Trading Update

RNS Number : 4721M

Cambria Africa PLC

18 September 2012

 



Cambria Africa Plc

("Cambria" or the "Company")

Trading update for the twelve months ending 31 August 2012

Cambria Africa Plc (AIM:CMB) is pleased to provide an update to its financial performance for the twelve months ending 31 August 2012.

Highlights

·     Focused on four core investments:  Payserv, the Leopard Rock Hotel, Millchem and Celsys

·     During the twelve months ending 31 August 2012 these core investments organically grew revenues and gross profit by 52% and 54% year-on-year, respectively

·     Continued high organic growth rates by our core investments are an indication of their solid position in Zimbabwe and their strong growth potential

·     Particularly high growth was achieved by Millchem and Celsys, growing gross profits year-on-year by 93% and 159%, respectively

·     Payserv and Millchem have made initial inroads in Zambia, and will continue to pursue regional expansion

·     Payserv is in advanced stages of upgrading its current Paynet EDI product into a real-time EFT system

·     As at 17 September 2012, Cambria's  shares traded at an approximate discount of approximately 70% to net tangible assets per share at  its interim balance sheet  date of 29 February 2012

Contacts
Cambria Africa plc	www.cambriaafrica.com
Ian Perkins	[phone]
Edzo Wisman	[phone]
WH Ireland Limited	www.wh-ireland.co.uk
James Joyce / Nick Field	[phone]

Trading update

Cambria has continued to accelerate a further focusing of the Company on its four core investments:  Payserv, the Leopard Rock Hotel, Millchem and Celsys.

During the 2012 financial year (FY2012) revenues and gross profit of Cambria grew to US$ 12.9 million (FY2011: US$ 9.6 million) and US$ 6.9 million (FY2011: US$ 5.1 million (adjusted for reallocation of certain labour costs at the Leopard Rock Hotel)), respectively, representing corresponding growth of 35% and 35% to the equivalent prior period.

Combined revenue and gross profit of Cambria's four core investments during FY2012 was US$ 12.0 million and US$ 6.8 million, respectively, during the period under review.  This compares to US$ 7.9 million and US$ 4.4 million (adjusted for reallocation of certain labour costs at the Leopard Rock Hotel) during the prior year, representing an increase of 52% and 54%, respectively.

There is currently a significant discount between the value of the Company's net tangible assets and its market capitalization on the AIM market.  As at September 17 2012 this discount was approximately 70% when compared to net tangible assets per share as at 29 February 2012, the date of the Company's interim balance sheet.

Given the growth rates of the Company's investments, and its increasingly attractive outlook towards group wide profitability, the Board continues to be cognisant of this discount.  Were this position to continue the Board may review strategic alternatives for one or more of its investments to unlock (and/or make more apparent) some of the value built-up within its underlying investments.  If this review were undertaken it may include, but would not be limited to, a potential sale of certain assets.  

In this context, the Company's Board may consider targeted buy-backs of its own shares were a realisation of any assets completed.

Operational Update Core Investments

Consolidated results of core investments

Cambria's core portfolio consists of the Payserv, Leopard Rock Hotel, Millchem and Celsys.  These investments jointly had a consolidated revenue and gross profit performance as per the following table:

(Unaudited; US$ mm)	2012	2011	Growth
Revenues	12.0	7.9	52%
Gross profit (1)	6.8	4.4	54%
Gross margin	57%	56%	2%

(1)  For comparison, FY2011 gross profit adjusted for
re-allocation of certain Hotel labour costs to SGA

Growth during FY2012 was entirely organic and based on adding new offerings in existing markets, adding new markets for existing offerings, as well as more efficient exploitation of existing platforms.

Millchem and Celsys achieved particularly high year-on-year gross profit growth of 93% and 159%, respectively.

Payserv (100% holding)

Payserv, previously trading as Paynet Group, provides EDI switching services (Paynet), 'payslip' processing (Autopay), and payroll based microfinance loan processing (Tradanet (51% holding))

(Unaudited; US$ mm)	2012	2011	Growth
Revenues	4.0	3.0	30%
Gross profit	3.6	2.2	62%
Gross margin	92%	74%	25%

Paynetprovides Electronic Data Interchange (EDI) services to all 22 banks and building societies in Zimbabwe, as well as to over 1,500 corporates (FY2011: over 1,100).  Paynet processed 12.3 million transactions (FY2011: 8.3 million) during the period under review, or a 48% increase.

Autopay, providing payroll services to 172 customers (FY2011: 113), processed over 286 thousand pay slips (FY2011: 241 thousand) during the period under review, or an 18% increase. 

Tradanet has seen significant growth in the value of payroll based micro-finance loans processed, which grew to US$ 140 million (FY2011: US$ 76 million), representing an 86% increase.  At the end of the period the loan book under management stood at US$ 100 million (FY2011: US$ 42 million), an increase of 138% when compared to last year.

Payserv is, in cooperation with its bank clients, concluding design and tests to upgrade the EDI Paynet product into a real-time Electronic Fund Transfer (EFT) system.  Furthermore, Payserv has been encouraged by its Zimbabwean bank clients to explore opportunities in Zambia and is currently actively pursuing this.  

During the twelve months under review, Payserv continued to return increasing amounts of cash to Cambria.

The Leopard Rock Hotel (100% holding)

The Leopard Rock Hotel is a four star hotel and resort located in the Eastern Highlands of Zimbabwe.  It boasts a world-class golf course, noted as one of the finest in Africa, a family-friendly game park, a casino and some of the finest food in Zimbabwe.

(Unaudited; US$ mm)	2012	2011	Growth
Revenues	2.5	2.1	17%
Gross profit (1)	1.9	1.6	20%
Gross margin	78%	76%	2%
(1) For comparison, FY2011 gross profit adjusted for re-allocation of certain labour costs

When compared to last year, the Leopard Rock Hotel saw occupancies of 46% (FY2011: 38%), an increase of 21%.  Average room rates decreased by 6% to US$ 111 (FY2011: US$ 117).  During the period, Revenue Per Available Room (RevPAR) increased to US$ 51 from US$ 44, an increase of 16%. 

At 31 August 2011, certain labour costs were allocated to 'costs of goods sold' (COGS), which were included in Selling, General and Administrative costs in the prior year. These amounts have been excluded from COGS again in FY2012 and the comparative FY2011 figures adjusted.  Unadjusted, consolidated gross profit for FY2011 was US$ 1.0m.  

Celsys (60% holding)

After significant investment by Cambria, Celsys has become, in the Company's view, one of the best equipped printers in Zimbabwe.  As a result, it now commands leading market positions in security and commercial printing.

(Unaudited; US$ mm)	2012	2011	Growth
Revenues (1)	1.8	1.1	65%
Gross profit (1)	0.6	0.2	159%
Gross margin	32%	20%	57%

(1) Adjusted figures relate to continuing businesses

Print and ATM leasing only

During the period, Celsys has been able to further consolidate its position as one of the leading commercial printers in Zimbabwe, allowing it to grow sales rapidly while increasing margins.

In May 2012 Cambria stated its intention to acquire the remaining 40% of Celsys shares not already owned by the Company.  This process will be completed as Cambria lists on the Zimbabwe Stock Exchange. 

Millchem (100% holding)

Millchem, previously trading as Millpal Chemicals, is a value-added chemicals distributor with leading market positions in Zimbabwe in solvents and metal treatment products.  It recently started distributing mining chemicals and alkyd resins. 

(Unaudited; US$ mm)	2012	2011	Growth
Revenues	3.8	1.7	126%
Gross profit	0.7	0.4	93%
Gross margin	19%	22%	(15%)

Millchem continues to regularly expand its existing product lines, while also actively exploring entry into new sectors.  Moreover, Millchem, during the second half of FY2012, was able to make initial sales into Zambia, and will continue to pursue regional expansion. 

Net Tangible Assets

As at 29 February 2012 net tangible assets of the Group were US$ 33.6 million.  Net tangible assets excluded certain contingent assets not included on the balance sheet of US$ 2.9 million.

Full year results

The information provided in this announcement is based on unaudited management information. The Company expects to announce its audited results for the year ended 31 August 2012 by 30 November 2012.

As reported in the interim results, the new Board took a prudent view on the various assets on the Company's balance sheet incurring accelerated write-offs relating to intangible assets (US$ 10.8 million at 29 February 2012), mainly related to the Celsys Limited and FMNA investments.  This had a negative impact on group wide operating results for the interim period and, as such, will impact results for FY2012.

Further write-offs of US$ 3.3 million were incurred on 7 August 2012 related to the sale of the ATR and F27 aircraft (see RNS 5278J).  As disclosed then, the total amount recognized by Cambria as being owed by its aircraft leasing customer is US$ 7.0 million, of which US$ 5.6 million are Contingent Assets.  We understand the aircraft leasing customer claims it is owed US$ 1.4 million, which is a claim Cambria will vigorously defend. 

In addition, the changes made to the Board on 24 February 2012 came with significant one-off costs which included legal fees and various other charges associated with the transition away from Cambria's then largest shareholder (US$ 439 thousand as at February 2012).  Again, this had a negative impact on group wide operating results for the interim period and, as such, will impact results for FY2012.  The Board expects some of these costs to continue to be incurred by the Company in the forthcoming half of FY2013. 

Notes for editors:

Cambria is a long term, active investment company, building a portfolio of investments primarily in Zimbabwe.  The name of the Company is inspired by the Cambrian period in the earth's development, also referred to as the "Cambrian explosion".  It represents an anticipated period of rapid development and a promising new era for the Company, its shareholders and employees - alongside the current economic renaissance of Zimbabwe.

Cambria has been listed on the AIM market of the London Stock Exchange since 2007.

 

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