| Mon 7 Nov 2011, 9:00 | | LAF - Lonrho Plc - Lonrho Plc announces its unaudited interim results for the |
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LAF
LOLAF
LAF - Lonrho Plc - Lonrho Plc announces its unaudited interim results for the
six months ended 30 September 2011.
LONRHO PLC
(Formerly Lonrho Africa Plc)
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813
("Lonrho" or "the Company")
Lonrho Plc reports a 35% increase in revenues and 190% increase in profits
LONRHO PLC ANNOUNCES ITS UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2011.
The Company is delighted to report a 35% increase in revenues and a 190%
increase in profit before tax for the period.
Lonrho continues to focus exclusively on the emerging Africa market and has seen
strong demand during the period for its core services in the Agriculture,
Logistics, Transport and Infrastructure sectors across the Continent.
Financial Highlights for the six months to 30 September 2011 are:
- The Company generated revenues of GBP81.4m, a 35% increase on the same
period in the prior year. Like-for-like sales grew by 21.3%.
- Gross profit margin in the period has increased to 28.7% during the period,
an increase of 1.6%.
- Profit before tax for the period increased by 190% to GBP5.8m.
- Net assets at 30 September 2011 stood at GBP151.6m. At 31 March 2011 the
comparative figure was GBP126.4m.
- Available cash balances held at 30 September 2011 totalled GBP14.6m,
compared to GBP7.8m at 30 September 2010.
The interim report and financial statements are, today, published on the
Company`s website (www.lonrho.com).
The financial information in this statement does not constitute the Company`s
statutory accounts within the meaning of Section 434 of the Companies Act 2006.
Lonrho is releasing a second set of interim results due to the change in the
Company`s accounting reference date from 30 September to 31 December, as
announced on 22 September 2011, so that the Company`s accounting period falls in
line with the statutory reporting obligations of the various countries in which
it operates such as Mozambique, DRC and Angola.
David Lenigas, Lonrho`s Executive Chairman, commented:
"Achieving a 35% increase in revenues and 190% increase in profits before tax
for the six month period demonstrates that Lonrho has delivered real progress in
building its business in Africa. During the period, Lonrho has completed five
synergistic and strategic acquisitions to further develop our core capabilities
and add further to revenues and margins.
Lonrho continues to see strong growth across all of its divisions since the end
of the period, spear-headed by Lonrho`s agribusiness division and expects this
to continue through to the end of the 15 month reporting period to 31 December
2011 and into 2012.
We believe that in an increasingly turbulent global economic environment, Africa
is a very attractive investment opportunity."
Enquiries
Lonrho Plc +44 (0) 20 7016 5105
David Lenigas
Geoffrey White
David Armstrong
Panmure Gordon +44 (0) 20 7459 3600
Tim Linacre
Dominic Morley
Adam Pollock
Hannah Woodley
Pelham Bell Pottinger +44 (0) 20 7861 3232
James MacFarlane
Chief Executive`s Statement
As a result of the Company`s change of accounting reference date to 31 December,
the Group presents a second set of interim accounts for the six month period
ended 30 September 2011.
The change to a calendar year accounting period will reduce potential seasonal
variances in reported results in relation to the main production season in the
expanding agriculture division, which has a September/October harvest output. It
will also bring the Group`s timetable into line with the statutory reporting
obligations of the various countries in which it operates, including Mozambique,
Democratic Republic of the Congo and Angola.
The Group`s next full financial statements will be in respect of the 15 months
to 31 December 2011.
Summary
For the financial period to the end of September 2011 Lonrho has delivered a
very strong result reporting significant growth in both profitability and
revenues.
Twelve month results on a year on year comparison show a 32% growth in revenue
and a 480% increase in profit before tax.
Six month results on a year on year comparison show a 35% growth in revenue and
a 190% increase in profit before tax.
Quarter 4 results on a year on year comparison show a 37% growth in revenue.
Revenue for the six month period was GBP81.4m, compared to revenue for the same
period last year of GBP60.5m. Profit before tax for the period was GBP5.8m
compared to profit before tax for the same period last year of GBP2.0m.
Revenue for the 12 months to 30 September 2011 was GBP142.5m compared with
GBP107.8m. Profit before tax for the same period was GBP4.4m before negative
foreign exchange movements of GBP1.5m which occurred in September 2011 due to
significant strengthening of the US dollar versus sterling. A significant
portion of this translation on exchange loss (GBP1.2m) has already been reversed
from beneficial moves in exchange rates since the period end. Gross margin in
the 12 month period rose from 26.4% to 26.7%.
The Group`s available cash balance at 30 September 2011 was GBP14.6m
(2010:GBP7.8m).
Market
Africa continues to grow in stature and economic significance and is becoming
widely recognised as an exciting emerging global market that plays an
increasingly important role in the global economy.
With the population of the Continent approaching one billion, the potential
consumer expenditure of the African consumer market is forecast to reach US$1.6
trillion (GBP1 trillion) by 2020. This market is attracting increasing attention
from the World`s leading consumer brands and retailers as they start to focus on
the opportunities across the Continent.
The continuing economic development on the Continent is being created by the
expansion of the African oil and gas industries; increasing agricultural output
for domestic and export markets and mineral extraction, which is driving GDP and
creating a burgeoning middle class with a rapidly expanding disposable income.
The World Bank recently published statistics demonstrating that seven out of the
ten fastest growing economies in the World are in Africa.
Sub-Saharan Africa is forecast to grow at over 5.8% in GDP in 2012 and, despite
the troubles with the western economies, the fundamentals of emerging market
growth in Africa have proven to be resilient. The social challenges in North
Africa have had little noticeable effect on sub-Saharan Africa and, in due
course, the stability and economic growth that will potentially follow the `Arab
Spring` will be beneficial for the rest of Africa.
Lonrho`s strategic objectives remain focused on supporting sub-Saharan African
economic growth and helping to provide the services and infrastructure required
to enable continued growth.
As a result, Lonrho operates in an environment that is typically growing
strongly and has seen each of its core businesses perform well during the
period, with revenues growing 33% in comparison to the first six months of the
year and 35% when compared year on year.
As each division within the Group grows, margins are improving as each business
builds market share and volumes increase. The Group maintains its policy of only
investing and operating in Africa and is building a reputation for being a
unique conduit for investors to access African growth. The Group maintains its
conservative approach of de-risking its operations through geographical spread
(operating in eighteen countries) and by each of Lonrho`s five divisions being
stand-alone investment silos with no recourse from one division to the other.
The move from AIM to a premium listing on the main market of the London Stock
Exchange in April 2011 proved to be very positive for the Company and a natural
step forward in the progress it is making.
In conjunction with the move to the London main market, the Company appointed
the Rt Hon. Sir Richard Needham as an independent non-executive director.
The Company undertook a placing of 118,000,000 new ordinary shares at a price of
16.5 pence in May 2011, raising GBP19.5m.
Financial highlights for the six months to end September 2011
- Revenue for the 6 months increased by 35% to GBP81.4m from GBP60.5m in the
same period in the previous year.
- Gross margin increased from 27.1% to 28.7% compared with the same period in
the previous year.
- Profit before tax for the 6 months increased 190% to GBP5.8m, after foreign
exchange losses of GBP1.5m, from GBP2.0m, after foreign exchange losses of
GBP0.6m representing an underlying improvement of GBP4.6m over the same
period in the previous year.
- Total equity at the period end was GBP151.6m compared with GBP127.7m at the
same date in the previous year.
Operational review
Lonrho remains focused on developing its five core divisions: Agribusiness,
Infrastructure, Transportation, Hotels and Support Services.
Agribusiness
Africa contains 60% of the World`s arable land, yet only 10% of it is productive
(McKinsey 2010). There is an increasing demand for agricultural output to meet
the growing domestic market within Africa but also an increasing demand from the
wider global market that, in the future, will be reliant on Africa to contribute
to meet worldwide demand.
Lonrho`s Agribusiness Division accounts for 55% of Group revenues and is a
vertically integrated supplier to the retail shelves of the World`s
supermarkets. Focusing on the vegetables, fruit, meat and fish markets, Lonrho
produces and procures large volumes of produce and then processes, packs and
ships it to retail chains both within Africa (such as Shoprite, Massmart,
Woolworths, Pic n Pay, Makro and Spar), Europe (such as Marks & Spencer, Tesco,
Sainsbury`s, Waitrose and Asda), the USA (such as Walmart, Sysco and Costco),
the Middle East and, increasingly, the Far East.
Lonrho believes that to meet the future requirements of its customers
(supermarkets worldwide) it needs to offer a single point solution to retailers,
where the growing, logistics, processing and packing are all available via
Lonrho as a one stop shop. The vertical integration of the whole process from
`field to fork` allows Lonrho to deliver the quality, product traceability and
transparency that the market is increasingly demanding.
Within its core markets Lonrho operations now operates over 100,000 square feet
of agri-processing capacity and, following the acquisition of the business of
Grindrod PCA during the period, Lonrho Logistics has grown to become the market
leader in Southern Africa in agri-logistics delivering fresh produce to world
retailers and supermarkets by air.
- In June 2011 Lonrho acquired 51% of the seafood wholesale business Fish On
Line, which increased Lonrho`s management expertise and product access in
the seafood industry and assisted Lonrho to meet its targets for its
rapidly expanding seafood exports to the USA.
- In July 2011, following approval by the Competition Committee of South
Africa, Lonrho acquired the business of Grindrod PCA. Grindrod PCA is a
leading exporter of fruit, vegetables and fish from Southern Africa and
complemented Lonrho`s existing capabilities.
During the period the Group has successfully expanded its farming operations and
continued its planting program in line with long term plans. The total number of
trees under cultivation at period end amounted to 189,000 (2010: 119,000) and
the net present value of these biological assets amounted to GBP23.6m.
With the expansion of the agricultural sector in Africa, quality agricultural
equipment is essential to increase productivity in the sector through
mechanisation. Lonrho`s John Deere business in Mozambique has reported
significant sales growth during the period, increasing sales 31% like for like
and the new John Deere distributorship in Angola has reported strong initial
sales following its inauguration in June 2011.
Lonrho focuses not only on equipment sales, but spares, maintenance and training
to fully support the after-sales service required. This philosophy continues to
successfully build market share for John Deere in the countries where Lonrho is
the distributor.
A joint promotion between Lonrho, John Deere, Standard Bank and USAID, where an
agricultural financial starter package is supported that brings the entry price
for mechanisation for small farmers from US$30,000 to US$5,000, has had a
significant uptake and excellent results.
Infrastructure
The oil and gas industry in Africa continues to deliver world class resources
and the economic opportunities for growth and development on both the west and
east coast are significant. Both the USA and China are increasingly dependent on
Africa for oil and gas resources and ongoing exploration and reported finds are
indicating that Africa potentially holds a quarter of the World`s oil and gas
reserves.
The Lonrho oil services terminal in Equatorial Guinea, Luba Freeport, continues
to develop. During the period, turnover growth was modest at 1% compared to
prior year due to a temporary decrease in exploration activity. A new container
scanner commenced operations ensuring the port meets the highest international
security standards. New customers entering the port during the year included
Tenaris and Dickerman Overseas & Champion Technologies and Luba Freeport now
handles the vast majority of the oil and gas logistics for the country. New
drilling programmes announced for Equatorial Guinea for 2012 will mean that the
port is in strong demand moving forward.
In August 2011 Lonrho Ports signed a Memorandum of Understanding with the
Government of Ghana to conduct the feasibility study and design for the oil
services terminal in the Western Region of Ghana to support the developing oil
industry. Lonrho has the sole right to develop the project in joint venture with
the Government. Ghana is forecast to become a significant African oil producer
by 2015 and the initial interest from the oil service and support industry
endorses the need for this strategic infrastructure to be developed as rapidly
as possible.
The prefabricated building business, e-Kwikbuild, has successfully commissioned
its new manufacturing base in Cape Town and reported strong growth year on year
for the period, increasing revenues from GBP2.9m to GBP6.6m. The strategy to
reduce the company`s dependency on Government contracts has been successful,
with private sector business increasing to 24% of business in the period and
important new clients being secured including Barrick Gold, First Quantum and
BHP.
Transportation
Fly540 saw continued growth during the period. The three regional hubs that are
an integral part of developing the pan-African network are now complete. In East
Africa the extension of the Kenyan hub operations into the Tanzanian market has
already delivered strong load factors and Fly540 has taken immediate and
significant market share. In Angola, despite the difficulty of operating in a
very frustrating bureaucratic environment, load factors are building and demand
for a scheduled first world, punctual, regional service is higher than expected.
The third regional hub, completing the pan-African network roll out, is Ghana,
which will service West Africa. A new ATR72 was delivered to Ghana in August to
establish the Ghanaian hub, which subsequently started commercial operations
after the period end in November.
Further leased aircraft are being deployed into both the Angolan and Ghanaian
hubs to meet passenger demand.
Following the completion of the route network for Fly540, Lonrho is undertaking
a strategic review on the alternative options to maximise the growth of the
business now that the unique core network across Africa has been established.
Operating losses for the transportation division amounted to GBP7.9m for the
period compared with GBP4.8m for the same period last year as a result of pre-
operating costs and route development costs in the two new hubs in Angola and
Ghana.
Hotels
During the period the Hotels division has seen steady progress. The existing
hotel management contracts and properties are operating in line with previous
performance, with the Hotel Cardoso in Mozambique continuing to deliver
exceptionally strong occupancy levels in the high 80% range.
The need for accommodation across the expanding African market is demonstrable
at all levels. Lonrho Hotels continues to seek new management opportunities and
to expand the portfolio with quality properties under management, focused on the
business market.
In July 2011 Lonrho Hotels signed a 20 year master franchise agreement with
Stelios Haji-Ioannou and his easyGroup to open and operate a budget chain of
hotel properties across Africa to be branded `easyHotel.com` and designated as
`a Lonrho Hotel` to build maximum market presence and credibility. The agreement
provides Lonrho with the exclusive rights to the easyHotel brand in Africa and
sets out an agreed opening schedule for fifty properties by 2016.
Support Services
Lonrho IT continues to provide the lead role in the support services division
and has continued to see strong results from the Mozambican market. The new IT
operations in Zambia and in Zimbabwe have started well with strong order books
and the businesses have attracted a range of blue chip clients. Despite
weaknesses in the Mozambique Metical, turnover for Lonrho IT grew by 18% and
profits grew by 55%.
AFEX, the division`s East African based camp and accommodation company with
operations in Kenya and Southern Sudan, is continuing to see strong demand in
its Juba camp as a result of the growing interest in the Republic of South Sudan
following its independence. The Republic of South Sudan is forecast to be one of
the fastest growing economies in Africa in the coming years and will become a
significant oil producer. AFEX is well positioned to benefit from this growth.
AFEX has contributed turnover of GBP5.7m and operating profit of GBP0.3m since
its acquisition.
Geoffrey White
Director and Chief Executive Officer
7 November 2011
Condensed consolidated interim income statement
Unaudited Unaudited Unaudited Audited
6 months 6 months 12 months 12 months
to to to to
30 30 30 30
September September September September
2011 2010 2011 2010
Note GBPm GBPm GBPm GBPm
Revenue 81.4 60.5 142.5 107.8
Cost of sales (58.0) (44.0) (104.5) (79.3)
GROSS PROFIT 23.4 16.5 38.0 28.5
Gain arising on fair 12.1 9.0 17.0 9.0
valuation of biological
assets
Other operating income 4.4 3.5 6.1 3.6
Operating costs (27.7) (27.5) (49.1) (45.4)
OPERATING PROFIT/(LOSS) 12.2 1.5 12.0 (4.3)
Finance income 8 1.2 2.9 2.7 8.6
Finance expense 8 (6.2) (4.9) (10.5) (5.7)
NET FINANCE (EXPENSE)/INCOME 8 (5.0) (2.0) (7.8) 2.9
Share of results of (1.8) 2.7 (1.7) 2.3
associates
Share of results of joint - (0.2) - (0.4)
ventures
Share of other investments 0.4 - 0.4 -
PROFIT BEFORE TAX 5.8 2.0 2.9 0.5
Income tax charge (0.6) (0.5) (1.0) (0.7)
PROFIT/(LOSS) FOR THE PERIOD 5.2 1.5 1.9 (0.2)
ATTRIBUTABLE TO:
Owners of the Company 2.5 1.3 1.3 0.3
Non-controlling interests 2.7 0.2 0.6 (0.5)
PROFIT/(LOSS) FOR THE PERIOD 5.2 1.5 1.9 (0.2)
EARNINGS PER SHARE:
Basic earnings per share 0.20p 0.12p 0.11p 0.03p
(pence)
Diluted earnings per share 0.19p 0.11p 0.11p 0.03p
(pence)
Condensed consolidated interim statement of
financial position
Unaudited Unaudited Audited
30 September 31 March 30 September
2011 2011 2010
GBPm GBPm GBPm
ASSETS
Goodwill 18.2 15.8 15.5
Other intangible assets 5.8 5.6 4.5
Biological assets 23.6 15.0 9.0
Property, plant and equipment 163.6 124.0 109.2
Investments in associates and 11.1 12.9 10.3
joint ventures
Other investments 0.6 0.2 0.6
Deferred tax 0.7 0.7 0.7
TOTAL NON-CURRENT ASSETS 223.6 174.2 149.8
Inventories 11.7 6.7 4.9
Trade and other receivables 60.9 45.8 33.9
Cash and cash equivalents 19.3 23.9 7.8
TOTAL CURRENT ASSETS 91.9 76.4 46.6
TOTAL ASSETS 315.5 250.6 196.4
EQUITY
Share capital 13.0 11.8 11.7
Share premium 138.3 138.4 138.0
Revaluation reserve 4.6 3.9 3.3
Share option reserve 4.9 4.6 4.7
Translation reserve (9.6) (9.2) (8.7)
Other reserves 10.9 (4.5) (5.5)
Retained earnings (34.8) (37.4) (36.1)
TOTAL EQUITY ATTRIBUTABLE TO 127.3 107.6 107.4
EQUITY HOLDERS OF THE COMPANY
NON-CONTROLLING INTERESTS 24.3 18.8 20.3
TOTAL EQUITY 151.6 126.4 127.7
LIABILITIES
Loans and borrowings 73.9 63.0 24.6
Obligations under finance leases 20.7 10.8 1.8
Trade and other payables 10.9 3.3 2.5
Deferred tax 3.3 3.0 3.0
TOTAL NON-CURRENT LIABILITIES 108.8 80.1 31.9
Bank overdraft 8.9 4.7 3.9
Loans and borrowings 3.3 3.9 4.6
Obligations under finance leases 2.5 0.9 1.0
Trade and other payables 40.4 34.3 27.0
Tax liability - 0.3 0.3
TOTAL CURRENT LIABILITIES 55.1 44.1 36.8
TOTAL LIABILITIES 163.9 124.2 68.7
TOTAL EQUITY AND LIABILITIES 315.5 250.6 196.4
Condensed consolidated interim statement of
comprehensive income
Unaudited Unaudited Unaudited Audited
6 months 6 months 12 months 12 months
to to to to
30 30 30 30
September September September September
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
Foreign exchange translation 1.5 (6.5) 2.3 (8.7)
differences
Revaluations of property, plant (0.2) (0.2) (0.2) -
and equipment
Total other comprehensive income 1.3 (6.7) 2.1 (8.7)
and expense
Profit /(loss) 5.2 1.5 1.9 (0.2)
Total comprehensive income and 6.5 (5.2) 4.0 (8.9)
expense
ATTRIBUTABLE TO:
Owners of the Company 2.9 (4.2) 1.8 (7.2)
Non-controlling interests 3.6 (1.0) 2.2 (1.7)
Total comprehensive income and 6.5 (5.2) 4.0 (8.9)
expense
Condensed consolidated interim cash flow statement
Unaudite Audited
d
30 30
Septembe September
r
2011 2010
Note GBPm GBPm
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) for the period 1.9 (0.2)
Adjustments 9 (13.6) (3.7)
CASH FLOWS FROM OPERATING ACTIVITIES
BEFORE MOVEMENTS IN WORKING CAPITAL (11.7) (3.9)
Change in inventories (5.8) (0.1)
Change in trade and other receivables (19.7) 1.0
Change in trade and other payables 7.7 (10.4)
CASH GENERATED FROM OPERATIONS (29.5) (13.4)
Interest received 0.2 0.1
Interest paid (6.4) (2.3)
Income tax paid (1.0) (0.4)
NET CASH FROM OPERATING ACTIVITIES (36.7) (16.0)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and 2.2 0.4
equipment
Acquisition of subsidiary, net of cash (6.1) (3.2)
acquired
Acquisition of property, plant and (15.8) (6.8)
equipment
Acquisition of associates and joint (0.9) (0.1)
ventures
Acquisition of investment - (0.4)
NET CASH FROM INVESTING ACTIVITIES (20.6) (10.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of share capital 19.1 23.6
Proceeds from the exercise of share 0.3 -
options
Loan advance 56.5 3.7
Repayment of borrowings (8.7) (2.1)
Payment of finance lease liabilities (3.4) (0.9)
Minority dividends paid - (0.4)
NET CASH FROM FINANCING ACTIVITIES 63.8 23.9
Net increase/(decrease) in cash and cash 6.5 (2.2)
equivalents
Cash and cash equivalents at 1 October 3.9 6.0
Foreign exchange movements - 0.1
CASH AND CASH EQUIVALENTS AT END OF THE 10.4 3.9
PERIOD
Condensed consolidated statement of changes in
equity
Owners of Non-
the Controlling
Company interests Total
GBPm GBPm GBPm
UNAUDITED
Balance at 1 October 2009 78.1 3.0 81.1
Loss (1.0) (0.7) (1.7)
Foreign exchange translation differences (2.2) - (2.2)
Revaluations of property, plant and 0.2 - 0.2
equipment
Total comprehensive income and expense (3.0) (0.7) (3.7)
Issue of shares 23.9 - 23.9
BALANCE AT 31 MARCH 2010 99.0 2.3 101.3
UNAUDITED
Balance at 1 April 2010 99.0 2.3 101.3
Profit 1.3 0.2 1.5
Foreign exchange translation differences (5.3) (1.2) (6.5)
Revaluation of property, plant and (0.2) - (0.2)
equipment
Total comprehensive income and expense (4.2) (1.0) (5.2)
Issue of shares 13.1 - 13.1
Issue of share options (net) 2.2 - 2.2
Purchase of non controlling interest (5.5) (4.1) (9.6)
Subsidiaries acquired - (0.1) (0.1)
Non controlling interests contribution - 25.5 25.5
Minority dividends - (0.4) (0.4)
Transfer from joint venture to subsidiary - 0.9 0.9
Transfer between accounts 2.8 (2.8) -
BALANCE AT 30 SEPTEMBER 2010 107.4 20.3 127.7
UNAUDITED
Balance at 1 October 2010 107.4 20.3 127.7
Loss (1.2) (2.1) (3.3)
Foreign exchange translation differences 0.1 0.7 0.8
Total comprehensive income and expense (1.1) (1.4) (2.5)
Issue of shares 0.3 - 0.3
Subsidiaries disposed - (0.1) (0.1)
Equity portion of convertible bond 1.0 - 1.0
BALANCE AT 31 MARCH 2011 107.6 18.8 126.4
UNAUDITED
Balance at 1 April 2011 107.6 18.8 126.4
Profit 2.5 2.7 5.2
Foreign exchange translation differences 0.6 0.9 1.5
Revaluation of property, plant and (0.2) (0.2)
equipment -
Total comprehensive income and expense 2.9 3.6 6.5
Issue of shares 19.1 19.1
-
Subsidiaries acquired 2.1 2.1
-
Put option - Fish on Line (2.3) (2.3)
-
Minority dividends (0.2) (0.2)
-
BALANCE AT 30 SEPTEMBER 2011 127.3 24.3 151.6
Notes:
Note of preparation
1 Basis of preparation
The annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the
EU. The condensed set of financial statements
included in this second half yearly report has been
prepared in accordance with IAS34 and the
recognition and measurement requirements of IFRSs as
adopted by the EU.
The financial information is unaudited, and has not
been reviewed by the Company`s auditors, and does
not constitute the Company`s statutory accounts
within the meaning of Section 434 of the Companies
Act 2006.
The comparative figures for the financial year ended
30 September 2010 are not the Company`s statutory
accounts for that financial year. Those accounts
have been reported on by the Company`s auditors and
delivered to the Registrar of Companies. The report
of the auditors was (i) unqualified, (ii) did not
include a reference to any matters to which the
auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the
Companies Act 2006.
2 Significant accounting policies
The accounting policies applied by the Group in
these condensed consolidated interim financial
statements are substantially the same as those
applied by the Group in its consolidated financial
statements for the year ended 30 September 2010.
Whilst there have been changes to standards which
become applicable for the period ending 31 December
2011, none have been assessed as having a
significant impact on the Group.
(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
as 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 period are included in the consolidated
income statement from the effective date of
acquisition or up to the effective date of disposal,
as appropriate. Negative goodwill recognised on
acquisition is recognised in the income statement at
the effective date of acquisition.
3 Earnings per share
Basic and diluted earnings per share are arrived at
by dividing the profit for the period by the average
number of shares in issue during the period.
The headline earnings per share are the same as
reported earnings per share i.e. for the six months
ended 30 September 2011 0.20p per share and for the
twelve months ended 30 September 2011 0.11p per
share.
There are no reconciling items between basic
earnings per share and headline earnings per share.
4 Capital management
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. In October 2010 the Company
completed the issue of US$70m (GBP44.3m) Guaranteed
Convertible Bonds due 2015. Further, on 20 May 2011,
Lonrho announced a placing of new ordinary shares in
the capital of the Company at 16.5 pence per share
to raise gross proceeds of GBP19.5m. The placing was
limited to 118,000,000 new shares in the capital of
Lonrho representing approximately 9.09% of the
current issued share capital of Lonrho.
5 Segmental reporting
The Chief Operating Decision Maker is deemed to be
the Executive Committee, which monitors 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
The Group has not aggregated any operating segment
in arriving at this analysis.
5. Segmental reporting (continued)
Unaudited 6 months to September 2011
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busine porta struct servi Hotel operati
ss tion ure ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm
EXTERNAL REVENUE 40.8 14.5 10.3 11.0 4.8 81.4
Segment result 20.7 (7.9) 1.0 0.2 4.0 18.0
Unallocated expenses (5.8)
OPERATING PROFIT 12.2
Net finance expense (5.0)
Share of results of associates (1.8)
Share of results of other 0.4
investments
Income tax charge (0.6)
PROFIT FOR THE PERIOD 5.2
Unaudited 6 months to September 2010
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busine porta struct servi Hotel operati
ss tion ure ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm
EXTERNAL REVENUE 31.5 11.6 7.6 6.2 3.6 60.5
Segment result 7.2 (4.8) 3.9 0.1 (0.5) 5.9
Unallocated expenses (4.4)
OPERATING PROFIT 1.5
Net finance expense (2.0)
Share of results of associates 2.7
Share of results of joint (0.2)
ventures
Income tax charge (0.5)
PROFIT FOR THE PERIOD 1.5
Unaudited 12 months to September 2011
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busine portat struct servi Hotel operati
ss ion ure ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm
EXTERNAL REVENUE 72.4 24.6 17.8 18.8 8.9 142.5
Segment result 27.8 (10.6) 1.0 0.5 3.8 22.5
Unallocated expenses (10.5)
OPERATING PROFIT 12.0
Net finance expense (7.8)
Share of results of associates (1.7)
Share of results of other 0.4
investments
Income tax charge (1.0)
PROFIT FOR THE PERIOD 1.9
Audited 12 months to September 2010
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busine porta struct servi Hotel operati
ss tion ure ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm
EXTERNAL REVENUE 55.3 21.5 14.0 11.1 5.9 107.8
Segment result 7.9 (7.6) 4.1 0.1 0.2 4.7
Unallocated expenses (9.0)
OPERATING LOSS (4.3)
Net finance income 2.9
Share of results of associates 2.3
Share of results of joint (0.4)
ventures
Income tax charge (0.7)
LOSS FOR THE PERIOD (0.2)
5. Segmental reporting (continued)
Unaudited 30 September 2011
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busin porta struc servi Hotel Other operati
ess tion ture ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Segment operating assets 100.0 47.9 84.9 13.4 38.9 - 285.1
Investment in associates - - - - - 11.1 11.1
Unallocated - - - - - 19.3 19.3
assets/interest bearing
assets
TOTAL ASSETS 100.0 47.9 84.9 13.4 38.9 30.4 315.5
Segment operating 42.1 34.3 14.6 7.6 16.2 - 114.8
liabilities
Unallocated - - - - - 49.1 49.1
liabilities/interest
bearing liabilities
TOTAL LIABILITIES 42.1 34.3 14.6 7.6 16.2 49.1 163.9
Depreciation of segment 1.1 0.6 1.6 0.3 0.6 0.1 4.3
assets
Amortisation of segment 0.3 - - 0.1 - - 0.4
assets
Capital expenditure 4.1 14.8 1.5 0.3 0.3 - 21.0
Unaudited 31 March 2011
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busin porta struc servi Hotel Other operati
ess tion ture ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Segment operating assets 58.8 33.5 83.4 12.5 25.0 - 213.2
Investment in associates - - - - - 12.9 12.9
Unallocated - - - - - 24.5 24.5
assets/interest bearing
assets
TOTAL ASSETS 58.8 33.5 83.4 12.5 25.0 37.4 250.6
Segment operating 22.2 19.3 15.2 6.8 11.0 - 74.5
liabilities
Unallocated - - - - - 49.7 49.7
liabilities/interest
bearing liabilities
TOTAL LIABILITIES 22.2 19.3 15.2 6.8 11.0 49.7 124.2
Depreciation of segment 0.7 0.2 1.6 0.1 0.6 0.1 3.3
assets
Amortisation of segment 0.3 - - 0.1 - - 0.4
assets
Capital expenditure 1.2 13.2 0.8 0.2 0.3 0.1 15.8
Audited 30 September 2010
Consoli
dated
Agri- Trans- Infra- Suppo continu
rt ing
busin porta struc servi Hotel Other operati
ess tion ture ces s ons
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Segment operating assets 51.1 16.4 82.9 3.9 23.3 - 177.6
Investment in associates - - - - - 10.3 10.3
Unallocated - - - - - 8.5 8.5
assets/interest bearing
assets
TOTAL ASSETS 51.1 16.4 82.9 3.9 23.3 18.8 196.4
Segment operating 28.8 7.4 14.5 1.2 9.9 - 61.8
liabilities
Unallocated - - - - - 6.9 6.9
liabilities/interest
bearing liabilities
TOTAL LIABILITIES 28.8 7.4 14.5 1.2 9.9 6.9 68.7
Depreciation of segment 1.5 0.6 3.0 0.1 0.6 0.1 5.9
assets
Amortisation of segment 0.5 0.1 - 0.2 - - 0.8
assets
Capital expenditure 2.9 0.8 3.7 - 1.4 0.3 9.1
6 Acquisition of subsidiaries
AFEX
With effect from 1 January 2011, the Group acquired
100% of the issued share capital of Global Horizons
Ltd (which trades as AFEX) for an initial
consideration of US$3m (GBP1.9m). Further payments
of up to US$5m (GBP3.1m) will be payable over two
years based on an EBIT related earn-out formula.
AFEX`s main focus of current operations is in
supplying secure accommodation in Juba in the
Republic of Southern Sudan. This infrastructure is
in great demand from corporate clients, NGO`s, and
Government Aid Agencies working in the Republic of
Southern Sudan.
The transaction has been accounted for by the
purchase method of accounting. The fair value of the
net assets at 1 January 2011 is set out below:
Fair
Pre- valuation Values
acquisition adjustment recognised
carrying on on
value acquisition acquisition
GBPm GBPm GBPm
Property, plant and equipment 2.9 0.7 3.6
Inventory 0.1 - 0.1
Trade and other receivables 1.6 - 1.6
Cash and cash equivalents 0.6 - 0.6
Trade and other payables (3.3) - (3.3)
Intangible related to franchise - 1.5 1.5
NET IDENTIFIABLE ASSETS AND LIABILITIES 1.9 2.2 4.1
Consideration paid 1.9
Contingent consideration 2.5
GOODWILL ON ACQUISITION 0.3
The transaction costs incurred to acquire the
company were GBP0.1m and have been expensed in
operating costs in the income statement.
The goodwill arising on the acquisition of AFEX is
attributable to the anticipated profitability of the
distribution of the company`s services to new
customers.
AFEX contributed GBP5.7m to the Group`s revenue and
GBP0.3m profit to the Group`s profit before tax for
the period between the date of acquisition and the
reporting date.
FISH ON LINE
With effect from 1 June 2011, the Group acquired 51%
of the issued share capital of Fish Online Pty
Limited for an initial consideration of GBP0.3m.
Pursuant to the share purchase agreement, the
sellers have been granted a put option to sell their
remaining 49% to Lonrho three years after the
signature date at a purchase price of 6x multiple of
Fish On Line`s profit before tax for the 2014
financial year end, which is capped at a maximum of
ZAR 35.0m (GBP2.3m).
The transaction has been accounted for by the
purchase method of accounting. The fair value of the
net assets at 1 June 2011 is set out below:
Fair
Pre- valuation Values
acquisition adjustment recognised
carrying on on
value acquisition acquisition
GBPm GBPm GBPm
Property, plant and equipment 0.1 - 0.1
Inventory 0.8 - 0.8
Trade and other receivables 1.2 - 1.2
Cash and cash equivalents (0.8) - (0.8)
Trade and other payables (0.7) - (0.7)
Loans and borrowings (0.2) - (0.2)
NET IDENTIFIABLE ASSETS AND 0.4 - 0.4
LIABILITIES
Non-controlling interest share (0.2)
Consideration paid 0.3
GOODWILL ON ACQUISITION 0.1
The transaction costs incurred to acquire the
company were GBP0.1m and have been expensed in
operating costs in the income statement.
The goodwill arising on the acquisition of Fish On
Line Pty Limited is attributable to the anticipated
profitability of the distribution of the company`s
service and product to new customers.
Fish On Line Pty Limited contributed GBP2.7m to the
Group`s revenue and GBP0.1m loss to the Group`s
profit before tax for the period between the date of
acquisition and the reporting date.
GRINDROD PCA
With effect from 1 July 2011, the Group acquired
100% of the trading assets of Grindrod PCA for a
consideration of ZAR 50m (GBP4.5m).
The transaction has been accounted for by the
purchase method of accounting. The fair value of the
net assets at 1 July 2011 is set out below:
Fair
Pre- valuation Values
acquisition adjustment recognised
carrying on on
value acquisition acquisition
GBPm GBPm GBPm
Property, plant and equipment 0.5 - 0.5
Inventory - - -
Trade and other receivables 5.2 - 5.2
Cash and cash equivalents 0.9 - 0.9
Trade and other payables (4.6) - (4.6)
Intangible related to customer - 2.5 2.5
relationships
NET IDENTIFIABLE ASSETS AND 2.0 2.5 4.5
LIABILITIES
Consideration paid 4.5
Contingent consideration -
GOODWILL ON ACQUISITION -
The transaction costs incurred to acquire the
company were GBP0.1m and have been expensed in
operating costs in the income statement.
The goodwill arising on the acquisition of Grindrod
PCA is attributable to the anticipated profitability
of the distribution of the company`s services.
Grindrod PCA contributed GBP9.1m to the Group`s
revenue and GBP0.1m loss to the Group`s profit
before tax for the period between the date of
acquisition and the reporting date.
ALDEAMENTO TURISTICO DE MACUTI SARLI "ATDM"
On 30 September 2011, the Group acquired 80% of the
issued share capital of ATdM from Lonzim Plc for
US$5.1m (GBP3.2m), which will be settled in cash
over the next 5 years. Pursuant to the share
purchase agreement, Lonrho Hotels will also take
responsibility for liabilities up to US$2.7m
(GBP1.7m).
The transaction has been accounted for by the
purchase method of accounting. The fair value of the
net assets at 30 September 2011 is set out below:
Fair
Pre- valuation Values
acquisition adjustment recognised
carrying on on
value acquisition acquisition
GBPm GBPm GBPm
Long leasehold property 4.5 6.1 10.6
Inventory - - -
Trade and other receivables - - -
Cash and cash equivalents - - -
Trade and other payables (0.6) - (0.6)
Intangible asset - - -
NET IDENTIFIABLE ASSETS AND LIABILITIES 3.9 6.1 10.0
Non-controlling interest (2.0)
Consideration paid 4.0
NEGATIVE GOODWILL RECOGNISED ON 4.0
ACQUISITION
The transaction costs incurred to acquire the
company were GBP0.1m and have been expensed in
operating costs in the income statement.
As a first phase development Lonrho Hotels plans to
refurbish an existing property on the site to
establish an easyHotel by Lonrho and provide quality
office space for key companies seeking to establish
offices in Beira.
The negative goodwill arising on the acquisition of
ATdM is attributable to the fair value of the
property reflecting its development potential.
ATdM contributed GBPnil to the Group`s revenue and
GBPnil profit to the Group`s profit before tax for
the period between the date of acquisition, and the
reporting date.
HOME FARMS
On 31 August 2011 the Group acquired 100% of the
issued share capital of Home Farms for a
consideration of US$60. Home Farms consists of 3
leased farms (20 year leases) and substantial
leasehold buildings including a 58,000 square feet
agricultural packhouse and high care unit.
The transaction has been accounted for by the
purchase method of accounting. The fair value of the
net assets at 31 August 2011 is set out below:
Fair
Pre- valuation Values
acquisition adjustment recognised
carrying on on
value acquisition acquisition
GBPm GBPm GBPm
Long leasehold property, plant and - 8.0 8.0
equipment
Inventory - - -
Trade and other receivables - - -
Cash and cash equivalents - - -
Trade and other payables - - -
Intangible related to lease - 3.0 3.0
NET IDENTIFIABLE ASSETS AND - 11.0 11.0
LIABILITIES
Consideration paid -
Contingent consideration -
NEGATIVE GOODWILL RECOGNISED ON 11.0
ACQUISITION
The transaction costs incurred to acquire the
company were GBP0.1m and have been expensed in the
income statement.
The negative goodwill arising on the acquisition of
Home Farms is attributable to the open market value
of the leasehold property and buildings acquired and
the beneficial lease arrangements.
Home Farms contributed GBP0.3m to the Group`s
revenue and GBP0.2m loss to the Group`s profit
before tax for the period between the date of
acquisition and the reporting date.
7 Interest bearing loans and borrowings
This note provides information about the contractual
terms of the Group`s interest-bearing loans and
borrowings.
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 31 March 30
September September
2011 2011 2010
GBPm GBPm GBPm
NON-CURRENT LIABILITIES
Finance lease liabilities 20.7 10.8 1.8
Unsecured bank loans 27.2 17.4 20.3
Convertible bond 43.8 42.6 -
Shareholder loans 2.9 3.0 2.5
Other loans - - 1.8
94.6 73.8 26.4
CURRENT LIABILITIES
Unsecured bank loans 3.0 3.9 2.8
Current portion of finance lease 2.5 0.9 1.0
liabilities
Other loans 0.3 - 1.8
Bank overdraft 8.9 4.7 3.9
14.7 9.5 9.5
The increase in finance leases reflects the
acquisition of 2 ATR aircraft, one in December 2010
and one in July 2011.
In October 2010, Lonrho Plc 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 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. On initial recognition GBP1.0m of
the total liability under the convertible bond has
been transferred to other reserves, representing the
equity portion of the Bonds at the date of initial
recognition.
8 Net finance income
Unaudited Unaudited Unaudited Audited
6 months 6 months 12 months 12 months
to to to to
30 30 30 30
September September September September
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
Bank interest receivable 0.1 0.1 0.1 0.1
Foreign exchange gain 1.1 2.8 2.6 8.5
FINANCE INCOME 1.2 2.9 2.7 8.6
Interest on loans repayable within (3.4) (1.3) (6.2) (2.1)
five years and overdrafts
Foreign exchange loss (2.6) (3.4) (4.1) (3.4)
Interest on finance leases (0.2) (0.2) (0.2) (0.2)
FINANCE EXPENSE (6.2) (4.9) (10.5) (5.7)
NET FINANCE INCOME (5.0) (2.0) (7.8) 2.9
Interest charges for the six months to 30 September 2011 includes GBP1.5m
relating to the 7% convertible bond issued in October 2010. Interest expenses
for the 12 month period ended 30 September 2011 include GBP2.8m relating to the
bond.
Foreign exchange losses for the 12 month period ended 30 September 2011 include
GBP0.7m relating to the 7% convertible bond issued in October 2010.
9 Note to the cash flow statement
Unaudited Audited
30 30
September September
2011 2010
GBPm GBPm
Depreciation of property, plant and equipment 7.6 5.9
Amortisation of intangible assets 0.8 0.8
Impairment of investment - 0.4
Share based payment expense 0.3 2.3
Finance income 7.8 (2.9)
Share of profit of associates and joint ventures 1.2 (1.9)
Gain arising on fair valuation of biological (17.0) (9.0)
assets
Income tax expense 1.0 0.7
Negative goodwill on acquisition (15.0) -
Profit on sale of property, plant and equipment (0.3) -
ADJUSTMENTS TO PROFIT FOR THE PERIOD (13.6) (3.7)
10 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Full details of the Group`s other related party transactions and balances are
given in the Group`s financial statement for the year ended 30 September 2010.
The only material change in these relationships since 1 October 2010 is Lonrho`s
participation in a placing of shares by LonZim Plc. Lonrho participated in the
placing to maintain its then percentage shareholding of 24.61% by subscribing
for 4,384,011 new LonZim Shares at a cost of GBP1,227,523. At 30 September 2011
Lonrho`s shareholding in Lonzim Plc was 22.92%.
11 Post balance sheet events
There have been no material post balance sheet events.
12 Cautionary statement
The interim results announcement contains forward looking statements. These have
been made by the Directors in good faith based on the information available to
them up to the time of their approval of this report. The Directors can give no
assurance that these expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk factors
underlying such forward looking information, actual results may differ
materially from those expressed or implied by these forward looking statements.
The Directors undertake no obligation to update any forward looking statements
whether as a result of new information, future events or otherwise.
There are a number of potential risks and uncertainties which could have a
material impact on the Group`s performance over the remainder of the financial
year and could cause actual results to differ materially from expected and
historical results. These include but are not limited to, competitor activity
and competition risk, changes in foreign exchange and commodity prices and the
political and economic risks of operating in Africa. Details of the key risks
facing the Group`s businesses at an operational level are included on pages 11
to 24 of the Group`s listing prospectus which is available on the Group`s
website (www.lonrho.com). Details of further potential risks and uncertainties
arising since the issue of that document are included within the operating
review as appropriate.
13 Responsibility statement
The interim results announcement complies with the Disclosure and Transparency
Rules ("the DTR") of the Financial Services Authority in respect of the
requirement to produce a second half yearly financial report.
The Directors confirm that to the best of their knowledge:
- This financial information has been prepared in accordance with IAS 34 as
adopted by the EU;
- This interim results announcement includes a fair review of the important
events during the 6 months ended 30 September 2011 and their impact on the
financial information, and a description of the principal risks and
uncertainties for the remaining part of the period as required by DTR
4.2.7R; and
- This interim results announcement includes a fair review of the disclosure
of related party transactions and changes therein as required by DTR
4.2.8R.
Geoffrey White
Director and Chief Executive Officer
7 November 2011
On behalf of the Board
South African sponsor
Java Capital
Date: 07/11/2011 09:00:01 Produced by the JSE SENS Department.
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