Lonrho Plc Annual Report & Accounts for the year … · Lonrho Plc Annual Report & Accounts for ......

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Lonrho PlcAnnual Report & Accounts

for the year ended 31 December 2012

Aligned with the Growth of Africa

Job: 160186 Lonrho Annual Report Cover Proof Read by:Operator: Darren Proof: 01 Set-up: Darren Date: 5 April 2013 8:45 PM First Read/Revisions

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Lonrho is aligned with the developing opportunities across Africa where it operates four strategic divisions in eighteen countries.

Business Review01 Highlights02 The African Opportunity04 Business Model and Strategy06 Summary of Lonrho divisions 08 Key Performance Indicators10 Principal risks and uncertainties 14 Chairman’s Statement16 Chief Executive Officer’s

Statement 20 Operating Review30 Financial Review37 Corporate Responsibility

Governance40 Board of Directors42 Corporate Governance

Statement 50 Directors’ Remuneration Report 56 Report of the Directors

Financial Statements60 Independent Auditor’s Report to

the Members of Lonrho Plc61 Consolidated income statement62 Consolidated and Company

statements of comprehensive income

63 Consolidated and Company statements of changes in equity

64 Consolidated and Company statements of financial position

65 Consolidated and Company statements of cash flows

66 Notes to the financial statements

Investor Information113 Shareholder Information 115 Corporate Information

The purpose of the Annual Report is to provide information to the shareholders of Lonrho Plc. The Company, its Directors, employees, agents and advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. The Annual Report contains certain forward–looking statements with respect to the operations, performance and financial condition of the Company. By their nature, these statements involve uncertainties since future events and circumstances can cause actual results to differ materially from those anticipated and no reliance should be placed on them. The forward-looking statements reflect knowledge and information available at the date of preparation of this Annual Report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this Annual Report should be construed as a profit forecast.

Front Cover Image – Home Farms, Memory Marowa.

Lonrho Plc Annual Report and Accountsfor the year ended 31 December 2012

Stock Codes: LONR (LSE) LAF (JSE) LOHOY (OTCQX)Website: www.lonrho.com


[ inside front cover ]

Lonrho Plc Annual Report and Accounts 2012 01

Highlights

Financial Highlights• Revenue from core operating divisions2 for the 12 months to 31 December 2012 was £186.3m compared

with £152.9m for the 15 months to 31 December 2011. On an adjusted like-for-like basis at constantcurrency1, revenue in the 12 months to 31 December 2012 has increased across all four divisions, with anoverall increase of 23.6%.

• The Group’s total reported gross margin increased from 26.9% to 28.9% (comparing the 12 month periodwith the prior 15 months).

• Net operating loss3 for the year from core operating divisions was £3.4m. • An Executive review of the value of Lonrho’s investment in FastJet Plc resulted in an impairment charge of

£7.7m recorded to the income statement in the reported period. • The Group’s loss before tax for the year was £6.3m (2011: profit before tax of £0.8m).• As at 31 December 2012, the Group’s net assets were £174.2m (2011: £155.7m).• Basic earnings/(loss) per share was 0.11 pence loss per share (2011: 0.49 pence earnings per share). • The Group’s net indebtedness4 reduced by £11.9m to £87.2m in the 12 months to 31 December 2012.

Operational HighlightsThe majority of Lonrho’s development programme has been completed and related capital expenditure hasfallen accordingly. The businesses which have been part of the Group for the entire year have performed well.Amongst the significant operating highlights in the period are:• At the end of 2012, Lonrho has completed the development of a unique, vertically integrated, international

standard, cold chain logistics and processing infrastructure within the Agribusiness division to deliver freshand frozen produce from across the countries of southern Africa to market.

• Following completion of the second phase expansion of the Luba Freeport project, entering 2013, the oilservices terminal continued to grow and is now forecast to handle 85%+ of all the support logistics for theEquatorial Guinea offshore fields.

• During 2012 Lonrho Hotels division has continued with the plan to roll-out its hotel management companyand Lonrho Hotels has won new management contracts and/or leases to operate some of the leadinghotels in Africa.

Agribusiness• Oceanfresh has implemented a partnership with Costco in the USA to supply ‘Kirkland Signature’ branded

hake loins to Costco stores worldwide. An additional Costco ‘Kirkland Signature’ line started delivery in thelater part of 2012.

• Oceanfresh has been granted exclusive fishing rights for Tuna in the 12 mile territorial waters and the 200mile Exclusive Economic Zone in Mozambique for 5 years, the first time the Mozambique Government hasissued fishing rights for longer than 1 year.

• LonAgro added the exclusive John Deere Distributorships for Tanzania and Southern Sudan in the year.

Infrastructure• Luba Freeport benefitted from significantly increased exploration activity in 2012 which is expected to

continue into 2013.

Hotels• The Lansmore Masa Square opened under Lonrho Hotels four/five-star brand in the heart of the central

business district in Gaborone.• Lonrho was awarded the management agreement for the Grand Hotel Kinshasa, in the Democratic Republic

of the Congo. • Continued strong performance of the Hotel Cardoso in Mozambique as well as increased activity at the

Grand Karavia in Lubumbashi in the DRC. • Entering into the easyHotel franchise agreement with the first hotel opened in March 2013 as part of the

budget hotels roll-out programme.

Support Services• CES expanded its operations into Namibia.• Arlington Associates, a new business start-up, implemented a contract with the Government of Nigeria for

the inspection of crude oil and gas exported from Nigeria.

FastJet Plc• During 2012 Lonrho’s aviation division (the Fly540 regional airline) was separated out of Lonrho to create

FastJet Plc, an African low cost carrier, whose shares are listed on AIM. On separation Lonrho became thelargest shareholder in FastJet Plc.

18 Countries

£186.3mRevenue up 23.6% like-for-like1

4 Divisions

28.9%Gross Margin up 2%

1 Adjusted like-for-like figures include acquisitions (pre-acquisition comparables based on unaudited management accounts), exclude start-up businesses tradingfor less than 12 months and are adjusted to the comparable 12 month period January to December at constant currency.

2 Core operating divisions include Agribusiness, Infrastructure, Hotels and Support Services. Following the FastJet Plc transaction, the Transportation Division is nolonger considered a core operating division.

3 Net operating profit/(loss) is defined as profit before tax for the period excluding share of results of associates, jointly controlled entities and investments, as wellas amortisation and share based payments expense.

4 Net Indebtedness excludes loans from minority shareholders.

Business ReviewGovernanceFinancial StatementsInvestor Information

Of the 10 fastest growingeconomies in the world, 7 arenow in Africa

The AfricanOpportunity

02

Lonrho Agribusiness, Home Farms, Strawberries. Opposite page, top right, Lonrho Logistics.

Africa as a continent has achieved social,economic and political progress that has seen adoubling of economic output over the pastdecade. The one billion people in Africa aredeveloping as significant consumers and areforecast to become a market worth an estimatedUS$2.5 trillion by 2020, making it one of theworld’s largest consumer markets.

The demographic profile of this young populationpredicts that the middle classes will continue togrow, from 355 million (34% of Africa’s population)in 2010 to a forecast 1.1 billion (42%) by 2060. Theincreasing disposable income from this growth isestablishing a new generation of consumers, whoare starting from a very low base, so have animmensely high propensity to spend and consume.

Africa has also experienced rapid urban growthover the last decade. The urban population iscurrently 40% of the total population and isprojected to rise to about 60% by 2050. Forty-nineAfrican cities now have a population in excess of1 million, and three of those are already home toover 8 million people, each larger than London.

Politically there has also been encouragingprogress and the majority of African countries nowconduct regular elections at national, regional andlocal levels. Twenty-one countries in Sub-SaharanAfrica are now full or hybrid democracies.

Sub-Saharan Africa’s GDP grew 5.8% in 2012, fasterthan Russia (4.1%) and Brazil (3.6%) and since 2000foreign direct investment into Africa has risen bymore than 400%. Governments in Sub-SaharanAfrica have reduced their external debt levels from63% of GDP in 2000 to just 22% in 2012.

Indicators of economic growth are clear, there aremore than 735 million mobile phone subscribers inAfrica in 2012, twice as many as in the USA. Sevenof the top ten fastest economies in the world arenow African economies.

African AgricultureForecasts predict that the world will be challengedto meet global food supply requirements by 2050.An increasing global population (estimated atanother 2.5 billion people by 2050) anddiminishing output from traditional agriculturalsources mean that food security has become ofparamount importance.

The forecast shortages are more concerning whencombined with projections demonstrating themove by the populations of India and China from asubsistence rice based diet to one demandingincreasing components of fruit, vegetables andprotein.

Africa is not the only, but is the most important,part of the solution to food security for the world.Africa contains 60% of the world’s potentiallyarable land, 733 million hectares, with abundantrainfall and an advantageous climate foragricultural production. Africa is the second largestland mass in the world, dwarfing China, the USAand Europe.

Africa’s agricultural output was US$250 billion in2011 and this is forecast to grow to US$500 billionby 2020 and US$800 billion by 2030. However, thisis a fraction of Africa’s natural potential to becomethe agricultural supplier to world demand.

The opportunity for agriculture in Africa to developto meet domestic demand within Africa as itbecomes a consumer society and also to export tomeet increasing global demand is clear.

Oil & GasRecent oil and gas finds both onshore andoffshore, in the East and West of Africa haveunderpinned estimates that Africa contains over25% of the world’s oil and gas reserves and as suchis becoming an important source of global energy.

The traditional African oil and gas producers ofAngola, Nigeria and Equatorial Guinea are nowbeing joined by a number of newly producingcountries across Africa.

2012 has seen a spate of further new discoveriesacross East Africa, with a recent U.S. GeologicalSurvey estimating over 250 trillion cubic feet ofnatural gas may lie off Kenya, Tanzania andMozambique, creating one of the largest gas fieldsin the world. Onshore discoveries have been madein East Africa, complementing the existing finds atLake Albert in Uganda.

In West Africa the reported reserves available fordevelopment continue to expand as a spate ofexploration both increases the volumes of alreadylocated reserves and establishes new fields fromAngola right along West Africa to Mauritania.


Agriculture60% of the world’s arable landis in Africa

Oil & GasIt is estimated that 25% of theworld’s Oil & Gas is in Africa

One billion people in Africaare becoming a significantconsumer market


04

OpportunityLonrho has an inherentunderstanding of thedrivers of the Africaneconomy.

StrategyLonrho’s strategy is todevelop a group ofcomplementarybusinesses across Sub-Saharan Africa whichoperate to the highestinternational standardsand are market leadersin their sectors. TheseGroup companies arealigned with the rapideconomic growth beingdriven by theagriculture and oil &gas sectors in Africaand the growingsignificance of thesesectors to the globaleconomy.

Business Modeland Strategy

African Oil and Gas

Global DemandSatisfying

African Consumer

Boom

African Agriculture

Driving

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Strategic Objectives

To deliver shareholder value and high returns by being

aligned with African growth


Lonrho focuses on providing the logistics and infrastructure for theagriculture and oil & gas sectors which are the main economic drivers of theAfrican economy. The Group operates in an economic environment that isexperiencing significant expansion. The Directors believe that the Group hasthe capabilities to deliver growth through supplying the required additionalservices and infrastructure to meet the increase in demand.

Strategic DriversExclusively focused on African businesses Lonrho understands the economicopportunities within the African continent.Our mandate is to invest in, and build,businesses across Africa. This has establishedthe Group as the leading UK Plcconglomerate with a specific ‘Africa only’focus. An increasing portfolio of investors,analysts and commentators are recognisingAfrica as an emerging market that is playingan increasingly vital role in the requirementsof the global market place. Lonrho is wellpositioned to benefit from this growth withits operating divisions directly related tosupporting the requirements needed for theeconomic development of Africa.

The Lonrho BrandLonrho is an established, recognised andtrusted brand across the African continent,which provides tangible competitiveadvantages for the Group. Lonrho has ahistory of strong working relationships withAfrican governments, leading businesses anddistinguished industry leaders. Our brandserves to reinforce our well establishedrelationships and assists us when seeking todevelop new relationships and opportunities.

Quality, experienced management teamswith local knowledgeExcellent, well-motivated, managementteams are essential for any growingcompany, especially one in an emergingmarket environment where there areexceptional challenges. Lonrho hasdeveloped a senior divisional managementteam across each of its divisions that havelocal knowledge and add real value withtheir experience of Africa and the specificindustry sectors in which Lonrho operates.

Mitigation of emerging market riskLonrho has a legacy of over 100 years ofoperating in Africa and an unparalleled localnetwork and knowledge base. Emerging anddeveloping markets are inherently riskyenvironments for commerce. To reduce thisrisk Lonrho has actively structured itsoperations with both sector andgeographical diversity. Lonrho hasdeliberately spread its operations across18 countries in Sub-Saharan Africa. Thissignificantly reduces the risk profile of theGroup.

First world practices and responsiblebusiness ethicsLonrho upholds good standards ofcorporate governance and is stronglycommitted to ethical business practices tointernational standards. The Groupencourages all its subsidiaries to achievegreater social, environmental and localeconomic benefits and its corporateresponsibilities are taken into account at allstages of the investment decision process.

London main market PlcLonrho has a premium main board listing onthe London Stock Exchange and hassecondary listings on the AltX market of theJohannesburg Stock Exchange and theOTCQX market in the USA. This providesinvestors with access to a stock that is aproxy for African growth, whilst they can becomfortable with a good level of corporategovernance standards and internationalpractices.


06

Summary ofLonrho divisions

AgribusinessLonrho Agribusiness is a core Lonrho division andvertically integrates the production, sourcing,logistics, processing and distribution of agriculturalproducts from Sub-Saharan Africa to theconsumer, both domestically and globally. Focusedon the fruit, vegetable, fish and meat sectors, thedivision supplies leading retailers in Sub-SaharanAfrica, Europe, the USA, Middle East, Scandinaviaand, increasingly, the Far East. The division alsodistributes agricultural and heavy machinery.

Operating companies• Lonrho Agribusiness (BVI) Ltd• Rollex (Pty) Ltd• Fresh Direct Ltd• Home Farms• Lonrho Logistics (Pty) Ltd• 0ceanfresh Seafoods (Pty) Ltd• Fish 0n Line (Pty) Ltd• LonAgro Equipamentos Agricolas Lda• LonAgro Tanzania Ltd• LonAgro South Sudan Ltd• Trak Auto Lda

Read more on p20

£123.6mRevenue

£2.0mNet operating profit*

InfrastructureLonrho Ports is a core Lonrho division anddevelops and manages oil logistics terminals. LubaFreeport, the successful oil service terminal in theGulf of Guinea, has attracted major global oilsector service companies to be long term tenantsat the port to service offshore exploration andproduction rigs.

e-Kwikbuild manufactures and supplies qualityprefabricated buildings across the Continent.

Operating companies• Luba Freeport Ltd• e-Kwikbuild Housing Company (Pty) Ltd

Read more on p24

£23.5mRevenue

£2.8mNet operating profit*

Lonrho now operates in four industry sectors: Agribusiness, Infrastructure, Hotels and Support Services. These important industriesprovide some of the building blocks and foundations required for successful economicgrowth.


Revenue split by coreoperating division as atend of 2012

66% Agribusiness13% Infrastructure

6% Hotels15% Support Services

HotelsLonrho Hotels is an established and recognisablebrand name in Africa with a portfolio of qualityhotels centred on the commercial, conference andbusiness related markets across the Continent.Lonrho Hotels owns or manages hotels inLubumbashi and Kinshasa in the DemocraticRepublic of the Congo, Maputo in Mozambique,Gaborone in Botswana and Mutare in Zimbabwe.

Operating companies• Hotel Cardoso SARL• Grand Karavia SPRL• Lansmore Botswana• Aldeamento Turistico de Macuti SARL• Lonrho Hotels Management Services (BVI) Ltd

Read more on p26

£11.9mRevenue

£(1.9)mNet operating loss*

Support ServicesLonrho's IT business is a full systems integrator andmanager that designs, builds, develops and integrates ITsolutions for large corporate clients, banks andgovernments and then undertakes managementcontracts to run and manage installations. Lonrho IT is atop tier distributor for Cisco, Microsoft, Dell and HewlettPackard systems and equipment and is strategicallybuilding a pan-African network of IT companies.

AFEX provides secure accommodation in Kenya andJuba in the Republic of South Sudan, and one stopsingle solution support services to large clientsoperating in Africa.

Operating companies• Sociedade Comercial Bytes and Pieces Lda• Complete Enterprise Solutions Ltd• AFEX Holdings Ltd• Arlington Associates

Read more on p28

£27.0mRevenue

£2.1mNet operating profit**See note 4 of the financialstatements


08

Key PerformanceIndicators

Lonrho has grownconsistently since2006 and operatesacross variousmarkets, each withtheir own keydrivers to success.

Key Performance Indicators (KPIs) are an important management tool and are reviewed weekly. Byfocusing on the key drivers in each business, management are able to maintain the best possibleunderstanding of underlying business performance across the Group.

KPIs, which are evaluated by management, are both financial and non-financial.

Due to the breadth of businesses which operate in the Group, operational KPIs are specifically agreedwith management on a division by division basis at a Group level.

From 2013 it is intended that the Group will be putting more emphasis on return on equity as a key KPIas the operating businesses mature.

Lonrho GroupAt a Group level, management views profitable revenue growth, both actual and like-for-like, andgross margin as the key performance indicators.

Revenue growthGroup revenue has been growing constantly,being driven both organically and byacquisition. The year ended 31 December 2012has seen revenue reach £206.5m.

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Adjusted like-for-like* revenue growth(12 months to 31 December)To show the underlying growth in the Group itis necessary to strip out the effects of start-upbusinesses operating for less than a year andthe impact of year on year currency changes.The Group has seen like-for-like revenuegrowth in all the core operating divisions in theyear ended 31 December 2012 with an overallincrease of 23.6%.

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Reported gross margin percentages (12 months to 31 December)By focusing on the gross margin beinggenerated by businesses, management is ableto ensure that profitability across the Groupcan be improved. Across the Group grossmargins increased in the year. Included in thisare underlying improvements in many of thebusinesses offset against start-up costs andlower margins in acquired businesses.

*Adjusted like-for-like figures include acquisitions (pre-acquisition comparables based on unaudited management accounts), excludestart-up businesses trading for less than 12 months and are adjusted to the comparable 12 month period January to December atconstant currency.

*FY11 represent a 15 month period due to the change of financial year end and therefore separately highlights October to December2010 revenues to form an accurate 12 month period comparison.

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Business specific KPIsAcross the divisions various metrics are tracked in order to understand businessperformance. In addition to financial measures, each individual business reportsbetween 3 and 10 largely non-financial KPIs on a weekly basis. In order to give anindication of KPI progression through the period, the main KPIs from thebusinesses which are major drivers of revenue are shown below.

Rollex/Lonrho LogisticsKPIs at Rollex and Lonrho Logistics focus on tonnages that thebusiness transport and process. One of the biggest drivers ofgrowth is tonnages which are air freighted. A restructuring in theperiod integrating the Rollex logistics division with the LonrhoLogistics business has put the business in the ideal position todrive further growth in 2013. The reduction in tonnage from Julywas the result of a management decision not to renew low margincontracts but the business saw strong recovery by December2012.

OceanfreshThe business looks to volume of product sold as the main KPI. Inthe period the growth resulted from the strengthening of theCostco retail relationship and maintaining strong volumes withexisting customers. Despite delays with the fish promotion withCostco, volumes to Costco and Checkers in South Africa havebeen especially strong towards the year end.

John DeereThe John Deere franchise continues to grow with the opening ofLonAgro Tanzania and South Sudan in the period. The businesslooks at units sold as one of the biggest drivers of growth and inthe period LonAgro Angola was a strong contributor reporting alike-for-like growth of 239% in the period. Delays in tractor andequipment deliveries to Lonrho adversely impacted expected salesvolumes, however going into 2013 Lonrho now has four JohnDeere businesses which will support growth opportunities andposition the business as one of the leading suppliers of JohnDeere equipment in Africa.

Luba FreeportIncreasing revenue at Luba is driven by increased activity from oilexploration and drilling in the Gulf of Guinea. The middle of 2012saw a drop in activity, but overall, the port saw an increase inaverage vessel calls with year on year growth of 17%. Increasedexploration is expected to continue into 2013 and will drive furthergrowth in the port.


10

Principal risks and uncertainties

Effectivemanagement of riskand uncertainty is essential tothe protection ofLonrho’s reputationand the achievementof sustainableshareholder value.

In the course of day to day operations the Groupfaces a number of risks and uncertainties. TheBoard considers the matters described in thissection to be principal risks that face the Groupas it currently stands which could adverselyaffect the business, results of operations,revenue, profit, cash flow, assets and the deliveryof its strategy.

Given the size, complexity and spread of theGroup's businesses and the continually changingenvironment in which the Group operates, thiscannot be an exhaustive list of such risks.

Internal ControlsLonrho’s corporate strategy was developed toexploit identified opportunities, whilst seeking tomitigate known downside risks. Where materialrisks have been identified within the businessesthe Board has implemented an appropriateinternal control environment to endeavour toprotect shareholders’ interests. The Board isultimately responsible for the Group’s system ofinternal controls and risk management, and itdischarges its duties in this area by:

• Determining Lonrho’s risk appetite (the riskexposure Lonrho’s strategy requires the Groupto take in the expectation of an economicreturn) and risk tolerance (the risk Lonrho isprepared to face in achieving its strategicgoals);

• Overseeing the risk management strategy; and• Ensuring management implement effective

systems of risk identification, assessment andmitigation and internal controls. These systemsare designed to manage, rather than eliminate,risk of failure to achieve business objectivesand cannot provide absolute assurance againstmaterial misstatement or loss.

Responsibility for reviewing the effectiveness ofthe internal controls has been delegated to theAudit and Executive Committees.

Throughout the year Lonrho complied with theprovisions of the UK Corporate GovernanceCode on internal controls and the relevantsections of Internal Control: Revised Guidancefor Directors (the Turnbull guidance) andGuidance on Audit Committees (formerly theSmith guidance). No significant weaknesses ormaterial failings were identified in the annualreview.

Systems and procedures are in place across theGroup intended to identify, assess and mitigatemajor business risks. The management of risk isan integral part of the operational review processand is supplemented at Group level by

independent challenge and review by theExecutive and Audit Committees.

Risk managementThe Board has ultimate responsibility for theGroup's risk management and internal controlsystems, which are overseen on its behalf by theAudit Committee. The Audit Committee reviewsaspects of the risk management and controlsystems on an ongoing basis at its meetings and,at least once a year, considers the systems'effectiveness on behalf of the Board. The AuditCommittee seeks the views of internal andexternal auditors on the control systems and asto how the Group's practice compares withprocesses in other companies. Internal controlsystems are also monitored operationally byGroup management and the internal auditfunction, which is provided by TAG Incorporated,including assessment against operationaloutcomes. TAG Incorporated, a third partyservice provider, acts under the overall controland discretion of the Audit Committee.

At the operational level, divisional ChiefExecutives have primary day to day operationalresponsibility for risk identification and riskmanagement arrangements and controls withintheir operations.

Risk assessments made at business unit level aresubject to regular review and challenge by Groupsenior management to test the thoroughnessand robustness of the judgments and evaluationsmade.

Risk management reports and a Group riskregister are regular items for the AuditCommittee, which also reviews regular reportsfrom internal auditors.

Principal risksThe specific risks referred to below are thoseconsidered to be of most direct relevance andsignificance to the Group at present. Those riskswhich are likely to affect businesses generally, orthat are in the nature of day to day operations,are not included, whilst those risks thatpotentially can materially and adversely impactLonrho's growth and strategic development areincluded.


Risks relating to the operations of the Group:

Description of risk Impact Mitigation

StrategyFailure to deliver on strategy ofgrowing market share; improvingmargin; controlling working capital;and selective capital expenditure

Unable to increase profits, revenuesand margins

• Investing in programmes to ensure that new customers are won andexisting ones retained

• Group-wide focus on working capital management• Obtaining favourable credit terms and making improvements in supply

chain management• Thorough reviews of all proposed capital expenditure

Strategy fails to meet shareholderexpectations

Ineffective or poorly executedstrategy fails to create shareholdervalue, leading to a loss of investorconfidence and a reduction in theshare price. This in turn reducesthe Group’s ability to accessfinance and increases vulnerabilityto a hostile takeover

• Annual business plan• Monthly reporting• Annual strategy review• Investor relations programme

One of the oil & gas or agriculturalsectors in which the Group supportsor operates is not as successful asanticipated

Unable to deliver business plans • Multi—channel business model which reduces dependency on a singlerevenue stream

OperationalPoor weather conditions Crop loss or damage due to frost,

flooding, drought or wind• Implementation of various risk models to control harvest risk• Hardy varieties of agricultural crops grown• Determining optimal harvest and processing rates

Key supplier failure Disruption in the supply of keyproduct lines

• Top suppliers and alternative supply routes monitored regularly

A food safety incident occurs or is noteffectively managed

As a leading supplier of fruit,vegetable, fish and meat toleading retailers in Sub-SaharanAfrica, Europe, USA, the MiddleEast, Scandinavia and the Far East,it is paramount that the foodproducts sold to our customersare safe

• Rigorous controls and processes, with a continuous focus on quality,ensure that all our products are safe for consumption

InvestmentNot sufficiently capitalising on marketinvestment opportunities throughdifficulty in sourcing opportunities atattractive prices

Unable to increase profits,revenues and margins

• The Group has dedicated resources whose remit is to constantly researcheach of the sectors in which the Group operates seeking suitableopportunities

Poor investment decisions due toinadequate financial assessment or duediligence on new projects/acquisitions

Expected benefits fromacquisitions might not be fullyrealised and recognised assetsmight become impaired

Unknown or understated liabilitiesmight be acquired

• Detailed valuation exercises are undertaken using various valuation criteriaand scenarios to assess potential returns, sensitivities and price

• Detailed due diligence is undertaken on all acquisitions prior to purchase toensure appropriate returns

• External financial and legal advice is taken on all acquisitions (over £10mfor financial)

• Where possible, the Group obtains commercially acceptable warrantiesand indemnities from vendors


12

Principal risks and uncertainties continued



Finance and treasuryFailure in internal controls oraccounting processes

Could severely disrupt operationsand have a material adverse effecton the Group’s financial position

• Lonrho has a clear organisational structure with appropriate segregationof duties and independent internal and external audits with follow-upactions

• The internal audit work plan is closely aligned to the risk managementframework and risk profile of the Group

Funding and liquidity risk Unable to meet obligations withinavailable committed facilities

Insufficient financing available tomeet budget requirements

• Cash flow and funding needs are regularly monitored to ensure sufficientundrawn facilities are in place

• Implementation of covenants/key terms database across the Group• Group Treasury function • Executive Committee sign-off on all debt facilities• Ongoing monitoring of bond and debt covenants• Regular contact with all lenders to enable renegotiation of covenants, if

necessary• Reduce pace of growth, if necessary• Ongoing programme of investor communications/analyst briefings and

research notes• Continued search for new sources of equity and debt finance• Network of partner banks established with regular communication

Currency risk Foreign exchange risk, as asignificant proportion of Grouptrading, is denominated in localcurrency

The Group is increasingly exposedto transactional risk

• Match currency of Company lending to subsidiary cash flows wheneverpossible

• Ongoing review of hedging• Net offsetting foreign currency exposures between Group companies

wherever practicable• Utilisation of appropriate instruments to hedge known foreign currency

exposures

Counterparty/credit risk Credit losses, reduction in futureprofitability and cash flow

• Approved counterparties and approved credit limits with regular review

Climate changeImpact of climate change on Lonrho’sbusinesses including the impact of acarbon pricing system

Climate change is an internationalproblem that could lead toconsequences which are not as yetcompletely understood. Coupledwith the proposed introduction ofcarbon taxation it is likely thatclimate change will have a financialimpact upon the business

• Lonrho is developing a comprehensive response strategy to climatechange. This will include operational plans to manage and monitor energy,electricity and water efficiencies and includes participation in climatechange forums

Business partners, key relationships and reputationNot sustaining current relationshipswith business partners

Impact on Group's ability to retainexisting businesses and to take onnew opportunities

• Constant focus on performance, effective communication and ensuringthat Group's objectives are closely linked to those of our business partners

Risk of third parties infringing theGroup's intellectual property rightsand brand

Loss of reputation • Global intellectual property protection plan in place to minimise any risk ofdetriment by way of infringement




Systems and technologyFailure of systems and technology toappropriately support the businessoperations

Loss of competitive advantage • Strategy in place to invest in new systems and technology

Legal and regulatoryLitigation and regulatory risk Litigation or breaching the laws or

regulations of the countries inwhich Group operates could have afinancial and/or reputational impact

• The Group ensures that it obtains timely information about forthcomingchanges in legislation and that it has robust procedures in place tominimise any risk of detriment or non-compliance

• Processes are in place which are aimed at reducing the potential forlitigation and for administering any problems which do arise with a viewto managing the exposure appropriately

• The Group has a risk management programme in place aimed atpreventing issues from arising where possible and managing any that docrystallise

PeopleFailure to attract, develop, motivateand retain talented employees

The loss of key staff and a lack ofinternal succession planning for keyroles within the Group causes shortto medium term disruption to thebusiness

Employees who lack motivation andengagement

• A remuneration system strongly linked to performance• Formal appraisal system to provide regular assessments of individual

performance and identification of training needs• Succession plans in place for key positions

Skills shortages Lack of appropriate skills couldnegatively impact upon safety,production and the ability todeliver against targets

• Processes for individual development programmes, succession planningand scarce skills are in place

Internal or external fraud Unable to deliver business plans

Loss of competitive advantage

• Segregation of duties at Head 0ffice• Financial controls, including payment approvals, bank and finance systems

access• Implementation of external or internal audit recommendations at Head

0ffice and subsidiary level

Economic, political and environmentalCorporate responsibility risk Loss of reputation as a good

corporate citizen• Global corporate responsibility programme

Markets recover more slowly due toglobal austerity measures

Unable to increase profits,revenues and margins

• The Group has a multi-market strategy primarily focused on Africa, wherethe potential for strong growth is forecast, with a presence in NorthAmerica, Europe and Far East

• The Group has a multi—channel business model which reducesdependency on a single revenue stream

The Group is exposed to politicalinstability in countries in which itoperates (e.g. the Group's biologicalassets, farming activities and portoperations, which are held for thelong term and consequently are at riskover such period)

May negatively affect the Group'sfinancial condition and prospectsor its ability to achieve itsobjectives

• The Group ensures that it is kept abreast of political developments in thecountries in which it operates and that it has robust procedures in place tominimise any negative impact


14

I have, during my long career with the USGovernment State Department, lived in Africa fora dozen years and have a strong affinity with theContinent and its people. I have now served5 years as a Non-Executive Director on the Boardof Lonrho and after visiting many of ouroperations in Africa, I can report, with conviction,that we are very well positioned to participate in,and to help, Africa’s emergence as a significantinternational economic motor.

Already, seven of the world’s ten fastest growingeconomies are in Africa, assisted by the discoveryof the impressive quantities of new onshore andoffshore hydrocarbons in West and in East Africa.

At Lonrho we are well positioned to supportAfrica’s export sector growth in hydrocarbonsand in agriculture. Africa is undergoing thelongest single period of economic expansion onthe Continent since the independence years ahalf century ago. Significantly, Africa’s macrolevel growth is widespread, far beyond the oileconomies. Expected growth will rise fromaround 4.5% last year to 4.8% in 2013. Foreigndirect investment has been slower into Africathan it should have been, given this kind ofimpressive record (though it is expected to rise, inthe non-oil sectors, from around US$33 billioncurrently, to around US$84 billion in 2014.) OurCEO, Geoffrey White reports an increasingly newand interested audience, wanting to understandAfrica’s potential and what our historic Companyis doing to take advantage of the Continent’scurrent immense opportunities.

Shareholders know that Lonrho is alreadyinvested in core sectors, from Agribusiness toInfrastructure, to Support Services and Hotels,sectors that are necessary to support the rapidgrowth that is already happening.

Our key division, Agribusiness, which accountsfor over 65% of Lonrho revenue from coreoperating divisions, has been going through amanagement transition, and restructuring, so itcan better compete in the fast moving, global,and demanding agriculture and logistics space.We hired a well-qualified CEO to specificallyoversee this division of Lonrho operations,located across Southern Africa, and ranging fromfruit and vegetables, to fish and crustacea, andfarm machinery. He will be focusing on marginimprovement, moving away from a short termtrading focus, while continuing to garnercontracts with the world’s largest food importers(Costco, Walmart and the majority of the UKbranded stores are already customers). We havejust opened a sales office in China as well. Whilst

Chairman’sStatement

“It is a special honour for me to be addressing shareholders in my first months as your new Chairman.”

Ambassador Frances CookNon-Executive Chairman


we had a few disappointments in this sectorduring this transitional year, it was not due to therevamped business model, but rather to the latedelivery of tractors to our John Deere salesoperation in Mozambique, and to lower thanexpected fish size off Namibia. Even with theselate year slippages, our Agribusiness divisionproudly posted a 12 month growth figure of24.5% adjusted like-for-like at constant foreignexchange. In short, this is a growth platform, andrecord, we can be proud of.

Infrastructure and Support Services coreoperating divisions continue to grow at a healthyrate, expanding business across a broad range ofactivities which, among other things, will supportthe rapid expansion of energy production inAfrica. Our IT operations have added anothercountry (Namibia), and our facilities operations,both e-KwikBuild and AFEX, our base supportoperations (for oil exploration companies, forexample), are also expanding into this dynamicnew sector. Our oil and gas port operation inLuba, Equatorial Guinea, which I visited inFebruary 2013, will be a model for ourengagement with this sector (with a major newLonrho managed oil and gas logistics portexpected to be announced in 2013 in Ghana).These are exciting times in the oil and gasindustry in Africa, and Lonrho is becoming ahighly regarded leader in logistics for this sector.

Hotels are legacy projects for Lonrho, but we aremoving into a more modern form of participationin that sector, creating our own brand for higherend facilities, and opening a series of “easyHotelsby Lonrho” for budget business travellers all overthe Continent. We opened a Lonrho “Lansmore”in Botswana this year, adding to our historic hotelproperty in Mozambique, as well as largerenovation and management efforts in the DRCof major government owned hotels. In 2013, weexpect to expand the “easyHotel by Lonrho”brand all over South Africa, and to launch intoNorth, East and West Africa.

FastJet Plc is in the midst of converting Lonrho’smuch appreciated Fly540 brand of smallerregional planes, flying local routes, into acontinental budget airline, flying larger planes,following the separation of Lonrho’s aviationdivision in June 2012. FastJet Plc, in whichLonrho is the largest shareholder, will still servicethe under-served “connector” market, as well asextending flights to regional destinations, withreliable, safe and inexpensive flights, using verymodern pricing algorithms. From the start of thenew operating model in Tanzania four months

ago, we expect FastJet Plc to expand its no-frills,reliable service in 2013.

Throughout its 100 year old legacy, Lonrho hasbeen known for its Corporate Responsibility(“CR”) across Africa. In 2012, each of ourcompanies named a CR coordinator, so that wecan better focus in our chosen areas, educationand good environmental citizenship. You will seephotographs throughout this report of our CRactivities, which should be a source of pride to allLonrho shareholders. We have instituted,company wide, an annual CR prize, trained ourDirectors in CR, and joined the UN GlobalCompact which monitors CR globally. We arecommitted to leaving a positive “footprint”wherever we work, and to being a goodcorporate citizen in the 18 countries where weare engaged. We know you would not expectanything less.

Ambassador Frances CookNon-Executive Chairman27 March 2013

Luba Freeport was awarded the CookAward, 2012, in recognition of successfulstrategies and initiatives implemented inpursuit of corporate responsibilityvalues.

Luba Freeport sponsored school, CentroPrescolar Virgin de Monsterrat.


16

This transition took longer to complete thanexpected, and there were some delays in 2012plans that caused potential 2012 business tomove to 2013, but entering 2013 the Group iswell positioned to deliver positive results forshareholders going forward.

Lonrho remains solely focused on Africa andbeing aligned with economic developmentacross the Continent.

In 2013 African growth is being stimulated by theburgeoning oil and gas industry, agriculturalopportunities and a consumer market that isyoung, communicative and developing as a verysignificant segment of society. The formal sectorof the African consumer market is forecast to beUS$1.3 trillion by 2020, and the informal sector isforecast to be similar in size.

Africa is becoming one of the world’s largestconsumer markets.

There is now an increasing commercialmomentum to address this growing consumermarket that can be seen across much of Africa,where the development of infrastructure,shopping centres, and consumer focusedprojects is expanding rapidly, albeit from a verylow base.

Surprising to many, seven of the top ten fastestgrowing economies in the world are now inAfrica.

The consumer market, of over one billion people,a large percentage of which are under the age of25, creates a significant commercial opportunity,and Lonrho’s businesses entering 2013 arestrategically aligned with the requirements andservices needed to meet some of the centraldemands of African consumer growth.

The growing demand of the consumer marketwithin Africa provides significant opportunities forLonrho’s core businesses.

Our core businesses focus on the oil and gasindustry, and the agriculture sector, and these arenot only helping to fuel African consumer growthby creating investment and prosperity, but arealso fundamentally changing the standing andimportance of Africa to the world. For the firsttime, the wider world is becoming dependent onAfrica for energy and for food production.

Chief ExecutiveOfficer’s Statement

“2012 was a very significant year forLonrho and saw the conclusion, by theend of the year, of the transition ofLonrho into a Company that hassuccessfully completed theestablishment of its core business unitsand is now in a strong position tobuild on the opportunities in Africa.”

Geoffrey WhiteDirector and ChiefExecutive Officer


25% of the world’s oil and gas is now believed tobe in Africa and 60% of the world’s potentiallyarable land is in Africa. These are importantstatistics that make the Africa of today of growingglobal significance. The tide is beginning to turn,rather than Africa being dependent on the world,the world is increasingly becoming dependent onAfrica for energy and for food production.

Lonrho has, over the past four years, strategicallypositioned its core businesses to be well placedto service the requirements of this new dynamicmarket. Having invested heavily in building theinternational standard infrastructure to meet thistrend, global food retailers are now approachingLonrho to source fresh and frozen produce fromAfrica, and the global oil and gas industry isencouraging and supporting our development ofthe essential infrastructure and logisticsnecessary to commercially develop Africa’s oiland gas resources.

In September 2012, David Lenigas, who was theExecutive Chairman of Lonrho since 2006,stepped down from the position to become theExecutive Chairman of FastJet Plc. The Boardthank him for his guidance, time and effort as theExecutive Chairman of Lonrho over the pastseven years.

Following a review, the Company’s seniorindependent director, Ambassador Frances Cook,was appointed as the Non-Executive Chairman ofthe Company on the departure of Mr Lenigas.Ambassador Cook brings a unique network ofcontacts and experience in Africa and theCompany looks forward to further benefittingfrom her guidance and knowledge of theContinent.

Human resources are key to successfuloperations in Africa. During 2012 the Groupcontinued to recruit industry specialists to furtherbolster and develop each of the divisionaloperations. The most senior during 2012 beingthe appointment of Ben Ward as the CEO of theAgribusiness division. Ben brings with him a longand experienced understanding of the sector.

Lonrho’s four operating business divisions arespecifically structured to help provide therequirements of African growth.

Entering 2013 Lonrho is structured into fourdivisions:

Agribusiness (66% of core operating revenues)Sourcing, production, cold chain logistics,processing and packaging of fruit, vegetablesand seafood for African and internationalsupermarkets

At the end of 2012, Lonrho completed thedevelopment of a unique, vertically integrated,international standard, cold chain logistics andprocessing infrastructure. This incorporates thecapacity required to source; produce, process,package and deliver fresh and frozen producefrom across the countries of southern Africa tomarket. This division supplies leading retailers inAfrica such as Shoprite, Checkers, Makro, FoodLovers and Spar who are all geographicallyexpanding their operations to serve the growth inthe African consumer market.

The division also increasingly supplies produceinto international supermarket chains such asCostco, Walmart, Asda, Tesco, Spinneys,Waitrose, Carrefour and others.

The world is becoming more and moredependent on Africa for food security. Lonrhoprovides the international standard deliveryinfrastructure required for the export of freshproduce from Africa to the global marketplacemeeting demand from Europe, the USA, MiddleEast and, increasingly, China and the Far East.

Lonrho is helping to fulfil the rapidly increasingdemand from global supermarkets as they lookto Africa as an essential source of fresh produce.

Within the division, Lonrho has also establishedniche market, demand driven, growingprogrammes aligned with specific customerrequirements.

The division also distributes John Deereagricultural equipment into Africa.

Infrastructure (13% of core operating revenues )Providing the logistical infrastructure necessaryfor the expanding oil and gas industry in Africa

Lonrho Ports division has developed an exclusiveoil and gas logistics terminal, Luba Freeport, thatis a ‘one stop shop’ that supports the growinglogistics requirements of the offshore industry inEquatorial Guinea. Equatorial Guinea is Africa’sthird largest oil producer. Following completion

Left to right Lonrho operations:Luba Freeport, Rollex,Oceanfresh.


18

Chief Executive Officer’s Statement continued

of the second phase expansion of the LubaFreeport project, entering 2013, the oil servicesterminal has grown and is now forecast to handle85%+ of all the support logistics for theEquatorial Guinea offshore fields.

Long term tenants at Luba Freeport includeExxonMobil, Schlumberger, Noble, MI Swaco,Ophir, CNOOC, Baker Hughes, Tenaris, Hess,Marathon and others.

Lonrho is seeking to replicate the success of theLuba Freeport project into other locations in bothWest and East Africa supporting the increasinginfrastructure requirements for oil and gas findson both sides of the Continent, the mostadvanced being a proposed oil and gas logisticsterminal in Ghana.

Hotels (6% of core operating revenues)The provision of safe, quality accommodation isan essential precursor for economic growth anddevelopment in an emerging market

During 2012 Lonrho Hotels division continuedwith the plan to roll-out its hotel managementcompany and create a Lonrho branded,corporate focused, hotel chain in Africa. LonrhoHotels has won management contracts andleases to operate some of the leading hotels inAfrica. Managing hotels in five countries, theLonrho Hotels brand is becoming the choice oftravellers to Africa. During 2012 the divisionsuccessfully added the Grand Hotel Kinshasa,DRC, and The Lansmore Hotel in Gaborone,Botswana to the portfolio.

In early 2013 Lonrho Hotels launched the first‘easyHotel by Lonrho’ to meet the growingmarket demand for budget hotels. The objectivebeing to establish a chain of budget hotelproperties managed on behalf of owners,branded ‘easyHotel by Lonrho’ that provide safebudget accommodation to a consistent standardwith reliable quality across the whole of Africa.

Support Services (15% of core operatingrevenues)Providing a single point service solution forresource companies, large corporates, NGO’sand Governments

Lonrho’s Support Services division provides a fullycohesive support service to major clients acrossthe Continent, delivering a one stop shop forlogistics, accommodation, catering, IT andservices. Customers are typically oil companies,

“Africa is forecast to deliver stronggrowth in 2013, and Lonrho hasstrategically aligned its operationswith what it believes are the mostimportant growth opportunitiesoccurring in Africa, supporting theincreasing demand from theexpanding agriculture, oil and gasand consumer markets.”

Lonrho Agribusiness, Rollex processing and packing facility, OR TamboInternational Airport, Johannesburg, South Africa


mining companies, NGO’s, the UN, andinternational Governments who see the benefit ina one stop shop provider offering a total solutionfor their requirements as they deploy into Africa.

FastJet PlcIn June 2012, Lonrho announced that it hadagreed to separate its aviation division, LonrhoAviation, into Rubicon Diversified InvestmentsPlc, an AIM listed investment company that wassubsequently renamed FastJet Plc (LON: FJET).As a consequence of the separation, Lonrhobecame the largest shareholder of FastJet Plcwith a 74% holding. The founder and largestshareholder in easyJet, Sir Stelios Haji-Ioannou’sinvestment company easyGroup, became ashareholder in FastJet Plc and provides strategicmanagement of the company.

FastJet Plc, in which Lonrho maintains a passive,arm’s-length, shareholding has subsequentlylaunched as a low cost carrier domestically inTanzania and believes that with Sir Stelios’direction and experience FastJet Plc has thepotential to develop into Africa’s leading low costcarrier.

Lonrho’s stake in FastJet Plc has been reducedfrom 74% to 55% post-separation as FastJet Plcraises development capital to implement itsbusiness plan.

Due to current market conditions experienced byFastJet Plc, an impairment review has beencarried out which resulted in an impairmentcharge being recorded in the income statementof £7.7m.

Outlook2012 was a very significant year for Lonrho andsaw the conclusion of the transition of Lonrhointo a Company that has successfully completedbuilding the foundations of its core businessunits. Africa is forecast to deliver strong growth in2013, and Lonrho has strategically aligned itsoperations with what it believes are the mostimportant growth opportunities occurring inAfrica, supporting the increasing demand fromthe expanding agriculture, oil and gas andconsumer markets.

Despite challenging global market conditions,Lonrho’s outlook for 2013 remains in line withthe Board’s expectations and the Group expectsto continue to deliver improved performanceacross each of its operating divisions.

The Board believes that the strategic action takenin Q3 and Q4 2012, to focus on increasingmargins through operational efficiencies andbuild long term sustainable customerrelationships, coupled with the decision towithdraw from less profitable lines of business,positions Lonrho strongly for entering 2013.

Geoffrey WhiteDirector and Chief Executive Officer27 March 2013

Left to right Lonrho operations:Luba Freeport, easyHotelsignage Johannesburg, HomeFarms produce.

20

Business�Review

GovernanceFinancial�StatementsInvestor�Information

OperatingReview

AgribusinessLonrho’s�Agribusiness�division�is�directly�aligned�with�theopportunities�for�the�development�of�African�agriculture.�Theseopportunities�are�not�just�to�meet�the�growing�demands�of�the�onebillion�people�who�are�becoming�the�consumer�market�in�Africa,�butalso�to�capitalise�on�the�increasing�demand�from�supermarket�chainsaround�the�world�to�source�and�deliver�African�produce�to�meet�theirincreasing�requirements.

Contribution�toGroup�Turnover

66%� £123.6mRevenue


The OpportunityLonrho’s strategic focus for the agriculturedivision is predicated on the macro economicfact that 60% of the world’s potentially arableland is in Africa, combined with the projections ofthe Food and Agriculture Organisation of theUnited Nations (www.fao.org) that the world willstruggle to produce sufficient food to feed the9 billion people forecast to be on the planet by2050.

As a result of the above Africa’s potentialagricultural output is going to become veryimportant to feeding the world.

The potential for Africa to play a significant part inworld food markets starts with the sheer scale ofvacant African arable land with abundant naturalwater and suitable microclimates creatingseasonal production advantages.

Lonrho believes that some of the best agriculturalopportunities in Africa in 2012 are found in theproducing countries across southern Africa,including Mozambique, Tanzania, Zambia,Zimbabwe, Angola and southern DemocraticRepublic of the Congo. This region has the water,climate, available land and seasonal advantagesto become a highly important part of globalproduction.

An essential component for thecommercialisation of this opportunity is theability for fresh produce to be packed, processed,handled and delivered from producers across thisregion of Africa and then delivered to market.

Lonrho’s positionTo meet this growing demand, Lonrho has,during 2012, completed developing aninternational standard, vertically integrated, coldchain logistics network, across the southernAfrican region, that can pack and process freshand frozen produce and deliver it to market,whether the market be in Africa or in China, USA,Europe or the Middle East.

Lonrho’s vertically integrated cold chain providesan auditable, single ownership, traceable, deliverysolution for African produce to reachinternational supermarket chains. This verticalintegration is important in building customerconfidence in the quality and traceability ofproducts being delivered to market.

Lonrho cold chain logistics undertakes themajority of the export of fresh produce fromsouthern Africa to market, including fruit,vegetables, crustacea and fish by air. It is also asignificant general logistics business handlingfresh produce and frozen goods by road and seafreight for both Lonrho and for third parties.

Lonrho also operates the largest ‘high care’facilities in the region that can take fresh produceand pack and process it to customers’ demands.For example, rather than delivering a tomato to aEuropean supermarket, the tomato can be slicedand diced in a Lonrho high care facility, added toother ingredients and developed into a salad or astir-fry. This ‘value add’ is all completed within theLonrho facilities in Africa, including theprocessing, pricing, date stamping and packing inretail brand packs for customers across Europeand the Middle East.

Lonrho operates a ‘demand driven’ agriculturalbusiness, where specific products are grown forspecific retailers to meet their demands. Lonrhofocuses on the fruit and vegetable sectors of themarket, where Lonrho believes there is asignificant market opportunity to meet theincreasing global demand from consumers forfruit and vegetables as disposable incomes riseand eating habits upgrade.

Since completing the development of itsvertically integrated, one stop, delivery platformtowards the end of 2012, Lonrho has seenincreasing interest from retailers, both in Africaand internationally, in developing long term,sustainable growing programmes with Lonrho tomeet their requirements.

As a result, at the end of 2012, Lonrho began toundertake annual growing programmes forretailers in Africa and in Europe. These long termdemand focused relationships with supermarketsare now being replicated into other markets suchas the ASEAN and China markets and the USA.

For example, Lonrho has supplied in excess of180 tonnes of strawberries to leading SouthAfrican supermarkets during 2012. The businessmodel for Lonrho is to understand and workclosely with supermarket chains to fullycomprehend their needs and then grow directlyto meet their requirements. These requirementsare often in relation to meeting seasonalproduction shortages, or the provision of ‘highcare services’ to develop value added productsfor customers.

Lonrho satisfies retailer demand from acombination of our internal growingprogrammes on Lonrho farming operationscombined with produce coming from Lonrhomanaged and sourced third party producers andoutgrower co-operatives. 20% of the Lonrhorequirement is from its own farming operationsand 80% comes from outgrower and contractco-operative initiatives working closely underLonrho’s oversight.

Left�to�right:Home�Farms, Oceanfreshsupplying�in-house�brandproducts�for�leadingsupermarkets�includingWalmart�and�Costco, Rollexfacility.

22

Business�Review


Where Lonrho is utilising co-operatives andoutgrowers, Lonrho provides off-takeagreements and monitors and assists withgrowing programmes, encouraging andmonitoring standards of local production. Wherenecessary, Lonrho provides agronomists tosupport local production to increase yields andthe quality of the output and provides trainingand skills development.

The various sources of production areconsolidated and delivered into the LonrhoLogistics cold chain to provide a one stopdelivery solution that operates to aninternational standard and seamlessly deliversproduce to the end customer in the bestpossible condition.

The completion of this demand driven ‘farm tofork’ infrastructure in 2012 now provides asimple and reliable platform for the world’ssupermarket chains to be able to access thepotential productivity of African fresh produce.

Lonrho does not own title to agricultural land inAfrica, preferring to have long term leases forfarm land and exclusive off-take agreementswith suppliers.

A specific example of Lonrho’s demand drivengrowing operations in 2012 would be Lonrho’s177,000 tree stone fruit plantation, the largest inAfrica. Lonrho identified the specific marketrequirement with retailers, and started plantingin 2010. This plantation is now maturing anddelivering peaches and nectarines into theEuropean market for the six weeks prior toChristmas filling a market gap where retailershad traditionally struggled to find ripe stone fruit.2012 production was around 500,000 kg ofpeaches and nectarines and as the plantationreaches maturity in 2014, the yield shouldincrease to 4 million kgs.

As highlighted previously, exceptionally lowtemperatures earlier in 2012 caused frostdamage to a proportion of the fruit on the veryyoung tree stock affecting last year’s harvest. Asthe trees mature, they become stronger andmore resilient and measures have been put inplace to ensure that, in the future, there will beminimal loss of fruit, and minimal impact on thebiological asset valuation, if the temperatureswere again to reach such unprecedented lows.

Similarly, Lonrho is planting 240,000 blueberrybushes over the next three years to meet amarket gap identified in the USA, UK, EU andSouth Africa when Africa has seasonaladvantages over USA and South Americanproducers.

Fish and CrustaceaLonrho’s Oceanfresh division primarily providesHake from Namibia and South Africa to retailclients. Hake is a quality white fish similar to cod.It is wild caught, not farmed, and is fished undera sustainable sourced fishing policy operated bythe WWF. SASSI (Southern African SustainableSeafood Initiative) controls the volume of fishbeing landed and sets and enforces quotas toensure that Hake is not over fished and thereforeremains a long term and sustainable resource.

Lonrho’s Oceanfresh is a significant buyer ofHake from the fishing fleets and processingcompanies in Namibia and South Africa, andpackages and delivers the product selling intoretailers in both Africa and internationally.

In Africa, during 2012 Lonrho has exclusivelylaunched the ‘Cape Point’ own brand range forShoprite/Checkers and supplies their wholerange of Cape Point branded fish products.Likewise, Oceanfresh exclusively provides the

own brand ranges to Makro stores and to Sparstores in Africa.

On the international market, Oceanfreshprovides Hake to Walmart stores in the USA andat the end of 2012 started also delivering Hakeinto Sam’s Club stores in the USA.

At Costco, from an initial supply of Oceanfreshbranded Hake in 2011, the product has soldstrongly and was upgraded to a Costco ‘KirklandSignature’ own brand line at the end of 2012. Asa result, it is currently being rolled out to everyCostco store worldwide.

Costco have also agreed two other ‘KirklandSignature’ lines to be supplied by Oceanfresh,the first of which has started to be supplied atthe end of 2012 and will see traction in 2013.

Lonrho Hake is also supplied to numerous othermarkets, such as a rolling contract for supply toUnited Airlines where it is served in first andbusiness class, into commercial cateringcompanies, and other global retail chains.

On the East Coast of Africa, in 2012, Lonrho hasbeen awarded an exclusive five year tunacatching licence for the coastal waters up to200 miles off Mozambique. This will begin to beoperated with contracted vessels in mid-2013.

Also in Mozambique, the Oceanfresh processingand handling facility in Maputo Port has beenupgraded to become the leading EU ratedfacility in Mozambique for the export of lobsters,langoustines and seafood. Mozambican lobstersand langoustines are a highly sought aftercommodity, that Lonrho supplies into marketssuch as the USA, Switzerland and the Far East.

John Deere EquipmentLonrho is the exclusive distributor of John Deereagricultural equipment into Angola andMozambique and in 2012 also became theexclusive distributor into Tanzania and SouthSudan. Lonrho also became the exclusivedistributer of John Deere constructionequipment into South Sudan in 2012. Lonrhoalso distributes Komatsu equipment intoMozambique.

As African agriculture develops, so therequirement for equipment is forecast to grow.Lonrho sees this business as synergistic with itsagricultural strategy to develop Africanagriculture and support local productioncapabilities.

John Deere agricultural equipment is a worldleading brand, benefitting from excellent qualityproducts and decades of product development.Lonrho strategy is to build long term marketshare for its John Deere businesses. This isestablished by a significant focus on implements,service, spare parts and maintenance. EachLonrho John Deere business is resourced withthe service capabilities and carries the spareparts to support the equipment that has beensupplied. Lonrho sees this as an essentialcommitment to its customers, and fundamentalin growing customer allegiance and long termrelationships.

As a result of this strategy, in 2012, Lonrho isseeing strong growth in its agriculturalequipment businesses, driven by the expandingmarkets in which it operates, but also by thereliable and professional support provided byeach Lonrho John Deere distributor.

f

p

p


Agribusiness Value Chain

Refrigerated distribution to local and global markets

Low careProducts are cared for in their original

form and packed for shipment.

High careValue added products are processed,

packaged and date stamped.

From field to fork From sea to shelf

Refrigerated transportLonrho Agribusiness trucking fleet transports

produce to local cold stores.

Lonrho cold storageHandling fresh, chilled and frozen products.

24

Business�Review

GovernanceFinancial StatementsInvestor�Information

InfrastructureAs�Africa�discovers�an�increasing�quantity�of�commerciallyviable�oil�and�gas�resources,�so�it�requires�the�necessaryinfrastructure�to�meet�the�demands�of�the�expanding�oiland�gas�industry.�Lonrho�Ports�provides�the�infrastructurenecessary�for�the�oil�and�gas�industry�to�operate�itsexploration�and�production�programmes�in�Africa.




It is believed that 25% of the world’s oil and gasreserves are in and around East and West Africa.The Continent will play an increasingly significantrole in meeting the world’s energy requirementsin the coming decades.

Large producing countries such as Angola andNigeria already have Government ownedinfrastructure to support the industry, howeverthe smaller and newly producing countries stillneed to develop the required infrastructure forthe industry. This is often made more critical asexisting, traditional, ports are already heavilycongested as they struggle to meet the growingdemand of general trade and are often incapableof meeting the demands of a highly efficient newindustry.

Lonrho Ports developed a PPP (Public PrivatePartnership) with the Government of EquatorialGuinea in 2006 and has subsequently developedLuba Freeport on Bioko Island in the Gulf ofGuinea to a position where it is forecast to handle85%+ of all the oil and gas logistics for theterritorial waters of Equatorial Guinea. Lonrhoowns 63% of the PPP, the Government NationalOil Company, GEPETROL, 37%.

Luba Freeport has attracted the world’s leadingoil and gas support service companies tobecome tenants and operate from Luba Freeport,where Lonrho has developed 270 metres of deepwater quay and has 200 acres of land assigned asa free trade zone exclusively for the oil and gasindustry.

Lonrho Ports has negotiated the sole rights todevelop a further oil and gas terminal in westernGhana to support the burgeoning oil and gasindustry in the country. The potential client basefor the project is similar to Luba Freeport, andLonrho has now completed the site selectionprocess for the project, the feasibility study forthe project, the environmental impactassessment , bathometric surveys, wave analysisand construction tenders. Following the electionsin Ghana, it is hoped that the project will moveforward in the first half of 2013.

Lonrho Ports believes that the opportunities existfor further oil services terminals in both the Eastand West coasts of Africa.

e-Kwikbuilde-Kwikbuild manufactures and supplies qualityprefabricated buildings across Africa. Designed tohave a 30 year product life, e-Kwikbuild buildingsprovide a fast-track solution for customers, at alower cost, than traditional construction methodsfor buildings, and can be delivered and installedmuch faster than traditionally built buildings.

e-Kwikbuild supplies buildings for a wide range ofapplications, including classrooms, schools,medical clinics, police stations, wards, offices,workers’ camps and accommodation.

e-Kwikbuild’s clients range from Governments tothe private sector and e-Kwikbuild supplies andinstalls buildings across southern Africa withe-Kwikbuild contracts delivered in South Africa,Angola, DRC, Mozambique, Lesotho, Uganda,Kenya and Tanzania.

During 2012 e-Kwikbuild successfully won a largetender for the supply of 398 school classroomsto the Eastern Cape Province of South Africa. Thefulfilment of this contract has been challengingfor the Company due to the remote locations ofmany of the school sites, which has impactedboth the delivery of materials to site, site securityand the ability to have on-site interaction withthe customer representatives. As a result, thecontract has over run and was not completed asexpected in 2012 but which will carry on into thesecond quarter of 2013.

During 2012 a new CEO was appointed toe-Kwikbuild to move the strategic focus furthertowards enlarging its private sector customerbase, supplying mining camps, offices andmedical clinics into the rest of Africa.

26

Business�Review


HotelsLonrho�Hotels�division�has�had�a�strong�year�in�2012during�which�it�has�successfully�added�to�its�portfolioof�properties�with�the�addition�of�the�Lansmore�MasaSquare�in�Botswana�and�the�Grand�Hotel�Kinshasa�inthe�DRC.




The strategic focus for the Lonrho Hotels brandremains to supply quality corporate gradeaccommodation for business travellers andothers visiting and trading in Africa.

The Lonrho portfolio now includes five hotels;

Hotel Cardoso, Maputo, Mozambique 130 rooms

Grand Karavia Hotel, Lubumbashi, DRC 198 rooms

Lansmore, Gaborone, Botswana 158 rooms

Grand Hotel Kinshasa, Kinshasa, DRC (management contract) 220 rooms

(plus 200 under refurbishment by

the owners)

Leopard Rock, Mutare, Zimbabwe (management contract) 57 rooms

A number of further management agreementsare being negotiated across Sub-Saharan Africato increase the footprint for the Lonrho Hotelsbrand and the number of properties on offer toguests.

Lonrho Hotels pays special attention to guestsneeds, and takes pride in understanding the localcommercial environment and traditions aroundeach of its properties and being able to adviseguests accordingly.

With the portfolio of Lonrho Hotels extending itsgeographical coverage, the division is seeing anincreasing ability for guests to make LonrhoHotels their hotel of choice as they travel inAfrica.

easyHotel by LonrhoThe budget hotel market has been developedsuccessfully throughout the world. Lonrhobelieves that this market is now applicable to thegrowing African marketplace as consumerspending increases, and has signed the exclusiverights for Africa to the easyHotel brand.

This product is aimed at the lower end businesstraveller, who is seeking a safe, clean andcomfortable place to stay with goodcommunications but who travels on a budget.Customers are not looking for the expensive frillsand costs of a four star hotel. The market sectorfor this in Africa is undeveloped and underserved,and Lonrho believes that it can roll-out a chain ofeasyHotels by Lonrho across the Continent,meeting this market opportunity.

The first easyHotel by Lonrho opened inJohannesburg at the end of the first quarter of2013 and it is planned to grow this into a chain of50 easyHotels by Lonrho across the Continent.

Lonrho Hotels’ policy is not to build hotels ordevelop a real estate portfolio, but rather to be arecognised operator and manager of hotels, or inexceptional circumstances, to lease hotelproperties.

Left�to�right:Grand�Kinshasa�Hotel,easyHotel�de�Korte�St.Johannesburg,�a�LonRHoHotel, Grand�Karavia�Hotel.

28

Business�Review


Support�ServicesLonrho�plays�an�integral�part�in�providing�support�services�to�businesses�and�organisations�working�in�Africa.




Africa is attracting larger and more internationalcompanies to operate within the Continent asglobal corporates increasingly understand thepotential size of the African opportunities.

Lonrho Support Services division provides ‘onestop, single solution’ to clients operating in Africa.The benefits of a one stop solution to clients isthat they have a single point of contact for alltheir support requirements, as opposed to havingmultiple suppliers. This structure allows thecontinuity of service and the quality of support tobe improved and provides a simple administrativesolution to clients, who pay a per person per dayfee for a comprehensive support service,providing transport, logistics, accommodation,catering, connectivity and security services underone single contract.

The Support Services division has strong synergywith Lonrho’s other activities in Africa and clientsthat have used Lonrho Support Services in 2012include Tullow, UN, USAID, Fluor, Barrick andothers.

Lonrho ITLonrho’s IT division works within the SupportServices division offering integrated IT solutionsto companies across Africa.

Lonrho IT comprises a number of leading ITbusinesses in Africa: Bytes & Pieces, CES andIndIT. Bytes & Pieces operates in Mozambiqueand is the foremost commercial IT provider tolarge corporates, banks and the Government.Bytes & Pieces is a top tier Dell Certified Partner,Microsoft Gold Certified Partner and authorisedreseller for CISCO Networking Systems and otherspecific leading product lines. It provides fullsystems design, integration, management andmaintenance services to its clients.

During 2012 Lonrho IT has developed operationsin Zambia, Zimbabwe and Namibia providing ITservices to corporates, banks and Governments,representing the roll-out of the successful Bytes& Pieces business model in Mozambique across agrowing African footprint.

AFEX Group AFEX headquarters are in Nairobi, Kenya – withassociated offices in South Sudan, Tanzania,Uganda and the United States. AFEX provides acost-effective solution specifically to remote siteproject support needs and offers organisations anopportunity to outsource to professionals withextensive regional experience. The company hasbuilt a reputation for providing the higheststandard of service in remote areas and oftenunder harsh and difficult conditions. Specialists inrapid response, AFEX delivers immediateassistance and support in internationalemergencies.

AFEX owns the largest accommodation camp inJuba in South Sudan, River Camp, which is thepremier place to stay for visitors to South Sudan.Clients in 2012 include corporates such asDeloitte, USAID, UN, World Bank, oil companiesand others working in the region as South Sudangoes through the transition post-independence.South Sudan has significant oil reserves and othernatural resources and potential, all of which arelargely undeveloped.

Arlington AssociatesArlington Associates is an entity in which theGroup has a 25% interest and charges amanagement fee. It has implemented an initialcontract with the Government of Nigeria for theinspection of crude oil and gas exported fromNigeria. The process is governed by the NigerianExport Supervisory Scheme (NESS) which wasestablished as Law 10/96. Arlington wasappointed to assist in the monitoring role byPresidential Decree in 2012. Inspection isprimarily intended as verification of what is beingexported and at what price so the Central Bankcan have a clearer understanding of the revenuesand taxes associated with the country’s primaryincome.

Monitoring and evaluation has variouscomponents which are being trialled and theoverall purpose is to create a comprehensive androbust export verification organisation andprocess for the Ministry of Finance and theNigerian Oil and Gas Industries, including bothmonitoring and inspection, in order to minimiseexport fraud and improve financial oversight withthe objective of increasing Governmentrevenues.

AFEX�Security�


Group PerformanceIn 2012 the Group deliberately reduced itsacquisition activity and concentrated on beddingin recent acquisitions and stimulating organicgrowth across each sector. This resulted instrong sales growth across each division andimprovement in the Group’s gross margins from26.9% to 28.9%.

In September the Executive Directors carried outa thorough review of the Group’s strategy with anemphasis on driving profitability ahead ofprioritising top-line growth. The impact of thiswas the withdrawal from certain distributioncontracts within the Agribusiness division and amuch more rigorous assessment of new businessacross the Group. The full benefit of thesedecisions will be seen in 2013 and beyond butthe short-term impact saw revenue in certainparts of the business fall.

FinancialReview

The Group continues to growrapidly largely through organicgrowth but also assisted by newbusiness start-ups in key marketsand the maturing of recentacquisitions. Margin improvementsand cashflow delivery are thepriorities for the Group movingforwards.

David ArmstrongFinance Director

30


Revenue from core operating divisions for the 12 months to 31 December 2012 was £186.3mcompared with £152.9m for the 15 months to 31 December 2011.

Full Year

ReportedGrowth

vs 15 *Adjusted12 months to months to *Adjusted like-for-like

December December like-for-like (Constant2012 2011 growth FX)

Continuing Operations £m

Revenue

Agribusiness 123.6 30.8% 12.8% 24.5%

Infrastructure 23.5 7.8% 25.9% 30.4%

Support Services 27.0 7.6% 20.5% 19.9%

Hotels 11.9 3.5% 12.4% 9.7%

Other 0.3

Core Divisions 186.3 21.8% 15.4% 23.6%

Transportation 20.2

Lonrho Plc 206.5

On an adjusted like-for-like basis at constant currency* revenue in the 12 months to 31 December 2012has increased across all four divisions, with an overall increase of 23.6%. This figure demonstrates theunderlying strength of businesses in the Group and the value Lonrho is able to add to new acquisitions.A diagrammatic representation of the increase in like-for-like revenue from core operating divisions is setout below:

* Adjusted like-for-like figures include acquisitions (pre-acquisition comparables based on unaudited management accounts),exclude start-up businesses trading for less than 12 months and are adjusted to the comparable 12 month period January toDecember and constant currency.

Net operating profit/(loss) is used as a consistent non-GAAP measure of business performance year-to-year. It is defined in accounting policy 3(w). In the 12 months to 31 December 2012 net operating lossfrom core operating divisions was £3.4m, compared with net operating profit of £20.6m in the 15 monthsto December 2011. However, the 2011 profit included a one-off gain of £15.8m in respect of assetspurchased below fair value. In 2012 the value of biological asset gains were £9.2m compared with £27.4min the comparative period.

Return on EquityAs the Group’s core businesses mature, the Board has started to develop and evaluate what would be themost appropriate way of setting and measuring long-term financial performance across each division,taking into account the different business models, market sectors and geographic mix of the business.The Board has chosen Return on Equity as the initial measure on which to focus and this will beimplemented during the 2013 financial year.

Return on equity (a non-IFRS financial measure) is defined as attributable profit to owners of the companyfor the preceding twelve months divided by the opening shareholder equity at the beginning of therelevant 12 month period. Benchmarks have been set at Group and divisional level to allow comparisonwith companies operating in the same sectors which also supported the development of long termtargets. The Group is not yet performing at the target levels but the Board will expect to see progresstowards these benchmarks over the course of each financial year.

120

130

140

150

160

170

180

190

2011

Agr

ibus

ines

s

Infr

astr

uctu

re

Supp

ort S

ervi

ces

Hot

els

2012

£m


32

Transfer of the Transportation Division to a Jointly Controlled EntityBy the end of 2011 the Transportation Division (trading as Fly540) had successfully created the foundationof its network with three strategic operational hubs in Kenya, Angola and Ghana. As the business reviewedits options for growth Lonrho entered into discussions with Rubicon Diversified Investments Plc (laterrenamed as FastJet Plc (“FastJet Plc”)) and easyGroup, the investment vehicle of Sir Stelios Haji-Ioannou(the founder of easyJet Plc) about a potential strategic co-operation.

On 29 June 2012 the Transportation division (headed by Lonrho Aviation BVI) was transferred to FastJetPlc at a market value of US$85.7m (£55.7m) in exchange for shares representing approximately a 73.6%equity interest in FastJet Plc. FastJet Plc is considered to be a jointly controlled entity as Lonrho does notexercise control over the business but is capable of doing so by acting jointly with easyGroup. Inaccordance with IFRS 3 the resulting interest in FastJet Plc was recognised at its fair value and theresulting gain recognised in the income statement. Up to 31 December 2012 Lonrho’s shareholding hadbeen diluted to approximately 63% through subsequent equity raises by FastJet Plc.

The Group records jointly controlled entities initially at cost, and thereafter cost, plus share of results, lessprovision of impairments. These investments are assessed at each reporting date to determine whetherthere is any objective evidence that it is impaired and if any such indication exists, an impairment charge isrecorded in the income statement. Due to current market conditions experienced by FastJet Plc, animpairment review has been carried out which resulted in an impairment charge being recorded in theincome statement of £7.7m.

In Lonrho’s financial statements the results of the Transportation Division are consolidated for the first 6months of the year. In the second half of the year the income statement only includes the Group’s shareof the results of the jointly controlled entity. FastJet Plc has not released its audited results for the periodto 31 December 2012 at the date of this report and, accordingly, the Directors have included an estimateof the Group’s share of results of FastJet Plc for the period from 29 June 2012 to 31 December 2012. Thetable below sets out the full impact on the Group income statement. A full explanation of the impact isset out in Note 11 to the financial statements.

£m

Revenue 20.2

Cost of sales (16.7)

GROSS PROFIT 3.5

Operating costs (9.9)

Depreciation (1.1)

Net interest payable (1.4)

OPERATING LOSS (8.9)

Amortisation (0.5)

LOSS BEFORE TAX (6 Months to June 2012) (9.4)

Gain on contribution of subsidiary to jointly controlled entity 33.5

Share of jointly controlled entity results to 31 December 2012 (10.6)

Impairment of jointly controlled entity at 31 December 2012 (7.7)

PROFIT BEFORE TAX FOR YEAR FROM TRANSPORTATION ACTIVITIES 5.8

Financial Review continued


Associate companies and investmentsDuring 2012 the Board took the decision to focus on its core operating sectors and to exit from itsassociate and investment holdings. The three key holdings affected were Cambria Africa Plc (formerlyLonZim Plc), Lucapo Diamond Company Limited (formerly Lonrho Mining Limited) and SouthWest Energy(an oil exploration company based in Ethiopia). The financial impact of these disposals is shown below:

CarryingShareholding at value at Shares of

31 December 31 December Results prior Gain/(loss)2011 2011 Impairment to disposal on Disposal Total

Company £m £m £m £m £m

Cambria Africa 22.92% 5.9 (2.0) (2.6) (0.2) (4.8)

Lucapo Diamond 13.96% 1.0 – – 0.4 0.4

SouthWest Energy 2.40% 1.3 – – (0.3) (0.3)

Total 8.2 (2.0) (2.6) (0.1) (4.7)

Lonrho still retains its 20% holding in Swissta DRC, a water bottling company. At 31 December 2012, thecarrying value for this investment was £0.1m.

Change of accounting reference dateThe Company's accounting reference date was changed from 30 September to 31 December in 2011.Accordingly, the 2012 comparative figures shown in these financial statements are in respect of the15 months period to 31 December 2011.

The change has aligned the Lonrho accounting period with the statutory obligations in various countrieswhere the Group operates and where December year end is a legal requirement.

Earnings per shareBasic earnings/(loss) per share as defined by IAS33 were 0.11 pence loss per share (2011: 0.49 penceearnings per share).

DividendThe Board do not recommend the payment of a dividend (2011: £nil).

The Directors keep under review the capital structure of the Group, with the objective of adopting aprogressive, prudent dividend policy once the Company has sufficient distributable reserves and hasachieved a level of sustained profitability, taking into account the Group’s financial position, underlyingearnings and cash flows, the resources required for the Group’s development and the prevailing marketoutlook.

Key factors driving growth of the businessThe Group continues to grow rapidly through a combination of organic growth, integration ofacquisitions and new business start-ups. During the year the Group made progress in all three aspects.

AcquisitionsDuring the year the Group deliberately reduced its acquisition activity in order to concentrate on the corebusiness portfolio and to complete the transfer of the Transportation Division into FastJet Plc. One smallacquisition was completed, the purchase of LonAgro Tanzania, as management continued its strategy ofidentifying bolt-on acquisitions which complement its existing business models.

Pre-Acquisition

CarryingConsideration Value of Fair Value Net Assets

Paid Assets Adjustments Acquired GoodwillCompany Division £m £m £m £m £m

LonAgro Tanzania Agribusiness 0.9 – 0.9 0.9 –


34

Business Start-upsIn addition to the acquisitive growth seen by the Group, Lonrho furthered its expansion by taking existingbusiness models into new territories. New business start-ups in the period are set out in the table below:

Capital expenditureCapital expenditure in the period amounted to £14.3m (2011: £43.4m). The largest part of this expenditurewas £7.2m in Agribusiness to increase production in the farming operations, new cold storage facilities atOceanfresh and expansion of the John Deere business into Tanzania and South Sudan.

Outside the Agribusiness division, the main expenditure on fixed assets has been at Luba Freeport whereapproximately £3m was spent on development and expansions for the port. Within the Hotels division afurther £3m of capital expenditure was incurred, mainly in relation to the opening of Lansmore MasaSquare Hotel.

Capital structure and Group financingThe pace of growth of the Group, especially within the Agribusiness division, has enabled a wider range offinancing options to be put in place to support the business. The ongoing capital structure of the Groupreflects the judgement of the Directors as to the appropriate balance of funding required.

During the period the Group completed the following key funding activities:• Lonrho Agribusiness secured additional divisional funding through Standard Chartered Bank in the

period drawing down US$13m from a pre-existing headroom facility.• Oceanfresh secured a multi-currency, multi-jurisdictional trade finance facility from Standard

Chartered Bank for up to US$25m. This facility covers financing of the full product life cycle from Letterof Credit through stock financing to sales invoice financing with specific focus on the growth of theOceanfresh business in the USA and Asia.

• Lonrho Hotels issued £2.4m promissory notes with Botswana Insurance Fund Management to financethe purchase of furniture, fittings and equipment at the new Lansmore Masa Square Hotel. The notesare repayable over three years from 2020.

In total repayments of bank debt and other financing liabilities of £6.6m were made during the year. At31 December 2012 the Group had undrawn facilities amounting to £7.3m.

Business Sector Start-up Date Description

LansmoreMasa Square (100%shareholding)

Hotels July 2012 The new property was opened as ‘LansmoreHotel by Lonrho’, Lonrho Hotels four/five-starbrand and in the heart of the central businessdistrict. It is expected that the property willbecome the hotel of choice for those visitingGaborone.

LonAgro South Sudan(100%shareholding)

Agribusiness November 2012 With the completion of the facilities inSouth Sudan, trading at LonAgro began inNovember. The business is working on significantorders from major agricultural projects as well assales to individual farmers.

CES Namibia(50%shareholding)

Support Services November 2012 The CES franchise, grown from the blueprintbuilt by Bytes & Pieces in Mozambique, has nowbeen rolled-out to Namibia. The business willprovide IT hardware and support services tobusinesses and organisations.

ArlingtonAssociates(25%shareholding)

Support Services April 2012 This new business start-up in the SupportServices division implemented an initial contractwith the Government of Nigeria for theinspection of crude oil and gas exported fromNigeria.

Financial Review continued


Capitalisation and indebtednessDuring the period the Group has undergone significant changes with regard to the composition of itsbalance sheet and facilities available to the Group have appreciably increased. The table below sets outsome of the changes which have been seen in the period.

31 December 31 December2012 2011£m £m

Total Shareholder Funds 174.2 155.7

Total Current Debt 30.0 20.1

Total Non-Current Debt 77.6 95.3

Guaranteed 43.0 44.4

Unguaranteed 34.6 50.9

Cash at bank 17.0 12.7

Net indebtedness* 87.2 99.1

* Excludes loans from minority shareholders

Finance costsNet finance expense including foreign exchange gain/(loss) for the period was £9.1m (2011: £9.4m) and ofthis total, £1.4m related to the Aviation division in the period prior to disposal. The total cost also includesa non-cash charge of £2.3m in respect of accrued redemption premium on the Convertible Bond.

The average cost of finance across the Group's debt facilities was 7.3% compared with an average interestcost in 2011 of 8.4%.

Treasury activityThe Group Treasury activities are overseen by the Executive Committee which includes the Group'sFinance Director and the Group Treasurer. All treasury activities are managed in accordance with theframework of treasury policies and guidelines approved by the Board. A key principle of these policies isthat speculative trading in financial instruments is prohibited, and such instruments are used solely for riskmanagement purposes. All borrowings are overseen by the Finance Director and Group Treasurer. Surplusfunds are invested with suitably creditworthy counterparties and in such a way as to ensure liquidity isavailable when required. The credit status of counterparties is kept under regular review.

CurrencyThe Group's objective is to reduce its exposure to volatility in earnings and cashflows from movements inforeign currency exchange rates. The Group is exposed to a number of foreign currencies, the mostsignificant being the US Dollar and the South African Rand. Currency risk is broken down intoTransactional Risk and Translation Risk.

Transactional riskThe Group is increasingly exposed to movements in foreign currency exchange rates in respect of foreigncurrency denominated transactions, most notably from the export of products from Africa to the USA,Europe and Asia. To mitigate this risk the Group has commenced to hedge clearly identifiable andmaterial transaction exposures through the use of internal netting, forward foreign exchange contracts,swaps and options as appropriate. There were no significant foreign exchange financial instrumentsextant at 31 December 2012 requiring recognition at market value on the Group balance sheet.

Translation riskThe Group is also exposed to movements in foreign currency exchange rates in respect of the translationof the net assets and income statements of foreign subsidiaries and Group borrowings denominated incurrencies other than sterling. The Group does not seek to fully hedge the translation effect of thesemovements, but mitigates its exposure where it is possible to match the currency denominationsexposures of assets and liabilities. This objective is secondary to ensuring that obligations are matched asclosely as possible to the currency of trading cash flows generated.

Interest ratesGiven the historically low interest rates in certain of the currencies in which the Group has borrowings,and to provide certainty over future cash flow requirements, the Group has intentionally increased theproportion of debt bearing interest at fixed rates. During the year, the amounts outstanding under termloan facilities in the Agribusiness division were hedged by way of a fixed-for-floating interest rate swap,meaning that the interest obligation is no longer vulnerable to changes in reference rates over the fullfacility value and term. The market value of this interest rate swap is recognised on the Group balancesheet.

As at 31 December 2012, 72% of Group debt instruments bore interest at fixed rates, compared with 57%at 31 December 2011.


36

Working capital managementCash and working capital positions are monitored on a daily and weekly basis from Head Office. Thisenables surplus cash resources to be deployed in the most effective manner and the Group’s tradereceivable and payable days to be managed. At 31 December 2012 both trade receivables and tradepayable days reduced to 50 days (2011: 56 days) and 59 days (2011: 85 days) respectively. However, on alike-for-like basis (excluding the Transportation division) trade receivables reduced to 55 days from 61days at 31 December 2011 and trade payables had reduced from 75 to 66 days.

TaxationThe Group had a tax credit of £0.3m (2011: tax charge of £0.3m). This tax credit largely comprises localcorporation tax payable in respect of the Group's profitable operating subsidiaries offset by deferred taxcredits.

The Group utilises available tax losses to offset corporation tax liabilities wherever possible. The Group iscarrying out a full review of its corporate structure in order to ensure maximum tax efficiency on futureprofitability as it arises.

David ArmstrongFinance Director27 March 2013


CorporateResponsibility

As a Group operating in eighteen African countriesand in sectors as diverse as agribusiness, hotels,infrastructure and support services, Lonrho’sapproach to corporate responsibility reflects thevariety of risks and opportunities faced by itsbusinesses. At the same time, stakeholders need todepend upon a sufficiently consistent approach thatthey can understand what to expect from the Lonrhobrand of companies.

Using a principlesand values basedframework, theGroup is applyinga more strategicand consistentapproach tocorporateresponsibility.

Lonrho continues to support the United NationsGlobal Compact with its ten principles in the areaof human rights, labour, environment and anti-corruption. These principles are also consistentwith the Group’s own corporate responsibilityvalues which were developed in 2011 andcontinue to be embedded across all of itsoperations.

2012 has been a year of review of the Group’scorporate responsibility practices, a focus on ourmanagement systems and the establishment ofminimum requirements for all subsidiaries.

At head office, Lonrho’s Directors and some ofthe divisional managers have received training onenvironmental and social risk management. Ourbusiness development processes nowincorporate a requirement to take into accountthese risks at the earliest stages of a transactionproposal and subsidiaries must report quarterlynot only on their business operations but also onany corporate responsibility issues that may havearisen or been addressed in their operations.

A number of corporate policies and procedureson Environmental Management, CommunityInvestment, Human Resources, Human Rights,Local Procurement, Stakeholder Engagement,Quality Management, and Whistleblowing haveeither been updated or are under development(incorporating full consultation with oursubsidiaries).

The Company has attained ISO 14001 onEnvironmental Management Systems andISO 9001 for Quality Management.

The system of having corporate responsibilityofficers in each subsidiary is having a valuableeffect to improve and embed a more consistentunderstanding of how to practically applyLonrho’s corporate responsibility values. Toencourage excellence, in 2012 the Company

announced there would be an internal annualcompetition for the best corporate responsibilityprogramme of an operating company, the CookAward.

Luba Freeport has been awarded the Cook Awardin 2012 in recognition for their outstandingapproach to improving the opportunitiesavailable to their staff and the surroundingcommunities. Through a comprehensiveprogramme of occupational training andeducation for members of the community, manylives have been improved at Luba. The award waspresented in February 2013 and includes adonation to a local charity supported by thesubsidiary and a bonus to the manager and teaminvolved in the work.

During 2013, Lonrho will develop a number ofnon-financial Key Performance Indicators (KPIs)relating to each corporate responsibility value.Baselines will then be captured and reportedagainst in future Annual Reports.

A short description of some practical activitiesthat Lonrho has taken to implement its fivecorporate responsibility values and the UN GlobalCompact principles is presented below. Moredetail on such activities are found on thesubsidiaries’ own websites.

Investing in our workforce and their wellbeing (UN Global Compact Labour Principles)We have updated all human resources policiesand procedures for staff at headquarters and areworking with all our subsidiaries to ensure thatminimum requirements are achieved across theGroup in 2013.

In August 2012, Luba Freeport presented to theMinistry of Labour in Equatorial Guinea the LubaFreeport nationalisation programme. Thisprogramme is designed to maximise the numberof local staff at Luba– currently 80 per cent. Allnew employment opportunities are advertised inthe Ministry of Labour, local tv and radio. Trainingof the local workforce in a wide range ofoccupational skills has enabled Luba Freeport toconsistently meet international standards ofoperations.

Oceanfresh successfully completed an externalsocial audit undertaken by Intertek Group Plc onbehalf of Costco in May 2012. It will be repeatedeach year.

Lonrho Logistics is on track to attain theinternational standard ISO 18001 onOccupational Health and Safety at itsJohannesburg, Cape Town, George and PortElizabeth branches in South Africa.

38

Business Review

GovernanceFinancial StatementsInvestor Information

Corporate Responsibility continued

Luba regularly assist the local hospital by supplying medicines and mosquito nets and providing theassistance of Dr. Suhas Narayan Patil (above) with consultations or medical procedures.

Supporting communitiesWe will be developing a Group CommunityInvestment Policy and a Group StakeholderEngagement Policy during 2013.

In 2012, Lonrho concluded a Feasibility Study intoa planned Oil Services Terminal in the WesternRegion of Ghana. Throughout the FeasibilityStudy, which included a full Environmental andSocial Impact Assessment, Lonrho has prioritisedits engagement with stakeholders in the projectarea. By directly engaging with the threecommunities who stand to be most affected bythe project, Lonrho has established constructiverelationships which reflect mutual respect andtrust. As well as holding regular meetings withtraditional leaders and governmentrepresentatives, Lonrho continues to discuss theproject and its expected impacts withdevelopment agencies, non-governmentalorganisations and local stakeholders such asfishermen, farmers, women and the elderly. Suchconsultations provide important input into thedesign of both mitigation measures and ways toenhance the wealth of opportunities the projectis anticipated to bring.

Lonrho realised that often stakeholderengagement activities can overlook theimportance of involving local children. However,it is especially important for children to beinformed and engaged by the opportunitiesenvisaged. A special art project was created, withthe support of the local primary and juniorschools in each community. Each school wasvisited and the proposed Oil Services Terminalexplained. Pictures of rigs, vessels, cranes and agraphic representation of the terminal wereposted on the community noticeboards. Paper,crayons, pencils and paints were distributed toeach school and children were asked to use their

imagination and draw their vision of the new OilServices Terminal. The children and the schoolsput in a huge amount of effort and we aregrateful for their support in the project. Eachschool put forward its best pictures and membersof the Livelihood Restoration Committeeselected a winner from each school with oneoverall winner. Prizes, including a new computerfor the school, were awarded in November 2012by the Vice President of Ghana’s wife, Mrs MatildaAmissah-Arthur.

Conducting our business with integrity (UNGlobal Compact Anti-Corruption Principles)In addition to the Anti-Bribery and CorruptionPolicy, Lonrho has developed a Whistle-blowingPolicy, which has been disseminated throughoutthe Group. To date no incidents have beenreported.

Strengthening the local economyResearch has shown that companies alreadyoperating on the Continent are overwhelminglypositive about Africa’s prospects and potential. Incontrast, those who do not currently invest aresurprisingly pessimistic. Lonrho is thereforeexcited to announce that it has become afounding partner in a new initiative, ‘Invest inAfrica’ (IIA). IIA aims to challenge the perceptionsof business on the Continent and so inspire newpartnership with local African companies to growmarkets and deliver enterprise.

By harnessing the first-hand experience andknowledge of firms which have been successfullyworking in Africa for many years, IIA will bridgethis gap between perception and reality. IIA willwork to demystify the investment process, createnew partnerships and drive growth into localeconomies and wider development.

Luba Freeport medical facility.


Lonrho’s subsidiaries are now keeping records ofthe extent to which they source goods andservices from local companies and areencouraged to develop their own localprocurement policies. Levels of localprocurement will become a Key PerformanceIndicator for the Group to report on in duecourse.

Hotel Cardoso also provides a complimentaryvenue at its Café Accaccia for a monthly trade fairof locally produced handicrafts.

Environmental stewardship(UN Global Compact’s Environment Principles)The Company has become certified for ISO14001. In 2013, subsidiaries will be encouraged toalso achieve this international standard in theirown operations.

In line with forthcoming UK legislation, Lonrho isplanning to record greenhouse gas emissionsacross its operations and will report on these infuture Annual Reports.

Oceanfresh is an active certified member of theMarine Stewardship Council – Chain of Custody,an active member of the World Wildlife Fund’sSouth African Sustainable Seafood Initiative andhas passed an international audit on sustainabilityand traceability.

As resource security and climate change areinterconnected, and in light of the growingrecognition of the effects that a change inclimate is going to have on business, a number ofmeasures have been implemented.

Across the Group, water use is being moreclosely monitored and efforts made to reduceconsumption and re-use water and recycle

where appropriate. For example, Fresh Direct hasconducted responsible irrigation training toemployees to educate on the sustainable use ofwater and the importance of maintainingirrigation systems to reduce water waste. In 2013,it is planning to create a drought action plan witha view to helping local communities, wherepossible.

In addition all Lonrho companies are beingencouraged to reduce their energy consumption.For example, AFEX has installed solar poweredhot water at its accommodation facilities in Juba,and Rumbek in South Sudan and Lokichoggio inKenya.

All Lonrho companies are also being encouragedto reduce, re-use and recycle materials used intheir operations.

Lonrho Logistics tests all vehicles for carbonemissions and has introduced fuel saver plans byusing locally developed fuel additives to reducefuel consumption and carbon emissions on allfleet vehicles.

UN Global Compact Human Rights PrinciplesLonrho’s approach to corporate responsibilitydoes not include a stand-alone value onrespecting human rights because it is coveredacross its other five corporate responsibilityvalues. However, a Group Human Rights Policy isbeing developed in consultation with oursubsidiaries. It will reflect new internationalguidance on how businesses must respecthuman rights and will guide the Group on how toidentify and avoid human rights risks inoperations.

Above and top right: Luba Freeport sponsored school, Centro Prescolar Virgin de Montserrat.

40

Business Review

Governance

Financial Statements

Investor Information

1. Ambassador Frances Cook (67, American)ChairmanChair: Nomination and Corporate Responsibility CommitteesA former U.S. Ambassador to Burundi, toCameroon and to the Sultanate of Oman,Ambassador Cook also held numerous seniorpositions in the Department of State, includingDeputy Assistant Secretary of State for RefugeePrograms, and Deputy Assistant Secretary ofState for Political-Military Affairs, Consul Generalin Alexandria, Egypt, and Director for West Africa.She transitioned to the private sector in May1999, where she runs an international businessconsulting firm, The Ballard Group LLC.Ambassador Cook is a Distinguished SeniorFellow at the Center for Naval Analyses, and amember of the Council on Foreign Relations andPhi Beta Kappa. She also serves on the Board ofTrustees of Center for American 0verseasResearch Centers, and the Institute for AmericanUniversities (Aix-en-Provence, France), as well asa board member for various NGOs which work inAfrica and the Middle East. She was educated atthe Universities of Virginia, Harvard and theUniversite d'Aix-Marseille. She also holds anHonorary LLM.

She was appointed a Non-Executive Director on23 0ctober 2007 and was appointed Chairmanon 13 September 2012.

Board of Directors

1.

2.

3.

5.

4.

6.


2. Geoffrey White (52, British)Director & Chief Executive OfficerGeoffrey White holds a BSc in Economics andManagement Science and joined the Board ofLonrho Plc on 5 0ctober 2007, having been ChiefOperating Officer from 1 May 2007. During hiscareer he has held senior management roles withThomas Tilling Plc, BTR Plc, Dee Corporation Plc,Asda Plc and latterly worked for five years for aprivate investment firm based in London. He hasbeen responsible for the planning, financing,development and management of a range ofprojects in the hotel, industrial and naturalresource sectors.

He is also an Executive Director of FastJet Plcand was formerly an Executive Director and ChiefExecutive Officer of Cambria Africa Plc (formerlyLonZim Plc).

3. David Armstrong (48, British)Finance DirectorDavid Armstrong (FCA) joined Lonrho Plc asFinance Director on 1 December 2008 and bringswith him extensive experience of operatingacross Africa having been the CommercialDirector of Diageo Africa with combinedfunctional responsibility for finance, informationsystems, strategy and business development. Hecontributed to the successful deployment ofDiageo's pan-African growth strategy,encompassing over 50 countries. He also heldroles previously with PepsiCo and CompassGroup Plc and was also the COO ofMcArtherGlen in the UK and Europe.

He was formerly the Finance Director of CambriaAfrica Plc (formerly Lonzim Plc).

4. Emma Priestley (40, British)Executive DirectorEmma Priestley was appointed Executive Directoron 24 February 2006, having worked ininvestment banking for the previous five yearsfollowing a career as a mining engineer. She hasa background in mining and financial serviceshaving worked with consultants IMC Mackay &Schnellman, investment bank CSFB, advisers VSAResources and Ambrian Partners, where sheworked as a corporate broker and adviser. Emmais a graduate of Camborne School of Mines, aChartered Mining Engineer and CharteredMineral Surveyor.

She was formerly an Executive Director ofCambria Africa Plc (formerly Lonzim Plc).

5. Kiran Morzaria (38, British)Senior Independent DirectorChair: Audit and Remuneration CommitteesKiran Morzaria holds a Bachelor of Engineering(Industrial Geology) from the Camborne Schoolof Mines and an MBA (Finance) from CASSBusiness School. He has thirteen years ofexperience in the mineral resource industrycovering gold and diamonds. Mr Morzaria spenthis first four years in exploration, mining and civilengineering. After completing his MBA in 2003he was appointed Finance Director of VatukoulaGold Mines Plc in 2004. He has served on severalother boards in the role of Non-ExecutiveDirector and covered numerous industriesincluding retail, technology, oil and gas andmining. Apart for his roles as Finance Director ofVatukoula Gold Mines Plc and as a Non-Executive Director of Lonrho Plc, Mr Morzariaholds no other directorships of publicly listedentities.

He was appointed a Non-Executive Director on28 September 2010.

6. Jean Ellis (43, British)Non-Executive DirectorJean Ellis is a Chartered Accountant andChartered Tax Adviser, and holds an InsolvencyPractitioner's license. She is the senior partner inthe regional firm of Chartered Accountants,Duncan Sheard Glass, having been a partnerthere since 2002. Prior to this, she was GroupFinancial Controller and Tax Manager withLonrho Plc and holds a number of directorshipsfor its subsidiary companies. Jean has a Bachelorof Arts Degree in Pure Mathematics fromLiverpool University. She was formerly FinanceDirector of Lonrho Plc, having been appointed on1 June 2007, and became a Non-ExecutiveDirector on 1 December 2008.

She was formerly a Non-Executive Director ofCambria Africa Plc (formerly Lonzim Plc).

42

Business ReviewGovernance

Financial StatementsInvestor Information

Combined Code complianceLonrho is committed to good corporate governance across theGroup, for which the whole Board is accountable.

The principal governance rules applying to UK companies listed onthe London Stock Exchange are contained in The UK CorporateGovernance Code (“the Combined Code”) that is appended to theListing Rules of the UK Listing Authority.

The Listing Rules require all companies with a premium listing ofequity shares (incorporated in the UK) to report on the extent towhich they comply with the provisions of the Combined Code and toexplain and justify any non-compliance. The Company did not fullycomply with the Combined Code as at 31 December 2012 because:

1. The composition of the Board and its Remuneration, Audit andNomination Committees was not consistent with therecommendations of the Combined Code as detailed on pages43 and 46 to 48.

2. In addition, whilst the Company has a separate Chairman andChief Executive Officer, the former Chairman had a significantexecutive function due to his ambassadorial role within theGroup and as he provided entrepreneurial leadership with regardto the strategy of the Group. The Board made the decision toappoint David Lenigas as Chairman whilst retaining his executiverole following consultation with major shareholders. Mr Lenigasleft the Company on 13 September 2012 and AmbassadorFrances Cook, who was the Senior Independent Director at thatdate, was appointed Non-Executive Chairman in his place.

The Company will continue to monitor its corporate governanceframework to ensure that it remains appropriate for the Company,having regard to the scale and complexity of its business.

Board compositionThe Board currently comprises six Directors: a Non-ExecutiveChairman, three Executive Directors and two Non-ExecutiveDirectors.

During the year, Sir Richard Needham resigned from the Board as aNon-Executive Director on 28 May 2012 and David Lenigasresigned as Executive Chairman on 13 September 2012.

The biographies of all members of the current Board are set out onpages 40 to 41.

Role of the BoardUK company law requires Directors to act in a way they consider,in good faith, would promote the success of the Company for thebenefit of shareholders as a whole. In doing so, the Directors musthave regard (amongst other things) to:

• the likely consequence of any decision in the long term• the interests of Lonrho employees• the need to foster business relationships with suppliers,

customers and others• the impact of operations on the community and the

environment• the desirability of maintaining a reputation for high standards of

business conduct• the need to act fairly as between shareholders

In addition to their statutory duties, the Directors must ensure thatthe Board focuses effectively on all its accountabilities.

Its role includes the establishment, review and monitoring ofstrategic objectives, approval of major acquisitions, disposals,capital expenditure and financing arrangements, and to theGroup’s systems of internal control, governance and risk

management. It also ensures adequate succession planning forsenior management and monitors policies and performance oncorporate responsibility.

The Board is collectively responsible for the success of the Group:the Executive Directors are directly responsible for running thebusiness operations and the Non-Executive Directors areresponsible for constructively challenging proposals on strategy,scrutinising the performance of management, determining levelsof remuneration and for succession planning for the ExecutiveDirectors. The Non-Executive Directors must also satisfythemselves on the integrity of financial information and thatcontrols and systems of risk management are robust.

The Board reviews strategic issues on a regular basis and exercisescontrol over the performance of each operating company withinthe Group by agreeing budgetary targets and monitoringperformance against those targets.

Following presentations by executive management and adisciplined process of review and challenge by the Board, cleardecisions on the policy and strategy are adopted and the executivemanagement are fully empowered to implement those decisions.

The powers of the Board are set out in a formal schedule ofmatters reserved for Board approval. These matters are significantto the Group as a whole due to their strategic, financial,operational or reputational implications.

The schedule of matters reserved for the Board is reviewed andupdated regularly.

A summary of those matters is set out below.

Summary of matters reserved for the Board:

• the approval of the Group’s long term objectives andcommercial strategy;

• the approval of the Group’s annual budgets and materialchanges to them;

• the extension of the Group’s activities into new businesses orgeographic areas;

• changes to the Group’s capital structure – both debt and equity;• ensuring maintenance of a sound and effective system of

internal controls and risk management processes;• approval of material transactions, major capital projects and

material contracts and conduct of material litigation;• composition of the Board and the remuneration and the reward

of the Directors, company secretary and other senior executives;and

• the Group’s corporate governance framework.

Chairman/Chief Executive Officer functionsThe Chairman is responsible for leading and managing the Board andensuring its effectiveness in all aspects of its role, and setting theBoard agenda taking into account the issues and concerns of allBoard members. She provides strategic guidance to the executivemanagement and promotes the highest standards of corporategovernance. She is responsible for maintaining close contact withmajor shareholders to understand their issues and concerns andensuring that they are regularly informed of the progress anddirection of the Company. The Chairman is fully engaged on allissues on which the Board will need to make a decision throughongoing consultation with the Chief Executive Officer and membersof the executive management.

The Chief Executive Officer is responsible for leading the ExecutiveDirectors and the senior team in the day to day running of theGroup’s businesses and, in particular, for developing the Group’sobjectives, strategy and annual budgets having regard to the Group’s

Corporate Governance Statement


responsibilities to its shareholders, customers, employees and otherstakeholders and for achieving those objectives, executing thatstrategy and achieving that budget following approval from theBoard. The Chief Executive Officer is also responsible for, amongstother matters, leading the Executive Committee examining all tradeinvestments and major capital expenditure proposed by Groupcompanies, leading geographical and sector diversification initiativesand ensuring effective internal controls and risk managementsystems are in place.

Due to the nature of the risks associated with working in Africa, theChairman and Chief Executive Officer work to have a closeunderstanding of each other’s roles to minimise risk and maximisecontinuity.

Senior Independent DirectorThe Combined Code also recommends that the Board shouldappoint one of the Independent Directors as the Senior IndependentDirector to provide a sounding board for the Chairman and to serveas an intermediary for the other directors when necessary. The SeniorIndependent Director should be available to shareholders if they haveconcerns which contact through the normal channels of Chairman,Chief Executive Officer or other Executive Directors has failed toresolve or for which such contact is inappropriate. The Board hasappointed Kiran Morzaria as its Senior Independent Director.

Non-Executive Directors The Non-Executive Directors scrutinise the performance of theexecutive management in meeting agreed goals and objectives andmonitor the reporting of performance. They will review the integrityof the financial information and determine whether internal controlsand systems of risk management are robust. They also determineappropriate levels of remuneration of the Executive Directors and areinvolved in the appointment and, where necessary, the removal ofExecutive Directors. They also monitor succession planning.

Appointments to the BoardThe Company’s Articles of Association empower the Board toappoint new Directors. To ensure a formal, rigorous and transparentprocedure for appointing new Directors to the Board, a NominationCommittee has been created, whose work is described on page 48.

In order for any Board to discharge its duties and responsibilitieseffectively, it must comprise the right blend of individuals, whoseskills and experience were gained in a diverse range of backgrounds.Above all, the Directors must exhibit independence of mind, integrityand the courage to challenge constructively when appropriate.Appointments are therefore made on personal merit and againstobjective criteria. In the case of candidates for Non-ExecutiveDirectorships, care is taken to ascertain that they have sufficient timeto fulfil their Board and, where relevant, Committee responsibilities.As part of this process, candidates disclose all other timecommitments and, on appointment, undertake to inform the Boardof any changes.

DiversityAs the current composition of the Board demonstrates, Lonrhostrongly supports the benefits of diversity, having three femalemembers on a Board of six.

The Board acknowledges that diversity extends beyond theboardroom and supports management in their efforts to build adiverse organisation throughout the Group by attracting anddeveloping a highly qualified and diversified workforce, ensuring allselection decisions are based on merit and that recruitment activitiesare fair and non-discriminatory.

The Board acknowledges the importance of diversity, includinggender, to the effective functioning of the Board and continues tofocus on encouraging diversity of business skills and experience;recognising Directors with diverse skills sets, capabilities andexperience gained from different geographic and culturalbackgrounds enhance the Board.

Balance between Independent and Non-Independent DirectorsThe Combined Code recommends that a “smaller company” withinthe meaning of the Combined Code should have at least twoIndependent Non-Executive Directors. For the purposes of theCombined Code a smaller company is one that is below theFTSE 350. A director is considered independent if the boarddetermines that the director is independent in character andjudgement and whether there are relationships or circumstanceswhich are likely to affect, or could appear to affect, the director’sjudgement.

Currently, the Board is composed of six members: three ExecutiveDirectors, two Non-Executive Directors and a Non-ExecutiveChairman.

Although Jean Ellis is not considered to be independent, as that termis defined by the Combined Code, the Board considers that she isindependent of management and free of any relationship whichcould materially interfere with the exercise of her independentjudgement. Jean Ellis is not considered to be independent as definedin the Combined Code because of her previous position as anExecutive Director and as she is a partner of DSG CharteredAccountants, which provides an immaterial level of services to theGroup. However, she makes a valuable contribution to the strategicdirection of the Group because of her objectivity and financialexperience and she also has significant historical knowledge of theGroup.

The Board believes that it has an acceptable number of memberswith a sufficiently diverse balance of backgrounds, experiences andskills to discharge its functions effectively and to manage successionissues. The Board keeps its membership, and that of the Committees,under review, to ensure gradual refreshing of skills and experience. Itis satisfied that all Directors have sufficient time to devote to theirroles and that it is not placing undue reliance on key individuals.

Composition of the BoardThe Board has been considering the appointment of anotherIndependent Non-Executive Director during the year. Upon theproposed appointment of another independent Non-ExecutiveDirector the Committee memberships will be adjusted to bring theircomposition into compliance with the Combined Code.

Conflicts of interestUnder UK company law, all Directors must seek authorisation beforetaking up any position that conflicts, or may possibly conflict, withthe interests of the Company. Lonrho’s Articles of Associationcontain provisions to allow the Directors to authorise situations ofpotential conflict of interests so that a Director is not in breach of hisor her duty under company law. All Directors are aware of the needto consult regarding any conflicts which may arise so that priorconsideration can be given by the Board as to whether or not suchconflicts should be approved.

Re-election of DirectorsIn line with the Combined Code, all Directors seek re-election everythree years and any Director appointed during the year also seeks re-election at the next Annual General Meeting.

44



Induction and business awareness On appointment, Non-Executive Directors, who are expected toprovide a time commitment to the Company of at least 24 days ayear or to devote such time as is necessary for the properperformance of their duties, are provided with an inductionprogramme. This covers the Group’s operations, including social,ethical and environmental matters, and meetings with seniormanagement as part of a guided tour of the Group’s mainoperations, as well as access to and guidance through Board policies,prior papers and minutes.

The Directors may, at the Company’s expense, take independentprofessional advice. They are also expected to take responsibility foridentifying their training needs and to take steps to ensure that theyadequately informed about the Company and their responsibilities asa Director.

Performance evaluationThe Combined Code recommends that an evaluation ofeffectiveness of the Board and its Committees is conducted annuallyand that the process is externally facilitated at least every third year.

This year an internal performance evaluation of the Board and itsCommittees and each individual Director was carried out inaccordance with the Combined Code.

The Directors were asked to consider and comment on theperformance of the Board as a whole. The Chairman led theassessment of the Directors. She held one-to-one interviews witheach Director and these discussions were facilitated by the Directorsbeing asked to consider a number of questions in advance. Amongstother things, Directors were asked for their views on Companystrategy; key challenges for the business; the mix of skills, experience,independence, knowledge and diversity on the Board (includinggender); effectiveness of the Board’s engagement with shareholders;and how well the Board operates. The outputs of the interviews werediscussed at the Board meeting in February 2013.

Each Board Committee member also undertook a detailed self-assessment questionnaire and feedback reported to the Board at theBoard meeting in February 2013.

The performance of the Chairman was not reviewed due to her shorttime in office but will be by the Senior Independent Director.

The Board found the performance of each Director to be effectiveand concluded that the Board provides effective leadership andcontrol required for a listed company. The evaluation found theBoard Committees were working well. As a result ofrecommendations made in this year’s Board performance evaluation,each Board meeting will be preceded by a meeting of the Chairmanand Non-Executive Directors; more time will be given during Boardmeetings to discuss growth opportunities and for strategic debate;and more opportunities will be given to Directors to visit variousGroup businesses. The Board will continue to review its procedures,its effectiveness and development in the financial year ahead.

Succession planningThe Board is ultimately responsible for succession planning fordirectorships and key management roles. The purpose of this istwofold – to mitigate the risk of not having identified successors forkey roles and to identify development opportunities for talentedindividuals within agreed career plans, which may help to retain themin the Group’s employment. the Board is therefore actively engagedin ongoing succession planning in order to ensure that plans are inplace for the orderly and progressive refreshing of the Board and forthe identification and development of senior management withpotential for Board and senior positions.

Information, training and development Keeping up to date with key business developments is essential forthe Directors to maintain and enhance their effectiveness. From timeto time the Board receives presentations from executives in Lonrho’sbusinesses on matters of significance. Financial plans, includingbudgets and forecasts, are regularly discussed at Board meetings.The Directors also have the opportunity to learn the views of majorinvestors throughout the financial year.

In the last year the Board received training focusing on recentcorporate governance developments and has recently receivedtraining on environmental and social risk management.

The Board intends to hold one meeting overseas each year, tofacilitate the Directors’ understanding of the Group’s Africanoperations.

Throughout their period in office, Directors are regularly updated onthe Group’s businesses and the regulatory environment in which theyoperate. Updates are by way of meetings with senior executives and,where appropriate, external sources.

As a further aspect of their ongoing development, each Director willreceive feedback on his or her performance following the Board’sperformance evaluation in each year.

The Board is confident that all its members have the knowledge,ability and experience to perform the functions required of a directorof a listed company.

Board meetingsThe Board previously had four board meetings scheduled each year,which with effect from 2013, has been increased to six. In addition tothe scheduled meetings during the year, there were a number ofadditional Board meetings to consider significant acquisitions,fundraisings and other corporate activities.

Scheduled Board and Committee meetings were previously arrangedup to one year in advance, although, with effect from 2013, this hasbeen increased to three years, and all Directors are expected toattend each meeting. All Directors are provided with the papers andrelevant information in advance of each meeting. If a director isunable to attend a meeting due to exceptional circumstances, he orshe will still receive the supporting papers and will discuss anymatters they wish to raise with the Chairman of the Board or theChairman of the relevant committee, in order to ensure that his orher views are given consideration.

Corporate Governance Statement continued


Meeting attendance for the year ended 31 December 2012 is set out in the table below:

Board and Committee attendanceAudit Committee Remuneration Nomination Committee Corporate

Board meetings meetings Committee meetings meetings Responsibility meetings––––––––––––––––––––– ––––––––––––––––––––– ––––––––––––––––––––– ––––––––––––––––––––– –––––––––––––––––––––

Name of Director A B C B C B C B C B

Non-Executive ChairmanChairman

Ambassador Frances Cook (a) 4 4 6 6 3 3 4 4

Executive Chairman

David Lenigas (c) 3 3

Executive Directors

Geoffrey White 4 4 3 3 4 4

David Armstrong 4 4

Emma Priestley 4 3

Non-Executive Directors

Jean Ellis 4 3 6 6 4 2

Kiran Morzaria (b) 4 4 6 5 6 6

Sir Richard Needham (d) 1 1 2 2 1 1

Notes:A Maximum number of scheduled meetings Director could have attendedB Number of meetings Director actually attendedC Maximum number of meetings Director could have attendeda Senior Independent Director until 27 November 2012b Senior Independent Director from 27 November 2012c Resigned from the Board on 13 September 2012d Resigned from the Board 28 May 2012

Board activities in 2012At each Board meeting, the Chief Executive Officer reported to theBoard on the businesses within the Group and the performance ofthe Group as a whole. Reports were also made by each of theprincipal Board Committees.

Internal controlsThe Board is ultimately responsible for the Group’s system of internalcontrols and for reviewing its effectiveness.

However, such a system is designed to manage rather than eliminaterisk of failure to meet business objectives and can provide onlyreasonable not absolute assurance against material misstatement orloss.

Consistent with the guidance provided for directors on internalcontrol by the Financial Reporting Council (“Internal Control: RevisedGuidance for Directors on The Combined Code”), the Boardconfirms that there is an on-going process for identifying, evaluatingand managing assessed significant risks faced by the Group, that thishas been in place for the year under review and up to the date ofapproval of the Report and Accounts and accords with the guidance.

Included in this review was an assessment of the effectiveness of theprocesses used to escalate emerging issues from the operating unitsto senior management and the Board.

The Board affirms the importance it attaches to continuous reviewand application of the guidance, the regular and systematicassessment of the risks facing the Group and the value of embeddingrisk management and internal control systems with its businessprocesses.

Due to its size and structure, the Group does not have an internalaudit function, choosing instead to outsource the function to a firmof chartered accountants, TAG International, based in South Africa,which carries out a rolling programme of visits to the Group’ssubsidiaries and reports back to the Audit Committee and the Board.

In addition, a rolling programme of review of key controls isconducted through a combination of the external audit process,external internal audit advisers or through reviews by members of thefinance team, as appropriate.

The key features which the Board and Audit Committee have appliedin reviewing the effectiveness of the Group’s system of internalcontrols include:

• a comprehensive system of financial reporting and businessplanning;

• a defined schedule of matters for decision by the Board;• an organisational structure with clearly defined levels of authority

and division of responsibilities;• formal documentation procedures;• the close involvement of the Executive Directors in all aspects of

day-to-day operations, including regular meetings with seniormanagement to review all operational aspects of the business andrisk management systems;

• the Board reviewing Group strategy and progress ondevelopments at each scheduled Board meeting; and

• a formal whistleblowing policy.

Relations with shareholdersThe Board is keenly aware of the importance of there being adialogue with shareholders to ensure that the Board keeps abreast of,and understands, shareholders’ views and opinions.

It achieves this as set out below:

• the Chairman and the Executive Directors regularly meetinstitutional shareholders, potential investors and analysts;

• there are presentations to, and/or conference calls with, analystsand investors at the time of the announcement of results;

• to provide a more detailed knowledge of the Group, the Companyarranges seminars, and investor and analyst visits to the Group’soperations;

46




• investor relations reports describing investor and analyst opinionsare provided to the Board;

• at the Annual General Meeting, shareholders have the opportunityto raise questions with the Board in the meeting;

• Directors also make themselves available before and after theformal general meeting to talk informally to shareholders;

• the Company’s website helps shareholders keep abreast ofdevelopments. It is regularly updated with press releases,comments and interviews. Shareholders may register on thewebsite for the Company’s mailing list to be sent news releasesautomatically.

Model CodeThe Company has a code of securities dealing in relation to theGroup (including the Ordinary Shares) which is based on, and is atleast as rigorous as, the Model Code as published in the Listing Rules.The code applies to the Directors of the Company and personsdischarging managerial responsibilities.

Anti-Corruption and Bribery PolicyThe Company’s commitment to high standards of ethical behaviourpre-dates the UK Bribery Act 2011. However, the Board is cognisantof the heightened legal risks arising as a result of the anti-briberylegislation and increased global enforcement activity.

Lonrho has in place an Anti-Corruption and Bribery Policy, which hasbeen adopted across all divisions of the Group. The Board has overallresponsibility for ensuring compliance by Directors, employees andother persons associated with the Group with applicable legal andethical obligations. The Group’s Finance Director has primary andday-to-day responsibility for implementation of the policy.Management at all levels of the Group are responsible for ensuringthose reporting to them are made aware of and understand thepolicy. The policy gives guidance on risk identification and theprocedures to follow where a risk is identified, together with clearguidelines on gifts, entertainment and donations.

Board CommitteesAs recommended by the Combined Code, the Board has Audit,Remuneration and Nomination Committees with formally delegatedduties and responsibilities with written terms of reference, which areperiodically reviewed. In addition, the Company has established aCorporate Responsibility Committee.

Audit CommitteeThe Audit Committee assists the Board in discharging itsresponsibilities with regard to financial reporting, external andinternal audits and controls, including reviewing the Company’sinterim and annual financial statements, reviewing and monitoringthe extent of the non-audit work undertaken by the external auditors,advising on the appointment of external auditors and reviewing theeffectiveness of the Company’s internal audit activities, internalcontrols and risk management systems. The ultimate responsibilityfor reviewing and approving the annual report and accounts and thehalf yearly reports remains with the Board.

The Combined Code recommends that the Audit Committee should,in the case of smaller companies such as the Company, comprisetwo Independent Non-Executive Directors. At least one member ofthe Audit Committee should have recent and relevant financialexperience.

The members of each committee are currently as follows:

Committee Chairman Members

Audit Kiran Morzaria Ambassador Frances Cook

Remuneration Kiran Morzaria Ambassador Frances Cook

Nomination Ambassador Frances Cook Kiran Morzaria and Geoffrey White

Corporate Responsibility Ambassador Frances Cook Jean Ellis, Emma Priestley and Geoffrey White


The membership of the Company’s Audit Committee comprises twomembers: Kiran Morzaria (Chairman) and Ambassador Frances Cook.The Chairman of the Audit Committee was Jean Ellis until27 November 2012, when she stepped down, Kiran Morzaria wasappointed as Chairman and Ambassador Frances Cook wasappointed to the Committee. The Deputy Company Secretary acts assecretary of the Audit Committee. The Company recognises that theAudit Committee did not comply with the Combined Coderecommendations regarding the composition of the AuditCommittee during the year ended 31 December 2012 because:

i) from 1 January 2012 to 28 May 2012, only one of the threemembers then on the Committee was an independent non-executive director;

ii) from 28 May 2012 to 27 November 2012, only one of the twomembers then on the Committee was an independent non-executive director; and

iii) from 27 November 2012 to 31 December 2012, only one of thetwo members then on the Committee was an independentnon-executive director.

However, the Board considered that, in order to ensure the effectiveworking of the Audit Committee, and in particular having regard totheir recent and relevant financial experience, it was appropriate forJean Ellis and Kiran Morzaria to serve as members of the AuditCommittee, and was confident of their experience to ensure that theCommittee’s affairs were conducted in an impartial and objectivemanner.

The Board considers that Kiran Morzaria became independent priorto his appointment as Chairman of the Committee.

The quorum for meetings of the Audit Committee is two members.The Lonrho Finance Director and a representative of the externalauditors normally attend meetings of the Audit Committee. There isat least one meeting, or a part of a meeting, each year which theexternal auditors attend without management present to discuss theremit of the Audit Committee and any issues arising from the audit.The Audit Committee meets as and when requested by either itsChairman or the Chairman of the Company. The Chairman of theAudit Committee ensures that meetings are held sufficientlyfrequently for the Audit Committee to fulfil its duties. However, in anyevent, the Audit Committee has particular regard to the managementand mitigation of risk, matters of internal control (including thegovernance of subsidiaries) and value for money. The AuditCommittee is authorised by the Board at the expense of theCompany to obtain external professional advice and to secure theattendance of outsiders with relevant experience at meetings when itconsiders necessary.

Duties of the Audit CommitteeThe principal duties of the Audit Committee include the following:

• to review and monitor the external auditor’s independence andobjectivity and the effectiveness of the audit process, taking intoconsideration relevant UK professional and regulatoryrequirements;

• to develop and implement policy on the engagement of theexternal auditor to supply non-audit services, taking into accountrelevant ethical guidance regarding the provision of non-auditservices by the external audit firm;

• to make recommendations to the Board, for it to put to theshareholders for their approval in general meeting, in relation tothe appointment, re-appointment and removal of the externalauditor and to approve the remuneration and terms ofengagement of the external auditor;

• to monitor the integrity of the financial statements of theCompany, reviewing significant financial reporting judgementscontained in them;

• to discuss problems and reservations arising from the interim andfinal external audits, as well as any matters the external auditormay wish to raise;

• to review the Group’s internal control and financial reportingsystems (including financial, operational, compliance and riskmanagement) and to make recommendations to the Board; and

• to review from time to time the need for an internal audit functionand, where such a function exists, to review the implementation ofthe programme ensuring its smooth efficient running andappropriate standing within the Group.

Remuneration CommitteeThe Remuneration Committee assists the Board in determining itsresponsibilities in relation to remuneration, including makingrecommendations to the Board on the Company’s policy onexecutive remuneration, determining the individual remuneration andbenefits package of each of the Executive Directors andrecommending and monitoring the remuneration of seniormanagement below Board level.

The Combined Code provides that the Remuneration Committeeshould, in the case of smaller companies such as the Company,consist of at least two independent Non-Executive Directors.

The membership of the Company’s Remuneration Committeecomprises two members: Kiran Morzaria and Ambassador FrancesCook. The Chairman of the Remuneration Committee wasAmbassador Frances Cook until 27 November 2012, when KiranMorzaria Chairman of the Committee was appointed, in her place,following her appointment as Chairman of the Company. TheDeputy Company Secretary acts as the secretary of theRemuneration Committee. The Company recognises that theRemuneration Committee did not comply with Combined Coderecommendations regarding the composition of the RemunerationCommittee during the year ended 31 December 2012 because;

i) from 1 January 2012 to 13 September 2012, only one of the twomembers then on the Committee was an independent non-executive director;

ii) from 13 September 2012 to 31 December 2012, only one of thetwo members then on the Committee was an independentnon-executive director;

However, the Board considered that, in order to ensure the effectiveworking of the Remuneration Committee, it was appropriate for KiranMorzaria and Ambassador Frances Cook to have been members ofthe Remuneration Committee and was confident that theCommittee’s affairs were conducted in an impartial and objectivemanner. The Board considers that Mr. Morzaria became independentprior to his appointment as Chairman of the Committee.

The quorum for meetings of the Remuneration Committee is twomembers. The Remuneration Committee may invite any Director tojoin meetings. However, no-one other than the Chairman of theRemuneration Committee and its members is entitled to attend andvote at a meeting. No Director is involved in any decisions as to his orher own remuneration. The Remuneration Committee meetsformally at least twice a year and otherwise as required. TheRemuneration Committee is authorised at the expense of theCompany to obtain professional advice and to secure the attendanceof outsiders with relevant experience at meetings when it considers itnecessary.

Duties of the Remuneration CommitteeThe principal duties of the Remuneration Committee include thefollowing:

• to make recommendations to the Board on the Company’sframework of Executive Director remuneration and its cost;

48



• to ensure that the Executive Directors and the Chairman are fairlyand appropriately rewarded for their individual contributions to theGroup’s overall performance, drawing on outside advice asnecessary;

• to monitor the level and structure of remuneration for seniormanagement and make recommendations regarding theirremuneration packages;

• to advise on and monitor any performance related bonus or otherincentive schemes; and

• to see that awards under the Group’s share option schemes andbonus or other incentive plans, if any, are consistent with theGroup’s overall performance and the performance of individualsand provide an additional incentive to management.

Nomination CommitteeThe Nomination Committee assists the Board in discharging itsresponsibilities relating to the composition and make-up of theBoard. The Nomination Committee is responsible for evaluating thebalance of skills, knowledge and experience of the Board, the size,structure and composition of the Board, retirements andappointments of additional and replacement directors and will makeappropriate recommendations to the Board on such matters.

The Combined Code provides that a majority of the members of theNomination Committee should be Independent Non-ExecutiveDirectors and that the Chairman or an Independent Non-ExecutiveDirector will chair the Nomination Committee.

The membership of the Company’s Nomination Committeecurrently comprises three members: Ambassador Frances Cook(Chairman), Kiran Morzaria and Geoffrey White. The DeputyCompany Secretary acts as the secretary of the NominationCommittee. The Company recognises that the NominationCommittee did not comply with the Combined Coderecommendations regarding the composition of the NominationCommittee during the year ended 31 December 2012 because:

1) from 28 May 2012 to 13 September 2012, only one of the twomembers then on the Committee was an independent non-executive director;

2) from 13 September 2012 to 27 November 2012, neither of thetwo members then on the Committee was an independentnon-executive director; and

3) from 27 November 2012 to 31 December 2012 only one of thethree members then on the Committee was an independentnon-executive director.

However, the Board considers that, in order to ensure the effectiveworking of the Nomination Committee, it was appropriate forAmbassador Cook and Geoffrey White to serve as members of theNomination Committee, and was confident of their experience toensure that the Committee’s affairs were conducted in an impartialand objective manner.

The quorum for meetings of the Nomination Committee is twomembers. No-one other than the Chairman of the NominationCommittee and its members is entitled to attend or vote at a meetingof the Nomination Committee, although Directors may attend ifinvited to do so by the Nomination Committee. Meetings of theNomination Committee shall be held at such times as the Chairmanof the Nomination Committee, or the Chairman of the Company,deems appropriate, and in any event not less than twice per year. TheNomination Committee is authorised by the Board to obtainwhatever professional advice it considers necessary.

Duties of the Nomination CommitteeThe principal duties of the Nomination Committee include thefollowing:

• to review regularly the structure, size and composition of theBoard (including the skills, knowledge and experience) and makerecommendations to the Board with regard to any changes;

• to identify and nominate for the approval of the Board, appropriatecandidates to fill Board vacancies as and when they arise;

• to evaluate the balance of skills, knowledge and experience of theBoard and, in the light of this evaluation, prepare a description ofthe role and capabilities required for a particular appointment;

• to give full consideration to succession planning taking intoaccount the challenges and opportunities facing the Company andwhat skills, knowledge and expertise will be needed on the Boardin the future and to make recommendations as regards plans forsuccession for both Executive and Non-Executive Directors;

• to review annually the time required for each Non-ExecutiveDirector having regard to their particular committee appointmentsand any other specific roles and to use performance evaluation toassess whether a Non-Executive Director has devoted sufficienttime to their role and duties;

• to keep under review the leadership needs of the organisation,both Executive and Non-Executive, with a view to ensuring thecontinued ability of the Company to compete effectively in themarketplace;

• to recommend to the Board the re-election (or not) byshareholders of any Director under the retirement and re-electionprovisions in the Company’s Articles of Association;

• to make recommendations as regards the re-appointment of anyNon-Executive Director at the conclusion of his or her specifiedterm of office;

• to make recommendations to the Board concerning membershipof the Audit and Remuneration Committee; and

• to ensure that, on appointment to the Board, Non-ExecutiveDirectors receive formal written terms of appointment.

Our policy on appointments to the BoardAll recommendations for Board appointments are made on merit andagainst objective criteria and take into account the benefit of diversityin all its forms. A job specification is drawn up which includes, in thecase of non-executive appointments, an estimate of the timecommitment required. Generally, the Committee will engageexecutive search consultants to assist in conducting acomprehensive listing of potential candidates from a range ofbackgrounds for the Committee’s consideration.

Ambassador Frances Cook was appointed as Non-executiveChairman during the year, following the departure of David Lenigas.She brings extensive knowledge of Africa, sound judgement andsuitable personal perspective on the need for the Company to meetits transformation imperatives. As she had been a Non-ExecutiveDirector for five years, the Nomination Committee had a deepunderstanding of her capabilities and her other significantcommitments, which are disclosed on page 40.

The Committee has developed a crisis management plan in the eventof the untimely demise, indisposition or departure of the ChiefExecutive Officer or Finance Director. It is also developing plans forthe orderly succession for appointments to the Board and to seniormanagement, so as to maintain an appropriate balance of skills andexperience within the Company and on the Board and to ensureprogressive refreshing of the Board.

Corporate Responsibility CommitteeThe Corporate Responsibility Committee is responsible for reviewingand approving policies and initiatives relating to corporateresponsibility matters and implementing the Group’s corporateresponsibility values, as determined by the Board, viz.:

• Investing in the Group’s workforce and their wellbeing• Supporting communities



• Integrity• Strengthening the local economy• Advancing Environmental Stewardship

The Corporate Responsibility Committee comprises four Directors of whom one is a Non-Executive Director. The current members areAmbassador Frances Cook, Jean Ellis, Emma Priestley and Geoffrey White. The Corporate Responsibility Committee is chaired by AmbassadorFrances Cook and supported by the Company’s commercial manager for corporate projects. The Corporate Responsibility Committee meetsat least twice each year. The Deputy Company Secretary acts as the secretary of the Corporate Responsibility Committee.

Duties of the Corporate Responsibility Committee The principal duties of the Corporate Responsibility Committee relate to identifying, evaluating and reviewing issues in relation to thefollowing:

• Employment• Health and safety• Human rights• Workforce diversity and inclusion• The environment• Community and social investment• Ethical trading and business practices• Other Corporate Responsibility related matters as may be determined by the Committee from time to time

Executive CommitteeIn addition to the Audit, Remuneration, Nomination and Corporate Responsibility Committees, the Company has also established an ExecutiveCommittee.

The Company’s Executive Committee comprises the Executive Directors and certain managers including the Group’s General Counsel,Treasurer and the Group Financial Controller. The Chairman of the Executive Committee is the Chief Executive Officer. Its terms of referenceprovide for at least eight regular meetings per year. The Executive Committee’s primary responsibilities are to review the operatingperformance of each Group company, manage the Group’s strategic planning process and corporate acquisitions and disposal programme,monitor and approve capital expenditure and contracts entered into by the Group and to manage the Group’s HR policies. In addition, theExecutive Committee is responsible for monitoring announcements required under the Listing Rules and the Disclosure and TransparencyRules and ensuring that they are made in a timely fashion.

Key activities for the Committees in the year ended 31 December 2012

Audit Committee Remuneration Committee Nomination Committee Corporate Responsibility Committee

Met 6 times Met 6 times Met 3 times Met 4 times

Approved annual audit plan

Approved whistleblowing policy

Group Corporate responsibilityvalues rolled out and monitored

Consideration of appointmentof further independent Non-Executive Director

Approved the grant of awardsover shares under theCompany’s Performance SharePlan

Reviewed scope andeffectiveness of internal andexternal audit functions

Approved senior managementappointments

Reviewed senior managementremuneration

Received reports from externaland internal auditors

Consideration of successionplanning

Appointed Opus ExecutivePartners as advisers to theCommittee

Monitored effectiveness ofcorporate governance, internalcontrols and risk management

Approved environmental policyApproved payments in lieu ofnotice and other benefits toformer Executive Chairman

Reviewed provision of non-audit services by externalauditors

Approved extension of noticeperiods to 12 months for ChiefExecutive Officer and FinanceDirector

Anti-Corruption and BriberyPolicy rolled out

Approved quality policy

Ghana Oil Services Terminaldevelopment reviewed andmonitored

Agreed to develop a GroupHuman Rights policy

Reviewed internationalcorporate responsibilitystandards

Reviewed Board and BoardCommittee composition toensure the correct mix of skillsand experience

Reviewed Executive Directors’remuneration including salaries,bonuses and pensionallowances

Reviewed financial statementsin annual report, half yearresults and quarterly resultsstatements

50



Remuneration ReportAs Chairman of the Remuneration Committee, I am pleased topresent to you the Directors’ Remuneration Report for the yearended 31 December 2012.

Remuneration strategyThe Remuneration Committee is acutely aware of increasing publicscrutiny of executive pay and concern regarding unmeritedpayments. At Lonrho, the close linkage of reward to the performanceof the Group is a guiding principle underlying executiveremuneration. The balance of remuneration for the ExecutiveDirectors is, therefore, such that a significant part of their overallreward is conditional upon the attainment of yearly profit and cashflow targets and the long term performance of the Group relative toits peers.

Remuneration CommitteeThe Remuneration Committee is responsible for recommending tothe Board the broad policy for the remuneration of the Chairman,Chief Executive Officer, Executive Directors and senior managementbelow Board level.

The remuneration of Non-Executive Directors is a matter reserved tothe Executive Directors.

Within the terms of the agreed policy, the Committee recommends:

• the total individual remuneration package including, whereappropriate, bonuses and share-based incentives;

• the targets for any performance-related incentives;• the scope of any pension arrangements;• contractual terms of engagement and any payments to be made

on termination;• any major changes in employee benefit structures throughout the

Group; and• the policy for authorising claims for expenses from the Chairman

and Chief Executive Officer.

Details of Committee members who served during the period, andtheir attendance at Committee meetings, are shown in the table onpage 45.

The Chairman, Chief Executive Officer or Finance Director attendmeetings by invitation.

The terms of reference of the Committee are summarised in theCorporate Governance Statement and can be found on theCompany’s website or are available upon request.

Adviser to the Remuneration CommitteeDuring the year, the Committee was materially assisted in its work byOpus Executive Partners, which had been appointed by theCommittee, to advise on various aspects of the Executive Directors’remuneration and provide general on-going advice on remunerationmatters.

Internal relativityThe Remuneration Committee is sensitive to the need to setDirectors’ remuneration having regard to pay and conditions in theGroup as a whole and is satisfied that the approach taken by theCompany is fair and reasonable in light of current market practiceand the best interests of shareholders.

Risk alignmentThe Committee has considered the alignment of the performancerelated pay systems with the Company’s key risks, and believes thatthe design of the pay systems incentivises effective risk management,including in relation to environmental, social and governance risks.The risk of the pay systems themselves causing perverse incentiveshas also been reviewed by the Committee. The current bonus

scheme contains a “claw back” mechanism, discussed more fully onpage 51.

Relations with shareholdersThe Committee is strongly committed to open and transparentdialogue with shareholders on remuneration matters. At the AGMheld in May 2012, the advisory vote on the Directors’ RemunerationReport received the support of 77% of those voting, with holders of13% of the register either voting against or withholding their votes.

Remuneration policyThe overall aims of Lonrho’s remuneration policy are to:

• ensure that the organisation has a continued ability to attract,motivate and retain the high calibre individuals required at Boardlevel;

• provide the opportunity for executives and other talentedindividuals to receive, within their overall remuneration package,competitive rewards for performance as a result of sustainedGroup performance over a longer period of time;

• support the Group’s strategy and its execution;• provide consistency in, and alignment with, the Group’s approach

to performance-based pay and Lonrho’s overall executivecompensation strategy.

The implementation of this policy involves:

• paying a base salary that reflects individual roles, performance andcontribution, taking into account salaries at companies of similarsize and complexity and international markets;

• giving executives the opportunity to increase their base earningsby meeting measures that support the Group’s strategy andbudget, thereby linking executive rewards to the Group’sperformance;

• rewarding executives fairly and responsibly for their contribution tothe Group’s performance;

• encouraging executives to hold shares in the Company.

As well as setting the specific remuneration packages for ExecutiveDirectors, the Remuneration Committee monitors the level andstructure of remuneration for the Group’s most senior and highlyremunerated executives.

At the Company’s next Annual General Meeting shareholder approvalwill be sought for the remuneration policy by way of an advisoryvote.

Salary and benefitsBase salaries and fees are established by reference to surveys of theterms offered by comparable quoted companies. The starting pointfor comparative surveys is the scope of the position and associatedperformance of each Executive Director. Excluding his own positionand performance, the Chief Executive Officer is responsible for thedefinition of the scope of positions and assessment of theperformance of each Executive Director, for approval by theRemuneration Committee. Salaries for the Executive Directors arereviewed at the beginning of each year and are set at competitivelevels.

This report sets out the Company’s current policy on Directors’remuneration for the year ended 31 December 2012. Subsequent tothe Company’s move from AIM to the main market the Committeecarried out a review of the Executive Directors’ remuneration andimplemented changes with effect from 1 April 2012. This report setsout both the arrangements that were in place during the period from1 January 2012 to 31 March 2012 and the new arrangements thatwere adopted from 1 April 2012.

Directors’ Remuneration Report


The Committee considers that a successful remuneration policyneeds to be sufficiently flexible to take account of future changes inthe Group’s business environment and remuneration practice.

Remuneration of Executive Directors for the year ended31 December 2012i) Remuneration from 1 January 2012 to 31 March 2012

Base salaryFrom 1 January 2012 to 31 March 2012, the annual base salary of theExecutive Chairman and Chief Executive Officer was £500,000respectively, whilst the annual base salary for the Finance Directorwas £300,000 and the other Executive Director was £330,000.

Incentive based salaryIn addition, between the period of 1 January and 31 March 2012incentive based salaries were paid to the Executive Chairman, ChiefExecutive Officer and the Finance Director to encourage theachievement of pre-defined annual financial objectives, taking intoaccount in particular the accelerated revenue growth targets of theGroup.

The aggregate of the base and performance based salaries for theChairman and Chief Executive Officer was set equal to 0.5% of theGroup’s turnover, whilst the base and performance based salary forthe Finance Director was set equal to 0.3% of the Group’s turnover.Details of the amounts paid are as follows and are detailed onpage 54.

£’000

D.A. Lenigas (resigned 13.09.12) 139

G.T White 139

D.J Armstrong 83

361

BonusesTo align remuneration with shareholders’ interest, a proportion of theExecutive Directors’ potential remuneration were related to annualcorporate performance.

Bonuses paid in the year ended 31 December 2012, which related tothe 15 month period ended 31 December 2011, were as follows andare detailed on page 54.

£’000


G.T White 61

D.J Armstrong 36

158

None of the bonuses referred to above are pensionable.

ii) Remuneration from 1 April 2012 to 31 December 2012

As mentioned above, following a review of Board remunerationconducted during the period following the move from AIM to themain market, the remuneration arrangements of the ExecutiveDirectors were substantially adjusted in 2012 as set out below.

Base salaryWith effect from 1 April 2012, the annual base salary of the ExecutiveChairman and Chief Executive Officer was £550,000 respectively,whilst the annual base salary for the Finance Director were £350,000.The performance based salary arrangements was revised as set outbelow.

The annual base salary of the other Executive Director was £330,000.

BonusesA new bonus scheme was also put in place for 2012 whereby theExecutive Chairman, Chief Executive Officer and Finance Directorwould receive an annual bonus of up to 100% of their base salaries,based on performance divided into three measures: Profit before Tax(“PBT”), to reflect business performance; net cash flow, to incentivisethem to perform well and to budget; and personal performance to bedecided by the Committee. Each of the three components wouldaccount for up to 33.3% of base salaries.

The PBT calculation would be normalised to remove the effect offoreign exchange gains or losses and the effect of acquisitions anddisposals. If PBT is on target (based on the Group’s consolidatedbudget approved by the Board), a 15% bonus would be awarded. IfPBT is on target plus 17%, a 25% bonus would be awarded. If PBT ison target plus 30%, a 33.3% bonus would be awarded.

If net cash flow is on target (based on the Group’s consolidatedbudget approved by the Board), a 15% bonus would be awarded. Ifnet cash flow is on target plus 17%, a 25% bonus would be awarded.If net cash flow is on target plus 30%, a 33.3% bonus would beawarded.

Personal performance targets are set by the Committee on anindividual basis, annually. These targets are stretching and include amix of operational, strategic and financial targets selected toincentivise delivery of key Group priorities.

Any bonus awarded over 60% of base salary would be used topurchase shares in the Company, unless shares were already ownedto the value of the individual’s annual base salary. Within five years allExecutive Directors should own shares equal to their level of annualnet base salary at that time.

A clawback mechanism will operate whereby the previous bonusesawarded to Executive Directors can be recovered from them for aperiod of up to 12 months. The clawback would apply where:

• A bonus had been awarded on the basis of performance which islater found to have been overestimated;

• It is discovered that an award had been paid out at a time whenthe Executive Director was in serious breach of his employment orfiduciary duties, which would have blocked the payment if knownat the time;

• It is discovered that an award had been paid out at a time whenthere had been any material misstatement of the Group financialstatements.

An annual bonus for the other Executive Director would berecommended by the Committee and approved by the Board basedon financial and personal performance.

During the year ended December 2012, the Chief Executive Officerand Finance Director had three personal performance targets each.Each target would contribute 11.1% of their potential bonus. If allthree personal performance targets were achieved a 33.3% would beawarded.

Whilst the criteria for the PBT and net cashflow targets were not met,during the year both the Chief Executive Officer and Finance Directorachieved one of their three personal targets. Therefore under theagreed bonus plan they were each awarded a 11.1% bonus on theirbase salary. The personal target achieved for both the Directors wasthe strategic disposal and listing of Lonrho Aviation which wascompleted on 29 June 2012.

52



The amounts paid in relation to the year ended 31 December 2012are as follows:

£’000

G.T. White 61

D.J Armstrong 39

100

It is envisaged that the structure of the bonus scheme will remain thesame for 2013.

Pension arrangementsWith effect from 1 April 2012, the Executive Chairman and ChiefExecutive Officer received a pension allowance of £150,000 perannum, and the Finance Director a pension allowance of £100,000per annum.

Benefits in kindThe value of benefits for Executive Directors during the year isincluded in the table of remuneration on page 54. These include acar allowance or provision of a company car, and life and healthinsurance. The value of each Director’s benefits is assessable toincome tax but is not pensionable.

Unapproved Share Option Plan (“the Scheme”)During the year, no options were granted over shares by theCompany. It is envisaged that no further share options will be grantedto the Executive Directors under the Scheme. Exercise of shareoptions under the Scheme were not subject to prior achievement ofa performance condition.

Share usage under Unapproved Share Option PlanBased on the number of options outstanding as at 31 December2012, the number of new shares issued under the Scheme over thelast eight years, together with the number potentially to be issued,totalled an amount equal to 7.68% of the Company’s issued ordinarycapital.

This is within the dilution limits of 10% set by the Association of BritishInsurers and reflected in the rules of the Scheme.

Share based incentivesIt is the intention of the Committee that all future share-basedincentives to Executive Directors should be made under a Long-TermIncentive Plan (the “LTIP Scheme”). Under the LTIP Scheme, annualawards of shares would be made which vest at the end of a threeyear period subject to a number of conditions including continuedemployment and the satisfaction of a Total Shareholder Return(“TSR”) target. The initial allocation would be equal to 100% of annualbase salary. Awards would be structured so that 25% of the shareswould vest if Lonrho’s TSR over a 3 year period was in the top half ofthe relative comparator index and 100% of the shares would vest if itwas in the top quartile of the same index. In addition, the maximumaward under the LTIP Scheme would be no more than twice annualbase salary. A comparator index of 27 companies was initially chosenfrom the FTSE SmallCap, FTSE SmallCap Support Services Index andFTSE 350 Food Producers Index, which has since reduced to 25 as aresult of acquisitions, as detailed below:

Speedy Hire plc St. Ives plcSmiths News plc XchangingRicardo plc Cranswick plcLavendon Group Dairy Crest GroupHyder Consulting plc Mears Group plcRobert Walters plc Anglo-Eastern PlantationsPremier Foods plc plcFiberweb plc Rea Holdings plcHilton Food Group plc Sthree plcJohn Menzies plc Hogg Robinson Group plcBrammer plc Management ConsultingDevro plc Group plcVP plc CPP Group plc

On 13 September 2012, the Company granted the following awards,structured as additional rights to shares, under the LTIP Scheme:

No ofshares

G. White 6,411,228

D.J. Armstrong 4,079,872

The awards will ordinarily vest on 29 May 2015, and will ordinarilylapse on cessation of employment (save for in circumstancesspecified in the Scheme rules).

It is envisaged that the grant of awards under the LTIP Scheme willremain unchanged.

Total Shareholder Return (“TSR”)The following graph indicates the value by the end of 2012 of £100invested in Lonrho Plc ordinary shares on 1 January 2009 comparedwith the value of £100 invested in the FTSE SmallCap over the sameperiod. The graph was selected as the most appropriate comparisonmeasure because the Company became a constituent member ofthe FTSE SmallCap index with effect from 26 April 2011 and themembers of inter alia the FTSE SmallCap will form the comparatorgroup for the purposes of the TSR performance test under the LTIPScheme.

Directors’ Remuneration Report continued


Contractual termsAll Executive Directors have rolling contracts subject to notice of termination by either party, or to summary notice in the event by a Directorof serious breach of obligations, dishonesty, serious misconduct or other conduct bringing the Company into disrepute.

The following table sets out a summary of the Directors’ service contracts or terms of appointment:

Length of service asDate of at 31.12.12 (or date

Contract Expiry Date Notice Period of resignation)

Executive Directors

D.A Lenigas (resigned 13.09.12) 01.05.07 – 6 months 6 years 9 months

G.T. White 01.05.07 – 12 months 5 years 2 months

D.J. Armstrong 11.11.08 – 12 months 4 years 1 month

E.K. Priestley 28.02.06 – 12 months 6 years 10 months

Non-Executive Chairman(1)

Ambassador F.D. Cook 22.10.07 12.09.13 1 month 5 years 2 months


J.M. Ellis 01.12.11 30.11.13 1 month 5 years 7 months

K. Morzaria 28.09.11 27.09.13 1 month 2 years 3 months

Sir Richard Needham (resigned 28.05.12) 23.03.11 28.05.12 1 month 1 year 2 months

(1) Non-Executive Director until 13.09.12

During the year, 8,138,352 ordinary shares of 1p in the Company were allotted to D.A. Lenigas, Lonrho’s former Executive Chairman, in lieu ofnotice and other benefits, as disclosed in this report.

In summary, the shares allotted were in respect of six months’ pay in lieu of notice (£350,000) (being the Company’s contractual obligation tomeet his salary and contractual benefits), a payment in respect of a discretionary bonus based on his performance to date (£178,750) andcompensation in relation to the LTIP Scheme based on the good leaver provisions of the scheme (£271,250).

No other compensation on termination of employment was made during the year.

Cambria Africa Plc (formerly LonZim Plc)The remuneration of the Directors in respect of their services to Cambria Africa Plc during the year ended 31 December 2012 were as follows:

£’000


G.T. White (resigned 24.02.12) 2

D.J. Armstrong (resigned 24.02.12) 2

E.K. Priestley (resigned 24.02.12) 2

J.M. Ellis (resigned 24.02.12) 2

10

FastJet PlcThe remuneration of the Directors in respect of their services to FastJet Plc during the year ended 31 December 2012 were as follows:

£’000

D.A. Lenigas* 10

G.T. White 26

36

*Resigned from Lonrho Plc on 13 September 2012

Other external appointmentsExecutive Directors may retain any payment received in respect of external Executive or Non-Executive appointments.

Non-Executive DirectorsThe review of Board remuneration previously conducted also determined that the base Non-Executive Director fees were below the marketmedian. Accordingly, following the approval of the Chairman and the Executive Directors, the Non-Executive Director fee was increased to£50,000 per annum. In addition, the Non-Executive Directors receive fees in respect of chairing and serving on the Audit, Remuneration,Nomination and Corporate Responsibility Committees.

54



All Non-Executive Directors’ conditions of appointment provide for a one month period of notice within the intended term of one year. Theappointment may be renewed by mutual agreement for further periods.

During the year ended 31 December 2012, no Non-Executive Director participated, or will in future participate, in bonus, share option orpension arrangements.

Directors’ remuneration and interestsThe auditors are required to report on the information contained in the following sections a) to d).

a) Emoluments of Directors excluding pension contributions for the year ended 31 December 2012

Payment in 15 monthsBenefits in lieu of Year to 31 to 31

Base Incentive kind and notice December Decembersalaries based taxable and other 2012 2011

and fees salaries Bonuses(3) expenses(1) benefits Total Total£’000 £’000 £’000 £’000 £’000 £’000 £’000

Executive Directors

D.A. Lenigas (resigned 13.09.12) 400 139 61 – 800 1,400 1,227

G.T. White 538 139 122 76 – 875 1,236

D.J. Armstrong 338 83 75 42 – 538 775

E.K. Priestley 330 – – 20 – 350 469

Total Executive Directors 1,606 361 258 138 800 3,163 3,707


Ambassador F.D. Cook 79 – – – – 79 106

J.M. Ellis 62 – – – – 62 85

K. Morzaria 65 – – – – 65 69

Sir R. Needham (resigned 28.05.12) 29 – – – – 29 48

Total Non-Executive Directors(2) 235 – – – – 235 308

Total 1,841 361 258 138 800 3,398 4,015

1. Benefits in kind include company cars and medical expenses insurance. Taxable expenses relate to allowances paid in lieu of company cars.2. For Sir Richard Needham, Ambassador Frances Cook, Jean Ellis and Kiran Morzaria, their basic annual fee of £50,000 is increased by an additional £7,500 annual fee for

each of the Nomination, Remuneration and Audit Committees they chair and serve on. In addition, Ambassador Frances Cook, Sir Richard Needham and Jean Ellis receive afurther £5,000 annual fee for chairing and serving on the Corporate Responsibility Committee.

3. The bonuses included in the table above relate to bonuses paid in 2012 in respect of the performance for the 15 months ended 31 December 2011. In addition, the amountsinclude bonuses in respect of 2012 performance, which have been agreed by the Remuneration Committee and which were paid in 2013.

b) Directors’ pensionsAllowances paid or Company contributions to defined contribution plans:

Year to 15 monthsto 31 to 31

December December2012 2011£’000 £’000

G.T. White 113 200

D.J. Armstrong 75 –

D.A. Lenigas (resigned 13.09.12) 75 –

263 200

c) Directors’ total remunerationYear to 15 monthsto 31 to 31

December December2012 2011£’000 £’000

Aggregate emoluments 3,398 4,015

Pension allowances 263 –

Company pension contribution to defined contribution scheme – 200

Gains made on exercise of share options (see note 27 to the financial statements) 439 578

4,100 4,793

Directors’ Remuneration Report continued


d) Directors’ interests in options to purchase sharesDetails of the interests of the Directors in the Lonrho Unapproved Share Option Plan are contained on page 57.

e) Directors’ interestsDetails of the beneficial interests of the Directors or their families in the ordinary shares of the Company are contained on page 57.

Future reviewsOpus Executive Partners will continue to advise the Committee on various aspects of the Executive Directors’ remuneration.

I hope that you will support the advisory vote on the 2012 Directors’ Remuneration Report, which will be put forward at the next AnnualGeneral Meeting.

Kiran MorzariaChairman of the Remuneration Committee27 March 2013Company number: 2805337

56



The Directors of Lonrho Plc are pleased to submit their report, together with the audited financial statements for the year ended 31 December2012.

The Company number is 2805337.

Principal activitiesThe Group has a diverse portfolio of investments across Sub-Saharan Africa in four core operating sectors: Agribusiness, Infrastructure, Hotelsand Support Services. In order to create maximum value for shareholders the management is implementing the investment strategy outlinedearlier.

Business review and developmentThe year has seen strong growth in the existing businesses and Lonrho has entered into a number of major agreements, to further develop itscore divisions.

During the year, Lonrho transferred its aviation division to a separate entity listed on the London Stock Exchange (AIM) to create FastJet Plc, anAfrican low cost airline in conjunction with Sir Stelios Haji-Ioannou and easyGroup.

The Chairman’s Statement, the Chief Executive Officer’s Statement and the Operating Review contain information on developments duringthe year and key potential future developments.

The requirements of the enhanced business review in relation to strategy and progress thereon are contained in the Chairman’s Statement,the Chief Executive Officer’s Statement and the Operating Review. Information on the principal risks and uncertainties relating to the Group’sbusinesses is contained on pages 10 to 13.

Going ConcernThe financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 30to 36.

Although the current economic conditions create uncertainty, the Group’s forecasts and projections, taking account of reasonably possiblechanges in trading performance, together with mitigation actions that are within management’s control, show that the Group is expected tobe able to operate within the level of its debt facilities.

The Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence forthe foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing these financial statements.

Key Performance IndicatorsThe Group has a number of key performance indicators which are measured at different tiers in the operation. At the divisional level the Grouptracks revenue and gross margin against budget. The Group uses a number of specific, non-financial, key performance indicators at individualbusiness levels. For example, occupancy levels at Hotel Cardoso and ship movements at Luba Freeport.

Further information is contained on pages 8 to 9.

RiskThe Directors wish to mitigate risk by proper evaluation of every investment that is made and follow a risk analysis reporting procedure, whichlinks into the Company’s Corporate Governance procedures. The Group is continuing to strengthen its management team by the recruitmentof highly experienced individuals.

Further information concerning the Group’s objectives, policies and process for managing its capital and financial risk managementobjectives; details of its financial instruments; and its exposure to credit risk and liquidity risk can be found in note 31 to the financialstatements.

Results and dividendThe Group results for the year ended 31 December 2012 are set out on page 61.

The Directors do not recommend the payment of a dividend (2011: £nil).

The Company has not paid dividends since 1999. During 2012 the Directors had intended to adopt a progressive dividend policy once theCompany has sufficient distributable reserves and had achieved a level of sustained profitability provided it was commercially prudent, bearingin mind the Group’s financial position, underlying earnings and cash flows, the resources required for the Group’s development and theprevailing market outlook. The Directors will keep this under review.

DirectorsThe following Directors have held office during the year: Mr D.A. Lenigas (appointed 21 December 2005; resigned 13 September 2012);Mr G.T. White (appointed 5 October 2007); Mr D.J. Armstrong (appointed 1 December 2008); Ms E.K. Priestley (appointed 24 February 2006);Ambassador F.D. Cook (appointed 23 October 2007); Mrs J.M. Ellis (appointed Finance Director 1 June 2007 and became a Non-ExecutiveDirector 1 December 2008); Mr K.C. Morzaria (appointed 28 September 2010) and Sir Richard Needham (appointed 26 April 2011; resigned28 May 2012).

At the next Annual General Meeting, Mr. G. T White and Mrs. J. M. Ellis will retire by rotation. Being eligible, they will both offer themselves forre-election. Biographical details of all Directors are set out on pages 40 to 41.

Report of the DirectorsFor the year ended 31 December 2012


Directors’ share interestsThe Directors set out below served throughout the year unless otherwise indicated.

At 31.12.12(or date

of resignation) At 01.01.12No. of shares No. of shares

D. A. Lenigas (resigned 13.09.12) 11,931,987 3,750,000

G. T. White 3,781,666 200,000

D. J. Armstrong 216,666 200,000

E. K. Priestley 187,926 40,712

Ambassador F. D. Cook 342,606 316,252

J. M. Ellis 104,333 4,000

K. C. Morzaria Nil Nil

Sir Richard Needham (resigned 28.05.12) 222,550 222,550

All of the above interests are recorded in the Company’s Register of Directors’ Share and Debenture Interests. No Director has a beneficialinterest in the shares or debentures of any of the Company’s subsidiary undertakings.

Share optionsDuring the period, unapproved share options were held by Directors over ordinary shares, as set out below. These options are embodied in anindividual contract between the Company and the individual and have been granted under The Lonrho Plc Unapproved Share Option Plan.

Grantedduring Exercised As at

As at Exercise the during 31 December01.01.2012 price period the period 2012 Exercise period

D.A. Lenigas 3,750,000 6.5p – 3,750,000** Nil April 2007-April 2012

D.A. Lenigas 1,615,000 6.5p – 1,615,000** Nil July 2007-July 2012

D.A. Lenigas 2,500,000 6.5p – 2,500,000** Nil Jan 2009-Jan 2014

D.A. Lenigas 20,000,000 13.75p – – 20,000,000 April 2010-March 2015

D.A. Lenigas 3,333,333 18.4p – – 3,333,333 Aug 2012-Aug 2016*

D.A. Lenigas 3,333,333 22.0p – – 3,333,333 Aug 2013-Aug 2016*

D.A. Lenigas 3,333,334 25.0p – – 3,333,334 Aug 2014-Aug 2016*(resigned 13.09.12)

G.T. White 2,500,000 6.5p – 2,500,000 Nil April 2007-April 2012

G.T. White 1,065,000 6.5p – 1,065,000 Nil July 2007-July 2012

G.T. White 2,000,000 6.5p – – 2,000,000 Jan 2009-Jan 2014

G.T. White 20,000,000 13.75p – – 20,000,000 April 2010-March 2015

G.T. White 3,333,333 18.4p – – 3,333,333 Aug 2012-Aug 2016*

G.T. White 3,333,333 22.0p – – 3,333,333 Aug 2013-Aug 2016*

G.T. White 3,333,334 25.0p – – 3,333,334 Aug 2014-Aug 2016*

D.J. Armstrong 1,000,000 6.5p – – 1,000,000 Jan 2009-Jan 2014

D.J. Armstrong 6,500,000 13.75p – – 6,500,000 April 2010-March 2015

D.J. Armstrong 2,000,000 18.4p – – 2,000,000 Aug 2012-Aug 2016*



E.K. Priestley 1,250,000 6.5p – 1,250,000 Nil April 2007-April 2012

E.K. Priestley 1,065,000 6.5p – 1,065,000 Nil April 2007-July 2012

E.K. Priestley 1,000,000 6.5p – – 1,000,000 Jan 2009-Jan 2014

E.K. Priestley 1,000,000 13.75p – – 1,000,000 April 2010-March 2015

J.M. Ellis 350,000 6.5p – 350,000 Nil July 2007-July 2012

J.M. Ellis 500,000 6.5p – 500,000 Nil Jan 2009-Jan 2014

* These options do not vest immediately but vest from 2012 to 2014.**Exercised post resignation.

58



InsuranceThe Company has effected Directors and Officers Liability insurance cover for Group Directors.

Business ReviewSection 417 of the Companies Act 2006, requires that the Directors present a Business Review in this report to inform the shareholders andhelp them assess how the Directors have performed their duty to promote the success of the Company. The information that fulfils thisrequirement can be found in the sections set out below and is incorporated by reference into this report. For the purposes of DTR 4.1.5R(2)and DTR4.1.8R, the management report is the Business Review consisting of all the sections referred to below:

• Chairman’s Statement on pages 14 to 15.• Chief Executive Officer’s Statement on pages 16 to 19.• Business Model and Strategy on pages 4 to 5.• Summary of Lonrho divisions on pages 6 to 7.• Key Performance Indicators on pages 8 to 9.• Principal risks and uncertainties on pages 10 to 13.• Operating Review on pages 20 to 29.• Financial Review on pages 30 to 36.• Corporate Responsibility on pages 37 to 39.• Corporate Governance Statement on pages 42 to 49.• This Director’s Report

which effectively contain a discussion of the main trends and factors likely to affect the future development, performance and position of theCompany’s business.

Substantial shareholdingsThe Directors have been advised of the following substantial shareholdings at 26 March in the Company’s issued share capital:

% of Issued Number of shares Capital

UBS AG London Branch 215,159,956 13.34%

Zesiger Capital Group LLC 175,275,000 10.86%

Mackenzie Financial Corp. 154,000,000 9.55%

Share capital and controlThe following information is given pursuant to Section 992 of the Companies Act 2006.

On 31 December 2012, there were 1,597,278,988 ordinary shares of 1 pence each in issue. There are no restrictions on transfer or limitationson the holding of the ordinary shares. None of the shares carries any special rights with regards to the control of the Company. There are noknown arrangements under which financial rights are held by a person other than the holder of the shares and no known agreements onrestrictions on share transfers and voting rights.

As far as the Company is aware, there are no persons with significant direct or indirect holdings in the Company other than those notedabove.

The powers of the Directors are contained in the Company’s Articles of Association. These include powers, subject to relevant legislation, toauthorise the issue of the Company’s shares by the Company, subject to authority being given to the Directors by the shareholders in generalmeeting.

The rules about the appointment and replacement of Directors are contained in the Company’s Articles of Association. Changes to theArticles of Association must be approved by the shareholders in accordance with legislation in force from time to time.

Post-balance sheet eventsOn 9 January 2013, the Company granted options over 484,612 ordinary shares of 1p each in the Company, exercisable on 1 February 2016 inaccordance with the rules of the Lonrho Sharesave Scheme at 7.8p per share.

On 18 January 2013, the Company granted options over 2,000,000 ordinary shares of 1p each in the Company under the Lonrho UnapprovedShare Option Plan exercisable at 9.252p per share. The options have a two year vesting period and a four year exercise period from date ofgrant.

On 14 March 2013, 15,825,000 ordinary shares of 1p were issued in relation to the AFEX share purchase agreement.

Share price performanceBetween 1 January 2012 and 31 December 2012 the share price in London varied between a high of 12.75p and a low of 6.73p and inJohannesburg a high of Rand 2.10 and a low of Rand 0.90. At 31 December 2012 the mid-market price of the shares was 8.46p in London andRand 1.20 in Johannesburg. At 26 March 2013, the mid-market price of the shares was 3.97p in London and Rand 0.9 in Johannesburg.

Political and charitable donationsNo political or charitable donations, save for those disclosed on pages 37 to 39, have been made by the Group during the period. The Group isinvolved in a number of charitable projects through its subsidiaries, details of which are set out on page 112.

Report of the Directors continued

For the year ended 31 December 2012


Payment to suppliersThe Group does not follow any code or standard with regard to the payment of its suppliers. The Group’s policy is to agree terms andconditions with suppliers in advance; payment is then made in accordance with the agreement provided the supplier has met the terms andconditions. Amounts due to suppliers at the balance sheet date are contained in note 28.

City Code on Takeovers and MergersThe Panel on Takeovers and Mergers confirmed that, at the date the Listing Particulars were issued in May 1998, Lonrho was subject to theCity Code on Takeovers and Mergers (the “Code”). The Directors believe that, so far as is practicable, they have operated and will continue tooperate the Group so that it will continue to be subject to the Code.

AuditorsA resolution to re-appoint KPMG Audit Plc and to authorise the Directors to fix their remuneration will be proposed at the next Annual GeneralMeeting in accordance with Section 489 of the Companies Act 2006.

Statement of Directors’ responsibilities in respect of the annual report and the financial statementsThe Directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance withapplicable law and regulations.

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law theyare required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted bythe EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of thestate of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parentcompany financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent company will

continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’stransactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure thatits financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open tothem to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Report of the Directors, Directors’ RemunerationReport and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’swebsite. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in otherjurisdictions.

The Directors who held office at the date of approval of this Report of the Directors confirm that, so far as they are each aware, there is norelevant audit information of which the Company’s Auditors are unaware; and each Director has taken all the steps that he/she ought to havetaken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s Auditors are aware ofthat information.

Responsibility statement of the Directors in respect of the annual reportWe confirm to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

• the information that is cross-referred from the Business Review section of the Report of the Directors includes a fair review of thedevelopment and performance of the business and the position of the Company and the undertakings included in the consolidation takenas a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board Registered Office:J. Hughes Level 2Company Secretary 25 Berkeley Square27 March 2013 London

W1J 6HB

60


We have audited the financial statements of Lonrho plc for the year ended 31 December 2012 set out on pages 61 to 112. Thefinancial reporting framework that has been applied in their preparation is applicable law and International Financial ReportingStandards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance withthe provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required tostate to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 59, the directors are responsible for thepreparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit,and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website atwww.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion:• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at31 December 2012 and of the group’s loss for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; and• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and asapplied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regardsthe group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006In our opinion:• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the CompaniesAct 2006; and

• the information given in the Directors’ Report for the financial year for which the financial statements are prepared isconsistent with the financial statements

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not beenreceived from branches not visited by us; or

• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not inagreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit; or• a Corporate Governance Statement has not been prepared by the company.

Under the Listing Rules we are required to review:• the directors’ statement, set out on page 56, in relation to going concern;• the part of the Corporate Governance Statement on page 42 relating to the company’s compliance with the nine provisions ofthe UK Corporate Governance Code specified for our review; and

• certain elements of the report to shareholders by the Board on directors’ remuneration.

Ian BoneSenior Statutory Auditorfor and on behalf of KPMG Audit Plc, Statutory Auditor

Chartered Accountants15 Canada Square, London, E14 5GL27 March 2013

Independent Auditor’s Report to the Members ofLonrho Plc

Year ended 31 December 2012 15 months ended 31 December 2011

Continuing Discontinued Continuing Discontinuedoperations operations Total operations operations Total

Note £m £m £m £m £m £m

Revenue 4, 5 206.5 – 206.5 188.4 0.2 188.6

Cost of sales 6 (146.9) – (146.9) (137.2) (0.7) (137.9)

GROSS PROFIT/(LOSS) 59.6 – 59.6 51.2 (0.5) 50.7

Gain arising on fair valuation of biological assets 6, 16 9.2 – 9.2 27.4 – 27.4

Other operating income 6

– Gains on acquisitions – – – 15.8 – 15.8

– Other 0.6 – 0.6 2.2 – 2.2

Operating costs 6 (77.0) (0.1) (77.1) (80.4) (0.6) (81.0)

OPERATING (LOSS)/PROFIT (7.6) (0.1) (7.7) 16.2 (1.1) 15.1

Finance income 10 5.5 0.1 5.6 6.8 – 6.8

Finance expense 10 (14.7) – (14.7) (16.2) – (16.2)

NET FINANCE (EXPENSE)/INCOME (9.2) 0.1 (9.1) (9.4) – (9.4)

NET OPERATING (LOSS)/PROFIT* (12.3) – (12.3) 9.6 (1.1) 8.5

Share based payments expense 6 (2.3) – (2.3) (0.7) – (0.7)

Amortisation 14 (2.2) – (2.2) (2.1) – (2.1)

OPERATING (LOSS)/PROFIT AFTER FINANCING (16.8) – (16.8) 6.8 (1.1) 5.7

Share of results of associates 18 (4.4) – (4.4) (5.9) – (5.9)

Share of results of jointly controlled entity 19 (10.6) – (10.6) – – –

Gain on contribution of subsidiary to jointlycontrolled entity 11 33.5 – 33.5 – – –

Impairment of jointly controlled entity 19 (7.7) – (7.7) – – –

(Loss)/gain on other investments 19 (0.3) – (0.3) 1.0 – 1.0

(LOSS)/PROFIT BEFORE TAX (6.3) – (6.3) 1.9 (1.1) 0.8

Income tax credit/(charge) 12 0.3 – 0.3 (0.3) – (0.3)

(LOSS)/PROFIT FOR THE YEAR/PERIOD (6.0) – (6.0) 1.6 (1.1) 0.5

ATTRIBUTABLE TO:

Owners of the Company 24 (1.7) – (1.7) 7.1 (1.1) 6.0

Non-controlling interests 24 (4.3) – (4.3) (5.5) – (5.5)

(LOSS)/PROFIT FOR THE YEAR/PERIOD (6.0) – (6.0) 1.6 (1.1) 0.5

EARNINGS PER SHARE

Basic (loss)/earnings per share (pence) 13 (0.11) – (0.11) 0.58 (0.09) 0.49

Diluted (loss)/earnings per share (pence) 13 (0.11) – (0.11) 0.57 (0.09) 0.48

The notes on pages 66 to 112 are an integral part of these financial statements.

* The directors have defined Net Operating (Loss)/Profit, a non-GAAP measure, as its key profit performance measure as explained in Note 3.


Consolidated income statementFor the year ended 31 December 2012 and 15 months ended 31 December 2011

Group Company

31 December 31 December 31 December 31 December2012 2011 2012 2011

Notes £m £m £m £m

Foreign exchange translation differences 24 (14.8) (0.2) – –

Revaluation of property, plant and equipment 15 2.5 7.2 – –

Total other comprehensive (expense)/income for the year/period (12.3) 7.0 – –

(Loss)/profit for the year/period (6.0) 0.5 (21.6) (17.3)

Total comprehensive (expense)/income (18.3) 7.5 (21.6) (17.3)

ATTRIBUTABLE TO:

Owners of the Company (13.1) 9.7 (21.6) (17.3)

Non-controlling interests (5.2) (2.2) – –

Total comprehensive (expense)/income (18.3) 7.5 (21.6) (17.3)


62


Consolidated and Company statements ofcomprehensive incomeFor the year ended 31 December 2012 and 15 months ended 31 December 2011

2012 2011

Owners Non- Owners Non-of the controlling of the controlling

Company interests Total Company interests Total£m £m £m £m £m £m

AT 1 JANUARY 2012/1 OCTOBER 2010 135.2 20.5 155.7 107.4 20.3 127.7

(Loss)/profit for the year/period (1.7) (4.3) (6.0) 6.0 (5.5) 0.5

Foreign exchange translation differences (12.9) (1.9) (14.8) (0.5) 0.3 (0.2)

Revaluation of property 1.5 1.0 2.5 4.2 3.0 7.2

Total comprehensive income (13.1) (5.2) (18.3) 9.7 (2.2) 7.5

Issue of shares 23.1 – 23.1 18.9 – 18.9

Costs associated with share issues – – – (0.4) – (0.4)

Provision for warrants 1.0 – 1.0 – – –

Share based payment charge 2.3 – 2.3 0.7 – 0.7

Share options exercised 1.1 – 1.1 0.7 – 0.7

Shares issued in relation to earn out agreement 0.4 – 0.4 – – –

Subsidiaries acquired – – – – 2.2 2.2

Subsidiaries disposed – – – – (0.2) (0.2)

Transfer from subsidiary to jointly controlled entity 0.5 8.6 9.1 – – –

Non-controlling interest dividends – (0.2) (0.2) – (0.2) (0.2)

Non-controlling interest put option – – – (2.3) – (2.3)

Capital element of Convertible Bond – – – 1.1 – 1.1

Elimination of non-controlling interest(1) – – – (0.6) 0.6 –

AT 31 DECEMBER 150.5 23.7 174.2 135.2 20.5 155.7


The Company had total equity brought forward of £125.6m (2011: £123.0m), and during the period issued shares of £23.1m(2011: £18.9m) with share based payment charges of £2.3m (2011: £nil), shares issued in relation to earn out agreement of£0.4m (2011: £nil), share options issued of £nil (2011: £0.7m), provision for warrants of £1.0m (2011: £nil), share optionsexercised of £1.1m (2011: £0.7m), costs associated with share issued of £nil (2011: £0.4m) and a loss for the period of £21.6m(2011: £17.3m) resulting in total equity carried forward of £131.9m (2011: £125.6m).

(1) The elimination of non-controlling interest relates to removal of the interest of minority shareholders during the period.


Consolidated and Company statements ofchanges in equityFor the year ended 31 December 2012 and 15 months ended 31 December 2011

64


Group Company



ASSETS

Goodwill 14 17.5 17.8 – –

Other intangible assets 14 16.8 21.9 – –

Property, plant and equipment 15 130.0 166.2 0.3 0.4

Biological assets 16 40.4 33.8 – –

Investments in subsidiaries 17 – – 31.5 31.5

Investments in associates 18 – 6.9 – 5.9

Investment in jointly controlled entity 19 37.4 – – –

Other investments 19 0.1 1.7 – –

Deferred tax assets 20 2.0 1.8 – –

TOTAL NON-CURRENT ASSETS 244.2 250.1 31.8 37.8

Inventories 21 23.1 20.1 – –

Trade and other receivables 22 44.2 48.8 147.5 128.2

Cash at bank 23 17.0 12.7 – –

TOTAL CURRENT ASSETS 84.3 81.6 147.5 128.2

TOTAL ASSETS 328.5 331.7 179.3 166.0

EQUITY

Share capital 24 16.0 13.0 16.0 13.0

Share premium account 24 140.3 138.2 140.3 138.2

Revaluation reserve 24 9.0 9.1 – –

Share option reserve 24 7.8 5.4 7.8 5.4

Translation reserve 24 (20.7) (10.4) – –

Other reserves 24 31.4 11.0 38.1 17.7

Retained earnings 24 (33.3) (31.1) (70.3) (48.7)

TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 150.5 135.2 131.9 125.6

NON-CONTROLLING INTERESTS 24 23.7 20.5 – –

TOTAL EQUITY 174.2 155.7 131.9 125.6

LIABILITIES

Loans and borrowings 25 76.3 76.7 – –

Deferred tax liabilities 20 3.3 4.1 – –

Obligations under finance leases 25 1.3 18.6 – –

Provisions 29 1.5 – – –

Trade and other payables 28 4.3 16.1 45.1 38.0

TOTAL NON-CURRENT LIABILITIES 86.7 115.5 45.1 38.0

Bank overdraft 23, 25 5.9 12.2 1.0 0.7

Loans and borrowings 25 22.9 3.0 – –

Obligations under finance leases 25 1.2 4.9 – –

Trade and other payables 28 37.2 39.7 1.3 1.7

Tax liability 0.4 0.7 – –

TOTAL CURRENT LIABILITIES 67.6 60.5 2.3 2.4

TOTAL LIABILITIES 154.3 176.0 47.4 40.4

TOTAL EQUITY AND LIABILITIES 328.5 331.7 179.3 166.0


These financial statements were approved by the Board of Directors and authorised for issue on 27 March 2013. They weresigned on its behalf by:

Geoffrey WhiteDirector & Chief Executive Officer

Consolidated and Company statements offinancial positionAs at 31 December 2012 and 31 December 2011

Group Company



CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/profit for the period (6.0) 0.5 (21.6) (17.3)

Adjustments 30 1.9 (16.4) 14.0 4.9

CASH FLOWS FROM OPERATING ACTIVITIES BEFOREMOVEMENTS IN WORKING CAPITAL (4.1) (15.9) (7.6) (12.4)

Change in inventories (8.1) (14.3) – –

Change in trade and other receivables (9.8) (17.3) (19.7) (43.1)

Change in trade and other payables 0.2 13.3 0.4 37.1

CASH GENERATED FROM OPERATIONS (21.8) (34.2) (26.9) (18.4)

Interest received 0.7 0.8 – 0.1

Interest paid (10.7) (8.1) – –

Interest element of finance lease rental payments (0.4) (0.5) – –

Income tax paid (0.9) (1.2) – –

NET CASH FROM OPERATING ACTIVITIES (33.1) (43.2) (26.9) (18.3)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from the sale of property, plant and equipment 2.6 2.2 – –

Investment in restricted cash (3.2) (3.2) – –

Utilisation of restricted cash 3.2 – – –

Acquisition of subsidiary, net of cash acquired 7 (0.9) (6.1) – –

Acquisition of property, plant and equipment 15 (12.6) (18.4) (0.1) (0.1)

Acquisition of intangible assets 14 (0.4) (5.1) – –

Acquisition of associates and joint ventures – (1.2) – (1.2)

Proceeds from sale of associates 18 2.5 – 1.1 –

Proceeds from sale of other investments 19 1.0 – – –

Bank overdraft transferred to jointly controlled entity 11 3.5 – – –

Proceeds from sale of subsidiary undertaking – 0.7 – –

NET CASH FROM INVESTING ACTIVITIES (4.3) (31.1) 1.0 (1.3)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issue of share capital net of costs 24 24.1 18.9 24.1 18.9

Proceeds from the issue of share options 24 1.1 0.7 1.1 0.7

Loan advance 28.3 61.1 – –

Finance leases advanced 1.3 – – –

Repayment of borrowings (3.9) (10.6) – (1.3)

Payment of finance lease liabilities (2.7) (3.7) – –

Non-controlling interest dividends paid 24 (0.2) 0.2 – –

Dividends received from Group companies – – 0.4 –

NET CASH FROM FINANCING ACTIVITIES 48.0 66.6 25.6 18.3

Net increase/(decrease) in cash and cash equivalents 10.6 (7.7) (0.3) (1.3)

Cash and cash equivalents at the beginning of the period (2.7) 3.9 (0.7) 0.6

Foreign exchange movements – 1.1 – –

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 23 7.9 (2.7) (1.0) (0.7)



Consolidated and Company statements of cash flowsFor the year ended 31 December 2012 and 15 months ended 31 December 2011

1. Reporting entityLonrho Plc (the “Company”) is a company incorporated and domiciled in the United Kingdom. The consolidated financialstatements of the Company for the 12 month period ended 31 December 2012 comprise the Company and its subsidiaries(together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities.

The financial statements were authorised for issue by the Directors on 27 March 2013.

The Company changed its financial year end from 30 September to 31 December annually with effect from the financial periodended 31 December 2011. Accordingly the comparative period information is for the 15 month period to 31 December 2011.

2. Basis of preparationStatement of complianceBoth the parent Company and the consolidated financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union (Adopted IFRS). On publishing the parent Companyfinancial statements here together with the Group financial statements, the Company is taking advantage of the exemption insection 408(4) of the Companies Act 2006 not to present its individual income statement and related notes that form a part ofthese approved financial statements. The loss of the Company is disclosed in note 24 to the accounts.

Going concernAlthough the current on-going economic conditions create uncertainty, the Group’s forecast and projections, taking intoaccount possible changes in trading performance, together with mitigating actions that are within managements control showthat the Group is expected to be able to operate within the level of its debt facilities.

The directors are carefully monitoring cash resources across the Group and have instigated a number of initiatives to ensurefunding will be available for planned projects.

Following the careful review of on-going performance, and after making due enquiries, the Directors have a reasonableexpectation that the Group has adequate resources to continue operational existence for the foreseeable future. For this reasonthey continue to adopt the going concern basis in preparing the accounts.

Functional and presentation currencyThe financial statements are presented in pounds sterling which is the Company’s functional currency. All financial informationpresented has been rounded to the nearest £0.1m.

Basis of measurementThe financial statements have been prepared on the historical cost basis except for the revaluation of certain long leaseholdproperties, related derivative financial instruments at fair value and certain jointly controlled entities and biological assets at fairvalue.

The accounting policies set out in these financial statements have been applied to all periods presented. A number of newstandards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013 andhave not been applied in preparing the Group accounts. None of these are expected to have a significant effect on the financialstatements of the group, except for IFRS 9 Financial Instruments. The Group does not plan to adopt this standard early and theextent of the impact has not been determined.

Use of estimates and judgementsThe preparation of financial statements in conformity with Adopted IFRS requires management to make judgments, estimatesand assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Theestimates and associated assumptions are based on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis of making the judgements about carrying values ofassets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised if the revision affects only that period or in the period of the revision and futureperiods if the revision affects both current and future periods.

Estimates made by management in the application of Adopted IFRS that have significant effect on the financial statements with asignificant risk of material adjustment in the next year are discussed in the following notes:• valuation of associates (note 18)• valuation of biological assets (note 16)• share of results of jointly controlled entity (note 19)• impairment of interest in jointly controlled entity (note 19)

66


Notes to the financial statements

Judgements made by management in the application of Adopted IFRS that have significant effect on the financial statementsare:• the determination of the functional currencies of subsidiaries (note 3c)• the determination of the accounting treatment in respect of the acquisition of investments as either associates, joint venturesor subsidiaries (note 3(a))

• the determination whether certain transactions represent business combinations (note 7)• the determination of investments as jointly controlled entity based on relative shareholder interest (note 11)• the conclusion as to whether certain businesses should be presented as part of continuing or discontinuing operations(note 8)

The timing of revenue recognition is not subject to significant uncertainty.

3. Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financialstatements. The accounting policies have been applied consistently by Group entities.

(a) Basis of consolidationSubsidiariesThe consolidated financial statements incorporate the financial statements of Lonrho Plc and entities controlled by Lonrho Plc(its subsidiaries). Control is achieved where Lonrho Plc (the Company) has the power to govern the financial and operatingpolicies of an investee entity so as to obtain benefits from its activities.

The portion of a non-controlling interest is stated at the non-controlling interest’s proportion of the fair values of the assets andliabilities recognised. Subsequently, losses applicable to the non-controlling interest in excess of the non-controlling interest inthe subsidiary’s equity are allocated against the interests of the Group where the non-controlling interest has a specificexemption from making an additional investment to cover the losses. Future profits attributable to the non-controlling interestare not recognised until the unrecognised losses have been extinguished.

The results of entities acquired or disposed of during the year are included in the consolidated income statement from theeffective date of acquisition or up to the effective date of disposal, as appropriate.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Associates and Joint Ventures and jointly controlled entitiesAssociates are those entities in which the Group has significant influence, but not control or joint control, over the financial andoperating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting powerof another entity. Jointly controlled entities are those entities whose activities the Group has joint control, established bycontractual arrangement.

Investments in associates and jointly controlled entities are accounted for under the equity method and are usually recognisedinitially at cost. The cost of the investment includes transaction costs. Upon contribution of a subsidiary to a jointly controlledentity, the Group derecognises the assets and liabilities of the subsidiary, and replaces with the fair value of the jointly controlledentity. Any gain arising is recognised in full in the income statement.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income ofequity-accounted investees, after adjustments to align the accounting policies with those of the Group, from the date thatsignificant influence or joint control commences until the date that significant influence or joint control ceases.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of the investment,including any long term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinuedexcept to the extent that the Group has an obligation or has made payments on behalf of the investee.

The Company records interests in associate, joint ventures and jointly controlled entities initially at cost and thereafter at costless provisions for impairment.

The acquisition of subsidiaries and businesses is accounted for using the purchase method. The cost of the acquisition ismeasured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities andcontingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisitiondate, except for non-current assets that are classified as held for sale in accordance with IFRS 5, which are recognised andmeasured at fair value less costs to sell.


2. Basis of preparation (continued)

Business combinationsGoodwill arising on acquisition is initially measured at cost, being the excess of the fair value of the consideration over theGroup’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

When the excess is negative the identified fair values are reassessed to ensure that all acquired assets and liabilities have beenrecognised.

If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingentliabilities exceeds the fair value of the consideration, the excess is recognised immediately in the income statement.

The interest of non-controlling interests in the acquiree is initially measured at the non-controlling interest’s proportion of thenet fair value of the assets, liabilities and contingent liabilities recognised.

Put optionsEquity put options held by non-controlling interest holders are recognised as financial liabilities at the present value of amountspayable on their exercise with a corresponding entry to other reserves. The Group continues to recognise non-controllinginterests in respect of these equity investments where the risks and rewards of ownership are deemed to have been retained bythe non-controlling interest holders.

(b) Intangible assets GoodwillPositive goodwill arising on consolidation is recognised as an asset.

Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at cost less accumulatedimpairment losses. The recoverable amount is estimated at each reporting date. Any impairment loss is recognised immediatelyin the income statement and is not subsequently reversed when the carrying amount of the asset exceeds its recoverableamount.

Any impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of anygoodwill allocated to cash-generating units (groups of units) and then, to reduce the carrying amount of other assets in the unit(groups of units) on a pro rata basis.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.Goodwill arising on acquisitions before the date of transition to adopted IFRS has been retained at the previous UK GAAPamounts, after being tested for impairment at that date.

Other intangible assetsOther intangible assets are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives.The carrying amount is reduced by any provision for impairment where necessary.

On a business combination, as well as recording separable intangible assets already recognised in the statement of financialposition of the acquired entity at their fair value, identifiable intangible assets that are separable or arise from contractual orother legal rights are also included in the acquisition statement of financial position at fair value.

Amortisation on intangible assets is charged on a straight line basis over their useful economic life, on the following basis:Brands 5 yearsIntellectual property 5 yearsLicences Life of licence, not to exceed 5 yearsCustomer relationships 5 years – 10 yearsFranchises 5 yearsContractual rights Life of right, not to exceed 20 years

Costs directly associated with the acquisition of the licenses required to provide commercial airline services are capitalised asintangible assets in accordance with IAS38 within contractual rights. Costs are capitalised from the point that it is highly likelythe conditions to acquire the licence will be met and the commercial success of the airline operations is anticipated. Capitalisedcosts excluded start up losses and any costs not directly attributable to obtaining the licence. No such costs have been incurredin 2012 as they did not meet the conditions for capitalisation as intangible assets.

(c) Foreign currenciesThe individual financial statements of each Group company are presented in the currency of the primary economic environmentin which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financialposition of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and thepresentational currency for the consolidated financial statements.

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Notes to the financial statements continued

3. Significant accounting policies (continued)

In preparing the financial statements of the individual companies, transactions denominated in foreign currencies are translatedinto the respective functional currency of the Group entities using the exchange rates prevailing at the dates of transactions.Non-monetary assets and liabilities are translated at the historic rate. Monetary assets and liabilities denominated in foreigncurrencies are translated into the functional currency at the rates of exchange ruling at the reporting date. Non-monetary assetsand liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at theexchange rate at the date that the fair value was determined.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included inthe income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fairvalue in respect of which gains and losses are recognised directly in equity are also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations aretranslated at exchange rates prevailing at the reporting date. Income and expense are translated at the average exchange ratesfor the period, unless exchange rates fluctuate significantly during that period, in which case weighted average rates are used.Exchange differences arising, if any, are classified in equity and are transferred to the Group’s foreign currency translationreserve within equity. Such translation is recognised as income or as expense in the period in which the operation is disposed of.

All foreign exchange gains or losses that are reflected in the income statement are presented within financing income orexpense.

(d) TaxationThe tax expense represents the sum of current tax and deferred tax.

Current taxationCurrent tax is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible in other years and it further excludes items thatare never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted orsubstantively enacted by the reporting date.

Deferred taxationDeferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accountedfor using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against whichdeductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arisesfrom goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transactionthat affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on the investments in subsidiaries and associates,except where the Group is able to control the reversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longerprobable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates substantially enacted at the reporting date, that apply in the period when the liability issettled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to itemscharged or credited to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against currenttax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis.

(e) InvestmentsThe Group’s investments in equity securities that are not associates or joint ventures are classified as either available-for-salefinancial assets or assets at fair value through profit and loss. This designation is made on acquisition of individual investments.For available for sale financial assets subsequent to initial recognition, they are measured at fair value or cost where fair valuecannot be assessed and changes therein, other than impairment losses (see below), are recognised directly in equity. When aninvestment is de-recognised, the cumulative gain or loss in equity is transferred to the income statement. For assets at fair valuethrough profit and loss, subsequent to initial recognition they are measured at fair value and changes recognised withingains/losses on other investments in the income statement.

ImpairmentA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.



A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effecton the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carryingamount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Animpairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financialasset recognised previously in equity is transferred to the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss wasrecognised. For financial assets measured at amortised cost, the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

(f) Property, plant and equipmentLong leasehold land and buildings are stated in the statement of financial position at their revalued amounts, being the fair valueat the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that whichwould be determined using fair values at the reporting date.

Any revaluation increase arising on the revaluation of such land and buildings is credited to the revaluation reserve, except to theextent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increaseis credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising onthe revaluation of such land and building is charged as an expense to the extent that it exceeds the balance if any, held in therevaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to the incomestatement. On subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining is transferreddirectly to retained earnings.

All other assets are stated at historical cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets (less estimated residual values updated annually), otherthan long leasehold land, over their estimated useful lives, on the following basis:Long leasehold land and buildings 2% of costShort leasehold land and buildings Over the term of the leasePlant and machinery 10% of costFixtures and fittings 15% – 25% of costAircraft 5% – 6.67% of cost

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carryingamount of the asset and is recognised in the income statement for the period.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or whereshorter, over the relevant lease term.

In respect of aircraft, subsequent costs incurred which lend enhancement to future periods such as long term scheduledmaintenance and major overhaul of aircraft and engines are capitalised and amortised over the length of the period benefitingfrom those enhancements. All other costs relating to maintenance are charged to the income statement as incurred.

(g) Biological assetsCertain Group subsidiaries involved in the production of fresh produce recognise biological assets, which includes agriculturalproduce due for harvest on fruit plantations. Under IAS41, Biological Assets are required to be included at fair value. Fair value isdetermined by reference to the net present value of the biological assets at the reporting date. Biological assets are stated at fairvalue less estimated point of sale costs, with any resultant gain or loss recognised in the income statement. The valuation of thefruit plantations is based on discounted cashflow models whereby the fair value of the assets is calculated using cashflows forcontinuous operations taking into account growth and yield potential.

When the fruit or other biological asset is harvested, it is transferred to inventory at the lower of cost and net realisable value.

(h) Impairment of assets excluding goodwill, inventories and deferred tax assetsAt each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether thereis any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of any impairment loss. Where the asset does not generate cash flows thatare independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the assetbelongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the

70




estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value and the risks specific to the asset for which the estimates of future cash flows have not beenadjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carryingamount of the asset (or cash-generating unit) is reduced to its recoverable amount.

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount in whichcase the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to therevised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount thatwould have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.

A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount,in which case the impairment loss is treated as a revaluation increase.

(i) Financial instrumentsFinancial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes aparty to the contractual provisions of the instrument.

Cash and cash equivalentsCash and cash equivalents comprise cash in hand and demand deposits and other short term highly liquid investments that arereadily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts thatare repayable on demand and form an integral part of the Group’s cash management are included as a component of cash andcash equivalents for the purpose of the statement of cash flows.

Trade receivablesTrade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using theeffective interest rate method. Appropriate allowances for estimated recoverable amounts are recognised in the incomestatement when there is objective evidence the asset is impaired.

Restricted cashRestricted cash is cash at bank that is not freely available due to specific restrictions on its use (note 23). It is presented togetherwith Cash and cash equivalents as Cash at bank in the Statement of financial position.

Trade payablesTrade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interestrate method.

Financial liabilitiesFinancial liabilities are classified according to the substance of the contractual arrangements entered into.

Bank borrowingsInterest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs.

Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative cash flow hedging instruments Derivative cash flow hedging instruments are initially recognised, and subsequently measured, at fair value. The fair values ofderivative hedging instruments are determined based on market data to calculate the present value of all estimated cash flowsassociated with each instrument at the balance sheet date. Changes in their fair values are recognised directly in othercomprehensive income (to the extent that they are effective), with the ineffective portion being recognised in the incomestatement. In order to qualify for hedge accounting, the Group is required to document prospectively the relationship betweenthe item being hedged and the hedging instrument.

The Group is also required to demonstrate an assessment of the relationship between the hedged item and the hedginginstrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performedperiodically to ensure that the hedge has remained, and is expected to remain, highly effective.

Hedge accounting is discontinued when a hedging instrument is derecognised (e.g. through expiry or disposal), or no longerqualifies for hedge accounting. Where the hedged item is a highly probable forecast transaction, the related gains and lossesremain in equity until the transaction takes place, when they are reclassified to the income statement. When a hedged future



transaction is no longer expected to occur, any related gains and losses, previously recognised in other comprehensive income,are immediately reclassified to the income statement.

Derivative fair value changes recognised in the income statement are either reflected in arriving at operating profit (if the hedgeditem is similarly reflected) or in finance expense.

(j) Capital managementThe Board’s policy for the Group and Company is to maintain a strong capital base so as to maintain investor, creditor andmarket confidence and to sustain future development of the business. The Board of Directors monitors ROCE (return on capitalemployed) and ROE (return on equity) as part of its capital management.

(k) InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable directexpenditure and attributable overheads that have been incurred in bringing the inventories to their present location andcondition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to beincurred in marketing, selling and distribution.

(l) Share based paymentsThe Group provides benefits to certain employees, including senior executives, in the form of share based payments, wherebyemployees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at whichthey are granted. The fair value is determined by using a Black-Scholes model. The dilutive effect, if any, of outstanding optionsis reflected as additional share dilution in the computation of earnings per share.

(m) Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initialrecognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption valuebeing recognised in the income statement over the period of the borrowings on an effective interest basis.

(n) DividendsInterim dividends are recognised when paid and final dividends are recognised as liabilities in the period in which they areapproved by shareholders.

(o) ProvisionsA provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation asa result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If theeffect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects currentmarket assessments of the time value of money and, where appropriate, the risks specific to the liability.

(p) Revenue recognitionRevenue, for the other major segments not detailed below, is derived from the sale of goods and services and is measured atthe fair value of consideration received or receivable, after deducting discounts, volume rebates, value-added tax and other salestaxes. A sale of goods and services is recognised when recovery of the consideration is probable, there is no continuingmanagement involvement with the goods and services and the amount of revenue can be measured reliably.

A sale of goods is recognised when the significant risks and rewards of ownership have passed to the buyer, the associated costsand possible return of goods can be estimated reliably. This is when title and insurance risk have passed to the customer and thegoods have been delivered to a contractually agreed location.

A sale of services is recognised when the service has been rendered.

Infrastructure divisionIncluded within the infrastructures division is revenue from port activities. Revenue from port activities represents the incomeearned from the provision of port facilities, which comprise cargo and other handling, towage, pilotage, conservancy and wastemanagement services and port related rental income. Such revenue is recorded once the service has been provided.

Agribusiness divisionRevenue for the agribusiness division includes the invoice value of goods where the Group grows or takes ownership risk on therelevant produce. Where the Group provides logistics or processing services without taking ownership risk on the relevantproduce, revenue comprises the invoiced value of the services provided. Revenue is recognised when the supply of the goodsor services are completed. There are no discounts or other arrangements that create uncertainty over the level of revenuerecognised.

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Support services divisionThe Group supplies an immaterial amount of bundled IT services. When these occur revenue is allocated based on the fairvalues of the respective services provided.

Aircraft divisionRevenue for the aircraft division comprises the invoiced value of airline services, net of passenger taxes, discounts, plus ancillaryrevenue. Revenue from the sale of flight seats (passenger revenue) is recognised in the period in which the service is provided.Unearned revenue represents flight seats sold but not yet flown and is included within deferred income.

(q) LeasesLeases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards ofownership to the lessee is classified as a finance lease. All other leases are classified as operating leases.

Finance leasesFinance leases are capitalised in the statement of financial position at their fair value or, if lower, at the present value of theminimum lease payments, each determined at the inception of the lease. The corresponding liability is shown as a finance leaseobligation to the lessor. Leasing repayments comprise both a capital and a finance element. The finance element is written off tothe income statement so as to produce an approximately constant periodic rate of charge on the outstanding obligation.

Operating leasesOperating lease rentals are charged to the income statement on a straight line basis over the period of the lease.

(r) Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of a qualifying asset, which are assets thatnecessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets,until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets isdeducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

(s) Earnings per shareBasic earnings per share is calculated based on the weighted average number of ordinary shares outstanding during the period.Diluted loss per share is based upon the weighted average number of shares in issue throughout the year, adjusted for thedilutive effect of potential ordinary shares. The potential dilutive ordinary shares in issue are employee share options and theequity conversion element of the convertible bond.

(t) Reportable SegmentsSegments are determined to be the lowest operational segment that the Chief Operating Decision Maker (“CODM”) evaluatesthe result of the segment and allocates resources to that segment. This is based on the Group’s internal organisation and thefinancial information provided to the CODM.

(u) Assets and liabilities classified as held for saleNon-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through salerather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (orcomponents of a disposal group) are remeasured in accordance with the Group’s accounting policies. Thereafter generally theassets (or disposal group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment losson a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that noloss is allocated to inventories, financial assets and deferred tax assets, which continue to be measured in accordance with theGroup’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss.

(v) Convertible bondsConvertible bonds are regarded as compound instruments, consisting of a liability component and either an equity componentor an embedded derivative component.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible bonds and the fair value assigned to theliability component represents the value of either an equity component or an embedded derivative component attributable tothe embedded option to convert the bonds into equity of the Group.

IAS 32 states that a derivative contract that will be settled by the entity receiving or delivering a fixed number of its own equityinstruments in exchange for a fixed amount of cash or another financial asset is an equity instrument. It also states that acontract that will be settled by the entity delivering or receiving a fixed number of its own equity instruments in exchange for avariable amount of cash or another financial asset is a financial asset or financial liability. For the purposes of the consolidated



financial statements, when making the assessment of whether a convertible bond, when exercised, gives rise to the exchange ofa fixed or variable amount of cash, or other financial asset, the functional currency of the parent company relative to thecurrency denomination of the bonds is considered in addition to other features within the bond.

For convertible bonds issued by the Group where there is a difference between the currency of the bond and the functionalcurrency of the issuer, the embedded option to convert the bonds is recorded as a derivative liability because it is not a contractto exchange a fixed number of shares for a fixed amount of bonds. The embedded derivative liability component is separatelyidentified and measured at fair value through profit or loss. For convertible bonds issued by the Group where the currency of thebond and the functional currency of the issuer are the same, i.e. where on conversion of the bonds a fixed number of shares isexchanged for a fixed amount of bonds, the value of the embedded option to convert the bonds is recorded within equity oninitial recognition.

Issue costs are apportioned between the liability and embedded option components of the convertible bonds (recorded asequity or as a derivative liability) based on their relative carrying amounts at the date of issue.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-convertible debt to the liability component of the instrument. This interest expense, recognised in the income statement, iscalculated using the effective interest method, i.e. the difference between the interest expense on the liability component andthe interest paid is added to the carrying amount of the convertible bond.

(w) Non-GAAP measuresFollowing a review of key performance indicators used by the Directors and consultations with key stakeholders, the Directorshave revised the key non-GAAP profit measure used to monitor performance of the business. From 1 January 2012 the key non-GAAP profit measure used by the board is net operating profit which is defined as operating profit before amortisation ofacquired intangible assets and share based payment charges less net finance charges. The directors believe that this measurebest reflect the trading performance of the group.

4. Segment reportingThe “Chief Operating Decision Maker” (CODM) is deemed to be the Executive Committee who monitors the results of thebusiness segments to assess performance and make decisions about the allocation of revenues. Segment performance isevaluated on both revenue and net operating profit/(loss).

Segment results, assets and liabilities include items directly attributable to a segment as well as those that are allocated on areasonable basis. Unallocated items comprise mainly corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be usedfor more than one period.

There is no inter-segment revenue.

Business segmentsThe Group has four core continuing reportable segments which are organised around the basis of products and services whichthey provide:• Agribusiness• Infrastructure• Support services• Hotels

The Group has not aggregated any operating segment in arriving at this analysis. Following the contribution of a subsidiary to ajointly controlled entity (note 11), the transportation division from the 29 June 2012 is no longer considered a core operatingdivision but remains a continuing operation. This is consistent with the reports provided to the (CODM).

The head office division includes head office costs that are not allocated to the operating divisions. The revenue from the headoffice division relates to income from related parties.

Geographical analysisAll of the segments operate in various parts of Africa, Europe and Americas.

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Business segmentsYear ended 31 December 2012

Core Dis-Agri- Infra- Support Head operating Trans-Continuing continued

business structure Services Hotels office divisions portation operations operations Total£m £m £m £m £m £m £m £m £m £m

EXTERNAL REVENUE 123.6 23.5 27.0 11.9 0.3 186.3 20.2 206.5 – 206.5

Net operating profit/(loss):Segment result* 2.0 2.8 2.1 (1.9) (8.4) (3.4) (8.9) (12.3) – (12.3)

Amortisation (1.4) – (0.3) – – (1.7) (0.5) (2.2) – (2.2)

Share based payments expense – – – – (2.3) (2.3) – (2.3) – (2.3)

OPERATING PROFIT/(LOSS) AFTER FINANCING 0.6 2.8 1.8 (1.9) (10.7) (7.4) (9.4) (16.8) – (16.8)

Share of results of associates – – – – (4.4) (4.4) – (4.4) – (4.4)

Share of results of jointly controlled entity – – – – (10.6) (10.6) – (10.6) – (10.6)

Gain on contribution of subsidiary to jointly controlled entity – – – – 33.5 33.5 – 33.5 – 33.5

Impairment of jointly controlled entity – – – – (7.7) (7.7) – (7.7) – (7.7)

Loss on other investments – – – – (0.3) (0.3) – (0.3) – (0.3)

Income tax credit/(charge) 1.3 (0.3) (0.3) (0.4) – 0.3 – 0.3 – 0.3

PROFIT/(LOSS) FOR THE YEAR 1.9 2.5 1.5 (2.3) (0.2) 3.4 (9.4) (6.0) – (6.0)

Net operating profit/(loss) before financing 4.9 4.3 2.1 (0.4) (6.4) 4.5 (7.6) (3.1) (0.1) (3.2)

Net finance (expense)/income (2.9) (1.5) – (1.5) (2.0) (7.9) (1.3) (9.2) 0.1 (9.1)

NET OPERATING PROFIT/(LOSS): SEGMENT RESULT* 2.0 2.8 2.1 (1.9) (8.4) (3.4) (8.9) (12.3) – (12.3)

* See accounting policy note (w).

4. Segment reporting (continued)

Business segments15 months ended 31 December 2011

Core Dis-Agri- Infra- Support Head operating Trans- Continuing continued

business structure Services Hotels office division portation operations operations Total£m £m £m £m £m £m £m £m £m £m

EXTERNAL REVENUE 94.5 21.8 25.1 11.5 – 152.9 35.5 188.4 0.2 188.6

Net operating profit/(loss):Segment result* 32.5 (2.4) 1.4 3.1 (14.0) 20.6 (11.0) 9.6 (1.1) 8.5

Amortisation (1.0) (0.1) (0.4) – – (1.5) (0.6) (2.1) – (2.1)

Share based payments expense – – – – (0.7) (0.7) – (0.7) – (0.7)

OPERATING PROFIT/(LOSS) AFTER FINANCING 31.5 (2.5) 1.0 3.1 (14.7) 18.4 (11.6) 6.8 (1.1) 5.7

Share of results of associates – – – – (5.9) (5.9) – (5.9) – (5.9)

Share of results of jointly controlled entity – – – – – – – – – –

Gain on contribution of subsidiary to jointly controlled entity – – – – – – – – – –

Gain on other investments 0.6 – – – 0.4 1.0 – 1.0 – 1.0

Income tax credit/(charge) (0.4) – (0.5) (0.2) 0.8 (0.3) – (0.3) – (0.3)

PROFIT/(LOSS) FOR THE PERIOD 31.7 (2.5) 0.5 2.9 (19.4) 13.2 (11.6) 1.6 (1.1) 0.5

Net operating profit/(loss) before financing 35.4 (1.6) 0.6 3.3 (9.5) 28.2 (9.2) 19.0 (1.1) 17.9

Net finance (expense)/income (2.9) (0.8) 0.8 (0.2) (4.5) (7.6) (1.8) (9.4) – (9.4)

NET OPERATING PROFIT/(LOSS): SEGMENT RESULT* 32.5 (2.4) 1.4 3.1 (14.0) 20.6 (11.0) 9.6 (1.1) 8.5

* See accounting policy note (w).

Year ended 31 December 2012

Core Dis-Agri- Infra- Support Head operating Trans-Continuing continued


Segment operating assets 136.8 85.4 16.2 46.3 – 284.7 – 284.7 0.7 285.4

Other investments – – – – 0.1 0.1 – 0.1 – 0.1

Investment in jointly controlled entity – – – – 37.4 37.4 – 37.4 – 37.4

Unallocated assets/interest bearing assets – – – – 5.6 5.6 – 5.6 – 5.6

TOTAL ASSETS 136.8 85.4 16.2 46.3 43.1 327.8 – 327.8 0.7 328.5

Segment operating liabilities 60.9 15.9 9.5 18.5 – 104.8 – 104.8 0.5 105.3

Unallocated liabilities/interest bearing liabilities – – – – 49.0 49.0 – 49.0 – 49.0

TOTAL LIABILITIES 60.9 15.9 9.5 18.5 49.0 153.8 – 153.8 0.5 154.3

Depreciation of segment assets 2.7 3.5 0.6 1.5 0.2 8.5 1.1 9.6 – 9.6

Amortisation of segment assets 1.4 – 0.3 – – 1.7 0.5 2.2 – 2.2

Capital expenditure 7.2 3.0 0.6 3.0 0.2 14.0 0.3 14.3 – 14.3

76




15 months ended 31 December 2011

Core Dis-Agri- Infra- Support Head operating Trans- Continuing continued


Segment operating assets 112.2 82.1 15.3 46.4 – 256.0 53.0 309.0 0.3 309.3

Investments in associates – – – – 6.9 6.9 – 6.9 – 6.9

Other investments – – – – 1.7 1.7 – 1.7 – 1.7

Investment in jointly controlled entity – – – – – – – – – –

Unallocated assets/interest bearing assets – – – – 13.8 13.8 – 13.8 – 13.8

TOTAL ASSETS 112.2 82.1 15.3 46.4 22.4 278.4 53.0 331.4 0.3 331.7

Segment operating liabilities 47.1 13.2 9.0 16.9 – 86.2 39.5 125.7 0.1 125.8

Unallocated liabilities/interest bearing liabilities – – – – 50.2 50.2 – 50.2 – 50.2

TOTAL LIABILITIES 47.1 13.2 9.0 16.9 50.2 136.4 39.5 175.9 0.1 176.0

Depreciation of segment assets 2.3 4.1 0.6 1.5 0.2 8.7 1.2 9.9 – 9.9

Amortisation of segment assets 1.0 0.1 0.4 – – 1.5 0.6 2.1 – 2.1

Capital expenditure 6.4 4.7 0.8 0.5 0.1 12.5 30.9 43.4 – 43.4

Geographical analysisYear ended 31 December 2012

ConsolidatedSouthern East West Central continuing Discontinuing

Africa Africa Africa Africa Europe Americas Asia operations operation£m £m £m £m £m £m £m £m £m

Revenue by location of external customers 123.7 27.3 18.4 18.8 5.7 10.9 1.7 206.5 –

Revenue by location of assets 144.3 25.2 17.7 18.8 0.5 – – 206.5 –

Net assets 99.4 2.1 69.5 8.8 (5.9) – – 173.9 0.3

Capital expenditure 9.9 0.5 2.9 0.9 0.1 – – 14.3 –

15 months ended 31 December 2011

ConsolidatedSouthern East West Central continuing Discontinuing

Africa Africa Africa Africa Europe Americas operations operation£m £m £m £m £m £m £m £m

Revenue by location of external customers 100.3 36.5 16.2 10.0 19.0 6.4 188.4 0.2

Revenue by location of assets 128.2 35.9 14.7 8.9 0.7 – 188.4 0.2

Net assets/(liabilities) 66.4 10.7 65.1 20.3 (7.0) – 155.5 0.2

Capital expenditure 7.7 30.3 4.9 0.3 0.2 – 43.4 –

5. RevenueContinuing operations Discontinued operation Total

Year 15 months Year 15 months Year 15 monthsended 31 ended 31 ended 31 ended 31 ended 31 ended 31December December December December December December

2012 2011 2011 2011 2011 2011£m £m £m £m £m £m

Sale of goods 80.3 52.1 – – 80.3 52.1

Services 126.2 136.3 – 0.2 126.2 136.5

206.5 188.4 – 0.2 206.5 188.6

Included in Revenue from services is £1.7m in the Infrastructure division (2011: £nil) from barter transactions where goods inkind rather than cash was received for services rendered.



6. Group net operating costsYear 15 months

ended 31 ended 31December December

2012 2011£m £m

Cost of sales 146.9 137.9

Operating costs 77.1 81.0

Gain arising on fair valuation of biological assets (note 16)* (9.2) (27.4)

Other operating income (0.6) (18.0)

NET OPERATING COSTS 214.2 173.5

INCLUDED IN NET OPERATING COSTS ABOVE ARE:

Depreciation of property, plant and equipment 9.6 9.9

Amortisation of intangible assets (other than goodwill) 2.2 2.1

Share based payments (notes 24 and 27) 2.3 0.7

Operating lease rentals:

– Land and buildings 3.1 1.7

– Plant and machinery 0.2 –

– Aircraft 3.4 6.0

Staff costs (note 9) 35.0 41.4

Legal fees and listing costs 1.6 2.8

Gain on acquisition – ATdm (note 7)* – (4.0)

Gain on acquisition – Home Farms (note 7)* – (11.8)

Restructuring and reorganisation costs 4.0 –

Pre-operating losses 1.8 –

Acquisition costs – 0.5

Impairment of trade receivables 0.5 0.5

Impairment of other investments – 0.4

Loss on sale of property, plant and equipment 0.4 –

Profit on disposal of subsidiary – (0.5)

Included in the prior period result of the transportation segment are start up costs of £8.1m.

* In accordance with the requirements of IAS 1, the Directors have presented movements in the fair value of biological assets and gains arising on acquisition as separateitems on the face of the income statement to provide full visibility of these items.

Auditors remunerationYear 15 months


2012 2011£m £m

Fees payable to the Company’s auditors for the audit of the Company’s annual accounts 0.1 0.1

For the audit of the Company’s subsidiaries pursuant to legislation 0.3 0.4

Total audit fees 0.4 0.5

All services related to corporate finance transactions* – 0.8

Total fees payable to the Company’s auditors 0.4 1.3

* Fees relating to listing and share issues during the period.

78



7. Acquisition of subsidiaries7(a) Acquisition of subsidiaries in the current periodLONAGRO TANZANIAWith effect from 17 January 2012, the Group acquired 100% of the issued share capital of LonAgro Tanzania Limited for aconsideration of US$1.4m (£0.9 m). LonAgro Tanzania is based in Dar es Salaam, the commercial hub of Tanzania, and hasexclusive John Deere distributorship for Tanzania.

Fair value ValuesPre acquisition adjustment recognised oncarrying value on acquisition acquisition

£m £m £m

Inventory 0.1 – 0.1

Intangible assets related to franchise – 1.2 1.2

Trade and other payables (0.1) – (0.1)

Deferred tax liability – (0.3) (0.3)

NET IDENTIFIABLE ASSETS AND LIABILITIES – 0.9 0.9

Consideration paid – – 0.9

Goodwill on acquisition – – –

LonAgro Tanzania contributed £1.8m to the Group’s revenue and £0.4m loss before tax for the period between the date ofacquisition and the reporting date.

There were no significant transaction costs incurred to acquire the company.

7(b) Acquisition of subsidiaries in the prior periodAFEXWith effect from 1 January 2011, the Group acquired 100% of the issued share capital of Global Horizons Ltd a companyregistered in the Isle of Man (which via subsidiaries in Kenya and South Sudan trades as AFEX) for an initial consideration ofUS$3m (£1.9m). Further payments of up to US$5m (£3.1m) will be payable over two years based on an EBIT related earn-outformula. AFEX’s main focus of current operations is in supplying secure accommodation in Juba in the Republic of South Sudan.This infrastructure is in great demand from corporate clients, NGO’s, and Government Aid Agencies working in the Republic ofSouth Sudan.

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 1 January2011 is set out below:


£m £m £m

Property, plant and equipment 2.9 – 2.9


Trade and other receivables 1.6 – 1.6

Cash and cash equivalents 0.6 – 0.6

Trade and other payables (3.3) 0.1 (3.2)


Intangible related to customer relationships – 2.3 2.3

NET IDENTIFIABLE ASSETS AND LIABILITIES 1.9 1.9 3.8

Consideration paid 1.9

Contingent consideration 2.5

Goodwill on acquisition 0.6

The transaction costs incurred to acquire the company were £0.1m and have been expensed in operating costs in the incomestatement.

The goodwill arising on the acquisition of AFEX is attributable to the anticipated profitability of the distribution of the company’sservices to new customers and the value attributed to the skills and experience of the acquired work force.


In 2011, AFEX contributed £8.4m to the Group’s revenue and £0.7m profit to the Group’s profit before tax for the periodbetween the date of acquisition and the reporting date.

There have been no changes in the recognised amount of contingent consideration, which have been based on the futureprobability of the business.

FISH ON LINE (PTY) LIMITEDWith effect from 1 June 2011, the Group acquired 51% of the issued share capital of Fish On Line (Pty) Limited for an initialconsideration of £0.3m.

Pursuant to the share purchase agreement, the sellers have been granted a put option to sell their remaining 49% to Lonrhothree years after the signature date at a purchase price of 6x multiple of Fish On Line’s profit before tax for the 2014 financialyear end, which is capped at a maximum of South African Rand (ZAR) 35.0m (£3.0m).

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 1 June 2011 isset out below:


£m £m £m




Cash and Cash equivalents (0.8) – (0.8)


Loans and borrowings (0.2) – (0.2)



Non-controlling interest share (0.2)


Goodwill on acquisition –

The transaction costs incurred to acquire the company were £0.1m and have been expensed in operating costs in the incomestatement. The transaction has been accounted using the present access method as the non-controlling interest is consideredto have an ongoing interest in the results of the company. The put option liability has been calculated at £2.3m allowing for theeffect of discounting. The corresponding entry has been recorded as a debit to other reserves.

In 2011, Fish On Line (Pty) Limited contributed £5.8m to the Group’s revenue and £0.1m loss to the Group’s profit before tax forthe period between the date of acquisition and the reporting date.

80



7. Acquisition of subsidiaries (continued)7(b) Acquisition of subsidiaries in the prior period (continued)


GRINDROD PCA (now LONRHO LOGISTICS)With effect from 1 July 2011, the Group acquired 100% of the trading assets of South African based Grindrod PCA for aconsideration of ZAR 50m (£4.6m).

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 1 July 2011 isset out below:


£m £m £m



Cash and Cash equivalents 0.9 – 0.9






Contingent consideration –

Goodwill on acquisition 1.9


The goodwill arising on the acquisition of Grindrod PCA is attributable to the anticipated profitability of the distribution of thecompany’s services, and the experience and expertise of the acquired work force.

In 2011, Grindrod PCA contributed £17.2m to the Group’s revenue and £0.2m profit to the Group’s profit before tax for theperiod between the date of acquisition and the reporting date.


ALDEAMENTO TURISTICO DE MACUTI SARL “ATDM”On 30 September 2011, the Group acquired 80% of the issued share capital of ATdM from Cambria Africa Plc (formally LonZimPlc) for US$5.1m (£3.4m), which will be settled in cash over the next 5 years. Pursuant to the share purchase agreement, LonrhoHotels will also take responsibility for liabilities up to US$2.7m (£1.7m), the fair value of which has been determined at £1.2m.

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 30 September2011 is set out below:


£m £m £m

Property, plant and equipment 4.5 6.1 10.6



Non-controlling interest share (2.0)

Liabilities acquired not attributable to non-controlling interest 0.6

Deferred consideration 3.4

Gain on acquisition (4.0)


As a first phase Lonrho Hotels plans to refurbish existing property on the site to establish an easyHotel by Lonrho and providequality office space for key companies seeking to establish offices in Beira.

The negative goodwill arising on the acquisition of ATdM is attributable to the fair value of the property reflecting its currentdevelopment potential and arises as the vendor was unable to provide the necessary experience and funding required to exploitthe business fully and realise its fair value. The gain arising from negative goodwill of £4.0m is presented within operatingincome within the income statement.

In 2011, ATdM contributed £nil to the Group’s revenue and £nil profit to the Group’s profit before tax for the period between thedate of acquisition, and the reporting date.

82




HOME FARMSOn 31 August 2011 the Group acquired 100% of the issued share capital of Sportsgear Investments (Private) Limited, Burp TrackInvestments (Private) Limited and Crosshairs Point (Private) Limited collectively known as Home Farms for a consideration ofUS$60. Home Farms consists of 3 leased farms (20 year leases) and substantial leasehold buildings including a 58,000 squarefeet agricultural packhouse and high care unit.

The transaction has been accounted for by the purchase method of accounting. The fair value of the net assets at 31 August2011 is set out below:


£m £m £m

Intangible related to operating leases – 11.8 11.8


Trade and other payables – (0.1) (0.1)


Consideration paid –

Contingent consideration –

Gain on acquisition (11.8)


The negative goodwill arising on the acquisition of Home Farms is attributable to the beneficial lease arrangements acquired inrespect of leasehold land and buildings. No fair value has been attributed to the work force or customer relationships acquiredas these were considered immaterial. Working capital assets and liabilities at date of transition remain with the vendors. Thenegative goodwill arises as the vendors were unable to provide sufficient working capital to achieve the operations’ full potentialand did not have sufficient international experience to reach all potential markets.

The £11.8m benefit arising from the negative goodwill is presented within operating income within the income statement.

In 2011, Home Farms contributed £1.0m to the Group’s revenue and £0.5m loss to the Group’s profit before tax for the periodbetween the date of acquisition and the reporting date.


7. Acquisition of subsidiaries (continued)7(b) Acquisition of subsidiaries in the prior year (continued)

8. Discontinued operations 2012Support Services divisionFollowing a review by the Board in December 2012, the Group decided not to continue to support operations of Lonrho Waterand Swissta Mozambique. Costs of discontinuing the operation were less than £0.1m. The comparatives have been re-presentedaccordingly.

Year 15 monthsended 31 ended 31December December

2012 2011£m £m

CASH FLOWS FROM DISCONTINUED OPERATION

Net cash used in operating activities (0.1) –

Net cash from financing activities – –

NET MOVEMENT IN CASH AND CASH EQUIVALENTS (0.1) –

2011Fly540 UgandaFollowing a review by the Board in December 2011, the Group decided not to continue to support air freight operations ofFly540 Uganda Ltd, which consequently ceased trading. Costs of discontinuing the operation in 2011 were less than £0.1m.

15 monthsended 31

December2011£m

CASH FLOWS FROM DISCONTINUED OPERATION

Net cash used in operating activities (1.7)

Net cash from financing activities 1.9

NET MOVEMENT IN CASH AND CASH EQUIVALENTS 0.2

9. Staff numbers and costsThe aggregate remuneration comprised (including Directors):

Group Company

Year 15 months Year 15 monthsended 31 ended 31 ended 31 ended 31December December December December

2012 2011 2012 2011£m £m £m £m

Wages and salaries 33.4 39.4 4.0 5.6

Compulsory social security contributions 1.3 1.8 0.4 0.5

Share based payments 2.3 0.7 2.3 0.7

Pension costs 0.3 0.2 0.3 0.2

37.3 42.1 7.0 7.0

84



The average number of employees (including Executive Directors) was:

Group Company

Year 15 months Year 15 monthsended 31 ended 31 ended 31 ended 31December December December December

2012 2011 2012 2011Number Number Number Number

Infrastructure 265 234 – –

Agribusiness 2,388 1,634 – –

Transportation 288 521 – –

Support services 838 902 – –

Hotels 480 364 – –

Central 27 30 21 21

4,286 3,685 21 21

REMUNERATION OF DIRECTORSDetailed disclosure of remuneration of Directors is given in the Directors’ Remuneration Report.

10. Net finance incomeYear 15 months


2012 2011£m £m

Bank interest receivable 0.7 0.8

Foreign exchange gain 4.9 6.0

FINANCE INCOME 5.6 6.8

Interest on loans repayable within five years and overdrafts (10.6) (8.6)

Foreign exchange loss (3.7) (7.1)

Interest on finance leases (0.4) (0.5)

FINANCE EXPENSE (14.7) (16.2)

NET FINANCE EXPENSE (9.1) (9.4)

Included in interest payable on loans repayable within five years and overdrafts of £10.6m is an amount of £2.3m (2011: £nil)relating to the premium payable at the maturity of the US$70m 7.0% Guaranteed Convertible Bonds due 2015 (refer to note 31).


9. Staff numbers and costs (continued)

11. Transfer of subsidiary to jointly controlled entityOn the 29 June 2012 Lonrho Plc transferred its Transportation division headed by Lonrho Aviation BVI to a jointly controlledentity Rubicon Diversified Investments Plc (‘Rubicon’), renamed FastJet Plc (‘FastJet’) on the 6 August 2012, resulting in a 73.6%equity interest in FastJet immediately post the transaction with a market value of £55.7m represented by 1,160,037,455 ordinaryshares in FastJet at 4.8p per share. Due to the terms of the articles of association, shareholder agreements in place and boardconstitution the Directors do not consider that Lonrho has control of FastJet. The Directors consider that, due to thecomposition of the board of Directors of FastJet, Lonrho controls this entity jointly with easyGroup and as such the Group'sinterest in FastJet is consolidated as a jointly controlled entity. In accordance with IFRS3 (2008) the interest in FastJet wasrecognised at its fair value at the date of transaction and the resulting gain recognised in the income statement. The assets andliabilities transferred to FastJet and the gain at 29 June 2012 are set out in the table below:

29 June2012£m

ASSETS

Goodwill 0.1

Other intangible assets 3.4

Property, plant and equipment 30.7

Inventories 2.9

Trade & other receivables 11.7

TOTAL ASSETS 48.8

LIABILITIES

Loans and borrowings (1.1)

Deferred tax (0.2)

Obligations under finance leases (19.3)

Trade & other payables (15.2)

Bank overdraft (Net) (3.5)

TOTAL LIABILITIES (39.3)

NET ASSETS 9.5

Fair value of jointly controlled entity 55.7

Net assets of subsidiary contributed (9.5)

Non-controlling interests * (8.6)

Liabilities recognised on transaction and held in provisions (1.5)

Costs relating to transaction (2.1)

Cumulative foreign exchange translation differences recognised (0.5)

Gain on contribution of subsidiary to jointly controlled entity 33.5

* Non-controlling interest represents the accumulated share of results attributable to non-controlling interest of the Lonrho Aviation Group immediately prior to thetransaction.

86



12. Income tax expenseYear 15 months


2012 2011Recognised in the income statement £m £m

CURRENT TAX EXPENSE Current period 0.6 1.6

DEFERRED TAXCredit for the period (0.9) (1.3)

TOTAL INCOME TAX (CREDIT)/EXPENSE IN THE INCOME STATEMENT (0.3) 0.3


2012 2011Reconciliation of effective tax rate £m £m

(Loss)/profit before tax (6.3) 0.8

Income tax using the domestic corporation tax rate (1.5) 0.2

Irrecoverable withholding taxes 0.3 0.2

Effect of tax rates in foreign jurisdictions (2.7) (7.3)

Capital losses utilised in respect of gain on contribution of subsidiary to jointly controlled entity (8.2) –

Impairment of jointly controlled entity non taxable 1.9 –

Reversal of provision against carrying value of associate – 1.0

Losses for which deferred tax is unrecognised 8.5 10.5

Effect of tax losses utilised (2.3) (1.5)

Non taxable items 3.7 (2.8)

TOTAL TAX EXPENSE (0.3) 0.3

UK Corporation tax is calculated at a rate of 24.5% (2011: 26.8%) of the estimated assessable loss (2011: profit) for the year.Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Recognised in other comprehensive income and equityThere is no material taxation effect arising on transactions recorded in other comprehensive income and equity.


13. Earnings per shareThe calculation of the basic and diluted profit per share is based on the following data:


2012 2011£m £m

(Loss)/profit for the purposes of basic earnings per share being net profit attributable toequity holders of the parent (1.7) 6.0

(Loss)/profit for the purposes of diluted earnings per share (1.7) 6.0

Number of shares (millions)2012 2011No. No.

Weighted average number of ordinary shares for the purposes of basic earnings per share 1,574.2 1,236.1

Effect of dilutive potential ordinary shares:

– Share options 1.8 20.1

Weighted average number of ordinary shares for the purposes of diluted earnings per share* 1,576.0 1,256.2

* The calculation of diluted earnings per share is based on the weighted average number of shares outstanding. The weighted average number of ordinary sharesoutstanding during the period was considered in light of the Convertible Bond (note 31). The potential ordinary shares associated with the bond issue are consideredanti-dilutive as their conversion to ordinary shares would increase earnings per share from continuing operations. The weighted average number of ordinary shares hastherefore not been adjusted in respect of the potential ordinary shares associated with the bond issue.

Earnings per shareYear 15 months


2012 2011

(Loss)/earnings per share (0.11p) 0.49p

(Loss)/Diluted earnings per share (0.11p) 0.48p

88




14. Intangible assetsDevelopment Customer Intellectual Contractual

Goodwill costs Franchises relationships Brands property rights Licences Total£m £m £m £m £m £m £m £m £m

COST

Balance at 1 October 2010 16.1 – 1.7 3.4 1.0 0.1 – 0.2 22.5

Additions – 0.2 – – 0.4 – 4.5 – 5.1

Acquired through business combinations 2.5 – – 3.6 – – 11.8 – 17.9

Effect of movements in foreign exchange rates (0.2) – – (0.1) – – (0.9) – (1.2)

BALANCE AT 31 DECEMBER 2011 18.4 0.2 1.7 6.9 1.4 0.1 15.4 0.2 44.3

Balance at 1 January 2012 18.4 0.2 1.7 6.9 1.4 0.1 15.4 0.2 44.3

Additions – 0.2 – – – – – 0.2 0.4

Acquired through business combinations – – 1.2 – – – – – 1.2

Transfer of subsidiary to jointly controlled entity (0.1) – – – – (0.1) (4.4) (0.2) (4.8)

Effect of movements in foreign exchange rates (0.2) – – (0.1) – – (1.1) – (1.4)

Transfer to discontinued operations (0.6) – – – – – – – (0.6)

BALANCE AT 31 DECEMBER 2012 17.5 0.4 2.9 6.8 1.4 – 9.9 0.2 39.1

AMORTISATION AND IMPAIRMENT

Balance at 1 October 2010 0.6 – 0.2 0.7 0.8 – – 0.2 2.5

Amortisation for the period – – 0.3 0.7 0.3 0.1 0.7 – 2.1

BALANCE AT 31 DECEMBER 2011 0.6 – 0.5 1.4 1.1 0.1 0.7 0.2 4.6

Balance at 1 January 2012 0.6 – 0.5 1.4 1.1 0.1 0.7 0.2 4.6

Amortisation for the year – – 0.4 0.7 0.1 – 1.0 – 2.2

Transfer of subsidiary to jointly controlled entity – – – – – (0.1) (1.0) (0.2) (1.3)

Effect of movements in foreign exchange rates – – – – – – (0.1) – (0.1)

Transfer to discontinued operations (0.6) – – – – – – – (0.6)

BALANCE AT 31 DECEMBER 2012 – – 0.9 2.1 1.2 – 0.6 – 4.8

CARRYING AMOUNTS

At 1 October 2010 15.5 – 1.5 2.7 0.2 0.1 – – 20.0

At 31 December 2011 17.8 0.2 1.2 5.5 0.3 – 14.7 – 39.7

AT 31 DECEMBER 2012 17.5 0.4 2.0 4.7 0.2 – 9.3 0.2 34.3

Amortisation and impairment chargeThe amortisation and impairment charge is recognised in the operating costs line of the income statement.

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected tobenefit from that business combination. The carrying amount of goodwill had been allocated as follows:

2012 2011Primary Reporting Segment CGU £m £m

AGRIBUSINESS Rollex (Pty) Limited 7.9 7.7

Trak Auto Lda 0.8 0.8

Oceanfresh Seafoods (Pty) Limited 0.5 0.5

Lonrho Logistics (Pty) Limited 1.5 1.9

10.7 10.9

INFRASTRUCTURE Luba Freeport Limited 3.5 3.4

KwikBuild Corporation Limited 2.7 2.8

6.2 6.2

TRANSPORTATION Five Forty Aviation Limited – 0.1

– 0.1

SUPPORT SERVICES Global Horizons Limited 0.6 0.6

0.6 0.6

TOTAL 17.5 17.8

At 31 December 2012 the Directors have reconsidered the economic lives attributed to these assets and consider they remainappropriate. No cash generating unit is considered to have any individual significant amount of goodwill.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impairedwhich include the current economic environment. The recoverable amounts are determined from value in use calculations. Thekey assumptions for the value in use calculations are those regarding discount rates, growth rates, expected changes to sellingprices and direct costs during the periods considered.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of moneyand the risks specific to the units. The growth rates are based on management’s assessment of the markets in which thebusinesses are operating and reflect known contracts and customer relationships combined with anticipated growth in marketsand market share. Industry growth forecasts are not always considered applicable as many of the businesses are operating innon-established markets. Changes in the selling prices and direct costs are based on past practices and expectations of futurechanges in the individual markets.

The Group prepares cash flow forecasts derived from the most recent financial budgets included in the individual reportingunit’s three year business plan which are approved by the Board. The Directors consider cashflow for a five year period as well aterminal value in the sixth year in determining value in use. The forecasts used for these businesses are the three year planapproved by the Board with years 4 and 5 based on year 3 performance escalated for growth rate determined for eachindividual company considering historic and future compounded annual growth rates. The growth rates used for the year 4 and5 forecast within Agribusiness are Rollex (Pty) Limited 4% (2011: 12%), Trak Auto Lda 10% (2011: 12%), Oceanfresh Seafoods (Pty)Limited 5% (2011: 12%), Lonrho Logistics (Pty) Limited 6% (2011: 12%); Infrastructure, Luba Freeport Limited 8% (2011: 10%) andKwikBuild Corporation Limited 16% (2011: 20%); and Support Services being Global Horizons Limited 6% (2011: 12%). The onlyexceptions are for Luba Freeport Limited, reflecting the significant capital investments in the project and the length of theremaining operating concession (16 years), the Directors have extended the 3 year forecast approved by the Board to reflect theremaining life of the concession in determining value in use. For KwikBuild Corporation, reflecting the challenges faced indelivering certain contracts, the directors have adjusted the 3 year forecast approved by the Board to reflect latest managementexpectations. The directors are satisfied that, based on these revised forecasts, sufficient headroom exists for no impairment tobe required as at 31 December 2012. This will be revisited in future years when an impairment charge may be required if theplanned improvements to this business do not materialise. The pre-tax rates used to discount the forecast cash flows withinAgribusiness are Rollex (Pty) Limited 13% (2011: 12%), Trak Auto Lda 15% (2011: 12%), Oceanfresh Seafoods (Pty) Limited 13%(2011: 12%), Lonrho Logistics (Pty) Limited 13% (2011: 12%); Infrastructure, Luba Freeport Limited 13% (2011: 10%) and KwikBuildCorporation Limited 15% (2011: 20%); and Support Services being Global Horizons Limited 15% (2011: 12%).

Management carried out a range of sensitivity analysis on all the assumptions used for each business. There is no single factorimpacting the sensitivity of the CGU analysis, other than the continued growth in the core markets as noted. The results of thisanalysis confirmed that there was sufficient headroom in the carrying value of goodwill for these entities.

90



14. Intangible assets (continued)

Other than as noted above, the Directors do not consider that any reasonably possible scenario currently foreseen could resultin goodwill impairment.

Estimates and judgementsThe Directors believe that the estimates and judgments used in preparing these financial statements would not have a materialimpact on the carrying values of the intangible assets described above. The Directors’ do not consider there to be any indicatorsof impairment on the other intangible assets.

15. Property, plant and equipmentLong Short

leasehold leasehold land and land and Plant and Fixtures andbuildings buildings machinery fittings Aircraft Total

£m £m £m £m £m £m

COST

Balance at 1 October 2010 40.9 63.6 12.1 6.0 5.5 128.1

Additions 1.2 2.8 8.0 1.7 29.7 43.4

Business combinations 10.6 2.0 0.9 0.7 – 14.2

Revaluations 6.6 0.1 – – – 6.7

Disposals (0.2) – (0.8) (0.1) (2.1) (3.2)

Effect of movements in foreign exchange 1.9 1.0 (0.4) 1.3 1.0 4.8

BALANCE AT 31 DECEMBER 2011 61.0 69.5 19.8 9.6 34.1 194.0

Balance at 1 January 2012 61.0 69.5 19.8 9.6 34.1 194.0

Additions* 0.2 4.8 5.9 3.1 0.3 14.3

Revaluations 2.3 – – – – 2.3

Disposals (0.1) (0.3) (1.1) (0.2) (3.3) (5.0)

Elimination of subsidiary to jointly controlled entity – – (1.2) (1.7) (30.6) (33.5)

Transfer between asset class – – 0.6 (0.6) – –

Effect of movements in foreign exchange (5.4) (3.3) (1.7) (1.0) (0.5) (11.9)

BALANCE AT 31 DECEMBER 2012 58.0 70.7 22.3 9.2 – 160.2

DEPRECIATION AND IMPAIRMENT LOSSES

Balance at 1 October 2010 0.8 9.4 5.8 1.9 1.0 18.9

Depreciation charge for the period 0.2 4.2 3.1 1.6 0.8 9.9

Eliminated on revaluation (0.4) (0.1) – – – (0.5)

Disposals – – (0.7) – (0.3) (1.0)

Effect of movements in foreign exchange 0.1 0.3 (0.3) 0.4 – 0.5

BALANCE AT 31 DECEMBER 2011 0.7 13.8 7.9 3.9 1.5 27.8

Balance at 1 January 2012 0.7 13.8 7.9 3.9 1.5 27.8

Depreciation charge for the year 0.3 3.7 3.2 1.5 0.9 9.6

Eliminated on revaluation (0.2) – – – – (0.2)

Disposals (0.1) (0.2) (0.7) (0.1) (0.9) (2.0)

Elimination of subsidiary to jointly controlled entity – – (0.4) (0.9) (1.5) (2.8)

Effect of movements in foreign exchange – (0.8) (1.2) (0.2) – (2.2)

BALANCE AT 31 DECEMBER 2012 0.7 16.5 8.8 4.2 – 30.2

CARRYING AMOUNTS

At 1 October 2010 40.1 54.2 6.3 4.1 4.5 109.2

At 31 December 2011 60.3 55.7 11.9 5.7 32.6 166.2

At 31 December 2012 57.3 54.2 13.5 5.0 – 130.0

* Additions of £14.3m include £1.7m for non cash items.


14. Intangible assets (continued)

In the current period, the Company had fixed assets brought forward with a net book value of £0.4m (2011: £0.4m). During theperiod, the Company acquired fixed assets for £0.1m (2011: £0.1m). The depreciation charge for the period was £0.2m (2011:£0.1m). The net book value as at 31 December 2012 was £0.3m (2011: £0.4m). These fixed assets relate to fixtures and fittings.

Leased plant and machinery and aircraftAt 31 December 2012, the net carrying amount of leased assets was £4.0m (2011: £25.1m). See note 25 for details of the leaseobligations.

Long leasehold land and buildingsIn 2010 £25.5m of long leasehold land and buildings were recognised in relation to the valuation of the land assigned under theconcession agreement from GEPetrol, following the completion of Phase 1 development at Luba Freeport and capitalisation ofLonrho loans. The value had not previously been recognised as assignment and availability of the land was effectivelyestablished following Phase 1 development completion. Depreciation has not yet commenced on this asset as it has yet to beput into service.

Long leasehold land and buildings relating to Hotel Cardoso SARL were revalued in December 2012 by SC Property ValuationServices CC, independent valuers, on the basis of the profit method of valuation. The valuations conform to InternationalValuation Standards and were based on historical feasabilities and comparative market information reflecting the currentdemand for hotels in the relevant cities. A revaluation gain of £2.5m has arisen on Hotel Cardoso.

On 31 December 2012, had revalued long leasehold land and buildings been carried at historical cost less accumulateddepreciation, their carrying amount would be approximately £0.6m (2011: £0.8m). The revaluation surplus is disclosed innote 24. The revaluation surplus arises in a subsidiary and cannot be distributed to the parent due its legal restrictions in thecountry of incorporation.

Assets in the course of constructionIncluded within short leasehold land and buildings are assets in the course of construction totalling £2.6m (2011: £1.6m) whichare not depreciated until they are brought into use. Assets of £nil (2011: £nil) were brought into use in the period.

Capital commitmentsDetails of capital commitments in relation to property, plant and equipment are disclosed in note 33.

Borrowing costsThe amount of borrowing costs in respect of interest capitalised during the year was £nil (2011: £nil) and has been includedwithin long leasehold land and buildings.

16. Biological assetsStone fruit orchards Blueberries Livestock Total

£m £m £m £m

Balance at 1 January 2012 32.8 0.9 0.1 33.8

Transfer to inventory (0.2) – – (0.2)

Due to physical changes – 2.6 – 2.6

Changes in assumption: reduction in farming costs 1.4 – – 1.4

Changes in assumption: reduction in WACC 5.2 0.2 – 5.4

Changes in assumption: reduction in stone fruit yields (4.4) – – (4.4)

Discount unwinding 3.9 0.3 – 4.2

Foreign exchange movements (2.3) (0.1) – (2.4)

31 December 2012 36.4 3.9 0.1 40.4

The Group has a 200 hectare fruit orchard that grows a range of stone fruits, primarily peaches (188 hectares), and blueberrybushes (12 hectares) which are part of a longer term farming operation. The stone fruit orchard was planted in 3 Phases(Phase 1, Phase 2 and Phase 3) over the period 2009 to 2011. The stone fruit trees take an average of 5 years to become fullymature to give maximum yields and have on average 15 years of minimum productive life cycle thereafter. The blueberry bushesplantation was also planted in 3 Phases (Phase 1, Phase 2 and Phase 3) over the period 2010 to 2012. The blueberry bushes takean average of 3 years to become fully mature to give maximum yields and have on average 10 to 12 years of minimumproductive life cycle thereafter. In the initial one to two years of life, the fair value of the plantation cycle is not consideredmaterial due to the risks attached to the startup operations.

Under IAS 41, Biological Assets are required to be accounted for at fair value less costs to sell. Fair value less cost to sell isdetermined by reference to the net present value of the biological asset at the reporting date. The calculation of the stone fruit

92



15. Property, plant and equipment (continued)

and blueberries is based upon the expected life of the trees and bushes and the anticipated yield of each tree and bush per yearof life. These yields are multiplied by the anticipated selling price of each variety of stone fruit and blueberry based on thecurrent market price. Market price can be volatile depending on the date of harvest which can affect the quality of the product.Management has sought to use prices that are considered conservative with regards to long term market trends.

Associated farming costs and cost of sales of the farm are then deducted from the forecast income to give a net income foreach of the years of production of the peaches and blueberries. The net income is discounted at 12.70% (2011: 14.86%) beingthe group weighted average cost of capital of 8.7% (2011: 10.86%) plus 4% as a farming industry risk factor. The movement in fairvalue arising on foreign exchange is taken to reserves (£2.4m), the transfer to inventory is taken to the balance sheet (£0.2m) andthe remaining net movement is taken to the income statement (£9.2m).

The change in discount rate to 12.70% (2011: 14.86%) has resulted in a fair value increase of £5.4m (stone fruit £5.2m, blueberries£0.2m).

As the biological asset matures the discount rate unwinds year on year to give a movement in the fair value. Both fair value gainsand losses are taken to the income statement for the relevant year and disclosed as other operating income or other operatingcosts as required by IAS 41. The unwinding of the discount rate has led to a fair value gain of £4.2m (stone fruit £3.9m,blueberries £0.3m).

The base currency for the fair value calculations is the South African Rand as the market price for peaches and blueberries isdetermined in that currency and the biological asset is held in a Rand functional currency entity. Each year after initialrecognition there will be a foreign exchange movement on the opening fair value. The exchange rate used on 31 December2012 is 13.6859 (Rand to the Pound) (2011: 12.5437). This has resulted in a negative movement on opening fair value of £2.4marising on foreign exchange (stone fruit £2.3m, blueberries £0.1m).

At the point of harvest, the harvested fruits will be transferred to inventory and accounted for under IAS 2 – Inventory. In thecurrent period the stone fruit harvest amounted to £0.2m (2011: £0.1m).

The Group has used a third party to assist in its assessment of future yields for the biological assets.

In 2012, the life cycle for Phases 1, 2 and 3 progressed to reach a point where Phase 1 (48 hectares) is due to yield in full in 2013,Phase 2 (92 hectares) is due to yield at approximately 67% in 2013 and Phase 3 (48 hectares) is due to yield at approximately30% in 2013. Long term yield forecasts were revised down in the current year by 11%. This resulted in a net fair value loss of£4.4m.

In 2012, a phase 2 and phase 3 planting program of blueberry bushes has been completed. The value of these bushesrecognised at 31 December 2012 is £2.6m (Phase 1 £0.2m, Phase 2 and 3 £2.4m).

As the orchard matures the associated costs of farming also become more stable and combined with savings generated fromimproved efficiencies of scale and better use of technology this has resulted in a further increase in fair value of the totalorchard of £1.4m for the period. The orchard is part of a larger farming operation incorporating the growing of cash crops whichhave further reduced the farming costs directly associated to the stone fruit orchard.

Over the life of the orchard, the fair value will be affected each year by the unwinding of the discount factors and this figure isan increase in value of £4.2m for the current period (2011: £0.5m).

Sensitivities over critical assumptions are included here: A 1% change in discount rate would affect the value by £2.7m; a 10%change in harvested yields would alter the valuation by £3.8m; and a 10% change in market prices would impact the valuation by£4.9m.

The Directors note that there is significant estimation and judgment in the valuation of the biological assets. There is alsosignificant operational risk associated with the orchard including flooding, frost impact and general loss of plantation andharvest.

At 31 December 2012 stone fruit trees comprised approximately 177,300 peach trees and 31,800 blueberry bushes (2011:181,000 peach trees and 12,700 blueberry bushes) which range from newly established trees to plantations that are 3 years oldand are producing fruit for current harvest.

At 31 December 2012 livestock comprised 153 cattle, of which nil (2011: nil) are less than one year old and considered to beimmature assets. During the year the Group did not sell any cattle.


16. Biological assets (continued)

17. Investments in subsidiariesThe principal investment by the Company is in respect of Lonrho Africa (Holdings) Limited is stated at cost. This is subject toimpairment testing.

A list of principal subsidiaries is set out in note 36.

18. Investments in associatesGroup Company

2012 2011 2012 2011£m £m £m £m

At 1 January 2012/1 October 2010 6.9 10.3 5.9 7.7

Additions to associate – 2.5 – 1.2

Share of (loss) after taxation – associates (2.6) (1.6) – –

Provisions in the year/period (2.0) (4.3) (4.6) (3.0)

Disposals (2.3) – (1.3) –

AT 31 DECEMBER – 6.9 – 5.9

Disposal of associatesDuring the year, the Company disposed of its interest in Cambria Africa Plc (formally LonZim Plc). In addition the Groupdisposed of its interest in Lucapo Diamond Company Limited (formally Lonrho Mining Limited). The share of results of associateson the income statement includes the trading results for the period when the Group had significant influence, as well as theprofit/loss on disposal.

Cambria LucapoAfrica Plc Diamond Co Total

£m £m £m

Carrying value at 1 January 2012 5.9 1.0 6.9

Share of losses recognised in year (4.6) – (4.6)

Net book value at date of disposal 1.3 1.0 2.3

Sale proceeds 1.1 1.4 2.5

(Loss)/gain on disposal (0.2) 0.4 0.2

The Group had the following investments in associates at the 2011 reporting date. The Group has no interest in associates at31 December 2012.

Ownership ofCountry ordinary share capital

2012 2011

Associates

Cambria Africa Plc (formally LonZim Plc) Isle of Man 0% 22.92%

Lucapo Diamond Company Limited (formally Lonrho Mining Ltd) Australia 0% 13.96%

19. Investments in jointly controlled entity and other InvestmentsInvestments in jointly controlled entity

2012 2011£m £m

At 1 January 2012/1 October 2010 – –

Transfer from subsidiary (note 11) 55.7 –

Share of loss for the period (10.6) –

Impairment of investment in jointly controlled entity (7.7) –

AT 31 DECEMBER 37.4 –

The investment in jointly controlled entity represents the Group’s interest in FastJet Plc.

FastJet PlcThe market value of the Group's investment in FastJet Plc at 31 December 2012 was £44.4m (31 December 2011: £nil) with abook value of £37.4m (31 December 2011: £nil). At 27 March 2013, the market value of the Group's investment in FastJet was

94



£28.4m. FastJet has not released its audited results for the period to 31 December 2012 at the date of this report andaccordingly the Directors have included an estimate of the Group’s share of the results of FastJet for the period from 29 June2012 to 31 December 2012. This estimate has been derived from management accounts of FastJet updated to include anoverlay for appropriate IFRS adjustments. This process includes the application of judgements and assumptions but the directorsconsider the amounts disclosed to be materially accurate. Whilst there were no individually significant estimates used in thisprocess it is possible that the reported result of FastJet will differ from those assumed.

The carrying amount of jointly controlled entities are assessed at each reporting date to determine whether there is anyobjective evidence that it is impaired and if any such indication exists, an impairment charge is recorded in the incomestatement. Due to current market conditions experienced by FastJet, an impairment review has been carried out which resultedin an impairment charge being recorded in the income statement of £7.7m.

Summary of financial information on jointly controlled entityRevenues Loss

for the for theAssets Liabilities Equity period period

£m £m £m £m £m

2012

FastJet Plc 100.8 (50.9) 49.9 21.7 (17.0)

Other Investments2012 2011£m £m

At 1 January 2012/1 October 2010 1.7 0.6

Additions – 0.1

Fair value gain – 1.4

Impairment charge – (0.4)

Disposals (1.3) –

Elimination of subsidiary to jointly controlled entity (0.3) –

AT 31 DECEMBER 0.1 1.7

During the year the Group disposed of its interest in SouthWest Energy. The impact of this is shown below:

SouthWestEnergy2012£m

Carrying value at 1 January 2012 1.3

Sale proceeds 1.0

Loss on disposal (0.3)

20. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Assets Liabilities

2012 2011 2012 2011£m £m £m £m

At 1 January 2012/1 October 2010 1.8 0.7 4.1 3.0

Origination of temporary timing differences 1.4 1.3 – –

Reversal of temporary timing differences (1.2) – (0.7) –

On acquisition of subsidiary – – 0.3 0.8

Disposals – – (0.1) –

Elimination of subsidiary to jointly controlled entity – – (0.2) –

Exchange differences – (0.2) (0.1) 0.3

AT 31 DECEMBER 2.0 1.8 3.3 4.1

The deferred tax liability at 1 January 2012 and 1 October 2010 related to the revaluation of property, plant and equipment anddeferred tax liabilities recognised on acquired intangibles.


19. Investments in jointly controlled entity and other Investments (continued)

There have been no deferred tax assets and liabilities off-set in the current or preceding period.

The deferred tax asset relates to previous trading losses in certain Group companies. The asset will be recoverable in futureperiods, which is supported by the future cashflows of the relevant businesses. There are no expiry dates on the carry forward oflosses.

21. Inventories2012 2011£m £m

Raw materials and consumables 2.4 3.7

Finished goods 20.7 16.4

23.1 20.1

22. Trade and other receivablesGroup Company

2012 2011 2012 2011£m £m £m £m

Amounts receivable from the sale of goods and services 27.3 28.3 – –

Amounts due from associates – 0.1 – –

Other receivables 11.2 12.7 0.6 0.1

Pre-payments and accrued income 5.7 7.7 0.9 0.8

Amounts owed by Group undertakings – – 146.0 127.3

44.2 48.8 147.5 128.2

The average credit period taken on sales of goods and services is 50 days (2011: 56 days). No interest is charged on receivables.

The Directors consider the carrying amount of trade and other receivables for the Group and Company approximates to theirfair value.

2012 2011Movement in the allowance for doubtful debts £m £m

At 1 January 2012/1 October 2010 1.0 0.9

Increase in allowance recognised in the income statement 0.5 0.5

Utilised (0.2) (0.4)

Elimination of subsidiary to jointly controlled entity (0.1) –

AT 31 DECEMBER 1.2 1.0

Refer to note 31 for further information on credit risk management.

23. Cash at bank2012 2011£m £m

Bank balances 13.8 9.5

Bank overdrafts (5.9) (12.2)

CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS 7.9 (2.7)

The Company had a bank overdraft of £1.0m at 31 December 2012 (2011: bank overdraft of £0.7m).

Included in Cash at bank of £17.0m (2011 £12.7m) as presented in the Statement of financial position is £3.2m (2011: £3.2m)subject to restrictions on use that means it is not freely available and accordingly does not represent cash and cash equivalents.

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20. Deferred tax assets and liabilities (continued)


24. Capital and reservesGroup reconciliation of movement in capital and reserves

Attributable to equity holders of the parent

Share Non-Share Share Translation option Revaluation Retained Other controlling Totalcapital premium reserve reserve reserve earnings reserves Total interest equity

£m £m £m £m £m £m £m £m £m £m

At 1 October 2010 11.7 138.0 (8.7) 4.7 3.3 (36.1) (5.5) 107.4 20.3 127.7

Share capital issued 1.2 – – – – – 17.7 18.9 – 18.9

Share based payment charge – – – 0.7 – – – 0.7 – 0.7

Share options exercised 0.1 0.6 – – – – – 0.7 – 0.7

Costs associated with share issues – (0.4) – – – – – (0.4) – (0.4)

Non-controlling interest dividends – – – – – – – – (0.2) (0.2)

Profit/(loss) for the period – – – – – 6.0 – 6.0 (5.5) 0.5

Subsidiaries acquired – – – – – – – – 2.2 2.2

Subsidiaries disposed – – – – – – – – (0.2) (0.2)

Transfer between accounts – – – – (0.1) 0.1 – – – –

Revaluation of property, plant & equipment – – – – 4.2 – – 4.2 3.0 7.2

Non-controlling interest put option – – – – – – (2.3) (2.3) – (2.3)

Capital element of Convertible Bond – – – – – – 1.1 1.1 – 1.1

Elimination of non-controlling interest – – – – – (0.6) – (0.6) 0.6 –

Foreign exchange translation – – (1.7) – 1.7 (0.5) – (0.5) 0.3 (0.2)

AT 31 DECEMBER 2011 13.0 138.2 (10.4) 5.4 9.1 (31.1) 11.0 135.2 20.5 155.7

At 1 January 2012 13.0 138.2 (10.4) 5.4 9.1 (31.1) 11.0 135.2 20.5 155.7

Share capital issued* 2.7 – – – – – 20.4 23.1 – 23.1

Share based payment charge 0.1 0.8 – 1.4 – – – 2.3 – 2.3

Provision for warrants – – – 1.0 – – – 1.0 – 1.0

Share options exercised 0.2 0.9 – – – – – 1.1 – 1.1

Shares issued in relation to earn-out agreement – 0.4 – – – – – 0.4 – 0.4

Non-controlling interest dividends – – – – – – – – (0.2) (0.2)

Loss for the year – – – – – (1.7) – (1.7) (4.3) (6.0)

Elimination of subsidiary to jointly controlled entity _ _ 0.5 _ _ _ _ 0.5 8.6 9.1

Revaluation of property, plant & equipment – – – – 1.5 – – 1.5 1.0 2.5

Foreign exchange translation – – (10.8) – (1.6) (0.5) – (12.9) (1.9) (14.8)

AT DECEMBER 2012 16.0 140.3 (20.7) 7.8 9.0 (33.3) 31.4 150.5 23.7 174.2

* Share capital issued proceeds of £24.1m less non cash costs of £1.0m.

Share capital and share premium Ordinary shares

In millions of 1p shares 2012 2011

On issue at 1 January 2012/1 October 2010 1,298.6 1,171.8

Issued for cash 269.5 118.0

Shares issued to former director 8.2 –

Shares issued in relation to earn-out agreement 4.3 –

Exercise of share options 16.7 8.8

ON ISSUE AT 31 DECEMBER – FULLY PAID 1,597.3 1,298.6

On 3 January 2012, 269.5m new ordinary shares of 1p each were issued by a placing of shares at 10.0p per share. The placingstructure utilised attracted merger relief under Section 612 of the Companies Act 2006, resulting in a net credit to a mergerreserve of £204.4m. Subsequent internal transactions required to complete the placing structure have resulted in this becomingdistributable.

On 20 May 2011, 118.0m new ordinary shares of 1p each were issued by a placing of shares at 16.5p per share. The placingstructure utilised attracted merger relief under Section 612 of the Companies Act 2006, resulting in a net credit to a mergerreserve of £17.7m. Subsequent internal transactions required to complete the placing structure have resulted in this becomingdistributable.

The costs of share issues of £nil have been deducted from the share premium account (2011: £0.4 m).

On 13 September 2012, 8.2m ordinary shares of 1p were issued to a former director, David Lenigas (see Remuneration Report).The share price at that date was 10.3p. The cost of this award has been recognised in the income statement and thentransferred to share capital and share premium.

On 3 November 2012, 4.3m ordinary shares of 1p were issued in relation to the earn-out agreement with Trak Auto LDA. Theshare price at that date was 11.2p.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote pershare at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Company reconciliation of movement in capital and reservesShare Share Share Other Retainedcapital premium option reserve earnings Total

£m £m £m £m £m £m

At 1 October 2010 11.7 138.0 4.7 – (31.4) 123.0

Share capital issued 1.2 – – 17.7 – 18.9

Share options issued – – 0.7 – – 0.7

Share options exercised 0.1 0.6 – – – 0.7

Costs associated with share issues – (0.4) – – – (0.4)

Loss for the period – – – – (17.3) (17.3)

AT 31 DECEMBER 2011 13.0 138.2 5.4 17.7 (48.7) 125.6

At 1 January 2012 13.0 138.2 5.4 17.7 (48.7) 125.6

Share capital issued 2.7 – – 20.4 – 23.1

Share based payment charge 0.1 0.8 1.4 – – 2.3

Provision for warrants – – 1.0 – – 1.0

Share options exercised 0.2 0.9 – – – 1.1

Shares issued in relation to earn out agreement – 0.4 – – – 0.4

Loss for the year – – – – (21.6) (21.6)

AT 31 DECEMBER 2012 16.0 140.3 7.8 38.1 (70.3) 131.9

Translation reserveThe translation reserve comprises all foreign exchange differences arising from the translation of the financial statements offoreign operations since the conversion to Adopted IFRS on 1 October 2006.

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24. Capital and reserves (continued)

Revaluation reserveThe revaluation reserve relates to property, plant and equipment (see note 15).

Share based payment reserveThe share based payment reserve comprises the charges arising from the calculation of the share based payments posted to theincome statement (see note 27).

25. Interest-bearing loans and borrowingsThis note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For moreinformation about the Group’s exposure to interest rate and foreign currency risk, see note 31.

2012 2011£m £m

NON-CURRENT LIABILITIES

Finance lease liabilities 1.3 18.6

Bank loans 25.2 27.9

Debt related derivative financial instruments 0.1 –

Convertible bond 43.0 44.4

Shareholder loans 3.2 3.6

Other loans 4.8 0.8

77.6 95.3

CURRENT LIABILITIES

Finance lease liabilities 1.2 4.9

Bank loans 22.0 2.9

Shareholder loans 0.2 –

Other loans 0.7 0.1

Bank overdrafts 5.9 12.2

30.0 20.1

At the reporting date the Company had interest bearing loans of £nil (2011: £nil).

Finance leasesFinance lease liabilities are payable as follows:

2012 2011

Future Present value Future Present valueminimum of minimum minimum of minimum

lease lease lease leasepayments Interest payments payments Interest payments

£m £m £m £m £m £m

Less than one year 1.3 (0.1) 1.2 6.4 (1.5) 4.9

Between one and five years 1.4 (0.1) 1.3 13.6 (4.8) 8.8

More than 5 years – – – 11.6 (1.8) 9.8

2.7 (0.2) 2.5 31.6 (8.1) 23.5

Interest is payable on the leases within a range of 7.8% to 25% per annum. Under the terms of the lease agreements, nocontingent rents are payable.


24. Capital and reserves (continued)

Bank overdraftsBank overdrafts are repayable on demand and are unsecured. The currency profile is as follows:

2012 2011£m £m

South African Rand 3.8 5.7

Central African Franc – 0.3

US Dollar 0.1 5.5

Sterling 1.0 0.7

Mozambique Metical 0.6 –

Tanzanian Shilling 0.2 –

Botswana Pula 0.2 –

5.9 12.2

The weighted average interest rates paid were 8.9% (2011: 10%).

The Company overdraft of £1.0m (2011: £0.7m) was denominated in sterling.

26. Shareholder loans2012 2011£m £m

Shareholder loans 3.4 3.6

3.4 3.6

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25. Interest-bearing loans and borrowings (continued)

27. Share optionsAt 31 December 2012 there were 97,250,000 (31 December 2011: 119,510,000) share options in issue with an average exerciseprice of 16.28p (2011: 15.73p). No share options were granted or re-priced in the current period.

The following share options were outstanding as at 31 December 2012:

Market price perNumber of share at

share options Exercise Period during date ofName Date granted granted Price which exercisable modification

Emma Priestley 13.01.2009 1,000,000 6.5p 13.01.2009–12.01.2014 5.8p

Geoffrey White 13.01.2009 2,000,000 6.5p 13.01.2009–12.01.2014 5.8p

David Armstrong 13.01.2009 1,000,000 6.5p 13.01.2009–12.01.2014 5.8p

Other employees and consultants 13.01.2009 1,750,000 6.5p 13.01.2009–12.01.2014 5.8p

David Lenigas 01.04.2010 20,000,000 13.75p 01.04.2010–31.03.2015 12.5p



Emma Priestley 01.04.2010 1,000,000 13.75p 01.04.2010–31.03.2015 12.5p


David Lenigas 04.08.2011 3,333,333 18.4p 04.08.2012–03.08.2016 16.75p

David Lenigas 04.08.2011 3,333,333 22p 04.08.2013–03.08.2016 16.75p

David Lenigas 04.08.2011 3,333,334 25p 04.08.2014–03.08.2016 16.75p


Geoffrey White 04.08.2011 3,333,333 22p 04.08.2013–03.08.2016 16.75p

Geoffrey White 04.08.2011 3,333,334 25p 04.08.2014–03.08.2016 16.75p


David Armstrong 04.08.2011 2,000,000 22p 04.08.2013–03.08.2016 16.75p

David Armstrong 04.08.2011 2,000,000 25p 04.08.2014–03.08.2016 16.75p


Other employees and consultants 04.08.2011 2,000,000 22p 04.08.2013–03.08.2016 16.75p

Other employees and consultants 04.08.2011 2,000,000 25p 04.08.2014–03.08.2016 16.75p


Total options in issue 97,250,000


The following share options were exercised during the period:

Number of Share price Pre tax gain at share options at date of date of exercise

Name Date granted exercised exercise Exercise price Date of exercise £

Emma Priestley 30.04.2007 1,250,000 8.36p 6.5p 21.06.2012 23,250

Jean Ellis 20.07.2007 350,000 8.36p 6.5p 21.06.2012 6,510

Jean Ellis 13.01.2009 500,000 8.36p 6.5p 21.06.2012 9,300

David Lenigas (former director) 13.01.2009 2,500,000 9.98p 6.5p 11.10.2012 87,000



Emma Priestley 20.07.2007 1,065,000 9.16p 6.5p 25.09.2012 28,329

Geoffrey White 30.04.2007 2,500,000 8.85p 6.5p 26.09.2012 58,750

Geoffrey White 20.07.2007 1,065,000 8.85p 6.5p 26.09.2012 25,028

Other employees and consultants 30.04.2007 875,000 11.25p 6.5p 24.04.2012 41,563



16,670,000

The number of shares exercised in the table above is 5,590,000 less than the number of share options granted at the respectivegrant date due to share options lapsed and forfeited. £1.1m was received from the exercise of the above share options.

In accordance with IFRS 2 ‘Share-based payments’ share options granted or re-priced during the year have been measured atfair value at the date of grant or re-pricing and, in the case of re-priced options, the increase in the fair value compared with thevalue of the original award at that date has been spread over the remaining vesting period. The fair value of the options grantedhas been estimated at the date of grant using the Black-Scholes option-pricing model.

Date of Grant

04.08.2011 04.08.2011 04.08.2011

Share price 16.75p 16.75p 16.75p

Exercise price 18.4p 22.0p 25.0p

Expected volatility 48.00% 56.00% 85.00%

Expected life 5 years 5 years 5 years

Expected dividends 0 0 0

Risk-free interest rate 1.46% 1.46% 1.46%

Volatility has been calculated by reference to the movement of the Company’s share price over the previous three and a halfyears.

All share options issued prior to 1 October 2010, vested at the date of grant and the basis of settlement is in shares of theCompany.

Long Term Incentive Plan:On 13 September 2012, 10,491,100 potential ordinary shares were awarded to two directors in accordance with a long termincentive plan.

The awards will be subject to a performance target based on the Company’s Total Shareholder Return (TSR). An initialcomparator index of 27 companies has been chosen from the FTSE Small Cap Support Services Index, the FTSE Food ProducersIndex and the FTSE 350 Food Processors Index. 25% of the shares subject to an award would vest if Lonrho’s TSR over theperiod from date of grant to vesting date was in the top half of the relative comparator index and 100% of the shares would vestif it was in the top quartile of the same index.

The Remuneration Committee may amend, vary or waive a performance target if events have occurred which cause theRemuneration Committee to consider that it has become unfair or impractical.

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27. Share options (continued)

Where an award vests before the intended vesting date in circumstances where the performance target cannot be measured inthe manner originally intended, the Remuneration Committee will determine the extent to which the award vests by referenceto the Company’s performance over the period from the date the award was granted to the date of vesting, having such regardto the performance target as it considers appropriate.

The income statement charge in 2012 for potential shares awarded under the long term incentive plan was not significant (lessthan £0.1m).

Refer to remuneration report for further details.

28. Trade and other payablesGroup Company

2012 2011 2012 2011£m £m £m £m

Trade payables 22.6 30.0 0.6 0.8

Amounts owed to Group undertakings – – 45.2 38.0

Indirect tax and social security liabilities 0.8 0.5 0.1 0.1

Deferred income 4.2 1.4 – –

Non-trade payables and accrued expenses 13.9 23.9 0.6 0.8

41.5 55.8 46.5 39.7

Group Company

2012 2011 2012 2011£m £m £m £m

Analysed as:

Current liabilities 37.2 39.7 1.3 1.7

Non-current liabilities 4.3 16.1 45.1 38.0

41.5 55.8 46.4 39.7

Trade payables principally comprise outstanding amounts for trade purchases and on-going costs. The average credit periodtaken for trade purchases is 59 days (2011: 85 days). The Directors consider that the carrying amount of trade and otherpayables approximates to their fair value.

29. ProvisionsAs at 31 December 2012, the Group had provisions of £1.5m being liabilities recognised as part of the FastJet Plc transaction.The Board expects this to be utilised within 1-5 years (Note 11).


27. Share options (continued)

30. Notes to the statements of cash flowsGroup Company

2012 2011 2012 2011£m £m £m £m

Depreciation of property, plant and equipment 9.6 9.9 0.2 0.2

Amortisation of intangible assets 2.2 2.1 – –

Impairment of investment – – 4.6 –

Impairment of jointly controlled entity 7.7 – – –

Loss on other investments 0.3 (1.0) 0.2 –

Contribution of subsidiary to jointly controlled entity (33.5) – – –

Foreign exchange (gain)/loss (1.2) 1.1 (1.7) 1.0

Share based payment charge 2.3 0.7 2.3 0.7

Finance income (0.7) (0.8) – (0.1)

Finance expense 11.0 9.1 8.4 –

Profit on disposal of subsidiary – (0.5) – –

Share of results of associates 4.4 5.9 – 3.0

Share of loss of jointly controlled entity 10.6 – – –

Loss on sale of property, plant and equipment 0.4 – – –

Gain arising on fair valuation of biological assets (9.2) (27.4) – –

Gain on acquisitions – (15.8) – –

Revenue in respect of barter transactions (1.7) – – –

Income tax (credit)/expense (0.3) 0.3 – 0.1

ADJUSTMENTS TO LOSS/PROFIT FOR THE YEAR/PERIOD 1.9 (16.4) 14.0 4.9

31. Financial instrumentsThe Company has no financial assets apart from the Trade and other receivables and amounts owed by Group undertakingsincluded within note 22. The Company applies a similar approach to credit risk management as the Group. The Directors believethat there are no significant credit risks to the Company at the reporting date.

Exposure to credit, liquidity, interest rate, market and foreign currency risks arise in the normal course of the Group’s business.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies andprocesses for measuring and managing risk, and the Group’s management of capital which the Directors consider to be thecomponents of Total Equity excluding minority interests. Further quantitative disclosures are included throughout theseconsolidated financial statements. The Board of Directors have overall responsibility for the establishment and oversight of theGroup’s risk management framework.

Credit risk managementCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.The Group has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral whereappropriate, as a means of mitigating the risk of financial loss from defaults. No collateral is held at the reporting date. TheGroup’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactionsconcluded is spread amongst approved counterparties.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoingcredit evaluation is performed on the financial condition of accounts receivable. The Group does not have any significant creditrisk exposure to any single counterparty or any Group of counterparties having similar characteristics. The credit risk on liquidfunds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

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The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents theGroup’s maximum exposure to credit risk without taking account of the value of any collateral obtained. At the reporting date,there were no significant credit risks. The maximum exposure to credit risk on customers at the reporting date was £38.5mbeing the total of the carrying amount of trade and other receivables as shown in the table below:

2012 2011£m £m

Cash at bank 17.0 12.7

Trade receivables 27.3 28.3

Other receivables 11.2 12.8

55.5 53.8

The ageing of trade receivables at the reporting date was:2012 2011£m £m

Not due 12.7 15.6

Past due 0-30 days 6.8 5.3

Past due 31-60 days 2.8 2.2

More than 60 days past due 5.0 5.2

27.3 28.3

The movement on the provision for doubtful debts is disclosed in note 22. The provision at the reporting date of £1.2m (2011:£1.0m) relates to and is included within trade receivables more than 60 days past due. Other amounts past due are consideredcollectible based on prior experience.

The maximum exposure to credit risk for trade receivables by geographic region was:

2012 2011£m £m

West Africa 2.3 1.9

Southern Africa 21.2 21.3

East Africa 0.5 4.4

Europe 1.0 0.7

North America 0.6 –

Rest of the World 1.7 –

27.3 28.3

Liquidity risk managementUltimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity riskmanagement framework for the management of the Group’s and Company’s short, medium and long term funding and liquiditymanagement requirements. The Group and Company manages liquidity risk by maintaining adequate reserves, banking facilitiesand reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles offinancial assets and liabilities.

31. Financial instruments (continued)

The Group had undrawn facilities in respect of uncommitted bank overdraft of £7.3m at 31 December 2012 (2011: £26.1m).

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effectof netting agreements:

2012

Carrying Contractual 1 year 1 to 2 to 5 yearsamount cash flows or less <2 years <5 years and over

£m £m £m £m £m £m

Bank overdrafts 5.9 5.9 5.9 – – –

Trade and other payables 41.5 41.5 37.2 3.2 1.1 –

Bank loans 47.2 52.7 24.6 10.6 15.5 2.0

Debt-related derivative financial instruments 0.1 0.1 – 0.1 – –

Finance leases 2.5 2.7 1.3 0.8 0.6 –

Shareholder loans 3.4 5.4 0.6 0.2 0.6 4.0

Convertible bond 43.0 55.0 3.0 3.0 49.0 –

Other loans 5.5 8.3 1.0 2.9 0.8 3.6

149.1 171.6 73.6 20.8 67.6 9.6

2011

Carrying Contractual 1 year 1 to 2 to 5 yearsamount cash flows or less <2 years <5 years and over

£m £m £m £m £m £m

Bank overdrafts 12.2 12.2 12.2 – – –

Trade and other payables 55.8 55.8 39.6 13.7 2.5 –

Bank loans 30.8 37.2 6.3 11.0 19.9 –

Finance leases 23.5 31.6 6.4 5.0 8.6 11.6

Shareholder loans 3.6 3.8 0.1 0.3 0.2 3.2

Convertible Bond 44.4 57.1 3.2 3.2 50.7 –

Other loans 0.9 0.9 0.1 0.8 – –

171.2 198.6 67.9 34.0 81.9 14.8

Convertible BondOn 15 October 2010, LAH Jersey Limited, a wholly-owned subsidiary company incorporated in Jersey, completed the offering ofUS$70m 7.0% Guaranteed Convertible Bonds due 2015, convertible into preference shares of LAH Jersey Limited at the holder’soption, immediately exchangeable for Ordinary Shares of, and unconditionally and irrevocably guaranteed by, Lonrho Plc.

The Bonds are convertible into Ordinary Shares of Lonrho Plc at an exchange price of 15.59p and at fixed exchange rate at anytime from 1 November 2010 to 8 October 2015, or, if the bonds shall have been called for redemption by LAH Jersey Limitedbefore 15 October 2015, the close of business on the day which is seven days before the date fixed for redemption. EachUS$10,000 principal amount of bonds will entitle the holder to convert into a US$10,000 paid-up value of preference shares ofLAH Jersey Limited. Upon a change of control the Bonds may be redeemed at the holder’s option at their early redemptionamount (together with accrued interest), to the date fixed for redemption. The Group is therefore exposed to market risk inrelation to the convertible bond.

If the conversion option is not exercised, the unsecured Convertible Bonds will be redeemed on 15 October 2015 at aredemption price equivalent to 106.0031% of their principal amount.

The net proceeds received from the issue of the Convertible Bonds have been split between the debt component and anembedded derivative component. This embedded derivative component represents the fair value of the equity conversion calloption held by the bondholders.

The interest charged for the year is calculated by applying an effective interest rate of 8.2%. This includes a coupon interest rateof 7.0% per annum. The Directors estimate the fair value of the liability component of the 7.0% convertible US Dollar Bonds 2015at 31 December 2012 to be approximately £38.7m. This fair value has been determined by reference to the market price at31 December 2012.

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In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effectiveinterest rates at the reporting date and the periods in which they re-price.

2012

Effectiveinterest 1 year 1-2 2-5 5 years

rate Total or less years years and over% £m £m £m £m £m

Cash at bank 0.2% 17.0 17.0 – – –

Loans 7.3% (56.1) (23.5) (2.7) (24.5) (5.4)

Finance lease liabilities 10.3% (2.5) (2.5) – – –

Convertible Bond 8.2% (43.0) – – (43.0) –

Bank overdrafts 8.9% (5.9) (5.9) – – –

(90.5) (14.9) (2.7) (67.5) (5.4)

2011

Effectiveinterest 1 year 1-2 2-5 5 years

rate Total or less years years and over% £m £m £m £m £m

Cash at bank 1.0% 12.7 12.7 – – –

Loans 7.8% (35.3) (31.5) (0.3) (0.2) (3.3)

Finance lease liabilities 8.8% (23.5) (4.9) (5.0) (8.6) (5.0)

Convertible Bond 8.25% (44.4) – – (44.4) –

Bank overdrafts 9.5% (12.2) (12.2) – – –

(102.7) (35.9) (5.3) (53.2) (8.3)

Foreign currency risk managementThe Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency otherthan pounds sterling. The currencies giving rise to this risk are primarily, US Dollars, South African Rand, Mozambique Metical,Kenyan Shilling and Central African Franc, South Sudanese Pound, Tanzanian Shilling, Botswana Pula, and Namibian Dollar.

The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities, and its total netassets at the reporting date is as follows:

Monetary net assets Total net assets

2012 2011 2012 2011£m £m £m £m

US Dollar (51.5) (77.8) 61.4 52.4

South African Rand (8.8) (7.9) 31.2 (3.9)

Mozambique Metical 0.6 1.8 32.1 26.7

Kenyan Shillings (0.9) (1.0) 7.3 2.5

Central African Franc (11.3) (12.3) (11.3) (12.3)

South Sudanese Pound – – 1.4 (0.8)

Zambian Kwacha – 0.3 – –

Tanzanian Shilling (0.4) – (0.3) –

Botswana Pula (3.6) – (1.3) –

Namibian Dollar 0.1 – – –

75.8 (96.9) 120.5 64.6



The following significant exchange rates applied during the year:Average Rate Closing Rate

2012 2011 2012 2011£m £m £m £m

US Dollar 1.58 1.56 1.62 1.55

South African Rand 12.99 12.74 13.69 12.54

Mozambique Metical 44.28 41.32 47.57 40.95

Kenyan Shilling 131.85 133.35 138.26 129.21

Central African Franc 797.17 760.29 800.23 768.48

The Company does not have any exposure to foreign currencies at the reporting date (2011: £nil).

Foreign currency sensitivity analysisA 10% strengthening of the UK sterling against the following currencies at 31 December would have increased/(decreased)equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

2012 2011

Equity Profit/(loss) Equity Profit/(loss)£m £m £m £m

US Dollar (5.6) (0.1) (4.8) 1.4

South African Rand (2.8) (0.5) 0.4 –

Mozambique Metical (2.9) (0.1) (2.4) (0.2)

Kenyan Shilling (0.7) – (0.2) –

Central African Franc 1.0 0.1 1.1 0.1

South Sudanese Pound (0.1) (0.2) – –

Botswana Pula 0.1 0.1 – –

A 10% weakening of UK sterling against the above currencies at 31 December 2012 and 31 December 2011 would have had theequal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remainconstant.

Interest rate risk managementThe Group is exposed to interest rate changes on its floating rate borrowings, arising principally from changes in borrowing ratesin US Dollars, South African Rand, Central African Franc, Kenyan Shilling, Mozambique Metical and Sterling.

The Group manages interest rate risk by issuing a combination of fixed and floating rate debt instruments, and through the useof derivative instruments (interest rate swaps). At 31 December 2012, the Group had 72% (2011: 57%) of fixed rate debt and 28%(2011: 43%) of floating rate debt based on a gross debt of £108.8m (2011: £115.4m).

The fair value of derivative instrument liabilities at 31 December 2012 was £0.1m (2011: £nil).

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk managementsection of this note.

Capital managementThe Board’s policy for the Group and Company is to maintain a strong capital base so as to maintain investor, creditor andmarket confidence and to sustain future development of the business. The Board of Directors monitors the return on capital,which the Group defines as net operating income divided by total shareholders’ equity, excluding non-controlling interests.

As the Group is in a phase of expansion, the key capital requirements are to ensure that funding is available for current andplanned projects. Historically this has been achieved through capital raises, but as the Group has developed, funding has beenraised through a mix of debt and equity.

The Group considers shareholders funds plus long term debt to represent capital as defined by IAS 1. The Group currently hasno target debt to equity funding range.

The Directors keep under review the capital structure of the Group, with the objective of adopting a progressive, prudentdividend policy once the Company has sufficient distributable reserves and has achieved a level of sustained profitability, taking

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into account the Group’s financial position, underlying earnings and cash flows, the resources required for the Group’sdevelopment and the prevailing market outlook.

Fair valuesThe fair value of a financial instrument is the price at which one party would assume the rights and/or duties of another party.The following summarises the major methods and assumptions used in estimating the fair values of financial instruments at thebalance sheet date.

(a) Investment in jointly controlled entity

Fair value is calculated with reference to the quoted price (unadjusted) of the instrument in an active market.

(b) Trade and other receivables/payables

For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.All other receivables/payables are discounted to determine the fair value.

(c) Finance lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneouslease agreements. The estimated fair values reflect changes in interest rates.

(d) Loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

(e) Convertible bond

Fair value is calculated with reference to the quoted price (unadjusted) of the instrument in an active market.

(f) Debt-related derivative financial instruments

The fair value is calculated by discounting expected future cash flows and translating at the appropriate balance sheet rates.

The following table compares the estimated fair values of certain financial assets and liabilities to their carrying values at thebalance sheet date.

2012 2011

Net carrying Estimated Net carrying Estimated

amount fair value amount fair value

£m £m £m £m

NON-CURRENT ASSETS

Investment in jointly controlled entity 37.4 44.4 – –

CURRENT ASSETS

Trade and other receivables 44.2 44.2 48.8 48.8

Cash at bank 17.0 17.0 12.7 12.7

NON-CURRENT LIABILITIES

Finance lease liabilities (1.3) (1.3) (18.6) (18.6)

Loans and Borrowings (33.3) (32.5) (32.3) (28.5)

Debt-related derivative financial instruments (0.1) (0.1) – –

Convertible bond (43.0) (38.7) (44.4) (38.1)

Trade and other payables (4.3) (3.7) (16.1) (13.9)

CURRENT LIABILITIES

Finance lease liabilities (1.2) (1.2) (4.9) (4.9)

Loans and Borrowings (22.9) (25.3) (3.0) (6.2)

Bank overdrafts (5.9) (5.9) (12.2) (12.2)

Trade and other payables (37.2) (37.2) (39.7) (39.7)

The estimated fair values of the remaining financial assets and liabilities are consistent with their carrying values at the balancesheet date.


Fair value measurement hierarchyThe fair value of assets and liabilities can be classed in three levels:

Level 1 – Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Fair values measured using inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 – Fair values measured using inputs for the asset or liability that are not based on observable market data(i.e. unobservable inputs).

The following table presents the Group’s assets and liabilities that are measured at fair value.

2012 2011

Level 1 Level 2 Total Level 1 Level 2 Total£m £m £m £m £m £m

LIABILITIES

Debt-related derivative financial instruments – 0.1 0.1 – – –

– 0.1 0.1 – – –

32. Operating leasesAt the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellableoperating leases, which fall due as follows:

Aircraft Property Equipment Total

2012 2011 2012 2011 2012 2011 2012 2011£m £m £m £m £m £m £m £m

Less than one year – 2.3 2.7 1.7 0.2 0.1 2.9 4.1

Between one and five years – 3.0 12.4 8.7 0.2 0.2 12.6 11.9

Over five years – – 13.5 – – – 13.5 –

– 5.3 28.6 10.4 0.4 0.3 29.0 16.0

Included in the above are property leases of the Company amounting to £0.4m (2011: £0.4m) less than 1 year and £1.3m (2011:£1.7m) between one and five years.

All leases are on standard market terms with no amounts of variable lease payments.

33. Capital commitmentsOther capital commitments of £nil will be paid within the next financial year (2011: £0.2m).

The Company had no capital commitments at 31 December 2012 (2011: £nil).

34. Contingent liabilitiesThere were no contingent liabilities at the reporting date (2011: £nil), the outturn of which the Directors consider couldmaterially impact the financial statements. The Group has no contractual obligation to provide future funding to associates orjoint ventures and has no contingent liabilities in respect of its associates and joint ventures. The Directors do not consider thatany of the Group’s associates or joint ventures have material contingent liabilities.

35. Related partiesThe Group has a related party relationship with its subsidiaries (see note 36), associates and jointly controlled entity’s (seenote 18 and 19), companies in which the Group has an investment, and with its Directors.

Transactions with subsidiariesTransactions within the Group companies have been eliminated on consolidation and are not disclosed in this note.

At the reporting date Lonrho Africa (Holdings) Limited owed the Company £144.2m (2011: £127.3m). Lonrho Africa (Holdings)Limited holds the operating bank accounts for the Group and the majority of the Group’s investments in subsidiaries. Themovement on the intercompany balance represents the transfer of cash raised during the year through the capital raises.

Other amounts owed by Group undertakings at the reporting date were Lonrho Projects South Africa (Pty) Limited £0.1m (2011:£nil), Lonrho Hotels Management Services Limited £0.1m (2011: £nil), Lonrho Agribusiness Limited £0.3m (2011: £nil) and LonrhoSupport Services Limited £1.6m (2011: £nil).

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At the reporting date the Company owed Lonrho Africa Holdings (Jersey) Limited £44.8m (2011: £37.2m), Lonrho AgribusinessLimited £0.8m (2011: £nil), Lonrho Africa (Holdings) Limited £nil (2011: £0.3m), and Eatec Limited £0.4m (2011: £0.4m).

Transactions with associatesCambria Africa Plc (formally LonZim Plc)During the period Lonrho disposed of its entire holding in Cambria Africa Plc (formally Lonzim Plc).

The final disposal took place on 12 September 2012. At 31 December 2012, the Company owned 22.92% of Cambria Africa Plcand therefore is deemed to have exerted significant influence over the company during the year and up to the point of disposal.During the period the Company charged £0.3m (2011: £0.7m) to Cambria Africa Plc as a management charge. At the reportingdate £0.3m was due from Cambria Africa Plc (2011: £nil).

During the year, Lonrho Hotels charged £0.1m to the Leopard Rock Hotel Company (Pty) Limited (2011: £0.1m), a Cambria AfricaPlc company, in relation to management fees. At the reporting date £0.1m remained outstanding (2011: £0.1m).

On 1 July 2009 Cambria Africa Plc acquired an aircraft from Lonrho Air Three (BVI) Limited, a subsidiary of Lonrho Plc, for a totalof US$4.3m (£2.6m). The aircraft is leased to Five Forty Aviation Limited (which was a Lonrho subsidiary until 29 June 2012).Total amounts charged under this arrangement during the year until 29 June 2012 were £0.2m (period ending 31 December2011: £0.4m).

Cambria Africa Plc also leased one aircraft to Fly 540 Uganda, which was a Lonrho subsidiary for part of the year (refer note 8),on industry standard operating lease terms. Total amounts charged under this arrangement during the year until 29 June 2012were £0.1m (period ending 31 December 2011: £0.3m).

During the period ended 31 December 2011 Cambria Africa Plc leased a further aircraft to Fly540 Uganda on industry standardoperating lease terms, however this lease arrangement came to an end in February 2011. Total amounts charged under thisarrangement in the period to 31 December 2011 were £0.1m.

On 30 September 2011 Lonrho Hotels (Holdings) Limited acquired an 80% interest from Cambria Africa Plc in the share capitalof Aldeamento Turistico de Macuti S.A.R.L. (details provided in Note 7b). During the year up to the point at which Cambria AfricaPlc was no longer a related party, Lonrho Hotels (Holdings) Limited made deferred consideration, interest and loan payments toCambria Africa Plc in respect of this acquisition totaling £1.0m (2011: £0.2m). At the date of disposal £2.4m (2011: £3.1m) ofdeferred consideration and £0.3m (2011: £0.6m) of loans were payable by Lonrho Hotels (Holdings) Limited to Cambria AfricaPlc.

InvestmentsSwissta DRC SPRLThe Group holds 20% of Swissta DRC SPRL. At the reporting date £0.1m (2011: £0.1m) was due from Swissta DRC SPRL as aresult of a short term non-interest bearing loan.

Arlington Associates International LimitedThe Group recognised management fee income from Arlington Associates International Limited of £1.0m (2011: £nil), which wasoutstanding at the reporting date.

Transactions with key management personnelKey management personnel are considered to be the Company’s Directors.

During the period £0.04m (2011: £0.04m) was charged to the Group by DSG Chartered Accountants. Jean Ellis, non-executiveDirector, is a partner in this firm.

The key management personnel compensations are as follows:


2012 2011£m £m

Short-term employee benefits 2.6 4.0

Post-employment benefits 0.3 0.2

Gain on share options exercised 0.4 0.5

Payment in lieu of notice and other benefits 0.8 –

4.1 4.7


35. Related parties (continued)

Total remuneration is included in “staff costs” (see note 9).

Details of Directors’ remuneration are given on page 77.

36. Group entities Principal subsidiaries Ownership interest

Country of incorporation 2012 2011

Luba Freeport Limited Jersey 63% 63%

Sociedade Comercial Bytes & Pieces Limitada Mozambique 65% 65%

Hotel Cardoso SARL Mozambique 59.04% 59.04%

Lonrho Africa (Holdings) Limited* UK 100% 100%

Rollex (Pty) Limited South Africa 100% 100%

e-Kwikbuild Housing Company (Pty) Limited South Africa 35.91% 35.91%

Trak Auto Lda Mozambique 100% 100%

Oceanfresh Seafoods (Pty) Limited South Africa 51% 51%

Indigo Bay Seafoods Incorporated USA 51% 51%

Protea Seafoods Mauritius Mauritius 51% 51%

Fresh Direct Limited British Virgin Islands 100% 100%

Grand Karavia SPRL Democratic Republic of Congo 50% 50%

Lonrho Agribusiness (BVI) Limited British Virgin Islands 100% 100%

Aldeamento Turistico de Macuti SARL Mozambique 80% 80%

LonAgro Equipamentos Agricolas Limitada Angola 51% 51%

Lonrho Logistics (Pty) Limited South Africa 100% 100%

Fish On Line (Pty) Limited South Africa 68% 51%

Global Horizons Limited Isle of Man 100% 100%

Africa Expeditions Limited Kenya 95% 95%

Sportsgear Investments (Private) Limited Zimbabwe 100% 100%

Burp Track Investments (Private) Limited Zimbabwe 100% 100%

Crosshairs Point (Private) Limited Zimbabwe 100% 100%

Yuagong (Pty) Limited Botswana 100% 100%

Lonrho Support Services Limited* UK 100% 100%

LAH Jersey Limited* Jersey 100% 100%

* Directly held by the Company.

Inclusion of all the subsidiaries in the Group would be excessive and therefore only the significant trading entities are shownabove.

A full list of Group companies will be included in the annual return registered with Companies House.

Although the Group owns less than half, or half, of the voting power of e-Kwikbuild Housing Company (Pty) Limited and GrandKaravia SPRL, the Group has Board control giving it the ability to govern the financial and operating policies of those companiesand hence the Group consolidates its investment in these companies.

Exchange control procedures exist in Mozambique, Angola, Zimbabwe, Democratic Republic of Congo and South Africa whichplace restrictions on repatriation of cash to the Group.

37. Events after the reporting dateOn 9 January 2013, the Company granted options over 484,612 ordinary shares of 1p each in the Company, exercisable on1 February 2016 in accordance with the rules of the Lonrho Sharesave Scheme at 7.8p per share.

On 18 January 2013, the Company granted options over 2,000,000 ordinary shares of 1p each in the Company under theLonrho Unapproved Share Option Plan exercisable at 9.252p per share. The options have a two year vesting period and a fouryear exercise period from date of grant.

On 14 March 2013, 15,825,000 ordinary shares of 1p were issued in relation to the AFEX share purchase agreement.

112


35. Related parties (continued)


Analysis of ordinary shareholdings as at 28 February 2013

Number of % of total Number % of totalholders holders of shares shares

UK REGISTER

Category of shareholder

Individuals 17,811 87.62 55,007,439 3.44

Banks, nominees & other corporate bodies 1,296 6.38 1,537,732,011 96.27

19,107 94.00 1,592,739,450 99.72

SA REGISTER

Category of shareholder

Individuals 1,093 5.37 1,375,505 0.09

Banks, nominees & other corporate bodies 128 0.63 3,164,033 0.20

1,221 6.00 4,539,538 0.28

COMBINED REGISTERS

Shareholding range

1 – 500 13,243 65.15 1,955,715 0.12

501 – 1,000 2,273 11.18 1,623,088 0.10

1,001 – 5,000 2,561 12.60 5,845,160 0.37

5,001 – 50,000 1,622 7.98 29,054,139 1.82

50,001 – 100,000 223 1.10 16,820,465 1.05

100,001 – 500,000 225 1.11 50,907,492 3.19

500,001 – 1,000,000 52 0.26 36,739,827 2.30

1,000,001 and over 129 0.63 1,454,333,102 91.05

20,328 100.00 1,597,278,988 100.00

Capital gains tax base cost of shares at demergerFor capital gains tax purposes, shareholders disposing of shares in either Lonrho Plc or Lonmin Plc after 7 May 1998, who heldshares prior to that date, should apportion the base cost of their original Lonmin Plc shares between the two companies. Basedon the closing share prices on 7 May 1998 of Lonrho Plc and Lonmin Plc this apportionment would be 19.502% for Lonrho Plcand 80.498% for Lonmin Plc.

For capital gains tax purposes, shareholders disposing of shares in either Lonrho Plc or Castle Acquisitions Plc after 3 May 2005,who held shares prior to that date, should apportion the base cost of their original Lonrho Plc shares between the twocompanies. Based on the closing share prices on 3 May 2005 of Lonrho Plc and Castle Acquisitions Plc this apportionmentwould be 81.8333% for Lonrho Plc and 18.1667% for Castle Acquisitions Plc.

RegistrarsAll administrative enquiries relating to shareholdings, such as queries concerning dividend payments, notification of change ofaddress or the loss of a share certificate, should be addressed to the Company’s registrars.

Free share sale facilityThe Company welcomes shareholders regardless of the size of their holding. However, it recognises the often disproportionatecost to smaller shareholders of disposing of their investments. In view of this the Company has arranged for its Registrars tooffer a share sale service free of charge to investors with a holding of 1,000 shares or less. Details of the service can be obtainedby telephoning Equiniti on 0800 169 2608 (if calling from overseas please dial +44 121 415 7047), or Link Market Services SouthAfrica Proprietary on +27 (0) 11 713 0800.

ShareGiftLonrho supports ShareGift, the share donation charity (registered charity 1052686) which accepts donations of shares whichwould otherwise be uneconomic to sell, collects them into holdings that are large enough to sell and uses the proceeds for thebenefit of UK Charities. ShareGift has given millions of pounds to hundreds of different charities since it was launched in 1996.Donating shares to charity in this way gives rise neither to a gain nor a loss for Capital Gains Tax purposes.

Shareholders who wish to donate shares in this way can contact Equiniti as above or, for further information, ShareGift (The OrrMackintosh Foundation), www.ShareGift.org or telephone + 44 (0) 20 7930 3737.



Shareholder Information

Unsolicited mailAs the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail fromorganisations that use it as a mailing list. Shareholders wishing to limit the amount of such mail should write to the MailingPreference Society, Freepost 29 Lon20771, London W1E 0ZT.

Share Fraud WarningShare Fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless ornon-existent, or an inflated price for shares they own. These calls come from fraudsters operating in ‘boiler rooms’ that aremostly based abroad.

While high profits are promised, those who buy or sell shares in this way usually lose their money.

The Financial Services Authority (FSA) has found most share fraud victims are experienced investors who lose an average of£20,000, with around £200m lost in the UK each year.

Protect yourselfIf you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company orresearch reports, you should take these steps before handing over any money:

1. Get the name of the person and organization contacting you.

2. Check the FSA Register at www.fsa.gov.uk/fsaregister to ensure they are authorised.

3. Use the details on the FSA Register to contact the firm.

4. Call the FSA Consumer Helpline on 0845 606 1234 if there are no contact details on the Register or you are told they areout of date.

5. Search our list of unauthorised firms and individuals to avoid doing business with.

6. REMEMBER: if it sounds too good to be true, it probably is!

If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial OmbudsmanService or Financial Services Compensation Scheme (FSCS) if things go wrong.

Report a ScamIf you are approached about a share scam you should tell the FSA using the share fraud reporting form atwww.fsa.gov.uk/scams, where you can find out about the latest investment scams. You can also call the Consumer Helplineon 0845 606 1234

If you have already paid money to share fraudsters you should contact Action Fraud on0300 123 2040

114


Shareholder Information continued


Secretary and registered officeJ H HughesLevel 225 Berkeley SquareLondonW1J 6HBTel: +44 (0) 20 7016 5105Fax: +44 (0) 20 7016 5109e-mail: [email protected]: www.lonrho.comRegistered in EnglandRegistered number 2805337

AuditorsKPMG Audit Plc15 Canada SquareCanary WharfLondonE14 5GL

PR AdvisersFTI ConsultingHolborn Gate26 Southampton BuildingsLondonWC2A 1PBTel: +44 (0) 20 7831 3113Fax: +44 (0) 20 3077 0599

Principal Group BankersBarclays Bank PlcLord StreetLiverpoolL2 6PB

RegistrarsEquinitiAspect HouseSpencer RoadLancingWest Sussex BN99 6DATel: 0800 169 2608 (if calling from UK)Tel: +44 121 415 7047 (if calling from overseas)Textel: 0871 384 2255 (for the hard of hearing)

Please be advised calls to the textel line are charged at 8p/minfrom BT landlines. Other telephone providers’ costs may vary.

South African transfer secretariesLink Market Services South Africa Proprietary LimitedPO Box 4844Johannesburg 2000South AfricaTel: +27 (0) 11 713 0800Fax: +27 (0) 86 674 4381

StockbrokersJefferies Hoare GovettWH IrelandJava Capital (Pty) Ltd

Corporate Information


[ inside back cover ]< 8mm spine< adjust size by using the custom page size

Lon

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Lonrho Plc25 Berkeley Square, London, W1J 6HB

Tel: +44 (0) 207 016 5105 www.lonrho.com


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