Cambria Africa : 29-02-16 Results for the full year ending 31 August 2015

Cambria Africa Plc

('Cambria' or the 'Company')

Results for the full year ending 31 August 2015

Cambria Africa Plc (AIM:CMB) announces its full year results for the year ending 31 August 2015.

The audited Financial Statements will be made available on the Company's website (www.cambriaafrica.com) immediately following the release of this announcement and will be sent to shareholders tomorrow.

All references to continuing operations relate to the Group's Payserv Africa and Millchem Holdings investments and head office activities.

Key events for the 2015 financial year were:

· On 21 October 2014 the Group disposed of its 100% shareholding in Lonzim Hotel Holdings Limited ('the Leopard Rock Hotel Group'), the owner of the Leopard Rock Hotel and related entities, for a total consideration of $2.5 million. The net asset value of the Leopard Rock Hotel Group had been impaired in the prior year by $8.9 million to reflect its net realisable value of $2.5 million at that date.

· On 3 September 2015, in the post balance sheet period, the Company entered into a Settlement Agreement with Lonrho Limited relating to the Company's Jet Claims in terms of which Cambria received $4,752,000 in full and final settlement of the Jet Claims.

· The Company's remaining assets are Payserv Africa ('Payserv') and Millchem Holdings ('Millchem') and the board is of the view that these two assets provide significant value creation opportunities to Cambria and its shareholders.

· The executive team continues its focus on:

o Rationalising and simplifying the head office function and central overheads. Significant progress has been made in reducing overheads, the full benefit of which will reflect in the next reporting period;

o Restoring the momentum lost in Millchem by re-establishing key supplier and customer relationships. Loss making subsidiaries, Millchem Zambia and Millchem Malawi have been discontinued after the financial year end, with focus restored on Millchem Zimbabwe, Millchem's core operating entity;

o Supporting the Payserv management team to continue the good growth in its core markets through an expanded service offering. Payserv Zambia is making progress towards achieving its maiden profits; and

o Enhancing the value of Payserv by replicating its successful technology platforms, products and services in the rest of Sub-Saharan Africa.

Results summary:

· During the year ended 31 August 2015, Payserv and Millchem combined, grew revenues and gross profit by 10% and 12% year-on-year, respectively.

· Cambria's central costs were reduced by 32% when compared to the equivalent period last year. As noted above, a further cost reduction has been implemented, the annualised result of which will reflect substantially in the next reporting period.

· Including the net Jet Claim litigation settlement proceeds of $3.47 million, Cambria's EBITDA from continuing operations for the year ended 31 August 2015 was $1.65 million compared to an EBITDA loss of $3.75 million for the 2014 financial year.

· TheGroup recorded a profit from continuing operations of $0.55 million for the year ended 31 August 2015 (2014 loss of $5.7 million).

Consilium dispute

The Consilium dispute arose over the validity of CCRMF's attempt to accelerate the repayment of the loans provided to the Company by Consilium Corporate Recovery Master Fund ('CCRMF' or 'Consilium') as a result of the subscription by Ventures Africa Limited ('VAL') in Cambria in April 2015. On 13 April 2015, Cambria shareholders approved the subscription by VAL of 107,000,000 ordinary shares in the Company which resulted in VAL owning 50.55% of Cambria. CCRMF and related parties hold 14.9% of Cambria's shares.

Cambria announced on 26 October 2015 that it received a statutory demand in the Isle of Man in which CCRMF had formally demanded repayment of the loans. In response to the statutory demand, the Company submitted that there was a genuine and substantial dispute as to whether the debt was then payable and that any future presentation of a winding up petition would constitute an abuse of the Court's process.

CCRMF withdrew their statutory demand in response to Cambria's application for an injunction. In addition, CCRMF was ordered by the High Court of Justice of the Isle of Man to pay the Company's costs of and incidentals to the Statutory Demand claim on a standard basis.

On 9 June 2015, Cambria announced the provision of a standby facility of $1.12m made available by VAL to the Company which was to be used as security for costs in relation to the now settled litigation against Lonrho. Pending the resolution of the dispute with CCRMF, as a consequence of which CCRMF has converted their floating charge on Cambria's assets, particularly the Company's primary bank accounts, the Lonrho settlement as well as the shares of Lonzim Holdings Limited, the Company is relying on this standby facility to fund its day-to-day operations.

Cambria continues to strongly dispute CCRMF's claim that there has been an event of default that entitles Consilium to accelerate repayment of the loans and maintains that the due date of the loans as disclosed in its audited financial statements and as defined in the loan agreements, as amended, is 30 April 2016.

CCRMF and Cambria have agreed to the litigation arising from the dispute being stayed until 30 April 2016. Cambria however continues to diligently investigate all the claims it may have against CCRMF and the former CEO and Chairman of Cambria, both also directors of Consilium.

Audit opinion

The Company's auditors, Baker Tilly Isle of Man LLC, have issued their opinion on the Group's financial statements for the year ended 31 August 2015. The audit was conducted in accordance with International Standards On Auditing (UK and Ireland). They have issued an unmodified audit opinion.

The Group, which at 31 August 2015 had net current liabilities of $2.35 million, has significant external borrowings which mature during 2016. $5.1 million is due for repayment on 30 April 2016 and a further $2 million is due for repayment in July 2016. Although the directors are taking steps to refinance these loans, material uncertainty exists which may cast significant doubt about the Group's ability to continue as a going concern. Whilst the full year results for the year ended 31 August 2015 have been prepared on the going concern basis, the audit opinion contains an emphasis of matter regarding the existence of the material uncertainty.

Working Capital and Going Concern

At the date of this announcement the Company has $3.2 million after costs from the Jet Claims settlement proceeds and approximately $0.5 million is held by operating subsidiaries.

The board of directors have considered the intrinsic value of Cambria's subsidiaries and is confident that it substantially exceeds the Group'sliabilities. Although uncertainty exists regarding the re-financing of the Group's liabilities, the board is of the opinion that the Group's financial statements have been appropriately prepared on the going concern basis and that it will be able to cover the contractual debt obligations before they become due.

Changes to the board

The following changes to the board of directors occurred during the financial period under review and up to the date of this report:

Director resignations:

Director appointments:

About Cambria Africa Plc

Cambria Africa Plc, quoted on the AIM market of the London Stock Exchange, is a long term, active investment company, investing primarily in Southern Africa.

Chief Executive's Review

Introduction

The first 6 months since having assumed the CEO role with effect from 3 August 2015, have been largely overshadowed by the unexpected Consilium dispute. Considerable time, cost and energy have been invested in defending the Consilium claims and in uncovering the true state of affairs in which Cambria was left by the previous executive management.

With a significant cash equity investment through VAL's subscription in April 2015, my interests as CEO are aligned with that of shareholders. Shareholders of Cambria have suffered a tremendous loss of value in their investment in the Company. It is my aim to guide the Group back to profitability and restore shareholder value.

Notwithstanding the significant distraction caused by the above, Cambria has continued its restructuring whereby the Company's central overheads have been reduced to be fit-for-purpose. In addition, the Group's financial position has been substantially strengthened following the settlement of the legal dispute with Lonrho.

During the 2015 financial year, revenues and gross profit of the continuing operations of Cambria, Payserv and Millchem, were $10.3 million (2014: $9.4 million) and $5.6 million (2014: $5.0 million) representing an increase of 10% and 12% respectively compared to the fiscal year 2014.

Including the net Jet Claim litigation settlement proceeds of $3.47 million,Cambria's EBITDA from continuing operations for 2015 was $1.65 million, compared to the prior year's EBITDA loss from continuing operations of $3.75 million.

The Group profit for the year is $0.55 million for continuing operations. Cambria's earnings per share for the financial year was 0.1c per share, compared to a loss of 19.5c per share for the same period last year.

Results for the Period

Consolidated results

Payserv and Millchem jointly had an aggregated performance as follows:

The following factors had a significant impact on financial performance:

· EBITDA for 2014 was impacted by once-off costs of $0.7 million incurred on investigating the acquisition of CelPay Zambia which was not concluded following the discovery of a significant deterioration in the financial position of CelPay Zambia;

· EBITDA for 2015 continued to be effected by Payserv's investment in expanding its presence and offering in Zambia, the costs of which are expensed in full; and

· Challenges experienced by Millchem Zambia and Millchem Malawi in the ramp up of these subsidiaries to full trading capacity. Investment in these territories has been discontinued in the post balance sheet period to refocus operations and investment in Millchem's core Zimbabwe market.

Payserv Africa

Payserv provides EDI switching services (Paynet), 'payslip' processing (Autopay), and payroll based microfinance loan processing (Tradanet).

Paynet provides Electronic Data Interchange (EDI) services to all the banks and building societies in Zimbabwe, as well as to over 1,500 corporates. Paynet processed 17.3 million transactions (2014: 16.4 million) during the period under review, a 5.5% increase.

Autopay provides payroll services to more than 150 customers and processed over 345 000 pay slips (2014: 313 000) during the period under review, a 10% increase.

Tradanet processed approximately 134,000 (2014: 121,000) loans during the period, representing a value of $176 million (2014: $154 million), an 11% increase and a 14% increase respectively.

During the year under review, Payserv continued to invest into product upgrades, new offerings, entry into the Zambian market, as well as exploration of other geographic markets. These investments have not been capitalised and have therefore directly impacted the income statement during the year under review.

The previous reporting period included an exceptional item of $0.7 million attributable to the write-off of transaction costs related to CelPay Zambia discussed above.

Millchem Holdings

Millchem is a value-added chemicals distributor with a leading market position in Zimbabwe.

Despite the challenging and uncertain business environment during the year, Millchem grew revenues by 10%.

Overheads were negatively impacted by the expansion and investment in establishing Millchem Zambia and Millchem Malawi under the Group's previous management. After the year-end, Millchem Malawi has been closed while Millchem Zambia has been disposed of.

Establishing Millchem as a profitable unit continues to be an important priority. The key focus areas are:

o Strengthening the executive leadership team following departure of senior executives;

o Rebuilding relationships with key customers;

o Re-establishing credit lines with key suppliers; and

o Streamlining overheads and trading efficiencies.

Central costs

Cambria incurred $2.0 million in central costs for the period under review, compared to $3.1 million in the prior year, a reduction of 32%.

Included in the above are salaries and benefits paid to the Company's previous CEO and Chairman, Messrs E Wisman and I Perkins of $0.4 million and $0.2 million, respectively. These amounts include once-off 'change in control' payments amounting to $0.2 million.

Current total central costs have been reduced to an estimated normalised annual cost of $0.3 million (excluding once-off costs legal costs) from US3.1 million before VAL's investment.

As the new CEO of Cambria, I will continue not to collect compensation including benefits until such time as the cash flow from the Company's underlying operations supports it. Similarly, my fellow directors have not received any compensation or benefits since VAL's investment.

Tradanet

The Company is defending a claim brought by the minority shareholder in Tradanet, Ottonby Trading (Private) Limited, relating to its right to acquire Payserv's51% share in Tradanet, allegedly triggered by the change in control of Cambria as a result of VAL's subscription in April 2015. The Company's legal advisers, having considered the terms of the related shareholders agreement, are confident that the claim will be unsuccessful. The parties have agreed to follow an arbitration process to resolve this dispute, which is expected to be completed shortly.

Events following the end of the period under review

Sale of Millchem Zambia

Millchem has agreedto the sale of the Zambian operations for net asset value of $46 000, with effect from 1 September 2015. The rights to the name 'Millchem Zambia' are not included in the sale.

Settlement with Lonrho

On 3 September 2015, the Company concluded a settlement agreement with Lonrho with respect to the Jet claims and counterclaims between the parties, in terms of which the Company received US$4.752 million in full and final settlement of the claims. After outstanding litigation and other associated costs, the net proceeds were US$3.47 million.

Strategy going forward and closing

The Company is now focused on creating value for shareholders through its investments in Millchem and Payserv. In addition, the Board is in the process of formulating its investment strategy to implement strategic value-creating acquisitions as appropriate opportunities arise. We will continue to focus on Zimbabwe, which we believe provides the best opportunity for successful investment and growth in the short to medium term.

Mr Samir Shasha

Chief Executive Officer

29 February 2016

Cambria Africa Plc

Audited consolidated income statement

For the year ended 31 August 2015

Cambria Africa plc issued this content on 29 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 29 February 2016 17:12:19 UTC

Original Document: http://www.cambriaafrica.com/rns?id=12717401