29 April 2021

Woodbois Limited

("Woodbois", the "Group" or the "Company")

Audited results for FY 2020

Woodbois, the African focused sustainable forestry, reforestation, carbon sequestration and timber trading company, announces its audited results for the full year ended 31 December 2020.

Highlights

2020:    

·      Balance sheet restructured: debt reduced by 85%

·      Business resilient despite COVID-19: gross profit $1.2m vs $2.8m in 2019

·      Building blocks in place for future growth

Post-period end:

·    From Q4 2020 to Q1 2021 Woodbois significantly grew its sawn timber and veneer production by 83% and 44% respectively

·    Launch of the Company's Reforestation and Carbon Credit division

·    On track to become cashflow positive and deliver record turnover

Commenting on today's announcement, Executive Chair and CEO Paul Dolan said: 

Despite the highly challenging market conditions during 2020, the business performed very credibly. At a company specific level, we were able to reset the balance sheet in August 2020 by converting the vast majority of our debt into equity. We subsequently dedicated our capex to maximizing returns from high margin production assets and built-out the operational team with a number of key hires towards the end of 2020/early 2021. This has enabled Woodbois to continue to further strengthen its operational and financial performance.

I am pleased that Woodbois has entered 2021 with greatly improved production rates, strong pricing, a strengthened team, greatly reduced debt and a new division in reforestation and carbon credit trading. I have never been more optimistic about the future prospects for our Company.  Woodbois presents a high growth proposition in an increasingly important sector.  To capture the opportunity, the Company's organisation has been divided into three distinct, but highly complementary, revenue streams with the production and supply of sustainable African hardwood products, the trading of hardwood, and the new reforestation and carbon credit division. We anticipate another record year, turning operationally cash flow positive and with frequent news flow.  The entry into the carbon credit market also has the potential to play a material role in future growth.  Woodbois believes that its entry into this important and growing market will bring multiple synergies, as well as providing a valuable add-on to the Company's existing sustainable forest management operations.  With a global hardwood timber market estimated to turnover US$40bn annually, the Board believes that the outlook for Woodbois, as an ESG focused and technology enabled company, has never been more attractive."

Annual Report and Accounts

The Company's 2020 Annual Report will be dispatched to shareholders shortly and will be available to be viewed or downloaded from the Company's website: https://www.woodbois.com/investors

Enquiries:

STRATEGIC REPORT

Chair & CEO Review

Building blocks put in place in 2020: Excellent start to 2021

After what has been a very challenging period for the global economy, I am pleased that Woodbois has entered 2021 with greatly improved production rates, strong pricing, a strengthened team, greatly reduced debt and a new division in reforestation and carbon credit trading. I have never been more optimistic about the future prospects for our Company. Our team is determined and dedicated to achieve our key objectives of becoming operationally cash flow positive, continuing on our growth trajectory, as well as maintaining our laser focus on sustainability and enhancing our net carbon sequestration.

The economic recovery being evidenced around the world, partly driven by government directed economic stimulus measures, has been an underlying factor in strong demand for our product offering in 2021, with pricing post FY 2020 year-end climbing to multi-year highs. Some of the expected margin increase has been negated by the increased cost of freight caused by the limited availability of containers whilst the shipping industry adjusts to a post economic-shock surge in demand. While freight rates are expected to normalise in line with container availability in the months ahead, a considerably longer period may be required for wholesalers to replenish their supplies of hardwood construction materials so we expect to enjoy robust demand as we work to support our customers in rebuilding their businesses post the peak of COVID-19.

Our strategic goal of becoming a market-leading sustainable forestry and timber-trading business remains in place and we took significant strides towards achieving this objective in 2020. While we are cognisant that work remains to be done, the wholesale restructuring of the Company's balance sheet in mid-year, implementation of new machinery and key management hires towards the end of the year and in 2021 have undoubtedly improved our position and we are now well placed to build on these strong fundamentals as we continue to expand the business.

We are pleased to report that we have made a strong start to 2021 and Woodbois remains on track to turn cashflow positive and to deliver record revenues this year. In Q1 2021, we increased our revenue by more than 44% quarter on quarter (from Q4 2020) and significantly grew our sawn timber and veneer production by 83% and 44% respectively. The commissioning of our Primultini sawmill line is now expected in May 2021. This addition to our facilities will increase sawn timber production capacity by a further 30%. We continue to review new opportunities to expand our forestry and product operations and are hopeful of concluding the purchase of additional veneer capacity shortly.

We also made the decision in March 2021, to embark upon a potentially significant commercial initiative, with the Company's entry into the carbon sequestration space through the delivery of reforestation projects at scale in Africa. This Reforestation and Carbon Credit division will enable Woodbois to generate carbon credits for corporate actors in the Voluntary Carbon Market, which the Mark Carney led Taskforce foresees could grow more than 15-fold by 2030, fuelled by net zero carbon emissions commitments from corporates and countries. In the months prior to the market entry, the Board monitored the size and volume of transactions by large European energy companies taking place in the sector and deduced that entry into this market would afford the business multiple synergies and provide a valuable add-on to the Company's existing sustainable forest management operations. Our internal team will be strengthened and will prioritise the options to undertake reforestation projects at scale in Africa as a component of our forestry management activities and consistent with our commitment to provide societal benefits through all our business activities.

2020 Business performance

Despite the highly challenging market conditions during 2020, the business performed very credibly. At a company specific level, we were able to reset the balance sheet in August 2020 by converting the vast majority of our debt into equity. We subsequently dedicated our capex to maximizing returns from high margin production assets and built-out the operational team with a number of key hires towards the end of 2020/early 2021. This has enabled Woodbois to continue to further strengthen its operational and financial performance.

We are delighted to have been able to attract such high-quality additions to our workforce. Experience, talent, enthusiasm, and ambition is a potent mix, particularly when aligned with the interests of the Company's stakeholders. I am confident that this team, supplemented with a few further hires, will have all of the required attributes and incentives to deliver on our objectives.

Achieving safe and reliable operations, whilst also hitting our ambitious growth targets, were a core focus for us during 2020. Our business performance was naturally impacted by COVID-19, but we exceeded our revised revenue target of $15 million for the year.  Details of our 2020 results are set out in our CFO's Report and in the attached financial statements.

Board Changes

2020 saw a reorganisation of Woodbois' Board of Directors.  Kevin Milne stepped down as Non-Executive Chair in April 2020.  In June 2020, Zahid Abbas and Jacob Hansen also stepped down as Executive Directors but remain with the Group at the core of our trading operations.  I would like to reiterate my thanks to Kevin, Zahid and Jacob for their significant contributions as Board members.

I also assumed the role of Executive Chair, whilst Graeme Thomson, our Senior Independent Non-Executive, was appointed Chair of the Audit and Remuneration Committees.

The Board reorganisation was designed to ensure improved compliance with best practice corporate governance, whilst having a Board of the right size and skillsets to best serve the Company's ambitious growth plans.  We continue to seek high-calibre talent at both operating and Group board levels. We are in the process of recruiting an additional Independent Non-Executive Director with complementary skillsets to those already found on the Board and will split my roles of Chair and CEO in due course.

Outlook

Woodbois presents a high growth proposition in an increasingly important sector.  To capture the opportunity, the Company's organisation has been divided into three distinct, but highly complementary, revenue streams with the production and supply of sustainable African hardwood products, the trading of hardwood, and the new reforestation and carbon credit division.

We anticipate another record year, turning operationally cash flow positive and with frequent news flow.  Our high-output Primultini sawmill line, the largest that we have installed to date, is expected to be operational in the coming few weeks. Separately, we are in very advanced discussions to conclude the purchase of additional veneer capacity which will lead to production increases from Q4 onwards. On the basis that both these initiatives occur on the above schedule the board is confident in increasing its output capacity and meeting its revenue expectations for 2021. We intend to continue to deliver on our strategy of commercialising the growing demand for sustainable, high quality, hardwood products.

The entry into the carbon credit market also has the potential to play a material role in future growth.  With more than 1,600 companies with revenues exceeding a combined total of more than $11 trillion committing to net zero carbon emissions by 2050, and Mark Carney's UN backed-task force mandated to bring the Voluntary Carbon Market to scale, this market is forecast to grow significantly over the coming years.  Woodbois believes that its entry into this important and growing market will bring multiple synergies, as well as providing a valuable add-on to the Company's existing sustainable forest management operations.

With a global hardwood timber market estimated to turnover US$40bn annually, the Board believes that the outlook for Woodbois, as an ESG focused and technology enabled company, has never been more attractive.  As a 4.3% shareholder I am also looking forward to being able to deliver a maiden dividend after the 2021 results.

I would like to thank all of our stakeholders for their support.  I am particularly grateful to our staff who have, despite the challenges presented by the pandemic, maintained the highest levels of professionalism and dedication.  

We are at an exciting moment in Woodbois' development, and I look forward to keeping shareholders and the markets updated as our operations continue to gather momentum.

Paul Dolan

Chair and CEO

28 April 2021

Chief Financial Officer's Report

2020 Fundraise and restructure

Arguably, the most important financial event that occurred in 2020 was the resetting of the Company's balance sheet. We would like to thank the existing and new shareholders, as well as other stakeholders, that supported us in the previously reported transactions that completely transformed the Company's balance sheet in August 2020. We were able to successfully execute a fundraise of £12.6 million and reduce our external debts at that time by 85% from $50.7 million to $7.8 million.  This transformed balance sheet has allowed the Company to materially reduce its interest burden, expand its production capacity in Gabon (and therefore future margins) and strengthen the organisation's trading activities.

The fundraise and restructure, specifically the capitalisation of almost all of the Convertible Bond, resulted in the creation of a new class of Ordinary Shares, being Non-Voting Shares. After this reorganisation our total Issued Ordinary Share Capital was 2,382,117,053 of which 1,430,751,958 was Voting and 951,365,094 was Non-Voting shares. Subsequently, in 2021 a total of 326,365,094 of those Non-Voting shares been converted into Voting shares. Further details are set out in note 26 of the financial statements.

2020 Financial performance review

We were not immune from COVID-19, and other associated macro-economic trends. So, while we are focused on delivering on our ambitious growth objectives, one consequence of the pandemic was the delay in securing the purchase of a second veneer line and the need to revise our 2020 revenue guidance to $15 million +, which I am pleased to report that we achieved.

In terms of the hard numbers for FY 2020, the Company recorded a gross profit of $1.2 million (versus $2.8 million in 2019) and an adjusted EBITDA loss of $1.7 million, compared with a FY 2019 EBITDA loss of $1.9 million.  Gross profit margin declined from 14% in 2019 to 8% in 2020 as we absorbed the substantially increased logistics costs and supported our loyal client and supplier base as the pandemic unfolded.

We continued to focus on right-sizing our administrative costs which fell 28% to $1.0 million in 2020.

There was a fair value gain of $9.5 million recorded on biological assets in 2020. The stable political conditions in Gabon, coupled with consistently achieving better prices than in 2019 and 2020 for the species in our concessions have prompted us to revalue upwards, the biological assets in that geography by $28.9 million (net of deferred tax).  However, although the current unrest in the Northern part of Mozambique has not affected the business, we have written down the value of the biological assets in that geography by $21.6 million as a result of lower forecast maximum permitted harvest rates. We remain optimistic for this business and continue to plan for improving our overall activity levels. Our Gabonese concessions now account for 64% of our total biological assets of $204.2 million (see note 10 for more details).

In 2020 we recorded a final charge of $2.2 million (2019: $1.0 million) relating to the 2017 purchase of Woodbois International Aps, as well as a loss of $1.5 million on the financial restructure. There was a foreign exchange gain of $1.2 million (2019: $0.3 million). Finance costs of $2.8 million (2019:  $2.0 million) only reflect the benefit of the balance sheet restructure from August onwards (finance cost up to August being $2.6 million).

The financial statements include a provision for a loss of $3.4 million arising from the theft from a third-party owned and operated warehouse in Ivory Coast as reported in January 2021. This is comprised of $2.2 million of timber and a $1.2 million non-cash write-down of prepaid costs there. The matter is in the hands of the local police who have detained and charged a number of those responsible and the courts are dealing with the matter.  The theft of the stock clearly involved mass collusion locally and occurred under cover of COVID-19 restrictions when the perpetrators had the opportunity to move the stock and falsify stock count records without interrupting shipping schedules, which would otherwise have quickly exposed the theft. The Group terminated the contract with the third-party management company in charge of the warehouse and stock controls resulting in the loss on prepaid costs. We must await the results of the police and judicial investigations and actions before being able to take any further actions.  However, based on the facts currently available, the Board has concluded that the probability of material recovery is limited.  As a result of this isolated matter, it has also decided not to maintain any inventory at third-party owned and operated warehouses in future.

A loss on discontinued operations of $0.1 million (2019:  $2.9 million) reflects various administration costs incurred by the Company (see note 24).

Cash and working capital

In 2020 the Company continued on a cost review project which ensured that we were running our operations leanly.  This stood us in good stead as the effect of COVID-19 took its hold.  Our continued review and consideration of whether any expenditure, large or small, was absolutely necessary ensured that we were able to reduce our cash outflow from operating activities to $5.5 million in 2020 from $10.6 million in 2019. We also reduced our capex to $1.6 million from the prior year $5.0 million: the full benefits of these investments are being seen as business has picked-up in early 2021. Our year end 2020 cash of $2.6 million compared with $1.5 million at the end of 2019.

At the end of 2020 the Group's receivables and inventory were $8.7 million (2019: $12.5 million), whilst payables and similar were $4.5 million (2019: $4.8 million. Total borrowings (excluding the convertible bond) reduced significantly from $19.9 million in 2019 to $8.7 million at the end of 2020 as a result of the Fundraise and Debt restructure. Of this $6.2 million (2019: $6.3 million) was classified as current.  As explained in note 15, $3.2 million of this is a revolving facility with a Danish bank with no specified maturity date and which, although there is no expectation it will need to be repaid in 2021, has nonetheless been classified as a current liability.

Net Assets

The Company significantly increased net assets year-on-year, from $117.2 million in 2019 to $156.8 million, largely due to debt elimination as part of the 2020 restructuring.

Going Concern

As set out more fully in the Directors' report, the Independent Auditor's Report and in the financial statements, the Company continues to adopt the going concern basis in the preparation of this Annual Report and at the date of this report.

Looking ahead to 2021

As mentioned in the Chair and CEO's report, we have made a strong start to 2021, achieving Q1 Revenue of $4.6 million, a 44% quarter on quarter increase.  Whilst the pandemic is far from over, we expect the overall trading environment to continue to improve. Our current cash balance is $1.4 million, with estimated net working capital of $6.3 million and interest-bearing bank borrowings of $8.3 million. 

We have every reason to believe that our fast acting, decisive and resilient management team will continue to guide the Company safely through this period.  The recent and planned asset additions, together with improvements made to our core production capabilities and product mix in Gabon, are expected to yield increased gross profit and cash generation from the sale of our own production. We expect these improvements, together with utilising our enhanced bespoke software, will ensure we are better able to select higher margin trades this year. The impact of the improved balance sheet will be more visible in our interim results.

Based on our budgets for 2021, which assumes increased production from the additional sawmill line later this quarter and veneer capacity from Q4 onwards, we are confident of meeting expectations and that the Company's trading and forest product activities will have a record year, will become operationally cash flow positive during the year and still intend to declare a maiden dividend in 2022 after the publication of the 2021 results.

Carnel Geddes

Chief Financial Officer

28 April 2021

Social Impact and Sustainability

With ESG investments increasing and sustainable forestry management an increasingly important focal point in the mitigation of deforestation and climate change, Woodbois remains fully committed to being a leader in terms of transparency and best practices. And despite the challenges brought on by the coronavirus pandemic, we were able to keep our team safe in 2020 while taking steps to strengthen the company and deliver value to stakeholders. Woodbois' approach is centred on the sustainable harvesting of our concessions.  The Company's forest management strategy is designed to ensure the long-term protection of the forests in which we operate while delivering material social and economic benefits as well as value creation for all stakeholders.

Ranked third worldwide in SPOTT report

In 2020, Woodbois was again recognised for its sustainable approach in the Sustainability Policy Transparency Toolkit ('SPOTT'') ESG policy transparency assessments for the worldwide timber and pulp industries.  In the annual assessment of operations and approaches to ESG, Woodbois was ranked third out of more than 100 companies by SPOTT, and highest amongst the public companies.  This was our second year of assessment, and saw the Company move further up the rankings, reflecting our efforts to improve the standards of our ESG policies, providing transparency and good governance along with our sustainability focussed operating model. This recognition serves to reinforce our leading position among the timber and pulp companies assessed by SPOTT and reflects the foundational sustainability within our business.

Reforestation and Carbon Credits

The opportunity to deliver reforestation projects in Africa, generating carbon credits for corporates in the Voluntary Carbon Markets adds an additional and important strand to Woodbois' credentials as a sustainability-focused company.  Photosynthetic carbon capture is amongst the most effective ways available of limiting atmospheric CO2 concentrations and our entry into The Voluntary Carbon Markets will see Woodbois providing a mechanism for companies to offset their emissions by acquiring credits in our reforestation based carbon sequestration solutions.  As well as making a positive contribution to the global effort to tackle climate change, we anticipate that our entry into reforestation and the provision of carbon credits through high-quality projects in the Voluntary Carbon Market to make a positive contribution to biodiversity, local skilling and employment. 

FSC Certification

The Company initiated its journey towards FSC Certification in 2020, as well as engaging with the Programme for the Endorsement of Forest Certification ("PEFC"), the leading global alliance of national forest certification systems. PEFC is a programme sponsored by The Central African Forest Commission and KfW, the German state-owned development bank, who have been providing us with third party certification support.

Health and Safety

Though coronavirus lockdowns reduced shifts and the number of employees allowed at Woodbois manufacturing sites during 2020, we took this opportunity to invest in up-skilling and training, with a heavy focus on Health & Safety. We also implemented continuous improvement initiatives and lean manufacturing processes with the idea of building a culture where everyone is encouraged to contribute to enhancing workplace safety and production efficiency. The impact has been considerable - we have since set consecutive production records and consider our approach to continuous improvement to be of a world-class standard. 

Our Communities

During the pandemic we have continued to support the communities where we operate through the provision of essential food items.  We consider assisting in the wellbeing of our employees and others in our communities to be of paramount importance and intend to continue to be a well-regarded corporate citizen.

Ambitions

Through our various operations we aim to be recognised as one of the best-in-class ESG companies.

Directors' Report

The Directors submit their report on the affairs of the Group, together with the financial statements and auditor's report for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES AND CORPORATE DEVELOPMENT

The principal activities of Woodbois Limited ("Woodbois") during 2020, together with its subsidiaries (the "Group") were forestry and timber trading. These activities were undertaken through both the Company and its subsidiaries. The Company is quoted on AIM and is incorporated and domiciled in Guernsey.

BUSINESS REVIEW

A review of the Group's performance and prospects is included in the Chair and CEO's review.

RESULTS AND DIVIDENDS

The consolidated loss for the year after taxation from continuing operations attributable to shareholders was $6.39 million (2019: $1.95 million).

The Directors do not recommend payment of an ordinary dividend (2019: $Nil). The Company intends, subject to results in 2021/early 2022 and its financial circumstances, to pay a maiden dividend after the publication of the 2021 financial statements.

SHARE CAPITAL AND FUNDING

Full details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year are shown in note 17 and subsequent to the year end are shown in note 26. The company has two classes of ordinary shares, which carry no right to fixed income. One class of ordinary shares carries a right to one vote at the general meetings of the Company ("Voting"). The other class does not carry any right to vote at the general meetings of the company ("Non-Voting").  

The Company has unlimited authorised share capital divided into ordinary shares of 1p each, of which 2,382,216,431 had been issued as at 31 December 2020, 1,430,751,958 of which were Voting shares, 951,365,095 were Non-Voting and the Company also holds 99,378 Shares in Treasury. As at 28 April 2021 the number of Ordinary Voting Shares was 1,757,117,053 and the Non-Voting Shares was 625,000,000.

POST BALANCE SHEET EVENTS

Please refer to note 26 of the financial statements and the Chair and CEO's review for details.

DIRECTORS

The Directors, who served during the year and to the date of this report were as follows:

Directors' indemnity insurance

The Group's policy is to maintain Directors and Officers insurance and to indemnify Directors against the consequences of actions brought against them in relation to their duties for the Group.

Directors' interests

Directors' interests in the Voting shares of the Company, including family interests at 31 December 2020 were:

1. P Dolan, Chair and Chief Executive Officer of Woodbois Limited, held 75,400,032 Voting Shares (4.29%) as at 28 April 2021: 30,000,000 of his Voting Shares in the Company are held through The Bank Of New York (Nominees) Limited, 42,517,461 are held through HSBC Client Holdings Nominee (UK) Limited, with the remainder being held as paper certificates. As part of the refinancing of the Company completed on 5 August 2020, he was issued with 16,526,757 Voting Shares in consideration for the repurchase of the 400,400 $1 Convertible Bonds and subscribed for 12,500,000 Voting Shares. He was issued with 244,704 Voting Shares on 21 January 2020 in lieu of ITF interest due.

2. H Ghossein was issued with 5,213,883 shares on 4 July 2017 as part of the WoodBois International ApS purchase agreement and a further 15,861,853 as part of the Deed of Variation to the SPA completed on 5 August 2020 as part of the restructure of the Company.

3. G Thomson subscribed for 1,250,000 shares in the fundraise completed on 5 August 2020.

4. H Turcan is a representative of Lombard Odier which holds 395,540,230 Voting Shares (22.51%) as at 28 April 2021.

Options

Effective 6 August 2020, the Board issued a total of 144.5 million new share options to directors and key personnel. The vesting of the new awards is substantially geared towards material improvement in both operating results and share price appreciation: these are further described in the Remuneration Committee Report. All share options under the previous share options plan were renounced.

Share option awards were made within the Company's existing share scheme and which are detailed in Note 22:

The awards distributed to the Board are as follows:

                                                                      Number of options

                                                                            (2p exercise price)

Directors' remuneration

The audited remuneration of the individual Directors who served in the year to 31 December 2020 was:

1 C Geddes is paid in full through a service company, Pomona.

All of the above Directors' remunerations are considered short term in nature.

The above table excludes deferred consideration payments made directly to or to companies owned and controlled by H Ghossein of $0.618 million in 2020 (2019: nil) Z Abbas of $nil (2019: $0.478 million), and J Hansen of $0.091 million (2019: $0.478 million).  These payments arose on the purchase of WoodBois International ApS in 2017 and as amended under the Deed of Variation completed on 5 August 2020.

It is the Company's policy that Executive Directors should have contracts with an indefinite term providing for a maximum of 3-6 months' notice. In the event of a take-over, the Directors' contracts provide for compensation of 2 years salary as a bonus on the take-over in the event that the Executive loses his or her position.

Non-Executive Directors are employed on letters of appointment which may be terminated on not less than 3 months' notice. The basic fees payable at the end of the year to Graeme Thomson are £50,000 per annum. No fees are paid directly to Henry Turcan, however, fees of $25,000 per annum, are payable to Lombard Odier, for his services. Since April 2020 Lombard Odier has temporarily waived these fees.

ProfileS of the CURRENT Directors

P DOLAN, AGED 56, CHAIR AND CHIEF EXECUTIVE OFFICER

Based in the UK, Mr Dolan held senior management positions within banking and hedge funds prior to joining Woodbois. He has consistently built award winning, world-class teams employing custom-built technology to manage substantial pools of human and financial capital across a diversified group of asset classes ranging from fixed income and equity derivatives to soft commodities and forestry.

C GEDDES, AGED 42, CHIEF FINANCIAL OFFICER

Based in South Africa, Mrs Geddes is a Fellow of the Institute of Chartered Accountants in England and Wales, a member of the South African Institute of Chartered Accountants and a Certified Fraud Examiner. During a 15-year career at BDO, the global audit, tax and advisory group, she served as director, forensic services, of BDO London and partner of BDO Cape Town. She has been a director and Board member of the largest South African pomegranate farming and export company, Pomona, since 2008. She is also the Chair of POMASA, the Pomegranate Growers Association of South Africa.

H GHOSSEIN, AGED 60, DEPUTY CHAIR

Based in Gabon, Mr Ghossein has 25 years of experience managing forestry operations, including full ownership of a forestry business. He previously served as a diplomat, travelling extensively across Africa, as well as owning various trading and real estate companies. Hadi is fluent in Arabic, French, Portuguese and English and holds Gabonese citizenship.

G THOMSON, AGED 64, NON-EXECUTIVE DIRECTOR (INDEPENDENT)

Mr Thomson is a Fellow of the Institute of Chartered Accountants in England and Wales and has been a public company director for many decades, as a CEO, CFO/Company Secretary and as a Non-Executive. He has varied commercial UK and international experience, including of Audit and Remuneration Committees.

H TURCAN, AGED 47, NON-EXECUTIVE DIRECTOR

Mr Turcan has worked in financial services since 1996, with a focus on equity capital markets. Having spent the majority of his career advising growth companies within investment banking he joined the Volantis team at Henderson Global Investors in 2015, which subsequently transferred to Lombard Odier Investment Management in 2017 becoming known as 1798 Volantis. He graduated with an MA (Hons) in Modern Languages from Edinburgh University and is a Member of the Securities Institute. He is a representative of the funds managed or sub-advised by Lombard Odier Investments Manager group entities, collectively the Company's largest shareholder.

SUBSTANTIAL SHAREHOLDERS

The Company has been notified that the following have, at 28 April 2021, an interest in three percent or more of the issued Voting ordinary share capital of the Company:

M Pelham, former Chair is the beneficial owner of Rhino Ventures Limited, which is the owner of 100% of the 625,000,000 Non-Voting shares in the Company.

CORPORATE GOVERNANCE

The Board is committed to achieving the highest standards of corporate governance, integrity and business ethics and is responsible for oversight of this. The Board has adopted the Corporate Governance Code produced by the Quoted Companies Alliance and has taken steps to apply the principles of the QCA Code in so far as they can be applied practically and with the exception set out below, given the size of the Group and the nature of its operations. We set out below how the Group complies with the QCA Code.

1. Establish a strategy and business model which promotes long-term value for shareholders 

The strategy and business operations of the Group are set out in the Chair and CEO review.

The Group had two divisions during the year Trading and Forestry, and on 8 March 2021 announced that it had established a Reforestation and Carbon Credit division: a clear strategy had been devised for each. The Board continually impresses upon the leadership teams of each division that capital allocation must be both performance and potential driven. Investment, either opex or capex, will only be forthcoming for strategies that can demonstrate significant return to shareholders over time. Running loss-making business lines is not a sustainable business strategy. We will leave no stone unturned in our quest to support and fund businesses where our combination of skills and experience give us an edge. Conversely, if we cannot source the requisite expertise to participate profitably in particular business lines or geographies, we will not waste shareholder money by trying. 

2. Seek to understand and meet shareholder needs and expectations 

Shareholders play a key role in corporate governance, with our Annual General Meeting for shareholders offering an opportunity to exercise their decision-making power in the Company. Shareholders are encouraged to attend the AGM and any other General Meeting's which are convened throughout the year and for which our Company Secretaries are the point of contact for shareholders.  Our Investor relations advisers, Celicourt Communications, is the contact point for shareholder updates and wider liaison. The contact details are set out in these financial statements.

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 Group is reliant upon the efforts of the employees of the Group and its contractors and suppliers. We continuously engage with our stakeholders ranging from customers, investors, international development banks, governments, not-for-profit organisations and academia, to identify and address issues of materiality and to gather feedback from each of them.  The Board ensures that all key relationships are the responsibility of, or are closely supervised by, one of the Directors.

Woodbois is in a unique position to bring vital positive impact to Africa's economic transformation, social development and environmental management through our operations. In this regard we have set out to align our sustainability strategy with the United Nations Sustainable Development Goals (SDGs), which provide a vision for ending poverty, hunger, inequality and protecting the earth's natural resources. 

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation 

The business of forestry and timber trading involves a high degree of risk, in addition to technical, political and regulatory risk; the Group is exposed to weather, nutrient and pest risks. Furthermore, the Group is exposed to a number of financial risks, which the Board seeks to minimise by adopting a prudent approach consistent with the corporate objectives of the Group.  Our approach to these risk factors is set out in the Financial Statements for the year ended 31 December 2020.   

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board.  Budgets are subsequently updated when there is a significant change in any of the key assumptions to the budget.  The Group's actual results, compared with the budget, are reported to the Executive Directors on a weekly basis and any material deviations from budget are followed up by a member of the Executive Board. Variances are reviewed at least monthly by the Board.  

The Group maintains appropriate Directors & Officers insurance cover in respect of actions taken against the Directors because of their roles, as well as insurance against material loss or claims against the Group, where it is considered cost-effective. The insured values and type of cover are comprehensively reviewed on a yearly-basis or where new assets or risks arise. 

5. Maintain the Board as a well-functioning, balanced team led by the Chair 

The Board is responsible for establishing the strategic direction of the Group, monitoring the Group's trading performance and appraising and executing development and acquisition opportunities. The Company holds a minimum of nine Board meetings per year at which financial and other reports are considered and, where appropriate, voted on. It also holds ad hoc meetings as required to deal with specific issues.  Board and Committee meetings are convened at times convenient to eligible members to ensure 100% attendance. 

Details of the Directors' beneficial interests in Ordinary Shares are available on our website and are set out in the Directors' Report. The Directors comply with Rule 21 of the AIM Rules and the Market Abuse Regulations 2014 relating to directors' dealings and will take all reasonable steps to ensure compliance by any employees of the Company to whom regulations apply. The Company has, in addition, adopted the Share Dealing Code for dealings in its Ordinary Shares by directors and senior employees.   

As of 28 April 2021, the Board comprised of three Executive Directors, one Independent Non-Executive Director and one Non-Independent Non-Executive Director. During 2020 the number of Executive Directors was reduced by two. The Chair and Chief Executive Officer roles were combined on 28 April 2020 and one Non-Executive Director left as part of the cost cutting in response to the effects of COVID-19. It is intended in due course to comply with the Code by separating the roles of Chair and Chief Executive Officer and to appoint a further Independent Non-Executive Director in the near-term. Executive Board members are considered full time employees, while Non-Executives are required to commit between 20 and 40 days per annum to their roles.  

The Board is supported by the Audit and the Remuneration Committees, which are comprised of Non-Executive Directors only, and the Nominations Committee which also includes the Chair and CEO. 

6. Ensure that between them, the Directors have the necessary up-to-date experience, skills and capabilities 

The Directors' biographies can be found in this Directors' Report and on the Company's website. The Board believes that their mix of significant senior financial and commercial experience gives a strong and appropriate background to formulate and deliver long term shareholder value.

The Nominations Committee oversees the requirements for and recommendations of any new Board appointments to ensure that it has the necessary mix of skills and experience to support the ongoing development of the Company.  Any appointments made will be on merit, against objective criteria and with due regard for the benefits of diversity and inclusivity on the Board.  The Nomination Committee will also be responsible for succession planning.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement 

Internal evaluation of the Board, the Committees and individual Directors is seen as an important next step in the development of the Board and one that is addressed.  An annual operational review of all members of the Board is undertaken, in which their performance is evaluated, and development needs identified and actions to be taken agreed.  Executive and Non-Executive Directors are subject to re-election intervals as prescribed in the Company's Articles of Incorporation. At each Annual General Meeting one-third of the Directors who are subject to retirement by rotation shall retire from office. They can then offer themselves for re-election. 

8. Promote a corporate culture that is based on ethical values and behaviours 

The Company is committed to complying with all applicable laws and best corporate governance practices, wherever we operate. It is a core aspect of our mission to act with integrity in all of our operations. The Board expects all employees and contractors to comply with both the letter and spirit of the law and governance codes.   

The Company fosters a culture where our businesses directly and indirectly promote a range of benefits for the host community and host country on social and environmental levels. One of the most fundamental and positive social impacts associated with our Company's strategic growth objective is the skills development and employment opportunity we bring to the region. The Group also commits to providing a safe environment for its staff and all other parties for which the Company has responsibility. The Company is committed to protecting the environment, contributing to sustainable management of natural resources by strictly following guidelines set out by host Governments and actively engaging with local communities. The Company clearly articulates objectives and has put in place an internal accountability mechanism to effectively implement commitments, as well as ensuring that outcomes are measured and communicated transparently.      

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.

The following Group matters are reserved for the Board: 

·      Overall strategy

·      Approval of major capital expenditure projects

·      Approval of the annual and interim results

·      Annual budgets, KPI's and revisions thereto

·      ESG matters, including climate change initiatives and actions 

The Company is committed to high standards of corporate governance. Both Management and the Board are dedicated to implementing best practice as the Company grows.

A clear organisation structure exists detailing lines of authority and control responsibilities.

The Board monitors the exposure to key business risks and reviews the strategic direction of all trading subsidiaries, their annual budgets, their performance in relation to those budgets and their capital expenditure.

The agenda of the overall business is determined by a Management Committee, setting out agreed targets that include financial return, sustainability and actions on climate change. Opportunities and improvements are identified and prioritised depending on analysis carried out by Management. These projects are supported by detailed financial planning. Comprehensive internal controls and systems enable the Board to manage business objectives. As well as Board discussions, regular meetings are held by Management to discuss performance. Detailed information packs are prepared bi-weekly to cover each major area of the business. Variances from the budget and previous forecasts are analysed, explained and acted on. 

Important capital investments are regularly discussed both at a Board and at a Management level where analysis of budget versus actual spend is carried out.

Effective corporate governance remains key to the business as it grows rapidly. The Company has a structure and process in place to help identify areas in which corporate governance can be improved. The Company is currently implementing technology that will allow both the Board and Management to oversee key performance indicators across the business in real time.

Within the Trading division, the Company has mandated a technology firm to create a custom-built tool to allow for real-time tracking of all trades, which has been largely implemented in 2020.

The Company is in discussion with several organisations to implement innovative blockchain based technology to manage both the traceability of the timber that the Company produces as well as providing real-time oversight of the business's supply chain.

The Audit Committee, Remuneration Committee and Nominations Committee have formally delegated duties and responsibilities.

Audit Committee:

The Board has established an Audit Committee with formally delegated duties and responsibilities. During the year, the Audit Committee comprised of Non-Executive Directors with Graeme Thomson as Chair from 29 April 2020, together with Henry Turcan and Kevin Milne until his resignation after the publication of the 2019 results.  It formally meets at least three times in the financial year. In addition, the Chair has a regular dialogue with our auditors.

The terms of reference for the Audit Committee include requirements: 

·      To monitor the integrity of the financial statements of the Group and any formal announcements relating to the Group's financial performance, reviewing significant financial reporting judgements contained in them;

·      To review the Group's internal financial controls together with the Group's internal control and risk management systems.

·      To monitor and review the external auditor's independence and objectivity and to make recommendations in relation to the appointment, re-appointment and removal of the external auditor.

Remuneration Committee:

The Remuneration Committee meets as and when required. During the year the Remuneration Committee comprised of Non-Executive Directors with Graeme Thomson as the Chair since 28 April 2020, together with Henry Turcan. It meets at least three times per year.

The policy of the committee is to reward Executive Directors in line with the current remuneration of Directors in comparable businesses in order to recruit, motivate and retain high quality executives within a competitive market place.   

There are three main elements of the remuneration packages for Executive Directors and senior management: 

-     Basic annual salary (including directors' fees) and benefits;

-     Discretionary annual bonus to be paid in accordance with a bonus scheme developed by the Remuneration Committee. This takes into account individual contribution, business performance, sustainability & climate change parameters and commercial progress; and

-     Equity Option incentive scheme, which takes into account the need to motivate and retain key individuals.

The Committee, having consulted with the Company's major shareholders, approved the terms of the issue of Options effective 5 August 2020, together with the cancellation of all of then existing Options. The total number of Options in issue at any time will not exceed 10% of the total issued Voting and Non-Voting share capital.

Nominations Committee:

The Nomination Committee which comprises of the Non-Executive Directors and the Chair & CEO meets at least twice a year and is responsible for the process of reviewing replacement or additional Directors, the monitoring of compliance with applicable laws, regulations and corporate governance guidance and making appropriate recommendations to the Board. 

10. Communicate how the Company is governed and is performing, by maintaining a dialogue with shareholders and other relevant stakeholders

The Company encourages regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group's activities are clear, fair and accurate. Quarterly updates are announced via RNS and are available on our website and users can register to be alerted when announcements or details of presentations and events are posted onto the website.  

We aim to release our half and full year results to the market well in advance of reporting deadlines and offer visibility for shareholders by including segmental reporting. The Company's financial statements and Notices of General Meetings of the Company can be found on its website.

The results of voting on all resolutions are announced via RNS immediately following completion of General Meetings and are available on its website.  Any actions that are required to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders will be detailed on the RNS. 

RISK MANAGEMENT

The business of forestry and timber trading involves a high degree of risk, in addition to technical, political and regulatory risk; the Group is exposed to weather, nutrient and pest risks. Furthermore, the Group is exposed to a number of financial risks, which the Board seeks to minimise by adopting a prudent approach which is consistent with the corporate objectives of the Group.

Technical Risk

The Company operates large-scale machinery in the forms of harvesting, sawmill and veneer equipment. All three are key revenue contributors and as such, any significant interruption to these assets could have an adverse effect on our financial performance. A number of procedures and programmes have been implemented to mitigate these technical risks. Capital investment programmes have replaced older equipment to improve both reliability and overall efficiency of our machinery, also reducing overall breakdown risk. The Group has actively sought best-in-class hires that have significant experience with the machinery that is currently being utilised, this has also allowed the Group to adopt best practice. Additionally, performance metrics for operating assets are monitored by Management on a weekly basis to quickly identify and resolve any issues. 

PANDEMIC RISK

Public health risks may add to instability in world economies and markets generally. The extent of the impact of a pandemic will be correlated with the magnitude and duration thereof, both aspects of which will be uncertain.  Entities may experience conditions often associated with a general economic downturn.  This includes, but is not limited to, financial market volatility and erosion, deteriorating credit and increased borrowing rates, volatility in exchange rates, liquidity concerns, further increases in government intervention, increasing unemployment, broad declines in consumer discretionary spending, increasing inventory levels, reductions in production because of decreased demand, layoffs and furloughs, and other restructuring activities. The continuation of these circumstances could result in an even broader economic downturn which could have a prolonged negative impact on an entity's financial results.  What recovery/emergence may look like will also be speculation.  The Board observes any pandemic developments across the world and continuously considers the potential impact on the Company's operations, the safety of its employees and the potential need for disclosures to be made to the market and as the situation unfolds.  Specifically, the Board will consider:

·      Impact on liquidity and cash flow estimates;

·      Valuation, recoverability and impairment of assets;

·      Contract modifications;

·      Events after the end of the reporting period;

·      Revision of material judgements and estimates;

·      Whether the Company remains a going concern;

·      Whether any restructuring is required;

·      Whether onerous contracts provisions are necessary;

·      The extent to which insurance recoveries may be available;

·      Availability of government assistance;

·      Potential breach of covenants.

Impact of coronavirus ("COVID-19")

Given the on-going and dynamic nature of the COVID-19 outbreak, it is challenging to predict the impact on our Company. The extent of such impact will depend on future developments, which are highly uncertain, including the resurgence of COVID-19 as restrictions are eased or lifted, new information that may emerge concerning the spread and severity of COVID-19, and actions taken to address its impact, among others. It is difficult to predict how this virus may affect our business in the future, including its effect (positive or negative; long or short term) on the demand and price for our products. It is possible that COVID-19, particularly if it has a prolonged duration, could have a material adverse effect on our supply chain, market pricing, customer demand, and distribution networks. These factors may further impact our operating plans, business, financial condition, liquidity, and operating results, which would, in turn, affect our estimates, including the valuation of inventories, allowance for expected credit losses, fair value measurements, the valuation of long-lived assets, and cash flow projections used for impairment testing. Actual results may materially differ from these estimates.

Political and Regulatory Risk

The Board observes any political developments across the geographies that Woodbois operates in closely, notably in Gabon and Mozambique. The political environment across all the countries that Woodbois operates in will remain an evolving discussion point for the Board, however the risk of political unrest disruptive to the Group's areas of operations remains low. It is noted that since 2017 the insurgency in Cabo Delgado Province, Mozambique has been ongoing. Although currently unaffected by the conflict, the Board continues to closely monitoring any wider implications.

The regulatory frameworks in place across the countries that Woodbois operates in support the development of forestry. However, the forestry sector in Mozambique has been subject to frequent policy changes with regard to exports and delays in issuing of annual licenses, which has created uncertainty. Furthermore, there is no assurance that future political and economic conditions in these countries will not result in the Governments changing their political attitude towards forestry. Any changes in policy may result in changes in laws affecting ownership of assets, land tenure, ability to export, taxation, environmental protection and repatriation of income and capital, which may adversely impact the Group's ability to carry out its activities.

OTHER RISKS

The UK departed from the European Union at the end of 2020. Whilst there have been many regulatory and operational changes in trade between the parties this has had a very limited effect on the Group's operations. The Board will maintain close dialogue with its advisors to ensure that any proposed regulatory changes are identified and actioned accordingly.

In order to avoid a repeat of the inventory theft set out in this Report the Company will no longer hold stock at third party owned and operated sites.

ENVIRONMENTAL RISK

The Group is exposed to climate, weather and the risk of pests affecting its forestry operations. The availability of water for its irrigation as well as the abundance of too much water also pose a risk to the biological assets. These risks are managed by ongoing assessment of local pests and the adoption of irrigation methods. Adverse weather conditions may impact transport routes both within the Group's countries of operation and when exporting finished product.

Financial Risk

This comprises of a number of risks explained below.

Market PRICE risk

The Group is exposed to market risk in respect of any equity investments as well as any potential market price fluctuations that may affect the revenues of the forestry and timber trading operations. The Group mitigates this risk by having established investment appraisal processes and asset monitoring procedures, which are subject to overall review by the Board.

Liquidity risk

The Group seeks to manage liquidity by regularly reviewing cash levels and expenditure budgets to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group had net cash balances of $2.56 million as at 31 December 2020 (2019: $1.49m).

INTEREST RATE RISK

The Group has limited its exposure to the risk of being negatively affected by variable interest rates by predominantly borrowing using fixed interest instruments. Refer to note 13 for a detailed assessment

Credit risk

The Group's principal financial asset is cash. The credit risk associated with cash is considered to be limited. The Group receives payment immediately upon delivery of its forestry products. The credit risk is considered to be minimal as no credit terms are offered and funds are received prior to the risk of ownership being transferred to the purchaser. From time to time cash is placed with certain institutions in support of trading positions. The credit risk is considered minimal as the Group only undertakes this with large reputable institutions.

DONATIONS

No political donations were made during the year (2019: nil). No charitable donations were made during the year (2019: nil).

POLICY ON PAYMENT OF SUPPLIERS

It is Group and Company policy to agree and clearly communicate the terms of payment as part of the commercial arrangements negotiated with suppliers and then to pay according to those terms based on the timely receipt of an accurate invoice.

EMPLOYMENT POLICIES

The Group supports employment of disabled people wherever possible through recruitment, by retention of those who become disabled and generally through training, career development and promotion.

The Group is committed to keeping employees as fully-informed as possible with regard to the Group's performance and prospects and seeks their views, wherever possible, on matters which affect them as employees.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.  Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). 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 state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the directors are required to:

a.    select suitable accounting policies and then apply them consistently;

b.   make judgements and accounting estimates that are reasonable and prudent;

c.    state whether they have been prepared in accordance with IFRS adopted by the EU; and

d.   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies (Guernsey) Law 2008. The Directors are also responsible for safeguarding the assets of the Group and 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 Woodbois Limited website. The Company is compliant with AIM Rule 26 regarding the Woodbois Limited website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Going concern

An assessment of going concern is made by the Directors at the date the Directors approve the annual financial statements, taking into account the relevant facts and circumstances at that date including:

·      Review of profit and cash flow forecasts for a period of not less than 12 months from the date hereof;

·      Review of actual results against forecast;

·      Timing of cash flows and working capital resources; and

·      Financial or operational risks.

Having made reasonable enquiries, and based on the budget for 2021 and onwards, the Directors are satisfied that the cash balance and resources and facilities available and expected to be made available to the Group is sufficient to cover all known financial liabilities for the next 12 months from the date of approval of the financial statements and as such consider it appropriate to prepare the financial statements on a going concern basis. 

Further details on the assumptions and their conclusion thereon are included in the statement on going concern included in note 1 to the Financial Statements.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR

The Directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.

AUDITOR

PKF Littlejohn LLP were reappointed as auditors for 2020 and a resolution to reappoint then will be proposed at the 2021 AGM.

On behalf of the Board

Paul Dolan

Chair and CEO

28 April 2021

Independent Auditor's Report to the Members of Woodbois Limited

Opinion

We have audited the group financial statements of Woodbois Limited ('the group') for the year ended 31 December 2020 which comprise the Consolidated Statement of Profit or Loss and other Comprehensive Income, Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the consolidated financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is Companies (Guernsey) Law, 2008 and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the group financial statements:

·      give a true and fair view of the state of the group's affairs as at 31 December 2020 and of its loss for the year then ended;

·      have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·      have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008

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 group 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.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included:

·      Obtaining management's forecast cash flows covering the period from the date of signing to 31 December 2022. We assessed the assumptions within the forecast with regards to revenue generation, capital funding and cash flows. 

·      Review and challenge of the Board's controllable mitigation plans and their forecast impact on the ability of the business to continue to operate. We obtained supporting documentation to evaluate the plausibility and achievability of management's mitigation plans, including sensitised scenario forecasts.

·      We performed sensitivity analysis on management's forecast cash flows.

·      A comparison of actual results for the year to past budgets to assess the forecasting ability/accuracy of management.

·      We agreed available borrowing facilities to underlying agreements and the extent to which additional facilities could be utilised and funds raised from other sources.

·      We have assessed the adequacy of going concern disclosures within the Annual Report and Accounts

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage, materiality is used to determine the financial statement areas that are included within the scope of our audit and the extent of sample sizes during the audit.

We determined our overall financial statement materiality to be US$420,000 (2019: US$460,000). Based on 5% of adjusted loss before tax which is calculated by removing all items deemed to be outside the normal course of business, such as the contingent acquisition expense as this is an area which involves management estimation. We consider adjusted loss before tax to be the performance measure used by shareholders as Woodbois Limited is a trading entity and its profit-making ability is a significant point of interest for investors.

We set performance materiality at 70% (2019: 60%) of overall financial statement materiality to reflect the risk associated with the judgemental and key areas of management estimation within the financial statements.

No significant changes have come to light through the audit fieldwork which has caused us to revise our materiality figure.

Our approach to the audit

In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked at areas involving significant accounting estimates and judgements (such as the valuation of biological assets) by the Directors and considered future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Our audit scope focused on the principal area of operation, being Africa. The head office in South Africa oversees the accounting function of the group and its subsidiaries, however, regional offices maintain the accounting records for many of the components. The components are based in Mauritius, Gabon, Mozambique, Denmark and London therefore, given the nature of the accounting function, our audit was conducted by local component auditors within Gabon, Mozambique, Denmark and Mauritius.

Each component was assessed as to whether they were significant or not significant to the group by either their size or risk. The parent Company and ten components were considered to be significant due to identified risk and size. These components have been subject to full scope audits by component auditors and reviewed by us. Two components were not subject to full scope audits and we performed specific audit procedures due to the risk identified with the sale of these entities in the year.

The audit was overseen and concluded in London where we acted as group auditor. As group auditors we maintained regular contact with the component auditors throughout all stage of the audit and we were responsible for the scope and direction of their work. We ensured that we challenged their findings in order to form an opinion on the group. 

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.  

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group financial statements does not cover the other information and, we do not express any form of assurance conclusion thereon. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the 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 where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: proper accounting records have not been kept by the parent company; or

·      the financial statements are not in agreement with the accounting records; or

·      we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

Responsibilities of directors

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the group 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 group financial statements, the directors are responsible for assessing the group'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 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

·      We obtained an understanding of the group and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, review of component auditor work papers, application of cumulative audit knowledge and experience of the sector.

·      We determined the principal laws and regulations relevant to the group in this regard to be those arising from:

o  Aim Rules

·      We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group with those laws and regulations. These procedures included, but were not limited to:

o  enquiries of management

o  review of board minutes

o  review of RNS announcements

·      We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, the potential for management bias was identified in relation to the valuation of biological assets and as noted above, we addressed this by challenging the assumptions and judgements made by management when auditing that significant accounting estimate.

·      As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals;  reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

·      As part of group reporting instructions issued, component auditors were required to report areas of non-compliance with laws and regulations, including fraud.  As part of our review of component auditors work, we held regular update meetings during all stages of the audit  and included within the discussions matters relating to country laws and regulations as well as how the risk of fraud at component level was being addressed.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

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.