Final ResultsThursday 10 April, 2008Landkom Intl PlcFinal ResultsLandkom International Plc
10 April 2008
10 April 2008
LANDKOM INTERNATIONAL PLC
67,000 hectares secured, 10,000 hectares planted and operational infrastructure
installed
Landkom International PLC (AIM: LKI, 'Landkom' or the 'Group'), the Ukrainian
producer of high-value oilseed rape and wheat, has published its preliminary
results for the eight months to 31 December 2007.
2007 Highlights
• Incorporated in April 2007
• Two fund raisings and AIM Admission
• Land bank of 50,000 hectares secured (31 December 2007)
• 10,000 hectares planted
• Managerial and operational infrastructure installed
• Equipment purchased for 2008
Q1 2008
• Total land bank increased to 67,000 hectares (March 2008)
• Third fund raising
• Orders placed for 2009 equipment
• 2,000 additional hectares planned spring crops for harvest in summer
2008
• Winter crop audit shows less than 3% of crop impacted, well below area
norm
Richard Spinks, Landkom Chief Executive, commented:
'2007 and the first few months of 2008 have been a tipping point in our
development. In less than 12 months we have: secured over 67,000 hectares of
land; planted 10,000 hectares; recruited and trained dozens of employees;
completed three fund raisings; secured admission of our shares to AIM; and
purchased equipment for 2008.
'We are developing some real momentum with the Group on target to build our land
bank to some 115,000 hectares by the end of 2008. With both wheat and oil seed
rape at historic price highs, we are very well placed to maintain our rapid
growth'.
For further information:
Landkom International PLC
Richard Spinks, Chief Executive Tel: +380 673 410 140
Libertas Capital
Aamir Quaraishi/Stephen Pickup Tel: +44 (0) 20 7569 9650
College Hill
Simon Whitehead/Adrain Duffield Tel: +44 (0) 20 7457 2020
Strategy Overview
2007 proved to be key in Landkom's development. Not only did the growth of the
land bank continue at a spectacular pace, but the Group completed two rounds of
fund raising and secured admission of its shares to the AIM market in London in
November 2007 as well as significantly increasing its managerial and operational
infrastructure.
Landkom aims to become Europe's largest producer of oilseed rape (OSR), wheat
and other agricultural feedstock within three years. The Group's origins are in
Western Ukraine and it commenced the leasing of land in November 2005. As at 31
December 2007, it had secured a land bank of approximately 50,000 hectares and
by March 2008 it totalled 67,000 hectares.
Landkom operates in areas which provide good rainfall and soil parameters for
the production of oilseed rape and wheat. Landkom now actively operates in six
Oblasts (counties), acquiring, reinstating and planting out historically high
yielding agricultural land with OSR and wheat.
The Group aims to maximise the area of land under cultivation, introduce high
yield agronomic practices and conserve the environment, particularly through
waste reduction. By returning fallow land to productive use, creating
employment and supporting responsible local investment programmes, it is also
seeking to create close relationships with local communities and regional
government.
The Group planted 10,000 hectares in 2007 and plans to plant 2,000 hectares in
Spring 2008; all for harvest in July to September 2008.
As this is the first reporting period since the Group's incorporation and given
the huge changes both operationally and financially, the reported figures do not
provide a complete annual picture.
The Board intends to focus on the following key performance indicators:
• Revenues - for the eight month period to 31 December 2007, revenues
were $6.6m
• Pre tax loss - $1.3m
• Operational cash flow - outflow $13.0m
• Cash and cash equivalents - $87.6m as at 31 December 2007
• Land bank - hectares 50,000 as at 31 December 2007
• Area planted- hectares 10,000
Operational review
Land bank
Ukraine is world famous for its historical agricultural output and its
production is based on deep, fertile, well drained highly productive soils and
high historical yields of wheat and other crops. The area of Western Ukraine
has near perfect temperature and rainfall characteristics thereby providing the
ideal conditions for the production of the Group's two key crops.
Landkom acquires leasehold interests in land. By 31 December 2007, Landkom had
amassed a land bank of approximately 50,000 hectares and by March 2008 it had
increased to a total land bank of 67,000 hectares.
In addition to securing leases, in order to accelerate its land acquisition
programme, Landkom is seeking to identify and acquire privately held farm
businesses in strategic locations.
Area planted
Landkom utilises modern western agricultural equipment, fertilisers and agronomy
techniques and employs wherever possible, local staff to run, operate and
harvest the crops. Over 10,000 hectares of land was prepared and sown in 2007
for harvest during July/August 2008.
Harvest in 2008
Landkom expects to harvest approximately 23,000 tonnes of OSR and 24,000 tonnes
of wheat from its autumn 2007 planting. A relatively mild winter has proved to
be very positive for the Group on two accounts:-
• The annual independent end-of-winter audit of crop conditions carried
out by the Scottish Agricultural College (SAC) during the last week of
March showed that the crops sown, both wheat and OSR, in the area
around L'viv were well established prior to the winter period. Losses
over the winter period have been minimal. Crops with problems from
moderate winterkill or lower than optimal plant populations accounted
for less than 3% of the area sown, which is significantly below normal
agricultural parameters in the area.
• Furthermore the Group plans to plant in spring for harvest in
September 2008 an additional 2,000 hectares of spring wheat. Revenues
from this additional crop will allow Landkom to take advantage of the
continuing high cereal prices. This cropping will not only provide
additional revenues, but will keep earlier prepared land free of weed
re-growth before the crop planting in August and September 2008.
Capital expenditure
Landkom has placed early orders for equipment. Over 50 tractors and 20 John
Deere/Claas Lexion combine harvesters have now been purchased. In addition the
Group has ordered 10 Horsch 9m drills, giving Landkom unrivalled local planting
capacity in the Ukrainian agricultural sector for the 2008 season. The Group
has already embarked upon its sourcing and buying programme for the 2009 season
in order to avoid shortfalls in production capabilities through equipment
shortages.
Cost control
Following the successful fund raising at the time of the IPO on 22 November
2007, the Group exploited the lower off season pricing to acquire fuel and
fertilizers at a discount to current market prices. In addition, Landkom is
developing an in-house bio-diesel production facility to decrease further its
exposure to higher fuel prices. Trucks recently acquired by Landkom were
selected in part for their ability to run on high concentrations of bio-diesel,
allowing the Group further cost savings on the logistics side of the operation.
Storage and logistics
Issues with the construction programme for the silo systems may delay
completion. However the management has implemented a parallel flat storage
solution which will enable the Group's harvest to be stored over an extended
period in proper conditions should this be required. Landkom also intends to
build warehousing infrastructure on its regional bases to house chemical and
fertiliser inventories.
Planting programme
The Board is confident that Landkom has the land, the equipment, the management
team and the experience now to plant at least 40,000 hectares in the autumn of
2008 for harvest in 2009.
Board, management and employees
As the Group has rapidly evolved and grown over the 12 months to April 2008, so
the managerial and operational infrastructure at all levels has been enlarged
and strengthened.
Neil Balfour, Gerald Howarth MP and David Mackie joined the Board as non
executive directors in October as did Lawrence Holyoke in April 2008. The Group
is now in a position to provide independent executive directors to sit on and
chair the various Board committees.
Richard Spinks was appointed Chief Executive in August and was joined by Keith
Dawson, Director of Agronomy in September and by Konrad Nowicki, Director of
Land in October. Warwick Smith, having been intimately involved with the Group
since the inception including the two fund raisings in 2007 and has extensive
financial and emerging market expertise, was appointed Group Finance Director in
April 2008.
The Group has made considerable advances in developing and building an
experienced, professional operational management infrastructure around a number
of key executives recruited from within the global agricultural sector from as
far a field as UK, Ireland, New Zealand and Australia. Stanislaw Dziedzic
joined in early April 2008 from British Sugar and has been appointed managing
director of Ukraine operations.
Landkom's programme of re-generating land in Ukraine is providing employment and
wealth creation for the local communities and regions where land is leased.
Landkom is now making notable contributions to a number of social programmes in
some of Ukraine's poorest villages and regions through donations and support to
schools, orphanages and hospitals.
The Group employed 249 people at the end of December 2007 and as it grows its
land bank and puts land back under cultivation, this number will also to
continue to grow rapidly.
Financial performance
Revenue in the period to 31 December 2007 of $6.6m comprises sales of services
of $1.5m and a change in fair value of biological assets of $5.1m. The one-off
sale of services relates to the original Landkom trading entity, which was
acquired post year end, and is offset by direct cost purchases from the same
entity. Biological assets represent the recognition of the fair value of crops
planted in 2007 that will be harvested in 2008 and are based on a planted area
of 10,000 hectares.
Distribution and administration expenditures were $5.9m and are in line with
expectations for this first period of operation. Staff costs for the period
were $2.7m.
Net interest receivable amounted to $0.6m. Funds raised from the IPO in
November 2007 contributed $0.7m to interest.
In the future the Board plans to focus on pre tax profits and adjusted earnings
per share, before the amortisation of intangible assets and share based
payments. For the eight months to 31 December 2007, Landkom reported a pre tax
loss of $1.3m, which included the non cash share based payments item of $0.3m.
The tax charge was nil.
The Group reported a basic and fully diluted loss per share of $0.013 (0.6p) and
an adjusted loss per share of $0.010 (0.5p).
At this very early stage of the Group's development, the Board does not
recommend the payment of a dividend.
Net cash outflow from operating activities was $13.0m after taking into
consideration $4.6m of working capital. Landkom has spent $13.8m on property
plant and equipment, principally comprising farm equipment and vehicles and has
placed orders for delivery in 2008 for a further $13.7m of storage systems, farm
equipment and vehicles.
The Group issued equity on two occasions in 2007. On 20 April 2007, £6.9m was
raised from a Private Placing and at the time of the IPO in November 2007 £50.4m
was raised.
Since the year end, a further £10.8m has been raised in a Placing to enable the
Group to grow more quickly and to take advantage of opportunities in a rapidly
changing market.
Operating working capital, excluding cash, amounted to a net $4.6m at 31
December 2007 and fair value of biological assets amounted to $7.3m. Landkom
had net cash of $87.6m.
As and when appropriate the Board will use financial instruments such as forward
off-take contracts or financial derivatives to hedge against OSR and wheat
prices as part of its proactive and prudent management of the Group's business.
At the end of December 2007 the Group had entered into a put option agreement
for 5,000 tonnes of OSR for delivery in November at $537 per tonne.
Current trading and outlook
Landkom's land acquisition programme is continuing apace. At the time of the
IPO last November, the Board said it intended to add a further 65,000 hectares
in 2008, over and above the planned 50,000 hectares acquired in 2007. This
would give Landkom a total land bank of 115,000 hectares by the end of 2008. At
the current acquisition rate Landkom is confident of achieving that goal.
The Group is also focussed on planting targets, harvesting and yield
maximisation whilst retaining a low cost base. As the Group develops it also
expects to make selective acquisitions of complimentary businesses.
Overall Landkom has ended the year with an established organisation that is well
prepared to deliver the substantial growth plans of the business in 2008 and
beyond, particularly as the Group has now built up some real momentum towards
implementing its strategy.
With the price of the two key products on the international markets at historic
highs, the Board is confident that the Group is well placed to meet its most
ambitious growth targets.
CONSOLIDATED INCOME STATEMENT FOR THE 8 MONTH PERIOD ENDED 31 DECEMBER 2007
8 months ended
Note 31 December 2007
$000
Continuing Operations
Revenue 1,567
Gains arising from changes in fair value of biological assets 5,063
_______
3 6,630
Direct costs (2,277)
_______
Gross profit 4,353
Distribution costs (144)
Administrative expenses (5,836)
Other (losses) / gains - net (286)
_______
Operating loss (1,913)
Finance income 606
Finance costs (17)
_______
Loss before income tax (1,324)
Income tax expense 4 -
_______
Loss for the period (1,324)
_______
Attributable to:
Equity holders of the Company (1,324)
_______
Loss per share (expressed in US$ per share) 5
Basic loss per ordinary share (1.3)c
_______
Restated in £ per share (calculated at average rate) (0.6)p
_______
Fully diluted loss per ordinary share (1.3)c
_______
Restated in £ per share (calculated at average rate) (0.6)p
_______
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007
Assets Note 2007
$000
Non-current assets
Property, plant & equipment 6 13,346
10 April 2008
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Landkom Share Price Index
LKI Current: 8.75p 52wk Minimum: 5.12p 52wk Maximum: 12.5p Market Value: £38.1 million Last updated 03 September 2010
Landkom on course to achieve profits
Interim Results
Notice of Interim results - 20 July 2010
Landkom International PLC (AIM: LKI), the Ukrainian producer of agricultural commodities, will be publishing its Interim results for the six months to 30 April 2010 on Tuesday, 20 July 2010
29 June 2010 Read more...
35,000 tonnes of rapeseed sold forward at approximately $318 per tonne
Completion of Spring Planting
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