| Tue 2 Nov 2010, 9:00 | | LAF - Lonrho reports strong growth with GBP33.6m turnover and a GBP2.9m profit |
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LAF
LOLAF
LAF - Lonrho reports strong growth with GBP33.6m turnover and a GBP2.9m profit
for the 4th Quarter
LONRHO PLC
(Formerly Lonrho Africa Plc)
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
("Lonrho" or the "Company")
Lonrho reports strong growth with GBP33.6m turnover and a GBP2.9m profit for the
4th Quarter
2nd November 2010
These results (and comparative figures included therein) do not form audited
accounts nor have they been extracted from audited accounts. The results
disclosed in this trading update may potentially be subject to adjustments
during the year-end audit in respect of goodwill valuations and other minor
items. The comparative figures used are year on year due to the influence of
seasonality within the different businesses in the group.
Lonrho Plc (AIM:LONR) today announces its unaudited results for the fourth
quarter and the full year to 30 September 2010. The year has seen strong growth
in the existing business and Lonrho make several complementary strategic
acquisitions to further develop its core divisions. During the final quarter of
the financial year, the Company has generated GBP33.6m of turnover and a profit
before tax of GBP2.9m.
On 8 October the Company announced both the launch and completion of a US$60m
Convertible Bond offering, with a US$10m overallotment. The bond issue was
significantly oversubscribed and the US$70m bond was approved at a shareholder
meeting on the 29th October 2010. The primary use of the proceeds will be to
restructure existing expensive debt and provide capital for the fish and
agricultural division to maximise current opportunities.
Financial highlights for the quarter and year include:
- Group turnover from continuing operations in the quarter, at GBP33.6m, has
increased 13% ahead of the same quarter in the prior year.
- Full year, turnover has increased by 20% to GBP107.7m.
- In the final quarter of 2010 the Group has achieved EBITDA of GBP5.1m. This
brings the full year figure to GBP9.4m, a GBP7.2m increase on 2009.
- Profit before tax for the quarter was GBP2.9m, compared to a GBP0.6m loss
in the final quarter of the previous financial year.
- Full year profit before tax stands at GBP0.5m, compared with a loss of
GBP4.5m for the financial year to 30th September 2009.
- Net Assets at the year end stood at GBP100.3m, compared with GBP101.9m as
at 30th June 2010.
- Cash balances in the Group at year end were GBP7.7m.
- Company market capitalisation was GBP128.9m at 30th September 2010. By 1st
November 2010 this had risen to over GBP200m.
Operational highlights for the quarter include:
- Following an eight month in store trial, Oceanfresh, the Lonrho
Agricultural division fish distributor has commenced sales of Oceanfresh
branded wild caught, sustainably sourced, frozen hake fillets into the
major US retailer Costco. The initial range being supplied to Costco has
already grown with the addition of Oceanfresh Magic Kiddies Fish Fingers
and four other lines to be delivered into the Costco range shortly.
Oceanfresh is implementing a roll out plan with Costco to enter all the
stores which Costco operates throughout the US and UK.
- During the quarter, Lonrho completed the purchase of the remaining 49% of
Fresh Direct. The business has volume production agreements on 200 hectares
of commercial farmland and as a result of agreed planting programmes, the
Lonrho Agriculture division has installed irrigation equipment and planted
over 120,000 fruit trees during the year. These will be delivering volume
commercial crops during the coming financial year and have already started
yielding fruit for Tesco, Sainsbury`s and Waitrose in the UK.
- A contract from Xstrata Mining for Lonrho to establish a community based
commercial farming and agri-processing project site is a template project
that has significant future potential. Directly aligned with President
Zuma`s Comprehensive Rural Development Programme (CRDP) the project, funded
by Xstrata, will develop community based viable standard farms that act as
cooperatives and through the existing Lonrho agri-logistics cold chain have
access to both domestic and international commercial markets.
- Tenaris, a world leading supplier of pipes, tubular products and related
services, has become a large client at Luba Freeport during the quarter.
The arrival of Tenaris, plus that of Noble Energy and Dickerman, re-
enforces Luba`s position as the premier oil services port in the region and
will continue to drive growth for 2011.
- Lonrho has strengthened management during the quarter with the appointment
of Kiran Morzaria as a non-executive director on the Board of Lonrho, Ewan
Cameron as CEO of the Lonrho Hotel division and Roger Stringer as
Commercial Director at Kwikbuild.
Divisional Highlights:
Agribusiness
The integration and growth of Oceanfresh, the Lonrho fish distributer, has
worked well having strong synergies with the existing Lonrho cold store and
processing capabilities. The increasing demand for wild caught, sustainably
sourced fish from Southern Africa is a strong growth opportunity.
- Agribusiness divisional turnover for the quarter increased 28% to GBP17.7m
bringing turnover for the full year to GBP55.3m, an increase of 19%.
- A contract from Xstrata Mining for Lonrho to establish a community based
commercial farming and agri-processing project site is a template project
that has significant future potential. The project is directly aligned with
President Zuma`s Comprehensive Rural Development Programme (CRDP) and the
Government Rural Development and Land Reform plans. The project, funded by
Xstrata as part of their Social and Labour Plan will develop community
based viable standard farms that act as cooperatives and through the
existing Lonrho agri-logistics cold chain have access to both domestic and
international commercial markets.
- Export freight tonnages of fruit and vegetables by Rollex during the
quarter rose by 27% compared to the same quarter in the prior year to
nearly 4,800 tonnes, an increase of 29% on the previous quarter. This was
partially offset by lower domestic volumes within South Africa and reduced
volumes of general cargo travelling northbound from Johannesburg. The
exceptional strength of the Rand (13% stronger year on year) also impacted
on reported sterling figures which fell by 5.9%,
- As mandated at the start of the year, Rollex has concentrated on improving
margins by increasing processing efficiencies, rationalising costs where
possible and negotiating better terms from customers. The success in this
strategy can be measured in the gross margin which for the quarter stands
at 15.4%, compared to 13.0% in the prior year.
- During the quarter, Oceanfresh Seafoods (51% holding) has commenced
delivery of product to Costco in the US. After an initial eight month
evaluation period, Oceanfresh is now supplying Costco with Hake fillets
throughout the Los Angeles, San Diego and Texas regions with a phased
rollout starting in the Chicago and the Northwest regions and building to
all stores by mid 2011.
- Following on from the success of the Hake fillet product, Costco has now
agreed to add two further lines commencing delivery by early 2011 including
Oceanfresh Kiddies Magic Fish Fingers before Christmas and the Oceanfresh
Hake Light launching in the 1st week of January 2011. Costco has now
approved six separate Oceanfresh lines.
- As well as success in export markets, Oceanfresh has been thriving in the
domestic South African market. Checkers have recently awarded Oceanfresh
the title of `supplier of the year` and added a further 2 new Oceanfresh
deli items to their buying list. Shoprite has become a new customer for
Oceanfresh joining the other South African retail chains.
- On 28 August, Lonrho completed the acquisition of the remaining 49%
minority interest in Fresh Direct. The consideration was settled by the
issue of 78,221,479 new ordinary shares at a price of 10.98p, a total
purchase price of GBP8.58m.
- Lonrho Agricultural division has now installed irrigation facilities on 200
hectares of farmland and has, to date, planted 122 hectares with 120,000
fruit trees and more than 10,000 blueberry bushes. The remaining 78
hectares are due to be planted in the coming financial year taking the
total number of plants to over 200,000. The first crop has begun harvesting
with peaches being sent to Tesco, Sainsbury`s and Waitrose in the UK.
- During the quarter, Trak-Auto (100% holding) has started to supply highly
competitively priced John Deere tractors manufactured in their Indian
factory to the Mozambique market. Trak-Auto is seeing strong growth in the
local market and increasing margins. On the back of the continued success
of selling John Deere units, Trak-Auto has generated growth in its parts
and servicing business, adding a strong continuing turnover stream in
spares and service.
Transport
The transport division has seen another strong quarter with load factors
increasing 19% on the prior year. The division is well placed for growth in the
coming financial year with the launch of the Angola and Ghana hubs completing
the core pan-African network.
- Fourth quarter turnover in the transport division was GBP6.7m, taking the
full year figure to GBP21.3m. After adjusting the prior year for GBP2.6m of
exceptional revenue from the sale of aircraft, this equates to an annual
increase of 14%.
- Fly540 Angola, after a long drawn out bureaucratic process, is ready to
commence commercial operations. The operations have undergone an extensive
ICAO audit and Fly540 Angola will be the only private sector airline in
Angola that is ICAO registered. The Angolan regional and domestic market
remains significantly under serviced and the demand for Fly540 Angola is
evident at all levels.
- Fly540 Uganda (100% holding) during the quarter signed an agreement with
Chapman Freeborn, the world leading air charter service company. This joint
venture will help to expand the capabilities of Fly540 Uganda and add
further clients to the Fly540 Group through the association with Chapman
Freeborn.
- Fly540 Kenya (49% holding + board control) has commenced flying the Nairobi
to Dar es Salaam route during the quarter. The route has helped to increase
passenger numbers on the airline and increased profitability. Additionally,
the airline will begin servicing coastal routes to Ukunda and Diani in
November of 2010 to give Fly540 an even more comprehensive portfolio of
routes.
- The Fly540 group has signed operating lease agreements for 2 additional CRJ
regional jet aircraft which will be added to the fleet in Kenya and
Tanzania (90% holding). The additional capacity that these aircraft add
will allow the group to increase passenger numbers and profitability in
2011.
Infrastructure
Luba Freeport and Kwikbuild have finished the year with very strong performance
significantly increasing turnover in comparison to Q4 2009. The Infrastructure
divisional turnover has increased 49% from the same quarter last year, with new
clients at Luba and projects with the Department of Health and Western Cape
Department for Education at Kwikbuild helping to fuel the growth.
- For the final quarter of 2010, Luba Freeport recorded turnover of GBP2.7m,
a 39% increase compared to the same quarter in the prior year. The
continuing growth in quality of services provided by the port has meant
that annual turnover has grown to GBP11.0m, up from GBP8.0m in the prior
year.
- During the quarter, Luba Freeport (63% holding) has added 2 further clients
to an already strong client list, Tenaris and Dickerman.
- Tenaris is a world leading supplier of pipes, tubular products and related
services for the world`s energy industry and will provide products and
services to the oil companies operating from Luba Freeport and in the Gulf
of Guinea from their new logistics facility at Luba.
- The fourth quarter has also seen Dickerman added to the service providers
at Luba. Dickerman has been one of the world leaders in surface preparation
and coating activities both offshore and onshore for 30 years. Their move
to Luba further extends the servicing capability of the port and further
advances the objective for Luba to be the one stop shop for all oil
companies in the region.
- Kwikbuild has added GBP0.7m to turnover in the final quarter compared to
GBP0.3m in the prior year, a GBP0.4m increase. Annual turnover of GBP3m is
more than twice the GBP1.3m achieved in 2009, with a strong order book
entering the new year.
- During the quarter, e-Kwikbuild (51% holding) has delivered a medical
laboratory in Kwa Zulu Natal for the Department of Health. The Laboratory
has been well received to the extent that Kwikbuild has since received an
order for a Tuberculosis testing laboratory in Somerset West. This is a
pilot unit for the national rollout of these Laboratories. The programme is
part of a drive to try and stem the expansion of TB and to treat the 10
million sufferers of the disease in South Africa.
Hotels
The hotel division has had a steady quarter. The Hotel Cardoso continues to
perform well in the Maputo marketplace with the Grand Karavia business building
month on month since the formal opening by President Kabila.
- The hotel division, driven by the continued strong performance of the
Cardoso and the opening of the Grand Karavia, has increased quarterly
turnover to GBP2.1m from GBP1.3m in the prior year, a 68% increase. In the
twelve months to September 2010 the total turnover generated in the hotels
division stood at GBP5.9m, 71% higher than the GBP3.4m in 2009.
- During the quarter, given the growth opportunities for the division, a new
CEO for Lonrho Hotels has been recruited to the team. Ewan Cameron, who
joins having worked with some of the world`s strongest hotel brands,
(InterContinental, Holiday Inn, LeMeridian, Grosvenor House and Crowne
Plaza) will manage the growth of the Lonrho hotels division as the
portfolio of properties increases through a combination of new
acquisitions, redevelopments and further management contracts.
- The Cardoso hotel (59% holding + Management Contract) continues to deliver
strong performance. Both occupancy and room rates have been impressive in
the final quarter of the year. Occupancy continues to remain around 80%
with room rates having increased 24% on the prior year.
- Food and beverage sales at the Cardoso have also been strong. With the new
Fiamma restaurant and conference centre, the hotel has been able to tap
into the conference market in Maputo and prove its ability to hold
exceptional events.
- The Grand Karavia hotel (50% holding + Management Contract) is now fully
operational. During the quarter the hotel has hosted a number of large
functions which have helped to prove the hotels capability to hold such
events and also helped to raise the profile of the hotel amongst businesses
in the area. The mining sector in Lubumbashi is seeing a resurgence of
confidence driven by Freeport McMorran, the single largest project,
settling the terms of its mining licence in October.
- The Leopard Rock hotel (Management Contract) has continued to attract
conferences, tourists and golfers to the superb resort and golf course.
Having completed the refurbishment program, the resort is seeing growing
occupancy levels. The resort is in the process of organising a Pro-Am event
which will attract some of the top South African PGA professionals to be
held early in 2011.
Support Services
Thanks to project wins for Bytes & Pieces at Riversdale and Tribunal
Adminstrativo, as well as the continued growth of IndIT and the CES businesses,
the support services division has recorded its strongest quarter to date.
- The support services division has in the final quarter of 2010 achieved a
record turnover figure of GBP3.6m. This result is 27% higher than the same
quarter in the prior year, with annual turnover increasing 22% in the
division to GBP11.1m.
- Bytes & Pieces, Mozambique`s largest IT services company, saw fourth
quarter turnover increase 43% on the same quarter in the prior year,
recording its best ever quarterly turnover thanks to large project wins.
- Bytes & Pieces (65% holding) have won the tender to implement the IT
infrastructure for Riversdale Mozambique (a coal mining operation in Tete,
Mozambique). The solution involved implementation of a turnkey solution
over three sites, supplying, installing and configuring of the Riversdale
servers, storage and workstations. Bytes & Pieces also won the Managed
Services contract for Riversdale IT and continues to provide ongoing
support and service. This contract is worth US$120,000 to Bytes & Pieces
per annum..
- Tribunal Adminstrativo, the organization which handles contracts for the
Government of Mozambique has awarded Bytes & Pieces the contract for the
installation of their Wide Area Network (WAN). The project involves
designing and implementing the IT network infrastructure, WAN optimization
and post-installation services. This contract is valued at US$600,000.
- CES Zambia (50% holding) have achieved sales 20% ahead of budget in the
year. Having started trading in the current financial year, the business
has managed to build a significant blue chip customer base and achieved
sales in excess of US$1.2m.
- During the quarter, IndIT (45% holding + board control) has seen strong
sales progress in sales of Cyberoam products. IndIT is the sole distributor
of Cyberoam, a comprehensive network security product, in South Africa, and
has additionally held certification training for re-sellers.
- IndIT has successfully launched its new website. Including regularly
updated downloadable guides and product data it has lead to increased
contact with customers resulting in increased sales.
Outlook
Lonrho has reached an important point in its development. Having moved into
profitability for the financial year and following on from its successful bond
issue, the Company is in a position of strength entering the new financial year
to deliver further growth. The opportunities now being implemented by Oceanfresh
in the US and the imminent launch of Fly540 Angola and Ghana, the recent opening
of new hotels, new clients arriving at Luba and the continued growth of the
African economy mean the Group is well positioned to deliver substantial growth.
David Lenigas, Lonrho`s Executive Chairman commented:
"The solid foundations of the business are in place and performing well and
Lonrho is now seeing profits emanating from its investments. The beneficial
financial results from the capital expenditure into our core divisions are
becoming more and more evident.
This will be a continuing trend as further investment that has been made during
the past year comes online and contributes to results. The capital expenditure
programmes at Fly540 Angola, John Deere Angola, the Karavia hotel, Luba Freeport
and Lonrho Agriculture are practically complete and these businesses will be
delivering additional growth for Lonrho during the coming financial year.
Management teams have been strengthened to support the forecasted growth in the
coming twelve months and the Company remains focused on its five core divisions
: agriculture, infrastructure, transport, hotels and support services and
continues to operate in seventeen countries thus de-risking the Company`s
operations geographically.
Lonrho is one of the first UK mid-caps to successfully place a convertible bond
(US$ 70m) since the financial crisis. The demand for the bond from existing
stakeholders and other institutional investors emphasises the growing confidence
in the Lonrho business as well as in Africa as an emerging market."
Reported Figures
Lonrho Group
Divisional Turnover,
GBP000s
3 months to
30 30 Variance Var %
September September
2010 2009
Agribusiness
Rollex 13,009 13,825 (816) (5.9%)
Other 4,713 0 4,713 N/a
Sub-Total 17,721 13,825 3,896 28.2%
Transport
540 Group 6,747 6,870 (123) (1.8%)
Aircraft 0 2,600 (2,600) (100.0%)
Sales
Sub-Total 6,747 9,470 (2,723) (28.8%)
Support Services
Bytes & 2,331 1,632 699 42.9%
Pieces
Other 1,290 1,221 69 5.6%
Sub-Total 3,621 2,853 768 26.9%
Infrastructure
Luba Free 2,710 1,950 760 39.0%
Port
e- 671 317 354 111.6%
Kwikbuild
Sub-Total 3,381 2,267 1,114 49.1%
Hotels
Hotel 1,183 849 334 39.4%
Cardoso
Other 957 425 532 125.2%
Sub-Total 2,141 1,274 867 68.0%
Total Turnover 33,611 29,689 3,922 13.2%
* In the fourth quarter of the year to 30th September 2009,
Lonrho aviation sold an aircraft held for resale for proceeds of
GBP2.6m
12 months to
30 30 Variance Var %
September September
2010 2009
Agribusiness
Rollex 48,148 46,529 1,619 3.5%
Other 7,145 0 7,145 N/a
Sub-Total 55,293 46,529 8,764 18.8%
Transport
540 Group 21,339 18,765 2,574 13.7%
Aircraft 0 2,600 (2,600) (100.0%)
Sales
Sub-Total 21,339 21,365 (26) (0.1%)
Support Services
Bytes & 7,481 6,773 708 10.5%
Pieces
Other 3,627 2,339 1,288 55.1%
Sub-Total 11,108 9,112 1,996 21.9%
Infrastructure
Luba Free 11,024 7,974 3,050 38.3%
Port
e- 3,010 1,276 1,734 135.9%
Kwikbuild
Sub-Total 14,034 9,250 4,784 51.7%
Hotels
Hotel 4,350 3,022 1,328 44.0%
Cardoso
Other 1,534 425 1,109 261.0%
Sub-Total 5,885 3,447 2,438 70.7%
Continuing 107,659 89,703 17,956 20.0%
Operations
Enquiries
Lonrho Plc
David Lenigas, Executive Chairman +44 (0)20 7016 5105
Geoffrey White, Chief Executive +44 (0)20 7016 5105
Officer
David Armstrong, Finance Director +44 (0)20 7016 5105
Emma Priestley, Executive Director +44 (0)20 7016 5105
Beaumont Cornish Limited (Nomad)
Rosalind Hill Abrahams +44 (0) 20 7628 3396
Pelham Bell Pottinger
Charles Vivian +44 (0) 20 7861 3126
+44 (0) 7977 297 903
James MacFarlane +44 (0) 20 7861 3864
+44 (0) 7841 672 831
South African Sponsor
Java Capital
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