Wrap Text
LONRHO
25 JANUARY 1999
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 1998
HIGHLIGHTS
* OPERATING PROFIT FROM CONTINUING OPERATIONS GBP 111 MILLION (GBP67 MILLION)
* PRE-TAX PROFITS BEFORE EXCEPTIONAL ITEMS GBP110 MILLION (GBP99 MILLION)
* LONRHO PLATINUM OPERATING PROFIT GBP69 MILLION (GBP32 MILLION)
* NET BORROWINGS AS ADJUSTED REDUCED TO GBP133 MILLION OR 26% GEARING
* FINAL DIVIDEND 10.0P, MAKING TOTAL DIVIDEND FOR THE YEAR 17.2P
* EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS 41.5P (24.4P)
COMMENTING ON THE RESULTS, NICK MORRELL, CHIEF EXECUTIVE, SAID:
"THE COMPANY HAS MADE AN EXCELLENT START IN ITS FIRST YEAR AS A FOCUSED MINING
GROUP. IN PARTICULAR, OUR PLATINUM DIVISION REPORTED AN OUTSTANDING RESULT. THE
INTEGRATION OF OUR COAL OPERATIONS WITH THE NEWLY ACQUIRED TAVISTOCK HAS
PROCEEDED WELL AND EXCEEDED FORECASTS PROVIDED TO SHAREHOLDERS AT THE TIME OF
THE ACQUISITION.
"THE GROUP IS WELL PLACED TO DELIVER ENHANCED SHAREHOLDER VALUE THROUGH A
COMBINATION OF ORGANIC GROWTH AND CORPORATE ACTIVITY."
PRESS ENQUIRIES: ANTHONY CARDEW CARDEW & CO 0171 930 0777
THIS PRESS RELEASE IS AVAILABLE ON HTTP://WWW.LONRHO.CO.UK
CHAIRMAN'S STATEMENT
LONRHO HAS MADE AN EXCELLENT START IN ITS FIRST YEAR AS A FOCUSED MINING GROUP.
WHILE PROFITS FROM GOLD AND COAL WERE DEPRESSED IN LINE WITH OTHER MAJOR
PRODUCERS BECAUSE OF POOR PRICES ON THE WORLD COMMODITY MARKETS, YOUR COMPANY'S
PLATINUM GROUP METALS MINING OPERATION REPORTED AN OUTSTANDING RESULT. THE
INTEGRATION OF OUR COAL ACTIVITIES BY THE COMBINATION OF THE NEWLY ACQUIRED
TAVISTOCK OPERATION IN DUIKER HAS PROCEEDED IN LINE WITH OUR EXPECTATIONS.
THE STRONG IMPROVEMENT IN PROFIT AND EARNINGS PER SHARE OF YOUR COMPANY FOR THE
YEAR ENDED 30 SEPTEMBER 1998 WERE ESPECIALLY PLEASING IN A PERIOD WHICH WAS
CHARACTERISED BY A GENERALLY TURBULENT FINANCIAL CLIMATE AND SPECIFICALLY,
STAGNANT MARKETS FOR COAL AND GOLD. SHARE PRICES FOR COMPANIES IN THE MINING
AND EXTRACTIVE INDUSTRIES SECTOR HAVE REMAINED DEPRESSED, BUT YOUR BOARD, WHICH
IS COMMITTED TO THE ENHANCEMENT OF SHAREHOLDER VALUE, BELIEVES THAT EVEN IN
THIS ENVIRONMENT, YOUR COMPANY'S SHARE PRICE DOES NOT ADEQUATELY REFLECT THE
ORGANIC GROWTH IN EARNINGS OR THE UNDERLYING VALUE OF THE QUALITY MINING ASSETS
WHICH WE POSSESS.
THERE ARE TWO MAJOR REASONS FOR THE RELUCTANCE THE FINANCIAL MARKETS HAVE SHOWN
IN RECOGNISING THE REAL VALUE OF YOUR COMPANY. THE FIRST IS HISTORIC AND YOUR
BOARD WOULD EXPECT THAT THE REASSURANCE PROVIDED BY THESE FIGURES PLUS THE
EVIDENCE OF OUR CONTINUED PROGRESS WILL PROVIDE AN EFFECTIVE REMEDY TO THE
UNCERTAINTY WHICH SURROUNDED THE SPRAWLING CONGLOMERATE WHICH LONRHO WAS A YEAR
AGO. THE SECOND REASON, THE FACT THAT WE DO NOT HAVE FULL OWNERSHIP OF OUR
PRINCIPAL ASSETS AND THE CASH FLOWS, OR IN THE CASE OF ASHANTI, MANAGEMENT
CONTROL, HAS THE EFFECT THAT THE MARKET PLACES AN "INVESTMENT TRUST" DISCOUNT
ON THE TRUE VALUE OF THE ASSETS AND DOES NOT PLACE A FAIR MULTIPLE ON THE
EARNINGS. TO ELIMINATE THIS DISCOUNT AND THUS ACHIEVE A PROPER VALUATION OF OUR
SHARES, IT IS CLEAR TO US THAT FURTHER RESTRUCTURING WILL HAVE TO BE
UNDERTAKEN. SATISFACTORY SOLUTIONS WILL DEPEND IN PART ON THE AGREEMENT OF
THIRD PARTIES, INCLUDING MINORITY SHAREHOLDERS, REGULATORS AND GOVERNMENTS AND
WILL BE COMPLICATED. YOUR COMPANY IS ALSO, FOR THE FIRST TIME, IN A POSITION
WHERE IT HAS A NUMBER OF ALTERNATIVES, WHICH CAN BE ASSESSED ON THE BASIS OF
VALUE AND OPPORTUNITY. I SHOULD EMPHASISE THAT YOUR BOARD WILL NOT BE DETERRED
FROM THE PURSUIT OF ENHANCED SHARE VALUE, HOWEVER RADICAL THE PROGRAMME OF
CHANGE REQUIRED. IN THE MEANTIME, WE HAVE CONFIDENCE IN OUR ABILITY TO CONTINUE
TO DELIVER EARNINGS GROWTH.
SHAREHOLDERS WILL APPRECIATE THAT MINING COMPANIES NORMALLY ADOPT A MORE
CONSERVATIVE DIVIDEND POLICY THAN CONGLOMERATES IN THE LIGHT OF THE GREATER
AMOUNTS ASSOCIATED WITH CAPITAL EXPENDITURE AND EXPLORATION COSTS IN THE MINING
INDUSTRY. WE WILL TAKE THESE CONSIDERATIONS INTO ACCOUNT IN FORMULATING AN
APPROPRIATE DIVIDEND POLICY AT THE TIME OF THE ANNOUNCEMENT OF OUR INTERIM
RESULTS.
FOLLOWING THROUGH ON THE COMMITMENT MADE AT THE TIME OF THE DEMERGER OF LONRHO
AFRICA FROM THE GROUP IN MAY 1998, WE SHALL BE PUTTING TO SHAREHOLDERS, AT THE
FORTHCOMING ANNUAL GENERAL MEETING, A PROPOSAL TO CHANGE THE NAME OF THE
COMPANY TO LONMIN PLC. THIS WILL MORE CLOSELY ALIGN THE COMPANY'S NAME WITH ITS
FOCUS ON MINING AND REMOVE ANY RESIDUAL CONFUSION IN THE FINANCIAL MARKETS AND
INSTITUTIONS BETWEEN YOUR COMPANY AND LONRHO AFRICA.
IT WAS WITH SADNESS THAT THE BOARD NOTED THE RECENT DEATH OF MR R W ("TINY")
ROWLAND WHOSE CONTRIBUTION TO THE CREATION AND DEVELOPMENT OF THE COMPANY WAS
IMMEASURABLE. AS A SUBSTANTIAL PRIVATE SHAREHOLDER, HE REMAINED, UP TO THE TIME
OF HIS DEATH, INTERESTED IN THE GROUP'S AFFAIRS, (AND WAS A VOCAL, IF NOT
ALWAYS A SUPPORTIVE COMMENTATOR ON OUR PROGRESS). WE WILL MISS HIM.
OUR ABILITY TO MAKE THE SUBSTANTIAL ADVANCES THAT WE HAVE REPORTED, BOTH IN
RESTRUCTURING THE GROUP AND DEVELOPING ITS CONTINUING OPERATIONS, HAS BEEN
BASED ON THE HARD WORK, COMMITMENT AND DETERMINATION OF ALL OUR EMPLOYEES,
INCLUDING THOSE WHO WORKED FOR THE BUSINESS WE SOLD OR DEMERGED, OR WHO LEFT
THE GROUP AS OUR HEAD OFFICE CONTRACTED. TO ALL THE PEOPLE WHO WORK OR WORKED
FOR YOUR COMPANY, ON BEHALF OF ALL THE BOARD, I GIVE MY THANKS AND APPRECIATION
FINALLY I WELCOME SIR ALASTAIR MORTON TO THE BOARD AND EXPRESS MY GRATITUDE TO
SIR JOHN LEAHY AND STEPHEN WALLS FOR THEIR VALUABLE CONTRIBUTIONS DURING THEIR
RESPECTIVE TENURES OF OFFICE.
SIR JOHN CRAVEN
CHAIRMAN
22 JANUARY 1999
CHIEF EXECUTIVE'S STATEMENT
THE FINAL STEP IN LONRHO'S TRANSITION FROM A DIVERSIFIED TRADING AND INDUSTRIAL
CONGLOMERATE TO A FOCUSED MINING COMPANY WAS MARKED BY THE SUCCESSFUL SALE OF
PRINCESS HOTELS TO CANADIAN PACIFIC, IN AUGUST LAST YEAR. WE NOW HAVE THE
POWERFUL COMBINATION OF A STRONG BALANCE SHEET AND FIRST CLASS ASSETS
GENERATING GOOD EARNINGS. IN SPITE OF EXTENSIVE CORPORATE RESTRUCTURING
THROUGHOUT THE PERIOD, OUR CONTINUING OPERATIONS PERFORMED WELL. IN PARTICULAR,
OUR PLATINUM GROUP METAL OPERATIONS REPORTED EXCELLENT PROGRESS WITH AN
INCREASE IN OPERATING PROFIT FROM GBP32 MILLION IN 1997 TO GBP69 MILLION IN
1998.
THE SALE OF PRINCESS HOTELS FOLLOWED LENGTHY AND COMPLICATED NEGOTIATIONS, BUT
OUR PATIENCE WAS REWARDED BY A PRICE OF US$540 MILLION, WHICH EXCEEDED MARKET
PREDICTIONS AND YIELDED AN EXCEPTIONAL PROFIT OF GBP65 MILLION. SINCE THE
COMPLETION OF THE SALE, THE MARKET FOR HOTEL PROPERTY HAS DETERIORATED
CONSIDERABLY.
THE SCALE OF THE REORGANISATION PROGRAMME COMPLETED IN THE LAST YEAR IS
SIGNIFICANT BY ANY STANDARD. AN APPRECIATION OF WHAT WAS ACHIEVED CAN BEST BE
GAINED BY REVIEWING THE DISCONTINUED ACTIVITIES WHICH SHOWS 37 COMPANIES BEING
SUCCESSFULLY SOLD OR, IN THE CASE OF LONRHO AFRICA, DEMERGED. SOME OF THE
COMPANIES SOLD WERE IN DIFFICULT MARKET SECTORS, SOME REQUIRED RADICAL CHANGE
BUT FOR THE MANY GOOD BUSINESSES, WE REALISED APPROPRIATE PREMIUMS. ALTHOUGH
NOT DIRECTLY CONNECTED WITH THE RESTRUCTURING THE DECISION TO MAKE A PROVISION
OF GBP69 MILLION AGAINST OUR INVESTMENT IN HONDO OIL AND GAS, ANNOUNCED WITH
OUR INTERIM RESULTS, WAS A DISAPPOINTING CONCLUSION TO AN HISTORIC INVESTMENT
THAT AT ONE TIME HELD CONSIDERABLE PROMISE.
ALONGSIDE THE DISPOSAL PROGRAMME, WE COMPLETED OUR FIRST SUBSTANTIAL
ACQUISITION FOR MANY YEARS WITH THE PURCHASE OF THE TAVISTOCK COAL MINES. IN A
SIMULTANEOUS TRANSACTION, THE UNCERTAINTY SURROUNDING THE ANGLO AMERICAN STAKE
IN LONRHO WAS REMOVED THROUGH THE BUYBACK AND CANCELLATION OF 167 MILLION
SHARES. SUBSEQUENTLY WE RATIONALISED OUR ZIMBABWEAN ACTIVITIES AND ACHIEVED 100
PER CENT OWNERSHIP AND CONTROL OF THE CORSYN MINES WHICH, TOGETHER WITH THE
ALREADY WHOLLY OWNED AND MANAGED INDEPENDENCE MINES, REPRESENT ANNUAL GOLD
PRODUCTION OF ALMOST 190,000 OUNCES.
IT IS A TREMENDOUS CREDIT TO OUR OPERATIONAL MANAGEMENT THAT THEY HAVE PRODUCED
EXCELLENT RESULTS DURING A PERIOD OF SUCH INTENSE CORPORATE ACTIVITY. OPERATING
PROFITS FROM LONRHO'S MINING OPERATIONS RECORDED A 53 PER CENT INCREASE TO
GBP115 MILLION. THAT FIGURE INCLUDES THE BEST EVER PERFORMANCE FROM THE
PLATINUM DIVISION WHICH MORE THAN DOUBLED ITS PROFITS FROM THE PREVIOUS YEAR.
RECORD PRODUCTION OF 1.2 MILLION OUNCES OF PLATINUM GROUP METALS, TOGETHER WITH
HIGHER METAL PRICES AND COST SAVINGS ENHANCED BY THE DEVALUATION OF THE SOUTH
AFRICAN RAND, COMBINED TO PRODUCE THIS OUTSTANDING RESULT.
COAL MINES ACROSS THE WORLD WERE AFFECTED LAST YEAR BY A DOWNTURN IN PRICES
PRECIPITATED BY THE FINANCIAL CRISIS IN THE FAR EAST. IN SPITE OF THESE TESTING
MARKET CONDITIONS, DUIKER SHOWED ITS STRENGTH BY REPORTING PROFITS FOR THE YEAR
SLIGHTLY AHEAD OF BOTH MARKET EXPECTATIONS AND THE FORECASTS PROVIDED TO OUR
SHAREHOLDERS AT THE TIME OF THE TAVISTOCK ACQUISITION.
THE EFFECTS OF MANAGEMENT ACTION TO REDUCE OPERATING COSTS, AN INCREASED LEVEL
OF PRODUCTION, AND A DEVALUING LOCAL CURRENCY, ENABLED OUR ZIMBABWEAN GOLD
MINES TO RECORD AN OPERATING PROFIT OF GBP2 MILLION COMPARED TO A LOSS OF GBP3
MILLION LAST YEAR. A MOST ENCOURAGING IMPROVEMENT, PARTICULARLY IN THE CONTEXT
OF THE LOW GOLD PRICE, WHICH PREVAILED THROUGHOUT THE YEAR.
PRODUCTION AT ASHANTI INCREASED BY 25 PER CENT TO 1.38 MILLION OUNCES AND CASH
OPERATING COSTS IMPROVED FROM US$265 TO US$224 PER OUNCE. THE GROUP'S SHARE OF
ASHANTI'S OPERATING PROFITS WERE SLIGHTLY UP IN STERLING TERMS,
WHICH WHEN COMBINED WITH A SUBSTANTIAL REDUCTION IN INTEREST COSTS, RESULTED IN
A 30 PER CENT INCREASE IN PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS TO GBP13
MILLION. ASHANTI REDUCED ITS DIVIDEND PAYOUT RATIO IN LINE WITH OTHER MAJOR
WORLD GOLD PRODUCERS WITH THE RESULT THAT OUR DIVIDEND WAS GBP4 MILLION
COMPARED WITH GBP5 MILLION IN 1997. ASHANTI CONTINUES TO INVEST FOR THE FUTURE.
OVERALL, LONRHO MADE A PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS OF GBP110
MILLION COMPARED WITH GBP99 MILLION IN 1997. THIS IMPROVEMENT IS EVEN MORE
IMPRESSIVE WHEN ONE TAKES INTO ACCOUNT THE FACT THAT THESE FIGURES ARE
CALCULATED AFTER THE INCLUSION OF GBP21 MILLION OF PROFITS FROM DISCONTINUED
OPERATIONS IN 1998 COMPARED WITH GBP57 MILLION IN 1997. THE IMPROVEMENT IN
PERFORMANCE IS HIGHLIGHTED BY THE DRAMATIC INCREASE IN EARNINGS BEFORE
EXCEPTIONAL ITEMS OF 70 PER CENT TO 41.5 PENCE PER SHARE FOR 1998. AFTER THE
SALE OF PRINCESS, OUR BALANCE SHEET IS IN EXCELLENT SHAPE. TAX AND OTHER
LIABILITIES ARISING FROM DISCONTINUED ACTIVITIES ARE FULLY REFLECTED IN
LONRHO'S 1999 PROFIT AND LOSS ACCOUNT BUT FALL OUTSIDE THE FINANCIAL YEAR FOR
THE PURPOSE OF CALCULATING BORROWINGS. TAKING PRUDENT ACCOUNT OF THE EFFECTS OF
THESE LIABILITIES WOULD RAISE THE GEARING OF THE MINING GROUP TO A LEVEL OF 26
PER CENT WHICH IS ENTIRELY COMFORTABLE FOR A COMPANY OPERATING IN THIS SECTOR.
THE OUTLOOK FOR THE COMPANY AS A FOCUSED MINING GROUP IS ENCOURAGING. DEMAND
FOR PLATINUM GROUP METALS REMAINS STRONG, REFLECTED IN THE STABLE PRICE FOR
PLATINUM AND THE INCREASES IN ASSOCIATED METALS, IN PARTICULAR RHODIUM AND
PALLADIUM. WE WILL UNDERTAKE FURTHER EXPANSION OF THE PLATINUM DIVISION IN THE
CURRENT YEAR WHICH WILL REINFORCE THE ADVANTAGES THAT HAVE TRADITIONALLY
IDENTIFIED US AS A LOW COST PRODUCER. OUR ZIMBABWEAN GOLD OPERATIONS HAVE
PROVED THAT THEY ARE NOT ONLY MAINTAINABLE AT CURRENT LOW PRICES BUT ALSO
CAPABLE OF FURTHER EFFICIENCIES AND IMPROVEMENT. ASHANTI REMAINS ONE OF THE
WORLD'S LEADING GOLD PRODUCERS. THEIR EXPANSION AT GEITA IN TANZANIA AS A
RESULT OF THE SAMAX GOLD ACQUISITION ADDS A NEW AND SIGNIFICANT DIMENSION TO
THE POTENTIAL VALUE OF OUR 33 PER CENT INTEREST IN THE COMPANY.
IN CONCLUSION YOUR COMPANY IS NOW WELL PLACED TO DEVELOP AND DELIVER VALUE TO
SHAREHOLDERS THROUGH A COMBINATION OF ORGANIC GROWTH AND CORPORATE ACTIVITY. IN
THIS RESPECT THE RESOLUTION OF THE COMPLEX RELATIONSHIP WITH OUR MINORITY
SHAREHOLDERS IN PLATINUM REMAINS HIGH ON OUR LIST OF PRIORITIES. ESTABLISHING
THE GROUP ON A WIDER GEOGRAPHIC BASIS WITH THE ACCENT ON DEVELOPING OUR
PRECIOUS METALS BUSINESS REMAINS OUR OBJECTIVE IN THE LONGER TERM.
NICHOLAS MORRELL
CHIEF EXECUTIVE
22 JANUARY 1999
FINANCIAL REVIEW
ANALYSIS OF RESULTS
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS FOR THE YEAR FROM CONTINUING
OPERATIONS INCREASED BY GBP44 MILLION TO GBP111 MILLION. MINING PROFITS WERE UP
GBP40 MILLION, WITH PLATINUM INCREASING BY GBP37 MILLION. PRODUCTION OF
PLATINUM GROUP METALS INCREASED AND THE DIVISION BENEFITED FROM HIGHER
PALLADIUM AND RHODIUM PRICES. GOLD PRODUCTION INCREASED AND CASH COSTS OF
PRODUCTION REDUCED, WITH ASHANTI INCREASING ITS OPERATING PROFIT AND THE
ZIMBABWE MINES MAKING AN OPERATING PROFIT OF GBP2 MILLION. DUIKER'S OPERATING
PROFITS DECREASED BY GBP3 MILLION, PRINCIPALLY AS A RESULT OF ADVERSE MARKET
CONDITIONS. THE GROUP ALSO GAINED FROM THE DEVALUATION OF THE SOUTH AFRICAN
RAND AND ZIMBABWE DOLLAR.
THE PROFITS OF F E WRIGHT, THE GROUP'S INSURANCE BROKER, REDUCED SLIGHTLY IN
1998. THE BAHAMAS HOTELS MADE AN OPERATING PROFIT OF GBP0.4 MILLION COMPARED
WITH A LOSS OF GBP2.3 MILLION IN 1997. HEAD OFFICE CENTRAL COSTS WERE REDUCED
BY GBP3 MILLION.
THE RESTRUCTURING OF THE GROUP INTO A FOCUSED MINING GROUP CONTINUED WITH THE
SALE OF CRAMLINGTON TEXTILES, DUTTON FORSHAW, PRINCESS HOTELS, SUNLEY TURRIFF
AND WILLOUGHBYS CONSOLIDATED. THE GROUP ALSO DEMERGED LONRHO AFRICA AND ITS
SHARES WERE DISTRIBUTED TO SHAREHOLDERS. THESE BUSINESSES MADE OPERATING
PROFITS OF GBP37 MILLION BEFORE THEIR DISPOSAL AND ARE SHOWN AS DISCONTINUED
OPERATIONS.
CPMZ'S CONCESSION FROM THE GOVERNMENT OF MOZAMBIQUE, TO RUN THE PIPELINE FROM
MOZAMBIQUE TO ZIMBABWE, HAS BEEN RENEWED TO 2007. NET INCOME FROM CPMZ IS
UNCHANGED; CPW IS NOW TREATED AS AN INVESTMENT.
AS A CONSEQUENCE OF THE INTRODUCTION OF FRS 9, THE OPERATING PROFITS, NET
INTEREST PAYABLE AND EXCEPTIONAL ITEMS OF ASSOCIATES ARE DISCLOSED SEPARATELY,
AND THE COMPARATIVE FIGURES HAVE BEEN RESTATED. ASSOCIATES' OPERATING PROFIT
FROM CONTINUING OPERATIONS HAS INCREASED BY GBP4 MILLION, REFLECTING AN
INCREASE AT ASHANTI OF GBP1 MILLION AND GBP3 MILLION PROFITS FROM THE ASSOCIATE
OF TAVISTOCK.
IT HAS BEEN DECIDED TO CHANGE THE BASIS ON WHICH ROYALTY PAYMENTS BY ASHANTI
ARE REPORTED FROM A TAX CHARGE TO A CHARGE AGAINST PROFIT BEFORE TAX. THIS WILL
BRING THE GROUP INTO LINE WITH THE WAY ASHANTI REPORT THESE ROYALTY PAYMENTS.
THE EFFECT OF THIS CHANGE IS TO REDUCE PROFIT BEFORE TAX IN 1997 AND 1998 BY
GBP2 MILLION AND TO REDUCE THE TAX CHARGE BY THE SAME AMOUNT. THE COMPARATIVE
FIGURES HAVE BEEN RESTATED.
NET INTEREST PAYABLE AMOUNTED TO GBP38 MILLION, COMPARED WITH GBP57 MILLION IN
1997. THE REDUCTION IS DUE TO LOWER BORROWINGS FOLLOWING THE SALE OF
BUSINESSES, OFFSET BY BORROWING RELATING TO THE ACQUISITION OF TAVISTOCK AND
THE BUYBACK OF LONRHO SHARES AT A COST OF GBP196 MILLION INCLUDING TAX.
TOTAL PROFIT BEFORE EXCEPTIONAL ITEMS AND TAXATION AMOUNTED TO GBP110 MILLION,
COMPARED WITH GBP99 MILLION IN 1997.
TOTAL EXCEPTIONAL LOSSES BEFORE TAXATION WERE GBP26 MILLION. THE PROFIT ON SALE
OF PRINCESS HOTELS AND DUTTON FORSHAW AMOUNTED TO GBP65 MILLION AND GBP8
MILLION RESPECTIVELY, INCLUDING REALISED SURPLUSES ON ACQUISITION COST OF GBP61
MILLION AND GBP2 MILLION. OFFSET AGAINST THIS WERE A PROVISION OF GBP69 MILLION
AGAINST HONDO OIL & GAS AND A PROVISION OF GBP18 MILLION, WHICH INCLUDED AN
AMOUNT OF GBP6 MILLION ALREADY PROVIDED AS GOODWILL ON ACQUISITION, FOR THE
DISPOSAL OF SUNLEY TURRIFF. EXCEPTIONAL COSTS ALSO INCLUDED THE GROUP'S SHARE
OF THE PROVISION AGAINST THE CLOSURE OF THE IDUAPRIEM MINE BY ASHANTI,
AMOUNTING TO GBP6 MILLION.
THE GROUP'S OVERALL TAXATION RATE ON PROFITS BEFORE EXCEPTIONAL ITEMS IS 13 PER
CENT, PRINCIPALLY DUE TO LOW TAX CHARGES IN PLATINUM, ASHANTI AND HOTELS. IN
ADDITION THERE IS A NET TAX PROVISION OF GBP9 MILLION AGAINST EXCEPTIONAL
PROFITS ARISING FROM THE SALE OF BUSINESSES.
THE MINORITY INTERESTS IN PROFITS FROM CONTINUING OPERATIONS INCREASED BY GBP8
MILLION TO GBP20 MILLION, DUE TO IMPROVED PROFITS IN THE PLATINUM DIVISION AND
THE MINORITY INTERESTS IN PROFITS OF DISCONTINUED OPERATIONS WERE GBP2 MILLION,
GIVING A TOTAL OF GBP22 MILLION.
PROFIT ATTRIBUTABLE TO SHAREHOLDERS BEFORE EXCEPTIONAL ITEMS AMOUNTED TO GBP74
MILLION COMPARED WITH GBP48 MILLION IN 1997. PROFIT ATTRIBUTABLE TO
SHAREHOLDERS AFTER EXCEPTIONAL ITEMS WAS GBP39 MILLION COMPARED WITH GBP142
MILLION IN 1997, LARGELY AS A RESULT OF THE PROVISION AGAINST THE INVESTMENT IN
HONDO IN 1998, AND THE PROFIT OF GBP 141 MILLION ON THE SALE OF LONRHO SUGAR IN
1997.
EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS ARE 41,5 PENCE COMPARED WITH 24.4
PENCE IN 1997.
FUNDING
THE NET BORROWINGS OF THE GROUP AT 30 SEPTEMBER 1998 WERE GBP104 MILLION
COMPARED WITH GBP259 MILLION IN 1997. INCLUDED IN NET CURRENT ASSETS ARE
SHORT-TERM PAYABLES AND SHORT-TERM RECEIVABLES IN RESPECT OF BUSINESSES SOLD.
HAD THESE PAYABLES AND RECEIVABLES BEEN SETTLED AT 30 SEPTEMBER 1998 THE NET
BORROWINGS WOULD HAVE BEEN GBP133 MILLION, RESULTING IN GEARING OF 26 PER CENT.
THE MOVEMENT IN NET BORROWINGS DURING THE YEAR INCLUDES THE RECEIPT OF THE
PROCEEDS FROM THE DISPOSAL OF BUSINESSES AND THE ELIMINATION OF THEIR NET DEBT
AMOUNTING TO GBP473 MILLION. THIS IS OFFSET BY THE CAPITAL INJECTION INTO
LONRHO AFRICA OF GBP48 PRIOR TO ITS DEMERGER, THE BUYBACK OF 166.7 MILLION
SHARES IN THE COMPANY COSTING GBP196 MILLION, INCLUDING TAX, AND THE
ACQUISITION OF THE TAVISTOCK COAL MINES FOR GBP136 MILLION.
THE BORROWING LIMIT IN THE ARTICLES OF ASSOCIATION IS GBP677 MILLION COMPARED
WITH ACTUAL NET BORROWINGS OF GBP104 MILLION.
GROUP POLICY HAS BEEN TO MATCH CURRENCY LOANS AGAINST RELATED CURRENCY ASSETS.
HOWEVER, WHERE THIS IS NOT POSSIBLE, FORWARD EXCHANGE CONTRACTS AND CURRENCY
SWAP ARRANGEMENTS ARE ENTERED INTO IN RESPECT OF THESE LOANS.
CAPITAL EXPENDITURE
CAPITAL EXPENDITURE IN 1998 AMOUNTED TO GBP48 MILLION COMPARED WITH GBP104
MILLION IN 1997. THE MINING COMPANIES ACCOUNTED FOR GBP34 MILLION OF THIS
EXPENDITURE, WITH THE BALANCE BEING PRINCIPALLY INCURRED BY DISCONTINUED
OPERATIONS.
CASH FLOW
THE CASH INFLOW FROM CONTINUING OPERATIONS WAS GBP120 MILLION COMPARED WITH
GBP86 MILLION IN 1997. OPERATING PROFIT FROM CONTINUING OPERATIONS INCREASED BY
GBP44 MILLION TO GBP111 MILLION, WHILE WORKING CAPITAL FROM CONTINUING
OPERATIONS DECREASED BY GBP11 MILLION IN THE YEAR.
EQUITY INTERESTS
EQUITY INTERESTS AT 30 SEPTEMBER 1998 WERE GBP377 MILLION, A DECREASE OF GBP598
MILLION ON 1997. ATTRIBUTABLE PROFIT AMOUNTED TO GBP319 MILLION. DIVIDENDS OF
GBP27 MILLION ARE PAID AND PROPOSED. THERE WAS A REDUCTION IN EQUITY INTERESTS
OF GBP123 MILLION DUE TO THE DEVALUATION OF CURRENCIES IN COUNTRIES IN WHICH
THE GROUP OPERATES, PRINCIPALLY SOUTH AFRICA. THE DEMERGER OF LONRHO AFRICA AND
THE BUY BACK OF 166.7 MILLION SHARES IN THE COMPANY ACCOUNTED FOR A FURTHER
GBP221 MILLION AND GBP196 MILLION RESPECTIVELY, OF THE REDUCTION IN EQUITY
INTERESTS. THE SALE OF SUBSIDIARIES RESULTED IN A CHARGE OF GBP56 MILLION TO
RESERVES IN RESPECT OF ACQUISITION SURPLUSES.
THE BOOK VALUE OF THE GROUP'S INVESTMENT IN DUIKER AND ASHANTI AT 30 SEPTEMBER
1998 WAS GBP107 MILLION AND GBP104 MILLION RESPECTIVELY COMPARED TO THEIR
MARKET VALUE AT THE SAME DATE OF GBP110 MILLION AND GBP184 MILLION RESPECTIVELY
DIVIDENDS
THE BOARD RECOMMENDS A FINAL DIVIDEND OF 10 PENCE PER SHARE, MAKING A TOTAL
DIVIDEND FOR THE YEAR OF 17.2 PENCE PER SHARE
R E WHITTEN
FINANCE DIRECTOR
22 JANUARY 1999
LONRHO GROUP
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 1998
THE RESULTS OF THE LONRHO GROUP OF COMPANIES IN RESPECT OF THE YEAR ENDED 30
SEPTEMBER 1998 ARE AS FOLLOWS:
1998 1998 1998
BEFORE EXCEPTIONAL TOTAL
EXCEPTIONAL ITEMS
ITEMS
NOTE GBPM GBPM GBPM
TURNOVER
- CONTINUING OPERATIONS 401 401
ACQUISITIONS - TAVISTOCK 56 56
- DISCONTINUED OPERATIONS 547 547
1,004 1,004
OPERATING PROFIT 1/2
GROUP
- CONTINUING OPERATIONS 82 82
ACQUISITIONS - TAVISTOCK 9 9
- DISCONTINUED OPERATIONS 36 (2) 34
127 (2) 125
SHARE OF ASSOCIATES'
OPERATING PROFIT 21 21
148 (2) 146
PROFIT ON DISPOSAL OF FIXED ASSETS 4
GROUP
- DISCONTINUED OPERATIONS
PROFIT/(LOSS) ON SALE OR
TERMINATION OF OPERATIONS 4
GROUP
- CONTINUING OPERATIONS (1) (1)
- DISCONTINUED OPERATIONS (17) (17)
ASSOCIATES
- CONTINUING OPERATIONS 5 (6) (6)
NET INTEREST PAYABLE
- GROUP (34) (34)
- ASSOCIATES (4) (4)
PROFIT BEFORE TAXATION 1/3 110 (26) 84
TAXATION 6 (14) (9) (23)
PROFIT AFTER TAXATION 96 (35) 61
MINORITY INTERESTS (22) (22)
PROFIT FOR THE YEAR 1/13 74 (35) 39
DIVIDENDS 9 (27) (27)
47 (35) 12
EARNINGS PER SHARE 1/8 41.5P (19.6)P 21.9P
1997 1997 1997
BEFORE EXCEPTIONAL TOTAL
EXCEPTIONAL ITEMS
ITEMS
RESTATED RESTATED
NOTE GBPM GBPM GBPM
TURNOVER
- CONTINUING OPERATIONS 460 460
ACQUISITIONS - TAVISTOCK
- DISCONTINUED OPERATIONS 1,390 1,390
1,850 1,850
OPERATING PROFIT 1/2
GROUP
- CONTINUING OPERATIONS 51 (2) 49
ACQUISITIONS - TAVISTOCK
- DISCONTINUED OPERATIONS 87 (3) 84
138 (5) 133
SHARE OF ASSOCIATES'
OPERATING PROFIT 18 18
156 (5) 151
PROFIT ON DISPOSAL OF FIXED ASSETS 4
GROUP
- DISCONTINUED OPERATIONS 1 1
PROFIT/(LOSS) ON SALE OR
TERMINATION OF OPERATIONS 4
GROUP
- CONTINUING OPERATIONS (19) (19)
- DISCONTINUED OPERATIONS 120 120
ASSOCIATES
- CONTINUING OPERATIONS 5
NET INTEREST PAYABLE
- GROUP (51) (51)
- ASSOCIATES (6) (6)
PROFIT BEFORE TAXATION 1/3 99 97 196
TAXATION 6 (24) (3) (27)
PROFIT AFTER TAXATION 75 94 169
MINORITY INTERESTS (27) (27)
PROFIT FOR THE YEAR 1/13 48 94 142
DIVIDENDS 9 (41) (41)
7 94 101
EARNINGS PER SHARE 1/8 24.4P 47.8P 72.2P
THE 1997 PROFIT FIGURES HAVE BEEN RESTATED IN ACCORDANCE WITH FRS NO 9 WHICH
REQUIRES THAT OPERATING PROFIT, NET INTEREST PAYABLE AND EXCEPTIONAL ITEMS OF
ASSOCIATES BE DISCLOSED SEPARATELY. THERE HAS ALSO BEEN A REALLOCATION OF THE
GROUP SHARE OF ASHANTI ROYALTY CHARGES BETWEEN OPERATING PROFIT AND TAXATION IN
1997.
CONSOLIDATED BALANCE SHEET
THE BALANCE SHEET OF THE LONRHO GROUP OF COMPANIES AS AT 30 SEPTEMBER 1999 IS
AS FOLLOWS:
NOTE 1998 1997
GBPM GBPM
FIXED ASSETS
TANGIBLE ASSETS 575 1,164
ASSOCIATES 119 138
OTHER INVESTMENTS 12 77
706 1,379
CURRENT ASSETS
STOCKS 36 238
DEBTORS 87 262
INVESTMENTS 1 1
CASH AT BANK AND IN HAND 119 260
243 761
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR:
- CURRENT BANK LOANS AND OVERDRAFTS (21) (275)
- OTHER CREDITORS (170) (394)
NET CURRENT ASSETS 52 92
TOTAL ASSETS LESS CURRENT LIABILITIES 758 1,471
CREDITORS:
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
- LOANS FROM A MINORITY SHAREHOLDER 11 (7)
- LOANS DUE AFTER MORE THAN ONE YEAR 10 (202) (237)
- OTHER CREDITORS (3) (15)
PROVISIONS FOR LIABILITIES AND CHARGES (39) (27)
NET ASSETS 12 514 1,185
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 158 198
RESERVES 219 777
EQUITY INTERESTS 14 377 975
MINORITY EQUITY INTERESTS 137 210
514 1,185
CONSOLIDATED CASH FLOW STATEMENT
THE CASH FLOW STATEMENT FOR THE LONRHO GROUP OF COMPANIES FOR THE YEAR ENDED 30
SEPTEMBER 1998 IS AS FOLLOWS:
1998 1997
NOTE GBPM GBPM GBPM GBPM
NET CASH INFLOW FROM
OPERATING ACTIVITIES 16
- CONTINUING OPERATIONS 120 86
- DISCONTINUED OPERATIONS 26 125
146 211
DIVIDENDS RECEIVED FROM ASSOCIATES 4 6
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE 17 (37) (68)
TAX PAID (28) (32)
NET CASH INFLOW BEFORE INVESTING
ACTIVITIES AND EQUITY DIVIDENDS 85 117
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT 18 (46) (119)
ACQUISITIONS AND DISPOSALS 19 135 518
EQUITY DIVIDENDS PAID (37) (32)
NET CASH INFLOW BEFORE FINANCING
- CONTINUING OPERATIONS 83 556
- DISCONTINUED OPERATIONS 54 (72)
137 484
APPLICATION OF CASH FLOWS
FINANCING 20 (186) (410)
(DECREASE)/INCREASE IN CASH
- CONTINUING OPERATIONS (84) 144
- DISCONTINUED OPERATIONS 35 (70)
(DECREASE)/INCREASE IN CASH (49) 74
1. PROFIT FOR THE YEAR
1998
CONTINUING DISCONTINUED TOTAL
OPERATIONS OPERATIONS
GBPM GBPM GBPM
TURNOVER
GROUP 457 547 1,004
ASSOCIATES 132 17 149
589 564 1,153
GROUP 91 36 127
ASSOCIATE 20 1 21
OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS 111 37 148
NET INTEREST PAYABLE (22) (16) (38)
PROFIT BEFORE EXCEPTIONAL ITEMS 89 21 110
EXCEPTIONAL ITEMS (7) (19) (26)
PROFIT BEFORE TAXATION 82 2 84
TAXATION (10) (13) (23)
PROFIT AFTER TAXATION 72 (11) 61
MINORITY INTERESTS (20) (2) (22)
PROFIT FOR THE YEAR 52 (13) 39
EARNINGS PER SHARE BASED
ON PROFIT FOR THE YEAR 29.2P (7.3)P 21.9P
EARNINGS PER SHARE EXCLUDING
NET EXCEPTIONAL ITEMS 32.0P 9.5P 41.5P
1997
CONTINUING DISCONTINUED TOTAL
OPERATIONS OPERATIONS
RESTATED RESTATED
GBPM GBPM GBPM
TURNOVER
GROUP 460 1,390 1,850
ASSOCIATES 107 40 147
567 1,430 1,997
GROUP 51 87 138
ASSOCIATE 16 2 18
OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS 67 89 156
NET INTEREST PAYABLE (25) (32) (57)
PROFIT BEFORE EXCEPTIONAL ITEMS 42 57 99
EXCEPTIONAL ITEMS (21) 118 97
PROFIT BEFORE TAXATION 21 175 196
TAXATION (15) (12) (27)
PROFIT AFTER TAXATION 6 163 169
MINORITY INTERESTS (12) (15) (27)
PROFIT FOR THE YEAR (6) 148 142
EARNINGS PER SHARE BASED
ON PROFIT FOR THE YEAR (3.1)P 75.3P 72.2P
EARNINGS PER SHARE EXCLUDING
NET EXCEPTIONAL ITEMS 7.6P 16.8P 24.4P
2. OPERATING PROFIT BY ACTIVITY AND GEOGRAPHICAL AREA
AN ANALYSIS OF PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION BY
ACTIVITY AND GEOGRAPHICAL AREA IS GIVEN BELOW:
1998
GROUP ASSOCIATES TOTAL
GBPM GBPM GBPM
PLATINUM 69 69
COAL
(1998 INCLUDES TAVISTOCK - GBP12M) 24 3 27
GOLD 2 17 19
OTHER 2 2
CENTRAL COSTS (6) (6)
91 20 111
DISCONTINUED OPERATIONS 36 1 37
127 21 148
EXCEPTIONAL ITEMS (26)
NET INTEREST PAYABLE (38)
PROFIT BEFORE TAXATION 84
SOUTH AFRICA
(1998 INCLUDES TAVISTOCK - GBP12M) 90 3 93
ZIMBABWE AND GHANA 2 17 19
EUROPE 1 1
THE AMERICAS 4 4
CENTRAL COSTS (6) (6)
91 20 111
DISCONTINUED OPERATIONS 36 1 37
127 21 148
EXCEPTIONAL ITEMS (26)
NET INTEREST PAYABLE (38)
PROFIT BEFORE TAXATION 84
1997
GROUP ASSOCIATES TOTAL
RESTATED RESTATED
GBPM GBPM GBPM
PLATINUM 32 32
COAL
(1998 INCLUDES TAVISTOCK - GBP12M) 30 30
GOLD (3) 16 13
OTHER 1 1
CENTRAL COSTS (9) (9)
51 16 67
DISCONTINUED OPERATIONS 87 2 89
138 18 156
EXCEPTIONAL ITEMS (97)
NET INTEREST PAYABLE (57)
PROFIT BEFORE TAXATION 196
SOUTH AFRICA
(1998 INCLUDES TAVISTOCK - GBP12M) 59 59
ZIMBABWE AND GHANA (3) 16 13
EUROPE 3 3
THE AMERICAS 1 1
CENTRAL COSTS (9) (9)
51 16 67
DISCONTINUED OPERATIONS 87 2 89
138 18 156
EXCEPTIONAL ITEMS 97
NET INTEREST PAYABLE (57)
PROFIT BEFORE TAXATION 196
3. PROFIT BEFORE TAXATION BY ACTIVITY AND GEOGRAPHICAL AREA
AN ANALYSIS OF PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION BY ACTIVITY AND
GEOGRAPHICAL AREA IS GIVEN BELOW:
1998 1997
RESTATED
GBPM GBPM
PLATINUM 60 16
COAL (1998 INCLUDES TAVISTOCK - GBP9M) 23 34
GOLD 13 4
OTHER 2 1
CENTRAL COSTS (9) (13)
89 42
DISCONTINUED OPERATIONS 21 57
EXCEPTIONAL ITEMS (26) 97
84 196
SOUTH AFRICA (1998 INCLUDES TAVISTOCK - GBP9M) 80 46
ZIMBABWE AND GHANA 13 4
EUROPE 1 4
THE AMERICAS 4 1
CENTRAL COSTS (9) (13)
89 42
DISCONTINUED OPERATIONS 21 57
EXCEPTIONAL ITEMS (26) 97
84 196
4. EXCEPTIONAL ITEMS
1998
CONTINUING DISCONTINUED TOTAL CONTINUING
OPERATIONS OPERATIONS OPERATIONS
GBPM GBPM GBPM GBPM
DISPOSAL OF OTHER FIXED ASSETS
- PROFIT 1
- LOSS (1)
PROFIT ON DISPOSAL OF FIXED ASSETS
SALE OR TERMINATION OF OPERATIONS
- PROFIT ON THE SALE OF PRINCESS
HOTELS 65 65
- PROFIT ON THE SALE OF DUTTON
FORSHAW 8 8
- PROVISION FOR LOSS ON SALE OF
SUNLEY TURIFF (18) (18)
- PROVISION AGAINST INVESTMENT
IN HONDO (69) (69)
- PROFIT ON THE SALE OF LONRHO
SUGAR
- PROVISION FOR LOSS ON SALE OF
CRAMLINGTON TEXTILES
- PROVISION AGAINST AMANTAYTAU
GOLD MINE (15)
- OTHER PROFITS
- OTHER LOSSES (1) (3) (4) (4)
(LOSS)/PROFIT ON SALE OR
TERMINATION OF OPERATIONS
BEFORE TAXATION (1) (17) (18) (19)
SHARE OF EXCEPTIONAL LOSS OF
ASSOCIATE (6) (6)
REDUNDANCY AND REORGANISATION
COSTS (2) (2) (2)
NET EXCEPTIONAL ITEMS BEFORE
TAXATION (7) (19) (26) (21)
TAXATION (9) (9)
NET EXCEPTIONAL ITEMS (7) (28) (35) (21)
1997
DISCONTINUED TOTAL
OPERATIONS
GBPM GBPM
DISPOSAL OF OTHER FIXED ASSETS
- PROFIT 1 2
- LOSS (1)
PROFIT ON DISPOSAL OF FIXED ASSETS 1 1
SALE OR TERMINATION OF OPERATIONS
- PROFIT ON THE SALE OF PRINCESS
HOTELS
- PROFIT ON THE SALE OF DUTTON
FORSHAW
- PROVISION FOR LOSS ON SALE OF
SUNLEY TURIFF
- PROVISION AGAINST INVESTMENT
IN HONDO
- PROFIT ON THE SALE OF LONRHO
SUGAR 141 141
- PROVISION FOR LOSS ON SALE OF
CRAMLINGTON TEXTILES (22) (22)
- PROVISION AGAINST AMANTAYTAU
GOLD MINE (15)
- OTHER PROFITS 12 12
- OTHER LOSSES (11) (15)
(LOSS)/PROFIT ON SALE OR
TERMINATION OF OPERATIONS
BEFORE TAXATION 120 101
SHARE OF EXCEPTIONAL LOSS OF
ASSOCIATE
REDUNDANCY AND REORGANISATION
COSTS (3) (5)
NET EXCEPTIONAL ITEMS BEFORE
TAXATION 118 97
TAXATION (3) (3)
NET EXCEPTIONAL ITEMS 115 94
EXCEPTIONAL ITEMS INCLUDE A NET SURPLUS ON CONSOLIDATION RELEASED TO THE PROFIT
AND LOSS ACCOUNT OF GBP56 MILLION.
A PROVISION OF GBP22 MILLION FOR THE LOSS ON SALE OF CRAMLINGTON TEXTILES WAS
MADE IN THE 1997 ACCOUNTS AND FOLLOWING COMPLETION OF THE SALE IN OCTOBER 1997,
NO FURTHER PROVISION WAS NECESSARY IN 1998.
THE SHARE OF EXCEPTIONAL LOSS OF ASSOCIATE IS IN RESPECT OF ASHANTI'S
ANTICIPATED CLOSURE OF IDUAPRIEM MINE.
5. NET INTEREST PAYABLE
NET INTEREST PAYABLE FOR THE YEAR ENDED 30 SEPTEMBER 1998 AMOUNTED TO GBP38
MILLION (1997 - GBP57 MILLION) INCLUDING SHARE OF ASSOCIATES' NET INTEREST
PAYABLE OF GBP4 MILLION (1997 - GBP6 MILLION).
6. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
1998 1997
RESTATED
GBPM GBPM
UNITED KINGDOM CORPORATION TAX AT 31 PER CENT
(1997 - 32 PER CENT) 7
RELIEF FOR OVERSEAS TAX (2)
5
OVERSEAS TAX FOR THE YEAR 13 19
ASSOCIATES 1
14 24
THE CHARGE FOR TAX HAS BEEN REDUCED BY GBP12 MILLION (1997 - GBP18 MILLION) IN
RESPECT OF ACCELERATED TAX ALLOWANCES IN EXCESS OF DEPRECIATION AND OTHER
TIMING DIFFERENCES.
7. CONSOLIDATED HISTORICAL COST PROFITS
THE HISTORICAL COST PROFIT BEFORE TAXATION FOR THE TWELVE MONTHS ENDED 30
SEPTEMBER 1998 IS AS FOLLOWS:-
1998 1997
RESTATED
GBPM GBPM
HISTORICAL COST PROFIT BEFORE TAXATION
REPORTED PROFIT BEFORE TAXATION 84 196
REALISATION OF PROPERTY REVALUATION GAINS OF
PREVIOUS YEARS 142 69
DIFFERENCE BETWEEN A HISTORICAL COST DEPRECIATION
CHARGE AND THE ACTUAL DEPRECIATION CHARGE
CALCULATED ON THE REVALUED AMOUNT 1 3
HISTORICAL COST PROFIT BEFORE TAXATION 227 268
HISTORICAL COST ATTRIBUTABLE PROFIT FOR THE YEAR
REPORTED PROFIT FOR THE YEAR 39 142
DIVIDENDS (27) (41)
REALISATION OF PROPERTY REVALUATION GAINS OF
PREVIOUS YEARS AFTER MINORITY INTERESTS 142 64
DIFFERENCE BETWEEN HISTORICAL COST DEPRECIATION
CHARGE AND THE ACTUAL DEPRECIATION CHARGE
CALCULATED ON THE REVALUED AMOUNT AFTER MINORITY
INTERESTS 1 2
HISTORICAL COST ATTRIBUTABLE PROFIT FOR THE YEAR
AFTER DIVIDENDS 155 167
8. EARNINGS PER SHARE
BASIC EARNINGS PER SHARE HAS BEEN CALCULATED ON THE PROFIT ATTRIBUTABLE TO
SHAREHOLDERS AMOUNTING TO GBP74 MILLION (1997 - GBP48 MILLION) BEFORE
EXCEPTIONAL ITEMS AND GBP39 MILLION (1997 - GBP142 MILLION) AFTER EXCEPTIONAL
ITEMS USING A WEIGHTED AVERAGE OF 178,133,954 ORDINARY SHARES (1997 RESTATED
FOR THE SHARE CONSOLIDATION - 196,558,442).
NO FULLY DILUTED EARNINGS PER SHARE FIGURE BASED ON SHARE OPTIONS AND THE
CONVERTIBLE BONDS IN ISSUE IS PROVIDED AS IT IS IN EXCESS OF THE BASIC EARNINGS
PER SHARE.
9. DIVIDENDS
A FINAL DIVIDEND OF 10.0 PENCE (1997 RESTATED - FINAL DIVIDEND OF 12.0 PENCE)
IS RECOMMENDED FOR PAYMENT ON 6 APRIL 1999 TO SHAREHOLDERS ON THE REGISTERS AT
5 FEBRUARY 1999.
AN INTERIM DIVIDEND OF 7.2 PENCE (1997 RESTATED - INTERIM DIVIDEND OF 9,0
PENCE) IS PAYABLE ON 6 APRIL 1999 TO SHAREHOLDERS ON THE REGISTERS AT 28 AUGUST
1998.
THE TOTAL DISTRIBUTION AMOUNTS TO GBP27 MILLION (1997 - GBP41 MILLION).
AS A RESULT OF THE ABOLITION OF ADVANCE CORPORATION TAX, THE BOARD HAS
SUSPENDED THE SCRIP DIVIDEND SCHEME AND WILL OFFER SHAREHOLDERS A DIVIDEND
REINVESTMENT PLAN. DETAILS WILL BE SENT TO SHAREHOLDERS WITH THE REPORT AND
ACCOUNTS.
10. NET BORROWINGS
NET BORROWINGS CAN BE ANALYSED BY GEOGRAPHICAL AREA AS FOLLOWS:-
1998 1997
GBPM GBPM
SOUTH AFRICA 59 38
THE AMERICAS (27) (5)
ZIMBABWE 5 11
EUROPE (4) (3)
UNITED KINGDOM CENTRAL FINANCE 71 (45)
104 (4)
DISCONTINUED OPERATIONS 263
104 259
INCLUDED IN NET CURRENT ASSETS ARE SHORT TERM PAYABLES AND SHORT TERM
RECEIVABLES IN RESPECT OF BUSINESSES SOLD. HAD THESE PAYABLES AND RECEIVABLES
BEEN SETTLED AT 30 SEPTEMBER 1998 THE NET BORROWINGS WOULD HAVE BEEN GBP133
MILLION.
LOANS DUE AFTER MORE THAN ONE YEAR CAN BE ANALYSED AS FOLLOW:-
SECURED UNSECURED
1998 1997 1998 1997
GBPM GBPM GBPM GBPM
BETWEEN ONE AND TWO YEARS 25 25 32
BETWEEN TWO AND FIVE YEARS 28 60 2
OVER FIVE YEARS:
- BY INSTALMENTS 36 6 3
- OTHERWISE 111 111
89 202 148
1L. LOANS FROM A MINORITY SHAREHOLDER
THE LOANS FROM A MINORITY SHAREHOLDER COMPRISING LOANS FROM GAZELLE PLATINUM
LTD, A WHOLLY OWNED SUBSIDIARY OF IMPALA PLATINUM HOLDINGS LTD, TO WESTERN
PLATINUM AND EASTERN PLATINUM WERE REPAID ON 14 JULY 1998 (1997 - GBP7 MILLION)
THE LOANS BORE INTEREST IN 1998 AT 19.2 PER CENT.
12. NET NON-INTEREST BEARING OPERATING ASSETS
AN ANALYSIS OF GROUP NET NON-INTEREST BEARING OPERATING ASSETS AND OF
ASSOCIATES' NET ASSETS BY ACTIVITY AND GEOGRAPHICAL AREA IS GIVEN BELOW:-
1998 1997
GROUP ASSOCIATES TOTAL GROUP ASSOCIATES TOTAL
GBPM GBPM GBPM GBPM GBPM GBPM
PLATINUM 324 324 408 408
COAL 192 15 207 61 61
GOLD 13 104 LL7 19 127 146
OTHER (1) (1) 24 24
CENTRAL FINANCE 1 1 5 5
DISCONTINUED OPERATIONS (15) (15) 838 11 849
514 119 633 1,355 138 1,493
NET INTEREST BEARING
LIABILITIES (95) (263)
PROPOSED DIVIDENDS AND
ACT (24) (45)
NET TOTAL ASSETS 514 1,185
SOUTH AFRICA 520 15 535 470 470
ZIMBABWE AND GHANA 13 104 LL7 19 127 146
EUROPE (1) (1)
THE AMERICAS (4) (4) 23 23
CENTRAL FINANCE 1 1 5 5
DISCONTINUED OPERATIONS (15) (15) 838 11 849
514 119 633 1,355 138 L,493
NET INTEREST BEARING
LIABILITIES (95) (263)
PROPOSED DIVIDENDS AND
ACT (24) (45)
NET TOTAL ASSETS 514 1,185
1998 1997
GBPM GBPM
NET INTEREST BEARING LIABILITIES COMPRISE THE FOLLOWING:
NET BORROWINGS 104 259
BILLS PAYABLE 10
BILLS RECEIVABLE (2)
LOANS RECEIVABLE (9) (4)
95 263
13. RECOGNISED GAINS AND LOSSES
THE STATEMENT OF TOTAL CONSOLIDATED RECOGNISED GAINS AND LOSSES IS AS FOLLOWS:
1998 1997
GBPM GBPM
RESULT FOR THE YEAR - GROUP 30 139
- ASSOCIATES 9 3
DILUTION OF THE GROUP'S INTEREST IN ASHANTI 1 22
UNREALISED NET SURPLUS ON REVALUATION OF ASSETS 66
EXCHANGE ADJUSTMENTS - GROUP (116) (46)
- ASSOCIATES (7) (3)
TOTAL RECOGNISED (LOSSES)/GAINS RELATING TO THE YEAR (83) 181
14. RECONCILIATION OF MOVEMENT IN EQUITY INTERESTS
1998 1997
GBPM GBPM
TOTAL RECOGNISED (LOSSES)/GAINS RELATING TO THE YEAR (83) 181
DIVIDENDS (27) (41)
SHARES ISSUED IN LIEU OF CASH DIVIDENDS 5 9
SHARES ISSUED 3
SHARE BUYBACK (196)
DEMERGER OF LONRHO AFRICA (221)
NET SURPLUS/(GOODWILL) ON ACQUISITION OF SUBSIDIARIES
AND ASSOCIATES 8 (9)
NET GOODWILL ON ACQUISITION OF SUBSIDIARIES BY
ASHANTI (19) (37)
SHARE BUYBACK IN ASHANTI (4)
NET (SURPLUS)/GOODWILL REALISED ON SALE OF
SUBSIDIARIES (56) 75
MOVEMENT OF THE GROUP'S INTEREST IN DUIKER MINING (2)
OTHER ITEMS (3) (5)
NET (REDUCTION)/INCREASE IN EQUITY INTERESTS IN THE
YEAR (598) 176
EQUITY INTERESTS AT 1 OCTOBER 975 799
EQUITY INTERESTS AT 30 SEPTEMBER 377 975
IN MAY 1998 SHAREHOLDERS RECEIVED SHARES IN LONRHO AFRICA FOLLOWING ITS
DEMERGER.
15. EXCHANGE RATES
FOREIGN CURRENCY ASSETS AND LIABILITIES AND THE RESULTS FOR THE YEAR HAVE BEEN
TRANSLATED INTO STERLING AT THE EXCHANGE RATES RULING AT THE BALANCE SHEET DATE
16. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
1998 1997
GBPM GBPM
OPERATING PROFIT FROM CONTINUING OPERATIONS BEFORE
EXCEPTIONAL ITEMS 111 67
EXCEPTIONAL COSTS (2) (7)
SHARE OF PROFITS OF ASSOCIATES (20) (16)
DEPRECIATION CHARGE 18 20
DECREASE IN WORKING CAPITAL 11 16
OTHER ITEMS 2 6
NET CASH INFLOW FROM CONTINUING ACTIVITIES 120 86
NET CASH INFLOW IN RESPECT OF DISCONTINUED ACTIVITIES 26 125
NET CASH INFLOW FROM OPERATING ACTIVITIES 146 211
17. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
1998 1997
GBPM GBPM
NET INTEREST PAID (34) (55)
DIVIDENDS PAID TO MINORITIES (3) (13)
(37) (68)
18. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
1998 1997
GBPM GBPM
PURCHASE OF TANGIBLE FIXED ASSETS 48 104
PURCHASE OF VEHICLES FOR LEASING 24
PURCHASE OF FIXED ASSET INVESTMENTS 14
SALE OF TANGIBLE FIXED ASSETS (4) (12)
SALE OF FIXED ASSET INVESTMENTS (3)
ADVANCES OF LOANS RECEIVABLE 3
REPAYMENT OF LOANS RECEIVABLE (1) (8)
46 119
19. ACQUISITIONS AND DISPOSALS
1998 1997
GBPM GBPM
PURCHASE OF SUBSIDIARIES 136 18
PURCHASE OF MINORITY INTEREST IN SCOTTSDALE PRINCESS
PARTNERSHIP 16
CASH RECEIVED ON SALE OF SUBSIDIARIES (274) (537)
DEMERGER OF LONRHO AFRICA (13)
INCREASE IN MINORITY INTEREST IN SUBSIDIARIES (2)
INVESTMENT IN ASSOCIATES 3
(135) (518)
20. FINANCING OF THE GROUP
1998 1997
GBPM GBPM
ISSUE OF SHARE CAPITAL (1) (2)
NET LOAN (ADVANCES)/REPAYMENTS (9) 412
SHARE BUYBACK 196
186 410
21. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET BORROWINGS
1998 1997
GBPM GBPM
NET BORROWINGS AT 1 OCTOBER 259 810
DECREASE/(INCREASE) IN CASH IN THE PERIOD 49 (74)
CASH INFLOW/(OUTFLOW) FROM DECREASE IN FINANCING 9 (412)
LOANS AND FINANCE LEASES DISPOSED OF AND ACQUIRED
WITH SUBSIDIARIES (192) (55)
EFFECT OF EXCHANGE RATE MOVEMENTS (27) (25)
OTHER 6 15
104 259
22. ANNUAL GENERAL MEETING
THE ANNUAL GENERAL MEETING WILL BE HELD ON THURSDAY, 18 MARCH 1999.
23. THE FINANCIAL INFORMATION SET OUT ABOVE IS TAKEN FROM BUT DOES NOT
CONSTITUTE THE COMPANY'S STATUTORY ACCOUNTS FOR THE YEARS ENDED 30 SEPTEMBER
1998 OR 1997. STATUTORY ACCOUNTS FOR 1997 HAVE BEEN DELIVERED, AND FOR 1998
WILL BE DELIVERED, TO THE REGISTRAR OF COMPANIES. THE AUDITORS HAVE MADE
UNQUALIFIED REPORTS ON THOSE ACCOUNTS AND SUCH REPORTS DID NOT CONTAIN A
STATEMENT UNDER SECTION 237 (2) OR (3) OF THE COMPANIES ACT 1985.
COPIES OF THE 1998 LONRHO ACCOUNTS WILL BE POSTED TO SHAREHOLDERS AND WILL BE
AVAILABLE AT THE COMPANY'S REGISTERED OFFICE IN MID FEBRUARY 1999.
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