Investment Column: Lonrho Africa's defences weak

IF THE mystery shareholders who bought 4 per cent of Lonrho Africa this month do mount a bid, the company could have one of the shortest lives on the London stock market. The group itself remained tight-lipped about the speculation - which has named George Soros and former chief executive Tiny Rowland as bidders - saying it had not held any discussions with potential suitors.

The company's maiden results are not a strong defence against a predator. A combination of bad weather, political uncertainty and heavy devaluations of the currencies in Zambia, Zimbabwe and Malawi led to an 18 per cent drop in turnover and a 43 per cent fall in operating profits to pounds 13.2m for the six months to 31 March. Restructuring costs, mainly in the motor division, totalled pounds 4.9m and interest charges on net debts of pounds 113m ballooned to pounds 10.6m - producing an overall loss of pounds 2.3m.

The second half will benefit from the pounds 48m cash injection from the company's former parent, Lonrho, which will help reduce debt. Further reorganisation costs should be small. The outlook for African currencies is also more stable.

Of Lonrho Africa's diverse collection of businesses, agribusiness usually does better in the second half of the year, while the motor division has shed costs.

A start has been made in selling the pounds 35m property portfolio, and the troubled David Whitehead textile business is next up for sale or possible closure.

Analysts have slashed their forecasts for operating profits of around pounds 29m in the full year. That puts the shares, which rallied 4p to 80p yesterday, on a forward earnings multiple of 14, falling to seven next year. For investors willing to take risks, a reasonable bet.