Buoyant Lonrho to demerge mining interests

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The Independent Online

City Editor

Lonrho took another giant step away from former chief executive Tiny Rowland yesterday when his successor and nemesis, Dieter Bock, confirmed the planned demerger of the conglomerate's mining operations.

Hiving off Lonrho's biggest profit-earner into a separately quoted company paves the way for a further break-up of the gold, plantations and hotels group as Mr Bock strives to realise the value of a group whose shares continue to trade well below analysts' expectations of its net asset value.

The announcement accompanied another strong set of trading figures as the three-year recovery at Lonrho continued. The company reported a 40 per cent rise in pre-tax profits from pounds 108m to pounds 151m as higher metal prices and rising hotel occupancy rates brightened the trading outlook.

Mr Rowland had always resisted calls to dismantle the far-flung empire of more than 600 trading companies in four continents he had built up over decades. The move was welcomed by the City yesterday, however, with Lonrho's shares closing 5.5p higher at 192.5p, three times the level at which they troughed in 1993.

Mr Bock said: "I remain confident that there is significant further potential in our businesses. However, it is clear that the existing structure makes it difficult to ensure that the underlying value of the group's assets is properly reflected in the share price."

Attention focuses on what other steps might be in the pipeline. The company yesterday poured cold water on the widely touted disposal of the Dutton Forshaw motor dealerships, saying it was definitely not for sale. The future of the hotels division, which includes the Princess and Metropole chains, is less certain, with a separate flotation a possibility.

Analysts said the plan showed Mr Bock, who took over the helm early last year after the ousting of Lonrho's controversial former chief executive, was serious in making Lonrho's structure more transparent.

A first step in that direction was taken last summer when Lonrho agreed to merge its platinum interests with those of Gencor of South Africa to create the world's biggest platinum producer. The mining demerger would leave Lonrho's shareholders with two shares - one in the new mining group and one in Lonrho.

The mining business contributed pounds 103m to total operating profits before central costs of pounds 233m. Last year's contribution was pounds 90m. Other African interests chipped in profits of pounds 38m, sugar pounds 39m and hotels pounds 44m. The full-year dividend rose 10.5 per cent to 5.25p.

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