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African Oxygen Limited - Announcement

Release Date: 31/10/2002 15:16:52      Code(s): AFX
AFRICAN OXYGEN LIMITED - ANNOUNCEMENT                                           
Strong recovery from gases and welding supports earnings growth                 
Revenue up 24%                                                                  
Operating profit up 29%                                                         
HEADLINE Earnings per share up 32%                                              
CASH INFLOWS EXCEED R1 BILLION                                                  
DEAR SHAREHOLDERS                                                               
In its 75th year of operation in southern Africa, and its 39th as a listed      
company, African Oxygen Limited (Afrox) has once again produced excellent       
results. All three lines of business, Industrial and Special Products (ISP),    
Process Gas Solutions (PGS) and Healthcare showed marked increases in revenue,  
trading profit and cash flow.                                                   
Afrox increased its total dividend for the year by 20 per cent, to 62,5 cents.  
Since listing, Afrox has never reduced a dividend.                              
The strong growth in revenue was attributable to increased activity levels in   
all three lines of business. In addition, new marketing initiatives, new product
launches and growing exports in the industrial businesses also contributed      
towards the improved results. Healthcare showed strong growth through the       
acquisition of several hospitals and through organic projects.                  
During the year, Real Africa Holdings Limited exercised its option to acquire a 
further 12 per cent of Afrox Healthcare Limited. As a result, Afrox`s interest  
in Afrox Healthcare reduced from 82 per cent to 70 per cent and minority        
interests increased.                                                            
Segmental information on Afrox`s three lines of business is detailed in this    
announcement.                                                                   
Financial results                                                               
Revenue increased by 24 per cent to R6,5 billion (2001: R5,2 billion) with      
operating profits increasing by 29 per cent to R896 million (2001: R694         
million).                                                                       
Within the Industrial and Special Products (ISP) business, Handigas margins     
showed good recovery and operating efficiencies supported improved margins for  
both ISP and Process Gas Solutions (PGS).                                       
The exceptional items of R15 million (2001: a R23,8 million profit) resulted    
mainly from the effect of Real Africa Holdings Limited excercising its option in
Afrox Healthcare Limited.                                                       
Cash generated from operations achieved a record R1,17 billion (2001: R947      
million). Good operating profits and excellent working capital management       
contributed to this very favourable result. The extra cash so generated was used
to finance acquisition and capital expenditure of R608 million and improve      
gearing to 22 per cent (2001: 24 per cent).                                     
Net interest paid increased by 8 per cent to R157,3 million (2001: R146,2       
million), in spite of interest rates increasing by 400 basis points during the  
year. Good profitability and working capital management resulted in lower       
borrowings.                                                                     
Accounting policies                                                             
The accounting policies at 30 September 2002 are consistent with those applied  
at 30 September 2001, except for changes in accounting policies with regard to  
retirement benefits and depreciation of owner-occupied buildings. These results 
have been prepared in accordance with South African Statements of Generally     
Accepted Accounting Practice including AC116 and AC135 which became applicable  
for the first time this year. Comparative amounts have been appropriately       
restated.                                                                       
Audit report                                                                    
The auditors, PricewaterhouseCoopers Inc., have issued their opinion on the     
group`s financial statements for the year ended 30 September 2002. A copy of    
their unqualified report is available for inspection at the company`s registered
office.                                                                         
Business review                                                                 
The industrial business of ISP and PGS benefited from overall growth in the     
manufacturing industry. This growth was supported by a newly launched marketing 
programme focusing on market segmentation and improved customer service levels. 
It was pleasing to record positive volume growth of 5 per cent from the core    
industrial cutting and welding products business.                               
Additional features of the improved operating performance were a strong recovery
in Handigas margins, export sales growth of 60 per cent leveraging off the      
company`s local welding manufacturing expertise, and the launch of new products.
The AfroxPac 35                                                                 
achieved sales of R59 million, mainly in the second half of the year. PGS gained
both oxygen and nitrogen volumes through increased orders and a PSA plant was   
sold to Anglo American in Mali.                                                 
Operational achievements included excellent working capital reductions, the     
implementation of world-class supply chain management, and the achievement of 5-
star NOSA ratings for all operational sites.                                    
The Healthcare business grew both organically and from hospital acquisitions.   
These acquisitions included the four hospitals in the Amahosp group, the Wilgers
and the Queenstown hospitals. In addition, continuing organic growth was        
realised from the new Eugene Marais Cathlab, new maternity and paediatric units 
at Anncron and Empangeni and renal dialysis and bone marrow transplant units at 
the Flora. Further efficiencies and integration benefits were achieved leading  
to cost savings.                                                                
Outlook                                                                         
Afrox`s growth strategy, developed in association with BOC, to expand the       
business is based on defending the core business, while actively seeking new    
marketing offers to customers. The focus includes growing new products and the  
export sales model, with a continuing emphasis on best operating and commercial 
practices to enhance efficiencies and improve profitability. Many of these      
initiatives are in place and already showing excellent results. This trend      
should continue in 2003.                                                        
John Walsh                 Rick Hogben                                          
Chairman                   Managing Director                                    
Johannesburg               31 October 2002                                      
AUDITED results for the YEAR ended 30 SEPTEMBER 2002                            
Summarised Balance Sheet                                                        
                                            30 September     30 September       
R`000                                  2002             2001                    
ASSETS                                                                          
Non-current assets                     2 988 843        2 434 923               
Property, plant and equipment          2 687 938        2 192 798               
Other non-current assets                 300 905          242 125               
Current assets                         1 662 426        1 442 600               
Inventories                              404 319          350 323               
Trade and other receivables            1 206 905        1 045 283               
Cash and cash equivalents                 51 202           46 994               
Total assets                           4 651 269        3 877 523               
EQUITY AND LIABILITIES                                                          
Capital and reserves                   1 892 528        1 585 247               
Share capital                             16 515           16 277               
Share premium                            360 478          298 756               
Accumulated profits and reserves       1 515 535        1 270 214               
Minority interest                        560 342          385 213               
Non-current liabilities                  794 673          706 992               
Borrowings                               550 365          470 190               
Other non-current liabilities            244 308          236 802               
Current liabilities                    1 403 726        1 200 071               
Current portion of borrowings            201 067          210 276               
Provisions                               113 347          108 209               
Other current liabilities              1 089 312          881 586               
Total equity and liabilities           4 651 269        3 877 523               
Statistics and Ratios                                                           
30 September     30 September            
                                       2002             2001                    
Statistics                                                                      
Total number of shares                                                          
in issue (`000)                        330 301          325 542                 
Number of ordinary share on which                                               
earnings per share are based (`000)    326 363          320 828                 
Dividends and capitalisation                                                    
share award, per share (cents)         62,5             52,0                    
- Final                                37,0             31,5                    
- Interim                              25,5             20,5                    
Ratios                                                                          
Interest cover (times)                 5,6              4,9                     
Effective tax rate (%)                 32,5             30,2                    
Gearing (%)                            22,0             24,0                    
Dividend cover - headline                                                       
earnings (times)                       2,0              1,8                     
Summarised Income Statement                                                     
                                 30 September     %     30 September            
R`000                            2002          Change   2001                    
Revenue                          6 511 510     24       5 239 374               
Cost of sales                    (4 732 843)           (3 870 490)              
Gross profit                     1 778 667     30       1 368 884               
Other operating income           -                         10 368               
Administration and other                                                        
expenses                         (882 191)              (685 227)               
Operating profit                 896 476       29        694 025                
Exceptional items                (15 033)                 23 768                
Profit from operations           881 443       23        717 793                
Finance costs                    (157 275)              (146 233)               
Income from associates             27 139                 30 465                
Profit before taxation           751 307       25       602 025                 
Income tax expense               (244 018)             (181 559)                
Profit after taxation             507 289      21       420 466                 
Minority interest                (117 040)              (90 294)                
Net profit for the year           390 249      18       330 172                 
Adjustments for headline earnings                                               
- Exceptional items              15 033                 (23 768)                
- Taxation effect                (1 370)                 (7 210)                
- Goodwill amortised              5 916                   1 734                 
- (Profit)/loss on sale of                                                      
property plant and equipment     (2 622)                1 569                   
Headline earnings                407 206       35       302 497                 
Basic earnings per ordinary                                                     
share (cents)                    120           16       103                     
Headline earnings per ordinary                                                  
share (cents)                    125           32       94                      
Segmental Information                                                           
R`000                                  Health-    Corporate                     
                  PGS      ISP         care       costs    Group                
Year ended                                                                      
30 September 2002                                                               
Revenue           369 314  2 256 160   3 886 036  -        6 511 510            
Operating profit  79 638   391 512     429 266   (3 940)   896 476              
Year ended                                                                      
30 September 2001                                                               
Revenue           293 381  1 891 223   3 054 770  -        5 239 374            
Operating profit  58 516   351 653     332 529    (7 471)  735 227              
Change in                                                                       
accounting                                                                      
policy            (982)    (21 507)    (18 713)   -        (41 202)             
Restated                                                                        
operating profit  57 534   330 146     313 816   (7 471)   694 025              
Summarised Cash Flow Statement                                                  
30 September     30 September            
R`000                                  2002             2001                    
Cash generated from operations         1 168 010        947 195                 
Finance costs and taxation paid        (374 370)        (338 859)               
Dividends received                     -                10 368                  
Dividends paid                         (123 221)        (77 495)                
Net cash inflow from operating                                                  
activities                             670 419          541 209                 
Acquisition of business                (227 653)        (32 365)                
Disposal of shares                     111 097          -                       
Purchase of property, plant                                                     
and equipment                          (380 804)        (256 565)               
Other investing cash flows, net        6 333            148 812                 
Net cash outflow from                                                           
investing activities                   (491 027)        (140 118)               
Minorities                             (38 375)         (68 141)                
Decrease in borrowings                 (136 422)        (418 523)               
Movement on retirement                                                          
benefit obligation                     (387)             (13 623)               
Net cash outflow from                                                           
financing activities                   (175 184)         (500 287)              
Net increase/(decrease) in cash and                                             
cash equivalents                          4 208           (99 196)              
Cash and cash equivalents                                                       
at beginning of year                     46 994           146 190               
Cash and cash equivalents at                                                    
end of year                              51 202           46 994                
Summarised Statement of Changes in Equity                                       
Revalua- Accumula-                         
                  Issued   Share     tion     ted                               
R`000             capital  premium   reserve  profits    Total                  
Balance at                                                                      
1 October 2001    16 277   298 756   87 807   1 182 407  1 585 247              
Surplus on                                                                      
revaluation of                                                                  
properties        -        -         15 940    -          15 940                
Other movements   -        -         624      10 104      10 728                
Currency                                                                        
translation                                                                     
difference        -        -         -         13 586     13 586                
Net profit                                                                      
for the year      -        -         -         390 249    390 249               
Dividends         -        -         -        (185 182)   (185 182)             
Issue of share                                                                  
capital           238      61 722    -          -          61 960               
Balance at                                                                      
30 September                                                                    
2002              16 515   360 478   104 371  1 411 164  1 892 528              
Balance at                                                                      
1 October 2000    15 924   221 642   84 801     982 562    1 304 929            
Changes in                                                                      
accounting                                                                      
policies          -        -         -          (99 787)   (99 787)             
Restated balance  15 924   221 642   84 801     882 775    1 205 142            
Surplus on                                                                      
revaluation of                                                                  
properties        -        -         1 419        -          1 419              
Other movements   -        -         (1 087)     37 919     36 832              
Transfer between                                                                
reserves          -        -         2 674       (2 674)    -                   
Net profit for                                                                  
the year          -        -         -          330 172    330 172              
Dividends         -        -         -          (65 785)   (65 785)             
Issue of share                                                                  
capital           353      77 114    -        -             77 467              
Restated balance                                                                
at 30 September                                                                 
2001              16 277   298 756   87 807   1 182 407  1 585 247              
This is a summarised commentary and results announcement. A full annual report  
will be published on the Internet and a hard copy will be mailed to shareholders
in the first week of December 2002.     The results can be viewed on the website
www.afrox.com.                                                                  
AFRICANOXYGENLIMITED                                                            
African Oxygen Limited (Incorporated in the Republic of South Africa).          
Registration number: 1927/000089/06.                                            
ISINCode: ZAE000030920.  South African share code: AFX.  Namibian share code:   
AOX. ("Afrox" or "the Company").                                                
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO  
Box 5404, Johannesburg 2000. Telephone (27 11) 490-0400.                        
Transfer secretaries: Computershare Services 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: HSBC. Member of the Namibian Stock Exchange,      
trading as HSBC Securities (Namibia) (Pty) Limited.                             
Directors:  JLWalsh**** (Chairman), RLHogben (Managing Director), RGCottrell, N 
Deeming*, CMDFlemming, AE Isaac*, LAMacNair,                                    
R Mdori**, GL Sedgwick***, GS Sibiya, CB Strauss.                              
Alternate director: RK Lourey***                                                
* British, ** French, *** Australian, **** American.                            
Company Secretary: IMMatthee.                                                   
Date: 31/10/2002 03:15:00 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             



                                        
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