ALTEO LIMITED

●ANNUAL REPORT: 2015-06-30

Dear Shareholder,

On behalf of the Board of Directors of ALTEO, I am pleased to present the company’s annual report for the financial year 2014-15.

During the year under review, ALTEO made significant additional headway towards achieving its mission of being “a competitive regional reference in the cane industry and its numerous derivatives, in renewable energy production and in sustainable property development”.

On the financial side, the ALTEO Group reported improved results for the year, mainly driven by:

  • The sustained performance of its sugar operations in Tanzania;
  • A marked turn-around in the property sector in Mauritius; and
  • Gains realised on the disposal of its shareholding in Anahita Hotel Limited (“AHL”).

At the same time, our sugar operations in Mauritius operated under very challenging conditions owing to the combined effect of reduced production and a significant additional drop in prices. The energy cluster continued to post satisfactory results. These were achieved through improved efficiency and relatively low coal prices, despite a reduced tariff.

OVERALL REVIEW

On the strategic and operational front, the Group’s main achievements during the year were:

  • The acceleration of the mechanisation of agricultural operations and launch of a garage and transport master plan in order to optimise synergies and efficiency gains;
  • The completion of an ambitious investment programme at Alteo Milling Ltd (“AML”) to operate sustainably above the capacity target of 400 tonnes of cane per hour (“TCH”);
  • The extension of the Consolidated Energy Ltd (“CEL”) power purchase contract for 3 years and the completion of a pre-feasibility study of a new, highefficiency 2 X 45MW power plant by Alteo Energy Ltd;
  • The successful completion of the development of the southern part of Anahita and the start of works on the first phase of an exclusive product range on the northern part of the estate;
  • In Tanzania, the decision to increase the factory capacity from 170 to 190 TCH from 2016-17 onwards, in order to match increased cane production; and
  • The completion of the acquisition of a 51% stake in Transmara Sugar Company Ltd (“TSCL”) in Kenya and the decision to increase the factory capacity from 90 to 180 TCH.

GROUP FINANCIAL RESULTS

The Group turnover for the year under review reached Rs 6,735m, up by 14% compared to the previous year. This increase has been largely achieved by the encouraging performance of the property cluster, resulting from the progress of works on phase 1 of the Amalthea development at Anahita. The increase in turnover of our Tanzanian sugar operations has unfortunately been offset by the poor performance of our local sugar operations, where both lower tonnage and lower sugar prices have had a significant and adverse impact on results.

Despite a 6% improvement in absolute terms, the Group’s Earnings before interest, tax, depreciation and amortisation (“EBITDA”) margin in the year under review went down compared to the previous year to reach Rs 2,091m. The lower sugar price, coupled with an increase in labour costs following the agreement reached with trade unions in November 2015, has had a negative impact on the EBITDA margin of the Group’s Mauritian sugar operations.

Group profit after tax increased significantly to reach Rs 1,157m, compared to Rs 569m in the previous financial year. This was largely explained by the gain of Rs 305m realised on the disposal of a 50% shareholding in AHL in 2015-15, and by the fact that last year’s results were adversely affected by a loss of Rs 225m on the disposal of a 50% shareholding in Novelife. Moreover, finance costs dropped by 20% due to foreign exchange gains and to the lower average gearing level of the Group during the financial year under review.

The share of results from associates and joint ventures dropped to Rs 21m compared to Rs 55m in the previous year, as the results of AHL have been excluded from these following its disposal in December 2014.

An interim dividend of Rs 0.35 per share (2015: Rs 0.35) and a final dividend of Rs 0.45 per share (2015: Rs 0.45) were declared during the financial year.

PROSPECTS

Agri and Sugars Our cane growing and sugar milling operations in Mauritius are expected to benefit from a good sugarcane crop, but will be affected by the prevailing low sucrose content of the cane and still-depressed EU sugar prices.

In Tanzania, above-average cane yields are again anticipated and strong results are expected despite the likely adverse effect of low world prices on the domestic market.

In Kenya, a planned increase in production and stable prices for the current year are expected to translate into positive results.

Energy

CEL’s power plant is currently undergoing a major overhaul and is expected to be back on the grid in October 2015 under the terms of an improved Power Purchase Agreement to December 2018. Results for Alteo Energy Ltd are expected to remain in line with the previous year on the basis of stable coal prices for the foreseeable future.

Property and Hospitality

The gain in sales momentum registered at Anahita this year should positively impact the results in the first semester of the current financial year as construction works progress on phase two of the Amalthea development. The launch of the next development phase is expected in the second quarter.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

This year’s edition of the annual report provides additional information on ALTEO’s environmental and social initiatives as well as on projects to continuously improve Health & Safety standards. This new ‘sustainability’ focus reflects the importance that ALTEO attributes to these issues and is a first step towards developing a future integrated report.

ALTEO’s commitment in this area is viewed as both a group responsibility and a priority for business success. Indeed, the quality of our products is increasingly assessed by our environmental and social standards. It is ALTEO’s belief that its various clusters can only progress if the environment in which they operate also benefits.

ALTEO’s total contribution to community projects in Mauritius reached Rs 10.6m this year (2015: Rs 11.3m). This was focused on social welfare, education and training, childcare and health. ALTEO continues to be active through the Fondation CIEL Nouveau Regard and the GML Fondation Joseph Lagesse, as well as through direct contributions to a number of other activities. In Tanzania, ALTEO is also actively involved in community development through a joint venture with a Dutch NGO.

APPRECIATION

At a Board meeting held on June 24, 2015, Mr. Arnaud Lagesse tendered his resignation as Chairman of the company, while nonetheless remaining a member of the Board. In the name of the Board, I would like to express our gratitude to Mr. Lagesse for having acted as Chairman since August 2013.

I would also wish to thank my colleagues on the Board of Directors for their contribution to the affairs of the company throughout the year.

We also seize this opportunity to welcome Mr. Fabien de Marassé Enouf, who was appointed to the Board on June 24, 2015.

Finally, we also extend our appreciation to the management and staff, under the leadership of our Chief Executive Officer, Patrick de L. d’Arifat, for their valuable contributions throughout the year.

P. Arnaud Lagesse

Chairman

September 24, 2015