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Email ArticleGeoffrey White spends three weeks of every month jetting across sub-Saharan Africa to check investments ranging from nectarine farms in Zimbabwe to a luxury hotel in the Democratic Republic of Congo.
The chief executive of Lonrho, the Africa-focused conglomerate, White believes that the company’s assets, in what he calls the “the world’s last frontier”, will bear fruit.
White, who used to give business advice to Gulf royal families, joined forces with David Lenigas, Lonrho’s chairman, to resurrect the 102-year-old company that had collapsed from its heights as a FTSE 100 constituent.
“Africa is where Asia was 30 years ago and, in reality, 10 to 15 years in front of people expectations,” Lenigas said, rattling off statistics about the continent’s booming growth.
Lonrho, short for London-Rhodesia, had been built into a multi-continent conglomerate by Roland “Tiny” Rowland, its larger-than-life leader who led the company for more than 30 years beginning in 1963.
But Mr Roland’s empire unravelled in the early 1990s due to declining metal prices and debt.
By 1993 he was ousted as chief executive. Lonrho’s assets were gradually sold and Lonmin, now a FTSE 250 metals company, was spun out. A lossmaking hotel in Mozambique was the only asset left on Lonrho’s books by December 2005.
Enter Lenigas, a mining specialist, who became chairman and convinced the board to once again bet on Africa. Along with Mr White, who joined two years later, the duo have revived Lonrho, which they say still has “the strength of a Coca-Cola brand name” in Africa.
Six years on, their gamble is starting to pay off. They have made investments in agribusiness, infrastructure, transportation, hotels and support services in 17 African countries.
Analysts at WH Ireland project that the company’s overall revenues will more than double to £300m ($462m) in the 15 months to December 31 of next year as the financial year is aligned with the calendar year. Pre-tax profits are estimated to increase by 83 per cent to £23m.
“We think a conglomerate is a clever way to diversify risk across Africa,” Lenigas said of the company’s broad portfolio.
Boasting that Lonrho can get fruit from a Zimbabwean farm to central London in three days, White said the company had integrated every step of the process from cold storage to delivery.
Produce accounts for half of the company’s agribusiness, which is 60 per cent of overall revenues. The other half comes from the company’s fish exports, which are sold to big supermarkets in the UK, US and South Africa.
“We don’t think there’s risk in non-cereal farming. If there’s a famine, people won’t come after our green peppers,” said White.
But the shares in the company, which returned to the main market from Aim in April, have dropped 49 per cent on the year to 9.17p, giving the company a market capitalisation of £129m.
“Our main shareholders have been there since 2006 and see this as an investment in the African growth story,” said Mr White.
He adds: “The last five years have been about building the fundamentals, 2012 is about delivering on them.”
The company said that most of the proceeds of a £27m placing in December will be used to buy out minority stakes in its agribusiness.
And Lenigas added that the next time he spoke with shareholders about money, he hoped that it was to tell them about a dividend.
Damian McNeela at Panmure Gordon said that would depend on what the company did with its lossmaking airline, Fly540.
Many suspect it will be acquired in a reverse takeover by Rubicon Diversified Investments, a cash shell with links to Sir Stelios Haji-Ioannou’s latest airline project, fastjet.com.
“Strategically, the Lonrho story sounds great, but when anyone looks into it, they wonder why aviation,” said McNeela.
While not ruling out the possibility of a reverse takeover, the company’s leaders are characteristically bullish about the possibilities for African aviation.
“There’s screaming demand for north-south and east-west travel in Africa,” said Lenigas.
LonZim, 23,7 percent owned by Lonrho ,registered a $9,3 million turnover in the year ended August 2011 up from $8 million recorded in the prior year.
Gross profit for the year went up 55 percent to $2 million.
The group’s loss before tax increased to $10 million up from previous year’s loss before tax of $9 million.
LonZim’s performance improved in the half year to February this year.
Operating losses fell to $4 million — down from $5 million — while gross profits rose to $2,8 million from $1,7 million .
Pre-tax losses rose $5 million from $ 4 million and the loss attributable to shareholders rose to $5,2 million from $4 million.
LonZim’s local interests include Zimbabwe Stock Exchange-listed technology firm Celsys Limited and the Vumba-based Leopard Rock Hotel.
In October, LonZim announced plans to reinvest into its Zimbabwean operations the $5,1 million proceeds from the disposal of its Mozambique subsidiary, Aldeamento Turistico de Macuti (ATdM).
The investment holdings group said the sale of ATdM was part of strategy to “focus on core Zimbabwean businesses”.
LonZim disposed of its 80 percent stake in ATdM to Lonrho Hotels Holdings Limited, a 100 percent subsidiary of Lonrho Plc with a 22,92 percent interest in LonZim.
Consideration for the shares is to be settled in cash, paid monthly over five years with a seven percent interest per annum accrued on the outstanding balance.
In addition Lonrho Hotels will repay an inter-company loan of $1,5million to LonZim and will take on potential liabilities of $1,2 million that LonZim assumed on the original acquisition.
ATdM reported net assets of $4 million as at February 28 this year and a loss after tax of $0,2 million for the six months to February.
LonZim was formed by Lonrho to invest in Zimbabwe and the Mozambican Beira corridor.
