TIDMCMB
RNS Number : 0054Y
Cambria Africa PLC
20 January 2014
Cambria Africa plc
("Cambria" or the "Company")
Trading update for the period ending 31 August 2013,
strategy update and appointment of Joint Broker
Cambria Africa Plc (AIM:CMB) is pleased to announce a trading
update for the period ending 31 August 2013 in advance of its final
results, which are expected to be announced in the first half of
February, as well as a strategy update to the Company. All
performance figures and comparisons quoted in this statement are
unaudited pending completion of the 2013 audit. All references to
continuing operations relate to the Group's Payserve Africa and
Milchem Holdings investments and head office activities. FY2012 and
any prior year comparison figures have been restated to reflect
this definition of continuing vs discontinued operations.
-- Cambria is continuing the disposal of its remaining non-core
assets, completion of which will mark the re-alignment away from
multiple investments operating in a single country, to a select
number of investments operating regionally. It is the Board's
conviction this strategy marks the best route towards maximising
shareholder value and ensuring continued future growth
-- As a result of this strategy, the Company is now solely
focused on Payserv Africa (Payserv) and Millchem Holdings
(Millchem), growing their scale and scope, and pursuing their
regionalization
-- A multi-year, regional and product roll-out strategy for both
Millchem and Payserv has been developed and Cambria is excited
about the return prospects offered by these two investments
o Initial steps have successfully been made. Millchem now has a
warehouse and offices in Zambia, where it is commencing operations,
and is opening the same in in Malawi. Payserv has received its
National Payments Licence in Zambia, signed it first customers and
is processing payments
o Cambria anticipates strong organic growth for both investments
and may make smaller acquisitions to accelerate their
regionalization strategy
-- During the year ended 31 August 2013, Payserv Africa and
Millchem Holdings combined, organically grew revenues and gross
profit by 10% and 6% year-on-year, respectively
-- Cambria's central costs were reduced by 54% when compared to the equivalent period last year
-- Cambria's EBITDA loss for the period for continuing
operations for the year ended 31 August 2013 was US$ 3.6 million, a
52% reduction when compared to last year
-- The Company expects to report a group loss of approximately
$5m for the year ending 31 August 2013 for its continuing
operations. Discontinued operations, including write downs of
property and assets, generated a loss of US$ 6.9 million
-- The Company is pleased to announce that it has appointed
Peterhouse Corporate Finance Limited as Joint Broker with immediate
effect
Contacts
Cambria Africa plc www.cambriaafrica.com
+44 (0) 796 4908
Ian Perkins 951
+44 (0) 796 4908
Edzo Wisman 950
WH Ireland Limited www.wh-ireland.co.uk
+44 (0) 20 7220
James Joyce / Nick Field 1666
Peterhouse Corporate Finance www.pcorpfin.com
Limited
Charles Goodfellow / Duncan +44 (0) 207 220
Vasey 9791
Introduction
During the period under review revenues and gross profit of the
continuing operations of Cambria, being the Payserv and Millchem
investments, were US$ 8.5 million (2012 US$ 7.7 million) and US$
4.6 million (2012 US$ 4.3 million) respectively, representing
corresponding increases of 10% and 6% to the equivalent prior
period.
There was a slowdown in the rate of growth when compared to last
year (when, for example, revenues grew 64% year-on-year) which can
largely be attributed to a high level of uncertainty in the
business environment during the second half of the financial year
in Zimbabwe as a result of the elections, which, irrespective of
country, always negatively impact economies. During this election
year, Zimbabwe experienced periods of liquidity shortages,
resulting in cautious consumer spending which directly contracted
growth within our portfolio. This slowdown continues to impact
current performance of our investments.
Our pursuit of scale for both Payserv and Millchem, together
with the prudent strategy to regionalise, has meant Cambria
continued to invest for the future throughout this period. We are
confident that the positive impact of regional expansion into
Zambia (and subsequent entry into Malawi for Millchem), together
with the launch of various new products, will yield results in the
coming periods.
Cambria's EBITDA loss for the period for continuing operations
for the year ended 2013 was US$ 3.6 million, a 52% reduction when
compared to last year. The Company expects to report a group loss
of approximately $5m for the year ending 31 August 2013 for
continuing operations. Discontinued operations, including write
downs, generated a loss of US$ 6.9 million.
On 1 October 2012 the Company raised US$ 1.4 million gross by
way of a placing with institutions of 8,615,115 new ordinary par
value shares of GBP0.0001 each at 10p per share.
Operational review main investments
Consolidated results
Payserv Africa and Millchem Holdings jointly had a consolidated
performance as follows:
(US$ '000) 2013 2012 Growth
Revenues 8,487 7,721 10%
Gross profit 4,581 4,326 6%
Gross margin 54% 56% -4%
SG&A (4,209) (3,194) 32%
EBITDA 372 1,132 -67%
EBITDA margin 4% 15% -70%
The decrease in EBITDA can be attributed to three factors: (i)
Significant investments made by Payserv into new products as well
as product upgrades, with the associated costs expensed rather than
capitalised; (ii) investments into regional expansion pursued by
both Payserv and Millchem; and, (iii) an unforeseeable and
unavoidable US$ 294 thousand multi-year VAT liability related to
Tradanet, accounting for 40% of the decrease in combined EBITDA for
the year.
As Cambria continues to actively pursue scale and scope through
regional expansion and development of new products it will continue
to expense rather than capitalise these investments. This will
continue to impact EBITDA performance in the coming periods.
Payserv Africa
Payserv provides EDI switching services (Paynet), 'payslip'
processing (Autopay), and payroll based microfinance loan
processing (Tradanet).
(US$ '000) 2013 2012 Growth
Revenues 4,164 3,951 5%
Gross profit 3,811 3,614 5%
Gross margin 91% 91% 0%
SG&A (3,369) (2,274) 48%
EBITDA 442 1,340 -67%
EBITDA margin 11% 34% -69%
Paynet provided Electronic Data Interchange (EDI) services to
all 22 banks and building societies in Zimbabwe, as well as to over
1,500 corporates. Paynet processed 15.2 million transactions (2012:
12.3 million) during the period under review, a 24% increase.
Autopay, provided payroll services to 150 customers, processed
over 303 thousand pay slips (2012: 286k) during the period under
review, a 6% increase.
Tradanet processed approximately 66,000 (2012: 55,000) loans
during the period, representing a value of US$ 131 million (2012:
US$ 140 million), a 19% increase and a 6% decrease respectively. At
the end of the period the loan book under management stood at US$
110 million (2012: US$ 100 million), an increase of 10%.
Over the period, Payserv has invested significantly into product
upgrades, new offerings, entry into the Zambian market, as well as
exploration of other geographic markets. These investments have not
been capitalised and have therefore directly impacted the income
statement during the period under review.
New Paynet products recently launched include, among others,
eSchedules and PayZIMRA. It is also launching PayFT, a joint
venture with South African based BankServ. Geographically, Paynet
has established a presence in Zambia, received its Zambian National
Payments Licence during December 2013, signed its first customers
in that country, and has commenced processing payments. Moreover,
Autopay now has a presence in Zambia as well, processed its first
payslips in Uganda, and reached agreement with a trial customer
regarding processing payslips in Botswana.
The bottom line effect of these investments should come through
in the coming periods through enhanced revenue growth as well as
diversification of revenue streams.
There was an exceptional item of a US$ 294,000 adjustment to
Payserv (and group) EBITDA resulting from a multi-year VAT
liability related to Tradanet dating back to March 2010 that was
paid in one tranche during 2013.
Millchem Holdings
Millchem is a value-added chemicals distributor with leading
market positions in Zimbabwe. It recently established a presence in
Zambia, and is working towards a presence in Malawi.
US$ '000 2013 2012 Growth
Revenues 4,323 3,770 15%
Gross profit 770 712 8%
Gross margin 18% 19% -6%
SG&A (840) (920) -9%
EBITDA (70) (208) 66%
EBITDA margin -2% -6% 71%
In general, chemicals distribution tends to outpace economic
growth, on the flipside, it also tends to shrink faster when an
economy stagnates. Millchem was thus strongly affected by the
uncertain business environment during FY2013. During some weeks
over the period it was generating 50% less gross profit when
compared to equivalent weeks during the prior year. Importantly,
despite decreased revenue Millchem did not lose market share or
customers over the period, in fact new customers were added as
competitors were struggling.
Despite the challenging environment in Zimbabwe, the Millchem
team, under new leadership after the appointment of Matthijs Mulder
as the CEO of Millchem Holdings, remained focused on the long term
and continued to launch new products as intended, opened up a
branch in Bulawayo, opened up warehouse space and offices in
Zambia, made its first steps towards opening of a warehouse and
offices in Malawi, established buying entities in the Netherlands
and South Africa, and was able to add relationships with various
attractive new suppliers (e.g. BASF, ENI (Cent-Lube), Sasol and
others). Moreover, in addition to the NACD, Millchem Africa is now
also a member of the FECC, as it seeks to position itself as a
Responsible Distributor in this territory.
Alongside a new CEO, Millchem also appointed two Non-Executive
Directors to the Millchem Board. Bernard West and David Edgington,
who jointly bring over 80 years of chemicals industry experience,
as well as extensive industry relationships.
Investments required for this geographic expansion have not been
capitalised and have therefore directly impacted the income
statement during the period under review.
Other
Celsys Limited
The Company sold its investment in Blueberry International Ltd
on 25 July 2013 for US$ 1. This sale included, among others, a 60%
stake in Celsys Limited. During the period, Celsys generated $ 1.8
million in sales and negative US$ 2.5 million EBITDA, excluding
certain write backs related to intercompany balances. Excluding
write backs Celsys generated 0.5 million of EBITDA losses.
The Leopard Rock Hotel
During the period under review, the Leopard Rock Hotel was
classified by Cambria as held for sale. During the period, the
Leopard Rock Hotel generated US$ 2.3 million in sales and negative
US$ 671 thousand in EBITDA, before write downs recognised in the
Income Statement of US$2.8 million.
LonZim Air (B.V.I.) Limited
Through LonZim Air (BVI) Limited Cambria previously owned three
aircraft. Over the years a number of disputes arose in relation to
these aircraft and certain associated contracts. At this point, in
summary, Cambria will pursue recovery of claims related to these
disputes that are now estimated to be in excess of US$ 10 million.
These amounts relate to, inter alia, maintenance reserve and lease
charges and related contractual interest, payment of insurance
proceeds, deterioration in market value of the aircraft, and the
significantly lower amount the Company was able to obtain through a
sale, due to the poor condition the aircraft were found to be in.
LonZim Air incurred US$ 205 thousand in operating losses for the
period under review, largely related to extra-ordinary legal
expenses related to the above mentioned claims.
Settlement with Lonrho
On 19 July 2013 Cambria reached final settlement with Lonrho Plc
with regards to all on-going disputes, loan assets, and management
contracts related to Lonrho, other than claims related to three
aircraft previously owned by Cambria and leased to subsidiaries of
Lonrho. As a result of this settlement, Cambria received from
Lonrho US$ 2.7 million. The settlement agreed related to, among
others, the Aldeamento Turistico de Macuti, S.A.R.L loan, the
Churchill Estates (1995) (Private) Limited loan, the Lonrho
Management Services Agreement, and the Hotel Refurbishment and
Management Agreement.
Central costs
Cambria incurred US$ 4.0 million in central EBITDA costs for the
period under review, compared to US$ 8.6 million last year, a
reduction of 54%.
Strategy going forward
Cambria is continuing the disposal of its remaining non-core
assets, completion of which will mark the re-alignment away from
multiple investments operating in a single country, to a select
number of investments operating regionally. It is the Board's
conviction this strategy marks the best route towards maximising
shareholder value and ensuring continued future growth
As a result of this strategy, the Company is now solely focused
on Payserv and Millchem, growing their scale and scope, as well as,
importantly, their regionalisation.
A multi-year, regional and product roll-out strategy for both
Millchem and Payserv has been developed and Cambria is excited
about the growth and return prospects of the two investments.
Initial steps in the regional expansion have been made
successfully. For example, Millchem now has warehouse and offices
in Zambia, has commenced operations there, and is in the process of
opening the same in Malawi. In Zambia, Payserv has received its
National Payment Licence, signed on its first customers, and
commenced the processing of payments.
In the coming years, both Millchem and Payserv will continue to
expand in additional geographies in a careful and coordinated
manner. Moreover, Cambria anticipates growth for both investments
will include smaller acquisitions, which may or may not be made
using Cambria shares.
The Company requires funds for the expansion of Millchem and
Payserv, as well as for the group's working capital. The Company is
reviewing its options regarding funding in this regard and this may
include funds realised from the disposal of its non-core operations
and assets as well as the raising of additional equity or debt
capital.
Appointment of Joint Broker
The Company is pleased to announce that it has appointed
Peterhouse Corporate Finance Limited as Joint Broker with immediate
effect.
In closing
Cambria has had a year of transition, which has seen the end of
ongoing legal disputes and completion of the strategy to focus on
companies that can effectively pursue growth and scale through
regionalisation. We have significantly reduced operating costs,
including central costs, streamlined our business model, and
significantly invested into new products and into new markets. We
close out the financial year with a platform of two very strong
companies, which have made significant progress in their product
rollout and regional strategy, and which have a clear strategy for
the next few years.
Implementing this strategy over the last 18 months came with
difficult choices for Cambria's Board. However, having brought
Cambria to where it is now, the Board's conviction is stronger than
ever that our current portfolio and focus marks the best route
forward towards maximising shareholder value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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