TIDMLONR
RNS Number : 9409Q
Lonrho PLC
13 November 2012
13 November 2012
Lonrho Plc ("Lonrho", the "Company" or the "Group")
Interim Management Statement
Lonrho reports steady third quarter results and confidence in
the growth opportunities now being delivered by its core
businesses
Lonrho announces its results for the third quarter to 30
September 2012 incorporating an update on material transactions to
12 November 2012.
The Company has continued to successfully build on its core
operational businesses that are directly aligned with the
increasing global importance of the emerging agriculture and oil
and gas sectors in Africa and the rapidly expanding consumer
markets across the Continent.
-- Revenue in the third quarter increased 14.4% to GBP43.6
million (2011: GBP38.0 million). Like-for-like revenue increased by
20.2%. For the nine months to 30 September 2012, reported revenue
from core businesses rose 54.1%, from GBP94.9 million to GBP146.3
million, a like-for-like increase of 24.2%.
-- Gross margins across the Group are up 0.4% on an adjusted
like-for-like basis in the quarter. Reported gross margin on core
businesses for the 9 months stands at 27.3%, having increased 1.7%
on a like-for-like basis.
-- Net debt was GBP88.4 million at 30 September 2012 compared
with GBP78.7 million at 30 June 2012. The increase is largely
attributable to drawing down the pre-arranged working capital
facilities to meet the requirements for the roll-out of Oceanfresh
products into the US market, specifically the volumes into Costco's
"Kirkland Signature" lines. These facilities will peak in early
2013 and thereafter reduce as each line becomes fully
established.
Continuing Operations
3(rd) Quarter 9 months
Quarter Reported Adjusted 9 months Reported Adjusted
to September growth like-for-like* to September growth like-for-like*
2012 growth 2012 growth
----------------------- -------------- --------- ---------------- -------------- --------- ----------------
GBP million GBP million
Revenue
- Agribusiness 28.5 11.5% 21.2% 101.2 76.6% 27.8%
- Infrastructure 6.0 32.0% 36.5% 16.9 15.8% 20.2%
- Hotels 3.2 30.7% 10.2% 8.3 20.3% 6.7%
- Support Services 5.9 6.4% 5.5% 19.9 22.7% 18.5%
Core Divisions 43.6 14.4% 20.2% 146.3 54.1% 24.2%
----------------------- -------------- --------- ---------------- -------------- --------- ----------------
- Transportation - - - 20.2 - -
Lonrho Plc 43.6 - - 166.5 - -
----------------------- -------------- --------- ---------------- -------------- --------- ----------------
Group Gross
Margin 27.8% (1.1%) 0.4% 27.3% (1.4%) 1.7%
----------------------- -------------- --------- ---------------- -------------- --------- ----------------
*includes acquisitions (pre-acquisition comparables based on
un-audited management accounts), excludes start-up businesses
trading for less than 12 months and is adjusted to constant
currency
Overall Q3 is typically focused on laying the groundwork for the
final quarter, which is traditionally the Group's strongest.
Although export demand from Europe was weaker during the period,
reflecting the economic turmoil in Europe, this was compensated for
by stronger and increasing volumes to the US, ASEAN and Chinese
markets.
2012 has seen large currency fluctuations in the value of
sterling against the currencies in which Lonrho's core operational
businesses operate. Over the first nine months of the year the
effect of movements in the US Dollar and South African Rand versus
forecast has been to reduce reported Group turnover by
approximately GBP7.6 million with a consequential impact on gross
profit of approximately GBP1.5 million.
Trading Highlights in the Third Quarter
-- The Agribusiness Division continues to grow, strongly
increasing its significance within the Group. In the 3(rd) quarter,
Agribusiness contributed 65% of the Group's revenue. This growth
has come from various businesses, with the strongest like-for-like
growth coming in Oceanfresh where sales have increased 179% on the
same quarter in the prior year. The growth at Oceanfresh is a
result of the hard work during the first part of 2012 establishing
formal and significant retail relationships for Oceanfresh both
within Africa (including Shoprite / Chequers; Spar; Massmart /
Makro etc) and internationally (including Costco; Walmart; Tesco
etc) and the commencement of the delivery on these relationships.
Oceanfresh is only just beginning to report the beneficial results
of the roll-out of a series of important product wins, such as
Costco's "Kirkland Signature" Hake Loins being supplied initially
into the US and thereafter to all Costco stores worldwide. A second
Costco "Kirkland Signature" line has just started deliveries and a
third will commence roll-out before year end. New product wins have
also been achieved with Sam's Club; Shoprite; Makro, Sainsbury's;
and others, further underpinning growth. Gross margins have been
lower than expectations in the quarter during the roll-out phases
but are expected to recover through the Christmas period and into
2013 as product launches become established.
-- Oceanfresh also announced in the quarter that it had been
granted the exclusive fishing rights for Tuna in the 12 mile
territorial waters and the 200 mile Exclusive Economic Zone off
Mozambique by the Mozambique Government. This exclusive five year
agreement will begin operations in 2013 with the full quota being
fished by 2014 and product being sold to Asia and the US. The Tuna
to be sold from this agreement will add meaningful further growth
at Oceanfresh over the coming years. Lonrho is committed to
creating jobs and economic development where it operates and
Oceanfresh is currently refurbishing and upgrading to EU standards
the largest commercial seafood cold storage and processing facility
in Maputo in Mozambique to further develop the industry and export
opportunities. Oceanfresh is also increasing its export of lobsters
and langoustines through the facility - gourmet product lines with
strong margins.
-- Fish On Line has launched its first roll-out of own branded
goods to Food Lovers Market (a new, fast growing, quality retail
chain) in South Africa. This relationship will see Fish on Line
provide a quality fish range throughout the 100 stores which are
currently trading across the country.
-- Lonrho's farming and cold chain logistics operations have
recently been inspected by leading European retailers including
Waitrose, Asda and Tesco, and, similar to the growth pattern of
Oceanfresh, strategic relationships are now developing to meet
specific retailers' long term demands, both within Africa and
internationally.
-- The Group's niche market farming operations have seen the
existing Strawberry programme for the leading South African
retailer Pick'n'Pay extended to be a continuous, rolling 12 month
supply contract. The last 12 months saw 900 tonnes of strawberries
delivered, and following the success of the 2011/12 season, this
year's planting programme has now been completed and designed to
deliver a significant increase in output during 2013 to meet
increasing demand.
-- The Group's 181,000 tree stone fruit plantation continues to
mature. During the end of the quarter and running into the final
quarter of the year, the first commercial peach harvest from the
plantation is underway with early season peaches being supplied to
Europe, the Middle East and South Africa. As highlighted in the
interim results, exceptionally low temperatures earlier in the year
caused frost damage to a proportion of the fruit on the very young
tree stock affecting this year's harvest. It is currently too early
to quantify the one-off profit impact in the current year (although
it is expected to be no more than GBP1.0 million). Looking forward,
as the trees mature, they become stronger and more resilient and
measures have been put in place to ensure that, in the future,
there will be no loss of fruit (and no impact on the biological
asset valuation) if the temperatures were again to reach these
unprecedented lows. The first peaches from the plantation have now
been exported to market and have proven the anticipated seasonal
timing advantages (and hence improved margins) and are being very
well received by customers, in relation to quality and flavour. The
produce from this plantation, now one of the largest stone fruit
orchards in the southern hemisphere, is already seeing strong
demand for the 2013 crop.
-- During the quarter Lonrho made a decision to pull out of a
3(rd) party, specific, distribution contract which was loss making
to the Group. This has resulted in a fall in revenue in the fruit
and vegetable sector of Agribusiness of GBP6.4 million when
compared with the second quarter. This was non-core, low margin
business that was not aligned with the long term objectives and
retailer relationships or the margin targets of the Group.
-- Lonrho's relationship with John Deere continues to flourish
with the new dealerships in Tanzania and South Sudan beginning to
deliver strong sales since the operations began earlier in the
year. The South Sudan business was further awarded the rights to
distribute John Deere construction equipment during the period.
South Sudan is a market that we believe has strong opportunity as
it takes control of it's oil revenues and begins to develop.
Trak-Auto has experienced difficulties in receiving stock during
the quarter which has been tied up both in South Africa, due to the
transport workers strike and at the port in Maputo. These delays
have seen a number of sales (revenue of approximately GBP2.0
million) slip from Q3 to Q4.
-- Within the Infrastructure Division, Luba Freeport has a seen
a large increase in vessel movements in the quarter when compared
to the prior year. Average weekly vessel calls in the 3 month
period were 19.8 compared to just 13.9 in 2011, a 42% increase.
Significantly increased exploration activity is expected to
continue through Q4 and throughout 2013.
-- The new management team at e-Kwikbuild has been working hard
to deliver the 398 classrooms for the Eastern Cape Schools project
that was won earlier in the year. Due to unusually bad weather in
the region the project has suffered from delays and, at the end of
the quarter, 44% of the schools had been completed, whereas the
project had been expected to be 90% complete by this point. The
remaining schools will be delivered in the final quarter of the
year and in the first quarter of 2013 with the full revenue from
the project recognised when schools are completed. There is a
strong pipeline of new projects building for the coming year both
domestically in South Africa and increasingly across the southern
Africa region with an increasing percentage of new business now
coming from the private sector
-- Within the Hotels Division, Lonrho's 'Lansmore' Masa Square,
Gaborone, opened on schedule in July with good initial occupancy
rates that are steadily increasing. The hotel has quickly
established itself as the leading hotel in Botswana. The Cardoso in
Maputo continues to perform well with occupancy for the quarter at
85%. The Karavia in Lubumbashi is also continuing to build in
popularity with occupancy up 12% on the same period in the prior
year and F&B revenues building month on month. The Grand Hotel
in Kinshasa is now undergoing a refurbishment funded by the
Government and is well on its way in 2013 to re-establishing itself
as one of the leading hotels in Southern Africa.
-- Within Support Services the AFEX group has expanded the
services provided to Tullow Oil in Kenya through the opening of a
new 250 man camp in northern Kenya. In 2013 it is expected that
increased drilling by Tullow will mean that revenues received from
AFEX's support contract should nearly double. Contract wins from
Fluor, USAID and others reflect the growing interest in South Sudan
and east Africa for development projects.
-- The IT division has had a quiet third quarter though Q4 has
started well with the new CES Namibia operation established from
July and trading strongly. This takes the Lonrho IT footprint to
four countries with further new country openings under
consideration. Bytes and Pieces, currently the largest component of
the IT division and the leading IT company in Mozambique, is at
present working to achieve ISO certification, which will be the
first in the market and help it to cement it's position as the IT
company of choice for Mozambique.
-- fastjet Plc, the African low cost carrier in which Lonrho
holds a 65.8%, arm's length, strategic stake, following the
reversal of the airline out of Lonrho earlier in the year,
continues to move toward launch of the first branded fastjet fleet
at the end of November. The business has announced that Tanzania
will be the initial hub through which the first branded fastjet
flights will launch operating three Airbus A319 aircraft. In the
quarter fastjet announced that current passenger numbers have gone
from 130,531 in the prior year to 170,988 in the same 3 months for
2012, a 31% increase.
Corporate Update
-- During the quarter David Lenigas stepped down from his
position as Executive Chairman on the Lonrho Board and departed
from his role in Lonrho, to concentrate on his role as Executive
Chairman of fastjet, Africa's first true low cost carrier, and
other personal interests.
-- Following David Lenigas' departure, Ambassador Frances Cook
was appointed to the position of non-executive Chairman of the
Company, separating the executive role from the Chairman's role.
Ambassador Cook has been a Non-Executive Director of Lonrho since
2007 and the Senior Independent Director since April 2011. She is a
former U.S. Ambassador to Burundi, to Cameroon and to the Sultanate
of Oman, and the former U.S. Consul General in Alexandria, Egypt.
She also holds a number of other directorships and brings an
extensive and unique knowledge of Africa to the position of
Chairman of the Company.
-- Since the quarter end, the Agribusiness division has
strengthened its senior management team by hiring a new divisional
CEO, Ben Ward. Ben has in-depth experience at the highest levels in
the produce market from production through logistics to interfacing
with global retailers. His experience is directly matched with
Lonrho's business model of providing the route to market for
African produce to the growing consumer base in Africa and to the
increasing number of the world's supermarkets that are turning to
Africa as an essential source of produce to fill their shelves.
The outlook for the full year will be driven by fourth quarter
performance, traditionally the Group's strongest period of the
year. Notwithstanding the one off impact to overall profit for the
full year of the frost damage to a proportion of this year's peach
harvest and the impact of the currency fluctuations referred to
earlier, we are encouraged that trading in the fourth quarter has
begun in line with our expectations.
Geoffrey White, Lonrho's Chief Executive Officer, commented:
"The third quarter of the year has been one of continued
delivery by our core businesses. We are just starting to see the
tangible results of the significant business that has been won over
the past eighteen months and this will continue to build month on
month as we move forward. The Group has secured a number of world
class opportunities and these will increasingly reflect in the
corporate results over time."
Lonrho will be hosting a conference call for analysts to discuss
the Group's 3(rd) quarter IMS with Geoffrey White and David
Armstrong on Tuesday 13(th) November 2012 at 9:30am. For details on
the call please contact FTI Consulting.
ENDS
Enquiries:
+44 (0) 20 7016 +44 (0) 20 7831
Lonrho Plc 5105 FTI Consulting 3113
Geoffrey White Edward Westropp
David Armstrong Georgina Bonham
This information is provided by RNS
The company news service from the London Stock Exchange
END
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