Adds comments from Panmure Gordon...
Africa-focused conglomerate Lonrho (LON:LNRO) announced this morning it had bought a 51 per cent stake in Fish On Line for £320,000.
The Cape Town-based fish processing and cold storage group last year posted a £15,000 gross profit on sales of £5.9 million.
The existing management will remain on board to grow and develop the company which handles piscine exotica such pangasius, and kingklip and the more run-of-the-mill prawns, salmon and hake.
The vendors have an option that can be exercised in three years to sell their remaining stake at a price equivalent to six times 2014 earnings, Lonrho said.
Chairman David Lenigas added: "The acquisition by Lonrho of Fish On Line strengthens Lonrho's fish division and provides Lonrho further access to and knowledge of the global wholesale fish market.
“Fish On Line brings strong synergies with Lonrho's current retail focused activities in the sector both in the African and global markets."
The company’s last deal was back in February when it agreed to pay a maximum of US$8 million for AFEX, which builds temporary accommodation.
Interim results, meanwhile, revealed Lonrho’s revenues were up 29 per cent to £6.1 million, while its losses narrowed substantially to £2.9 million.
As at March 31 it had £17.8 million of cash on the balance sheet, which puts it in an incredibly strong position to expand its portfolio, which includes farming assets and a regional airline.
Panmure Gordon responded positive to the news, saying that the acquisition should enhance the capabilities of Lonrho’s fish operations in the agribusiness, introducing further management expertise and additional bulk cold storage and fish processing capabilities.
The broker’s forecasts remain unchanged. Panmure Gordon is still projecting the group’s revenues to rise 74 percent to £187.8 million for the year. Pre-tax profits are expected at £6.7 million.
Accordingly, the “buy” recommendation for the stock and its target price of 23 pence were maintained.