| Mon 6 Dec 2010, 11:31 | | LAF - Lonrho Plc - Results for the year ended 30 September 2010 |
|
LAF
LOLAF
LAF - Lonrho Plc - Results for the year ended 30 September 2010
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")
Results for the year ended 30 September 2010
6 December 2010
Lonrho (AIM:LONR), the conglomerate focused on investing in and building
businesses in Africa, is pleased to publish its audited results for the year
ended 30 September 2010. These are broadly in line with the quarterly report
and trading update released on 2nd November 2010.
Lonrho has continued to develop its investments in agribusiness,
infrastructure, transportation, hotels and support services.
Financial review
The trading results remain in line with the Company`s expectations. The year
has seen strong growth in the existing businesses and Lonrho made several
complementary strategic acquisitions to further develop its core divisions.
- Turnover on continuing operations increased by 20% to GBP107.8m (up from
GBP89.7m in 2009)
- Net assets increased to GBP127.7m (up from GBP81.1m in 2009)
- Profit before tax on continuing operations was GBP0.5m (2009: loss of
GBP5.9m)
David Lenigas, Executive Chairman of Lonrho commented:
"This has been a strong year for Lonrho. The foundations are already in place
in each Group division to deliver the budgeted expansion in the coming year.
We are seeing growing demand for our core services across all the seventeen
countries in which Lonrho operates.
Africa is making real progress, stimulated by a population that has reached
one billion people and the booming oil and mineral industries that are
driving economic growth and the concerns about global food shortages that are
stimulating the agriculture sector. "
LONRHO ENQUIRIES
Lonrho Plc +44 (0)20 7016 5105
David Lenigas, Executive Chairman +44 (0)7881 825378
Geoffrey White, Chief Executive Officer +44 (0)7717 307 308
David Armstrong, Finance Director +44 (0)7833 054 693
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
Beaumont Cornish Limited (Nomad)
Rosalind Hill Abrahams +44 (0)20 7628 3396
Roland Cornish +44 (0)20 7628 3396
Statutory accounts
The financial information set out in this announcement does not constitute
the Company`s statutory accounts for the years ended 30 September 2010 or
2009. The financial information for the year ended 30 September 2009 is
derived from the statutory accounts for that year. The audit of statutory
accounts for the year ended 30 September 2010 is complete. The auditors
reported on those accounts, their report was unqualified and did not include
references to any matters to which the auditors drew attention to by way of
emphasis without qualifying their report.
Lonrho`s full annual report and financial statements are published on its
website (www.lonrho.com) today and are being posted to shareholders next
week.
Chairman`s Statement
David Lenigas
Executive Chairman
3 December 2010
I am delighted to report to shareholders that Lonrho is making excellent
progress. Lonrho is specific in that it is exclusively focused on the growth
opportunities relating to the emerging African economy.
We are tremendously proud of the Lonrho legacy of more than one hundred years
of building real businesses across the continent. Hundreds of thousands of
people have had their lives improved by Lonrho over the years, and the Group
continues to create employment and prosperity where it operates.
Private sector investment is a real driver of sustainable economic
development in Africa. Lonrho operates in seventeen countries and our
portfolio of businesses is strategically focused on business sectors that are
an integral part of the growth of Africa.
Lonrho`s five core philosophies continue to be clearly defined as:
- 100% focus on Africa.
- Geographical diversity across the continent to mitigate risk.
- Operations in five separate divisions, each independent of the other.
- Focus on servicing the requirements of the oil, agriculture and mineral
sectors, the drivers of economic growth in Africa.
- Build the highest quality management teams and operate to international
standards.
In Africa the opportunities for responsible businesses are significant. The
continent today has over one billion people. By 2050 it will have doubled to
two billion, equating to 22% of the global population (UN population
division). According to a McKinsey report in 2010, Africa is forecast to have
128 million households with disposable income by 2020.
Gross domestic product (GDP) in Africa between 2000 and 2010 increased on
average at 5.5% per year, with many countries delivering double digit growth.
External debt has decreased from 65% of GDP to 23% and investment has grown
from 17% of GDP to 23%. A 2010 McKinsey report on Africa forecast that
Africa`s collective GDP will reach US$ 2.6 trillion (GBP1.67 trillion) by
2020.
Africa now has some of the fastest growing economies in the world primarily
driven by the expanding oil, gas and mineral industries. As a result, Africa
is seeing growing attention from the global investment community, which is
gradually becoming more aware of the economic potential of the continent.
Increasing political stability, growing foreign direct investment and
improving levels of transparency are all assisting economic growth. The
increasing number of success stories in Africa, such as Angola, Ghana,
Equatorial Guinea and Mozambique, are delivering real economic progress and
offer some of the most exciting growth opportunities globally. However, the
continent continues to suffer from a widely portrayed international
perception that is outdated and years behind the reality of progress on the
ground.
Lonrho is successfully working with the growing economies in Africa and is
helping to deliver the infrastructure and service related industries that are
essential to support growth.
Chief Executive`s Statement
Geoffrey White
Director and Chief Executive Officer
3 December 2010
Lonrho has had a good year. The Group is showing growth across all divisions
and, importantly, the management teams across the Group operations have
delivered on the objectives set by management for the past twelve months.
Financial highlights for the year include:
- Turnover on continuing operations increased by 20% to GBP107.8m.
- EBITDA of GBP9.4m, a GBP7.2m increase on 2009.
- Full year profit before tax on continuing operations was GBP0.5m,
compared with a loss of GBP5.9m for the financial year to 30 September
2009.
- Net assets at year end stood at GBP127.7m compared with GBP81.1m as at
30 September 2009.
- Cash balances in the Group at year end were GBP7.8m.
The Group is in a strong position with each division performing well, with
sound management teams in place to continue to drive development and further
growth. The Group remains focused on prudent investment in the emerging
African market. With geographical and industry diversity, the Group
significantly mitigates risk from both a political and commercial
perspective.
Lonrho has continued to focus on its five current divisions: agribusiness,
infrastructure, transportation, hotels and support services. Each of these
has clear opportunity for organic growth. The foundations of the businesses
in each divisional sector are established and successful, and the corporate
strategy for the coming year is to develop and replicate existing businesses
to increase turnover and profitability and to build a wider geographical
spread.
Margins are constantly reviewed for each division and compared with industry
standards. As individual businesses expand, margins often have the ability to
be increased as scale reduces operational costs and greater volumes improve
purchasing and logistics overheads.
Quality human resources are key to success in any market, but especially in
an emerging market. Lonrho makes great efforts to ensure that its divisional
and operational management are of the highest possible calibre and are top
of their industry sectors. This is fundamental to the corporate aim of
meeting international standards of operations in all of Lonrho`s businesses.
As the Group develops, so its ability to retain and develop existing
management and to attract quality new management for growth improves.
The Group focuses on servicing the requirements of the oil, mineral and
agriculture sectors in Africa. The countries that have significant oil,
mineral or agricultural output are those where the strongest growth can be
seen. As a consequence of this policy, Lonrho`s businesses typically operate
in an environment that is delivering strong market growth.
Outlook
Lonrho has reached an important point in its development. Having moved into
pre-tax profitability for the financial year and following on from its
successful bond issue after the financial year end, the Group is entering the
new financial year well funded with several new projects coming on stream to
deliver further growth.
During the financial year Lonrho continued with its investment program in a
number of new projects across the Group that the Directors believe will be
reflected in further growth for the 2011 financial year.
Chief Executive`s Review
New Lonrho businesses
New businesses within the Group include:
Grand Karavia Hotel
The Grand Karavia hotel in Lubumbashi, the centre of the Democratic Republic
of Congo copper province, was opened by President Kabila on 15 June 2010. The
only international standard hotel in the centre of the burgeoning copper
region, the Grand Karavia has seen immediate strong demand for the hotel and
its conference facilities. The hotel commenced official trading after the
Presidential opening and will be a significant addition to the revenue and
profitability of the Group for the coming year.
Oceanfresh
In June 2010 Lonrho acquired a 51% stake in Oceanfresh, a leading vertically
integrated producer and supplier of premium, sustainable seafood sourced from
Southern Africa, including Mozambique, Namibia and South Africa. As a result
of synergies in processing and handling with existing Lonrho agricultural
businesses, significant operational cost efficiencies have been achieved. As
a result of joining the Lonrho Group, Oceanfresh has been able to expand its
core business outside of its traditional South African retail markets and
post year end has commenced volume deliveries into the European and US
markets.
The demand for wild (not farmed) sustainable sourced fish is growing
globally. Oceanfresh fulfils this requirement. There is grave concern about
sustainable fishing practices in many traditional fishing grounds, with
claims of overfishing, quota abuse and depletion of fish stocks threatening
the long term survival of many species. Oceanfresh operates within, and
supports, the World Wildlife Foundation SASSI (Southern Africa Sustainable
Seafood Initiative).
Lonrho is committed to helping to ensure that wild fish stocks are managed
responsibly and that stocks will continue for the benefit of generations to
come. The scheduled roll-out of Oceanfresh products to the international
markets in the USA and Europe during 2011 will establish Oceanfresh as one of
the leading international seafood brands.
John Deere
The investment that was made during 2010 in the John Deere distributorship in
Angola will allow the new facility, incorporating sales, servicing and
training, to open early in 2011. The Angolan Government is funding the rapid
rebuilding of the agricultural sector across Angola. Historically,
agriculture was a very successful economic sector for Angola. The abundant
water, land and the ideal climate gives Angola an enormous agricultural
potential for serving both the domestic and export market. The availability
of quality equipment, servicing and training from Lonrho`s John Deere
operations in Angola are an essential element of the support necessary for
the growth in this sector.
Trak Auto
In April 2010 the Group acquired 100% of Trak Auto, the John Deere and
Komatsu equipment dealership in Mozambique. During the year, Trak Auto
started to supply highly competitively priced John Deere tractors
manufactured in their Indian factory to the Mozambique market.
Fly540 Angola
The demand for an international standard domestic and regional airline in the
booming Angolan economy is clearly evident. The establishment of Fly540
Angola and the process of launching the first private sector International
Civil Aviation Organisation (ICAO) registered airline for Angola has been a
long and difficult procedure. This has involved the training and education of
staff to the standards required for an international airline. Fly540 Angola
should commence commercial operation by the end of 2010.
Post year end bond issue
In October 2010 the Company completed the issue of US$70m (GBP44.3m)
Guaranteed Convertible Bonds due 2015 ("Bonds"). The bond issue was
significantly oversubscribed and was approved at a shareholder meeting on
29th October 2010. The proceeds of the Bonds will be used to restructure some
expensive debt within the Lonrho divisions and provide the capital necessary
for the agribusiness division to meet the targeted development schedules for
2011 into the US and European markets.
A review of the five divisions follows:
Agribusiness
Lonrho`s Agribusiness division remains the Group`s largest division,
providing 51% of Group turnover.
The division focuses on the vertical integration of the Southern African
agricultural sector, providing the production, sourcing, logistics,
processing and distribution of agricultural products from Southern Africa to
the consumer, both to the domestic market and globally.
Lonrho Agribusiness focuses on the fruit, vegetable, fish and meat sectors,
working closely with a wide range of the leading retailers in South Africa
and internationally in Europe, the USA, Middle East, and Scandinavia.
Agro-economic forecasts are raising growing concerns regarding the worldwide
capabilities for the global agricultural industry to meet future demand. The
United Nations Food and Agriculture Organisation predict that global
agriculture will have to increase 70% to meet food demand forecasts by 2050.
The situation is being made worse by the continual depletion of historic
water supplies available for traditionally agriculturally productive regions,
changing global climate patterns and increasing desertification.
Southern Africa is seen as a partial solution to the pending threat. Southern
Africa has abundant under-utilised land, a willing labour force and the ideal
climatic conditions (rainfall and heat units) to become a significant global
source of food. Africa has more than a quarter of the world`s arable land yet
only generates 10% of global agricultural production (UNFAO). The potential
is tremendous.
Lonrho focuses operations on what it believes is the strongest potential
production belt across the continent, from Angola across to Mozambique,
including Zimbabwe, Zambia, and the south of the DRC and Kenya. This region,
including South Africa, not only has the correct elements in place to be
productive, it also has a strong domestic consumer market and efficient
logistic access to highly competitive air freight capabilities out of
Johannesburg to deliver to the international marketplace.
The Southern African region is becoming an important agricultural producer
for the world, and Lonrho Agriculture is aligned with this growth opportunity
with operations in South Africa, Mozambique, Zimbabwe, Zambia and Angola. The
division is well positioned to benefit from the forecast growth across the
region.
Agribusiness highlights
- Agribusiness divisional turnover for the full year increased 19% to
GBP55.3m.
- In May 2010 the Group increased its holding in Rollex to 100% by
acquiring the remaining 49% not previously owned. In August 2010 the
Group also increased its holding in Fresh Direct to 100% by acquiring
the remaining 49% not previously owned.
- Irrigation equipment has been installed on 200 hectares of land and
approximately 119,000 fruit trees were planted during the year. These
will be delivering volume commercial fruit crops during the coming
financial year and have already started yielding produce for Tesco,
Sainsburys and Waitrose in the UK.
- An agreement has been reached with Xstrata for Lonrho to establish a
community based commercial farming and agri-processing project site,
which 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 farms that act as cooperatives. Through the existing Lonrho
logistics cold chain the farms will have access to both domestic and
international commercial markets.
- During the year, Rollex made good progress on improving margins by
increasing processing efficiencies, rationalising costs where possible
and negotiating better terms from customers. Gross margins for the final
quarter stood at 15%, compared to 13% for the final quarter in the
previous year.
- Following an eight month evaluation period, Oceanfresh is now supplying
Costco with hake fillets throughout Los Angeles, San Diego and Texas
with a phased roll-out starting in Chicago and the Northwest regions,
building to all US stores by mid-2011. Following on from the success of
the hake fillet product, Costco has now agreed to include six new lines
commencing delivery in early 2011.
- Checkers, a leading South African retailer, has recently awarded
Oceanfresh the title of `supplier of the year` and added a further two
new Oceanfresh product lines to their buying list. Shoprite has also
become a new customer for Oceanfresh.
Infrastructure
West Africa is seeing a spate of exploration projects for the oil industry,
and indicated oil and gas reserves and proven resources for the region are
growing fast. West Africa`s traditional oil producer, Nigeria, is now only
one of several economies seeing rapid economic development on the back of oil
revenues. Angola became the Chair of OPEC and has increased production to
over 2 million barrels a day, arguably becoming Africa`s largest producer.
Equatorial Guinea, Ghana, Gabon and the DRC all have growing oil industries
and some estimates indicate that up to 25% of global oil resources may be in
Africa.
The USA currently sources 18% of its oil imports from Africa and 30% from
China. Both are forecast to increase these levels as Africa develops the oil
sector further. The oil industry is stimulating significant foreign direct
investment ("FDI"), such that oil producing states received 80% of total
African FDI inflows of US$59 billion (GBP37.8 billion) in 2009. The oil
industry is now the pre-eminent economic driver in West Africa.
Luba Freeport, the Lonrho oil services terminal in the Gulf of Guinea which
is a private public partnership with the Government of Equatorial Guinea, has
seen increases in the number of vessels using the port and the number of
tenants based there. Revenues are growing month on month and the returns from
operating an oil service terminal are higher than a standard port due to the
long term contracts with tenants (generally ten years for oil companies and
five years for service companies) and the economic strength of the oil
sector. Lonrho has invested heavily in building the infrastructure for the
port and the returns on the investment are now tangible. The initial phase of
the development of the port is now complete per the original business plan
and the right to the concession granted by the Equatorial Guinea government
is now capable of being valued and recognised. Vessel movements at Luba
Freeport have grown to an average of 107 a month from 67 last year as the
port has developed into the centre for the oil industry in Equatorial Guinea.
e-Kwikbuild`s prefabricated buildings are an ideal solution to meet the
growth of the emerging African marketplace. Fast to deliver and install, e-
Kwikbuild`s buildings provide cost effective solutions for schoolrooms,
clinics, offices, workers` camps and general purpose buildings in Africa.
Designed to a quality standard that meets a 30 year product life, the company
is seeing growing demand for its products in South Africa and in the rest of
Africa.
Infrastructure highlights
- The continuing growth in the number of tenants and vessel movements
resulted in the annual turnover for the port growing to GBP11.0m, up
from GBP8.0m in the prior year.
- New tenants and further oil blocks being released by the Government will
continue to build future port revenues.
- Tenaris, a world leading supplier of pipes, tubular products and related
services for the world`s energy industry, has established a new
logistics facility, which will provide products and services to the oil
companies operating from Luba Freeport and in the Gulf of Guinea.
- Dickerman, one of the world leaders in surface preparation and coating
activities both offshore and onshore for 30 years, has established a new
base at Luba Freeport.
- In December 2009 the Group increased its holding in Kwikbuild, the
holding company of e-Kwikbuild, to 70%.
- e-Kwikbuild`s turnover has doubled year on year and margins have
improved as a result of investment in the manufacturing process and
improved raw material pricing. As the business develops, further margin
improvements are expected as volumes grow.
Transportation
International standard regional aviation is a fundamental requirement for any
emerging market. Africa has over one billion people hampered by poor
infrastructure, a lack of roads and railways, and long distances between
urban populations. Regional aviation is a market that is growing rapidly as
the requirement for people to travel around the continent expands with
economic development.
The number of passengers flying into Africa has seen strong growth, and the
continent is serviced by an expanding number of global carriers such as BA,
Virgin, Delta, Air France, Emirates, Qatar, and Singapore. In 2009, 31
million international air passengers travelled to Africa.
Lonrho`s regional airline, Fly540, is building an international standard
regional carrier operation that will be the first airline to address two
markets, the regional movement of passengers within Africa, East to West and
North to South, and the regional distribution of passengers arriving in
Africa from intercontinental flights.
This market is currently underserved and Fly540 is already well established
in the roll-out of the first pan-African network centred around three
strategic hubs in Kenya, Angola and Ghana. Fly540`s East African hub is
showing strong growth and has built market share to 15% of the domestic
market in Kenya. The services into Tanzania, Uganda and Burundi further
expanded the network during the year.
Transportation highlights
- Turnover in the transportation division was GBP21.5m and the Fly540
network is building towards carrying half a million passengers per year.
This will grow significantly once the Angolan and Ghanaian hubs are
operational and the objective for the network remains to be connecting
eighteen countries by the end of 2012.
- Fly540 Angola, after a long drawn out process, is nearly 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 underserved and the demand for
Fly540 Angola to meet this latent demand is clear.
- Fly540 Ghana is expected to commence operations in 2011.
Hotels
Hotels are an important fundamental to building an economy in an emerging
market. The ability for businessmen and investors to meet, stay and transact
in a safe and quality environment has a direct correlation with their
propensity to transact, invest, build businesses and to drive economic
development. Lonrho focuses on management contracts for third party owners
and its own hotel portfolio.
Lonrho Hotels is a long established and recognisable brand name in Africa.
The hotel management team is actively sourcing new hotel projects for the
Group where it is believed that Lonrho can add real brand value. The hotel
sector in Africa accommodates an estimated 45 million international visitors
a year.
Hotels highlights
- The hotel division, driven by the continued strong performance of Hotel
Cardoso and the opening of the Grand Karavia in June 2010, has increased
turnover 74% year on year.
- A new CEO for Lonrho Hotels has been recruited who has worked with some
of the world`s strongest hotel brands such as InterContinental, Holiday
Inn, LeMeridian, Grosvenor House and Crowne Plaza.
- The Hotel Cardoso in Maputo has seen occupancy levels remain over 80%
all year. Room rates have increased 24% on the prior year following the
completion of the refurbishment program and the opening of the new
restaurant and conference facilities.
- The Grand Karavia hotel, opened by President Kabila in June 2010, is
seeing occupancy and conference business building strongly since its
inauguration. The only international standard hotel in Lubumbashi, the
centre of the copper region of the DRC, the property has established
itself as a centre for Government, business and social events.
- 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 to be held early in 2011, which will attract some of the top South
African PGA professionals.
Support Services
Lonrho IT (comprising Bytes & Pieces, CES and Indit)
The requirement for quality corporate IT services in Africa is stimulated by
foreign direct investment as companies develop projects across the continent.
The Lonrho strategy to focus on the oil, mineral and agriculture sectors that
drive economic growth in Africa implicitly means that these sectors require
complementary IT infrastructure as they develop. Lonrho IT has, as a result,
seen strong growth during the year and continued growing demand for its
services.
A full systems integrator and manager, Lonrho IT designs, builds, develops
and integrates IT solutions for large corporate clients, banks and
Governments and then undertakes management contracts to run and manage
installations. Lonrho IT is a top tier distributor for Cisco, Microsoft, Dell
and Hewlett Packard systems and equipment and is strategically building a pan-
African network of IT companies.
Already the market leader in Mozambique, Lonrho IT has successfully
established further operations in South Africa and Zambia and will open in
three further countries in the coming year.
Lonrho Water
The demand for clean, potable, water to be available to the one billion
people living across Africa is immense. From both a social development and a
health perspective the requirement for the continent to build the ability to
provide safe drinking water to the population is fundamental.
Lonrho`s water division develops and operates water bottling plants and this
year has further utilised the technology from these plants to develop a stand
alone, solar powered, containerised water purification plant. These are
suitable for a myriad of applications where a local water source (river,
borehole, lake) is used for water supply. The Lonrho Water unit will take any
local water source and treat the water to ensure it is potable and safe. The
interest in the unit has been significant from corporates, municipalities,
central governments and the agricultural sector.
Support services highlights
- The support services division has seen annual turnover increasing 22% in
the division to GBP11.1m.
- The Lonrho IT company, Bytes & Pieces, won the tender to implement the
IT infrastructure for Riversdale Mozambique (a coal mining operation in
Tete, Mozambique). The project involves implementation of a turnkey
solution over three sites, supplying, installing and configuring 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.
- Tribunal Adminstrativo, the organisation 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
optimisation and post-installation services.
LonZim Plc
LonZim is an investment company that is focused on investments in Zimbabwe
and the Beira corridor of Mozambique and is quoted on the AIM market of the
London Stock Exchange. Lonrho Plc owns 24.61% of LonZim and holds a
management contract to manage it. LonZim has acquired a number of companies
in Zimbabwe and has invested in restructuring and recapitalising them to
prepare for economic recovery in the country. The opportunities for growth in
the Zimbabwe market are significant, and the beginning of an economic
recovery is evident across the LonZim Group. LonZim has invested GBP29m in
creating a portfolio in Zimbabwe that is well placed for growth. During the
year, each company has reported progress and become financially independent.
Businesses acquired include: the iconic Leopard Rock hotel; a leading
commercial security printing company; a chemical distribution company; a
microfinance company; and the foremost electronic funds transfer platform for
payroll and interbank transfers. LonZim also holds the rights to FMNA, an
instant messaging software package for cell phones that permits users to send
and receive data and emails on a standard mobile. FMNA has seen significant
interest from cell phone companies across Africa and is building a large
footprint with carriers such as Econet, Glo, Safraicom, Warid and others.
Lonrho Mining Limited
Lonrho held a 13.16% interest in ASX listed Lonrho Mining at the year end.
Lonrho Mining holds the Lulo diamond concession in Angola that covers a total
area of about 3,000km2 and is located in the Cuango River Basin within the
Lunda Norte Province of north-eastern Angola. The project area is situated
approximately 630km from Angola`s capital city of Luanda and can be accessed
via sealed road.
The project is operated as a joint venture with the Government-owned diamond
company, Endiama, the exclusive concessionary for Angolan diamond mining
rights. Under the joint venture arrangement, Lonrho Mining holds a 39%
interest in the concession, with Endiama holding a 51% interest and the
remaining 10% owned by a private Angolan interest. Lonrho Mining is the
manager and operator on the concession and funds all exploration activities.
The Lulo Project, which covers both an extensive alluvial diamond field and
more than 200 kimberlite targets, has commenced sampling on the concession,
operating a Dense Media Separation plant. Early results have been very
positive with the recovery of large, quality diamonds from the initial
sampling, including a 22.25ct gem quality diamond post year end.
Corporate Social Responsibility
Lonrho Group companies make a strong contribution to development by
supporting economic growth in Africa. Each of the five industry sectors in
which the Lonrho Group operates: Agribusiness, Infrastructure,
Transportation, Hotels and Support Services, are important to Africa`s
economic growth and create employment and prosperity in the communities where
Lonrho works. Lonrho`s core philosophy is building long term sustainable
businesses in Africa.
Operational: Employee Health and Safety and Training
Responsible business practices are important within the Group`s operations.
This includes the health and safety of staff and their training and skills
development. Examples include:
- Luba provides work experience opportunities for students and has an
extensive ongoing training programme for employees, which includes
internationally recognised qualifications.
- In the Lonrho Hotels division, the Hotel Cardoso in Mozambique provides
an in-house clinic for staff and immediate families, with a full time
nurse and a qualified doctor who visits the clinic twice daily, whilst
employees at the Grand Karavia Hotel in the Democratic Republic of the
Congo are offered free medical treatment for themselves, their spouses
and up to five children. Staff members at the Grand Karavia are
benefiting from training in information technology, first aid and CPR.
- Rollex complies with international standards such as BRC Global
Standards and the Hazard Analysis Critical Control Point.
- e-Kwikbuild is a level 1 Broad Based Black Economic Empowerment company
and seeks to promote the transfer of skills and creation of work
opportunities for people local to their projects. The company is working
towards ISO 18001 certification for their Occupational Health and Safety
Management System.
Strengthening the Local Economy and Protecting the Environment
The Group is mindful of the impacts its businesses have on their environment.
Examples of the initiatives taken by Lonrho Group companies include:
- Complete Enterprise Solutions is encouraging staff to use less paper in
their work and to recycle where possible and are now looking to gain ISO
14001 on Environmental Management Systems.
- The town of Luba currently has no means of disposing household waste so
Luba Freeport supplies waste skips throughout the town and collects and
disposes local waste daily.
- Oceanfresh has a Sustainable Seafood Policy and actively participates in
the World Wildlife Fund`s South African Sustainable Seafood Initiative.
The company works closely with other stakeholders to improve practices
and to attain Marine Stewardship Council certification on its products.
- Hotel Cardoso separates and recycles hotel waste, has low energy bulbs
across the hotel and wherever possible uses recycled paper for
stationary and consumables.
- e-Kwikbuild`s buildings are energy efficient and resistant to extreme
weather conditions
- Fly540 donated tree seedlings which were planted at the Kenya National
Park.
- Luba Freeport supports an open air market in the town by supplying
floodlighting and sponsors an English language night school for the
local community to help them access job opportunities in the oil and gas
industry.
- Rollex provides support to farms in terms of advice on new farming
techniques and quality inputs.
Supporting Communities
All Lonrho companies have a strong tradition of supporting local communities.
In some cases financial support is given, in others the support is in kind.
For example:
- Hotel Cardoso has supported the repainting of the local high school and
regularly supports Imagine Mozambique to cover costs of food support and
distribution to vulnerable families and children. The hotel also donates
soap to campaigns that highlight the importance of hand washing to poor
communities.
- Fly540 has supported numerous local community organisations by providing
free return flight tickets. It has also supported a community service
project of Medicins Sans Frontieres by airlifting, free of charge,
doctors and medicines in Kenya and has supported the Imani Childrens`
Home and the Terry Hope Centre, a children`s orphanage.
- Rollex donates vegetables, fruit and salad to a local old age home and
supports the education of children at Churchill farm while their parents
work.
- Luba Freeport sponsors a pre-school in Luba, supplies medicines to the
local hospital and provides emergency response services for fires in the
Luba area through a qualified fire fighting unit.
- e-Kwikbuild has supported two day care centres for children from
disadvantaged communities in Cape Town.
The Company has established a Board Committee on Corporate Social
Responsibility (CSR). The Committee is developing a strategic approach to CSR
across the Lonrho Group.
Executive Directors
David Lenigas Executive Chairman
David Lenigas was appointed to the Board of Lonrho on 21 December 2005 and
holds a Bachelor of Applied Science in Mining Engineering. He has extensive
experience operating in the public company environment and is currently the
Executive Chairman of LonZim Plc, Leni Gas & Oil Plc and Solo Oil Plc. Mr
Lenigas is also a Non-Executive Chairman of Lonrho Mining Limited and is a
Director of Vatukoula Gold Mines Plc and Reef Resources Ltd.
Geoffrey White Director & Chief Executive Officer
Geoffrey White holds a BSc in Economics and Management Science and joined the
Board of Lonrho Plc on 5 October 2007, having been Chief Operating Officer
from 1 May 2007. . During his 29 year career he has held senior management
roles with Thomas Tilling Plc, BTR Plc, Dee Corporation Plc, Asda Plc and
latterly worked for five years for a private investment firm based in London.
He has been responsible for the planning, financing, development and
management of a range of projects in the leisure, industrial and natural
resource sectors. These projects include establishing joint ventures with
international corporations such as Hilton Hotels International, Ford Motors
(PAG), Praton International GmbH and FFS Refiners (pty) Ltd. Prior to joining
Lonrho he had direct experience with the natural resources, distribution and
logistics sectors in Africa. He is also an Executive Director and the Chief
Executive Officer of LonZim Plc.
David Armstrong Finance Director
David Armstrong (FCA) joined Lonrho Plc as Finance Director on 1 December
2008 and brings with him extensive experience of operating across Africa
having been, until October 2004, the Commercial Director of Diageo Africa
with combined functional responsibility for finance, information systems,
strategy and business development. He contributed to the successful
deployment of Diageo`s pan-African growth strategy, encompassing over 50
countries, and was also the COO of McArtherGlen in the UK and Europe. He is
also the Finance Director of LonZim Plc.
Emma Priestley Executive Director
Emma Priestley was appointed Executive Director on 24 February 2006, having
worked in investment banking for the previous five years following a career
as a mining engineer. She has a background in mining and financial services
having worked with consultants IMC Mackay & Schnellman, investment bank CSFB,
advisors VSA resources and Ambrian Partners, where she worked as a corporate
broker and advisor. Emma is a graduate of Camborne School of Mines, a
Chartered Mining Engineer and Chartered Mineral Surveyor. She is also an
Executive Director of LonZim Plc.
Non-Executive Directors & General Counsel
Jean Ellis Non-Executive Director
Jean Ellis is a Chartered Accountant and Chartered Tax Advisor, and holds an
Insolvency Practitioner`s license. She is the senior partner in the regional
firm of Chartered Accountants, Duncan Sheard Glass, having been a partner
there since 2002. Prior to this, she was Group Financial Controller and Tax
Manager with Lonrho Plc and holds a number of directorships for its
subsidiary companies. Jean has a Bachelor of Arts Degree in Pure Mathematics
from Liverpool University. She was formerly Finance Director of Lonrho Plc,
having been appointed on 1 June 2007, and became a Non-Executive Director on
1 December 2008. She was also formerly Finance Director of LonZim Plc and is
now a Non-Executive Director of LonZim Plc.
Ambassador Frances Cook Non-Executive Director
A former U.S. ambassador to Burundi, to Cameroon and to the Sultanate of
Oman, Ambassador Cook also held numerous senior positions in the Department
of State, including Deputy Assistant Secretary of State for Refugee Programs,
and Deputy Assistant Secretary of State for Political-Military Affairs,
Consul General in Alexandria, Egypt, and Director for West Africa. She
transitioned to the private sector in May 1999, where she runs an
international business consulting firm, The Ballard Group llc. Ambassador
Cook is also a Director of Global Options Group (NASDAQ), and the Corporate
Council on Africa. She is a Senior Fellow at the Center for Naval Analyses,
and a member of the Council on Foreign Relations. She was educated at the
Universities of Virginia and Harvard, and resides in Washington, D.C.
Kiran Morzaria Non-Executive Director
Mr Morzaria holds a Bachelor of Engineering (Industrial Geology) from the
Camborne School of Mines and an MBA (Finance) from CASS Business School. He
has eight years of experience in the mineral resource industry covering gold
and diamonds. Mr Morzaria spent his first four years in exploration, mining
and civil engineering and in 2004 was appointed Finance Director of Vatukoula
Gold Mines Plc. In this role, Mr Morzaria has been active in corporate
acquisitions, joint venture agreements, valuations, qualified persons reports
and due diligence. Mr. Morzaria is also currently a non-executive director of
Solo Oil Plc and Hot Tuna (International) Plc.
Michael Bennett General Counsel
Michael Bennett has a BA LLB degree from Rhodes University in South Africa
and was admitted as a legal practitioner in the Republic of Zimbabwe in 1996.
He practised law at one of the biggest firms in Zimbabwe before moving to the
United Kingdom in 2000 where he joined a corporate law firm in Central London
specialising in mergers and acquisitions and AIM related transactional work.
He qualified as an English solicitor in 2001 becoming a partner in 2004.
Michael has specialised in the acquisition and disposal of companies across a
variety of sectors and in jurisdictions ranging across Africa, Europe, the
former Soviet Union and North America.
Statement of Directors` responsibilities in respect of the Annual Report and
Accounts
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent company
financial statements for each financial year. As required by the AIM Rules of
the London Stock Exchange they are required to prepare the Group financial
statements in accordance with IFRSs as adopted by the EU and applicable law
and have elected to prepare the parent company financial statements on the
same basis.
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 parent company and of their profit or loss for that
year. In preparing each of the Group and parent company financial statements,
the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with IFRSs as
adopted by the EU; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the parent company will
continue in business.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the parent company`s transactions and
disclose with reasonable accuracy at any time the financial position of the
parent company and enable them to ensure that its financial statements comply
with the Companies Act 2006. They have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Report of the Directors
For the year ended 30 September 2010
The Directors of Lonrho Plc are pleased to submit their report, together with
the audited financial statements for the year ended 30 September 2010.
The Company number is 2805337.
Principal activities
The Group has a diverse portfolio of investments across Sub-Saharan Africa in
five key sectors: agribusiness, transportation, infrastructure, hotels and
support services. In order to create maximum value for shareholders the
management is implementing the investment strategy outlined in the Chairman`s
Statement.
Business review and development
The year has seen strong growth in the existing businesses and Lonrho made
several complementary strategic acquisitions to further develop its core
divisions. The Chairman`s statement and the Chief Executive`s review of
operations contain information on developments during the year and key
potential future developments.
The requirements of the enhanced business review in relation to strategy and
progress thereon are contained in the Chairman`s statement and the Chief
Executive`s review of operations. The principal risks and uncertainties
relate to the revenue generation in the Group`s businesses, which being
located in Africa are subject to respective government policies, political
stability and general economic conditions in the relevant country. Other
risks to which the Group is exposed are the lack of suitably experienced
management and exposure to foreign currency movements.
The Group monitors cash flow as its primary key performance indicator. Given
the current global financial situation, the Directors are carefully
monitoring cash resources within the Group and have instigated a number of
initiatives to ensure funding will be available for planned projects. The
operating cash outflow for the year to 30 September 2010 was GBP16.0 million
(2009: GBP14.5 million). If such funding cannot be secured, the projects will
be delayed or cancelled to ensure that the Group can manage its cash
resources for the foreseeable future and hence the financial statements have
been prepared on a going concern basis. The Group has raised additional
capital since the year end by way of an issue of US$70 million (GBP44.3
million) guaranteed convertible bonds due 2015 (note 35). 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.
The Group also uses a number of other key performance indicators which are
measured at different tiers in the operation. At the top level the Group
tracks turnover, gross margin, contribution to overheads, cash generation and
performance against budget. The Group uses a number of specific, non-
financial, key performance indicators at individual business levels. For
example passenger numbers and load factors for Fly540, occupancy levels at
Hotel Cardoso, and ship movements at Luba Freeport.
The Directors wish to mitigate risk by proper evaluation of every investment
that is made and follow a risk analysis reporting procedure, which links into
the Company`s Corporate Governance procedures. The Group is continuing to
strengthen its management team by the recruitment of highly experienced
individuals.
Further information concerning the Group`s policies and exposure to financial
risk can be found in note 29 to the financial statements.
Post balance sheet events
Details of the significant events since the balance sheet date are contained
in note 35 to the financial statements.
Dividend
The Directors do not recommend the payment of a dividend (2009: GBPnil).
Corporate governance
Compliance with the Combined Code
The Directors recognise the value of the Combined Code on Corporate
Governance and, whilst under AIM rules full compliance is not required, the
Directors have considered the recommendations and applicability insofar as is
practicable and appropriate for a public company of its size.
Board of Directors
The Board of Directors currently comprises four Executive Directors, one of
whom is the Chairman, and three Non-Executive Directors. The Directors are of
the opinion that the Board comprises a suitable balance to enable the
recommendations of the Code to be implemented to an appropriate level. The
Board, through the Chairman and Chief Executive Officer in particular,
maintains regular contact with its advisors, public relations consultants and
institutional investors in order to ensure that the Board develops an
understanding of the views of the major shareholders of the Company.
The Board meets quarterly and is responsible for formulating, reviewing and
approving the Company`s strategy, financial activities and operating
performance. Day to day management is devolved to the executive management
who are charged with consulting the Board on all significant financial and
operational matters. Consequently decisions are made promptly following
consultation amongst the Directors and managers concerned where necessary and
appropriate.
All necessary information is supplied to the Directors on a timely basis to
enable them to discharge their duties effectively, and all Directors have
access to independent professional advice, at the Company`s expense, as and
when required.
The Chairman is available to meet with institutional shareholders to discuss
any issues and concerns regarding the Group`s governance. The Non-Executive
Directors may also attend meetings with major shareholders if requested.
The participation of both private and institutional investors at the Annual
General Meeting is encouraged by the Board.
Internal controls
The Directors acknowledge their responsibility for the Company`s and the
Group`s systems of internal control, which are designed to safeguard the
assets of the Group and ensure the reliability of financial information for
both internal use and external publication. Overall control is ensured by a
regular detailed reporting system covering the state of the Group`s financial
affairs. The Board has implemented procedures for identifying, evaluating and
managing the significant risks that face the Group.
Any system of internal control can provide only reasonable, and not absolute,
assurance that material financial irregularities will be detected or that the
risk of failure to achieve business objectives is eliminated.
Committees
The Board has devolved duties to the following committees:
Executive Committee
The Executive Committee ("the Committee") comprises the Executive Directors
and senior managers including the Group`s General Counsel, Group Financial
Controller and the Business Development Manager. The Chairman of the
Committee is David Lenigas or, in his absence, Geoffrey White. Its terms of
reference indicate at least eight regular meetings per year. The Committee`s
primary responsibilities are to review the operating performance of each
Group operating company, manage the Group`s strategic planning process and
corporate acquisition and disposal programme, monitor and approve capital
expenditure and contracts entered into by the Group and to manage the Group`s
HR policies.
Audit Committee
The Audit Committee ("the Committee") comprises two Directors, both of whom
are Non-Executive Directors. The current members are Jean Ellis
(Chairperson), and Kiran Morzaria. Until his resignation, Donald Strang
chaired the Committee with Jean Ellis and Geoffrey White as Committee
members. Its terms of reference indicate at least three regular meetings per
year. The Committee`s primary responsibilities are to review the
effectiveness of the Company`s systems of internal control and financial
reporting systems (including financial, operational, compliance and risk
management), to review with the external auditors the nature, scope and
results of their audit, to evaluate and select external auditors ensuring
their independence and objectivity, and to review the Company`s financial
statements.
Remuneration Committee
The Remuneration Committee ("the Committee") comprises two Directors, both of
whom are Non-Executive Directors. The current members are Ambassador Frances
Cook (Chairperson), and Kiran Morzaria. Until his resignation, Donald Strang
chaired the committee with Ambassador Frances Cook and David Armstrong as
Committee members. Its terms of reference indicate at least two regular
meetings per year. The Company`s policy is to remunerate senior executives
fairly in such a manner as to facilitate the recruitment, retention and
motivation of staff. The Committee will agree with the Board a framework for
the remuneration of the Chairman, the Executive Directors and the senior
management of the Group.
The principal objective of the Committee is to ensure that members of the
executive management of the Company are provided incentives to encourage
enhanced performance and are, in a fair and responsible manner, rewarded for
their individual contributions to the success of the Group bearing in mind
inter alia the size, profitability, market capitalisation of the Company, its
reputation and performance relative to other companies, the performance of
individuals and the best interests of shareholders. Non-Executive Directors`
fees are considered and agreed by the Board as a whole.
Nomination Committee
The Nomination Committee ("the Committee") comprises three Directors, two of
whom are Non-Executive Directors. The current members are Jean Ellis
(Chairperson), Ambassador Frances Cook and Geoffrey White. Its terms of
reference indicate at least two regular meetings per year. The Committee`s
primary responsibility is to identify candidates to fill Board vacancies as
and when they arise, give consideration to succession planning, review the
structure, size and composition of the Board and to review the leadership
needs of the organisation.
Corporate Social Responsibility ("CSR") Committee
The CSR Committee ("the Committee") comprises three Directors, two of whom
are Non-Executive Directors. The current members are Ambassador Frances Cook
(Chairperson), Jean Ellis and Geoffrey White, and the Committee is supported
by Julia Lewis, Commercial Manager - Corporate Projects. The Committee meets
at least twice a year and is responsible for reviewing and approving policies
and initiatives relating to CSR matters.
Directors
The following Directors have held office during the year: Mr D A Lenigas
(appointed 21 December 2005); Mr G T White (appointed 5 October 2007); Mr D J
Armstrong (appointed 1 December 2008); Ms E K Priestley (appointed 24
February 2006); Ambassador F D Cook (appointed 23 October 2007); Mrs J M
Ellis (appointed Finance Director 1 June 2007 and became a Non-Executive
Director 1 December 2008); Mr D I G L Strang (appointed 19 December 2006 and
resigned 30 June 2010); and Mr K C Morzaria (appointed 28 September 2010).
At the next Annual General Meeting, Mr D A Lenigas and Ambassador F D Cook
will retire by rotation. Mr K C Morzaria, having been appointed since the
last Annual General Meeting, will also retire. Being eligible, they will all
offer themselves for re-election. Biographical details of all Directors are
set out on pages 12 and 13.
Directors` share interests
The Directors at the year-end are set out below. All Directors served
throughout the year unless otherwise indicated.
At At 01.10.09
30.09.10 (or date of
No of shares appointment if later)
No of shares
D A Lenigas 250,000 250,000
G T White 200,000 200,000
D Armstrong 200,000 200,000
E K Priestley 40,712 40,712
Ambassador F D Cook Nil Nil
J M Ellis 4,000 4,000
K C Morzaria (appointed 28 Nil Nil
September 2010)
All of the above interests are recorded in the Company`s Register of
Directors` Share and Debenture Interests. No Director has a beneficial
interest in the shares or debentures of any of the Company`s subsidiary
undertakings. There have been no changes in Directors` share interests since
30 September 2010.
Share options
Following shareholder approval at the Company`s Annual General Meeting on
31st March 2010, unapproved share options were granted to Directors over
ordinary shares, as set out below. These options are embodied in an
individual contract between the Company and the individual and have been
granted under The Lonrho Plc Unapproved Share Option Plan.
As at Exercise Granted As at Exercise
1.10.2009 price during the 30.09.10 period
year
D A Lenigas 3,500,000 6.5p - 3,500,000 Jan 2006 -
March 2011
D A Lenigas 3,750,000 6.5p - 3,750,000 April 2007
- April
2012
D A Lenigas 1,615,000 6.5p - 1,615,000 July 2007 -
July 2012
D A Lenigas 2,500,000 6.5p - 2,500,000 Jan 2009 -
Jan 2014
D A Lenigas - 13.75p 20,000,000 20,000,000 April 2010
- March
2015
G T White 2,500,000 6.5p - 2,500,000 April 2007
- April
2012
G T White 1,065,000 6.5p - 1,065,000 July 2007 -
July 2012
G T White 2,000,000 6.5p - 2,000,000 Jan 2009 -
Jan 2014
G T White - 13.75p 20,000,000 20,000,000 April 2010
- March
2015
D J Armstrong 1,000,000 6.5p - 1,000,000 Jan 2009 -
Jan 2014
D J Armstrong - 13.75p 6,500,000 6,500,000 April 2010
- March
2015
E K Priestley 1,250,000 6.5p - 1,250,000 April 2006
- April
2011
E K Priestley 1,250,000 6.5p - 1,250,000 April 2007
- April
2012
E K Priestley 1,065,000 6.5p - 1,065,000 July 2007 -
July 2012
E K Priestley 1,000,000 6.5p - 1,000,000 Jan 2009 -
Jan 2014
E K Priestley - 13.75p 1,000,000 1,000,000 April 2010
- March
2015
F D Cook 500,000 6.5p - 500,000 Jan 2009 -
Jan 2014
J M Ellis 350,000 6.5p - 350,000 July 2007 -
July 2012
J M Ellis 500,000 6.5p - 500,000 Jan 2009 -
Jan 2014
Insurance
The Company has offered Directors and Officers Liability insurance cover for
Group Directors.
Substantial shareholdings
The Directors have been advised of the following shareholdings at 2 December
2010 in 3 per cent. or more of the Company`s issued share capital:
Number of Shares % of Issued Capital
Mackenzie Financial Corporation 128,986,072 11.01%
Zesiger Capital Group LLC 120,833,950 10.31%
BlackRock, Inc. 90,526,973 7.73%
Capital Group International 88,578,895 7.56%
Oak Nominees Limited 78,221,479 6.68%
EP Cayman, Ltd, Eton Park Fund & Eton 70,000,000 5.97%
Park Master Fund, L.P.
Capital Research & Management Company 49,607,000 4.23%
Rensburg Sheppards Investment 45,761,951 3.90%
Management Ltd
Share price performance
Between 1 October 2009 and 30 September 2010 the share price in London varied
between a high of 14.5p and a low of 7.7p and in Johannesburg a high of Rand
1.8 and a low of Rand 0.85. At 30 September 2010 the mid-market price of the
shares was 11.0p in London and Rand 1.8 in Johannesburg. At 2 December 2010,
the mid-market price of the shares was 16.5p in London and Rand 1.53 in
Johannesburg.
Political and charitable donations
No political or charitable donations, save for those disclosed on pages 10
and 11, have been made by the Group during the year. The Group is involved in
a number of charitable projects through its subsidiaries and investments,
details of which are set out on pages 10 and 11.
Payment to suppliers
The Group does not follow any code or standard with regard to the payment of
its suppliers. The Group`s policy is to agree terms and conditions with
suppliers in advance; payment is then made in accordance with the agreement
provided the supplier has met the terms and conditions. Amounts due to
suppliers at the balance sheet date are contained in note 27.
City Code on Takeovers and Mergers
The Panel on Takeovers and Mergers confirmed that, at the date the Listing
Particulars were issued in May 1998, Lonrho was subject to the City Code on
Takeovers and Mergers (the "Code"). The Directors believe that, so far as is
practicable, they have operated and will continue to operate the Group so
that it will continue to be subject to the Code.
Auditors
A resolution to re-appoint KPMG Audit Plc and to authorise the Directors to
fix their remuneration will be proposed at the Annual General Meeting in
accordance with section 489 of the Companies Act 2006.
The Directors who held office at the date of approval of this Directors`
Report confirm that, so far as they are each aware, there is no relevant
audit information of which the Company`s Auditors are unaware; and each
Director has taken all the steps that he/she ought to have taken as a
Director to make himself/herself aware of any relevant audit information and
to establish that the Company`s Auditors are aware of that information.
By order of the Board
J. Hughes
Company Secretary
3 December 2010
Consolidated income statement
For the year ended 30 September 2010
Note Continuin 2010 Total Continuing 2009 Total
g GBPm operations GBPm
operation Discont GBPm Discont
s inued inued
GBPm operati operati
ons ons
GBPm GBPm
Revenue 4, 5 107.8 - 107.8 89.7 1.2 90.9
Cost of sales 6 (79.3) - (79.3) (72.8) (1.9) (74.7)
GROSS 28.5 - 28.5 16.9 (0.7) 16.2
PROFIT/(LOSS)
Gain arising on 6, 15 9.0 - 9.0 - - -
fair valuation
of biological
assets
Other operating 6 3.6 - 3.6 1.1 2.2 3.3
income
Operating costs 6 (45.4) - (45.4) (29.5) (0.1) (29.6)
OPERATING (4.3) - (4.3) (11.5) 1.4 (10.1)
(LOSS)/PROFIT
Finance income 10 8.6 8.6 6.6 6.6
- -
Finance expense 10 (5.7) - (5.7) (1.2) - (1.2)
NET FINANCE 2.9 - 2.9 5.4 - 5.4
INCOME
Share of results 17 2.3 2.3 0.4 0.4
of associates - -
Share of results 17 (0.4) - (0.4) (0.2) - (0.2)
of joint
ventures
PROFIT/(LOSS) 0.5 0.5 (5.9) 1.4 (4.5)
BEFORE TAX -
Income tax 11 (0.7) - (0.7) (0.8) - (0.8)
charge
(LOSS)/PROFIT (0.2) - (0.2) (6.7) 1.4 (5.3)
FOR THE YEAR
ATTRIBUTABLE TO:
Owners of the 23 0.3 - 0.3 (7.6) 1.4 (6.2)
Company
Non- 23 (0.5) - (0.5) 0.9 - 0.9
controlling
interests
(LOSS)/PROFIT (0.2) - (0.2) (6.7) 1.4 (5.3)
FOR THE YEAR
EARNINGS PER
SHARE
Basic 12 0.03 - 0.03 (1.06) 0.20 (0.86)
earnings/(loss)
per share
(pence)
Diluted 12 0.03 - 0.03 (1.06) 0.20 (0.86)
earnings/(loss)
per share
(pence)
The notes on pages 25-65 are an integral part of these financial statements.
Consolidated and Company statements of comprehensive income
For the year ended 30 September 2010
Group Company
2010 2009 2010 2009
Note GBPm GBPm GBPm GBPm
- -
Foreign exchange 23 (8.7) (2.8)
translation
differences
Total other (8.7) (2.8) - -
comprehensive income
for the year
Loss for the year (0.2) (5.3) (10.1) (7.0)
Total comprehensive (8.9) (8.1) (10.1) (7.0)
income
ATTRIBUTABLE TO: (7.2) (8.6) (10.1)
Owners of the Company (1.7) 0.5 - (7.0)
Non-controlling -
interests
Total comprehensive (8.9) (8.1) (10.1) (7.0)
income
The notes on pages 25-
65 are an integral
part of these
financial statements.
Consolidated statement of changes in equity
For the year ended 30 September 2010
2010 2009
Owners Non- Total Owners Non- Total
of the contro of the controll
Company lling Compan ing
intere y interest
sts s
GBPm GBPm GBPm GBPm GBPm GBPm
AT 1 OCTOBER 78.1 3.0 81.1 69.6 0.1 69.7
Profit/(loss) for 0.3 (0.5) (0.2) (6.2) 0.9 (5.3)
the year
Foreign exchange (7.5) (1.2) (8.7) (2.4) (0.4) (2.8)
translation
differences
Total (7.2) (1.7) (8.9) (8.6) 0.5 (8.1)
comprehensive
income
Issue of shares 37.0 - 37.0 16.8 - 16.8
Issue of share 2.2 - 2.2 0.3 - 0.3
options
Purchase of non- (5.5) (4.1) (9.6) - 0.2 0.2
controlling
interests
Subsidiaries - - - - 2.9 2.9
disposed - (0.1) (0.1) - - -
Subsidiaries
acquired
Non-controlling - 25.5 25.5 - - -
interests - (0.4) (0.4)
contribution
Minority dividends
Transfer from - 0.9 0.9 - - -
joint venture to
subsidiary
Transfer between 2.8 (2.8) - - (0.7) (0.7)
accounts (1)
AT 30 SEPTEMBER 107.4 20.3 127.7 78.1 3.0 81.1
The notes on pages 25-65 are an integral part of these
financial statements.
The Company had total equity brought forward of GBP93.9m (2009: GBP83.8m),
and during the year issued shares of GBP37.0m (2009: GBP16.8m) with share
options of GBP2.2m (2009: GBP0.3m) and a loss for the year of GBP10.1m (2009:
GBP7.0m).
(1) The transfer represents the amount of losses previously not allocated to
non-controlling interests now allocated following additional capital
contribution by the non-controlling interests.
Consolidated and Company statements of financial position
As at 30 September 2010
Group Company
Note 2009
2010 GBPm 2009
GBPm 2010 GBPm
GBPm
ASSETS
Goodwill 13 15.5 14.2 - -
Other intangible assets 13 4.5 3.4 - -
Property, plant and equipment 14 109.2 69.8 0.4 -
Biological assets 15 9.0 - -
Investments in subsidiaries 16 - - 31.5 31.5
Investments in associates and 17 10.3 9.2 7.7 7.7
joint ventures
Other investments 18 0.6 0.6 - -
Deferred tax 19 0.7 - - -
TOTAL NON-CURRENT ASSETS 149.8 97.2 39.6 39.2
Inventories 20 4.9 3.4 - -
Trade and other receivables 21 33.9 32.4 85.7 56.3
Cash and cash equivalents 22 7.8 6.9 0.6 -
TOTAL CURRENT ASSETS 46.6 42.7 86.3 56.3
TOTAL ASSETS 196.4 139. 125.9 95.5
9
EQUITY
Share capital 23 11.7 8.0 11.7 8.0
Share premium account 23 138.0 104. 138.0 104.
7 7
Revaluation reserve 23 3.3 4.1 - -
Share option reserve 23 4.7 2.5 4.7 2.5
Translation reserve 23 (8.7) (2.0 - -
)
Other reserves 23 (5.5) - - -
Retained earnings 23 (36.1 (39. (31.4 (21.
) 2) ) 3)
TOTAL EQUITY ATTRIBUTABLE TO 107.4 78.1 123.0 93.9
EQUITY
HOLDERS OF THE COMPANY
NON-CONTROLLING INTERESTS 23 20.3 3.0 - -
TOTAL EQUITY 127.7 81.1 123.0 93.9
LIABILITIES
Financial liabilities - 0.3 - -
Loans and borrowings 24 24.6 15.3 1.3 -
Deferred tax 19 3.0 3.0 - -
Obligations under finance 24 1.8 1.1 - -
leases
Trade and other payables 27 2.5 - 0.4 -
TOTAL NON-CURRENT LIABILITIES 31.9 19.7 1.7 -
Bank overdraft 22,24 3.9 0.9 - 0.7
Loans and borrowings 24 4.6 1.5 - -
Obligations under finance 24 1.0 0.2 - -
leases
Trade and other payables 27 27.0 36.5 1.2 0.9
Tax liability 0.3 - - -
TOTAL CURRENT LIABILITIES 36.8 39.1 1.2 1.6
TOTAL LIABILITIES 68.7 58.8 2.9 1.6
TOTAL EQUITY AND LIABILITIES 196.4 139. 125.9 95.5
9
The notes on pages 25-65 are an integral part of these financial statements.
These financial statements were approved by the Board of Directors and
authorised for issue on 3 December 2010. They were signed on its behalf by:
David Lenigas Director
Consolidated and Company cash flow statements
For the year ended 30 September 2010
No Group Company
te
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
CASH FLOWS FROM OPERATING 28 (0.2) (5.3 (10. (7.0)
ACTIVITIES Loss for the (3.7) ) 1) 0.3
year (0.7 2.4
Adjustments )
CASH FLOWS FROM OPERATING
ACTIVITIES BEFORE
MOVEMENTS IN WORKING (3.9) (6.0 (7.7 (6.7)
CAPITAL ) )
Change in inventories (0.1) (1.1 - -
)
Change in trade and other 1.0 (16. (16. (10.9)
receivables 7) 1)
Change in trade and other (10.4 10.1 0.7 0.5
payables )
CASH GENERATED FROM (13.4 (13. (23. (17.1)
OPERATIONS ) 7) 1)
Interest received 0.1 0.2 - -
Interest paid (2.3) (1.0 - -
)
Income tax paid (0.4) - - -
NET CASH FROM OPERATING (16.0 (14. (23. (17.1)
ACTIVITIES ) 5) 1)
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from the sale of 0.4 3.7 - -
property, plant and
equipment
Acquisition of subsidiary, 7 (3.2) (2.5 - -
net of cash acquired )
Acquisition of property, 14 (6.8) (14. (0.5 -
plant and equipment 7) )
Acquisition of associates (2.4 - (0.4)
(0.1) )
Acquisition of investment (0.4) - - -
NET CASH FROM INVESTING (10.1 (15. (0.5 (0.4)
ACTIVITIES ) 9) )
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from the issue of 23 23.6 16.8 23.6 16.8
share capital
Loan advance 3.7 11.4 1.3 -
Repayment of borrowings (1.1 - -
(2.1) )
Payment of finance lease (0.9) (0.2 - -
liabilities )
Minority dividends paid (0.4) - - -
NET CASH FROM FINANCING 23.9 26.9 24.9 16.8
ACTIVITIES
Net (decrease)/increase in (2.2) (3.5 1.3 (0.7)
cash and cash equivalents )
Cash and cash equivalents 6.0 9.4 (0.7 -
at 1 October )
Foreign exchange movements 0.1 0.1 - -
CASH AND CASH EQUIVALENTS 22 3.9 6.0 0.6 (0.7)
AT 30 SEPTEMBER
The notes on pages 25-65 are an integral part of these financial
statements.
Notes to the financial statements
1. Reporting entity
Lonrho Plc (the "Company") is a company incorporated and domiciled in the
United Kingdom. The consolidated financial statements of the Company for the
year ended 30 September 2010 comprise the Company and its subsidiaries
(together referred to as the "Group") and the Group`s interest in associates
and jointly controlled entities.
The financial statements were authorised for issue by the Directors on 3
December 2010.
2. Basis of preparation
Statement of compliance
Both the parent Company and the consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (Adopted IFRS). On publishing the
parent Company financial statements here together with the Group financial
statements, the Company is taking advantage of the exemption in section
408(4) of the Companies Act 2006 not to present its individual income
statement and related notes that form a part of these approved financial
statements. The loss of the Company is disclosed in note 23 to the accounts.
Going concern
Given the current global financial crisis, the Directors are carefully
monitoring cash resources within the Group and have instigated a number of
initiatives to ensure funding will be available for planned projects. As
described in note 35, the Group has raised US$70 million (GBP44.3 million) in
October 2010 through the issue of convertible bonds.
Following the capital raise, and after making due enquiries, the Directors
have a reasonable expectation that the Group has adequate resources to
continue operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the accounts.
Functional and presentation currency
The financial statements are presented in pounds sterling which is the
Company`s functional currency. All financial information presented has been
rounded to the nearest GBP0.1 million.
Basis of measurement
The financial statements have been prepared on the historical cost basis
except for the revaluation of certain long leasehold properties, and the
recognition of available-for-sale financial assets at fair value.
The following standards and interpretations have been applied during the
period:
Revised IAS 1 Presentation of Financial Statements (2007)
Revised IAS 1 introduces the term total comprehensive income, which
represents changes in equity during a period other than those changes
resulting from transactions with owners in their capacity as owners. Total
comprehensive income may be presented in either a single statement of
comprehensive income (effectively combining both the income statement and all
non-owner change in a single statement), or in an income statement and a
separate statement of comprehensive income.
Revised IFRS 3 Business combinations (2008)
Revised IFRS 3 incorporates the following changes that are relevant to the
Group`s operations:
- The definition of a business has been broadened, which is likely to
result in more acquisitions being treated as business combinations.
- Contingent consideration will be measured at fair value, with subsequent
changes therein recognised in the income statement.
- Transaction costs, other than share and debt issue costs, will be
expensed as incurred.
- Any pre-existing interest in the acquiree will be measured at fair value
with the gain or loss recognised in the income statement.
- Any non-controlling (minority) interest will be measured at either fair
value, or at its proportionate interest in the identifiable assets and
liabilities of the acquiree, on a transaction-by-transaction basis.
Revised IFRS 3, which is mandatory in these consolidated financial
statements, has been applied prospectively and therefore there is no impact
on prior periods.
Amended IAS 27 Consolidated and separate financial statements (2008)
Amended IAS 27 requires accounting for changes in ownership interests by the
Group in a subsidiary, while maintaining control, to be recognised as an
equity transaction. When the Group loses control of a subsidiary, any
interest retained in the former subsidiary will be measured at fair value
with the gain or loss recognised in the income statement. The amendments to
IAS 27, which are mandatory in these consolidated financial statements, have
impacted minority interests in the consolidated financial statements.
The following standards have been effective during the year but are not
deemed to have had a significant impact on the Group, other than minor
disclosure effects where applicable.
- IFRS 2 - Share based payments
- IFRS 7 - Financial Information Disclosure
- Amendments to IAS 32 - Financial Instruments Presentation
- IFRIC 13 - Customer Loyalty Programmes
- IFRIC 14 - IAS 19 - Limit of a Defined Benefit Asset
- IFRIC 15 - Agreement of Construction Real Estate
- IFRIC 16 - Hedges of a Net Investment in a Foreign Operation
At the date of authorisation of the financial statements, the following
Standards and Interpretations are issued but not yet effective which have not
been applied to these financial statements:
- IFRIC 19 Extinguishing financial liabilities with equity instruments
- Revised IAS 24 Related Party Disclosures
- Amendments to IFRS 2 Group Cash-settled Share-based payment transactions
- Amendment to IAS 32 Financial Instruments: Presentation: Classification
of Rights Issues
- Amendments to IFRIC 9 and IAS 39 Embedded Derivatives
- Amendments to IFRS 5 - Non-current assets held for sale and discontinued
operations
- Amendment to IAS 7 - Classification of expenditures on unrecognised
assets
- Amendment to IAS 17 - Classification of leases of land and buildings
Use of estimates and judgements
The preparation of financial statements in conformity with Adopted IFRS
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods.
Estimates made by management in the application of Adopted IFRS that have
significant effect on the financial statements with a significant risk of
material adjustment in the next year are discussed in the following notes:
- valuation of intangible assets (note 13)
- valuation of associates and joint ventures (note 17)
- valuation of biological assets (note 15)
Judgements made by management in the application of Adopted IFRS that have
significant effect on the financial statements are:
- the determination of the functional currencies of subsidiaries (see
below)
- the determination of the accounting treatment in respect of the
acquisition of investments as either associates, joint ventures or
subsidiaries (note 3(a)).
The timing of revenue recognition is not subject to significant uncertainty.
Luba Freeport Limited
Luba Freeport Limited, a Jersey registered company, uses US dollars as its
functional currency as the significant transactions of the business are
denominated in US dollars.
Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements and in preparing
an opening adopted IFRS balance sheet as at 1 October 2006 for the purposes
of the transition to Adopted IFRS. The accounting policies have been applied
consistently by Group entities.
(a) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of
Lonrho Plc and entities controlled by Lonrho Plc (its subsidiaries). Control
is achieved where Lonrho Plc (the Company) has the power to govern the
financial and operating policies of an investee entity so as to obtain
benefits from its activities.
The portion of a non-controlling interest is stated at the non-controlling
interest`s proportion of the fair values of the assets and liabilities
recognised. Subsequently, losses applicable to the non-controlling interest
in excess of the non-controlling interest in the subsidiary`s equity are
allocated against the interests of the Group except to the extent that the
non-controlling interest has a binding obligation and is able to make an
additional investment to cover the losses. Future profits attributable to the
non-controlling interest are not recognised until the unrecognised losses
have been extinguished.
The results of entities acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition
or up to the effective date of disposal, as appropriate.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
Associates and Joint Ventures
An associate is an entity in which the Group has the ability to exercise
significant influence but not control over the financial and operating
policies. A joint venture is an entity where the Group jointly controls its
financial and operating policy together with other parties. Associates are
accounted for using the equity method and are initially measured at cost as
adjusted by post- acquisition changes in the Group`s share of the net assets
of the associate, less any impairment of the individual investments, from the
date that significant influence commences until the date it ceases.
Losses of the associates in excess of the Group`s interest in those
associates are not recognised except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of its
investee. The Group`s investment includes goodwill identified on acquisition,
net of any impairment losses. Any excess of the cost of acquisition over the
Group`s share of the fair values of the identifiable net assets of the
associate at the date of acquisition is recognised as goodwill. Any
deficiency of the cost of acquisition below the Group`s share of the fair
values of the identifiable net assets of the associate at the date of
acquisition (i.e. discount on acquisition) is credited to the income
statement in the period of acquisition.
The Company records interests in associate and joint ventures initially at
cost and thereafter at cost less provisions for impairment.
Business combinations
The acquisition of subsidiaries and businesses is accounted for using the
purchase method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree. The acquiree`s identifiable assets, liabilities
and contingent liabilities that meet the conditions for recognition under
IFRS 3 are recognised at their fair values at the acquisition date, except
for non-current assets that are classified as held for sale in accordance
with IFRS 5, which are recognised and measured at fair value less costs to
sell.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the fair value of the consideration
over the Group`s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised.
If, after reassessment, the Group`s interest in the net fair value of the
acquiree`s identifiable assets, liabilities and contingent liabilities
exceeds the fair value of the consideration, the excess is recognised
immediately in the income statement. The interest of non-controlling
interests in the acquirer is initially measured at the non-controlling
interest`s proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
(b) Intangible assets Goodwill
Goodwill arising on consolidation is recognised as an asset.
Following initial recognition, goodwill is subject to impairment reviews, at
least annually, and measured at cost less accumulated impairment losses. The
recoverable amount is estimated at each balance sheet date. Any impairment
loss is recognised immediately in the income statement and is not
subsequently reversed when the carrying amount of the asset exceeds its
recoverable amount.
Any impairment losses recognised in respect of cash generating units are
allocated first to reduce the carrying amount of any goodwill allocated to
cash-generating units (groups of units) and then, to reduce the carrying
amount of other assets in the unit (groups of units) on a pro rata basis.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the gain or loss on disposal. Goodwill arising on
acquisitions before the date of transition to adopted IFRS has been retained
at the previous UK GAAP amounts, after being tested for impairment at that
date.
Other intangible assets
Other intangible assets are measured initially at cost and are amortised on a
straight-line basis over their estimated useful lives. The carrying amount is
reduced by any provision for impairment where necessary.
On a business combination, as well as recording separable intangible assets
already recognised in the balance sheet of the acquired entity at their fair
value, identifiable intangible assets that are separable or arise from
contractual or other legal rights are also included in the acquisition
balance sheet at fair value.
Amortisation on intangible assets is charged on a straight line basis over
their useful economic life, on the following basis:
Brands 5 years
Intellectual property 5 years
Licences Life of licence, not to exceed 5 years
Customer relationships 5 years - 10 years
Franchises 5 years
(c) Foreign currencies
The individual financial statements of each Group company are presented in
the currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in pounds sterling, which is the functional currency of the
Company, and the presentational currency for the consolidated financial
statements.
In preparing the financial statements of the individual companies,
transactions denominated in foreign currencies are translated into the
respective functional currency of the Group entities using the exchange rates
prevailing at the dates of transactions. Non-monetary assets and liabilities
are translated at the historic rate. Monetary assets and liabilities
denominated in foreign currencies are translated into the functional currency
at the rates of exchange ruling at the balance sheet date. Non-monetary
assets and liabilities denominated in foreign currencies that are measured at
fair value are retranslated to the functional currency at the exchange rate
at the date that the fair value was determined.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
period. Exchange differences arising on the retranslation of non-monetary
items carried at fair value in respect of which gains and losses are
recognised directly in equity are also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group`s foreign operations are translated at exchange
rates prevailing at the balance sheet date. Income and expense are translated
at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case weighted average rates are
used. Exchange differences arising, if any, are classified in equity and are
transferred to the Group`s foreign currency translation reserve within
equity. Such translation is recognised as income or as expense in the period
in which the operation is disposed of.
All foreign exchange gains or losses that are reflected in the income
statement are presented within financing income or expense.
(d) Taxation
The tax expense represents the sum of current tax and deferred tax.
Current taxation
Current tax is based on taxable profit for the period. Taxable profit differs
from net profit as reported in the income statement because it excludes items
of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group`s
liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on the investments in subsidiaries and associates, except where the
Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates substantially enacted at the
balance sheet date, that apply in the period when the liability is settled or
the asset is realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited to equity, in
which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
(e) Available for sale financial assets
The Group`s investments in equity securities that are not associates or joint
ventures are classified as available-for-sale financial assets. Subsequent to
initial recognition, they are measured at fair value and changes therein,
other than impairment losses (see below), are recognised directly in equity.
When an investment is de-recognised, the cumulative gain or loss in equity is
transferred to the income statement.
Impairment
A financial asset is assessed at each reporting date to determine whether
there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated
future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount, and the present
value of the estimated future cash flows discounted at the original effective
interest rate. An impairment loss in respect of an available-for-sale
financial asset is calculated by reference to its fair value.
All impairment losses are recognised in the income statement. Any cumulative
loss in respect of an available-for-sale financial asset recognised
previously in equity is transferred to the income statement.
An impairment loss is reversed if the reversal can be related objectively to
an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost, the reversal is recognised in the income
statement. For available-for sale financial assets that are equity
securities, the reversal is recognised directly in equity.
(f) Property, plant and equipment
Long leasehold land and buildings are stated in the balance sheet at their
revalued amounts, being the fair value at the date of revaluation, less any
subsequent accumulated depreciation and subsequent accumulated impairment
losses. Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be
determined using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and
buildings is credited to the revaluation reserve, except to the extent that
it reverses a revaluation decrease for the same asset previously recognised
as an expense, in which case the increase is credited to the income statement
to the extent of the decrease previously charged. A decrease in carrying
amount arising on the revaluation of such land and building is charged as an
expense to the extent that it exceeds the balance if any, held in the
revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to the income statement. On
subsequent sale or retirement of a revalued property, the attributable
revaluation surplus remaining is transferred directly to retained earnings.
All other assets are stated at historical cost less accumulated depreciation
and accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets
(less estimated residual values updated annually), other than long leasehold
land, over their estimated useful lives, on the following basis:
Long leasehold buildings 2% of cost
Short leasehold land and buildings Over the term of the lease
Plant and machinery 10% of cost
Aircraft 5%-6.67% of cost
Motor cars 15%-25% of cost
Fixtures and fittings 15%-25 % of cost
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset
and is recognised in the income statement for the period.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets, or where shorter, over the relevant
lease term.
In respect of aircraft, subsequent costs incurred which lend enhancement to
future periods such as long term scheduled maintenance and major overhaul of
aircraft and engines are capitalised and amortised over the length of the
period benefiting from those enhancements. All other costs relating to
maintenance are charged to the income statement as incurred.
(g) Biological assets
Certain Group subsidiaries involved in the production of fresh produce
recognize biological assets, which includes agricultural produce due for
harvest on fruit plantations. Biological assets are stated at fair value less
estimated point of sale costs, with any resultant gain or loss recognized in
the income statement. The valuation of the fruit plantations is based on
discounted cashflow models whereby the fair value of the assets is calculated
using cashflows for continuous operations taking into account growth and
yield potential.
When the fruit is harvested, it will be transferred to inventory and
accounted for under IAS 2 - Inventory.
(h) Impairment of assets excluding goodwill, inventories and deferred tax
assets
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of any impairment loss. Where the asset does not
generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs. Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value and the risks
specific to the asset for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as income immediately, unless
the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation increase.
Financial instruments
Financial assets and financial liabilities are recognised in the Group`s
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits and other
short term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Bank overdrafts that are repayable on demand and form an integral part of the
Group`s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Trade receivables
Trade receivables are measured at initial recognition at fair value and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated recoverable amounts are
recognised in the income statement when there is objective evidence the asset
is impaired.
Trade payables
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost using the effective interest rate method.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual arrangements entered into.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Capital management
The Board`s policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The Board of Directors monitors the return on capital, which
the Group defines as net operating income divided by total shareholders`
equity, excluding minority interests.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and where applicable direct expenditure and
attributable overheads that have been incurred in bringing the inventories to
their present location and condition. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to
be incurred in marketing, selling and distribution.
(j) Share based payments
The Group provides benefits to certain employees, including senior
executives, in the form of share based payments, whereby employees render
services in exchange for shares or rights over shares (equity-settled
transactions). The cost of these equity-settled transactions with employees
is measured by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined by using a Black-
Scholes model. The dilutive effect, if any, of outstanding options is
reflected as additional share dilution in the computation of earnings per
share.
(k) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between
cost and redemption value being recognised in the income statement over the
period of the borrowings on an effective interest basis.
(l) Dividends
Interim dividends are recognised when paid and final dividends are recognised
as liabilities in the period in which they are approved by shareholders.
(m) Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to settle the
obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability.
(n) Revenue recognition
Revenue, for the other major segments not detailed below, is derived from the
sale of goods and services and is measured at the fair value of consideration
received or receivable, after deducting discounts, volume rebates, value-
added tax and other sales taxes. A sale of goods and services is recognised
when recovery of the consideration is probable, there is no continuing
management involvement with the goods and services and the amount of revenue
can be measured reliably.
A sale of goods is recognised when the significant risks and rewards of
ownership have passed to the buyer, the associated costs and possible return
of goods can be estimated reliably. This is when title and insurance risk
have passed to the customer and the goods have been delivered to a
contractually agreed location.
A sale of services is recognised when the service has been rendered.
Aircraft division
Revenue for the aircraft division comprises the invoiced value of airline
services, net of passenger taxes, discounts, plus ancillary revenue. Revenue
from the sale of flight seats (passenger revenue) is recognised in the period
in which the service is provided. Unearned revenue represents flight seats
sold but not yet flown and is included within deferred income.
Luba Freeport
Revenue from port activities represents the income earned from the provision
of port facilities, which comprise cargo handling, towage, pilotage,
conservancy services and port related rental income. Such revenue is recorded
once the service has been provided.
(o) Leases
Leases are classified according to the substance of the transaction. A lease
that transfers substantially all the risks and rewards of ownership to the
lessee is classified as a finance lease. All other leases are classified as
operating leases.
Finance leases
Finance leases are capitalised in the balance sheet at their fair value or,
if lower, at the present value of the minimum lease payments, each determined
at the inception of the lease. The corresponding liability is shown as a
finance lease obligation to the lessor. Leasing repayments comprise both a
capital and a finance element. The finance element is written off to the
income statement so as to produce an approximately constant periodic rate of
charge on the outstanding obligation.
Operating leases
Operating lease rentals are charged to the income statement on a straight
line basis over the period of the lease.
(q) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the
period in which they are incurred.
r) Loss per share
Basic loss per share is calculated based on the weighted average number of
ordinary shares outstanding during the period. Diluted loss per share is
based upon the weighted average number of shares in issue throughout the
year, adjusted for the dilutive effect of potential ordinary shares. The only
potential dilutive ordinary shares in issue are employee share options.
(s) Reportable Segments
Segments are determined to be the lowest operational segment that the Chief
Operating Decision Maker ("CODM") evaluates the result of the segment and
allocates resources to that segment. This is based on the Group`s internal
organization and the financial information provided to the CODM.
(t) Assets and liabilities classified as held for sale
Non-current assets (or disposal groups comprising assets and liabilities)
that are expected to be recovered primarily through sale rather than through
continuing use are classified as held for sale. Immediately before
classification as held for sale, the assets (or components of a disposal
group) are remeasured in accordance with the Group`s accounting policies.
Thereafter generally the assets (or disposal group) are measured at the lower
of their carrying amount and fair value less cost to sell. Any impairment
loss on a disposal group first is allocated to goodwill, and then to
remaining assets and liabilities on a pro rata basis, except that no loss is
allocated to inventories, financial assets and deferred tax assets, which
continue to be measured in accordance with the Group`s accounting policies.
Impairment losses on initial classification as held for sale and subsequent
gains or losses on re-measurement are recognised in the income statement.
Gains are not recognised in excess of any cumulative impairment loss.
3. Segment reporting
The "Chief Operating Decision Maker" (CODM) is deemed to be the Executive
Committee who monitor the results of the business segments to assess
performance and make decisions about the allocation of revenues. Segment
performance is evaluated on both revenue and operating profit/(loss).
Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly interest earning assets, interest-bearing
loans, borrowings and expenses, and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
There is no inter-segment revenue.
Business segments
The Group has five continuing reportable segments which are organized around
the basis of products and services which they provide:
Agribusiness
Infrastructure
Transportation
Support services
Hotels
Cargo and shipping (discontinued)
The Group has not aggregated any operating segment in arriving at this
analysis.
Geographical analysis
All of the segments operate in various parts of Africa.
Business segments
Agribu Infrast Transpo Support 2010 Consolidated
siness ructure rtation service continuing
GBPm GBPm GBPm s operations
GBPm Hotel GBPm
s
GBPm
EXTERNAL REVENUE 55.3 14.0 21.5 11.1 5.9 107.8
Segment result 7.9 4.1 (7.6) 0.1 0.2 4.7
Unallocated (9.0)
expenses
OPERATING LOSS (4.3)
Net finance income 2.9
Share of results of 2.3
associates
Share of results of (0.4)
joint venture
Income tax charge (0.7)
LOSS FOR THE YEAR (0.2)
Business segments
Agribu Infras Transp Suppor 2009 Consol Cargo
siness tructu ortati t idated and
GBPm re on servic contin shippin
GBPm GBPm es Hotel uing g
GBPm s operat discont
GBPm ions inued
operati
GBPm ons
GBPm
EXTERNAL REVENUE
46.5 9.3 21.4 9.1 3.4 89.7 1.2
Segment result 1.0 (4.5) (5.1) 0.1 0.4 (8.1) (0.8)
Unallocated (3.4) 2.2
expenses
OPERATING (11.5) 1.4
(LOSS)/PROFIT
Net finance income 5.4 -
Share of results of 0.4 -
associate
Share of results of (0.2) -
joint venture
Income tax expense (0.8) -
(LOSS)/PROFIT FOR (6.7) 1.4
THE YEAR
Agribusin Infrastru Transpo Suppor 2010 Othe Consolida
ess cture rtation t r ted
GBPm GBPm GBPm servic GBPm continuin
es Hotel g
GBPm s operation
GBPm s
GBPm
Segment
operating 51.1 82.9 16.4 3.9 23.3 - 177.6
assets
Investment in - - - - - 10.3 10.3
associates/jo
int ventures
Unallocated - - - - - 8.5 8.5
assets/intere
st bearing
assets
TOTAL ASSETS 51.1 82.9 16.4 3.9 23.3 18.8 196.4
Segment 28.8 14.5 7.4 1.2 9.9 - 61.8
operating
liabilities
Unallocated - - - - - 6.9 6.9
liabilities/i
nterest
bearing
liabilities
TOTAL 28.8 14.5 7.4 1.2 9.9 6.9 68.7
LIABILITIES
Depreciation 1.5 3.0 0.6 0.1 0.6 0.1 5.9
of segment
assets
Amortisation 0.5 - 0.1 0.2 - - 0.8
of segment
assets
Capital 2.9 3.7 0.8 - 1.4 0.3 9.1
expenditure
Agribusi Infras Transp Suppor 2009 Other Consolid
ness tructu ortati t GBPm ated
GBPm re on servic continui
GBPm GBPm es Hotel ng
GBPm s operatio
GBPm ns
GBPm
Segment 31.8 58.7 14.5 4.5 11.9 - 121.4
operating assets
Investment in - - - - 1.3 7.9 9.2
associates/joint
ventures
Unallocated - - - - - 9.3 9.3
assets/interest
bearing assets
TOTAL ASSETS 31.8 58.7 14.5 4.5 13.2 17.2 139.9
Segment 19.4 22.5 5.3 1.2 1.2 - 49.6
operating
liabilities
Unallocated - - - - - 9.2 9.2
liabilities/inte
rest bearing
liabilities
TOTAL 19.4 22.5 5.3 1.2 1.2 9.2 58.8
LIABILITIES
Depreciation of 1.4 2.4 1.0 0.1 0.4 - 5.3
segment assets
Amortisation of 0.3 0.1 0.1 0.1 - - 0.6
segment assets
Capital 4.6 3.6 1.5 0.9 4.1 - 14.7
expenditure
Geographical analysis
2010
Consolid
Southern East West United ated
Africa Africa Africa Europe States continui
GBPm GBPm GBPm GBPm GBPm ng
operatio
ns
GBPm
Revenue by location of 61.1 21.5 11.9 11.4 1.9 107.8
external customers
Revenue by location of 73.9 21.5 11.9 0.5 - 107.8
assets
Segment net assets 34.2 8.2 74.2 11.1 - 127.7
Capital expenditure 2.4 0.2 6.2 0.3 - 9.1
2009
Consoli Souther
Southern East West dated n
Africa Afric Europe continu Africa
GBPm Afri a GBPm ing discont
ca GBPm operati inued
GBPm ons operati
GBPm ons
GBPm
Revenue by location of 59.8 21.4 8.0 0.5 89.7 1.2
external customers
Revenue by location of 59.8 21.4 8.0 0.5 89.7 1.2
assets
Segment net assets 29.5 8.6 35.0 8.0 81.1 -
Capital expenditure 9.6 1.5 3.6 - 14.7
-
Revenue
Continuing operations Discontinued operations Total
2009 22009 2010 2009 2010
0
1
0
GBPm GGBPm GBPm GBPm GBPm
B
P
m
Sale of goods 17.0 12.4 - - 17.0 12.4
Services 90.8 77.3 _ 1.2 90.8 78.5
107.8 89.7 _ 1.2 107.8 90.9
5. Group net operating costs
2010 2009
GBPm GBPm
Cost of sales 79.3 74.7
Operating costs 45.4 29.6
Gain arising on fair valuation of biological (9.0) -
assets (3.6) (3.3)
Other operating income
NET OPERATING COSTS 112.1 101.0
Administrative expenses include management
related overheads for operations and head
office.
INCLUDED IN NET OPERATING COSTS ABOVE ARE:
Depreciation of property plant and equipment 5.9 5.3
Amortisation of intangible assets (other than 0.8 0.6
goodwill)
Share based payments (notes 23 and 26) 2.3 0.3
Operating lease rentals:
- Land and buildings 1.7 0.4
- Plant and machinery 0.1 0.1
- Other 1.8 1.7
Staff costs (note 9) 24.1 13.0
Impairment of trade receivables 0.6 0.2
Impairment of other investments 0.4 0.1
The costs above include the following relating to discontinued operations:
2010 2009
GBPm GBPm
Gain arising on liquidation of SAILS - (2.2)
Other operating lease rentals - 0.6
Auditors remuneration
2010 2009
GBPm GBPm
Fees payable to the Company`s auditors for the audit 0.2 0.2
of the Company`s annual accounts
For the audit of the Company`s subsidiaries pursuant 0.3 0.1
to legislation
Total audit fees 0.5 0.3
Other fees payable to the Company`s auditors 0.1 -
Total fees payable to the Company`s auditors 0.6 0.3
6. Acquisition of subsidiaries
Trak Auto
On 8 April 2010, the Group acquired 100% of the issued share capital of Trak
Auto Lda for an initial consideration of US$2 million (GBP1.3 million).
Further payments of US$1 million (GBP0.6 million) a year for three years will
be payable upon the meeting of growth targets. Trak Auto Lda holds the
exclusive John Deere and Komatsu dealership agreements for Mozambique and is
involved in the sale and after-sale service of these vehicles.
The transaction has been accounted for by the purchase method of accounting.
The fair value of the net assets at 8 April 2010 is set out below:
Pre Values
acquisiti recognised
on on
carrying acquisition
value GBPm
GBPm
Property, plant and equipment 0.2 0.2
Inventory 0.4 0.4
Trade and other receivables 0.7 0.7
Interest-bearing loans and borrowings (0.1) (0.1)
Trade and other payables (0.8) (0.8)
Intangible related to franchise - 1.7
NET IDENTIFIABLE ASSETS AND LIABILITIES 0.4 2.1
Consideration paid 1.3
Contingent consideration 1.6
Goodwill on acquisition 0.8
The transaction costs incurred to acquire the company were GBP0.1 million and
have been expensed in the income statement.
The goodwill arising on the acquisition of Trak Auto Lda is attributable to
the anticipated profitability of the distribution of the company`s services
and products to new customers.
Trak Auto Lda contributed GBP3.5 million to revenue and GBP0.8 million profit
to the Group`s profit before tax for the period between the date of
acquisition and the reporting date.
Oceanfresh
On 7 June 2010, the Group acquired 51.0% of the issued share capital of
Oceanfresh Limited for a consideration of R3.8 million (GBP0.3 million)
including R0.8 million (GBP0.1 million) related to the subscription of shares
with the proceeds retained in Oceanfresh. An additional working capital
injection of R7.7 million (GBP0.7 million) was provided by way of an interest
bearing loan. Oceanfresh is a supplier of frozen fish and crustaceans from
Mozambique with customers across South Africa and also in the United States.
The transaction has been accounted for by the purchase method of accounting.
The fair value of the net assets at 7 June 2010 is set out below:
Pre Values
acquisitio Subscript recognise
n carrying ion of d on
value shares acquisiti
GBPm recognise on
d GBPm
GBPm
Property, plant and equipment 0.5 - 0.5
Inventory 0.9 - 0.9
Trade and other receivables 1.7 - 1.7
Deferred tax asset 0.3 - 0.3
Cash and cash equivalents (1.6) 0.1 (1.5)
Trade and other payables (2.4) - (2.4)
Intangible related to customer - - 0.2
relationships
NET IDENTIFIABLE ASSETS AND (0.6) 0.1 (0.3)
LIABILITIES
Non-controlling interests - - 0.1
Consideration paid - - 0.3
Goodwill on acquisition - - 0.5
The transaction costs incurred to acquire the company were GBP0.1 million and
have been expensed in the income statement.
The goodwill arising on the acquisition of Oceanfresh Limited is attributable
to the anticipated profitability of the distribution of the company`s
services and products to new customers.
Oceanfresh Limited contributed GBP2.3 million to revenue and GBP0.2 million
loss to the Group`s profit before tax for the period between the date of
acquisition and the reporting date.
7. Discontinued operations SAILS
Following a review by the Board in September 2008, the Group decided not to
continue to support SAILS. The Board began actively marketing the company for
sale prior to the 2008 year end. Unfortunately this proved unsuccessful and
the company was placed into liquidation on 15 October 2008. No cash flow
relating to this business arose in the year and none is anticipated in the
future.
2010 2009*
GBPm GBPm
CASH FLOWS FROM DISCONTINUED OPERATION
Net cash used in operating activities - (0.1)
NET MOVEMENT IN CASH AND CASH EQUIVALENTS - (0.1)
* In the period to liquidation
8. Staff numbers and costs
The aggregate remuneration comprised (including Executive Directors):
Group Company
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
Wages and salaries 20.8 11.6 3.5 2.5
Compulsory social security 0.8 1.1 0.3 0.2
contributions
Share based payments 2.3 0.3 2.3 0.3
Pension costs 0.2 - 0.2 -
24.1 13.0 6.3 3.0
The average number of employees
(including Executive Directors) was:
Group Company
2010 2009 2010 2009
Number Number Number Number
Infrastructure 209 183 - -
Agribusiness 732 217 - -
Transportation 405 300 - -
Support services 56 88 - -
Hotels 314 161 - -
Central 32 21 22 21
1,748 970 22 21
REMUNERATION OF DIRECTORS
Detailed disclosure of remuneration of Directors is given in note 33.
9. Net finance income
2010 GBPm 2009 GBPm
Bank interest receivable Foreign exchange
gain 0.1 0.2
8.5 6.4
FINANCE INCOME 8.6 6.6
Loans repayable within five years and 2.1 0.9
overdrafts
Foreign exchange loss 3.4 0.2
Finance leases 0.2 0.1
FINANCE EXPENSE 5.7 1.2
NET FINANCE INCOME 2.9 5.4
The foreign exchange gain of GBP8.5 million (2009: GBP6.4 million) has arisen
on the translation of intercompany balances.
Income tax expense
Recognised in the income statement 2010 2009
GBPm GBPm
CURRENT TAX EXPENSE Current year
1.0 0.8
DEFERRED TAX
Credit for year (0.3) -
TOTAL INCOME TAX EXPENSE IN THE INCOME STATEMENT 0.7 0.8
Reconciliation of effective tax rate 2010 2009
GBPm GBPm
Profit/(loss) before tax 0.5 (4.5)
Income tax using the domestic corporation tax 0.1 (1.2)
rate
Effect of tax rates in foreign jurisdictions (1.1) (0.5)
Reversal of provision against carrying value of (0.9) -
associate
Net losses where no Group relief is available 4.7 3.8
G
Gain on disposal of subsidiary undertaking not - (0.7)
tax effected
Effect of tax losses utilised (0.3) (0.3)
Non taxable items (1.8) (0.3)
TOTAL TAX EXPENSE 0.7 0.8
UK Corporation tax is calculated at a rate of 28% (2009: 28%) of the
estimated assessable loss for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
Earnings per share
The calculation of the basic and diluted profit/(loss) per share is based on
the following data:
2010 2009
GBPm GBPm
Profit/(loss) for the purposes of basic earnings
per share being net loss attributable to
equity holders of the parent 0.3 (6.2)
Profit/(loss) for the purposes of diluted
earnings per share 0.3 (6.2)
Number of shares (millions) 2010 2009
No. No.
Weighted average number of ordinary shares for 1,017.1 715.
the purposes of basic earnings per share 7
Effect of dilutive potential ordinary shares:
- Share options 13.6 37.5
Weighted average number of ordinary shares for 1,030.7 753.
the purposes of diluted earnings per share* 2
*The calculation of diluted loss per share is based on the weighted average
number of shares outstanding. In 2009 the Group made a loss and hence the
effect of share options is considered to be anti-dilutive.
11. Earnings per share 2010 2009
Earnings per share 0.03p (0.86)p
Diluted earnings per share 0.03p (0.86)p
12. Intangible assets
Goodwil Bran Intell Lic Total
l Custom ds ectual enc GBPm
GBPm Franch er GBPm proper es
ises relati ty GBP
GBPm onship GBPm m
s
GBPm
COST
Balance at 1 October 10.8 - - 1.0 0.1 0.2 12.1
2008
Acquired through 9.1 - 3.2 - - - 12.3
business combinations
Discontinued business (5.1) - - - - - (5.1)
BALANCE AT 30 14.8 - 3.2 1.0 0.1 0.2 19.3
SEPTEMBER 2009
Balance at 1 October 14.8 - 3.2 1.0 0.1 0.2 19.3
2009
Acquired through 1.3 1.7 0.2 - - 3.2
business combinations -
BALANCE AT 30 16.1 1.7 3.4 1.0 0.1 0.2 22.5
SEPTEMBER 2010
AMORTISATION AND
IMPAIRMENT LOSSES
Balance at 1 October 5.7 - -
2008 0.4 - 0.1 6.2
Amortisation for the - 0.3 0.2 - 0.1 0.6
year -
Discontinued business (5.1) - - - - - (5.1)
BALANCE AT 30 0.6 - 0.3 0.6 - 0.2 1.7
SEPTEMBER 2009
Balance at 1 October 0.6 - 0.3 0.6 - 0.2 1.7
2009
Amortisation for the 0.2 0.4 0.2 - 0.8
year - -
BALANCE AT 30 0.6 0.2 0.7 0.8 - 0.2 2.5
SEPTEMBER 2010
CARRYING AMOUNTS
At 1 October 2008 5.1 - - 0.6 0.1 0.1 5.9
AT 30 SEPTEMBER 2009 14.2 - 2.9 0.4 0.1 - 17.6
At 1 October 2009 14.2 - 2.9 0.4 0.1 - 17.6
AT 30 SEPTEMBER 2010 15.5 1.5 2.7 0.2 0.1 - 20.0
Amortisation and impairment charge
The amortisation and impairment charge is recognised in the operating costs
line of the income statement, with the exception of the goodwill relating to
discontinued operations which has been disclosed separately.
Goodwill acquired in a business combination is allocated at acquisition to
the cash generating units (CGU`s) that are expected to benefit from that
business combination. Before recognition of impairment losses, the carrying
amount of goodwill had been allocated as follows:
Primary CGU 2010 2009
Reporting GBPm GBPm
Segment
AGRIBUSINESS Rollex (Pty) Limited 7.8 7.8
Trak Auto Lda 0.8 -
Oceanfresh Seafoods (Pty) Limited 0.5 -
9.1 7.8
INFRASTRUCTUR Luba Freeport Limited 3.5 3.5
E
KwikBuild Corporation Limited 2.8 2.8
6.3 6.3
TRANSPORTATIO Five Forty Aviation Limited 0.1 0.1
N
0.1 0.1
SUPPORT Swissta Holdings Limited 0.6 0.6
SERVICES
TOTAL 16.1 14.8
At 30 September 2010 accumulated impairment losses in respect of goodwill
totalled GBP0.6million (2009: GBP0.6 million) fully impairing the goodwill
related to Swissta Holdings Limited.
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired which include the current
economic environment. The recoverable amounts are determined from value in
use calculations. The key assumptions for the value in use calculations are
those regarding discount rates, growth rates, expected changes to selling
prices and direct costs during the periods considered.
Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the
units. The growth rates are based on management`s assessment of the markets
in which the businesses are operating and reflect known contracts and
customer relationships combined with anticipated growth in markets and market
share. Industry growth forecasts are not always considered applicable as many
of the businesses are operating in non-established markets. Changes in the
selling prices and direct costs are based on past practices and expectations
of future changes in the individual markets.
The Group prepares cash flow forecasts derived from the most recent financial
budgets included in the individual reporting unit`s five year business plan
which are approved by management. For Rollex (Pty) Limited and KwikBuild
Corporation Limited the Directors have not considered cashflow beyond the
five year period in determining value in use. The forecasts used for these
businesses are the three year plan approved by the Board with years 4 and 5
based on year 3 performance escalated for growth of 5% in Rollex (Pty)
Limited and 10% in Kwikbuild Corporation Limited. For Luba Freeport Limited,
reflecting the significant capital investments in the project and the length
of the remaining operating concession (18 years), the Directors have extended
the 3 year forecast approved by the Board to reflect the remaining life of
the concession using a 5% growth rate over this period in determining value
in use. For Trak Auto Lda and Oceanfresh Seafoods (Pty) Limited the Directors
have considered the 5 year acquisition case business models updated for
current development as appropriate. The pre-tax rates used to discount the
forecast cash flows within Agribusiness are Rollex (Pty) Limited 12%;
Infrastructure, Luba Freeport Limited 10% (2009: 10%) and KwikBuild
Corporation Limited 15% (2009: 15%); and Transportation, being Five Forty
Aviation Limited 15% (2009: 15%).
Management carried out a range of sensitivity analysis on all the assumptions
used for each business. There is no single factor impacting the sensitivity
of the CGU analysis, other than the continued growth in the core markets as
noted. The results of this analysis confirmed that there was sufficient
headroom in the carrying value of goodwill for these entities. The Directors
do not consider that any reasonably possible scenario currently foreseen
could result in goodwill impairment.
Estimates and judgements
The Directors believe that the estimates and judgments used in preparing
these financial statements would not have a material impact on the carrying
values of the intangible assets described above.
Property, plant and equipment
Long Short Plan Fixture Aircr Total
leasehol leasehol t s and aft GBPm
d land d land and fitting GBPm
and and mach s
building building iner GBPm
s s y
GBPm GBPm GBPm
COST
Balance at 1 October 10.0 39.7 5.5 2.7 6.6 64.5
2008
Additions 7.1 3.6 1.0 1.5 1.5 14.7
Business combinations 0.7 - 2.4 - - 3.1
Disposals - - (1.2 (0.2) (3.2) (4.6)
)
Effect of movements in (0.7) 4.1 0.8 0.4 0.4 5.0
foreign exchange
BALANCE AT 30 SEPTEMBER 17.1 47.4 8.5 4.4 5.3 82.7
2009
Balance at 1 October 17.1 47.4 8.5 4.4 5.3 82.7
2009
Additions 0.9 4.3 2.1 1.7 0.1 9.1
Business Combinations - - 0.6 0.1 - 0.7
Additions due to joint - 11.1 - 1.0 - 12.1
venture becoming a
subsidiary
Non-controlling 25.5 - - - - 25.5
interest contribution
Disposals (0.4) - (0.3 (0.1) - (0.8)
)
Effect of movements in (2.2) 0.8 1.2 (1.1) 0.1 (1.2)
foreign exchange
BALANCE AT 30 SEPTEMBER 40.9 63.6 12.1 6.0 5.5 128.1
2010
DEPRECIATION AND
IMPAIRMENT LOSSES
Balance at 1 October - 4.4 1.6 1.1 0.6 7.7
2008
Depreciation charge for 0.5 1.9 1.6 0.6 0.7 5.3
the year
Disposals - - - (0.1) (0.8) (0.9)
Effect of movements in 0.2 0.2 0.2 - 0.2 0.8
foreign exchange
BALANCE AT 30 SEPTEMBER 0.7 6.5 3.4 1.6 0.7 12.9
2009
Balance at 1 October 0.7 6.5 3.4 1.6 0.7 12.9
2009
Depreciation charge for 0.1 2.7 2.0 0.8 0.3 5.9
the year
Disposals - - (0.3 (0.1) - (0.4)
)
Effect of movements in - 0.2 0.7 (0.4) - 0.5
foreign exchange
BALANCE AT 30 SEPTEMBER 0.8 9.4 5.8 1.9 1.0 18.9
2010
CARRYING AMOUNTS
At 1 October 2008 10.0 35.3 3.9 1.6 6.0 56.8
At 30 September 2009 16.4 40.9 5.1 2.8 4.6 69.8
At 1 October 2009 16.4 40.9 5.1 2.8 4.6 69.8
At 30 September 2010 40.1 54.2 6.3 4.1 4.5 109.2
During the year, the Company acquired fixed assets for GBP0.5m (GBP2009:
GBPnil), with a depreciation charge of GBP0.1m (2009: GBPnil) in the year.
The net book value as at 30 September 2010 was GBP0.4m (2009:GBPnil). These
fixed assets relate to fixtures and fittings.
Leased plant, machinery and aircraft
At 30 September 2010, the net carrying amount of leased assets were GBP0.4
million (2009:GBP1.5 million). See note 24 for details of the lease
obligations.
Revalued long leasehold land and buildings
The GBP25.5 million recognition of long leasehold land and buildings in the
year relates to the valuation of the land assigned under the concession
agreement from GEPetrol following the completion of Phase 1 development and
capitalisation of Lonrho loans. The value had not previously been recognised
as assignment and availability of the land is effectively established
following Phase 1 development completion.
Long leasehold land and buildings, relating to Hotel Cardoso SARL and
Sociedade Comercial Bytes & Pieces Limitada, were revalued in June 2008 and
January 2009 respectively, by Zambujo & Associados Lda, independent valuers,
on the basis of market value. The valuations conform to International
Valuation Standards and were based on recent market transactions at arm`s
length terms for similar properties. The Directors believe these valuations
remain appropriate and accordingly have not commissioned new valuations since
January 2009.
On 30 September 2010, had revalued long leasehold land and buildings been
carried at historical cost less accumulated depreciation, their carrying
amount would be approximately GBP1.9 million (2009: GBP2.0 million). The
revaluation surplus is disclosed in note 23. The revaluation surplus arises
in a subsidiary and cannot be distributed to the parent due its legal
restrictions in the country of incorporation.
Assets in the course of construction
Included within short leasehold land and buildings are assets in the course
of construction totalling GBP1.4 million (2009: GBP8.3 million) which are not
depreciated until they are brought into use.
Capital commitments
Details of capital commitments in relation to property, plant and equipment
are disclosed in note 31.
Borrowing costs
The amount of borrowing costs in respect of interest capitalised during the
year was GBP0.1 million (2009: GBP0.3 million) and has been included within
long leasehold land and buildings.
Biological assets
Livesto Total
Stone ck GBPm
fruit GBPm
orchard
s
GBPm
Balance at 1 October 2009 - - -
Due to physical changes 8.9 0.1 9.0
BALANCE AT 30 SEPTEMBER 2010 8.9 0.1 9.0
The Group has a 200 hectare stone fruit orchard in Zimbabwe that grows a
range of stone fruits. The fair value at the start of the plantation cycle
was not considered material due to the risks attached to the start up of
operations. The cycle has now reached a point where 47 hectares of the
orchard has developed and is about to yield fruit. The fair value at the end
of the plantation cycle represents the discounted value of future net
cashflows over the life of the orchard, taking into account the expected
yield of the fruit, at a current market value discounted at a rate of 15%
over the future period. The Group has used a third party to assist in its
valuation. A 1% change in discount rate would affect the value by GBP0.7
million.
At the point of harvest, the harvested fruits will be transferred to
inventory and accounted for under IAS 2 - Inventory.
The discounted cashflows for the orchard represent the future discounted
revenue less estimated point of sale costs.
The Directors note that there is significant estimation and judgement in the
valuation of the biological assets. There is also significant operational
risk associated with the orchard including flooding, frost impact and general
loss of plantation and harvest.
At 30 September 2010 stone fruit trees comprised approximately 108,000 peach
trees and 11,000 blueberry bushes (2009: Nil) which range from newly
established trees to plantations that are 2 years old and are producing fruit
for current harvest.
At 30 September 2010 livestock comprised 153 cattle, of which 9 are less than
one year old and considered to be immature assets. During the year the Group
did not sell any cattle.
Investments in subsidiaries
The investment by the Company in respect of Lonrho Africa (Holdings) Limited
is stated at cost. This is subject to impairment testing.
A list of principal subsidiaries is set out in note 34.
Investments in associates and joint ventures
Group Company
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
At 1 October 9.2 8.8 7.7 7.3
Acquisition of joint venture - 1.5 - -
Transfer to business acquisitions - (2.2) - -
Additions to associate 0.1 0.9 - 0.4
Transfer from joint venture to (0.9) - - -
subsidiary(2)
Share of (loss) after taxation - joint (0.4) (0.2) - -
ventures
Share of (loss)/profit after taxation - (1.1) 0.4 - -
associates (1)
Write back of impairment(1) 3.4 - - -
AT 30 SEPTEMBER 10.3 9.2 7.7 7.7
Additions to associates represents the purchase of additional shares
in Lonrho Mining Limited (see note 33)
The net value of the write back of impairment and share of loss in associate
of GBP2.3 million is shown in the consolidated income statement, as "share of
results of associates."
The transfer from joint venture to subsidiary relates to control of Grand
Karavia SPRL being obtained and the joint venture being classified as a
subsidiary. This reclassification has resulted in fixed assets of GBP12.1
million, loans of GBP10.4 million, inventory of GBP0.2 million, receivables
of GBP0.3 million and other creditors of GBP0.2 million being recognised.
The Group had the following investments in associates and joint ventures at
the balance sheet date:
Ownership of
Country ordinary share capital
2010 2009
Associates
LonZim Plc+ Isle of Man 24.61% 27.87%
Lonrho Mining Limited Australia 13.16% 25.32%
Arlington Associates
Limited UK 20.00% 20.00%
Joint ventures
Grand Karavia SPRL DRC - 50.00%
+ Held directly by
Lonrho Plc.
Lonrho Mining Limited
Lonrho Mining Limited was presumed not to be an associate in 2007 due to the
Group not being able to exercise significant influence over the company. As a
result of a change in the Board of Lonrho Mining Limited in September 2008,
this was no longer the case and hence it was reclassified from other non-
current asset investments with effect from this date.
Following the rights issue that the Group did not participate in, the
shareholding was diluted to 13.16% at the year end. The Group still exerts
significant influence due to the Board positions held by Lonrho.
The value of the Group`s investment in Lonrho Mining Limited was impaired by
GBP4.0 million in 2008, to reflect the fall in the value of the shares on the
Australian Securities Exchange. The impairment loss was included in share of
loss after taxation. At 30 September 2010, Lonrho Mining Limited`s share
value had risen, and thus GBP3.1 million of the impairment loss has been
written back and included in the share of profit after taxation. The
Directors consider that this is due to a change in the long term outlook of
the business, primarily in relation to developments in the mine plan.
Summary financial information on associates and joint ventures (100%)
Reve Los
nues s
Assets Liab Equit for
GBPm ilit y the for
ies GBPm the
year
GBPm yea
GBPm r
GBP
m
2010
Associates
LonZim Plc* 36.3 (4.4 31.9 4.9 (5.
) 1)
Lonrho Mining Limited 4.7 (0.2 4.5 - (1.
) 7)
Arlington Associates Limited - - - - (0.
1)
41.0 (4.6 36.4 4.9 (6.
) 9)
Reve Pro
nues fit
for /(l
the oss
Assets Liab Equit year )
GBPm ilit y /per for
ies GBPm iod the
from yea
GBPm acqu r/p
isit eri
ion od
GBPm fro
m
acq
uis
iti
on
GBP
m
2009
Associates
LonZim Plc* 37.4 (3.9 33.5 2.6 1.2
)
Lonrho Mining Limited 2.7 (2.5 0.2 - 0.7
)
Arlington Associates Limited 0.1 - 0.1 - (0.
3)
40.2 (6.4 33.8 2.6 1.6
)
Joint ventures
Grand Karavia SPRL 2.6 - 2.6 - (0.
4)
* The reported LonZim profit is adjusted to exclude amortisation of the
element of the non-compete agreement not recognised in these accounts on
formation of LonZim.
LonZim Plc
The market value of the Group`s investment in LonZim Plc at 30 September 2010
was GBP2.1 million (2009: GBP2.2 million) with a book value of GBP5.9 million
(2009: GBP6.9 million). The entity`s year end is 31 August and it was
incorporated on 25 October 2007. It was quoted on the AIM market of the
London Stock Exchange on 11 December 2007 whereby Lonrho Plc received 20% of
the shares in exchange for a non-compete agreement in Zimbabwe and the Beira
corridor of Mozambique. At 1 December 2010 the market value of the Group`s
investment in LonZim Plc was GBP2.7million. The Directors do not believe
there is any need for impairment in the carrying value of the investment in
LonZim Plc.
Grand Karavia SPRL
On 1 April 2010 Lonrho Plc obtained Board control of Grand Karavia SPRL and
has changed the status of the investment from a joint venture to a
subsidiary.
Estimates and judgements
The Directors use estimates when assessing the carrying value of the Group`s
investments in associates and joint ventures. In assessing the carrying value
of these investments, the Directors consider a number of sources of
information including financial forecasts prepared by management and market
information where available. In considering impairment risks, the Directors
have regard to the quoted share price of Lonrho Mining Limited and LonZim
Plc. Management forecasts have been used to assess whether impairment of the
Group`s other investments in associates and joint ventures was necessary.
Taking all of these factors into account, including the early stage of
development of these businesses, whilst the carrying value of these interests
exceed their quoted market values at 30 September 2010 the Directors do not
consider these investments impaired.
The Directors believe the estimates and judgements used in preparing the
financial statements of associates and joint ventures do not have a material
impact on the carrying values of investments described above. Where
associates and joint ventures do not have 30 September as their year end the
most recent audited financial statements, adjusted as appropriate to align
with the Lonrho year end, are used for consolidation purposes.
17. Other investments
2010 2009
GBPm GBPm
At 1 October 0.6 0.7
Acquired in year 0.4 -
Impairment charge (0.4) (0.1)
AT 30 SEPTEMBER 0.6 0.6
These investments present the Group with opportunity for return through
dividend income and trading gains. None are traded on active equity markets.
They have no fixed maturity or coupon rate. The fair values, and carrying
values, of these investments are stated at cost less provisions for
impairment.
The Directors consider the fair value of these investments is equal to their
book value. The impairments are based on a review of the Company`s net assets
and prospects.
Other investments are classified as available-for-sale financial assets.
18. Deferred tax assets and liabilities Recognised deferred tax assets and
liabilities
Assets Liabiliti
es
2010 2009 2010 200
GBPm GBPm GBPm 9
GBP
m
At 1 October - - 3.0 0.7
Acquisition of intangible assets from - - - 1.0
acquisition of subsidiaries
Recognised in period in respect of current 0.3 - - -
trading losses
Revaluation of property, plant and equipment - - - 1.0
On acquisition of subsidiary 0.3 - - -
Exchange differences 0.1 - - 0.3
AT 30 SEPTEMBER 0.7 - 3.0 3.0
The deferred tax liability at 1 October 2010 and 2009 related to the
revaluation of property, plant and equipment.
There have been no deferred tax assets and liabilities off-set in the current
or proceeding period.
The deferred tax asset relates to previous trading losses. The asset will be
recoverable in future periods, which is supported by the future cashflows of
the business.
Unrecognised deferred tax assets
Additional deferred tax assets have not been recognised in respect of tax
losses totalling GBP6.5 million (2009: GBP4.1 million) due to uncertainty
against the ability to deduct these losses against future profits.
Inventories
2010 2009
GBPm GBPm
Raw materials and consumables 1.4 0.9
Finished goods 3.5 2.5
4.9 3.4
20. Trade and other receivables
Group Company
201 2009 201 200
0 GBPm 0 9
GBP GBP GBP
m m m
Amounts receivable from the sale of goods and 16. 18.6 0.4 -
services 8
Amounts due from associates 1.0 - - -
Other receivables 10. 7.8 0.2 0.5
5
Pre-payments and accrued income 5.6 6.0 0.2 -
Amounts owed by Group undertakings - - 84. 55.
9 8
33. 32.4 85. 56.
9 7 3
The average credit period taken on sales of goods and services is 57 days
(2009: 66 days). No interest is charged on receivables.
The Directors consider the carrying amount of trade and other receivables for
the Group and Company approximates to their fair value.
2010 2009
Movement in the allowance for doubtful debts GBPm GBPm
At 1 October 0.3 0.1
Increase in allowance recognised in the
income statement 0.6 0.2
AT 30 SEPTEMBER 0.9 0.3
Refer to note 29 for further information on credit risk management.
21. Cash and cash equivalents
2010 2009
GBPm GBPm
Bank balances 7.8 6.9
Bank overdrafts (3.9) (0.9)
CASH AND CASH EQUIVALENTS IN THE STATEMENT 3.9 6.0
OF CASH FLOWS
The Company had a bank balance of GBP0.6 million at 30 September 2010 (2009:
GBP(0.7) million).
22. Capital and reserves
Group reconciliation of movement in capital and reserves
Attributable to equity holders of the parent
Shar Shar Transl Share Reval Retain Tota Non- Tota
e e ation Option uatio ed Othe l cont l
capi prem reserv reserv n r GBPm roll equi
tal ium e e reser earnin rese ing ty
GBPm GBPm GBPm GBPm ve gs rves inte GBPm
GBPm GBPm GBPm rest
GBPm
At 1 4.6 91.3 - 2.2 4.5 (33.0) - 69.6 0.1 69.7
October
2008
Share 3.4 13.4 - - - - - 16.8 - 16.8
capital
issued
Share - - - 0.3 - - - 0.3 - 0.3
options
issued
Subsidia - - - - - - - - 0.2 0.2
ries
acquired
Subsidia - - - - - - - - 2.9 2.9
ries
disposed
Transfer - - - - - - - - (0.7 (0.7
) )
Loss for - - - - - (6.2) - (6.2 0.9 (5.3
the ) )
period
Foreign (2.0) (0.4) - - (2.4 (0.4 (2.8
exchange - - - ) ) )
translati
on
AT 30 8.0 104. (2.0) 2.5 4.1 (39.2) - 78.1 3.0 81.1
SEPTEMBER 7
2009
At 1 8.0 104. (2.0) 2.5 4.1 (39.2) - 78.1 3.0 81.1
October 7
2009
Share 3.7 33.3 - - - - - 37.0 - 37.0
capital
issued
Share - - - 2.2 - - - 2.2 - 2.2
options
issued
Purchase - - - - - - (5.5 (5.5 (4.1 (9.6
of non- ) ) ) )
controlli
ng
interests
Non- - - - - - - - - 25.5 25.5
controlli
ng
interests
contribut
ion
Minority - - - - - - - - (0.4 (0.4
dividends ) )
Profit/(l - - - - - 0.3 - 0.3 (0.5 (0.2
oss) for ) )
the
period
Transfer - - - - - - - - 0.9 0.9
from - - - - - - - - (0.1 (0.1
joint ) )
venture
to
subsidiar
y
Subsidiar
ies
acquired
Transfer - - - - - 2.8 - 2.8 (2.8 -
between )
accounts
Foreign -- - (6.7) - (0.8) - - (7.5 (1.2 (8.7
exchange ) ) )
translati
on
AT 30 11.7 138. (8.7) 4.7 3.3 (36.1) (5.5 107. 20.3 127.
SEPTEMBER 0 ) 4 7
2010
Share capital and share premium
Ordinary shares
In millions of 1p shares 2010 2009
On issue at 1 October 799.1 454.
9
Issued for cash 251.2 308.
9
Issued as part of acquisition 120.3 35.3
Exercise of share options 1.2 -
ON ISSUE AT 30 SEPTEMBER - FULLY PAID 1,171.8 799.
1
The "purchase of non-controlling interests" relates to the purchase of the
remaining minority shareholdings in Rollex (Pty) Limited and Fresh Direct
Limited during the period.
The "non-controlling interests contribution" relates to the recognition of
the value associated with the long leasehold land and buildings provided by
the non-controlling interests in Luba Freeport Limited as described in note
14.
At the AGM of the Company on 31 March 2010, a resolution was passed to remove
the authorised share capital of the Company. At 30 September 2009, the
authorised share capital comprised 1,100,000,000 ordinary shares (2008:
550,000,000) of 1p each.
During the year ended 30 September 2010, the Company issued 160.3 million and
90.9 million shares both at the prices 10p (2009: 308.9 million and 35.3
million at prices of 5p and 7p respectively). The costs of the share issues
of GBP1.4 million (2009: GBP1.1 million) have been deducted from the share
premium created on issue.
The Company also issued 120.3 million shares at 10.98 pence in respect of the
purchase of the non-controlling interests in Fresh Direct Limited and Rollex
(Pty) Limited. 1.2 million shares were issued on the exercise of share
options.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company. All shares rank equally with regard to the Company`s residual
assets.
The Group also issued share options in 2010 (see note 26).
Company reconciliation of movement in capital and reserves
Share capital Share Share Retain Total
GBPm premiu option ed GBPm
m reserve earnin
GBPm GBPm gs
GBPm
At 1 October 2008 4.6 91.3 2.2 (14.3) 83.8
Share capital issued 3.4 13.4 - - 16.8
Equity settled transact - - 0.3 - 0.3
tions
Loss for the period - - - (7.0) (7.0)
AT 30 SEPTEMBER 2009 8.0 104.7 2.5 (21.3) 93.9
At 1 October 2009 8.0 104.7 2.5 (21.3) 93.9
Share capital issued 3.7 33.3 - - 37.0
Equity settled - - 2.2 - 2.2
transactions
Loss for the period - - - (10.1) (10.1
)
AT 30 SEPTEMBER 2010 11.7 138.0 4.7 (31.4) 123.0
Translation reserve
The translation reserve comprises all foreign exchange differences arising
from the translation of the financial statements of foreign operations since
the conversion to Adopted IFRS on 1 October 2006.
Revaluation reserve
The revaluation reserve relates to property, plant and equipment (see note
14).
Share based payment reserve
The share based payment reserve comprises the charges arising from the
calculation of the share based payments posted to the income statement (see
note 26).
23. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group`s
interest-bearing loans and borrowings. For more information about the Group`s
exposure to interest rate and foreign currency risk, see note 29.
2010 2009
GBPm GBPm
NON CURRENT LIABILITIES
Finance lease liabilities 1.8 1.1
Unsecured bank loan 20.3 5.2
Shareholder loans 2.5 7.3
Other loan 1.8 2.8
26.4 16.4
CURRENT LIABILITIES
Unsecured bank loans 2.8 1.2
Convertible loan note - 0.3
Current portion of finance lease liabilities 1.0 0.2
Other loan 1.8 -
Bank overdrafts 3.9 0.9
9.5 2.6
At the year end the Company had interest bearing loans of GBP1.3m (2009:
GBPnil).
Finance leases
Finance lease liabilities are denominated in US dollars and are payable as
follows:
2010 2009
Future Present Future Presen
value t
value
Minimum of minimu of
minimum m minimu
m
Lease lease lease lease
Payments Intere payment paymen Inter paymen
st s ts est ts
GBPm GBPm GBPm GBPm GBPm GBPm
Less than one year 1.0 - 1.0 0.3 (0.1) 0.2
Between one and five 1.9 (0.1) 1.8 1.2 (0.1) 1.1
years
2.9 (0.1) 2.8 1.5 (0.2) 1.3
Interest is payable on the leases at 9.5% per annum. Under the terms of the
lease agreements, no contingent rents are payable.
Bank overdrafts
Bank overdrafts are repayable on demand and are unsecured. The currency
profile is as follows:
2010 2009
GBPm GBPm
South African Rand
Central African Franc US Dollar 3.1 -
Sterling - 0.1
0.2 0.1
0.6 0.7
3.9 0.9
The weighted average interest rates paid were 12%
(2009:12%).
The Directors consider the carrying amount of the Group`s
loans and borrowings approximates their fair value.
24. Shareholder loans
2010 2009
GBPm GBPm
Shareholder loans 2.5 7.3
2.5 7.3
The loans are unsecured and are repayable at the discretion of the Directors.
25. Share options
At 30 September 2010 there were 89,305,000 (2009: 37,505,000) share options
in issue with an average exercise price of 12.6p (2009: 10.8p).
The following share options over 1p ordinary shares were granted under an
Unapproved Share option scheme on 1 April 2010:
Name Date Number Exercise Period during Market
granted of Price which price per
share exercisable share at
options date of
granted grant or
modificat
ion
David Lenigas 01.04.201 20,000, 13.75p 01.04.2010-31. 12.5p
0 000 03.2015
Geoffrey White 01.04.201 20,000, 13.75p 01.04.2010-31. 12.5p
0 000 03.2015
David Armstrong 01.04.201 6,500,0 13.75p 01.04.2010-31. 12.5p
0 00 03.2015
Emma Priestley 01.04.201 1,000,0 13.75p 01.04.2010-31. 12.5p
0 00 03.2015
Other employees and 01.04.201 5,500,0 13.75p 01.04.2010-31. 12.5p
consultants 0 00 03.2015
Total options in 53,000,
issue 000
The following share options were outstanding as at 30 September 2010.
Name Date Number Exercise Period during Market
granted of Price which price
share exercisable per
options share at
granted date of
grant or
modifica
tion
David Lenigas* 25.01.200 3,500,0 6.5p 25.01.2006 - 5.8p
6 00 31.03.2011
Emma Priestley* 11.04.200 1,250,0 6.5p 11.04.2006 - 5.8p
6 00 10.04.2011
James Hughes* 25.01.200 1,000,0 6.5p 25.01.2006 - 5.8p
6 00 24.01.2011
Other employees 30.03.200 1,500,0 17.0p 30.03.2006 - 15.0p
and consultants 6 00 29.04.2011
David Lenigas* 30.04.200 3,750,0 6.5p 30.04.2007 - 5.8p
7 00 29.04.2012
Emma Priestley* 30.04.200 1,250,0 6.5p 30.04.2007 - 5.8p
7 00 29.04.2012
Geoffrey White* 30.04.200 2,500,0 6.5p 30.04.2007 - 5.8p
7 00 29.04.2012
Martin Horgan 30.04.200 1,000,0 34.5p 30.04.2007 - 32.5p
7 00 29.04.2012
James Hughes* 30.04.200 750,000 6.5p 30.04.2007 - 5.8p
7 29.04.2012
Gerard Holden 30.04.200 3,500,0 34.5p 30.04.2007 - 32.5p
7 00 29.04.2012
Other employees 30.04.200 290,000 34.5p 30.04.2007 - 32.5p
and consultants 7 29.04.2012
Other employees 30.04.200 1,520,0 6.5p 30.04.2007 - 5.8p
and consultants 7 00 29.04.2012
David Lenigas* 20.07.200 1,615,0 6.5p 20.07.2007 - 5.8p
7 00 19.07.2012
Emma Priestley* 20.07.200 1,065,0 6.5p 20.07.2007 - 5.8p
7 00 19.07.2012
Geoffrey White* 20.07.200 1,065,0 6.5p 20.07.2007 - 5.8p
7 00 19.07.2012
Martin Horgan 20.07.200 200,000 44.0p 20.07.2007 - 39.5p
7 19.07.2012
James Hughes* 20.07.200 350,000 6.5p 20.07.2007 - 5.8p
7 19.07.2012
Jean Ellis* 20.07.200 350,000 6.5p 20.07.2007 - 5.8p
7 19.07.2012
Other employees 20.07.200 100,000 44.0p 20.07.2007 - 39.5p
and consultants 7 19.07.2012
Other employees 20.07.200 250,000 6.5p 20.07.2007 - 5.8p
and consultants* 7 19.07.2012
David Lenigas 13.01.200 2,500,0 6.5p 13.01.2009 - 5.8p
9 00 12.01.2014
Emma Priestley 13.01.200 1,000,0 6.5p 13.01.2009 - 5.8p
9 00 12.01.2014
Geoffrey White 13.01.200 2,000,0 6.5p 13.01.2009 - 5.8p
9 00 12.01.2014
Frances Cook 13.01.200 500,000 6.5p 13.01.2009 - 5.8p
9 12.01.2014
Jean Ellis 13.01.200 500,000 6.5p 13.01.2009 - 5.8p
9 12.01.2014
David Armstrong 13.01.200 1,000,0 6.5p 13.01.2009 - 5.8p
9 00 12.01.2014
Other employees 13.01.200 2,000,0 6.5p 13.01.2009 - 5.8p
and consultants 9 00 12.01.2014
David Lenigas 01.04.201 20,000, 13.75p 01.04.2010-31. 12.5p
0 000 03.2015
Geoffrey White 01.04.201 20,000, 13.75p 01.04.2010-31. 12.5p
0 000 03.2015
David Armstrong 01.04.201 6,500,0 13.75p 01.04.2010-31. 12.5p
0 00 03.2015
Emma Priestley 01.04.201 1,000,0 13.75p 01.04.2010-31. 12.5p
0 00 03.2015
Other employees 01,04.201 5,500,0 13.75p 01.04.2010-31. 12.5p
and consultants 0 00 03.2015
Total options 89,305,
issued 000
*The exercise price was amended to 6.5p on 13 January 2009.
The following share options were exercised during the year.
Name Date Number of Share Exercis Pre
granted share price e price tax
options at Date of gain
exercised date exercis at
of e date
exerci of
se exerci
se
GBP
Donald Strang 30.04.200 500,000 11.5p 6.5p 09.08.2 25,000
7 010
Donald Strang 20.07.200 200,000 11.5p 6.5p 09.08.2 10,000
7 010
Donald Strang 13.01.200 500,000 11.5p 6.5p 09.08.2 25,000
9 010
1,200,000
The number of shares exercised in the table above is consistent with the
number of share options granted at the respective grant date.
In accordance with IFRS 2 `Share-based payments` share options granted or re-
priced during the year have been measured at fair value at the date of grant
or re-pricing and, in the case of re-priced options, the increase in the fair
value compared with the value of the original award at that date has been
recognised as an expense in the income statement with a corresponding
increase in equity. The fair value of the options granted has been estimated
at the date of grant using the Black-Scholes option-pricing model. The
estimated fair value of the options granted on 1 April 2010 was GBP2.3
million.
Date of Grant
01.04 13.01 20.07. 30.04
.2010 .2009 2007 .2007
Share price 12.5p 5.8p 39.5p 32.5p
Exercise price 13.75 6.5p 44.0p 34.5p
p
Expected volatility 59% 49.0% 45.3% 45.3%
Expected life 2.5 2.5 2.5 2.5
years years years years
Expected dividends 0.00 0.00 0.00 0.00
Risk-free interest rate 2.95% 5.50% 5.50% 5.50%
Volatility has been calculated by reference to the movement of the Company`s
share price over the previous three and a half years.
All share options vest at the date of grant and the basis of settlement is in
shares of the Company.
26. Trade and other payables
Group Company
2010 2009 2010 200
GBPm GBPm 9
GBPm GBP
m
Trade payables 17.9 21.1 0.8
-
Amounts owed to Group undertakings - - 0.4 0.4
Indirect tax and social security 0.6 0.4 0.1 -
liabilities
Deferred income 1.5 4.0 - -
Non-trade payables and accrued expenses 9.5 11.0 0.3 0.5
29.5 36.5 1.6 0.9
2010 2009 2010 200
GBPm GBPm 9
GBPm GBP
m
Analysed as:
Current liabilities 27.0 36.5 1.2 0.9
Non-current liabilities 2.5 - 0.4 -
29.5 36.5 1.6 0.9
Trade payables principally comprise outstanding amounts for trade purchases
and on-going costs. The average credit period taken for trade purchases is 82
days (2009: 45 days). The Directors consider that the carrying amount of
trade and other payables approximates to their fair value.
27. Notes to the cash flow statement
Group Company
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
Depreciation of property, plant and
equipment Amortisation of intangible
assets 5.9 5.3 0.1 -
Impairment of investment 0.8 0.6 - -
0.4 - - -
Share based payment expense 2.3 0.3 2.3 0.3
Finance income (2.9) (5.4) - -
Share of profit of associates (1.9) (0.2) - -
Gain arising on fair valuation of (9.0) - - -
biological assets
Gain on disposals of assets/liabilities - (2.2) - -
held for sale
Loss on sale of intangible fixed asset - 0.1 - -
Income tax expense 0.7 0.8 - -
ADJUSTMENTS TO LOSS FOR THE YEAR (3.7) (0.7) 2.4 0.3
28. Financial instruments
The Company has no financial assets apart from the other receivable amounts
owed by and to Group undertakings included within note 21. The Company
applies a similar approach to credit risk management as the Group. The
Directors believe that there are no significant credit risks to the Company
at the year end.
Exposure to credit, liquidity, interest rate and currency risks arises in the
normal course of the Group`s business.
This note presents information about the Group`s exposure to each of the
above risks, the Group`s objectives, policies and processes for measuring and
managing risk, and the Group`s management of capital which the Directors
consider to be the components of Total Equity excluding minority interests.
Further quantitative disclosures are included throughout these consolidated
financial statements. The Board of Directors have overall responsibility for
the establishment and oversight of the Group`s risk management framework.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with credit worthy counterparties and
obtaining sufficient collateral where appropriate, as a means of mitigating
the risk of financial loss from defaults. No collateral is held at the year
end. The Group`s exposure and the credit ratings of its counterparties are
continuously monitored and the aggregate value of transactions concluded is
spread amongst approved counterparties.
Trade receivables consist of a large number of customers, spread across
diverse industries and geographical areas. Ongoing credit evaluation is
performed on the financial condition of accounts receivable. The Group does
not have any significant credit risk exposure to any single counterparty or
any Group of counterparties having similar characteristics. The credit risk
on liquid funds is limited because the counterparties are banks with high
credit- ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements,
net of any allowances for losses, represents the Group`s maximum exposure to
credit risk without taking account of the value of any collateral obtained.
At the balance sheet date, there were no significant credit risks. The
maximum exposure to credit risk at the balance sheet date was GBP41.7 million
being the total of the carrying amount of financial assets, excluding equity
investments as shown in the table below:
2010 2009
GBPm GBPm
Cash and cash equivalents
Trade receivables 7.8 6.9
Other receivables(1) 16.8 18.6
11.5 7.8
36.1 33.3
Other receivables includes other receivables of GBP10.5 million (2009:
GBP7.8 million) and amounts due from associates of GBP1.0 million (2009:
GBPnil)
The ageing of trade receivables at the balance sheet date was:
2010 2009
GBPm GBPm
Not due 9.3 7.7
Past due 0-30 days 2.9 3.4
Past due 31-60 days 1.4 2.1
More than 60 days past due 3.2 5.4
16.8 18.6
The movement on the provision for doubtful debts is disclosed in note 21. The
provision at the year end of GBP0.9 million (2009: GBP0.3 million) relates to
and is included within trade receivables more than 60 days past due. Other
amounts past due are considered collectible based on prior experience.
The maximum exposure to credit risk for trade 2010 2009
receivables by geographic region was: GBPm GBPm
West Africa 1.3 8.4
Southern Africa 13.3 9.2
East Africa 1.8 1.0
Europe 0.4 -
16.8 18.6
The maximum exposure to credit risk for trade
receivables at the balance sheet date by type
of counterparty:
2010 2009
GBPm GBPm
Wholesale customers 16.8 18.6
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group`s and Company`s short, medium and long term
funding and liquidity management requirements. The Group and Company manages
liquidity risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets and
liabilities.
The following are the contractual maturities of financial liabilities,
including estimated interest payments and excluding the effect of netting
agreements:
Carrying Contract 2010 1 to 2 to 5years
amount ual cash <2years <5year and
GBPm flows 1 year GBPm s over
GBPm or GBPm GBPm
less
GBPm
Bank overdrafts 3.9 3.9 3.9 - - -
Trade and other 29.5 29.5 27.0 2.5 - -
payables
Bank loans 23.1 25.5 4.8 5.6 14.4 0.7
Finance leases 2.8 2.9 1.0 1.9 - -
Shareholder loans 2.5 2.5 2.5 - - -
Other loans 3.6 3.6 1.8 - -
1.8
65.4 67.9 41.0 11.8 14.4 0.7
2009
Carrying Contra 1 1 to 2 to 5yea
amount ctual year <2ye <5ye rs
GBPm cash or ars ars and
flows less GBPm GBPm over
GBPm GBPm GBPm
Bank overdrafts 0.9 0.9 0.9 - - -
Trade and other 36.5 36.5 36.5 - - -
payables
Bank loans 6.4 6.9 1.3 1.4 4.2 -
Finance leases 1.3 1.5 0.3 0.3 0.9 -
Shareholder loans 7.6 12.1 0.9 0.9 2.7 7.6
Convertible loans 0.3 0.3 0.3 - - -
Other loans 2.8 3.4 0.3 3.1 - -
55.8 61.6 40.5 5.7 7.8 7.6
In respect of income-earning financial assets and interest-bearing financial
liabilities, the following table indicates their effective interest rates at
the balance sheet date and the periods in which they re-price.
2010
Effective
Interest 1 year 1-2 2-5 5 years
rate Total or less years years and over
% GBPm GBPm GBPm GBPm GBPm
Cash and cash 1% 7.8 7.8 - - -
equivalents
Loans 8.6% (29.2 (8.4) (6.8 (13. (0.7)
) ) 3)
Finance lease 9.2% (2.8) (1.0) (1.8 -
liabilities )
Bank 10.2% (3.9) (3.9) - - -
overdrafts
(28.1 (5.5) (8.6 (13. (0.7)
) ) 3)
2009
Effective
Interest 1 year 1-2 2-5 5 years
rate Total or less years years and over
% GBPm GBPm GBPm GBPm GBPm
Cash and 1% 6.9 6.9 - - -
cash
equivalents
Loans 12% (16.5 (1.2) (2.8) (5.2) (7.3)
)
Convertible 8% (0.3) (0.3) - - -
loan note
Finance 9.9% (1.3) - (1.3) - -
lease
liabilities
Bank 12% (0.9) (0.9) - - -
overdrafts
(12.1 4.5 (4.1) (5.2) (7.3)
)
Foreign currency risk management
The Group is exposed to foreign currency risk on sales, purchases and
borrowings that are denominated in a currency other than pounds sterling. The
currencies giving rise to this risk are primarily, US Dollars, South African
Rand, Mozambique Metical, Kenyan Shilling, Central African Franc and the
Euro.
The carrying amount of the Group`s foreign currency denominated monetary
assets and monetary liabilities, and its total net assets at the reporting
date is as follows:
Monetary net Total net
assets assets
2010 2009 2010 2009
GBPm GBPm GBPm
GBPm
U.S.Dollar (10.0) (13.8) 10.9 50.
5
South African Rand (6.5) (7.7) 10.0 12.
3
Mozambique Metical 0.1 1.0 12.1 14.
0
Kenyan Shillings (1.5) - 0.9 -
Central African Franc (8.1) (5.4) 62.6 (5.
4)
Angolan Kwanza 0.1 - 1.0 -
Zambian Kwacha (0.1) - - -
(26.0) (25.9) 97.5 71.
4
The following significant exchange
rates applied during the year:
Average Rate Closing
2010 2009 Rate
2010
2009
US Dollar 1.56 1.55 1.5 1.60
8
Euro 1.16 1.15 1.1 1.09
6
South African Rand 11.68 13.99 11. 12.1
03 2
Mozambique Metical 48.64 40.35 57. 46.3
39 6
Kenyan Shilling 125.91 125.11 133 124.
.45 99
Central African Franc 773.63 766.2 777 717.
.07 73
The Company does not have any exposure to foreign currencies at the reporting
date (2009: GBPnil).
Foreign currency sensitivity analysis
A 10% strengthening of the UK sterling against the following currencies at 30
September would have increased/(decreased) equity and profit or loss by the
amounts shown below. This analysis assumes that all other variables remain
constant. The analysis is performed on the same basis for 2009.
2010 2009
Equity Profit/(loss) Equity Profit/(loss)
GBPm GBPm GBPm GBPm
US Dollar 9.9 (4.6) (3.3) (1.0)
Mozambique 11.0 1.2 (0.8) 0.1
Metical
South African 9.1 4.4 (0.6) 0.1
Rand
Central African 56.9 0.2 (0.3) (0.3)
Franc
Kenyan Shilling 0.8 (0.6) - -
A 10% weakening of UK sterling against the above currencies at 30 September
would have had the equal but opposite effect on the above currencies to the
amounts shown above, on the basis that all other variables remain constant.
Interest rate risk management
The Company and the Group are not exposed to interest rate risk due to
entities in the Group with larger borrowing, making these borrowing on long
term, fixed rate agreements. The only major loan carries a fixed interest
rate as detailed in note 24. The Company and the Group`s exposures to
interest rates on financial assets and financial liabilities are detailed in
the liquidity risk management section of this note.
Capital management
The Board`s policy for the Group and Company is to maintain a strong capital
base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Board of Directors monitors
the return on capital, which the Group defines as net operating income
divided by total shareholders` equity, excluding minority interests.
As the Group is in a phase of expansion, the key capital requirements are to
ensure that funding is available for current and planned projects. To date
this has been achieved through capital raises, and since the year end an
issue of convertible bonds.
The Group considers shareholders funds plus long term debt to represent
capital as defined by IAS 1.
Reflecting the stage of development of the Group, no formal dividend policy
exists.
Fair values
The Directors consider fair values are approximate to the carrying amounts
shown in the balance sheet in the current and proceeding year. The following
summarises the major methods and assumptions used in estimating the fair
values of financial instruments.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and
interest cash flows.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows,
discounted at market interest rates for homogeneous lease agreements. The
estimated fair values reflect change in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the
notional amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine the fair value.
The fair value of assets and liabilities can be classed in three levels:
Level 1 - Fair values measured using quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2 - Fair values measured using inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either
directly(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Fair values measured using inputs for the asset or liability that
are not based on observable market data (i.e. unobservable inputs).
All assets and liabilities held within Lonrho are within Level 1 of the
hierarchy.
29. Operating leases
At the balance sheet date, the Group had outstanding commitments for future
minimum lease payments under non-cancellable operating leases, which fall due
as follows:
Aircraft Property Total
2010 2009 2010 2009 2010 2009
GBPm GBPm GBPm GBPm GBPm GBPm
Less than one 2.2 - 0.6 0.4 2.8 0.4
year
Between one and 3.4 - 2.9 1.4 6.3 1.4
five years
5.6 - 3.5 1.8 9.1 1.8
Included in the above, are property leases of the Company amounting to GBP0.1
million (2009: GBP0.3 million) less than 1 year and GBP0.8 million (2009:
GBP0.2 million) between one and five years.
For leased aircraft, the amount disclosed includes all maintenance
obligations.
Capital commitments
The Group has long term capital commitments in respect of an order for two
ATR aircraft (2009: ten). The total purchase price for the two aircraft is
capped at US$37.0 million (GBP23.5 million). The deposits for the two (2009:
two) aircraft of US$7.9 million (GBP4.9 million) have been paid and are
included within other receivables (note 21). The timing of the delivery and
finance for the two aircraft continues to be negotiated. An Export Credit
Agency Promise of Guarantee has been issued by Coface for 80% of the
financing of the two aircraft.
The above commitments are contingent on the successful arrangement of
commercial finance which will be arranged by ATR. Other capital commitments
of GBP1.1 million will be paid within the next financial year (2009: GBP1.2
million).
The Company had no capital commitments at 30 September 2009 (2009: GBPnil).
The Group`s share of capital commitments of joint ventures is GBPnil (2009:
GBP4.5 million).
Contingent liabilities
There were no contingent liabilities at the balance sheet date (2009:
GBPnil), the outturn of which the Directors consider could materially impact
the financial statements. The Group has no contractual obligation to provide
future funding to associates and has no contingent liabilities in respect of
its associates.
Related parties
The Group has a related party relationship with its subsidiaries (see note
34), associates and joint ventures (see note 17), companies in which the
Group has an investment, and with its Directors.
Transactions with subsidiaries
Transactions within the Group companies have been eliminated on consolidation
and are not disclosed in this note.
At the balance sheet date Lonrho Africa (Holdings) Limited owed the Company
GBP76.3 million (2009: GBP55.8 million). Lonrho Africa (Holdings) Limited
holds the operating bank accounts for the Group and the majority of the
Group`s investments in subsidiaries. The movement on the intercompany balance
represents the transfer of cash raised during the year through the capital
raises.
Transactions with associates
LonZim Plc
At the balance sheet date, the Company owned 24.61% of LonZim Plc (2009:
27.87%) and exerts significant influence over the company. On admission to
AIM in 2007 LonZim Plc issued shares to the value of GBP7.3 million in
exchange for Lonrho Plc entering into a non-compete agreement. The agreement
covers a period of five and a half years from November 2007.
Between 5 February 2009 and 11 February 2009 Lonrho Plc acquired 1,650,000
ordinary shares of GBP0.0001 each in LonZim Plc, taking its total interest to
8,940,000 ordinary shares, which represented an approximate 24.53 per cent.
holding in LonZim`s total issued share capital at that time. The reduction in
the overall interest reflects the impact of a share issue by LonZim in
December 2009 in which the Group did not participate.
During the period the Company charged GBP0.5 million (2009: GBP0.4 million)
to LonZim Plc as a management charge. At the balance sheet date GBP0.2
million was due from LonZim Plc (2009: GBPnil).
In the prior year LonZim acquired 59,682,817 shares in Lonrho Plc at a
weighted average cost of 5p per share. At the prior year end LonZim Plc held
17,182,817 shares in Lonrho Plc. These were sold over the period to December
2009.
On 1 July 2009 LonZim acquired an aircraft from Lonrho Air Three (BVI)
Limited, a subsidiary of Lonrho Plc, for a total of US$4.3 million (GBP2.6
million). The aircraft is leased to Five Forty Aviation Limited, a Lonrho
subsidiary, for US$50k million per month. The total lease income for the year
to 30 September 2010 amounted to US$0.1 million (GBP0.1 million).
Investments
On 1 October 2008 LonZim leased two aircraft to 540 (Uganda) Limited, a
Lonrho subsidiary, for US$50k (GBP31k) per month under rolling monthly
agreements. The total lease expense for the year to 30 September 2010
amounted to US$0.6 million (GBP0.4 million).
From 1 January 2009 until 31 July 2010 ForgetMeNot Africa Limited, a 51%
subsidiary of LonZim, leased office space from Lonrho Plc for GBP2k per
month. The total amount for the year amounted to GBP20k.
On 16 December 2008 Lonrho Africa (Holdings) Limited transferred the entire
share capital of Lonrho Africa Property (Holdings) Limited to LonZim Holdings
Limited for GBP1 consideration.
Lonrho Mining Limited
During the prior year the Group increased its stake in Lonrho Mining Limited
from 24.16% to 25.32% at a cost of GBP0.5 million. During the year Lonrho
Mining Limited issued new shares in which Lonrho did not participate, hence
reducing the holding to 13.16%. At the balance sheet date GBP0.9 million was
due from Lonrho Mining Limited (2009: GBP0.1 million) which arose from a
short term convertible interest bearing loan.
Arlington Associates Limited
In the prior year the Group completed its acquisition of 20% of the ordinary
share capital of Arlington Associates Limited for GBP0.04 million.
Swissta DRC SpRL
The Group holds 20% of Swissta DRC SpRL. At the balance sheet date GBP0.1
million (2009: GBP0.1 million) was due from Swissta DRC SpRL as a result of a
short term non-interest bearing loan.
Transactions with key management personnel
Key management personnel are considered to be the Company`s Directors.
During the year GBP0.1 million (2009:GBP0.1 million) was charged to the Group
by DSG Chartered Accountants. Jean Ellis is a partner in this firm.
The key management personnel compensations are as follows:
Year Year ended
ended 2009
2010
GBPm GBPm
Short-term employee benefits 2.5 1.7
Post-employment benefits 0.2 -
Share based payment (see note 26) 2.3 -
5.0 1.7
Total remuneration is included in "staff costs" (see note 9).
Directors` remuneration
Fees Bonus Benefit Total
s in
Kind
Excluding pension contributions: GBP000 GBP000 GBP000 GBP000
D Lenigas 500 292 - 792
G White 464 239 4 707
D Armstrong 324 127 6 457
E Priestley 300 45 19 364
Jean Ellis 40 3 3 46
Ambassador Frances D Cook 40 23 - 63
D Strang 30 12 - 42
1,698 741 32 2,471
One-off pension contributions: G 213
White
Total Directors` remuneration 2,684
There are no further recurring pension obligations in respect of the
Directors or other employees.
G White was the highest paid employee of the Company and the Group in the
year, with total remuneration of GBP920k.
Group entities Principal subsidiaries
Country of Ownership
incorporation interest
2010 2009
Luba Freeport Limited Jersey 63% 63%
Five Forty Aviation Limited Kenya 49% 49%
Lonrho Air (BVI) Limited British Virgin 100% 100%
Islands
Sociedade Comercial Bytes & Pieces Mozambique 65% 65%
Limitada
Complete Enterprise Solutions Mauritius 50% 50%
Limited
Complete Enterprise Solutions South South Africa 40% 40%
Africa (Pty) Limited
Indit Technology Distribution (Pty) South Africa 45% 45%
Limited
Swissta Holdings Limited Mauritius 100% 100%
Swissta Mozambique Lda Mozambique 100% 100%
Hotel Cardoso SARL Mozambique 59.04% 59.04%
KwikBuild Corporation Limited Isle of Man 70.42% 61.97%
Lonrho Africa (Holdings) Limited* UK 100% 100%
Rollex (Pty) Limited South Africa 100% 51%
e-Kwikbuild Housing Company (Pty) South Africa 35.91% 32%
Limited
Trak Auto Lda Mozambique 100% -
Oceanfresh Seafoods (Pty) Limited Mozambique 51% -
Fresh Direct Limited South Africa 100% -
Grand Karavia SPRL Democratic 50% -
Republic of Congo
Complete Enterprise Solutions Zambia Zambia 50% -
Limited
* Directly held by the Company.
Inclusion of all the subsidiaries in the Group would be excessive and
therefore only the significant trading entities are shown above.
Although the Group owns less than half of the voting power of Five Forty
Aviation Limited, it is able to govern the financial and operating policies
of the company by virtue of an agreement with the other investors of Five
Forty Aviation Limited. Consequently, the Group consolidates its interest in
the company.
Similarly for Complete Enterprise Solutions South Africa (Proprietary)
Limited and Indit Technology Distribution (Proprietary) Limited, e-Kwikbuild
Housing Company (Pty) Limited and Grand Karavia SPRL, the Group has Board
control giving it the ability to govern the financial and operating policies
of the companies and hence the Group consolidates its investment in these
companies. In the case of the Grand Karavia SPRL, control was obtained during
the year (see note 17). Exchange control procedures exist in Kenya,
Mozambique and South Africa which place restrictions on repatriation of cash
to the Group.
Events after the balance sheet date
In October 2010:
Lonrho Plc announced that it had successfully completed the offering of
US$60m (GBP38.0m) Guaranteed Convertible Bonds due 2015 ("Bonds") via a
wholly owned subsidiary company LAH (Jersey) Limited. Lonrho has then further
placed US$10m (GBP6.3m) of additional Bonds, which were fully subscribed. The
net proceeds of the offering will be used to allow the Company and its
subsidiaries to repay certain existing indebtedness, to fund general working
capital and to accelerate growth in its operations. A copy of the Offering
Circular in relation to the Bonds is available on the Company`s website:
www.lonrho.com.
In November 2010:
The Group disposed of its subsidiary company, Peninsular Horticulture (Pty)
Limited, for a cash consideration of GBP0.7 million.
Lonrho Plc announced that it had participated in a placing of shares in its
24.61% owned associate company LonZim Plc. Lonrho subscribed for 4,384,011
LonZim shares at a cost of GBP1,227,523, maintaining its 24.61% interest.
South African sponsor to Lonrho Plc
Java Capital
Date: 06/12/2010 11:31:48 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
