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Lonrho Africa Plc - Preliminary Results For The Year Ended 30 September 2004
Lonrho Africa Plc
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
(`Lonrho Africa` or `the Company`)
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004
CHAIRMAN`S STATEMENT
We have continued to follow our strategy of disposing of the businesses and
assets in Africa. As you will see from the Operating Review, the results of the
hotels in Kenya improved markedly during the year.
We are proposing to demerge Lonrho Africa Trade & Finance Limited from the
Lonrho Africa Group by way of a scheme of arrangement and the listing on AIM of
its new holding company, Castle Acquisitions Plc.
Bernard Asher stepped down as Chairman and as a Director on 31 May 2004 after
six years service with the Group. The Board would like to thank him for his
important and valued contribution.
Christopher Mills
Chairman
18th February 2005
For further information please contact:
Nadja Vetter, Cardew Group Tel: 020 7930 0777
OPERATING REVIEW
RANCHING
The disposal of the Group`s 100% interest in Ol Pejeta Ranching Netherlands
Holdings BV (`OPRNBV`) for a cash consideration of US$14.75m (GBP8.2m) was
completed in September 2004. OPRNBV is the owner of Ol Pejeta Ranching Limited
(`OPR`) in Kenya, which includes Sweetwaters Tented Camp, which produced a pre-
tax loss of GBP85,000 in the year to 30 September 2003. At that date, the net
asset value of OPR was GBP4.3m. The proceeds of sale were used to eliminate
Lonrho Africa`s remaining net debt.
HOTELS
The Hotels division broke even this year compared to an operating loss before
exceptional items last year of GBP1.0m.
KENYA
The Kenyan Hotels returned an operating profit of GBP0.6m (2003 loss GBP0.6m)
which was largely as a result of a 32% increase in rooms sold, driven by large
scale European marketing both by the hotels and the Kenya Tourist Board. The
growth is continuing in the new financial year, with a 38% growth in occupancies
over the previous year.
The Kenya Tourist Industry has recently completed a sales drive with American
Agents and Operators in a bid to revive the American market to Kenya, which
traditionally used to represent 40% of Lonrho Africa`s business.
The Norfolk Hotel has shown a marked improvement in its trading and business
house revenue has increased by 82% in the year. Rooms sold in the year
increased by 55%.
The Kenyan hotels continue to attract Tourist Industry Awards and the Norfolk
Hotel celebrated its 100th Birthday in December 2004 to general acclaim from the
Tourism Industry.
GHANA
The Labadi Beach Hotel was sold in April 2004 for a cash consideration of
US$5.4m (GBP3m).
MOZAMBIQUE
Room occupancies continue to decline with a 9% drop in the year. Available
rooms in Maputo continue to grow at 13%, whilst there was only a 4% gain in room
demand. As a result all Maputo Hotels suffered a drop in room yield.
PROPERTY
The sale of a major part of the remaining agricultural land in Kenya, which was
signed in September 2003, has still to be completed.
Efforts to sell the three remaining South African industrial properties continue
with the disposal since the year end of one property for a cash consideration of
R6.5m (GBP0.55m) and another for R8.75m (GBP0.75m). It is hoped that the third
property will be sold later this year.
JOINT VENTURE
The sale of the shareholding in Kariba Minerals Zambia, which was signed in
February 2002, was completed in May 2004 for a cash consideration of US$0.35m
(GBP0.19m).
FINANCIAL REVIEW
GROUP PERFORMANCE
The Group`s only operation is Hotels. The decrease in turnover reflects the
sale of the Hotel in Ghana. The operating loss incurred last year has been
eliminated.
Profit on sale or termination of discontinued operations and other non operating
exceptional items amounted to GBP4.6m compared to GBP3.4m in 2003.
FINANCING
Cash balances and interest rate risks are managed centrally in the UK. Wherever
possible exposure to currencies other than sterling are covered to eliminate any
exchange risk.
Cash is held in a number of currencies and includes GBP5.0m held in the UK.
FOREIGN EXCHANGE EXPOSURE
The Group`s businesses maintain their accounting records in the currency of the
country in which they operate. However, the Group`s results and assets and
liabilities are consolidated and reported to shareholders in sterling at year
end exchange rates, although results of operations disposed of during the year
are translated into sterling at the exchange rate at the date of disposal.
Therefore, devaluation of local currencies during a financial year will have an
impact on the profit or loss reported throughout the year as well as on the
Group`s balance sheet.
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 Wednesday 16th March 2005 at 11.30am
(or as soon thereafter as the Extraordinary General Meeting for the same date
and place shall have been concluded or adjourned) at The Pearce Room, Britannia
Adelphi Hotel, Ranelagh Place, Liverpool L3 5UL
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30th September 2004
Note Conti- Disco- Conti- Disco-
nuing ntinued nuing ntinued
opera- opera- Total opera- opera-
tions tions tions tions Total
2004 2004 2004 2003 2003 2003
GBPm GBPm GBPm GBPm GBPm GBPm
Turnover
Group 8.2 1.7 9.9 7.4 2.9 10.3
Joint
ventures - 0.2 0.2 - 0.5 0.5
8.2 1.9 10.1 7.4 3.4 10.8
Group
net
operating
costs (8.8) (1.7) (10.5) (9.4) (2.8) (12.2)
Operating
(loss)
/profit
Group
- before
exceptional
items (0.6) (0.6) (1.4) (0.1) (1.5)
- exceptional
items 1a - - (0.6) 0.2 (0.4)
(0.6) (0.6) (2.0) 0.1 (1.9)
Joint
ventures - - - 0.1 0.1
Total
operating
(loss)
/profit
- before
exceptional
items (0.6) (0.6) (1.4) - (1.4)
- exceptional
items 1a - - (0.6) 0.2 (0.4)
(0.6) (0.6) (2.0) 0.2 (1.8)
Non-
operatin
exceptional
items 1b 4.6 3.4
Net
interest
payable - (0.2)
Profit
before
taxation 4.0 1.4
Taxation (0.3) 0.2
Profit
after
taxation 3.7 1.6
Minority
interests
0.30.2
Profit
for the
year 4.0 1.8
Dividends
to
shareholders--
Retained
profit for
the year 4.0 1.8
Profit
per share 2.5p 1.1p
Loss
per share
before
exceptional
items (0.4)p (0.7)p
Note: The figures for 2003 have been restated to reflect operations that ceased
during 2004 as discontinued.
BALANCE SHEET
for the year ended 30th September 2004
Group Company
2004 2003 2004 2003
Note GBPm GBPm GBPm GBPm
Fixed assets
Tangible 17.0 26.8 - -
Investments:
Joint ventures - 0.3 46.2 58.3
Other investments
17.0 27.1 46.2 58.3
Current assets
Stocks 1.2 1.9 - -
Debtors:
Amounts
falling due
within one year 3.3 3.9 - -
Amounts falling
due after more
than one year - 0.4 - -
3.3 4.3 - -
Cash at bank 6.0 3.2 - -
10.5 9.4 - -
Creditors: amounts
falling due within
one year (3.0) (9.0) (38.4) (49.0)
Net current
assets/(liabilities) 7.5 0.4 (38.4) (49.0)
Total assets less
current liabilities 24.5 27.5 7.8 9.3
Provisions for
liabilities
and charges (2.5) (4.8) (1.0) (2.8)
Net assets 22.0 22.7 6.8 6.5
Capital and reserves
Called up share
capital 31.5 31.5 31.5 31.5
Merger reserve 96.1 96.1 - -
Revaluation reserve 7.4 13.1 - -
Profit and loss
account (115.6) (122.3) (24.7) (25.0)
Shareholders`
funds (equity) 19.4 18.4 6.8 6.5
Minority interests
(equity) 2.6 4.3 - -
22.0 22.7 6.8 6.5
These financial statements were approved by the Board of Directors on 18th
February 2005 and signed on its behalf by:
M S Wilson
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30th September 2004
2004 2003
Note GBPm GBPm
Net cash flow from
operating activities
- continuing operations 0.1 (0.4)
- discontinued operations (1.0) (0.9)
(0.9) (1.3)
Returns on investments and
servicing of finance
Interest
- paid (0.2) (0.3)
Net cash outflow after
returns on investments and
servicing of finance (1.1) (1.6)
Tax paid
Overseas (0.1) (0.4)
Net cash outflow before
investing activities and financing (1.2) (2.0)
Net capital (payments)/receipts (0.2) 0.6
Net proceeds from disposal
of subsidiaries 10.8 0.7
Increase/(decrease)
in cash in the year 9.4 (0.7)
Statement of total
recognised gains and losses
for the year ended
30th September 2004
2004 2003
Group Note GBPm GBPm
Profit for the year 4.0 1.8
Exchange adjustments (3.0) (2.9)
Total recognised gains/
(losses) relating to the year 1.0 (1.1)
Prior year adjustment
(see page 7) - (7.7)
Total recognised gains/
(losses) since last annual report 1.0 (8.8)
Reconciliation of movements in shareholders` funds
for the year ended 30th September 2004
2004 2003
Group Note GBPm GBPm
Recognised gains/
(losses) relating to the year 1.0 (1.1)
Net increase/(decrease)
in shareholders` funds
in the year 1.0 (1.1)
At beginning of year
(2003 originally GBP27.2m
before deducting a prior
year adjustment of GBP7.7m) 18.4 19.5
At end of year 19.4 18.4
Note of historical cost profits and losses
for the year ended 30th September 2004
2004 2003
Group Note GBPm GBPm
Reported profit
before taxation 4.0 1.4
Difference between
historical cost
depreciation
charge and the actual
depreciation charge
calculated on the
revalued amount 0.1 0.1
Realisation of
property revaluation gains 0.2 1.9
Historical cost profit
before taxation 4.3 3.4
Historical cost profit
after taxation and
minority interests 4.3 3.8
Note: A prior year adjustment was made in 2002 of GBP7.7m relating to the
implementation of FRS17 Retirement Benefits.
Notes to the financial statements
1(a) Operating exceptional items
Operating (loss)/profit includes the following exceptional items
Continuing Discontinued
Total operations operations Total
2004 2003 2003 2003
GBPm GBPm GBPm GBPm
Reorganisation and
rationalisation costs - (0.6) 0.2 (0.4)
Operating exceptional
items analysed
by division are
as follows:
Hotels - (0.8) - (0.8)
Central - 0.2 0.2 0.4
- (0.6) 0.2 (0.4)
1(b) Non-operating
exceptional items
2004 2003
GBPm GBPm
Profit on disposal of
subsidiaries:
Motors - 0.3
Hotels 1.3 -
Agribusiness 3.7 -
Exchange gains on
discontinued activities 0.3 1.4
(Charge)/recovery for disposal
and closure costs (0.2) 1.7
Recoverable surplus in the
pension scheme written
off (note 2) (0.5) -
4.6 3.4
Non-operating exceptional
items analysed by
division are as follows:
Motors - 0.3
Hotels 1.3 -
Agribusiness 3.7 -
Property - 1.6
Central (0.4) 1.5
4.6 3.4
Profits 5.4 3.4
Losses (0.8) -
4.6 3.4
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 GBP0.1m (2003: GBP0.1m) resulting in a
total pension charge for the Group of GBP0.2m (2003: GBP0.2m). 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 adopted Financial Reporting Standard 17 (FRS17) Retirement
Benefits.
The contributions are determined by a qualified actuary on the basis of
triennial valuations using the attained age method. The most recent full
actuarial valuation was carried out at 30th September 2002 and showed that the
market value of the scheme`s assets was GBP48.9m and that the surplus was
GBP28.3m. The contributions of the UK employer and the employees will remain at
nil.
In order to comply with FRS17, the full actuarial valuation carried out at 30th
September 2002 has been updated to 30th September 2003 and 2004 by a qualified
independent actuary. The major assumptions used by the actuary under FRS17 were:
30th September 30th September 30th September
2004 2003 2002
Rate of increase in
salaries 4.40% 4.20% 3.75%
Rate of increase in
deferred pensions 2.90% 2.70% 2.25%
Rate of increase of
pensions in payment 2.90% 2.70% 2.25%
Discount rate 5.50% 5.20% 5.50%
Inflation assumption 2.90% 2.70% 2.25%
2.Pension costs (continued)
The assets and actuarial liabilities in the scheme under FRS17 and the expected
rates of return were:-
30th September 30th September 30th September
2004 2003 2002
GBPm GBPm GBPm
Corporate bonds and
gilts 4.60% 43.5 4.60% 37.1 4.50% 24.7
Equities - - - - 6.50% 0.1
Cash 4.75% 0.7 3.50% 7.2 4.00% 24.1
Total market value
of assets 44.2 44.3 48.9
Actuarial value of
liabilities (16.7) (15.4) (13.7)
Surplus in the scheme 27.5 28.9 35.2
Further improvements in benefits costing GBP2.9m were made during the year.
During the previous year an additional 10% was granted to certain pensioners and
deferred pensioners at a cost of GBP5.9m. These past service costs have been met
from the unrecognised surplus in the scheme. The actuarial value of the
liabilities has increased at 30th September 2004 mainly because of the
improvements to benefits. An analysis of the amount recognised and of the
decrease in the surplus in the scheme is as follows:-
2004 2003 2002
GBPm GBPm GBPm
Actual return less expected
return on scheme
assets 1.2 1.1 (3.1)
Gains/(losses) arising on
scheme liabilities (0.2) 0.1 (2.4)
Changes in assumptions underlying
the present
value of the scheme liabilities 0.3 (1.6) (1.1)
Improvements in benefits (2.9) (5.9) -
Net return on assets 0.2 0.1 0.2
Current service cost (0.1) (0.1) (0.2)
Decrease in the surplus in the scheme (1.5) (6.3) (6.6)
History of experience
gains and losses 2004 2004 2003 2003 2002 2002
% GBPm % GBPm % GBPm
Difference between
the expected and
actual return on
scheme assets 2.7 1.2 2.5 1.1 (6.3) (3.1)
Experience gains and
losses on scheme
liabilities 1.3 (0.2) (0.7) 0.1 (17.5) (2.4)
Total amount recognised
in statement of
total recognised
gains and losses - - - - 13.0 (1.8)
The pension cost for the defined benefit scheme is an operating charge of
GBP0.1m (2003 GBP0.1m), offset by a credit to finance income of GBP0.2m (2003
GBP0.1m). The credit to finance income represents the expected return on pension
scheme assets of GBP1.0m (2003 GBP0.8m) less the interest on pension scheme
liabilities of GBP0.8m (2003 GBP0.7m). The recoverable surplus is restricted to
the present value of an employer contribution holiday.Notes to the financial
statements (continued)
2.Pension costs (continued)
Movement in recoverable surplus during the year
2004 2003 2002
GBPm GBPm GBPm
Surplus at beginning of year 0.4 0.4 2.2
Current service cost (0.1) (0.1) (0.2)
Net return on assets 0.2 0.1 0.2
Actuarial loss recognised in
the statement of
recognised gains and losses - - (1.8)
Surplus written off as a
non-operating
exceptional item (0.5) - -
Surplus at end of year - 0.4 0.4
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
In previous years the Trustee has purchased annuities for the majority of the
pensioners. Since the end of the financial year the Trustee has decided to
purchase annuities for the remainder of the pensioners and this is likely to be
finalised in February 2005. The cost of these annuities will be significantly
greater than the corresponding liabilities for FRS17 purposes and therefore the
surplus reported under FRS17 at 30th September 2005 will be correspondingly
reduced.
The actuarial assumptions used for the full actuarial valuation are more
conservative than those used for FRS17 purposes and the surplus on the full
actuarial valuation will therefore be significantly less than the surplus of
GBP27.5m disclosed for FRS17 purposes. Having had discussions with the Trustee
and the qualified independent actuary the directors believe that, on a basis
consistent with the full actuarial valuation at 30th September 2002, the surplus
in the scheme would have been approximately GBP20m at 30th September 2004. This
is significantly less than the corresponding figure of GBP28.3m at 30th
September 2002 and this is mainly due to the cost of benefit improvements which
have been awarded under the scheme in the two previous years.
Statutory information
The financial information set out above does not constitute the Company`s
statutory accounts for the years ended 30 September 2003 or 2004 but is derived
from those accounts. Statutory accounts for 2003 have been delivered to the
registrar of companies, and those for 2004 will be delivered following the
Company`s Annual General Meeting. The auditors` report on the accounts for 2003
was unqualified, although it draws attention to the uncertainties relating to
the preparation of the accounts on a going concern basis and the carrying value
of fixed assets; 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 2004 was
unqualified, although it draws attention to the uncertainty over the carrying
value of fixed assets. It did not contain a statement under sections 237 (2) or
(3) of the Companies Act 1985.
Date: 21/02/2005 10:58:48 AM
Produced by the JSE SENS Department
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