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LAF - Lonrho - Lonrho reports 37% Growth in revenue in Q2 and Profit

Release Date: 05/05/2011 08:07
Code(s): LAF
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LAF - Lonrho - Lonrho reports 37% Growth in revenue in Q2 and Profit Improvement of GBP4.2m at the half year Lonrho Plc (Incorporated and registered in England and Wales) (Registration number 2805337) (Share code: LAF; ISIN number: GB0002568813) ("Lonrho" or the "Company" or the "Group") 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 reports 37% growth in revenue in Q2 and profit improvement of GBP4.2m at the half year Lonrho Plc ( LONR ) today announces its unaudited results for the second quarter to 31 March 2011. The unaudited interim results for the six months to 31 March 2011 will be announced by the end of May. Lonrho is delighted that it was admitted to the Main Market of the London Stock Exchange as a Premium Listing with effect from 26th April 2011. The Directors believe that a listing of the Company`s ordinary shares on the Official List is the most appropriate platform for the continued growth of the Company. Specifically, the Company`s Board anticipates that trading on the London Stock Exchange`s Main Market will raise the Company`s profile and provide the ability for a broader range of institutional and other investors from around the world to have the ability to participate in the Company. On admission to the Main Market, the Rt. Hon Sir Richard Needham joined the Board as an independent Non-Executive Director. Sir Richard has had a distinguished career in Parliament culminating in his time as Britain`s longest serving Minister in Northern Ireland from 1985 - 1992 and as Minister of Trade from 1992 - 1995. Sir Richard left politics in 1997 and has since focused on the private sector, and has been a director of GEC Plc, Meggitt Plc, and currently is the Vice Chairman of NEC Europe Ltd. He has been on the Board of Dyson Ltd for over 15 years, and is currently the Senior Independent Director. He has been Non-Executive Chairman of Avon Rubber Plc since January 2007. During the quarter the Group also announced the completion of the purchase of the AFEX group of companies. AFEX`s main focus of operations is in supplying services and secure accommodation in Juba, Southern Sudan. This infrastructure is in great demand from corporate clients, NGO`s and Government Aid Agencies working in Southern Sudan. Juba is forecast to be one of the fastest growing cities globally following the referendum establishing Southern Sudan as an independent country. Lonrho has purchased 100% of AFEX for an initial cash consideration of US$3 million and an EBIT related, capped earn-out payment. The existing management of AFEX will remain in place to develop and grow the company during the transitional period. Financial highlights for the second quarter include: - Group turnover from continuing operations in the quarter has increased 37% ahead of the same quarter in the prior year to reach GBP33.5m. For the half year the turnover of GBP61.1m is 29% ahead of the first half of FY10. - In the second quarter of 2011 the Group has achieved EBITDA of GBP1.9m, a GBP2.7m improvement on the second quarter of 2010. The six months to March have seen EBITDA rise to GBP3.6m, GBP6.1m ahead of the same point in the prior year. - In the first half, the loss before tax was GBP2.9m. When compared to the prior year, and after excluding an exchange gain of GBP5.7m in that year (current year GBPnil), this represents an underlying improvement of GBP4.2m. - Net assets at 31 March 2011 stood at GBP123.7m, compared with GBP124.5m as at 31 December 2010. Cash balances in the Group at 31st March 2011 were GBP17.8m. Divisional highlights for the quarter include: Agribusiness The agribusiness division has increased turnover during the quarter by 33%, a GBP4.1m increase on the same quarter of FY10 to GBP16.5m for the quarter. Oceanfresh and Trak-Auto both had their best quarters since becoming Lonrho companies. - In the first half of FY11, as planned, Rollex (100% holding) has refocused its strategy around pure vertically integrated agribusiness with less emphasis on general logistics. As a result revenues in the quarter fell by 11.6% compared to the prior year but the focus on the core business and new good margin opportunities for produce from formal growing agreements in Mozambique, Zambia and Zimbabwe position the business well for core business growth in the second half of the year. The comparison for Rollex in FY10 also includes the Peninsula business which locked exclusive supply to the Woolworths retail chain. This was disposed of in November 2010 to strategically diversify supply to other retailers and have no exclusive lock-in agreements that restrict growth. This strategy is now showing results with alternative retail clients and excluding Peninsula revenue of GBP2.1m, turnover grew by 12.3%. - During the quarter a significant new sea-freight opportunity was commenced, shipping citrus products from Cape Town to customers in the Far East. The planned delivery schedules will generate significant additional revenue through the second half of 2011 and into FY12. - In the USA, Oceanfresh (51% holding) ran a very successful Lent promotion on 3 items with Costco on the West Coast. Costco continues to increase the distribution and range of Oceanfresh lines to further stores within the Costco Group. Also in the US, Oceanfresh products have now been rolled out to a further major US retailer (Fresh & Easy). In the UK, Oceanfresh will launch the Kiddies Magic Fish range with Costco UK in May and is expected to start supplying fresh seafood to ASDA in the near future. - In South Africa, Oceanfresh has launched its own brand of coated fish items with Makro, which has been extremely successful. As a result, the product will change to the Makro private label in June 2011 substantially increasing sales volumes. Oceanfresh is also working on expanding operations within the Massmart group, to include the Shield stores. Oceanfresh has also won a contract for the first time with South Africa`s largest retailer, Pick `n` Pay, to supply 16 product lines both domestically and internationally, which will commence towards the end of FY11. - Oceanfresh has further secured its first orders for the Far East, where it will be supplying retail lines to Carrefour stores. - Oceanfresh is in the process of relocating to bigger premises in Johannesburg to meet forecast demand and increase in-house capabilities. The new facility, which will quadruple capacity, includes a 500 tonne cold store unit, a high-care processing area and a general processing area. The new facility will allow Oceanfresh to further increase the export and local retail lines available for customers. - Trak-Auto (100% holding) had its strongest quarter in its history with turnover of GBP2.6m, 34% ahead of the first quarter. Trak-Auto has significantly increased the John Deere market share in Mozambique. The order book is also strong with 32 new John Deere units ordered and 3 Komatsu units in the quarter. Transport On a revenue basis, the transport division has had a strong quarter. Turnover for the division was 18% higher than in the same quarter of FY10, with all of the major markets showing good growth. Most pleasing is the growth in Tanzania where new routes have helped to increase turnover in excess of 300% compared to Q2 FY10. - Fly540 Kenya (49% holding + board control) has been successful in increasing the number of passengers being flown, being 25% higher than the same quarter in FY10. Despite the continued strong presence of competition in the market which has depressed prices on some routes, revenues for Kenya have grown by 8% compared to the same quarter in the prior year. - The first scheduled operational flights for Fly540 Angola (60% holding) commenced on 31 January 2011. The deployment of the Angolan hub has been building as new aircraft arrive in the country. This has been a slow initial process. Since the quarter end business has been building with three aircraft operating scheduled services in May with a plan for five to be operating scheduled services by the end of July. Regular services between Cabinda, Soyo and Luanda have ensured that operating systems and procedures are working efficiently and initial flights in Angola have proved successful with load factors on the routes being served over 40% prior to any marketing activity taking place or brand recognition. An encouraging start. - Operations at Fly540 Ghana (60% holding), following the set strategy, will commence towards the end of FY11. Management will ensure that the Angola hub is bedded in before focusing attention and human resources on the launch of the Ghana hub for West Africa. - With new routes now being operated, Fly540 Tanzania (90% holding) experienced its most productive quarter ever. With load factors over 80% and over 15,000 passengers flown in the quarter to 10 destinations, Fly540 Tanzania has entered a new phase of expansion with further investment being made in the business in order to gain the full reward from the opportunity. - Operating margins have remained low in the aviation division due to the continuing price war in Kenya and the rising price of fuel. These issues have recently begun to ease with the price war diminishing and fuel surcharges being introduced, therefore margins in March were above those seen in the first two months of the quarter. - Fly540 Kenya has recently announced it intends to commence flights from Nairobi to Juba. Operations are scheduled to commence in May, with the additional revenues being seen in Q3 FY11. Demand for flights to the Southern Sudan region is steadily increasing driven by investors, financial service providers and industrialists, all looking to make the most of the prospects of the region since its independence vote in January. Infrastructure The Infrastructure division has experienced revenue growth in the quarter of 12% over the same period in FY10. Both companies in the division have had good successes in the quarter which underpin confidence in their future. The order book at KwikBuild is standing at a record high, with in excess of R42m of new orders taken in the quarter. Important works have been completed at Luba to accommodate new clients arriving in the second half of the year. - During the quarter Luba Freeport (63% holding) saw the completion of facilities for Dickerman, with rent commencing on 1 March 2011 and a further open storage and inspection area for Tenaris was also completed in the quarter, for which rents commenced on 1 January 2011. Both of these facilities will help generate further fixed revenues, with the Tenaris facility also leading to more movements across the quay, increasing the variable element of income. - Luba Freeport also took delivery of its mobile container scanner in the quarter. Installation and training on use of the scanner is now underway, with the first revenues to be generated from the scanner from June. This increases the ports security in line with international practices. - Luba saw supply vessel movements in the port total 275, a marginal fall of 1% on Quarter 1 due in part to delays in the launch of two new offshore projects with Ophir and Rocoil which are now scheduled to commence in the second half of the year. - Luba has had confirmation that Technip, a leading engineering and project management company, will be performing work out of the port. Further to this the start up of SBM`s project with Noble Energy has been confirmed, with materials arriving for preparation works prior to the arrival of a floating production, storage and offloading unit (FPSO) before the end of 2011. - In February KwikBuild (51% holding) won the largest part of the IDT Emergency Schools programme, having been selected to provide 103 classrooms to replace mud and storm damaged classrooms in the Eastern Cape. The first stage of this project is worth over R20m in revenue and demonstrates the company`s ability to successfully compete for large scale projects, which should in turn help to increase margins through the economies of scale. - KwikBuild has also mobilised its SAPS (South African Police Service) contract to support the installation of Trauma Victim and other Units. SAPS is a new client to KwikBuild and the contract is again significant, demonstrating a broader client-base and focus on higher value deals. Mobilisation has gone well and already led to further direct business from other SAPS units. - Orders in the second quarter for KwikBuild totalled in excess of R42m, representing a new record for the business. Turnover for the quarter of GBP1.5m is the largest it has achieved and with the factory operating three shifts the strategic restructure of KwikBuild has proven to be a good decision and has created a substantially stronger company ready for further growth. Hotels The hotels division enjoyed a good quarter, driven both by exceptional occupancy at the Hotel Cardoso and some improvement at the Grand Karavia. March trading at the Grand Karavia, as well as the latest quarter, have been the best seen to date with both occupancy and room rates higher than previous months as the hotel continues to move towards its full business plan, after a slower than expected start. - At the Hotel Cardoso (59% holding) occupancy has been high, averaging over 85% since January. High occupancy at the hotel has also been backed up by strong room rates, with March`s average room rate rising to $153, a 37% increase on the same period a year ago. - Compared to the same quarter in the prior year, the Mozambique Metical has devalued 17% against sterling. This movement has had the effect of reducing reported turnover from the Hotel Cardoso by GBP0.2m. Despite this movement in exchange, revenues for the quarter have grown by 7% compared to Q2 FY10. - During March occupancy at the Grand Karavia (50% holding + management contract) was approaching 50% - its highest level since opening in June 2010. The growth in occupancy has been driven by a new sales and marketing strategy, including representation at INDABA, the African mining conference. The hotel has also seen changes in personnel and growth is expected to continue in the second half. - Lonrho Hotels has successfully signed a new lease in the Gabon capital of Libreville. The 49 room, 5-star boutique hotel is scheduled to check-in its first guests in July 2011 and is anticipated to trade as the top five star hotel in Gabon. - Lonrho Hotels Management Services has seen other projects which it had hoped to sign in Q2 slip into the second half of the year. Additional management contracts are now expected to be signed during the second half of the year with revenues accruing in the fourth quarter. Support Services Throughout the support services division there have been strong contract wins. The success in big contracts was especially prevalent in CES Zambia where revenue was GBP0.6m, which was GBP0.5m or 500% ahead of the same quarter in the prior year, demonstrating the viability of the CES roll out through Southern Africa. Despite the impact of the weaker metical, which lowered turnover by GBP0.2m, Bytes & Pieces managed to increase turnover by 15% in the quarter compared to the prior year. AFEX group was also added to the division during the quarter, adding additional revenues. - Bytes & Pieces (65% holding) has had a number of successes in the period. These include new contract wins as well as completing important projects for a number of clients. New client wins in the quarter include Banco Unico, where a production and disaster recovery platform is being installed, Assoiacao Nacional de Estradas, where the first sale of a Dell blade in Mozambique has been made with installation underway, and Maputo Port Development Corporation with whom Bytes & Pieces are converting their current infrastructure to VMWare. - The biggest contract win in the quarter for Bytes & Pieces was at Bank BCI Formento, where nearly US$2m worth of contracts have been won to supply and install Dell servers, Riverbed WAN optimisation as well as Cisco networking and services. - Bytes & Pieces has recently won a number of awards from PMR Africa, a leading consulting and research firm across Africa, including being the highest rated IT consulting company in Mozambique and also the highest rated IT sales and service company in Mozambique. - CES Zambia (40% holding + board control) has had an exceptional quarter with growth being driven by a number of new contract wins. Among these were Africonnect, FHI (USAID) and World Vision with new orders being in excess of US$300k. - AFEX (100% holding), whose purchase was completed during the quarter, has continued to progress under Lonrho ownership. Key to the AFEX business is the Riversdale Lodge in Juba, on which a new 16 year lease has been signed. Since acquisition the camp has added 18 new VIP containerised accommodation units, expanding the camp`s revenue generating potential. - AFEX has also had further wins for a contract to provide the camp and services for a seismic exploration in Kenya and a short term contract to erect a tented camp in Ethiopia. The contract to provide security services for the World Bank in Sudan was also renewed for another year and the contract to provide security services for Tri Star in Sudan was extended to eight new locations. - Lonrho Water`s bulk water business (100% holding) is beginning to gain momentum, with the business starting two sizeable projects in Q2 being a sewage pump station in Luanda and six solar powered boreholes in South Africa. Both of these projects have resulted in additional opportunities from the respective clients, with two more pump stations and a Sewage treatment plant in Angola and 30 additional boreholes in South Africa being quoted. In the corporate water bottling business, the prime target client in South Africa, Fedics, has been secured and volumes will begin to grow steadily from this customer. In addition several new smaller customers are being secured every month, which all contribute to the ongoing growth of the business. Outlook Lonrho has had a good start to the financial year. Having completed the placing of a convertible bond and also securing admission to the London Stock Exchange`s Main Market as a Premium Listing, the Company is well placed to take advantage of the opportunities which present themselves in the second half of the year. The Company is focused on ensuring that the strategies it puts in place will continue to deliver year-on-year growth for the rest of this year and into FY12. Oceanfresh remains a strong contributor to growth. The business is continuing to add new customers both in South Africa and internationally, specifically seeing strong demand from the US, as well as extending the range of products being offered. Trak-Auto, with a strong order book going into the second half of the year is on track to deliver excellent results and LonAgro, the John Deere distributor in Angola should begin generating revenues in the next quarter. The Company has seen short-term delays affect the speed of deployment in some of the growth businesses such as the roll out of Fly540 Angola but these are now coming on track and delivering promising results. It is anticipated that there will be 10 routes operational in Angola by the end of the year with more following in FY12. Margins in the aviation division in Kenya remain under pressure due to high levels of competition in the Kenyan market. The Grand Karavia hotel had a slow start following opening but results in the last 8 weeks have been encouraging. The pipeline of potential new hotel projects is strong with opportunities identified by the new management team. The 2010 financial year saw exceptional foreign exchange gains of GBP6.9m arising on the re-translation of intercompany loans whilst the effect of currency fluctuations for FY11 remain unclear. The devaluation of the Mozambique Metical and the strength of the South African rand continue to exert pressure on several of the Group`s businesses. The overall trading performance of the Group for the first half has shown significant progress on the previous year, and the second half of the financial year is expected to deliver further increased improvement on the underlying 2010 results. David Lenigas, Lonrho`s Executive Chairman, commented: "The results for the half year are positive, showing a 33% increase in turnover for the past quarter and a 29% increase in turnover for the six months when compared to the previous year. EBITDA for the Company for the second quarter was GBP1.9m with a total for the half year improving by GBP6.1m over the same period last year. We are seeing strong growth across all of the five divisions of Lonrho in all seventeen countries where we operate. Sub Saharan Africa is attracting growing interest from global investors as the significance of the oil, gas, mineral and agriculture potential of the continent becomes clearer. These are fundamental resources of significant importance to the rest of the world. This, combined with the domestic market generated from a population approaching one billion people, is driving continuing growth in Africa." 3 months to 31 31 March March
2011 2010 Variance Var % GBP000s GBP000s Agribusiness Division Turnover 16,502 12,386 4,117 33.2% Gross Margin 17.2% 18.5% -1.3% - Gross Profit 2,831 2,286 545 23.8% Transportation Division Turnover 5,492 4,642 850 18.3% Gross Margin 18.2% 8.9% 9.4% - Gross Profit 1,002 411 590 143.5%
Support Services Division Turnover 5,165 2,496 2,669 106.9% Gross Margin 24.7% 32.0% -7.2% - Gross Profit 1,276 797 479 60.1% Infrastructure Division Turnover 4,225 3,771 454 12.0% Gross Margin 42.8% 49.5% -6.6% - Gross Profit 1,809 1,865 -56 -3.0% Lonrho Hotels Division Turnover 2,151 1,272 880 69.2% Gross Margin 67.9% 70.1% -2.2% - Gross Profit 1,462 892 570 63.9% Group Turnover 33,536 24,566 8,969 36.5% Group Gross Profit 8,380 6,252 2,128 34.0% Group EBITDA 1,910 -820 2,730 N/a 6 months to 31 31 March March 2011 2010 Variance Var %
GBP000s GBP000s Agribusiness Division Turnover 31,653 23,897 7,756 32.5% Gross Margin 17.0% 18.0% -1.0% - Gross Profit 5,370 4,302 1,068 24.8% Transportation Division Turnover 10,066 9,818 248 2.5% Gross Margin 12.0% 9.6% 2.4% - Gross Profit 1,206 943 263 27.9% Support Services Division Turnover 7,820 4,873 2,947 60.5% Gross Margin 27.4% 30.4% -3.0% - Gross Profit 2,145 1,482 663 44.8%
Infrastructure Division Turnover 7,431 6,370 1,061 16.7% Gross Margin 49.4% 47.2% 2.2% - Gross Profit 3,669 3,008 661 22.0% Lonrho Hotels Division Turnover 4,171 2,361 1,810 76.7% Gross Margin 67.5% 68.8% -1.2% - Gross Profit 2,817 1,623 1,194 73.6% Group Turnover 61,140 47,319 13,821 29.2%
Group Gross Profit 15,208 11,359 3,849 33.9% Group EBITDA 3,552 -2,514 6,066 N/a 5 May 2011 South African sponsor Java Capital Date: 05/05/2011 08:07:05 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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