(TALKZIMABWE) LonZim delivers strong growth as economy recovers

COMMENT - LonZim is an 'investment fund' created by LonRho (London-Rhodesia), Tiny Rowland's company. Predictably someone is profiting from the low prices in Zimbabwe created by sanctions.

LonZim delivers strong growth as economy recovers
Proactive Investors
Tue, 26 Jan 2010 15:07:00 +0000

LONZIM said it is delivering strong growth as the general Zimbabwe market begins to recover, as it reported a return to profit for the full year ended 31 August 2009.

LonZim reported £2.6 million in turnover, up from 188,000 a year earlier, and a pretax profit of £1.08 million, compared with a £1.09 million loss in the preceding year. Shares were buoyed by the positive results, climbing nearly 9% following the announcement.

Fundamental changes in the Zimbabwe economy in early 2009 brought the end of hyperinflation and slowly helped the country’s employment recover. The changes were largely the result of two key events, the establishment of the inclusive Government in February and the US dollarization of the currency.

Most of its operating businesses have become cash generative and are delivering strong growth in the current year, LonZim said. Net assets rose to £32.6 million at the year-end, following a share buy back of £1.3 million. Cash held at the end of the year was £2.4 million and the company’s net assets per share were 101.6p.

During Zimbabwe’s economic downturn, the company paid its partner’s debts and wages, consequently they retained a skilled workforce and are ready to trade.

Importantly, LonZim's subsidiaries had access to funds and liquidity, at a time when finding liquidity was very challenging in the market.

Through the support and acquisition of distressed businesses, which were forced to operate on a barter system, the company’s subsidiaries have successfully positioned themselves to be 'first back to market'.

During the financial year, LonZim acquired several businesses, which fell in line with its investment criteria.

In October 2008, the company bought 100% of electronic money transfer (ETF) business Paynet Ltd for US$3.19 million. Paynet’s newly built commercial property in Harare which is valued at US$0.95 million, was included in the acquisition.

Paynet provides an EFT platform for 19 of the 21 Zimbabwean banks and more than 1,000 Zimbabwean corporate clients. The Paynet business collapsed under hyperinflation, but LonZim maintained the business's staff, retaining systems in place ready for recovery. In February 2009, the business started to make progress and monthly transactions increased steadily as the economy restarted.

In April 2009, LonZim acquired Zimbabwe's iconic Leopard Rock Hotel for US$8.5 million, the property includes a PGA rated golf course and 400 hectare game farm.

The company said that the hotel has already seen a significant increase in occupancy with growth in bookings and revenues for conferences and meetings as well as from leisure orientated visitors. As the market recovers, the hotel will expand its accommodation and facilities and plans to attract the PGA to hold a tournament at the hotel in due course.

Also during the year, LonZim bought controlling 51% stakes in the ForgetMeNot Africa (FMNA) and Panafmed Ltd. FMNA is a telecommunications software developer, providing a 'message optimiser' application for basic non-3G mobile phones which provide two-way SMS - SMS, instant messaging and email technology platform without the need for sophisticated infrastructure. Panafmed provides a refrigerated distribution logistics for pharmaceuticals and medical product delivery and distribution into and around Zimbabwe.

The company also bought a 6,600 square metres industrial site, including 2,650 square metres of offices and factory space, for US$0.95 million. LonZim acquired the property from the Zimbabwean banking group Kingdom Bank.

LonZim also announced it intends to launch oparations of African low-cost airline Fly540 in Zimbabwe. The company has allocated funds from existing resources for the deployment and establishment of the airline. Operations will be based at Harare airport to serve as a regional freight and passenger operation as and when the market develops.

LonZim said it 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.