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African Oxygen Ltd - Results For The Six Months Ended 31 March 2001

Release Date: 10/05/2001 17:33:33      Code(s): AFX
AFRICAN OXYGEN LIMITED
www.afrox.com
Results for the six months ended 31 March 2001
* Revenue up 11%
* Net profit up 7%
* Gearing improved
* Cash generated from operations R315 million
Message to our shareholders
Dear Shareholders
Performance
Your company produced satisfactory results during a difficult six months'
trading period, particularly for the industrial business which was affected by
lower than expected manufacturing activity. Nevertheless, our long-term
strategy to broaden the base of the company to include more service-related
sectors in addition to our core gases and welding businesses, has enabled the
group once again to produce a sound performance off a high base in revenue,
profits and earnings. The quality of the balance sheet has been retained,
reflecting prudent asset management.
Revenue increased by 11 percent to R2,5 billion (2000: R2,3 billion), with net
profit up 7 percent at R162,9 million (2000: R158,2 million). This rise needs
to be seen in the light of an exceptionally strong performance in the first six
months of the previous financial year.
Over the past twelve-month period there has been deterioration in the
manufacturing sector trading conditions, and Handigas, our liquefied petroleum
gas business, has experienced margin erosion as a result of the rapid oil price
increase, together with the decline in the rand/dollar exchange rate. We are
pleased, however, that Handigas margins recovered in the past quarter and are
now at the previous years levels.
Cash generated from operations was a very healthy 314,8 million (2000: R153,3
million). Asset management initiatives have proved successful, particularly
with regard to stock and debtor  management. This achievement is reflected in
our level of current assets which, at R1,6 billion are only 4 percent above the
previous year's level. Borrowings are lower than the previous year's at R1,2
billion. Financing costs of R75,5 million (2000: R86,2 million) reflect the
benefit of lower borrowings and lower interest rates. Gearing at 50 percent now
includes the previously off-balance sheet Highveld plant funding of R104
million. This change was necessitated by the new accounting standard (AC412).
During the period under review, Afrox disposed of its investment in Lifecare
Group Holdings Limited to its subsidiary Afrox Healthcare Limited. The reason
for this transaction is to consolidate the group structure, with all healthcare
businesses grouped under the Afrox Healthcare Limited umbrella.
Segmental analysis
Afrox reports its results along three lines of business. Gases and welding
operations consist of Industrial and Special Products (ISP) (comprising
cylinder and liquid fabrication gases, special and medical gases, Handigas and
welding products), and Process Gas Solutions (PGS) made up of large
gas-producing plants, gas pipelines and bulk liquid gases. The Healthcare
business comprises the hospital and healthcare services businesses.
Business review
The gases and welding businesses (ISP and PGS) had satisfactory revenue growth
over the period, most noticeably in the area of gaseous chemicals (refrigerants
and propellants), hospitality (Handigas and Suremix), and medical gases. Carbon
dioxide continues to perform well, with strong sales to the beverage and pulp
and paper industry in particular.
Product margins were, however, negatively affected by lower Handigas margins
for the first quarter due to the high oil price and deteriorating rand/dollar
exchange rate. Higher sales of lower margin products also
affected overall margins.
Business gains in the period under review included the winning and
commissioning of three major Handigas industrial contracts, and the gaining of
significant Handigas supply to the rapidly developing hospitality sector
including the new casinos. New compressed gas and welding contracts were won
and significant gains in the refrigerant gases market were realised. In
addition, PGS won several bulk gas contracts, particularly for nitrogen.
During this period we continued to upgrade sales centres and we have expanded
our operations into Mozambique and Madagascar.
There has been continued focus on cost and asset management in both ISP and
PGS. Overhead growth was contained to 2 percent, and under-performing assets
have been identified for disposal.
The Healthcare business again performed strongly. Revenues were improved off
slightly higher activity levels.
Strategic investments in facilities and the latest medical equipment have
helped the healthcare business grow market share and profitability in all the
regions it operates. Although the trend for shorter stays remains
because of managed care, more surgical cases and high technology procedures are
being recorded as a result of our investments to ensure world-class facilities
and equipment.
For Healthcare, this has been a period of consolidation, characterised by
exceptionally good asset management, particularly in reducing debtor levels.
Capex levels are also well down.
Healthcare services companies performed well and, at the same time, continued
to grow their markets and increase revenues. Organic growth targets were
achieved, and plans to broaden these businesses' services and products are at
an advanced stage.
Dividend and capitalisation share awards
The directors have declared an increased dividend of 20,5 cents a share (2000:
19,0 cents), up 9 percent. This dividend marks the 75th since the listing in
1963 - all increased with the exception of one, which remained the same as that
of the previous corresponding period.
The 20,5 cents dividend is covered 2,5 times by earnings of 50,9 cents.
Shareholders will have the option of taking a cash dividend or a capitalisation
share award.
Prospects
Efficiency-enhancing projects relating to asset and cost structures will remain
a core focus. Further development of our broader business base, especially in
the service-related businesses of healthcare, our new gaseous chemical
business, hospitality, Handigas and global sales of welding products, will also
continue.
There are opportunities for both organic and acquisition growth, and, we expect
certain projects to materialise by the financial year end.
Barring unforeseen circumstances, we anticipate an improved second half.
Royden Vice                  Jimmy Marriott
Chairman                     Managing Director
Surrender of share certificates in exchange for a share statement under the
Share Transfer and Replacement ("STAR") Programme
The directors of your company have considered that it is in the best interests
of the company and shareholders to implement the STAR programme to facilitate
an orderly transition to Share Transactions Totally Electronic ("STRATE").
All existing share certificates will cease to be good for delivery for
transactions on the JSE Securities Exchange South Africa ("JSE") and the
Namibian Stock Exchange ("NSX") from the start of business on Monday, 11 June
2001.
Shareholders will be required to surrender their existing share certificates
together with relevant surrender and share transfer form and, if applicable,
the private shareholder custody mandate (which will appoint Mercantile Bank
Limited as the custodian of the surrendered shares) contained in the circular
to be posted to shareholders on or around Tuesday, 15 May 2001.
Capitalisation share award and cash option
Notice is hereby given that an award of new fully paid ordinary shares ("the
new shares") will be distributed to shareholders registered in the books of the
company at the close of business on Friday, 6 July 2001, by way of a
capitalisation of accumulated profits according to the following formula per
share:
20,5 cents
97,5% of the ruling price at the close of business on Friday, 6 July 2001.
Shareholders may elect to decline the award in respect of all or part of their
shareholding and instead receive a cash dividend of 20,5 cents (2000: 19.0
cents) for the six month period ended 31 March 2001.
All fractions of new shares will be aggregated and sold on the JSE for the
benefit of the relevant shareholders. Subject to the approval of the JSE and
the NSX, a listing of the new shares to be issued pursuant to the award will
commence on Wednesday, 8 August 2001.
Documentation, subject to the approval of the JSE and NSX, dealing with the
capitalisation award and incorporating an election form in respect of each
dividend, will be posted to shareholders on or around Friday, 13 July 2001.
In order to be valid, completed election forms must be received by the transfer
secretaries by no later than 12h00 on Friday, 3 August 2001.
Where relevant, either share statements or share certificates in respect of the
new shares, and/or payments will be issued/made on or around Wednesday, 8
August 2001.
A further announcement will be published on Wednesday, 8 August 2001, detailing
the results of the capitalisation share award and cash election.
By order of the Board
IM Matthee
Company Secretary
Johannesburg
10 May 2001
The directors report that the interim results for the six months ended 31 March
2001 are as follows:
Condensed Balance Sheet
                                     Unaudited     Unaudited      Audited
                                     Six           Six            Twelve
                                     months to     months to      months to
R'000                                Mar-01        Mar-00         Sep-00
ASSETS
Non-current assets                   2 541 530     2 460 626      2 520 602
Property, plant and equipment        2 264 619     2 192 449      2 248 827
Other non-current assets             276 911       268 177        271 775
Current assets                       1 566 739     1 500 187      1 446 011
Inventories                          326 785       282 818        303 838
Receivables and prepayments          1 100 506     1 140 119      1 011 308
Cash and cash equivalents            139 448       77 250         130 865
Total assets                         4 108 269     3 960 813      3 966 613
EQUITY AND LIABILITIES
Capital and reserves                 1 595 439     1 343 205      1 387 487
Issued capital                       16 045        15 855         15 924
Share premium                        244 466       206 836        221 642
Accumulated profits and reserves     1 334 928     1 120 514      1 149 921
Minority interest                    375 464       377 034        402 156
Non-current liabilities              655 705       663 789        578 032
Borrowings                           550 748       555 732        463 087
Other non-current liabilities        104 957       108 057        114 945
Current liabilities                  1 481 661     1 576 785      1 598 938
Current portion of borrowings        608 831       614 509        614 331
Provisions for liabilities
 and charges                         60 491        65 740         89 928
Other current liabilities            812 339       896 536        894 679
Total equity and liabilities         4 108 269     3 960 813      3 966 613
Condensed Income Statement
                                   Unaudited          Unaudited  Audited
                                   Six                Six        Twelve
                                   months to  %       months to  months to
R'000                              Mar-01     Change  Mar-00     Sep-00
Revenue                            2 520 511  11      2 278 058  4 722 332
Operating profit before
 finance costs                     364 865            347 922    674 007
Exceptional items                  -                  (6 731)    (18 190)
Finance costs                      (75 486)           (86 215)   (161 662)
Share of result of associates      12 651             6 633      15 943
Profit before taxation             302 030    15      261 609    510 098
Taxation                           (97 187)           (79 913)   (163 110)
Profit from ordinary activities    204 843    13      181 696    346 988
Minority interest                  (41 966)           (29 508)   (64 652)
Net profit for the period          162 877    7       152 188    282 336
Adjustments for headline earnings
- Exceptional items                -                  6 731      18 190
- Taxation effect                  -                  (729)      (1 263)
Headline earnings                  162 877    2       158 190    299 263
Earnings per share (cents)         50,9       6       48,1       89,1
Headline earnings per
 share (cents)                     50,9       1       50,0       94,5
Condensed Cash Flow Statement
                                   Unaudited     Unaudited     Audited
                                   Six           Six           Twelve
                                   months to     months to     months to
R'000                              Mar-01        Mar-00        Sep-00
Cash generated from operations     314 770       153 290       633 804
Finance costs and taxation paid    (192 128)     (129 309)     (258 086)
Dividends received                 7 295         4 059         7 552
Net cash inflow from operating
 activities                        129 937       28 040        383 270
Acquisition of business            -             (32 046)      (32 046)
Purchase of property, plant
 and equipment                     (119 334)     (158 461)     (315 942)
Other investing cash flows, net    (17 949)      19 849        12 133
Net cash used in investing
 activities                        (137 283)     (170 658)     (335 855)
Dividends paid                     (66 232)      (59 294)      (104 668)
Increase in borrowings             82 161        163 322       72 278
Net cash generated/(used) in
 financing activities              15 929        104 028       (32 390)
Net increase/(decrease) in cash
and cash equivalents               8 583         (38 590)      15 025
Cash and cash equivalents at
 start of period                   130 865       115 840       115 840
Cash and cash equivalents at
end of period                      139 448       77 250        130 865
Condensed Statement of Changes in Equity
                              Issued  Share Revaluation  Accumulated
R'000                         capital premium   reserve  profits   Total
Balance at 1 October 2000     15 924  221 642   84 801   1 035 109 1 357 476
Change in accounting policy
(refer to commentary
on performance)               -       -         -        30 011    30 011
Restated balance              15 924  221 642   84 801   1 065 120 1 387 487
Surplus on revaluation
of properties                 -       -         1 129    -         1 129
Other movements               -       -         1 883    19 118    21 001
Net profit for the period     -       -         -        162 877   162 877
Issue of share capital        121     22 824    -        -         22 945
Balance at 31 March 2001      16 045  244 466   87 813   1 247 115 1 595 439
Balance at 1 October 1999     15 757  184 966   83 251   913 535   1 197 509
Change in accounting policy
(refer to commentary on
 performance)                 -       -         -        28 251    28 251
Restated balance              15 757  184 966   83 251   941 786   1 225 760
Surplus on revaluation
 of properties                -       -         1 153    -         1 153
Other movements               -       -         (331)    2 716     2 385
Net profit for the period     -       -         -        152 188   152 188
Dividends                     -       -         -        (60 249)  (60 249)
Issue of share capital        98      21 870    -        -         21 968
Balance at 31 March 2000      15 855  206 836   84 073   1 036 441 1 343 205
Statistics & Ratios
Statistics
Total number of shares
 in issue ('000)              320 902           317 102            318 488
Number of ordinary
shares on which earnings
per share are based ('000)    320 141           316 473            316 719
Dividends and capitalisation
share award, per
share (cents)                 20,5              19,0               47,0
Ratios
Interest cover (times)        4,8               4,0                4,2
Effective tax rate (%)        32,2              30,5               32,0
Gearing (%)                   49,8              59,8               50,3
Dividend cover (times)        2,5               2,5                1,9
Segmental Information
R'000                            PGS      ISP       Healthcare   Group
Six months ended 31 March 2001
Revenue                          143 182  917 581   1 459 748    2 520 511
Operating profit                 29 037   192 544   143 284      364 865
Six months ended 31 March 2000
Revenue                          136 758  812 538   1 328 762    2 278 058
Operating profit                 26 926   197 739   123 257      347 922
Year ended 30 September 2000
Revenue                          284 996  1 644 629 2 792 707    4 722 332
Operating profit                 56 177   339 736   278 094      674 007
A complete set of these results, complying with AC 127, will be mailed to
shareholders.
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO
Box 5404, Johannesburg 2000. Telephone (27 11) 490-0400  Transfer secretaries:
Mercantile Registrars Limited, 8th Floor, Anglo Building, 11 Diagonal Street,
Johannesburg 2001. PO Box  1053, Johannesburg 2000. Telephone (27 11) 370-5000
Sponsor in South Africa: HSBC Investment Services (Africa) (Pty) Limited.
Sponsoring broker in Namibia: Phillip JA van Heerden. Member of the Namibian
Stock Exchange, trading as HSBC Securities (Namibia) (Pty) Limited.
Directors:  RT Vice (Chairman), JM Marriott (Managing Director), AE Isaac*, R
Medori**, GL Sedgwick ***, LA MacNair, GS Sibiya, CB Strauss, RG Cottrell.
Alternate director: RK Lourey***   * British, ** French, ***
Australian.
Company secretary: IM Matthee.
Company registration: 1927/000089/06
CONTINUED GROWTH FOR AFROX DESPITE DIFFICULT TRADING CONDITIONS
MEDIA RELEASE
10 May 2001
REVENUE UP 11% AND NET PROFIT 7% HIGHER
Gases and welding, and healthcare group, African Oxygen Limited (Afrox) has
increased revenue by 11 percent to R2,5 billion with net profit 7 percent
higher at R163,0 million for the six months ended March 2001. These results
were achieved despite difficult trading conditions and lower than expected
manufacturing activity.
Afrox chairman, Royden Vice, says, "Afrox produced excellent results for the
same period last year with revenue and profit up 46 percent and 19 percent
respectively. Since then, however, the past 12 months has seen a significant
deterioration in manufacturing trading conditions. This, coupled with the rapid
oil price increase in the second half of 2000 and the unfavourable rand/dollar
exchange rate, has meant we have experienced margin erosion for our Handigas
liquefied petroleum gas business. Higher sales of lower margin products also
affected overall margins."
"Handigas margins have, however, now recovered and are at the same level as a
year ago. Additionally, signs of a firming in the manufacturing sector have
been experienced in the past few months."
Vice is confident of an improved second half and forecasts increased earnings,
barring unforeseen circumstances. He also reports that Afrox has firm organic
and acquisition growth plans and expects certain growth projects to materialise
by the September year end.
"It is through these difficult periods that our long term strategy to broaden
Afrox's business base to include more service related businesses has meant,
once again, that we continue to show positive growth off a high base," says
Vice.
Cash generated from operations was a very healthy R314,8 million (R153,3
million). Asset management  continues to be a core focus with Afrox producing a
strong balance sheet with particular regard to stock and debtor management.
Current assets, at R1,6 billion, are only 4 percent above the previous year's
levels, with borrowings lower at R1,2 billion.
Finance costs are R75,5 million (R86,2 million) reflecting the benefit of the
lower borrowings and interest rates.
Gearing at 50 percent includes, for the first time, the previously off balance
sheet financing of the Mpumalanga gas producing plant, amounting to R104
million.
Afrox sold its stake in Lifecare Group Holdings Limited (Lifecare) to its
subsidiary Afrox Healthcare Limited (AHealth). The reason for the sale is to
consolidate Afrox's structure, with all healthcare businesses grouped under the
AHealth umbrella.
Segmental reporting shows that the healthcare business again performed well
with a 19 percent increase in trading profit on a 10 percent revenue growth.
The industrial businesses of gases and welding had satisfactory revenue growth
but Handigas margin erosion and tough trading conditions, resulted in an
overall marginal increase in industrial trading profits.
Afrox reports along three lines of business: Industrial and Special Products
(ISP) consists of cylinder, special and medical gases, Handigas and welding
products. Process Gas Solutions (PGS) is made up of large gas producing plants,
gas pipelines and bulk liquefied gases. The third line of business is
healthcare.
ISP showed a 14 percent increase in sales, but lower Handigas margins, tough
trading conditions and highly competitive pricing resulted in a 4 percent
decline in trading profit. PGS' trading profit was 7 percent higher although
sales dipped 3 percent, reflecting a contraction in the economy. The efficiency
enhancing programme  which was launched some three years ago helped contain
gases and welding overhead growth to well below inflation, at two percent.
Afrox's managing director, Jimmy Marriott, says, "Some of our gases and welding
businesses were pretty hard hit. There are signs, however, of a firming which
we hope will carry through from now on. Countering this were strong
performances from our new gaseous chemical business, hospitality, medical gases
and global sales of welding products. Bulk gases, such as carbon dioxide and
nitrogen, continued to show good growth."
Our global drive for welding products has gone well. Since marketing our global
range through The BOC Group, our parent company, we have concentrated on the
Australian and New Zealand markets where we now hold some 30 percent and 50
percent of the specific markets respectively. We recently launched into
Malaysia where we have a 30 percent market share and, are presently launching
in Thailand where we expect 20 percent of the market by year end. Launches in
other countries are planned.
Afrox's revenue was up 11 percent at R2,5 billion (R2,3 billion). Profit before
tax was R302,0 million (R261,6 million) up 15 percent. Net profit was 7 percent
at R162,9 million (R152,2 million).
Earnings per share were 6 percent higher at 50,9 cents (48,1 cents) and
headline earnings per share were 50,9 cents (50 cents), up 1 percent.
The board has declared an increased dividend of 20,5 cents (19 cents), up 9
percent. This dividend is covered 2,5 times by earnings and shareholders have
the option of a cash dividend or taking up capitalisation shares.
Rick Hogben, managing director of the R2,4 billion a year Afrox subsidiary,
Afrox Healthcare Limited, has been appointed an executive director of the
holding company, Afrox.
Business Review
Business gains in the period under review included the winning and
commissioning of three major Handigas industrial contracts and the gaining of
significant Handigas supply to the rapidly developing hospitality sector,
including the new casinos. New compressed cylinder gas and welding contracts
were won and significant gains in the refrigerant gases market were realised.
In addition, PGS won several bulk gas contracts, particularly for nitrogen.
During this period Afrox continued to upgrade sales centres and expanded
operations into Mozambique and Madagascar.
The Healthcare business again performed strongly.  Revenues were improved off
slightly higher activity levels.
For Healthcare, this has been a period of consolidation, characterised by good
asset management, particularly in reducing debtor levels.  Capex levels are
also well down.
Strategic investments in facilities and the latest medical equipment has helped
the healthcare business grow in all the regions it operates. Although the trend
for shorter stays remains because of managed care, more surgical cases and high
technology procedures are being realised as a result of investments ensuring
world-class facilities and equipment.
Healthcare services companies performed well and at the same time, continued to
grow their markets and increase revenues. Organic growth targets were achieved
and plans to broaden these businesses' services and products are at an advanced
stage.
Ends
Issued by: African Oxygen Limited
For further information contact Chris Fieldgate
Tel: 011 490-0554 Cel: 082 495-1481



                                        
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