Lonrho PLC LONR Interim Management Statement

  Lonrho PLC (LONR) - Interim Management Statement

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 £43.6 million (2011:
£38.0 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
£94.9 million to £146.3 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 £88.4 million at 30 September 2012 compared with £78.7
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      growth  like-for-like*    to      growth  like-for-like*
               September              growth     September              growth
                 2012                              2012
               £ million                         £ million
Revenue
- Agribusiness   28.5     11.5%       21.2%        101.2    76.6%       27.8%
-                 6.0     32.0%       36.5%        16.9     15.8%       20.2%
Infrastructure
- Hotels          3.2     30.7%       10.2%         8.3     20.3%        6.7%
- Support         5.9      6.4%        5.5%        19.9     22.7%       18.5%
Services
Core Divisions   43.6     14.4%       20.2%        146.3    54.1%       24.2%
-                  -        -           -          20.2       -           -
Transportation
Lonrho Plc       43.6       -           -          166.5      -           -
Group Gross      27.8%    (1.1%)       0.4%        27.3%    (1.4%)       1.7%
Margin



*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 £7.6 million with a consequential impact on gross profit of
approximately £1.5 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  £1.0 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 £6.4 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 £2.0 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:
Lonrho Plc      +44 (0) 20 7016 5105 FTI Consulting  +44 (0) 20 7831 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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