11 July 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.
("Woodbois", the "Group" or the "Company")
Woodbois, the African focused forestry and timber trading company, is pleased to provide a quarterly update on operations for the three months ended 30 June 2019 (Q2 of the Group's 2019 financial year); based on unaudited management information.
• $4.7m Group revenue in Q2 2019. Record quarter
• $9.2m Group revenue in H1 2019 vs $6.6m in H1 2018 (39% increase YOY)
• $3.2m trading revenue in Q2 2019 vs $2m in Q2 2018 (60% increase YOY)
• Perpetual preference share to be re-structured into 4% convertible bond
• 2018 Sustainability Report released
• Kevin Milne becomes acting Chairman as Miles Pelham steps down
• Graeme Thomson joins board as NED
The strong start to 2019 gathered momentum in Q2 2019 with a new quarterly revenue record of $4.7m. Total H1 2019 revenues of $9.2m confirm the Group's growth path with a 39% revenue increase over the previous year. The additional quarterly growth was achieved despite the context of a slower quarter for revenues from our own production. This was due to prevention of the shipping of timber from Gabon during May and June 2019 following the discovery of the attempted illegal shipping of Kevazingo logs by a Chinese company.
Gabon banned the export of the Kevazingo species in 2018, but in March 2019 300 containers of the species were discovered at Owendo port. This abuse was taken seriously by the government and led to the dismissal of both the vice-President and the Forestry Minister, as well as multi-level changes within the Customs Department. In an encouraging move for ethical operators, Professor Lee White, a UK national and committed environmentalist who was previously in charge of the national parks of Gabon was announced as the new Minister of Forests, Environment and the Sea on 10 June 2019. We very much look forward to meeting Professor White in order to present our sustainable operating credentials and to learn about his vision for Gabon's forestry sector. In the meantime, timber exports have now been approved to re-commence so our logistics team in Libreville can look forward to a busy summer ahead.
Trading and sales
The shortfall in revenues from export of our own production in Gabon was compensated for by growth in trading, which was supported by inflows to our Internal Trading Fund (ITF) detailed in the Q1 report. The final remaining tranche of $2.5m of previously reported ITF subscription was drawn down at the beginning of June 2019. Volumes with existing suppliers increased during Q2 to a record $3.2m, a 60% YOY increase vs Q2 2018 trading revenues. The increase in volumes has come largely from existing suppliers, but with available trade finance firepower now in place, we continue to seek relationships with reliable, high quality suppliers across the Congo basin to match the global demand for traceable, sustainable hardwood products generated by our sales team.
Envision, the Tanzanian entity which purchased the Tanzanian agriculture business from us, has not yet paid the initial proceeds in accordance with the payment schedule agreed in the SPA. We are currently in discussions with Envision to restructure the payment schedule. The Group has no ongoing cost commitment in Tanzania.
Further corporate structure consolidation
The company is proposing to restructure the 5% perpetual preference shares in Woodbois subsidiary Argento by buying it back and issuing its holders instead with a convertible bond issued by Woodbois. The Woodbois convertible bond will have a 5 year tenure, 4% coupon and conversion price of 8p. Preference shareholders are currently being asked to commit to this transaction and thus far 96.69% have accepted the switch terms. The switch is from a preference share with variable conversion terms linked to a subsidiary company, to a bond convertible into Woodbois common stock at a fixed rate. This simplifies the capital structure and serves to more closely align management, bondholders and shareholders' interest, as well as making the company more investible and easier to value for institutional investors. The Company is in discussions with the Panel on Takeovers and Mergers as to whether the transaction should be subject to a 'whitewash' waiver from the provisions of Rule 9 of the Takeover Code, which would include a shareholder vote. The Company will make a separate announcement upon entering into definitive documentation and the transaction is expected to complete in September 2019 and full details of the convertible bond will be available on our website at www.woodbois.com thereafter.
Installation of our new Techdry kilns is now underway and is expected to be completed on time before the end of September. The new line of sawmilling equipment from China and Slovenia is also scheduled to arrive in Gabon during Q3 and is expected to be operational before the year end. Production at the sawmill has suffered minimal disruption and will continue to operate throughout this major upgrading of facilities.
The new equipment that arrived at the end of Q1, namely a debarking machine, two hydraulic lifters and a hydraulic press, have all been commissioned and are operational. Research continues into optimizing the veneer factory via an additional veneer line or plywood line, but analysis of several months' worth of data from the factory while working at full capacity must first be undertaken in order for decisions to be made.
Miles Pelham to step down, Kevin Milne to become interim Chairman
Woodbois announces that it has received notice from its Non-Executive Chairman, Miles Pelham, that he will be stepping down with immediate effect. Since leaving banking in 2017 Miles has built Diginex Limited, his start-up blockchain company, into a diversified global leader in the blockchain arena. Its growth is such that it will now be listed on the Nasdaq with Miles serving as its Executive Chairman. Miles remains fully committed to Woodbois' future success and remains its largest stakeholder but feels that he cannot adequately service the needs of the company with another Chairmanship of a listed entity. The Board has appointed Kevin Milne as interim Chairman whilst candidates are vetted and a replacement found. The company does not expect this change to have any material effect on the performance of the company. Kevin, who has been NED since August 2015 is a Chartered Fellow of the CISI and has held leadership and senior management positions in the UK, Europe, Asia and Australia. Kevin has extensive experience operating in highly regulated environments including being a member of the Executive Committee of the London Stock Exchange Group.
Graeme Thomson to join the board
I am pleased report that after a wide search Graeme Thomson has agreed to become Independent Non-Executive Director and Chairman of the audit committee. Graeme, 62, 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. His varied commercial experience, including of Audit and Remuneration Committees, as well as internationally and of financial matters, will be of considerable benefit to the Company as we expand.
Sustainability report released
Alongside the quarterly business update, we are also pleased to announce the release of the Woodbois Sustainability Report for 2018. The publication of a yearly report is something we had committed to in 2017 and we feel that this year's report builds on the excellent foundation laid down by last year's version. It can be found on our website at www.woodbois.com.
The modus operandi at Woodbois has always been to operate in a sustainable way, engaging with all relevant stakeholders while building a commercially and developmentally successful business. The report aims to be informative, enhance transparency and provide data relating to the economic, environmental and social impacts of our operations. The report also serves to establish a clear link between the values driving our business and the ways in which our operations contribute to achieving the United Nations Sustainable Development Goals. The publication helps to identify areas that, as a business, we can improve on to further establish Woodbois as a leader in the sustainable timber space. As management continues to grow the business, we remain keen to be at the forefront of transparency within the forestry industry.
I look forward to presenting the consolidated 2019 half-year results in full in due course.
The following information is disclosed pursuant to Schedule Two, paragraph (g) of the AIM Rules for Companies:
Full name: Graeme Paul Thomson
Current Directorships / Partnerships: Sydenham Garden
Past Directorships / Partnerships (past 5 years): Tower Resources plc, Tower Resources (Namibia) Holdings Limited, Tower Resources (Namibia) Limited, Tower Resources Namibia Limited, Tower Resources Cameroon Limited, Tower Resources Cameroon SA, Rift Petroleum UK Limited, Rift Petroleum Holdings Limited, Rift Petroleum Limited, Tower Resources (Kenya) Limited, Tower Resources (UK) Limited, Wilton Petroleum Limited, Neptune Petroleum Limited, Neptune Petroleum (Uganda) Limited, Comet Petroleum Limited, Comet Petroleum (SADR) Limited.
Miles Pelham - Chairman
Paul Dolan - CEO
+44 (0)20 7099 1940
Arden Partners Plc (Nominated adviser and broker)
Maria Gomez de Olea
+44 (0)20 7614 5900