Wrap Text
Trading Statement
Lonrho Plc
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
(“Lonrho” or “the Company”)
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 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 (£3m) and (£5m) 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
£186.1m for the full year.
- Revenue in the Quarter 4 increased 34.3% to £46.2m (2011: £34.4m). 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 £128.9m to £186.1m, 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-for- months Growth like-for- like-for-
December like growth like growth to like growth like growth
2012 (Constant December (Constant
FX) 2012 FX)
£ 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:
- 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 £6m). 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.
- 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 £4m).
This delayed delivery of some 72 units, all of which were successfully delivered in late December and
January.
- 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 £1.2m). The Lansmore Masa Square in Botswana opened on schedule and has rapidly
become the number one hotel in Gaborone.
- 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 £4m). 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.
- 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 £1.6m). 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.
- 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 £1.3m, 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.
- 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.
- The deterioration of foreign exchange rates versus expectations caused a shortfall of £2.7m 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 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 £0.9m.
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:
Lonrho Plc +44 (0) 20 7016 5105 FTI Consulting +44 (0) 20 7831 3113
Geoffrey White Edward Westropp
David Armstrong Georgina Bonham
4 February 2013
South African sponsor
Java Capita
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