TIDMLONR
RNS Number : 5973A
Lonrho PLC
03 February 2011
3rd February 2011
These results (and comparative figures included therein) do not
form audited accounts nor have they been extracted from audited
accounts. The results disclosed in this trading update may
potentially be subject to adjustments during the year-end audit in
respect of goodwill valuations and other minor items. The
comparative figures used are year on year due to the influence of
seasonality within the different businesses in the Group.
LONRHO Plc
("Lonrho" or the "Company" or the "Group")
Lonrho delivers 21% growth in turnover for first quarter
Lonrho Plc (AIM:LONR) today announces its unaudited results for
the first quarter to 31 December 2010. Turnover in the Group
continues to grow, delivering a 21.3% increase compared with the
first quarter in the prior year. Lonrho continues to develop its
core markets and GDP growth forecasts for Sub Saharan Africa remain
over 5%.
Specific milestones since the last quarterly report include the
launch of commercial flights by Fly540 Angola, the start of
large-scale deliveries by Oceanfresh to the US market and the
success of Trak-Auto's tractor and equipment sales scheme in
Mozambique in conjunction with a finance package provided by
Standard Bank.
During the quarter the Company announced both the launch and
completion of a US$60m Guaranteed Convertible Bond offering, with a
US$10m overallotment. The bond issue was significantly
oversubscribed and the US$70m bond was approved at a shareholder
meeting on 29 October 2010. The bond proceeds are being used to pay
down certain existing indebtedness, to fund general working capital
requirements and accelerate growth, especially with respect to the
ongoing roll-out of Oceanfresh products into the US market. The
Company continues to review opportunities for potential acquisition
targets that are synergistic to the current operations.
Financial highlights for the quarter include:
-- Group turnover from continuing operations in the quarter, at
GBP27.6m has increased 21.3% ahead of the same quarter in the prior
year.
-- In the first quarter of 2011 the Group has achieved EBITDA of
GBP1.4m a GBP2.7m improvement on the first quarter of 2010. This
growth is improved to GBP3.3m when foreign exchange gains of
GBP0.4m in the first quarter of 2010 and foreign exchange losses of
GBP0.2m in 2011 are taken into account.
-- Net assets at 31 December 2010 stood at GBP124.5m, compared
with GBP127.7m as at 30 September 2010.
-- Cash balances in the Group at quarter end were GBP34.3m.
-- Lonrho market capitalisation has risen 63.6% from 30
September 2010.
Divisional highlights for the quarter include:
Agribusiness
The agribusiness division has again seen strong revenue growth
in the quarter, 31.6% ahead of the same period in the prior year,
driven in the main by the developments at Oceanfresh and strong
sales growth in Trak-Auto, the John Deere dealership in Mozambique.
Rollex has achieved volume increases in trade, but the strong Rand,
as well as unseasonal rain in December in South Africa and the
closure of Heathrow airport the week before Christmas due to snow,
had a limiting effect on growth.
-- Oceanfresh (51% holding) continues to grow with both the
domestic and export markets expanding strongly. In the first
quarter nearly 20,000 cases of product were shipped to the US, with
total sales volume of 170 000 units domestically showing the demand
for the product.
-- Oceanfresh products are currently being sold in 119 Costco
stores, with up to 4 products in each store and the roll-out across
all 425 stores to be completed by the end of the year. This
roll-out is augmented by the addition of further products to the
range across many of the stores.
-- Oceanfresh has also been expanding domestically listing 5 new
own branded products into Spar from April 2011. In addition to
this, Oceanfresh has been listed to supply product to Pick'n'Pay.
These new agreements, which were won in December, demonstrate
Oceanfresh's ability to design and deliver its product lines to a
comprehensive range of retailers.
-- Fresh & Easy, Tesco's retail outlet in the US, have also
listed Oceanfresh products to all 380 stores currently in the US.
Following the injection of working capital from the successful bond
in October, Oceanfresh has been building relationships with a
number of other new potential customers including Wal-Mart, Asda,
Costco Asia, and other South African retailers.
-- Rollex (100% holding) saw volumes affected due to
exceptionally wet conditions through November and December in
Southern Africa, with parts of South Africa recording 100%
increases on average monthly rainfall in December - meaning a lower
harvest yield. The closure of Heathrow airport due to snow in
December, across the peak Christmas delivery period, resulted in a
reduction in turnover, amounting to approximately GBP0.7m. These
weather related events were uncharacteristic and to mitigate future
risk and ensure supply chain continuity Rollex has commenced a
programme of delivery to Europe by sea to back up the airfreight
business. The opening of sea freight as well as air was inevitable
as the business volumes grow but has been implemented now as a
result of improved refrigerated technology to enable alternative
options for delivery in the future.
-- A strong Rand makes exporting goods less competitive from
South Africa. The Rand hit a low of 6.65 against the US dollar in
December, but in January has since recovered above 7. Despite these
obstacles in the quarter, Rollex was flat in terms of turnover
compared to the same quarter in the prior year.
-- Fresh Direct (100% holding) during the quarter completed its
first harvest of peaches. The harvest yielded fruit which was
significantly better than expected both in terms of quantity and
quality. Initially the first crop had been expected to be small and
poor quality and would only have been intended for local discounted
distribution. However, the improved quality meant that the crop was
sold to export markets including Tesco in the UK.
-- Trak-Auto (100% holding) has achieved its best quarter to
date since becoming a Lonrho company. Excellent sales of John Deere
units and a continuing growth in the spare parts and servicing
business have bolstered turnover.
-- An agricultural equipment package, offering smaller scale
farmers a John Deere tractor with plough, harrow and other
equipment bundled together with a service agreement and finance
from Standard Bank, has helped lift unit sales above 30 units a
quarter.
-- The John Deere distributorship in Angola (51% holding) is
moving towards opening with the showroom and service centre to be
completed in February. Orders have been received for spare parts
and the management and sales team are in place. The opening stock
orders have been made and customer enquiry levels continue to be
high.
Transport
Since the quarter end, Fly540 launched its second strategic hub
in Angola. As the only fully ICAO registered airline, meeting
international standards, it is uniquely placed to service the
Angolan market. The establishment and approval process has taken
much longer than originally anticipated. However, the board
believes that, during the delay, the market potential for domestic
and regional flights in and from Angola has continued to grow.
In the East African hub, strong growth in passenger numbers has
delivered positive operational signs for the division although
competitive price pressures on ticket sales in Kenya and the expiry
of a wet lease charter contract have resulted in turnover 11.7%
below that of the first quarter of the prior year.
-- Since the end of the quarter Fly540 Angola (60% holding) has
been issued with its AOC (Air Operators Certificate) after an
extensive approval and ICAO registration process. Fly540 Angola is
the first Angolan airline with full ICAO registration. Having
received the AOC, commercial flights began in Angola on 30 January
2011.
-- Lonrho Aviation (100% holding) has taken delivery of its
first new ATR72-500, acquired through a finance lease arranged by
HSBC and Afriexim Bank against ECA guarantees. The aircraft is
expected to commence operating in Angola in February, allowing
additional routes to be serviced immediately.
-- Fly540 Kenya (49% holding + board control) has seen good
passenger growth in the quarter. Passenger numbers have increased
through the period with over 25,000 passengers flown in December,
the quarter showing a 14% increase compared to the same quarter in
the prior year. Pricing on some routes was very competitive in
December, but the growth in passenger numbers places the company in
a strong market position as pricing levels return to normality in
2011. December volumes reached a level where it became necessary to
wet lease third party aircraft in order to meet demand and the
airline now expects to fly its millionth customer early in
2011.
-- During the quarter a wet lease charter arrangement, which
grossed Fly540 c.GBP400k in the same period last year, expired
impacting the first quarter's comparable result.
-- Fly 540 Tanzania (90% holding) is currently increasing its
commercial activities, including the recently announced opening of
a new route between Dar-es-Salaam and Mwanza, the home of
Tanzania's gold fields in the North of the country. Flights began
on the route on 24 January 2011, with the first week's load factors
very encouraging.
-- Fly540 Ghana's (60% holding) Air Carriers Licence was renewed
this January enabling the process of certification to continue and
an ATR 42-320 is being transferred to Ghana as part of the ICAO
registration process. Commercial services are scheduled to begin in
Q3 FY11 subject to completion of certification and issue of the
AOC.
-- During the quarter Lonrho Aviation appointed a new Finance
Director. Michael Hammelink brings with him vast experience of the
aviation world having worked at KLM, Cityhopper and Mandala
Airlines and will work with the current management team to further
develop the Fly540 network.
Infrastructure
Luba Freeport has again achieved steady growth during the
quarter. The 30% increase in turnover at Luba represents an
excellent achievement and the port's ability to continue to add
clients and revenues. e-Kwikbuild, having completed restructuring
its operations and bringing in additional sales staff to the
management team, has begun to see the result with some significant
orders.
-- Luba (63% holding) saw the completion during the quarter of
the open storage facility to be used by Tenaris. Now that this work
has been completed, the client will begin using the facility with
lease rentals becoming payable in Q2 FY11.
-- For the first quarter of 2011 supply vessel calls were up
28%. This helps to illustrate the continuing development of the
port as the premium oil services destination in the region and,
increasingly, as a centre for regional operations for its
clients.
-- During the quarter Luba received confirmation that two
companies, Technip and SBM, which have been awarded contracts with
Noble Energy, will be using Luba as base for their operations.
Noble has recently been given the go-ahead for their Alen offshore
development, a liquid-rich gas field in the Gulf of Guinea. The
first of these projects will begin in Q3 FY11.
-- Through the first quarter, e-Kwikbuild (51% holding) has been
completing a restructuring and consolidation process, moving
operations from Port Elizabeth to Cape Town and bringing together
all departments in one location. A new commercial director, Roger
Stringer, joining from GCC Services, has been appointed together
with a strengthened business development team. These appointments
have added impetus to the sales effort and, as planned, started to
move the direction of focus to export markets in the African
continent.
-- In the first quarter of the year e-Kwikbuild won contracts in
excess of R30m. In total the company won 5 separate tenders with
orders varying between classrooms, office units and a mobile police
victim unit.
Hotels
The Lonrho hotels division had a strong quarter across all
businesses. Much of the improved performance has been driven by the
continuing success of the Hotel Cardoso, with both the Grand
Karavia and Lonrho Hotels Management Services building their
operations.
-- The Hotel Cardoso in Mozambique (59% holding), achieved a 19%
increase in turnover in sterling terms for the quarter resulting
from improved room rates, which were 40% higher than the prior
year. The increase was also thanks to improving occupancy levels in
the quarter compared to the same quarter in the prior year, taking
the average in the quarter to 75%. These results would have been
even larger without the significant weakening of the Metical
between the two periods.
-- During the 2010 Christmas period the Cardoso implemented an
initiative in order to keep occupancy up during the traditionally
slow month of December. This was a great success with occupancy
levels staying above 60% for the full month.
-- Room rates at the Grand Karavia in the DRC (50% holding)
continue to increase, up 10% on the final quarter of the last
financial year. The Grand Karavia has built occupancy slower than
had been budgeted, however with the copper industry in the region
regaining momentum on the back of a surge in the price of the
metal, and the resolution of most of the mining contractual
reviews, a strong second quarter is expected. Despite its lower
than anticipated occupancy levels, the Grand Karavia has been doing
exceptionally well on food and beverage income, driven in the main
by a strong reputation being built in the conferencing market, with
a single week in November seeing over 2,500 covers through the
dining room.
-- The Lonrho hotels division has signed a lease on a new hotel
in Libreville, the capital of Gabon. A multi-million pound
refurbishment project has upgraded the building to a five star
standard that will offer travellers a modern product. The hotel has
forty-nine bespoke bedrooms, pool, gymnasium, an indoor-outdoor bar
and restaurant. Lonrho hotels has taken a renewable twenty year
lease on the property with lease payments related to the property's
gross revenues.
-- The Leopard Rock hotel (management contract) has seen
impressive growth in the quarter. October was the hotel's most
productive month since refurbishment with occupancy rates above
60%, meaning that revenues are significantly ahead of the same
point in the prior year.
Support Services
The support services division, helped by the continued strong
performance of Bytes & Pieces, the leading IT company in
Mozambique, has increased turnover on the prior year by 11.6%. With
a number of new contract wins across all of the businesses, the
division is well set to meet its targets for FY11.
-- Bytes & Pieces (65% holding) has been awarded a number of
contracts through the period which have helped to maintain the
growth seen throughout 2010. The biggest of these contracts include
supplying and installing new IT infrastructure at The Mozambican
National Road Administration (ANE) and supplying a new range of
hardware for Telecomunicacoes de Mocambique, as well as a new
contract with Riversdale Mining.
-- In the quarter Bytes & Pieces has also had projects
ongoing at BCI Fomento - a WAN optimisation for their head office,
disaster recovery site and 60 bank branches throughout Mozambique -
and Mozambique Leaf Tobacco - an infrastructure virtualisation and
upgrade, SAN implementation and WAN optimisation.
-- CES Zambia (40% holding + board control) continues to
roll-out the business model with significant sales being made of
Dell computers as well as installations of networks and servers at
Banc ABC and Pick'n'Pay in Zambia. These have resulted in a 112%
increase in turnover compared to the first quarter of the prior
year.
-- CES South Africa (40% holding + board control) has, during
the first quarter of the year, fulfilled two separate projects for
TATA - one to install a network infrastructure upgrade at TATA
Automobiles, the other to project manage the office extension for
TATA Africa.
-- IndIT (45% holding + board control) continues to bring new
product partners on-line with two signing in the first quarter of
2011. IndIT now offers nitro Pro PDF as well as PaperCut, a print
monitoring solution among its products. During the quarter IndIT
has also supplied Telekom SA with Nexan cablings for their
buildings upgrade.
-- Lonrho Water (100% holding) began generating revenues from
its new water purification and contract bottling operations during
the quarter. The first customer for the former being Rand Water,
South Africa's water utility. Lonrho Water now has a strong product
offering and a potential pipeline of deals both in South Africa and
across Southern Africa.
Outlook
The Group has continued to show strong growth, continuing the
trend shown throughout 2010. There have though been some exciting
developments which will further the Group's performance in the
coming quarters.
Fly540 Angola, having now received its AOC and ICAO
registration, will begin generating revenues in the second quarter
of the year. This will help to strengthen the Group as the
business, which has been operationally ready to fly for the last 3
months, starts to contribute to turnover. Further to this the
continued growth of Oceanfresh, which is adding more substantial
customers to its portfolio, as well as increasing its product range
within existing customers, helps to further push the Group
forward.
During the coming quarters the Group will continue developing
all of its businesses in order to meet demand. In addition to this,
the Group will continue to look at strategic acquisitions which
will strengthen the business divisions.
David Lenigas, Lonrho's Executive Chairman, commented:
"Lonrho has delivered a 21% growth in turnover for the period
and continues to see strong, growing, market demand for each
division.
Within the portfolio of businesses there have been some
excellent performances. Oceanfresh is building a strong
international market and having exceptional success in the USA and
exciting progress in Europe and the Far East. Oceanfresh reported a
quarter on quarter increase in sales of 67%.
The start of Fly540 Angola's operations is a significant
milestone for the Company. The Angolan market opportunity is clear
for an international standard, ICAO registered, airline to service
the oil, mining and domestic markets. Africa is a strong emerging
market that has real opportunities and is delivering real GDP
growth and exceeding economic expectations. Lonrho is well
positioned to continue to grow during the year."
Reported Figures
3 months to
31 December 31 December
2010 2009 Variance Var %
Agribusiness
Turnover 15,150 11,511 3,639 31.6%
Gross Margin 16.8% 17.5% (0.7%) -
Gross Profit 2,540 2,016 524 26.0%
Transport
Turnover 4,573 5,177 (604) (11.7%)
Gross Margin 3.0% 10.4% (7.4%) -
Gross Profit 137 539 (402) (74.6%)
Support Services
Turnover 2,502 2,241 261 11.6%
Gross Margin 28.6% 24.9% 3.7% -
Gross Profit 715 557 158 28.4%
Infrastructure
Turnover 3,206 2,598 608 23.4%
Gross Margin 58.0% 44.0% 14.0% -
Gross Profit 1,859 1,143 716 62.6%
Hotels
Turnover 2,019 1,089 930 85.4%
Gross Margin 67.2% 67.1% 0.1% -
Gross Profit 1,356 731 625 85.5%
Head Office
Turnover 153 135 18 13.3%
Gross Profit 153 135 18 13.3%
Group Turnover 27,603 22,751 4,852 21.3%
============ ============ ========= ========
Group Gross Profit 6,760 5,121 1,639 32.0%
============ ============ ========= ========
Group EBITDA 1,437 (1,216) 2,653 N/a
Lonrho Plc -
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David Lenigas, Executive Chairman +44 (0)20 7016 5105
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Geoffrey White, Chief Executive Officer +44 (0)20 7016 5105
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David Armstrong, Finance Director +44 (0)20 7016 5105
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Emma Priestley, Executive Director +44 (0)20 7016 5105
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Pelham Bell Pottinger
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Charles Vivian +44 (0) 20 7861 3126
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+44 (0) 7977 297903
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James MacFarlane +44 (0) 20 7861 3864
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+44 (0) 7841 672831
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Beaumont Cornish Limited (Nomad)
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Rosalind Hill Abrahams
Roland Cornish +44 (0) 20 7628 3396
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This information is provided by RNS
The company news service from the London Stock Exchange
END
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