20,074,325 19,399,198
Basic and diluted loss per share (pence) (5.16p) (1.47p)
Basic and diluted loss per share are the same, since where a loss is incurred
the effect of outstanding share options and warrants is considered
anti-dilutive and is ignored for the purpose of the loss per share calculation.
As at 31 October 2020 there were 21,966,087 (31 October 2019 - 19,399,198)
shares in issue, 12,421,622 (31 October 2019 - 8,188,066) outstanding share
warrants and 897,809 (2019 - 1,074,809) outstanding options, both are
potentially dilutive.
15.Investments
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Investment in Subsidiary
- Cost of investment - - 297,915 297,915
- Impairment of investment - - (226,644) -
Carrying value - - 71,271 297,915
15.1. Investment in Associate
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Investment in Dynamic 6,154 96,979 6,154 96,979
Intertrade Agri (Pty) Ltd
(held for sale)
Equity accounted profit for - - - -
the period
Impairment of investment - (90,825) - (90,825)
Carrying value 6,154 6,154 6,154 6,154
Management have committed to selling its investment in the associate, Dynamic
Intertrade Agri (Pty) Ltd. The asset is available for immediate sale to a
willing buyer. A buyer for the asset has been identified and a preliminary
price of £6,154 has been discussed. It was anticipated that the sale will be
concluded within the last financial year ending 31 October 2020, however
COVID-19 delayed the process. The investment is still being held for sale to
the existing buyer. Accordingly, for the current year the investment is
reflected under current assets as held for sale. As part of the process of
selling the group's investment in the associate a fair value exercise was
undertaken. Management considered the financial performance of the company, the
price that a willing buyer was prepared to pay for the investment as well as
the prevailing market conditions. Based on the above, the directors are of the
opinion that the fair value of the company is £6,154.
As at 31 October 2020, the Company directly and indirectly held the following
subsidiary and associate:
Name of company Principal Country of Proportion (%) Proportion
activities incorporation and of equity (%) of equity
place of business interest interest
2020 2019
Dynamic Trading in South Africa 100% 100%
Intertrade (Pty) Agricultural
Limited Products
Dynamic Agricultural South Africa 46.8% 46.8%
Intertrade Agri commodity trading Designated as Designated as
(Pty) Limited and distribution Held for Sale Held for Sale
16.Long Term Intercompany Loans
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Loan to Dynamic Intertrade
(Pty) Ltd
- Amount receivable - - 884,651 842,437
- Impairment of loan - - (884,651) -
Carrying value - - - 842,437
The loan is unsecured and bears interest at 7% p.a. As indicated in Note 10,
both the capital and the interest elements of the above loan have been fully
impaired in the current year.
17.Property, Plant and Equipment
Group Leasehold Furniture, Plant and Total
Improve-ments fixtures machinery
and
equipment
£ £ £ £
Cost
As at 31 October 2019 21,067 4,647 285,347 311,061
Additions - - 3,423 3,423
Disposals - - - -
Exchange difference (1,496) (330) (20,258) (22,084)
As at 31 October 2020 19,571 4,317 268,512 292,400
Accumulated depreciation
As at 31 October 2019 19,243 3,519 257,461 280,223
Charge for the year 1,217 408 15,268 16,893
Released on disposal - - - -
Exchange difference (1,375) (253) (18,386) (20,014)
As at 31 October 2020 19,085 3,674 254,343 277,102
Net Book Value
As at 31 October 2019 1,824 1,128 27,886 30,838
As at 31 October 2020 486 643 14,169 15,298
The holding company held no tangible fixed assets at 31 October 2020 and 2019.
18.Goodwill
Goodwill has been calculated as £nil (2019: £226,644) and is measured as the
excess of the sum of the consideration paid and the fair value of the
acquirer's previously held equity interest in the acquiree over the net of the
acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed.
Goodwill has been tested for impairment as at the end of the reporting period.
The recoverable amount of goodwill at 31 October 2020 and 2019 was assessed on
the basis of value in use. As at 31 October 2020 this did not exceed the
carrying values, the goodwill was fully impaired. The key assumptions in the
calculation to assess value in use are future revenues and the ability to
generate future cash flows.
The most recent financial results and forecasts for the next year were used,
followed by an extrapolation of future cash flows using a price earnings ratio.
The projected results were discounted at a rate which is a prudent evaluation
of the pre-tax rate that reflects current market assessments of the time value
of money and risks specific to the cash-generating unit.
The key assumptions used in the value in use calculations in 2020 and 2019 were
as follows:
- A discount rate of 10%
- Sales growth of 18%
- Weighting of probabilities assigned to potential earnings.
The Directors believe that despite the significant long term earning potential
identified, based upon the current poor performance of Dynamic Intertrade, the
goodwill should be fully impaired. Refer to Note 10.
19.Loan Receivable
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Loan to Touchwood Investments 994,729 871,579 994,729 871,579
Ltd
Carrying value 994,729 871,579 994,729 871,579
The loan was advanced to Touchwood Investments Ltd, a company that is part of
the Comarco Group, which operates a port in Mombasa. This loan bears interest
at 12% for the first 9 months, where after the rate increased to 15%. The loan
was initially for a period 24 months and was initially repayable in full on 12
November 2020, however due to the COVID-19 pandemic the repayment of the loan
has been extended to 30 April 2021. The Company has security to cover the loan,
being an option to acquire, for a nominal consideration, the shares of
Touchwood Investments Ltd. Touchwood's major asset is the land at the Comarco
port which was valued at $12,000,000. The valuation was done in June 2018 and
despite the possible effect of COVID-19 the directors are of the opinion that
there is sufficient equity to cover the loan.
20.Inventories
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Raw materials 171,943 62,253 - -
Finished goods 9,765 5,106 - -
Carrying value 181,708 67,359 - -
21.Trade and other receivables
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Financial instruments
Trade receivables 272,130 381,112 - -
Deposits 5,963 26,602 - 13,381
Other receivables 12,163 12,281 12,163 12,281
Non-financial instruments
Prepayments 1,683 2,780 - -
Carrying value 291,939 422,775 12,163 25,662
Current 291,939 422,775 12,163 25,662
Non-Current - - - -
291,939 422,775 12,163 25,662
The receivables are considered to be held within a held-to-collect business
model consistent with the Group's continuing recognition of the receivables.
As at 31 October 2020 the Group does not have any contract assets nor any
contract liabilities arising out of contracts with customers relating to the
Group's right to receive consideration for agricultural products sold but not
billed. Group Trade receivables represent amounts receivable on the sale of
agricultural products and are included after provisions for doubtful debts.
Credit and market risks, and impairment losses
The Group did not impair any of its trade receivables as at 31 October 2020, as
all trade receivables generated during the financial year were settled in full
prior to the year-end.
Information about the Group's exposure to credit and market risks and
impairment losses for trade receivables is included in Note 30.
The Directors consider that the carrying amount of trade receivables and other
receivables approximates their fair value.
22.Cash and Cash Equivalents
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Cash on hand 45,251 5,218 25,624 4,383
Bank overdraft - - - -
45,251 5,218 25,624 4,383
23.Trade and Other Payables
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Trade Payables 1,500,098 768,246 1,202,316 640,263
Other Payables 32,909 5,819 32,909 5,819
Related Party Payables 60,223 48,550 - -
1,593,230 822,615 1,235,225 646,082
Trade payables represent amounts due for the purchase of agriculture materials
and administrative expenses. The Directors consider that the carrying amount of
trade payables approximates to their fair value.
The related party financial liabilities comprise:
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
G Roach 20,637 22,214 - -
M Bonner 24,052 26,336 - -
R Scott 15,534 - - -
60,223 48,550 - -
Terms:
G Roach: The loan bears interest at the South African prime overdraft rate. The
interest will be calculated and paid when the loan is repaid. The loan is
repayable as decided upon from time to time.
M Bonner: The loan bears interest at the South African prime overdraft rate.
The interest is calculated and paid quarterly. The loan is repayable as decided
upon from time to time.
R Scott: The loan bears interest at the South African prime overdraft rate. The
interest is calculated and paid quarterly. The loan is repayable as decided
upon from time to time.
24.Share Capital and Share Premium
Allotted, called up and Number of Nominal Share Total
fully paid share capital and shares Value Premium
share premium
£ £ £
Balance at 31 October 2018 387,983,954 387,984 2,519,909 2,907,893
Issued during the year - - - -
Share consolidation at 20:1 (368,584,756) - - -
Balance at 31 October 2019 19,399,198 387,984 2,519,909 2,907,893
Share issue - 27 July 2020 2,566,889 51,338 51,338 102,676
Balance at 31 October 2020 21,966,087 439,322 2,571,247 3,010,569
Share capital is the amount subscribed for shares at nominal value.
During the 2019 financial year the company consolidated all existing and issued
shares and share options on the basis of 20 existing shares/options for 1 new
share/option.
Retained losses represent the cumulative loss of the Group attributable to
equity shareholders.
Share-based payments reserve relate to the charge for share-based payments in
accordance with IFRS 2.
During the prior year the company placed these shares and as the number of
placing shares comprised more than 10% of the companies issued share capital,
and although the placing shares has been allotted, admission of the placing
shares required publication of a Prospectus within a twelve-month period.
25.Share Based Payments Reserve
The Company has a share-ownership compensation scheme for senior executives of
the Company whereby senior executives may be granted options to purchase
Ordinary Shares in the Company.
Warrants
During the 2019 financial year the company consolidated all existing and issued
shares and share options on the basis of 20 existing shares/options for 1 new
share/option.
There are 12,421,622 warrants to subscribe for ordinary shares at 31 October
2020 (31 October 2019: 8,188,066).
As at 1 Exercised As at 31
/
Date of Grant November Vested / October Exercise Exercise/Vesting Date
2019 Issued 2020 Price From To
Warrants
09/05/2012 138,066 - 138,066 20p 09/05/2012 05/09/2022
27/11/2018 8,050,000 - 8,050,000 20p 27/11/2018 30/09/2022
24/07/2020 - 4,233,556 4,233,556 5p 24/07/2020 27/07/2022
8,188,066 4,233,556 12,421,622
Warrants were attached to the Subscription Shares on 24 July 2020 a 1-for-1
basis, with an exercise price of 5.0p per ordinary share and expire 12 months
from allotment of the Subscription Shares. Further warrants were attached to
any new ordinary shares that are issued as a result of conversion of any Loan
Notes, on a 1-for-1 basis on the same terms as the Subscription Warrants.
Warrants were attached to the Subscription Shares on 14 September 2018 a
1-for-1 basis, with an exercise price of 20.0p per ordinary share and expire 12
months from allotment of the Subscription Shares. Further warrants were
attached to any new ordinary shares that are issued as a result of conversion
of any Loan Notes, on a 1-for-1 basis on the same terms as the Subscription
Warrants. A maximum of 20,450,222 new ordinary shares could potentially be
issued in the event that all Subscription Warrants and Loan Note warrants are
exercised.
Options
At 31 October 2020 there were 897,809 share options issued to the directors and
past directors of the Company. During the current year nil share options were
granted (2019: Nil). During the financial year the Company consolidated all
existing and issued shares and share options on the basis of 20 existing shares
/options for 1 new share/option.
The movement on the share-based payment charge for the year was £nil (2019 - £
nil) in respect of the issued options. The details of warrants and options are
as follows:
As at 1 Exercised As at 31
/
Date of Grant November Vested / October Exercise Exercise/Vesting Date
2019 (Forfeited) 2020 Price From To
Options
09/05/2012 1,047,809 (150,000) 897,809 20p 09/05/2012 05/09/2022
1,047,809 (150,000) 897,809
The remuneration committee's aim is to remunerate executive directors
competitively and to reward performance. The remuneration committee determines
the company's policy for the remuneration of executive directors, having regard
to the UK Corporate Governance Code and its provisions on directors'
remuneration.
The number of options outstanding to the Directors that served in the year, as
at 31 October 2020 were as follows:
2020 2019
Director Options Options
Andrew Monk 191,952 191,952
George Roach (resigned) 191,952 191,952
Robert Scott 50,000 50,000
Matthew Bonner 180,000 180,000
Total 613,904 613,904
The estimated fair value of the options in issue was calculated by applying the
Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:
Share price at date of grant £0.0050
Exercise price £0.0075 to £0.01
Expected volatility 65%
Expected dividend 0%
Contractual life 1.1 years
Risk free rate 1.63%
Estimated fair value of each £0.003764 - £0.0378
option
The share options outstanding at the year-end had a weighted average remaining
contractual life of 1.5 years (2019: 2.5 years).
26.Borrowings
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Loan from director M, Bonner - 5,000 - 5,000
Loan from director R, Scott - 5,000 - 5,000
Bibby Apex Financial
services (Pty) Ltd
- Inventory Financing - 61,077 - -
- Accounts receivable - 251,450 - -
financing
Euro Middle East Trading
(PTY) LTD
- Inventory Financing - 40,564 - -
Euro 2 Afrisko Ltd
- Inventory Financing 256,400 - - -
Onga Wari CRS (PTY) LTD
- Inventory Financing 52,808 - - -
Working Capital Partners
- Accounts receivable 119,511 - - -
financing
Carrying value 428,719 363,091 - 10,000
The Group's wholly owned subsidiary Dynamic Intertrade has entered into a
funding agreements with Euro 2 Afrisko Ltd and Onga Wari (2019 - Bibby Apex
Financial services (Pty) Ltd) whereby Euro 2 Afrisko pay the suppliers directly
and this is then repaid by Dynamic Intertrade to purchase stock from suppliers
where deposits are required.
The borrowings are secured by a Security Agreement from the Company. The loans
bear interest at 14% per annum.
27.Convertible loan notes
Group Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Convertible loan notes 250,000 250,000 250,000 250,000
Carrying value 250,000 250,000 250,000 250,000
The Loan Notes holder will be paid an annual interest rate of 12 per cent in
cash, semi-annually, with a term of 24 months. The Loan Notes will not be
admitted to trading on any exchange.
As per note 25, during the financial year, as part of the subscription dated 24
July 2020, 3,333,333 additional share warrants were allocated to the capital
portion of the convertible loan notes and 750,000 additional share warrants
were allocated to the outstanding interest portion of the convertible loan
notes, which at the subscription date was £37,500.
The new ordinary shares issued as a result of conversion of all Loan Notes
would represent 5,000,000 (2019: 1,666,667) ordinary shares, or 7.9 per cent of
the issued share capital of the Company, as enlarged by the 2018 Fundraising.
On 14 September 2018 issued £250,000 of convertible loan notes for 50,000,000
loan notes of 0.50p (the "Loan Notes") with a conversion price of 0.75p (the
"Conversion Price"). The Subscription Price was at the last closing price of
0.50p per ordinary share as at 13 September 2018. Further, the Conversion Price
represents a premium of 50.0 per cent to this same closing price. The
Subscription included the issue of 50,000,000 Convertible Loan Notes of 0.50p
with a conversion price of 0.75p which after the 20:1 share consolidation of
2018 resulted in there being 2,500,000 Convertible Loan Notes of 10.0p with a
conversion price of 15.0p.
If the Convertible Loan Notes were converted, up to 5,750,000 (2019: 1,666,667)
new Ordinary Shares will be issued ("Loan Conversion Shares"). Further,
Warrants will be attached to any Loan Conversion Shares that are issued on a
1-for-1 basis on the same terms as the Warrants attached to the New Ordinary
Shares ("Loan Conversion Warrants"). A maximum of 20,450,222 (2019: 9,716,667)
New Ordinary Shares could potentially be issued in the event that all New
Ordinary Shares Warrants and Loan Conversion Warrants are exercised.
However, under the terms of the Loan Note Instrument, the maximum number of
Loan Notes that can be converted into ordinary shares at any one time will be
restricted such that Mike Joseph's total voting rights cannot exceed 29.9 per
cent. of the shares in issue of the Company.
28.Leases
Right of use assets and lease liability
This note explains the impact of the adoption of IFRS 16 Leases on the Group's
financial statements and the new accounting policies that have been applied
from 1 October 2019 can be found in note 1. The Group has adopted IFRS 16
retrospectively from 1 October 2019, but has not restated comparatives for the
year ended 31 October 2019, as permitted under the specific transitional
provisions in the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening statement of
financial position on 1 November 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to
leases which had previously been classified as 'operating leases' under the
principles of IAS 17 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee's
incremental borrowing rate for comparable assets as of 1 November 2019. The
weighted average lessee's incremental borrowing rate for comparable mortgage
bonds applied to the lease liabilities on 1 November 2019 was 8.5%, being the
discount rate on the Group's borrowings. In the Directors opinion this is the
discount rate that the Group would obtain should it be purchasing land and
buildings. Without further security available the Group would be unlikely to
secure funding from other sources and therefore the Directors believe the 8.5%
rate applied is the most appropriate basis on which to base the IFRS 16
calculations.
For leases previously classified as finance leases the entity recognised the
carrying amount of the lease asset and lease liability immediately before
transition as the carrying amount of the right of use asset and the lease
liability at the date of initial application. The measurement principles of
IFRS 16 are only applied after that date.
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Operating lease commitments
disclosed as at 31 October - 68,732 - -
2019
Discounted using the
incremental
borrowing rate at date of initial - - - -
application
Additions to leases during 430,973 - - -
the year
Lease payments (20,471) - - -
Lease liability recognised in
the
statement of financial 410,502 - - -
position
Of which:
Current lease liabilities 66,477 - - -
Non-current lease liabilities 344,025 - - -
410,502 - - -
Right-of use assets were measured at the amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments relating to
that lease recognised in the statement of financial position as at 31 October
2019. There were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial application. The
recognised right of-use assets relate to the following types of assets:
Group Group Company Company
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Properties 409,424 - - -
On the 3rd of March 2020 a new lease was signed for the Group's main trading
address, 104 Bofors Circle, Epping Industria 2, Cape Town, South Africa with
commencement date of 1 July 2020. On the commencement date, the Group
recognised a lease liability and right-of-use asset of £430,973.
The change in accounting policy did not affect the statement of financial
position as at 1 November 2019 and there were no changes to the Retained Income
as at 1 November 2019.
Impact on earnings per share
Depreciation on the right-of-use asset amounting to £21,549 and interest on the
right-of-use lease liability of £11,552 were charged to the statement of profit
and loss for the current year. As a result, the earnings per share decreased by
0.005p.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following
practical expedients permitted by the standard:
* the accounting for operating leases with a remaining lease term of less
than 12 months as at 1 November 2019 as short-term leases;
* the exclusion of initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and
* the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a
lease at the date of initial application. Instead, for contracts entered into
before the transition date the group relied on its assessment made in applying
IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
29.Notes to the Statement of Cash Flows
Group Group Company Company
For the For the For the For the
year year year year
ending ending ending ending
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Cash and cash equivalents 45,251 5,218 25,624 4,383
Borrowings (428,719) (363,091) - (10,000)
Convertible loan notes (250,000) (250,000) (250,000) (250,000)
Right of use lease (410,502) - - -
liability
Net Debt (1,043,970) (607,873) (224,376) (255,617)
Cash and liquid 45,251 5,218 25,624 4,383
investments
Fixed rate instruments (1,089,221) (613,091) (250,000) (260,000)
Net Debt (1,043,970) (607,873) (224,376) (255,617)
Net Debt Reconciliation for the
Group
Cash and Right of
use
cash Convertible lease Total
equivalents Borrowings loan notes liability debt Net debt
£ £ £ £ £ £
Net debt as at 1 945,823 (91,898) (253,863) - (345,761) 600,062
November 2018
Cash flows (940,527) (278,725) 3,863 - (274,862) (1,215,389)
Foreign exchange (78) 7,532 - - 7,532 7,454
adjustments
Net debt as at 31 5,218 (363,091) (250,000) - (613,091) (607,873)
October 2019
Cash flows 40,093 (38,687) - 20,471 (18,216) 21,877
New lease - - - (430,973) (430,973) (430,973)
agreements
Foreign exchange (60) (26,941) - - (26,941) (27,001)
adjustments
Net debt as at 31 45,251 (428,719) (250,000) (410,502) (1,089,221) (1,043,970)
October 2020
Net Debt Reconciliation for the
Company
Cash and Right of
use
cash Convertible lease Total
equivalents Borrowings loan notes liability debt Net debt
£ £ £ £ £ £
Net debt as at 1 944,094 - (253,863) - (253,863) 690,231
November 2018
Cash flows (939,711) (10,000) 3,863 - (6,137) (945,848)
Foreign exchange - - - - - -
adjustments
Net debt as at 31 4,383 (10,000) (250,000) - (260,000) (255,617)
October 2019
Cash flows 21,241 10,000 - - 10,000 31,241
New lease - - - - - -
agreements
Foreign exchange - - - - - -
adjustments
Net debt as at 31 25,624 - (250,000) - (250,000) (224,376)
October 2020
30. Financial Instruments - Fair values and risk management
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a
reasonable approximation of fair value.
Trade and other receivables and trade and other payables classified as
held-for-sale are not included in the table below. As at 31 October 2020 the
Group did not have any trade and other receivables nor any trade and other
payables that were classified as held-for-sale.
The Group has not disclosed the fair values of financial instruments such as
short-term trade receivables and payables, because their carrying amounts are a
reasonable approximation of their fair value.
Carrying Fair value
value
Group as at 31 October 2020 Note FVOCI - Financial Other Total Level 1 Level 2 Level 3 Total
equity assets at financial
instruments amortised liabilities
cost
£ £ £ £ £ £ £ £
Financial assets measured at fair
value
Investment in associate 6,154 - - 6,154 - - 6,154 6,154
Loan receivable 994,729 - - 994,729 - - 994,729 994,729
1,000,883 - - 1,000,883
Financial assets not measured at
fair value
Trade and other receivables - 290,256 - 290,256
Cash and cash equivalents - 45,251 - 45,251
- 335,507 - 335,507
Financial liabilities measured at
fair value
- - - -
- - - -
Financial liabilities not
measured at fair value
IFRS 16 Financial Lease - - (410,502) (410,502)
Liability
Unsecured borrowings - - (428,719) (428,719)
Convertible loan notes - - (250,000) (250,000)
Trade and other payables - - (1,593,230) (1,593,230)
- - (2,682,451) (2,682,451)
Carrying Fair value
value
Group as at 31 October 2019 Note FVOCI - Financial Other Total Level 1 Level 2 Level 3 Total
equity assets at financial
instruments amortised liabilities
cost
£ £ £ £ £ £ £ £
Financial assets measured at fair
value
Investment in associate 6,154 - - 6,154 - - 6,154 6,154
Loan receivable 871,579 - - 871,579 - - 871,579 871,579
877,733 - - 877,733
Financial assets not measured at
fair value
Trade and other receivables - 419,995 - 419,995
Cash and cash equivalents - 5,218 - 5,218
- 425,213 - 425,213
Financial liabilities measured at
fair value
- - - -
- - - -
Financial liabilities not
measured at fair value
IFRS 16 Financial Lease - - - -
Liability
Unsecured borrowings - - (363,091) (363,091)
Convertible loan notes - - (250,000) (250,000)
Trade and other payables - - (822,615) (822,615)
- - (1,435,706) (1,435,706)
Carrying Fair value
value
Company as at 31 October Note FVOCI - Financial Other Total Level 1 Level 2 Level 3 Total
2020 equity assets at financial
instruments amortised liabilities
cost
£ £ £ £ £ £ £ £
Financial assets measured at fair
value
Investment in associate 6,154 - - 6,154 - - 6,154 6,154
Loan receivable 994,729 - - 994,729 - - 994,729 994,729
1,000,883 - - 1,000,883
Financial assets not measured at
fair value
Intercompany loans - - - -
receivable
Trade and other receivables - 12,163 - 12,163
Cash and cash equivalents - 25,624 - 25,624
- 37,787 - 37,787
Financial liabilities measured at
fair value
- - - -
- - - -
Financial liabilities not
measured at fair value
IFRS 16 Financial Lease - - - -
Liability
Unsecured borrowings - - - -
Convertible loan notes - - 250,000 250,000
Trade and other payables - - 1,235,225 1,235,225
- - 1,485,225 1,485,225
Carrying Fair value
value
Company as at 31 October Note FVOCI - Financial Other Total Level 1 Level 2 Level 3 Total
2019 equity assets at financial
instruments amortised liabilities
cost
£ £ £ £ £ £ £ £
Financial assets measured at fair
value
Investment in associate 6,154 - - 6,154 - - 6,154 6,154
Loan receivable 871,579 - - 871,579 - - 871,579 871,579
877,733 - - 877,733
Financial assets not measured at
fair value
Intercompany loans - 842,437 - 842,437
receivable
Trade and other receivables - 25,662 - 25,662
Cash and cash equivalents - 4,383 - 4,383
- 872,482 - 872,482
Financial liabilities measured at
fair value
- - - -
- - - -
Financial liabilities not
measured at fair value
IFRS 16 Financial Lease - - - -
Liability
Unsecured borrowings - - 10,000 10,000
Convertible loan notes - - 250,000 250,000
Trade and other payables - - 646,082 646,082
- - 906,082 906,082
Financial instruments - Fair values and risk management
B. Measurement of fair values
i. Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 3
fair values for financial instruments measured at fair value in the statement
of financial position, as well as the significant unobservable inputs used.
Related valuation processes are described in Note 3.
Financial instruments measured at fair value
Type Valuation technique Significant Inter-relationship
unobservable inputs between significant
unobservable inputs
and fair value
measurement
Investment in The value of the None None
Associate investment is adjusted
annually based upon
the group's share of
the associates profit
or loss.
ii. Transfers between Levels 1 and 2
There were no transfers between Levels 1 and 2 in either the current financial
year or in the prior financial year.
C. Financial Risk Management
The Group has exposure to the following risks arising from financial
instruments:
* credit risk;
* liquidity risk; and
* market risk.
Risk management framework
The Company's board of directors has overall responsibility for the
establishment and oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities.
The Group's audit committee oversees how management monitors compliance with
the Group's risk management policies and procedures and reviews the adequacy of
the risk management framework in relation to the risks faced by the Group. The
Group's audit committee undertake ad hoc reviews of risk management controls
and procedures, the results of which are reported to the audit committee.
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 amounts of financial assets represent the maximum credit exposure.
There was no impairment loss in the current year nor in the prior year.
Trade receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. However, management also considers the
factors that may influence the credit risk of its customer base, including the
default risk associated with the industry and country in which its customers
operate. Details of concentration of revenue are included in Note 6.
The Group has established a credit policy under which each new customer is
analysed individually for creditworthiness before the Group's standard payment
terms and conditions are offered. The Group's review includes external ratings,
if they are available, financial statements, credit agency information,
industry information and in some cases bank references. Sales limits are
established for each customer and are reviewed regularly.
The Group limits its exposure to credit risk from trade receivables by
establishing a maximum payment period of one month.
The Group does not require collateral in respect of trade and other
receivables. The Group does not have trade receivables for which a no allowance
is recognised because of collateral.
Group Group Company Company
2020 2019 2020 2019
£ £ £ £
As at 31 October the exposure
to credit
risk for trade receivables by
geographic
region was follows:
South Africa 272,130 381,112 - -
Other - - - -
272,130 381,112 - -
As at 31 October the exposure
to credit
risk for trade receivables by
counterparty was follows:
Other - - - -
- - - -
As at 31 October the exposure
to credit
risk for trade receivables by
credit
rating was follows:
External credit ratings - - - -
Other 272,130 381,112 - -
272,130 381,112 - -
Expected credit loss assessment for corporate customers as at 31 October 2019
and 31 October 2020
The Group allocates each exposure to a credit risk grade based on data that is
determined to be predictive of the risk of loss (including but not limited to
external ratings, audited financial statements, management accounts and cash
flow projections and available press information about customers) and applying
experienced credit judgement. Credit risk grades are defined using qualitative
and quantitative factors that are indicative of the risk of default.
The company had no exposure to credit risk for the year ended 31 October 2020.
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables
during the year amounted to nil.
Cash and cash equivalents
As at 31 October 2020, the Group held £45,251 in cash and cash equivalents
(2019: £5,218) and had a bank overdraft of £nil. The cash and cash equivalents
are held with bank and financial institution counterparties which are rated
Baa3 to A1+ by Moody's.
Impairment on cash and cash equivalents has been measured on a 12-month
expected loss basis and reflects the short maturities of the exposures. The
Group considers that its cash and cash equivalents have low credit risk based
on the external credit ratings of the counterparties. On the implementation of
IFRS 9 the Group did not impair any of its cash and cash equivalents.
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.
Exposure to liquidity risk
The following tables present the remaining contractual maturities of financial
liabilities at the reporting date. The amounts are gross and undiscounted and
include contractual interest payments and exclude the impact of netting
agreements.
Contractual cash
flows
Group as at Carrying Total 2 Months or 2 to 12 1 to 2 2 to 5 More than
31 October value less Months Years Years 5 years
2020
£ £ £ £ £ £ £
Non- derivative
financial
liabilities
Bank - - - - - - -
overdrafts
Unsecured shareholders'
loans - - - - - - -
Convertible loan
notes 250,000 (250,000) - - (250,000) - -
Secured loans - - - - - - -
Right-of-Use Finance
Lease 410,502 (410,502) (10,446) (56,031) (77,196) (266,829) -
Trade 1,500,098 (1,500,098) (1,500,098) - - - -
Payables
Other 32,909 (32,909) - (32,909) - - -
Payables
Related Party
Payables 60,223 (60,223) - (60,223) - - -
2,253,732 (2,253,732) (1,510,544) (149,163) (327,196) (266,829) -
Derivative financial
liabilities - - - - - - -
- - - - - - -
Contractual cash
flows
Group as at Carrying Total 2 Months 2 to 12 1 to 2 2 to 5 More than
31 October value or less Months Years Years 5 years
2019
£ £ £ £ £ £ £
Non- derivative
financial
liabilities
Bank - - - - - - -
overdrafts
Unsecured shareholders'
loans 10,000 (10,000) - (10,000) - - -
Convertible loan
notes 250,000 (250,000) - - (250,000) - -
Secured loans 353,091 (353,091) - (353,091) - - -
Right-of-Use Finance
Lease - - - - - - -
Trade 768,246 (768,246) (768,246) - - - -
Payables
Other 5,819 (5,819) - (5,819) - - -
Payables
Related Party
Payables 48,550 (48,550) - (48,550) - - -
1,435,706 (1,435,706) (768,246) (417,460) (250,000) - -
Derivative financial
liabilities - - - - - - -
- - - - - - -
Contractual cash
flows
Company as at Carrying Total 2 Months or 2 to 12 1 to 2 2 to 5 More than
31 October value less Months Years Years 5 years
2020
£ £ £ £ £ £ £
Non- derivative
financial
liabilities
Bank - - - - - - -
overdrafts
Unsecured shareholders'
loans - - - - - - -
Convertible loan
notes 250,000 (250,000) - - (250,000) - -
Secured loans - - - - - - -
Right-of-Use Finance
Lease - - - - - - -
Trade 1,202,316 (1,202,316) (1,202,316) - - - -
Payables
Other 32,909 (32,909) - (32,909) - - -
Payables
Related Party
Payables - - - - - - -
1,485,225 (1,485,225) (1,202,316) (32,909) (250,000) - -
Derivative financial
liabilities - - - - - - -
- - - - - - -
Contractual cash
flows
Company as at Carrying Total 2 Months 2 to 12 1 to 2 2 to 5 More than
31 October value or less Months Years Years 5 years
2019
£ £ £ £ £ £ £
Non- derivative
financial
liabilities
Bank - - - - - - -
overdrafts
Unsecured shareholders'
loans 10,000 (10,000) - (10,000) - - -
Convertible loan
notes 250,000 (250,000) - - (250,000) - -
Secured loans - - - - - - -
Right-of-Use Finance
Lease - - - - - - -
Trade 640,263 (640,263) (640,263) - - - -
Payables
Other 5,819 (5,819) - (5,819) - - -
Payables
Related Party
Payables - - - - - - -
906,082 (906,082) (640,263) (15,819) (250,000) - -
Derivative financial
liabilities - - - - - - -
- - - - - - -
The interest payments on the financial liabilities represent the fixed interest
rates as per the respective contracts.
The Group aims to maintain the level of its cash and cash equivalents and other
highly marketable debt investments at an amount in excess of expected cash
outflows on financial liabilities other than trade payables. The Group also
monitors the level of expected cash inflows on trade and other receivables
together with expected cash outflows on trade and other payables.
Market risk
Market risk is the risk that changes in market prices - such as foreign
exchange rates, interest rates and equity prices - will affect the Group's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:
Exposure to currency risk
The summary quantitative data about the Group's exposure to currency risk as
reported to the management of the Group is as follows:
Group Foreign 31 October 2020 31 October 2019
exchange
risk GBP USD ZAR GBP USD ZAR
Loan receivable - 1,307,472 - - 1,127,997 -
Trade and other
receivables 12,163 - 5,880,723 11,448 - 7,441,976
Cash and cash 25,624 - 412,539 4,383 - 16,314
equivalents
Unsecured
shareholders'
loans - - - (10,000) - -
Secured loans - - (6,933,134) - - (6,894,845)
Convertible loan (250,000) - - (250,000) - -
notes
Right-of-Use Finance
Lease - - (9,058,788) - - -
Trade payables (1,202,316) - (8,771,247) (646,083) - (5,111,050)
Net statement of
financial
position exposure (1,414,529) 1,307,472 (18,469,907) (890,252) 1,127,997 (4,547,605)
Next 6 months sales
forecast - - 24,584,495 - - 18,559,430
Next 6 months
purchases
forecast (85,642) - (19,570,291) - - (17,001,391)
Net forecast
transaction
exposure (85,642) - 5,014,204 - - 1,558,039
Net exposure (1,500,171) 1,307,472 (13,455,703) (890,252) 1,127,997 (2,989,566)
Company Foreign 31 October 2020 31 October 2019
exchange risk GBP USD ZAR GBP USD ZAR
Loan receivable - 1,307,472 - - 1,127,997 -
Trade and other
receivables 12,163 - - 11,448 - -
Cash and cash 25,624 - - 4,383 - -
equivalents
Unsecured
shareholders'
loans - - - (10,000) - -
Secured loans - - - - - -
Convertible loan (250,000) - - (250,000) - -
notes
Right-of-Use Finance
Lease - - - - -
Trade payables (1,202,316) - - (646,083) - -
Net statement of
financial
position exposure (1,414,529) 1,307,472 - (890,252) 1,127,997 -
Next 6 months sales
forecast - - - - - -
Next 6 months
purchases
forecast (85,642) - - (214,288) - -
Net forecast
transaction
exposure (85,642) - - (214,288) - -
Net exposure (1,500,171) 1,307,472 - (1,104,540) 1,127,997 -
The following significant exchange rates in relation to the reporting currency
are applicable:
Average for the year Year end spot rate
2020 2019 2020 2019
United States Dollar ($) 1.2818 1.1109 1.3144 1.2936
South African Rand (ZAR) 20.8703 18.2842 21.0194 19.5271
The presentation currency of the Group is British Pound Sterling.
The Group is exposed primarily to movements in USD and ZAR, the currency in
which the Group receives most of its funding, against other currencies in which
the Group incurs liabilities and expenditure.
Sensitivity analysis
Financial instruments affected by foreign currency risk include cash and cash
equivalents, trade other receivables and trade and other payables. The
following analysis, required by IFRS 7 Financial Instruments: Disclosures, is
intended to illustrate the sensitivity of the Group's financial instruments (at
year end) to changes in market variables, being exchange rates.
The following assumptions were made in calculating the sensitivity analysis:
* All income statement sensitivities also impact equity
* Translation of foreign subsidiaries and operations into the Group's
presentation currency have been excluded from this sensitivity as they have
no monetary effect on the results
Income Statement / Equity
2020 2020 2019 2019
+10% -10% +10% -10%
Base currency of British pound
Sterling:
- United States Dollar ($) 0.1314 (0.1314) 0.1294 (0.1294)
- South African Rand (ZAR) 2.1019 (2.1019) 1.9527 (1.9527)
The above sensitivities are calculated with reference to a single moment in
time and will change due to a number of factors including:
* Fluctuating other receivable and trade payable balances
* Fluctuating cash balances
* Changes in currency mix
Interest rate risk
The Group has entered into fixed rate agreements for its finance leases and
shareholders loans. The Group does not hedge its interest rate exposure by
entering into variable interest rate swaps.
Exposure to interest rate risk
The interest rate profile of the Group's interest-bearing financial instruments
as reported to the management of the Group is as per the table below.
Group Group Company Company
2020 2019 2020 2019
Fixed rate instruments
Financial assets 994,729 871,579 994,729 871,579
Financial liabilities (1,022,744) (613,091) (250,000) (260,000)
Fair value sensitivity analysis for fixed-rate instruments
The Group does not account for any fixed-rate financial assets of financial
liabilities at FVTPL. Therefore, a change in interest rates at the reporting
date would not affect profit or loss.
Other market price risk
The Group is exposed to equity price risk, which arises from equity securities
at FVOCI are held as a long-term investment.
The Group's investments in equity securities comprise small shareholdings in
unlisted companies. The shares are not readily tradable and any monetisation of
the shares is dependent on finding a willing buyer.
Valuation techniques and assumptions applied for the purposes of measuring fair
value
The fair value of cash and receivables and liabilities approximates the
carrying values disclosed in the financial statements.
Capital management
The Group manages its capital resources to ensure that entities in the Group
will be able to continue as a going concern, while maximising shareholder
return.
The capital structure of the Group consists of equity attributable to
shareholders, comprising issued share capital and reserves. The availability of
new capital will depend on many factors including a positive operating
environment, positive stock market conditions, the Group's track record, and
the experience of management. There are no externally imposed capital
requirements. The Directors are confident that adequate cash resources exist
or will be made available to finance operations but controls over expenditure
are carefully managed.
31.Related Party Transactions
Directors' fees
Andrew Monk, a non-executive director of the company, is a director of VSA
Capital Limited and that company provided services amounting to £113,575 (2019:
£129,574) to the Company during the year.
During the year ended 31 October 2020 £49,896 was paid to Directors of the
company (2019: £59,896). At the year-end a total of £194,266 (2019: £144,370)
was outstanding in respect of directors' emoluments.
Other related party transactions
Included in trade and other payables are the following related party financial
liabilities:
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
G Roach 20,637 22,214 - -
M Bonner 24,052 26,336 - -
R Scott 15,534 - - -
60,223 48,550 - -
Terms:
G Roach: The loan bears interest at prime overdraft rate. The interest will be
calculated and paid when the loan is repaid. The loan is repayable as decided
upon from time to time.
M Bonner and R Scott: The loan bears interest at the South African prime
overdraft rate. The interest will be calculated and paid when the loan is
repaid. The loan is repayable as decided upon from time to time.
Outstanding director's salaries and related party transactions
Included in trade and other payables are the following outstanding directors'
salaries and fees payable to related parties for other services:
Group Group Company Company
As at As at As at As at
31 October 31 October 31 October 31 October
2020 2019 2020 2019
£ £ £ £
Company controlled by a
director:
VSA Capital 356,934 229,464 356,934 229,464
Included in the amount due to VSA Capital are director's salaries owed to A.
Monk
Directors' salaries
outstanding
- A. Monk 31,266 17,370 31,266 17,370
- M. Bonner 42,000 30,000 42,000 30,000
- D. Lenigas 49,000 37,000 49,000 37,000
- R. Scott 37,000 25,000 37,000 25,000
- G. Roach (resigned) 35,000 35,000 35,000 35,000
194,266 144,370 194,266 144,370
32.Controlling Party Note
There is no single controlling party. Significant shareholders are listed in
the Directors Report and Business Review.
33.Events Subsequent to 31 October 2020
Loan to Comarco
The agreement to acquire the Comarco Group expired on 31 December 2019 and both
the vendors and the Company have agreed to extend the agreement to 30 April
2021. The loan to Comarco has been similarly extended to 30 April 2021.
34.COVID-19
COVID-19 has had a devasting effect on the world economy and social fabric.
Although the company has been affected by the pandemic, the effects have been
minimised. There is a concern however that the long term effects may be more
than what is currently being experienced.
END
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