TIDMLONR
RNS Number : 9888W
Lonrho PLC
04 February 2013
1st February 2013
Lonrho Plc ("Lonrho", the "Company" or the "Group")
Trading Statement
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.
As part of the year end process, Lonrho today updates the market
on its trading performance in Quarter 4 of the financial year to
31(st) December 2012. The Group's preliminary results will be
released in late March 2013.
Throughout 2012, the Group has continued to develop its
operational businesses and remains confident that these are aligned
with the strongest growth opportunities in Africa. However,
progress in certain areas has been slower than expected in the
final quarter, impacting on revenue and profitability in 2012. The
Board now expects to report a net operating loss* of between
(GBP3m) and (GBP5m) for the full year due to the factors outlined
below.
Geoffrey White, Lonrho's Chief Executive Officer, commented:
"2012 has delivered good progress for the Group with revenues
growing by 44.3% and the successful reverse of Lonrho's aviation
business into Fastjet Plc. Following the departure of the Group
Executive Chairman in September, the Executive Directors carried
out a strategic review of the Group's businesses and implemented a
plan across the Group to heighten focus on margin improvements.
This strategic review resulted in the discontinuance of a number of
lines of business where exchange risk or the desired margins did
not meet the Board's revised investment criteria. The strategic
decision to focus on improving margins across the Group has not had
a demonstrable impact on the latter part of 2012 but has positioned
the Group to approach 2013 from a stronger and more reliable base
with much improved budgeting. Each business division has, during
the year, transitioned to become cash generative for the Group and
the balance sheet is satisfactory to support the Group and the
Board's plans.
Quarter 4 has been demanding in several areas of the business
where the lead times on delivering new product lines have proven
longer than previously expected. Whilst the reporting of a net
operating loss in 2012 is disappointing, the shortfalls have
largely reflected delays in the timing of delivery of major
contract or project implementation delays and not any weakness in
the underlying business models, which remain very positive.
Over the past five months the Group has realigned itself to move
away from a short term trading focus to concentrate on building
long term, sustainable, businesses with large, global corporate
clients. Lonrho is in the right markets at the right time, and the
opportunities facing the Group as we move into 2013 are clear for
the Board and the management team to deliver strong, profitable and
reliable growth for shareholders."
Headline and like-for-like revenue growth has been strong across
all four operating divisions reaching GBP186.1m for the full
year.
-- Revenue in the Quarter 4 increased 34.3% to GBP46.2m (2011:
GBP34.4m). Like-for-like revenue at constant currency increased by
28.9%.
-- For the full year to 31 December 2012, reported revenue was
up 44.3%, from GBP128.9m to GBP186.1m, a like-for-like increase at
constant currency of 23.9%. Strong performance was recorded at Luba
Freeport, LonAgro Angola, and from in-house farming operations all
of which exceeded management expectations. The farming off-take and
outgrower programmes have been established, are expanding, and have
started delivery. The Group is successfully transitioning its
agricultural operations from short term individual trading
contracts to demand driven, longer term, sustainable, growing
programmes in conjunction with and in partnership with the world's
leading retail chains.
Continuing 4th Quarter Full Year
Operations
---------------- ---------------------------------------------------- ----------------------------------------------------
Quarter Reported **Adjusted **Adjusted 12 Reported **Adjusted **Adjusted
to Growth like-for-like like-for-like months Growth like-for-like like-for-like
December growth growth to growth growth
2012 (Constant December (Constant
FX) 2012 FX)
---------------- --------- --------- -------------- -------------- --------- --------- -------------- --------------
GBP GBP
million million
Revenue
Agribusiness 27.6 27.1% 11.1% 21.9% 123.4 56.3% 12.9% 24.7%
Infrastructure 6.6 62.9% 62.9% 68.7% 23.5 25.9% 25.9% 30.4%
Support
Services 8.5 38.2% 24.0% 31.9% 27.3 24.7% 22.5% 21.4%
Hotels 3.6 41.4% 10.1% 18.9% 11.9 25.9% 12.4% 9.7%
Core Divisions 46.3 34.3% 19.0% 28.9% 186.1 44.3% 15.8% 23.9%
---------------- --------- --------- -------------- -------------- --------- --------- -------------- --------------
Transportation 0.0 20.2
Other 0.1 0.7
Lonrho Plc 46.4 207.0
---------------- --------- --------- -------------- -------------- --------- --------- -------------- --------------
Over the past five months, the increased corporate focus on
long-term profitability, subsequent restructuring and a number of
implementation delays impacted on the Group's performance in
Quarter 4 versus management expectations. These impacts are mainly
now historic and completed or timing related, where contracts and
business development that were forecast for 2012 have rolled over
into the financial year 2013:
-- Adjustments to management expectations in Quarter 4 were largely driven by:
o Delivery by Oceanfresh of hake volumes to fulfil the Costco
Lent promotion for Kirkland Signature Hake Loins fell short of
expectations. The fulfilment of the required volumes and sizes was
delayed, but sales remain on track for 2013 (shortfall in 2012
Revenue of GBP6m). Fish volumes were good in November and the first
part of December but sizes were, unusually, smaller than normal
impacting the Oceanfresh loin availability. Fish sizes being landed
have recovered strongly in late December and January and sufficient
stock has now been secured to meet Costco's promotional
requirements. However, this revenue was largely delayed from
accruing in 2012 into 2013.
o Trak Auto, the Lonrho John Deere distributor in Mozambique,
experienced significant import delays of tractors and other
equipment arriving into Mozambique in Q4 due to port congestion in
Maputo port, a transport workers' strike and production delays at
John Deere (shortfall in 2012 Revenue of GBP4m). This delayed
delivery of some 72 units, all of which were successfully delivered
in late December and January.
o The Lansmore Hotel in Libreville, Gabon, and the first
easyHotel in Johannesburg were forecast to open in the fourth
quarter 2012 but have been delayed and will now open in 2013
(shortfall in 2012 Revenue of GBP1.2m). The Lansmore Masa Square in
Botswana opened on schedule and has rapidly become the number one
hotel in Gaborone.
o Lonrho Logistics declined to renew a contract to source and
supply animal feed to the Middle East dairy farming market
(shortfall in 2012 Revenue of GBP4m). This is in line with the
Group's new strategic focus on increasing Group margins. Management
concluded that, although this was a sizeable revenue opportunity,
it would be challenging to achieve satisfactory profitability and
the project margin was overly sensitive to the Rand / US$ exchange
and freight rates.
o e-Kwikbuild continued to encounter delays in completing its
two key Government contracts in South Africa for 418 Eastern Cape
Schools and for 112 victim friendly units, kitchens and offices for
the South African Police Service (shortfall in 2012 Revenue of
GBP1.6m). Both contracts are now expected to be substantially
complete in Quarter 1 of 2013. e-Kwikbuild continues to focus on
developing a larger part of its business with the private
sector.
o The vertical integration and reorganisation of Rollex Pty and
Lonrho Logistics to improve efficiencies and customer service
levels has been completed in Q4. This has led to one-off
restructuring costs totalling GBP1.3m, including the costs of
closing Rollex Pvt' s discontinued retail activities, closing
transport contracts that did not meet the Group's new margin
threshold and the recruitment of new senior management. Lonrho
Logistics now incorporates all the freight forwarding activities of
the Group, including the rapidly growing sea freight business.
o Rollex Pty is now solely focused on its high value
Agri-Processing business based at Johannesburg International
airport and building long term, sustainable, supply contracts for
major global supermarkets.
o The deterioration of foreign exchange rates versus
expectations caused a shortfall of GBP2.7m in Quarter 4 Revenue. In
particular the South African Rand (which is the reporting currency
for over 40% of the Group's Revenue), declined 6% versus previous
forecasts.
In addition, as announced on 13(th) September 2012, David
Lenigas was awarded 8,138,352 shares in lieu of notice and other
benefits upon his departure from the Company. This has resulted in
a share based payment charge of GBP0.9m.
The Board believes that the strategic action taken in Q3 and Q4
2012, to focus on increasing margins through operational
efficiencies and build long term sustainable customer
relationships, coupled with the decision to withdraw from less
profitable lines of business, positions Lonrho well for entering
2013.
* Net operating profit/(loss) is defined as Profit before Tax
for the core 4 operating divisions adding back gain/(loss)on
associates, jointly controlled entities, investments, amortisation
and share based payments
** Includes acquisitions (pre-acquisition comparables based on
un-audited management accounts), excludes start-up businesses
trading for less than 12 months.
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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