TIDMCMB
RNS Number : 6307Z
Cambria Africa PLC
21 September 2020
Cambria Africa Plc
("Camb ria" or "the Company")
Trading and operational update
Cambria's subsidiaries are operating at near or above cash flow
break-even levels since publication of the Company's mid-year
results in February 2020. The Company continues to pursue a
defensive strategy to protect its resources and assets.
Supreme Court Award
On 15 July 2020, in a landmark case, the Company was awarded US
$31,500 plus interest and costs by the Supreme Court of Zimbabwe.
The Company lodged a claim against Nemchem International due to its
refusal to settle this debt in foreign currency. The High Court
decision in favor of the Company was appealed by Nemchem to the
Supreme Court and upheld. The Company has applied to remit the
award in foreign currency from its subsidiary accounts in Zimbabwe
to Cambria's account in the Isle of Man.
Crystallization of Paynet Debt at Parity
On 18 August 2020, the final tranche of Paynet Zimbabwe's legacy
debt lodged at parity with the Reserve Bank of Zimbabwe was funded
through FBC Bank. US $1.3 million of legacy debt owed by Paynet
Zimbabwe has now been fully expunged in accordance with the
Governor's written commitment in March 2019. This amount was
carried on Cambria's books at parity to the US dollar. The balance
of the Company's legacy debt is carried at the prevailing exchange
rate and should it be settled by the RBZ, the difference to parity
will be recorded as a profit. Cambria is one of the few companies
operating in Zimbabwe which did not receive an adverse audit
opinion for its treatment of its FY 2019 accounts. The
crystallization of Paynet Zimbabwe's debt at parity validates the
unqualified opinion issued by the auditors.
Old Mutual Limited Portfolio Value
On 12 August 2019, the Company purchased 292,547 shares of Old
Mutual Limited on the Johannesburg Stock Exchange (OMU:JO) for
GBP350,000. The Company sold 90,000 shares of Old Mutual to finance
its arbitration case with respect to Radar Holdings Limited
("Radar") shares and to increase its shareholding in Radar from
8.98% to 9.74% on 28 February 2020. These shares were purchased and
removed from the Johannesburg Stock Exchange (JSE) to the Zimbabwe
Stock Exchange (ZSE) to guarantee Paynet's pursuit of its bid for
shares in Radar. In the event of failing in its bids, the
investment in Old Mutual allowed the Company to repatriate these
shares to the JSE due to the fungibility of the Old Mutual Shares
between LON:OMU, JSE:OMU and ZSE:OMU.
In the course of holding shares in Old Mutual Limited on the
ZSE, a number of events have prejudiced the free and fair pricing
of Old Mutual Shares on the ZSE. Concurrent with the removal of
these shares, the Government of Zimbabwe (GoZ) imposed a
three-month vesting period on the ownership of dual-listed shares,
particularly Old Mutual. On 12 March 2020, the GoZ announced a
12-month suspension of the fungibility of Old Mutual Shares. On 26
June the GoZ halted trading on the ZSE - announcing that the
implied international value of Old Mutual shares was responsible
for its faltering currency . On 3 August the ZSE re-opened,
suspending all dual listed shares, specifically Old Mutual Limited.
At the time of fungibility suspension, the value of the Company's
Old Mutual Portfolio was US $589,000 at the Interbank Rate, and at
the time of the ZSE's suspension of trading in ZSE:OMU, the
Portfolio value had fallen to $292,000.
The Company has been in contact with Old Mutual Limited's Head
of Investor Relations and its Head of Legal since 29 July 2020,
requesting action on behalf of shareholders on the ZSE. The Company
continues to pursue a substantive response and will update its
shareholders on its efforts to achieve fair value for its Old
Mutual portfolio.
Payserv Africa
Payserv Africa, a wholly owned onshore Mauritius subsidiary of
Cambria, owns the Company's substantive intellectual property which
was hitherto operated by Paynet Zimbabwe to manage bulk payments on
behalf of all banks in Zimbabwe. The software was used to process
and clear bulk payments using the RTGS facilities on a straight
through (STP) or gross clearance basis. Payserv Africa has been
approached by a number of African Central Banks outside Zimbabwe to
participate in a bid to process and clear bulk transactions. The
outcome of such bids remains uncertain. Payserv has also indicated
its willingness to consider licensing its technology to third party
entities in Zimbabwe.
Paynet Zimbabwe :
Following the end of Paynet Zimbabwe's bulk payment processing
on behalf of EcoCash, the government significantly curtailed the
ability of EcoCash to process payments, effecting a daily limit of
US $50 per account holder and corporate bulk account holders could
only deploy receipted funds by depositing them into a bank account.
This validated the Company's decision to suspend its operations on
behalf of EcoCash, and underscores its view of a deliberate
economic policy to shrink the economy in a bid to tame inflation
and control the flow of foreign currency.
AutoPay remains a significant source of operating income
supporting the remaining staff of Paynet Zimbabwe. A recent review
of pricing has resulted in a substantial increase to the Company
which provides outsourced payroll services. The Company intends to
continue investing in the expansion of payroll services.
Tradanet , Paynet Zimbabwe's 51% owned subsidiary, continues to
provide loan processing services to the country's largest building
society, the Central Africa Building Society (CABS). Tradanet was
recently awarded a three-year renewal of its contract with CABS.
The revenues at Tradanet are highly dependent on the size of the
CABS loan book which has significantly shrunk, due to the
predominance of loans to government employees who have not received
pay rises commensurate with inflation.
Millchem:
In April of 2020, in response to the COVID-19 Pandemic, Millchem
diverted its resources to the production of Hand Sanitizers and
disinfection products in a joint venture with the Merken Group, a
personal healthcare group based in Zimbabwe. To date, this project
is yet to become cashflow positive. The Joint Venture has the
immediate capacity to supply the market with an 350,000 hand
sanitizer tubes over and above the units currently on sale in
supermarkets and drugstores. The sanitizer market in Zimbabwe is
crowded but the company hopes its superior product will distinguish
itself in the market.
Millchem has supplied value-added ethanol based products over
the last 5 years with limited access to foreign currency. The local
generation of funds has financed the company overheads while the
locally denominated profits have lost value against the US dollar
as a result of hyperinflation. As a consequence, management has
decided to focus on sanitizer production and reduce exposure to the
industrial market. Millchem is in the process of selling excess
inventory and non-productive assets through ABC Auctions and
reducing its payroll and fixed overheads. We expect the process to
be revenue neutral.
Millchem has funded approved intercompany legacy debt of US
dollars $416,000 at parity to the Zimbabwe Dollar with the Reserve
Bank of Zimbabwe. The value of cash transferred to the RBZ for
settlement of this debt is being accounted for at the prevailing
exchange rate, and on the Company books at $23,000 as of 29
February 2020 instead of the Company's legal entitlement to receive
the currency at 1:1. Should this debt be honored at parity or below
the exchange rate, the Company will experience a profit.
Cash Resources and NAV
Excluding the potential market value or compensation for Old
Mutual Shares, the Company and its subsidiaries currently hold cash
resources of US $1.79 million in accounts in the United Kingdom and
Mauritius. The Company reported NAV of $7.17 million (1.32 US cents
per share) as of 29 February 2020. The Company expects NAV to
remain at or near these levels. Significant components of the NAV
include a $2.5 million valuation of Paynet Headquarters and its
adjacent plot with main road frontage, and an investment in Radar
valued at $1.74 million.
Economic Outlook and Strategy
The COVID trading environment remains fraught with uncertainty
and risk, not just in Zimbabwe, but in the region. The financial
resources to support the impact of the pandemic is simply
non-existent. The newly implemented auction system has produced an
exchange rate for the Zimbabwe dollar (ZWL) to the US dollar that
has recently fluctuated with less volatility than any major
currency to the US dollar. Hence, despite the intentional
contraction of the economy to dampen demand for foreign currency,
the weighted average auction rate for ZWL doesn't yet reflect its
market value or its availability on a willing buyer / willing
seller basis.
As a result of the uncertain economic outlook, the Company's
Zimbabwe operations have been significantly downsized to contain
costs. The Company has engaged the services of ABC Auctions to
achieve best value for assets it cannot dispose of on an arm's
length basis. The Company's Board of Directors is actively
evaluating investment options and strategies in view of the rapidly
changing circumstances it is facing.
Contacts
Cambria Africa Plc www.cambriaafrica.com
Samir Shasha +44 (0)20 3287 8814
WH Ireland Limited www.wh-ireland.co.uk
James Joyce / Matthew Chan +44 (0) 20 7220 1666
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