Last checked at 6 Mar 2009 15:00
6 March 2009
LONZIM PLC
("LonZim" or the "Company")
LonZim Annual Report and Accounts for the period ended 31 August 2008
Restoration of Trading
LonZim (AIM: LZM), which was established for the principal purpose of making investments in Zimbabwe and the Beira corridor in Mozambique, announces its unqualified audited annual report and accounts for the period 25 October 2007 to 31 August 2008. A full copy of the annual report is available from the Company's website, www.lonzim.co.uk, and copies are being posted to Shareholders today.
In conjunction with this announcement the Company announces that trading in its AIM listed securities has recommenced with immediate effect.
Financial Review
The results for the year, as expected, reflect the fact that the businesses invested in were either new start-up ventures or established businesses which required resource in the form of cash and management. For the period to 25 October 2007 to 31 August 2008 the Company has:
Listed on the AIM market of the London Stock Exchange on 11 December 2007 after raising £29.16 million.
Incurred a loss for the period of £1.2 million. This was expected given the current economic climate in Zimbabwe and is after charging amortisation of intangible assets of £1.0 million.
Acquired 59,682,817 ordinary shares in Lonrho Plc ("Lonrho"). In aggregate, as at 26 February 2009, LonZim owned 7.81 per cent. of Lonrho. The total consideration was approximately £2.95 million which was funded out of LonZim's cash resources.
Cash held at the end of the period was £20.3 million.
Operational Highlights
LonZim has acquired and established a portfolio of assets focused on key strategic sectors. During the period to 31 August 2008, the Company entered into the following transactions:
Blueberry International Services Limited ("Blueberry") (100% holding)
100% interest in Blueberry purchased for US$7.2 million (£3.6 million) inclusive of costs.
Blueberry owns a 60% interest in Celsys Limited ("Celsys"), a Zimbabwean publicly listed company active in the telecommunications and security printing markets in Zimbabwe.
Blueberry also owns a 100% stake in Gardoserve (Private) Limited, an industrial chemical and solvent manufacturer and supplier to industry in Zimbabwe.
Hotels and development
Purchase of an 80% stake in Aldeamento Turistico de Macuti SARL ("ATdM"), for a cash consideration of US$4.25 million (£2.1 million),
ATdM owns a development site on the coast in central Beira, which is described as the 'coast of Zimbabwe', a location of significant strategic importance not just in terms of trade but also tourism.
Plans for the development of the site are advanced and will be completed in March 2009.
LonZim has also made the following significant trading acquisitions after 31 August 2008:
Paynet Limited ("Paynet")
Acquisition of 100% of Paynet in October 2008 for US$3.19 million (£1.85 million). Paynet provides an electronic funds transfer system for sixteen banks in Zimbabwe and over one thousand of the largest Zimbabwean corporate clients.
The purchase included a newly built commercial property valued provisionally at US$1.0 million (£0.5 million).
ForgetMeNot Africa Limited ("FMN Africa")
Acquired a 51% stake of FMN Africa which provides a 'message optimiser' application for mobile phones.
This system provides a unique two-way SMS - SMS Instant messaging and email technology platform whereby emails and interactive messages can be received and sent on a basic mobile phone.
Fly540 Airline
LonZim will aim to launch the Lonrho Plc aviation subsidiary Fly540 in Zimbabwe and has allocated funds of £1.85 million for this purpose.
In October 2008 the acquisition was completed of two aircraft for £1.128 million of the allocated £1.85 million.
Property acquisition
LonZim entered into an agreement in January 2009 to acquire the total issued equity of Medalspot (Private) Ltd from the Zimbabwean banking group, Kingdom Bank. Medalspot owns a 6,600m² industrial site with 2,650m² of offices and factory space in Harare. The acquisition price was US$0.95 million (£0.658 million).
This acquisition will provide additional flexibility for Celsys to execute its growth strategy.
David Lenigas, Executive Chairman of LonZim commented:
"We are pleased with LonZim's progress since listing on AIM in December 2007 and we believe that the acquisitions made to date will play a significant role in a potential economic recovery in Zimbabwe and contribute to the future growth of the Zimbabwean economy.
"We remain confident that Zimbabwe will reemerge as a major economic hub in Sub Saharan Africa. We also believe that looking ahead the investment potential for Zimbabwe is considerable, and are positive that we will identify further investment opportunities to create value for our shareholders."
ENQUIRIES
| LonZim Plc | +44 (0)20 7016 5105 |
| David Lenigas, Executive Chairman | +44 (0)7881 825 378 |
| Geoffrey White, Chief Executive Officer | +44 (0)7717 307 308 |
| Emma Priestley, Executive Director | +44 (0)7867 785 177 |
| Beaumont Cornish: NOMAD | |
| Roland Cornish | +44 (0) 207 628 3396 |
| Pelham Public Relations | |
| Charles Vivian | +44 (0) 20 7337 1538 +44 (0) 7977 297903 |
| James MacFarlane | +44 (0) 20 7337 1527 +44 (0) 7841 672831 |
Extracts from the Annual Report and Accounts for 2008:
Chief Executive's Review
LonZim Plc continues to follow its very specific mandate to invest in companies and projects in Zimbabwe and the region of Mozambique known as the Beira Corridor. This mandate remains focused on acquiring or establishing companies that demonstrate high growth potential with the ability to become market leaders in their respective fields as and when the Zimbabwean economy normalises. LonZim is committed to supporting these companies in the interim period.
The Board of LonZim maintains its view that Zimbabwe will re-emerge as a central economic and geographic platform in Africa in the event of an economic recovery and is confident that over time Zimbabwe will return to being one of the economic powerhouses of the continent.
The current commercial position in Zimbabwe poses a significant challenge for all areas of business in the country and day to day activities can be considerably influenced by the current situation placing strain on the health of industry in general. The socio-economic environment is also dire. However, LonZim remains clear that it is important to support jobs in this time of crisis and provide companies in which it invests with a reliable platform from which to continue operations and 'keep the doors open' throughout this challenging period.
The LonZim focus is on retaining quality staff in its operations, where possible maintaining a positive cash flow and developing strategic and clear plans to rapidly build the businesses once the economy shows sign of recovery.
Since listing on the London Stock Exchange's AIM market in December 2007, LonZim has acquired and established a portfolio of assets focused on key strategic sectors that the Board believe will position the company to play a significant role in a potential economic recovery in Zimbabwe and contribute to the future growth of the Zimbabwean economy.
Transactions entered into during the period ended 31 August 2008:
Blueberry International Services Limited ("Blueberry")
LonZim purchased a 100% interest in Blueberry for US$7.2 million (£3.6 million) inclusive of costs. Blueberry owns a 60% interest in Celsys Limited ("Celsys"), a Zimbabwean publicly listed company active in the telecommunications and security printing markets in Zimbabwe. Celsys is the market leader in security printing in Zimbabwe (cell phone recharge cards, cheque books, share certificates, securities etc), is the distributor for the internationally recognised SOPHOS anti-virus security software and operates a network of ATMs throughout the country. Celsys is also a Nokia mobile phone sales and service franchise.
LonZim has installed a new mobile phone recharge card printing line in Celsys since the acquisition. Celsys has since become the market leader in this sector and is now actively seeking export opportunities to Angola, Mozambique and Mali.
Blueberry also owns a 100% stake in Gardoserve (Private) Limited, which trades as "Millpal", an industrial chemical and solvent manufacturer and supplier to industry in Zimbabwe. With central chemical storage facilities in Harare, this business is being expanded into export markets and has become a Sasol chemical distributor for Zimbabwe.
Millpal is the largest manufacturer of solvents in Zimbabwe and a market leader in the production and distribution of industrial chemicals for industry.
Despite the continuing difficult economic conditions in Zimbabwe, since acquisition, both businesses have maintained their market positions and continue to trade.
Hotels and development
LonZim purchased an 80% stake in Aldeamento Turistico de Macuti SARL ("ATdM"), for a cash consideration of US$4.25 million (£2.1 million), the other shareholders of ATdM being the Mozambican Government investment fund IGEPE and Beira Municipality.
Beira is described as the 'coast of Zimbabwe' and is the principal and nearest supply route from the sea to Zimbabwe, making its location of significant strategic importance not just in terms of trade but also tourism.
ATdM owns a development site on the coast in central Beira, Mozambique, around the Macuti lighthouse where the derelict Don Carlos and Estoril Hotels are located. The site consists of a 300,000m² plot of land, including 1.5km of beach front, which LonZim plans to develop.
LonZim has undertaken and designed a masterplan for the development of the site, and proposes to develop a 200 room four star hotel, a 60 room boutique luxury hotel and a significant regional shopping and office complex. There are also plans to develop one kilometre of beach front housing on the site.
The masterplan will be completed in March 2009 and demonstrates a phased development, where elements that have an immediate market appeal can be developed initially, and thereafter stimulate the development of other aspects of the project.
Significant trading acquisitions after 31st August 2008:
Paynet Limited ("Paynet")
LonZim completed the acquisition of 100% of Paynet in October 2008, announced in March 2008, for US$3.19 million (£1.85 million). The purchase included a newly built commercial property valued provisionally at US$1.0 million (£0.5 million). Paynet provides an electronic funds transfer (EFT) system for sixteen banks in Zimbabwe and over one thousand of the largest Zimbabwean corporate clients.
Paynet also automates company bulk payment transactions to corresponding banks and includes the largest private sector outsourced salary bureau utilised by the majority of large corporations in Zimbabwe for payments of electronic payrolls.
ForgetMeNot Africa Limited ("FMN Africa")
LonZim has taken up an option to acquire a 51% stake of FMN Africa which provides a 'message optimiser' application for mobile phones for the sum of US$0.58 million (£0.35 million), with a further payment related to the growth of the business of US$1.0 million (£0.66 million). This system provides a unique two-way SMS - SMS Instant messaging and email technology platform whereby emails and interactive messages can be received and sent on a basic mobile phone. The system does not require a G3 capability.
Telecom company Econet Lesotho has already instigated a trial for the service and negotiations continue to launch this exciting product across a range of telecom users in Zimbabwe and the surrounding countries.
Fly540 Airline
LonZim has announced that it will launch the Lonrho Plc aviation subsidiary Fly540 in Zimbabwe. The company has allocated US$3.3 million (£1.85 million) from existing resources for the deployment and establishment of the company and its operations at Harare airport, and to serve as a regional freight and passenger operation as and when the market develops.
In October 2008 LonZim completed the acquisition of two aircraft for £1.128 million of the allocated £1.85 million. These aircraft have been leased to Fly540 Uganda, a subsidiary of Lonrho Plc, whilst the Air Operator Certificate for Zimbabwe is obtained.
Property acquisition
In January 2009, LonZim entered into an agreement to acquire the total issued equity of Medalspot (Private) Ltd from the Zimbabwean banking group, Kingdom Bank. Medalspot owns a 6,600m² industrial site with 2,650m² of offices and factory space. The acquisition price was US$0.95 million (£0.658 million).
Non Executive Director
LonZim was pleased to announce in June 2008 that Paul Turner had been appointed to the Board of Directors of the company with effect from 1 July 2008. Paul Turner has unprecedented experience of commerce and the structure and operation of businesses in Zimbabwe, having previously been a partner at Ernst & Young Zimbabwe for thirty years.
Results for the period
The loss for the period of £1.2 million is as expected given the current economic climate in Zimbabwe after charging amortisation of intangible assets of £1.0 million. The cash held at the end of the period was £20.3 million. The company continues to undertake detailed due diligence on a range of potential acquisitions where it can identify real opportunities for growth in value in a normalised economic environment.
Despite the ongoing uncertainty in Zimbabwe the Directors welcome the recent announcements in relation to the Government of National Unity and remain positive for the eventual recovery of the economy. LonZim continues to undertake extensive due diligence on potential investments which are appropriate and demonstrate a strong fit with the Company's business model and investment focus.
On 26 February 2009, LonZim announced that it had acquired 59,682,817 ordinary shares in Lonrho Plc ("Lonrho") (a related party within the meaning of the AIM Rules for Companies). The Lonrho shares were acquired over a period of approximately three months and included the acquisition of 55,000,000 ordinary shares in a private placement by Lonrho at a price of 5p per share announced on 11 November 2008. In aggregate, as at 26 February 2009, LonZim owned 7.81 per cent. of Lonrho. The total consideration was approximately £2.95 million which was funded out of LonZim's cash resources. The company's independent non-executive directors (being Paul Heber and Paul Turner) have consulted with the company's nominated adviser, Beaumont Cornish Limited, and have confirmed that the terms of the purchases in the placing are fair and reasonable insofar as the company's shareholders are concerned.
Geoffrey White
Director & Chief Executive Officer
6 March 2009
Note:
All US$ to GBP£ conversions are at exchange rates at the time of the relevant transaction.
Report of the directors
For the period ended 31 August 2008
The directors present their first report on the affairs of the group, together with their financial statements and auditors' report, for the period from 25 October 2007 to 31 August 2008 (the "period").
Principal activities
The company was incorporated on 25 October 2007 and was admitted to AIM on 11 December 2007. The group is establishing itself as an investment company with a diverse portfolio of investments in Zimbabwe and the Beira Corridor in Mozambique. The company's investment objective is to provide shareholders with long term capital opportunities through the investment of its capital in Zimbabwe and the Beira Corridor.
Results
A consolidated loss on operations of £1,193,000 after minority interests has been made by the group during the period and has been transferred to reserves. This is after charging amortisation of intangible assets of £994,000.
Business Review and Development
The Chief Executive's review contains information on developments during the period and key potential future developments.
Post Balance Sheet Events
Details of significant events since the balance sheet date are contained in note 34 to the financial statements.
Dividends
The directors do not recommend the payment of a dividend.
Declared substantial shareholdings
The Directors have been advised of the following shareholdings at 5 March 2009 in 3 per cent. or more of the company's issued share capital:
| Number of shares | Percentage of the issued capital | ||||
| Lonrho Plc | 8,840,000 | 24.25% | |||
| Morgan Stanley | 7,166,548 | 19.66% | |||
| MKM Longboat Multi-Strategy Master Fund | 4,860,000 | 13.33% | |||
| Emerging Markets Management, LLC | 2,916,000 | 8.00% | |||
| Deutsche Asset Management Americas | 2,886,762 | 7.92% | |||
| HSBC Bank Plc | 2,556,000 | 7.01% | |||
| Enso Capital Management, LLC | 1,409,000 | 3.87% | |||
| Renaissance Investment Management (UK) Ltd | 1,215,000 | 3.33% |
Directors
David Anthony Lenigas (Executive Director) Appointed 7 November 2007
Emma Kinder Priestley (Executive Director) Appointed 7 November 2007
Geoffrey Trevor White (Executive Director) Appointed 7 November 2007
Jean Mckay Ellis (Finance Director) Appointed 7 November 2007
Paul David Heber (Independent Non-Executive Director) Appointed 7 November 2007
Paul Turner (Independent Non-Executive Director) Appointed 1 July 2008
The directors' interests in the shares of the company at the beginning or, where relevant, the date of appointment, and end of the period were as follows:
| Number of Ordinary Shares | |||
| David Lenigas | 200,000 | ||
| Emma Priestley | - | ||
| Geoffrey White | 100,000 | ||
| Jean Ellis | - | ||
| Paul Heber | 50,000 | ||
| Paul Turner | - |
Share options held by the directors are detailed in note 21 of the financial statements.
Annual General Meeting
The Annual General Meeting will be held at 10.00am on Friday, 24th April 2009 at The Oak Room, Le Meridien Piccadilly, 21 Piccadilly, London W1J 0BH.
The notice of meeting, together with a form of proxy, will be sent out separately at a later date.
Auditors
During the period, KPMG Audit LLC were appointed as auditors. KPMG Audit LLC, being eligible, have indicated their willingness to continue in office.
By order of the Board
D. Lenigas Chairman
6 March 2009
Consolidated Income Statement
For the period from incorporation on 25 October 2007 to 31 August 2008
| 2008 Total | |||
| £000 | |||
| Revenue | 188 | ||
| Cost of sales | (66) | ||
| Gross profit | 122 | ||
| Monetary adjustment | (1) | ||
| Operating costs | (2,056) | ||
| Operating loss before financing income | (1,935) | ||
| Finance income | 974 | ||
| Finance costs | (129) | ||
| Loss before tax | (1,090) | ||
| Income tax expense | (142) | ||
| Loss for the period | (1,232) | ||
| Attributable to: | |||
| Equity holders of the parent | (1,193) | ||
| Minority interest | (39) | ||
| Loss for the period | (1,232) | ||
| Basic loss per share (pence) | 3.4 | ||
| Diluted loss per share (pence) | 3.4 |
Consolidated statement of recognised income and expense
For the period from incorporation on 25 October 2007 to 31 August 2008
| 2008 | |||
| £000 | |||
| Foreign currency translation differences for foreign operations | 26 | ||
| Revaluation of property, plant and equipment | 232 | ||
| Loss for the period | (1,232) | ||
| Total recognised income and expense for the period | (974) | ||
| Attributable to: | |||
| Equity holders of the parent | (1,034) | ||
| Minority interest | 60 | ||
| Total recognised income and expense for the period | (974) |
Consolidated and Company balance sheets
As at 31 August 2008
| Group 2008 | Company 2008 | |||
| £000 | £000 | |||
| Assets | ||||
| Property, plant and equipment | 4,284 | - | ||
| Goodwill | 3,450 | - | ||
| Other intangible assets | 6,296 | 6,296 | ||
| Investment in subsidaries | - | 2,962 | ||
| Total non-current assets | 14,030 | 9,258 | ||
| Financial assets | 213 | - | ||
| Inventories | 21 | - | ||
| Trade and other receivables | 1,277 | 4,352 | ||
| Cash and cash equivalents | 20,282 | 20,270 | ||
| Total current assets | 21,793 | 24,622 | ||
| Total assets | 35,823 | 33,880 | ||
| Equity | ||||
| Issued share capital | 4 | 4 | ||
| Share premium account | 33,697 | 33,697 | ||
| Revaluation reserve | 148 | - | ||
| Share option reserve | 165 | 165 | ||
| Retained earnings | (1,182) | (1,079) | ||
| Total equity attributable to equity holders of the Company | 32,832 | 32,787 | ||
| Minority interest | 904 | - | ||
| Total equity | 33,736 | 32,787 | ||
| Liabilities | ||||
| Provisions | 759 | 759 | ||
| Deferred tax liabilities | 107 | - | ||
| Total non-current liabilities | 866 | 759 | ||
| Bank overdrafts | 2 | - | ||
| Current tax liabilities | 41 | 35 | ||
| Trade and other payables | 1,178 | 299 | ||
| Total current liabilities | 1,221 | 334 | ||
| Total liabilities | 2,087 | 1,093 | ||
| Total equity and liabilities | 35,823 | 33,880 |
These financial statements were approved by the Board of Directors and authorised for issue on 6 March 2009. They were signed on its behalf by:
G White Director & Chief Executive Officer
Consolidated cash flow statement
For the period from incorporation on 25 October 2007 to 31 August 2008
| Group 2008 | |||
| £000 | |||
| Cash flows generated from operating activities | (903) | ||
| Cash received for inventories | 1 | ||
| Increased cash due from customers | (601) | ||
| Increased cash due to suppliers | 351 | ||
| Cash generated from operations | (1,152) | ||
| Interest received | 832 | ||
| Net cash from operating activities | (320) | ||
| Cash flows from investing activities | |||
| Acquisition of subsidiaries, net of expenses | (5,811) | ||
| Net cash from investing activities | (5,811) | ||
| Cash flows from financing activities | |||
| Proceeds from the issue of share capital | 26,411 | ||
| Net cash from financing activities | 26,411 | ||
| Net increase in cash and cash equivalents | 20,280 | ||
| Cash and cash equivalents at 25 October 2007 | - | ||
| Cash and cash equivalents at 31 August 2008 | 20,280 |
Statutory Information
The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 August 2008 but is derived from those accounts. The auditors have reported on those accounts.