| Tue 11 Nov 2008, 14:39 | | LAF - Lonrho Raises GBP 15.6 Million To Continue The Development Of |
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LAF
LOLAF
LAF - Lonrho Raises GBP 15.6 Million To Continue The Development Of
Its Core Businesses
Lonrho Plc
(Formerly Lonrho Africa Plc)
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
("Lonrho Africa" or "the Company")
Lonrho Raises GBP15.6 million to Continue the Development of its Core Businesses
11 November 2008
Lonrho Plc (AIM: LONR), the conglomerate with a structured portfolio of African
investments is pleased to announce that it has undertaken a placing to provide
sufficient funds for Lonrho to continue the development of its core businesses
across Africa through 2009.
The placing, which is being made following consultation with major institutional
investors, has raised GBP15.6 million (before expenses), equivalent to
approximately US$ 24.4 million, by means of the issue of 308,846,000 new
ordinary shares in the Company (the "Placing Shares") at 5 pence per Ordinary
Share (the "Placing"). The issue of the Placing Shares is subject to shareholder
approval at an EGM, which is expected to be held on Tuesday 9th December 2008
and the admission of the Placing Shares to trading on AIM.
The Placing has received strong support from existing shareholders and will
provide substantial commercial risk reduction to shareholders given the current
market conditions.
The Placing Shares, when issued, would represent approximately 40% of the
Company`s enlarged issued share capital and application will be made for the
admission of the Placing Shares to trading on AIM. It is expected that dealings
in the Placing Shares will commence at 8.00 a.m. on Wednesday 10th December
2008. The total number of shares in issue following completion of the Placing
would be 763,819,076.
A circular convening the EGM of the Company to approve, inter alia, the issue of
the Placing Shares will be sent to shareholders.
Introduction
Lonrho conducted a strategic review of each of its businesses in October this
year. The five-year business plans for each division in the Group have been
updated and now reflect changes in the world economy.
The Board concluded from the review that it was prudent for Lonrho to ensure
that each of the business plans are funded through 2009 and that head office
costs are brought in line with this strategy. In the current market conditions,
our planning has assumed that the Company does not have to return to
shareholders for further funding during 2009.
Currently, Lonrho has no debt at Plc level. Net proceeds of the Placing will
significantly reduce the Company`s exposure to further insecurity in world
financial markets. Africa remains an attractive investment opportunity; it is an
emerging market with little commercial or consumer debt. Economic forecasts for
Sub Saharan Africa continue to predict GDP growth upwards of between 5% and 6%
for several strategic countries in which Lonrho`s businesses operate, and for
Angola with 20% in GDP.
The Company`s business portfolio has matured sufficiently enough to enable the
individual businesses to raise structured finance or debt as deemed necessary to
fuel further growth. Lonrho`s core businesses are demonstrating strong economic
growth.
An update on Lonrho`s key businesses are set out below. It is expected that some
US$ 17.5 million of the proceeds of the Placing, will be allocated to completion
and expansion of current projects under development.
Luba Freeport
A natural, deepwater, oil services terminal in the Gulf of Guinea, Luba is an
operating Freeport. Since Lonrho`s acquisition in 2006, the port has developed
as the central logistics hub for the Gulf of Guinea oil industry. Long term
contractual clients now operating from the port include Exxon Mobil; Baker
Hughes; Amerada Hess; Schlumberger and SBM with Noble and others mobilising.
Luba is owned 63% by Lonrho and 37% by the Government of Equatorial Guinea.
Lonrho completed its first phase of the port extensions on time and on budget in
November 2007 and phase two, taking the port`s accessible quay to three hundred
and fifty metres, will be completed by January 2009. Currently the port averages
124 vessels per month and growth is constrained by quay capacity. The completion
of the quay extension will allow double the number of vessels to be handled.
Lonrho has invested US$ 65 million in this key asset, which is a fundamental
infrastructure centre for the Gulf of Guinea oil and gas industry and the stated
policy requirements for America to source one quarter of all American oil
requirements from the Gulf of Guinea by 2012.
Lonrho plans to invest a further US$ 1.2 million to complete the current
development phase of the port by January 2009 and US$ 0.5 million on the
purchase of an x-ray `container scanner` for the port to meet international
security standards for the clearance of containers at the Freeport.
Lonrho Aviation : Fly540
Fly 540 is progressing well as a pan African airline connecting Africa North to
South and East to West. The airline has demonstrated its ability to provide
international, reliable standards in an African environment. Over ninety-five
percent of all flights leave within 10 minutes of schedule.
Having established a strong and cash generative position in the domestic market
in Kenya in 2007, Fly540 commenced regional flights to Uganda; Tanzania; DRC and
Southern Sudan at the start of 2008. The regional Kenyan hub will continue to
develop routes to service Rwanda, Mozambique and Burundi in 2009.
The second strategic hub for Fly540 is based in Angola and is nearing completion
of development. This will initially serve six domestic locations in Angola,
which is expected to grow to fifteen.
Operationally the airline has been established, crews trained, maintenance
facilities established, ticket offices developed and staff recruited. The
inaugural flight in Angola is scheduled for later in 2008.
Negotiations regarding the extension of Fly540 Angola to service the regional
market will commence once the domestic market has been established and
demonstrated its success. Angola as a country with a 20% plus growth in GDP and
a massive boom in FDI as a result of the oil industry clearly requires an
international standard domestic scheduled airline. The Fly540 Angola budget
forecasts further funding of US$ 2.9 million to take it through to operational
breakeven for the regional Angolan hub.
The third strategic hub, for West Africa, is Ghana and this will commence
flights first quarter 2009. Lonrho`s participation forecasts a budget for Fly540
Ghana of US$ 3.6 million to take it through to operational breakeven. The
combination of the three regional hubs, East, West and South will, when
interconnected, deliver an international standard, quality airline that connects
sub Saharan Africa.
The Fly540 business plan is to provide an international standard passenger
service providing a level of service that is such that Fly540 becomes the
regional distribution and hub and spoke carrier of choice for the
intercontinental airlines flying into and out of Africa whilst being the
reliable and quality airline for those in Africa to transit Africa.
Lonrho Agriculture
Lonrho Agriculture is centred on the ability to agri-process, pack and deliver
fresh produce from Africa to the global consumer. Lonrho`s subsidiary, Rollex
operates a 3,500m2 state of the art agri-processing facility airside at
Johannesburg airport.
The company collects fresh produce from across southern Africa with its own
fleet of new refrigerated trucks and consolidates the produce (vegetables and
fruit) for processing and packing to customer`s specification.
Rollex then delivers the finished produce to supermarkets and retailers both in
South Africa and Europe. The company currently sends on average 40 tonnes of
fresh produce per day to Europe from Africa. The produce is processed and packed
to the highest international standards for customers including Marks & Spencer,
Tesco, Sainsbury and Carrefour in Europe and Woolworths and Spar in South
Africa.
A new fruit salad processing line at the Johannesburg facility, which commenced
operations in early 2009, is expected to add US$ 20 million to annual turnover.
A newly commissioned fish processing facility in Walvis Bay will add further to
the Lonrho processing and export capabilities.
Lonrho Agriculture is focused on increasing its cold store and agri-processing
and logistics capabilities to service the growing market for African produced
foodstuffs. New cold store and agri-processing facilities are being developed by
Lonrho in Lilongwe, Malawi to open up new delivery opportunities to the Middle
Eastern market.
Lonrho is intent on establishing a world-class chain of facilities to service
the cold store agri-processing market.
To support the flow of fresh produce into this logistics chain, Lonrho
Agriculture is currently negotiating agricultural projects in several countries
to service both the domestic market in South Africa and export markets.
The roll out of the agri-processing and cold stores, plus Lonrho farming
initiatives has been budgeted to require approximately US$ 6 million further
equity finance.
Lonrho Construction : Kwikbuild
Kwikbuild is an established and cash generative business that manufacturers
prefabricated buildings. The core business for the company has been the supply
of prefabricated school rooms to the South African Government. Currently,
Kwikbuild supplies 50 class rooms per month as part of the Government`s
requirement to build sixty-four thousand class rooms for South Africa. It is
planned to increase this to 200 units a month when new production facilities are
completed.
Following the controlling acquisition of Kwikbuild by Lonrho, the company has
developed a new manufacturing plant for Kwikbuild panels and components in Port
Elizabeth, South Africa.
This has increased the production capabilities of the company, and has
positioned the company to move beyond its historic markets.
In conjunction with Lonrho`s expertise, the company is attracting export orders
from Angola, Mozambique and the DRC for oil companies, miners, clinics, workers
camps, municipal offices, and a wide range of uses.
The strength of Kwikbuild product is that it requires minimal skill to install
and no local construction components. Thus in rural environments, four standard
Kwikbuild buildings can be delivered in a 40ft container and installed and
operational in four days.
Kwikbuild is operating profitably and has no immediate funding requirements.
Lonrho Hotels
Cardoso Hotel
The Hotel Cardoso in Maputo, the capital of Mozambique, is one of the leading
properties in the city. Lonrho has invested US$ 1.5 million in a major
refurbishment project which has brought the hotel back up to a four star
standard. Funds have also been invested in the adjacent park to expand its
stunning hill top position with panoramic views over the bay of Maputo. The park
now incorporates a coffee shop and restaurant run by the hotel. This has
enhanced the location of the Cardoso, making it one of the top meeting venues in
the city.
Since the new Lonrho management commenced in 2006, occupancy rates have risen
from 38% to 70%, and the hotel now averages approximately US$ 120 revenue per
room compared to US$ 40 in 2005. With the completion of a new panoramic roof top
restaurant early in 2009, the hotel will become one of the most prestigious
destinations in Maputo.
The hotel is cash generative and does not require further funding.
Karavia Hotel
The Karavia Hotel is in Lubumbashi in the Democratic Republic of Congo. Lonrho
has been awarded a 50 year hotel refurbishment and management contract under a
World Bank formatted tender by COPIREP, the DRC Government body for
reconstruction.
The project, to provide an international standard 200 plus room hotel in Katanga
Province, the centre of the DRC copper belt, is on schedule to be open mid 2009.
The completed hotel will be the only large accommodation facility in Lubumbashi,
a market where many visitors are currently paying up to US$ 300 a night to stay
in small guest houses.
The refurbished hotel will have 212 rooms and 12 suites, including a
Presidential Suite.
Due to the increase in foreign direct investment into the Katanga province
(estimated to be in the region of US$ 12.5 billion over the coming five years),
there is a huge requirement in the market for quality accommodation in
Lubumbashi and conservative estimates for occupation of the Karavia are set at
80%.
The US$ 20 million rebuild of the Karavia has been funded by equity supported by
debt finance by the DBSA for US$ 10m and a working capital facility from
Standard Bank.
Lonrho has an outstanding commitment of a further US$ 1.7m to complete its
equity investment.
Lonrho IT
Computer Enterprise Solutions ( CES ) is an expanding IT solutions provider. A
master franchise for Dell, HP, Microsoft and Tata IT, the company is the market
leader in this market in Mozambique.
Having dominated the Mozambique market, CES has opened an office in Johannesburg
to address the South African market, and is expanding into Uganda and Angola.
The expansion of CES is self-funding from internally generated cash flows.
Lonrho Springs
With bottling plants in production in Maputo and Kinshasa, Lonrho Springs is
developing new water bottling operations in Luanda, Angola and Lubumbashi in the
DRC. The new plants will produce 5.0 million litres and 1.2 million litres
respectively per year.
The bottled water market remains strong across Africa with recent studies
demonstrating an average market growth of 30% per year.
Expanding markets such as Lubumbashi and Luanda have chronic supply shortages,
with not only the inability to supply locally, but also long delays experienced
in expensive imported waters reaching market.
The Lubumbashi and Angolan plants are scheduled to start production in the
second half of 2009. Equity requirements for funding of the projects by Lonrho
are budgeted at approximately US$ 1.5m.
David Lenigas, Lonrho`s Executive Chairman commented today:
"In these turbulent markets, it is incumbent on the Board of Lonrho to ensure
sufficient capital is available for the business to meet its corporate
objectives. The Board has considered in detail the requirements of the company
for the coming twelve months and has reduced growth plans in some sectors and
cut corporate overheads by thirty percent.
Having discussed the position with our major shareholders, the Board has
concluded that it is prudent for the Company to raise GBP 15.6 million to
maintain the development of our core businesses. These funds will be applied
judiciously.
Lonrho remains bullish on African growth and economic development. Sub Saharan
Africa will, in our opinion, continue to show significant economic growth over
the coming years and Lonrho`s mandate remains to be an integral and successful
component of that growth."
Enquiries
Lonrho Plc +44 (0)20 7016 5105
David Lenigas, Executive Chairman +44 (0)7881 825 378
Geoffrey White, Chief Executive +44 (0)7717 307 308
Officer
Emma de +44 (0)7867 785 177
Borchgrave, Executive Director
Pelham PR
Charles Vivian +44 (0) 20 7743 6672
+44 (0) 7977 297903
James MacFarlane +44 (0) 20 7743 6375
+44 (0) 7841 672831
Collins Stewart Europe Limited
Hugh Field +44 (0) 20 7523 8350
NOTES TO EDITORS
About LONRHO:
Lonrho Plc is an expanding conglomerate that is rapidly growing a successful
business throughout Africa. The Company`s shares are traded on the London AIM
stock exchange (LONR). Lonrho is strategically focused on the development of
business opportunities in infrastructure, transportation, support services,
hotels and natural resources. The Company has over 19,000 shareholders and
substantial institutional backing to support its mandate to build a profitable
business that plays a fundamental role in the development of the African
economy.
Since 2006, the Company has invested in or acquired control of:
Hotel Cardoso - www.hotelcardoso.co.mz
Lonrho Mining - www.lonrhomining.com
Luba Freeport - www.lubafreeport.com
Fly540 - www.fly540.com
Swissta Holdings - www.swissta.com
Bytes and Pieces www.bytespieces.com
Kwikbuild - www.e-kwikbuild.co.za
Rollex - www.rollex.co.za
LonZim - www.lonzim.co.uk
South African sponsor to Lonrho Plc
Java Capital (Proprietary) Limited
Date: 11/11/2008 14:39:01 Produced by the JSE SENS Department.
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