LONDON, 29 September 2017

AMBRIAN PLC

Interim Results for the six months to 30 June 2017

Ambrian plc ("Ambrian" or the "Company" and, together with its subsidiaries, the "Group") today announces its unaudited consolidated results for the six months ended 30 June 2017.

Highlights

·    Group turnover of US $0.23 billion (1H2016: US $0.57 billion), a 60% reduction due to the run-down of the Company's trading and logistics business during the period

·    Group EBITDA loss of US $0.30 million (1H2016: US $1.40 million loss)

·    Turnover of cement business of US $6.18 million (1H2016: US $5.44 million)

·    EBITDA of cement business US $0.22 million (1H 2016: US $0.04 million)

·    EBITDA of trading and logistics business of US $0.17 million (1H 2016: EBITDA loss US $0.91 million)

·    Group loss before tax of US $3.68 million (1H 2016: Loss of US $17.29 million after impairment charge of US 13.70 million)

·    Trading and logistics business has been run-down with a reduction in exposures to the Group

·    Net asset value attributable to owners of the Company as at 30 June 2017 of US $22.58 million (31 December 2016: US $25.73 million) equivalent to US 9.16 cents per share (31 December 2016: US 10.44 cents per share)

·    Cimentos da Beira, the Company's operating subsidiary in Mozambique, is in advanced negotiations with its term loan lender, the Industrial Development Corporation of South Africa Ltd ("IDC") to restructure the terms and conditions of its loans

Commenting on the results, Martin Abbott, non-executive Chairman, stated:

"We continue to examine strategic options for the business against the backdrop of improving performance of our cement business in Mozambique. We are heartened by the commercial performance of our cement plant in the first six months of this year and we continue to believe in the long term GDP growth in Mozambique and the likely significant increase in per capita cement consumption driven by the current housing deficit and ambitious infrastructure plans."

Enquiries

Ambrian plc    

Roger Clegg                + 44 (0)20 7634 4785

Cenkos Securities plc 

Neil McDonald            + 44 (0)20 7397 8900

Nick Tulloch   

Notes to Editors

Ambrian is active is the cement business in Mozambique. We pursue selective strategic acquisitions and ventures which can demonstrate a compelling industrial, commercial and financial justification.

Ambrian is quoted on the Alternative Investment Market of the London Stock Exchange under the ticker symbol AMBR.  Further information on the Group is available on the Company's website: www.ambrian.com or the website of Cimentos da Beira Lda: www.cdb.co.mz.

Chairman's Statement

Gross profit for the Group for the six months ended 30 June 2017 was US $2.64 million on a turnover of US $0.23 billion (1H 2016: US $1.80 million on a turnover of US $0.57 billion).

For the period under review EBITDA was a loss of US $0.30 million (1H2016: US $1.40 million loss), a function of positive trading and cement sales.

The operating loss for the six months ended 30 June 2017 amounted to US $0.94 million (1H 2016: operating loss of US $16.42 million) and the loss before tax amounted to US $3.68 million (1H 2016: loss before tax US $17.29 million).

Within the overall loss before tax, the cement business reported a loss before tax of US $2.78 million for the period (1H 2016: loss before tax of US $16.01 million). Trading and logistics, in the run-up to its closure in June 2017, reported a profit before tax of US $0.11 million for the period (1H 2016: loss before tax of US $0.95 million). 

Cement

The first quarter of the year is typically the latter part of the "wet season", however Q1 2017 experienced higher than average rainfall. In February, Beira had the month's average rainfall in two days, a pattern repeated through March. The unpredictable rainfall patterns led to wide spread flooding which curtailed construction projects and caused logistics difficulties. This down turn in demand together with competitors' strong wholesale discounting tactics led to sales volumes for the first quarter being adversely affected. Despite the continuing rain into February, the latter part of that month saw some record deliveries of bagged cement from the plant. As the weather improved in the second quarter of the year, sales volumes did improve.

Ready mix cement has not performed as well as expectations due to the adverse weather and the unavailability of mixer-trucks over the first half of the year.

The cement market is influenced by the general economy of the country which is still struggling with the impacts of the debt crisis and suspension of IMF and Donor funding. This has resulted in the postponement or cancellation of a number of public infrastructure projects. In addition, the residential and commercial markets have been negatively affected by a lack of available income, high interest rates and low borrowing capacity. Whilst the downturn in cement sales is national, the impact has been more pronounced in the south of the country and less so in the central region where the plant is located, and also in the northern region.

Despite the downturn, the Company continues to develop its sales strategy and we have expanded our distribution network by establishing depots in Chimoio which we believe will achieve increased penetration rates in the area, and in Massinga, where a large proportion of the population has above average purchasing power. Building these centres now will allow us to establish our brand locally and then benefit more quickly from an improving economy.

Our brand is increasingly recognised as a premium product and efforts are continuing by the sales team to promote the products' advantages to block makers, concrete product manufacturers and construction companies, comprising a large section of our customer base.

Realised prices have improved over the period, helped by the strengthening of the local currency against the US dollar.  The market has begun to stabilize after the reduction of aggressive discounts being offered in the market as industry participants sought to maintain market share in Central Mozambique.

Raw material unit costs and usage factors have been stable over the period. However, power costs are above the industry average and so we are actively negotiating with the power utility to align the costs with those of our competitors.

Cimentos da Beira Lda ("CDB"), a subsidiary of the Company, has been provided with a US $13.5 million and a US $5.5 million term loan facility from the Industrial Development Corporation of South Africa Ltd ("IDC") to assist in the construction of its cement plant in Mozambique. As at 30 June 2017, both term loans had been fully drawn down. These loans were originally repayable in 60 equal monthly instalments from April 2016 onwards. Given the delay in start-up of the operations and the lower than forecast sales volumes, the Company and the IDC entered into negotiations in June 2016 to amend the terms of the facilities, although, at that time, the IDC did also notify CDB that it was in default under the existing term loan agreements.

Negotiations have been ongoing between CDB and the IDC over the past year regarding the deferral of the repayment of the term loans. CDB and IDC have agreed to a tentative restructuring of the term loans with the first quarterly repayments under the term loans starting in March 2018.  Repayments will be in equal quarterly payments and the maturity date of both term loans will be in 2023.  The tentative restructuring of the term loans is subject to certain approvals, final documentation and conditions precedent customary for a transaction of this nature.

The challenges that the country faces are not unique for an emerging economy.  We remain confident of the long-term growth prospects in Central Mozambique and more particularly of the Beira corridor which is a natural gateway for the hinterland and landlocked countries such as Zambia, Malawi and Zimbabwe.

Trading & Logistics

Following the announcement by the Company on 14 October 2016 of its intention to withdraw from metals trading and logistics, the activity has been in a winding down phase since then. This has resulted in the execution of contractual obligations with respect to the purchase and sale of metal, the sale of any non-allocated inventory and a reduction in staff. The withdrawal from the business has been made in an orderly manner with the assistance of our financing banks who have supported the business to the end. As at 30 June 2017, there were three transactions outstanding which have been subsequently completed. All capital that had been allocated to this activity has been released and there are no staff involved in the business. Overseas offices related to the activity are in the course of closure.

Board Changes

On 25 August 2017, the executive contract of Mr Conrad, the Chief Executive Officer, was terminated. This was due to the lack of confidence on the part of the majority of the Board in Mr Conrad's ability to lead the Company. Mr Conrad is contesting the validity of his removal. His responsibilities have been reallocated to other Directors and executives.

A General Meeting of the Company will be held on 3 October 2017 with a resolution to remove Mr Conrad as a Director of the Company.  The General Meeting has been requisitioned by certain shareholders.

Current Trading and Future Prospects

Cement

CDB's sales volumes of cement have been at record levels in July and August of this year which is encouraging for the remainder of the year. Sales prices have stabilized and discounting has been less aggressive.

The exchange rate of the Mozambiqan Meticals against the US Dollar has moved from approximately 71 in December 2016 to approximately 61 at the current time which has been beneficial to the business as it purchases its raw materials in US Dollars and sells it product in Mozambiqan Meticals.

We expect unit costs to further reduce over the remainder of the year as a result of a falling raw material costs, feed optimisation and a ramp up in production volumes.

Transport costs are a significant part of the variable costs of the business so we are constantly reviewing our transport options to improve our cement distribution capabilities and refine our pricing strategy. We are also focused on securing transport and pumping capacity for our concrete products.

Strategy

As announced on 31 July 2017, the Company engaged Verdant Capital, an African corporate finance specialist, to assess strategic options for the Company's cement operations.

Martin Abbott                         

Chairman                                

Financial Review

Overview

Gross profit for the Group was US $2.64 million on turnover of US $0.23 billion for the six months ended 30 June 2017 (1H 2016: US $1.80 million gross profit on turnover of US $0.57 billion). 

After administrative expenses and finance income and costs, loss before tax for the six months ended 30 June 2017 was US $3.68 million (1H 2016: US $17.29 million which included an impairment charge of US $13.70 million (1H 2017: nil)).

Cement

Turnover of US $6.18 million for the period under review compares favourably with turnover of US $5.44 million for the six months ended 30 June 2016 and is indicative of the ramping up of production and the stabilisation of cement prices.

The business reported a gross margin of US $1.79 million which resulted in an EBITDA of US $0.22 million after administrative expenses of US $1.56 million. The comparative figures for the six months ended 30 June 2016 were a gross margin of US $0.64 million, administrative expenses of US $0.60 million and an EBITDA of US $0.04 million. The loss before tax for the cement business for the six months ended 30 June 2017 was US $2.78 million (1H 2016: loss before tax US $16.01 million which included an impairment charge of US $13.70 million (no impairment charge in 1H 2017).

Trading and Logistics

This activity was in a run-off phase during the period under review which was reflected in its lower turnover of US $0.22 billion compared to US $0.56 billion for the period to 30 June 2016. EBITDA for the period was US $0.17 million (1H 2016: EBITDA loss US $0.91 million). The profit before tax for trading and logistics for the six months ended 30 June 2017 was US $0.11 million (1H 2017: Loss before tax US $0.95 million).

Expenses 

Group administrative expenses were US $2.94 million for the six months to 30 June 2017 (1H 2016: US $3.20 million), of which US $0.70 million (1H 2016: US $0.53 million) was represented by Group corporate overheads. Total headcount at 30 June 2017 was 107, a reduction of 17 since 31 December 2016 due to the run-off of the trading and logistics business.

Balance Sheet 

Total assets were US $70.18 million at 30 June 2017 compared with US $282 million at 31 December 2016. The majority of the decrease is due to the withdrawal from the trading and logistics business in the first six months of 2017.

As already reported in the Chairman's Statement, there are ongoing negotiations between CDB and the IDC regarding the restructuring of the term loans. Although the negotiations have progressed well, at the date of publication of the Group's condensed consolidated interim financial statements as at 30 June 2017, approvals, final documentation and conditions precedent were still outstanding.  The Group is therefore required to categorise all liabilities with the IDC as Current Liabilities, which would normally be reported as Non-Current Liabilities.

These conditions indicate the existence of a material uncertainty which may cast doubt about the Group's ability to continue as a going concern. The Directors are confident that the revised terms regarding the commencement of the loan repayments to March 2018 will be formally approved by the IDC.

Total equity before non-controlling interests was US $22.58 million at 30 June 2017 compared with US $25.73 million at 31 December 2016.  Net asset value per share which is equity attributable to the owners of the parent was US 9.16 cents per share (31 December 2016: US 10.44 cents). Net asset value per share is based on 246,457,301 ordinary shares outstanding at 30 June 2017, excluding treasury shares, non-treasury shares and shares held by the Ambrian Employee Benefit Trust (31 December 2016: 246,457,301 ordinary shares outstanding). The reduction in net asset per share is attributable to the losses incurred by the Group in the six months to 30 June 2017.