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LONRHO AFRICA PLC - PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2003
LONRHO AFRICA PLC
SHARE CODE :LAF
ISIN CODE :GB00002568813
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2003
Chairman"s Statement
We have continued to follow our strategy of disposing of the businesses and
assets in Africa. However, as you will see from the Operating Review, the
hotels in Kenya have been affected by a number of adverse factors and this
has resulted in delays in concluding a sale of the businesses.
The Group continues to seek new business opportunities in the United Kingdom.
Shareholders will know that we have been trying to clarify with the Trustee
of The John Holt Pension Scheme the manner in which the surplus in that
Scheme can best be utilised. Those discussions continue.
Gavin Barnes retired as Chief Operating Officer on 30th September 2003 after
seven years service with the Group. The Board would like to thank Gavin for
his important contribution and wish him a pleasant retirement. We thank our
staff for the loyalty and service during the year.
Bernard Asher
Chairman
3 March 2004
For further information please contact:
Nadja Vetter, CardewChancery
Tel: 020 7930 0777
Operating review
Motors
The High Court action instituted by certain Commercial Paper holders in
Lonrho Motors East Africa Limited (in Receivership) has been settled with the
claims being withdrawn and without any admission of liability on the part of
Lonrho Africa and two of its former Directors.
We completed the sale of Lonrho Africa"s shareholding in Lonrho Motors BV in
December 2002. This represented our shareholding in W Dahmer & Co, our bus
building business in Zimbabwe. Proceeds of GBP0.7 million were banked in the
UK.
Ranching
The Ol Pejeta ranch reported a marginal loss for the year. The cattle herd
increased to 6,500 head as sales were constrained owing to the reduced off-
take by the tourist industry. The sheep flock continues to be reduced. The
Wildlife division again lost money and is awaiting the Government plan for
wildlife management.
Distribution
The settlement of the deferred consideration of GBP0.3 million arising from
the disposal of Lonrho Africa"s interest in John Holt Plc, our distribution
business in Nigeria, was received in March 2003, ahead of the original
scheduled date of July 2003.
Hotels
The Hotel division incurred an operating loss of GBP1.0 million before
operating exceptionals (2002: GBP0.3 million profit). The war in Iraq
affected all markets, whilst additional security concerns in Kenya had a
major impact on visitor arrivals. Overall, occupancies fell 8% to 43%, the
fall being mitigated by marketing efforts and discounting.
Kenya
The Kenya hotels suffered an operating loss of GBP0.6 million (2002: GBP0.1
million profit), driven by a 12% fall in occupancies to 37%. In addition to
the Iraq conflict Kenya"s specific problems included the Mombasa hotel bomb
in November 2002, the suspension of BA flights into Nairobi and the negative
travel advisories issued by both the US and British governments. Arrivals
from what was our largest market, the USA, dropped a staggering 41% after
having fallen 37% in 2002. The number of European guests declined some 12%,
with the UK segment dropping 22%. The change in marketing focus to business
and conference and local tourism was relatively successful, but at the cost
of an 8% reduction in average room rates. A further GBP0.4 million in cost
savings was achieved on top of the saving of GBP1.0 million in 2002.
Headcount was reduced by a further 4% (2002: 10%). The Norfolk, Mount Kenya
Safari Club and Sweetwaters Tented Camp continued to collect industry awards.
As regards the 2003/4 financial year rooms sold in the first four months have
increased by 13%. A Recovery Plan has been initiated by the Kenya Tourism
Board in the face of a reduction of visitors to the country in 2003 of 40%.
Ghana
The Labadi Beach hotel suffered a 3% drop in occupancies to 70%. Primary
causes were a drop-off in corporate business due to the Iraq conflict, an
increase in hotel room stock in Accra and the loss of the South African and
Lufthansa aircrew contracts. The hotel was, however, successful in obtaining
the Kenya Airways contract. Conference room nights nearly doubled over the
prior year but had a negative impact on the average room rate. The hotel
remains profitable, and has had a very encouraging start to the current year.
Mozambique
Whilst occupancies increased marginally to 43%, despite a 51% increase in the
number of hotel rooms available in Maputo, a decline in margins resulted in
an operating loss of GBP0.2 million. Costs were adversely affected by the
strength of the South African Rand, in which currency most supplies are
sourced.
Property
The sale of agricultural land in Kenya continues. Contracts were exchanged
for the disposal of a major part of the land for GBP1.2 million in September
2003.
Our efforts to sell the remaining South African industrial property portfolio
continue and we anticipate completion in the near future.
Of the three remaining properties in Malawi one was sold during the year and
one has been sold since year-end.
Joint Venture
The sale of the Lonrho Africa shareholding in Kariba Minerals Zambia, which
was signed in February 2002, still awaits Government approval.
Financial review
Basis of preparation of financial statements
Going concern
The directors continue to adopt the going concern basis in preparing the
financial statements as the disposal process continues in accordance with the
Board"s strategy. The Directors remain confident that further disposals will
be made in the next financial year to eliminate borrowings.
Bank facilities are now uncommitted but the principal lender has an agreed
repayment schedule based on a share of disposal proceeds. Regular meetings
are held to discuss the progress of the disposal programme and whilst this is
taking longer than anticipated, sufficient progress has been made for the
Directors to believe that the support of the principal lender will remain in
place.
Asset values
In preparing the financial statements the Directors have reviewed the
carrying values of fixed assets in light of the current economic
uncertainties, and have made such adjustments as they consider reasonable and
prudent.
Group performance
Operations at 30 September 2003 consist of Hotels and Ol Pejeta Ranching.
Total turnover decreased by 15% for the year because of continued depressed
trading.
The Hotels division suffered an operating loss before operating exceptional
items this year of GBP1.0m compared to a profit of GBP0.3 million in 2002.
Group Head Office costs have been reduced this year to GBP0.4 million before
operating exceptionals compared to GBP1.0 million in 2002.
Profit on sale or termination of discontinued operations amounted to GBP2.0
million compared to a GBP0.3 million loss in 2002 and there were exchange
gains on discontinued activities of GBP1.4 million compared with a loss of
GBP1.0 million in 2002.
Pension Scheme
The group has now fully adopted the new accounting standard Financial
Reporting Standard 17 (FRS17) in respect of its defined benefit pension
scheme in the United Kingdom.
Dividend
The Board has decided that it is not appropriate to declare a dividend.
Annual General Meeting
The Annual General Meeting will be held on Friday 30th April 2004 at 3.00pm
at Liverpool Moat House, Paradise Street, Liverpool L1 8JD
Consolidated profit and loss account for the year ended 30 September 2003
Note Continuing
Total operations Discontinued Total
2003 2002 operations 2002
GBPm Restated 2002 Restated
GBPm GBPm GBPm
Turnover
Group 10.3 12.1 9.0 21.1
Joint ventures 0.5 0.2 - 0.2
10.8 12.3 9.0 21.3
Group net (12.2) (12.8) (8.2) (21.0)
operating costs
Operating (loss)/
profit
Group
- before (1.5) (0.2) (0.2) (0.4)
exceptional
items
- exceptional 1a (0.4) (0.5) 1.0 0.5
items
(1.9) (0.7) 0.8 0.1
Joint ventures 0.1 0.1 - 0.1
Total operating
loss/(profit)
- before (1.4) (0.1) (0.2) (0.3)
exceptional
items
- exceptional 1a (0.4) (0.5) 1.0 0.5
items
(1.8) (0.6) 0.8 0.2
Profit/(loss) on 1b 3.4 (1.3)
sale or
termination of
discontinued
operations
Net finance costs (0.2) (0.1)
Profit/(loss) 1.4 (1.2)
before taxation
Taxation 0.2 (0.3)
Profit/(loss) 1.6 (1.5)
after taxation
Minority interests 0.2 (0.1)
Profit/(loss) for 1.8 (1.6)
the year
Dividends to - -
shareholders
Retained 1.8 (1.6)
profit/(loss) for
the year
Profit/(loss) per
share
(basic and 1.1 p (1.0) p
diluted)
Loss per share before
exceptional
items (basic and (0.7) p (0.5) p
diluted)
Notes: All operations in 2003 were continuing. The 2002 figures have been
restated following implementation of FRS17 Retirement Benefits.
Balance sheet for the year ended 30 September 2003
Group
Note 2003 2002
Restated
GBPm GBPm
Fixed assets
Tangible 26.8 31.2
Investments :
Joint ventures 0.3 0.3
Other investments - -
27.1 31.5
Current assets
Stocks 1.9 1.9
Debtors :
Amounts falling due within 4.7
one year 3.9
Amounts falling due after 0.4 0.4
more than one year
4.3 5.1
Cash at bank 3.2 4.9
9.4 11.9
Creditors: amounts falling (12.4)
due within one year (9.0)
Net current 0.4 (0.5)
assets/(liabilities)
Total assets less current 27.5 31.0
liabilities
Provisions for liabilities (4.8) (6.5)
and charges
Net assets 22.7 24.5
Capital and reserves
Called up share capital 31.5 31.5
Revaluation reserve 13.1 15.9
Other reserves 67.6 58.2
Profit and loss account (93.8) (86.1)
Shareholders" funds (equity) 18.4 19.5
Minority interests (equity) 4.3 5.0
22.7 24.5
Note: The 2002 figures have been restated for the implementation of FRS17
Retirement Benefits.Consolidated cash flow statement
for the year ended 30 September 2003
2003 2002
Note
GBPm GBPm
Net cash flow from
operating activities
- continuing operations (1.3) 0.1
- discontinued - 0.2
operations
(1.3) 0.3
Returns on investments and
servicing of finance
Interest
- received - 0.1
- paid (0.3) (0.4)
Net cash outflow from (0.3) (0.3)
returns on investments and
servicing of finance
Tax paid
Overseas (0.4) (0.3)
Total tax paid (0.4) (0.3)
Net cash outflow before (2.0) (0.3)
investing activities and
equity dividends
Net capital receipts 0.6 3.4
Net proceeds from 0.7 0.4
disposal of subsidiaries
Net cash (outflow)/inflow (0.7) 3.5
before financing
Financing
Repayment of short-term - (1.0)
loans
Net cash outflow from - (1.0)
financing
(Decrease)/increase (0.7) 2.5
in cash in the year
Statement of total recognised gains and losses
for the year ended 30 September 2003
Group Note 2003 2002
Restated
GBPm GBPm
Profit/(loss) for the year 1.8 (1.6) (1
Exchange adjustments (2.9) (3.6)
Actuarial loss relating to the pension fund 2 - (1.8)
Total recognised losses (1.1) (7.0) (2
relating to the year
Prior year adjustment (2002) - (1.7)
Prior year adjustments (7.7) -
Total recognised losses since (8.8) (8.7)
last annual report
Reconciliation of movements in shareholders" funds
for the year ended 30 September 2003
Group Note 2003 2002
Restated
GBPm GBPm
Recognised losses relating to (1.1) (7.0)
the year
Net decrease in shareholders" (1.1) (7.0)
funds in the year
At beginning of year 2003 (originally 19.5 26.5
GBP27.2m before deducting a prior year
adjustment of GBP7.7m)
At end of year 18.4 19.5
Note of historical cost profits and losses
for the year ended 30 September 2003
Group Note 2003 2002
Restated
GBPm GBPm
Reported profit/(loss) before 1.4 (1.2)
taxation
Difference between historical cost 0.1 0.1
depreciation charge and the actual
depreciation charge calculated on the
revalued amount
Realisation of property 1.9 2.3
revaluation gains
Historical cost profit before 3.4 1.2
taxation
Historical cost profit after 3.8 0.8 (15.
taxation and minority interests
Notes:
A prior year adjustment was made in 2002 of GBP1.7m relating to deferred tax.
The 2002 figures have been restated for the implementation of FRS17
Retirement Benefits. Of the total adjustment of GBP7.7m, GBP1.8m is shown as
an actuarial loss relating to the pension fund in 2002.
Notes to the Financial Statements
1.
a) Operating items
Operating Total Continuing Discontinued Tota
(loss)/profit 2003 operations operations 2002
includes the GBPm 2002 2002 GBPm
following GBPm GBPm
exceptional items
Release against fixed assets, stocks provisions and debtors in :
Zimbabwe motor - - 0.2 0.
business
Malawi motor - - 0.8 0.
business
Reorganisation and (0.4) (0.5) - (0.5)
rationalisation costs
(0.4) (0.5) 1.0 0.
Motors - - 1.0 1.
Hotels (0.8) - -
Central 0.4 (0.5) - (0.5
(0.4) (0.5) 1.0 0.
1.
b) Non-operating items
Profit/(loss) on sale or
termination of discontinued
operations
2003 2002
GBPm GBPm
Profit/(loss) on disposal
of subsidiaries :
Motors 0.3 (0.4)
Agribusiness - 0.5
Exchange gains/(losses) on 1.4 (1.0)
discontinued activities
Recovery/(charge) for disposal 1.7 (0.4)
and closure costs
3.4 (1.3)
Motors 0.3 (0.5)
Agribusiness - 0.3
Property 1.6 (0.8)
Central 1.5 (0.3)
3.4 (1.3)
Profits 3.4 1.9
Losses - (3.2)
3.4 (1.3)
Notes to the Financial Statements (continued)
2. Pension costs
The Group operates one defined benefit pension scheme in the United Kingdom
which is a funded scheme; the assets are held separately from those of the
Group. There are a variety of small overseas schemes which are at different
stages of being wound up. The Group does not have any material post
retirement benefits other than these pension schemes.
The charge for the overseas schemes was GBP0.1 million (2002: GBP0.2 million)
resulting in a total pension charge for the Group of GBP0.2 million (2002:
GBP0.2 million). In respect of the overseas schemes, pension costs have been
determined in accordance with the latest actuarial advice where practicable
and otherwise in accordance with local regulations.
The Group has now adopted Financial Reporting Standard 17 (FRS17) Retirement
Benefits with the result that the pension scheme asset of GBP8.1 million,
which related to a prepayment of contributions under SSAP 24, has been
deducted from Revenue reserves. The recoverable surplus as calculated under
FRS17 of GBP0.4 million has now been recognised in the balance sheet.
In the UK the contributions are determined by a qualified actuary on the
basis of triennial valuations using the attained age method. The most recent
valuation was at 30 September 2002 and showed that the market value of the
scheme"s assets was GBP48.9 million and that the actuarial value of those
assets represented 137% of the benefits accruing to the members. The
contributions of the UK employer and the employees will remain at nil.
Inland Revenue regulations stipulate that in order to continue to be tax
exempt, Pension Funds must maintain assets at no more than 105% of
liabilities, and Pension Funds should be valued at three year intervals using
prescribed actuarial assumptions in order to ensure that this ratio is
maintained. Because the valuation at 30 September 1999 disclosed that assets
were in excess of 105% of liabilities the Trustee of the scheme implemented,
in June 2003, a series of benefit improvements for members and is considering
the implication of the September 2002 valuation.
The full actuarial valuation carried out at 30 September 2002 has been
updated to 30 September 2003 by a qualified independent actuary. The major
assumptions used by the actuary were:
30 September 2003 30 September 2002
Rate of increase in salaries 4.20% 3.75%
Rate of increase in deferred
pensions 2.70% 2.25%
Rate of increase of
pensions in payment 2.70% 2.25%
Discount rate 5.20% 5.50%
Inflation assumption 2.70% 2.25%
The assets in the scheme and the expected rates of return were:
30 September 2003 30 September 2002
GBPm GBPm
Equities - - 6.50% 0.1
Corporate bonds and gilts 4.60% 37.1 4.50% 24.7
Cash 3.50% 7.2 4.00% 24.1
Total market value of assets 44.3 48.9
Actuarial value of liabilities (15.4) (13.7)
Surplus in the scheme 28.9 35.2
Recoverable surplus in the scheme 0.4 0.4
Related deferred tax liability (0.1) (0.1)
Net pension asset after deferred tax liability 0.3 0.3
Notes to the Financial Statements (continued)
Pension costs (continued)
The recoverable surplus is restricted to the present value of an employer
contribution holiday.
The market value of the scheme"s assets has decreased largely due to
improvements to benefits costing GBP5.9m made during the year. These past
service costs have been met from the unrecognised surplus in the scheme.
The actuarial value of the liabilities has increased at 30 September 2003
because the actuarial assumptions used have been changed to reflect the
reduction in bond yields.
The pension cost for the defined benefit scheme is an operating charge of
GBP0.1 million (2002 GBP0.2 million), offset by a credit to finance income of
GBP0.1 million (2002 GBP0.2 million). The credit to finance income represents
the expected return on pension scheme assets of GBP0.8 million less the
interest on pension scheme liabilities of GBP0.7 million.
An analysis of the amount recognised in the statement of total recognised
gains and losses is as follows:
2003 2002
GBPm GBPm
Actual return less expected return on scheme 1.1 (3.1)
assets
Gains and losses arising on scheme liabilities 0.1 (2.4)
Changes in assumptions underlying the present (1.6) (1.1)
value of the scheme liabilities
Actuarial loss recognised (0.4) (6.6) (2.7)
Adjustment due to recoverable surplus 0.4 4.8
Net loss recognised in statement of total - (1.8)
recognised gains and losses
Movement in recoverable surplus during the year
2003 2002
GBPm GBPm
Surplus in scheme at 1 October 2002 0.4 2.2
Current service cost (0.1) (0.2)
Net return on assets 0.1 0.2
Actuarial loss - (1.8) (2.7)
Surplus in scheme at 30 September 2003 0.4 0.4
Statutory information
The financial information set out above does not constitute the Company"s
statutory accounts for the years ended 30 September 2002 or 2003 but is
derived from those accounts. Statutory accounts for 2002 have been delivered
to the registrar of companies, and those for 2003 will be delivered following
the Company"s Annual General Meeting. The auditors have reported on those
accounts; their report from 2002 was unqualified, although it draws attention
to the uncertainties relating to preparation of the accounts on a going
concern basis and asset valuations; it did not contain a statement under
section 237 (2) (inadequate accounting records or returns or accounts not
agreeing with records and returns) or 237 (3) (failure to obtain necessary
information and explanations) of the Companies Act 1985. The auditors"
report for 2003 was unqualified, although it draws attention to the
uncertainties relating to:
preparation of the accounts on a going concern basis and
fixed asset valuations.
It did not contain a statement under sections 237 (2) or (3) of the Companies
Act 1985.
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