Lonrho transformation is only half complete

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The Independent Online
Lonrho transformation is only half complete

Lonrho is looking more and more the "normal company" that Dieter Bock set as his goal when he quietly but ruthlessly ousted Tiny Rowland last year. Such is the momentum he has created, in fact, that no sooner had the announcement been made that the mining operations were to be hived off into a separately quoted company than the market was looking ahead to the next stage in the company's renaissance.

The company is, however, wisely refusing to commit itself to any further deals, be they the widely mooted hotels flotation, a disposal of the Dutton Forshaw car dealerships or something else the market hasn't even guessed at yet. With profits on a strong upward tack for at least another year, there is plainly no hurry and shareholders will be grateful that the company ignored calls, 18 months ago, to pull out of hotels, now beginning to really motor.

Even so, Mr Bock clearly needs to do more to satisfy the market's anti- conglomerate, pro-focus, mood. Most of what he has done runs in that direction, but there is plainly still a long way to go. The rump of Lonrho after the mining operations are floated off remains a disparate collection of businesses ranging from car distribution to bus assembly, textile manufacturing to retailing, construction, printing, brewing, insurance broking and oil pipelines.

That is one obstacle to be overcome. Another potential fly in the ointment is the risk that clumping all the mining assets into one separately traded entity will merely see Lonrho's shareholders exchange a discount based on distrust, for one that reflects the new company's status as a quasi- investment trust. Mr Bock claims that Lonrho's dominant shareholdings in its mining investments and the company's management control make that unlikely, but only time will tell.

While the moves so far will have gone a long way to persuading the market that a share price of under 192p is a poor measure of underlying assets of maybe 240p, and while the political outlook in Africa is a lot more stable than even a few years ago, investors are right to be cautious. Until it is possible to say in a sentence or two what Lonrho does, the transformation will remain half complete.