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African Oxygen Limited - Audited Results For The Year Ended

Release Date: 26/10/2006 15:46:59      Code(s): AFX
African Oxygen Limited - Audited results for the year ended                     
                         30 September 2006 and dividend declaration             
(Incorporated in the Republic of South Africa)                                  
(Registration number 1927/000089/06)                                            
JSE Share code: AFX                                                             
NSX Share code: AOX                                                             
ISIN: ZAE000067120                                                              
("Afrox" or "the company" or "the Group")                                       
African Oxygen Limited audited results for the year ended 30 September 2006     
- Revenue from industrial operations up 19% to R4 billion                       
- Operating profit from Industrial operations up 15% to R684 million            
- Net profit from Industrial operations up 12% to R437 million                  
- Total normal dividend per share up 10% to 88 cents per share                  
- Special dividend of 60 cents per share                                        
Afrox imports LPG for the first time                                            
To end the liquefied petroleum gas (LPG) shortage in the Western and            
Eastern Cape the largest distributor in southern Africa, Afrox, started         
importing gas for the first time. Here part of the first shipment is            
offloaded into road tankers at Saldanha. The ship then sails to Port            
Elizabeth to offload further product.                                           
Summarised Balance Sheet                                                        
                                       As at           As at                    
                                       30 September    30 September             
Rm                                     2006            2005                     
ASSETS                                                                          
Non-current assets                     2 297           2 178                    
Property, plant and equipment          2 016           1 665                    
Investments in associates              11              377                      
Other non-current assets               270             136                      
Current assets                         1 618           1 066                    
Inventories                            452             326                      
Trade and other receivables            664             565                      
Financial instruments                  54              8                        
Cash and cash equivalents              448             167                      
Total assets                           3 915           3 244                    
EQUITY AND LIABILITIES                                                          
Capital and reserves                   2 271           1 644                    
Share capital                          15              15                       
Share premium                          537             537                      
Accumulated profits and reserves       1 696           1 080                    
                                       2 248           1 632                    
Minority interest                      23              12                       
Non-current liabilities                464             599                      
Borrowings                             311             467                      
Other non-current liabilities          153             132                      
Current liabilities                    1 180           1 001                    
Current portion of borrowings          205             57                       
Provisions for liabilities and                                                  
charges                                -               52                       
Trade payables and other current                                                
liabilities                            960             887                      
Bank overdraft                         15              5                        
Total equity and liabilities           3 915           3 244                    
Summarised Income Statement                                                     
                                       30 September    30 September             
Rm                                     2006            2005                     
Group                                                                           
Revenue                                3 914           5 754                    
Operating profit                       754             923                      
Profit on sale of investment           362             1 085                    
Profit from operations                 1 116           2 008                    
Finance (costs)                       (39)            (61)                      
Finance income                         4               62                       
Income from associates                 100             60                       
Profit before taxation                 1 181           2 069                    
Income tax expense                    (316)           (623)                     
Profit for the year                    865             1 446                    
Attributable to:                                                                
Equity holders of the company          858             1 350                    
Minority Interest                      7               96                       
Net profit for the year                865             1 446                    
Earnings per share                                                              
                                       30 September    30 September             
Rm                                     2006            2005                     
Total net profit for the year                                                   
attributable to equity holders                                                  
of the company                         858             1 350                    
Adjustments for headline earnings                                               
- Profit on sale of investment        (362)           (1 085)                   
- Capital gains tax on sale of                                                  
investment                             76              144                      
- Transaction costs within associate                                            
investment                             -               10                       
- Impairment of trade and subsidiary                                            
investment                             -               4                        
- Goodwill impaired                    21              8                        
- Profit on disposal of property,                                               
plant and equipment                   (2)             (3)                       
Headline earnings                      591             428                      
Basic earnings per ordinary                                                     
share - Group (cents)                  278,1           403,6                    
Headline earnings per ordinary                                                  
share - Group (cents)                  191,4           127,9                    
Statistics and Ratios                                                           
                                       30 September    30 September             
2006            2005                     
Statistics                                                                      
Total number of shares in issue                                                 
(net of treasury shares                                                         
issued) ("000)                         308 568         308 568                  
Number of ordinary shares on which                                              
earnings per share are based ("000)    308 568         334 587                  
Dividends per share (cents) - Group    148,0           495,0                    
- Final                                40,0            40,0                     
- Special dividend                     60,0            415,0                    
- Interim                              48,0            40,0                     
Ratios                                                                          
Interest cover (times)                 21,7            >100                     
Effective tax rate (%)                 26,8            30,1                     
Gearing (%)                            3,3             16,1                     
Dividend cover - (interim and final                                             
dividend for current year)             2,18            1,75                     
Segmental information                                                           
                             Industrial                                         
                             operations             2006                        
Rm                           % change   Industrial   Other*   Total             
Revenue                      19         3 914        -        3 914             
Operating profit             15         684          70       754               
Net profit for the year      12         437          421      858               
HEPS (cents)                 19         141,6        49,8     191,4             
*Relates to the Healthcare earnings, profit on the sale of the healthcare       
investment, pension fund surplus and other non-recurring items.                 
Segmental information (continued)                                               
2005                          
Rm                                    Industrial   Other*    Total              
Revenue                               3 279        2 475     5 754              
Operating profit                      597          326       923                
Net profit for the year               391          959       1 350              
HEPS (cents)                          118,9        9,0       127,9              
*Relates to the Healthcare earnings, profit on the sale of the healthcare       
investment, pension fund surplus and other non-recurring items.                 
Summarised Cash Flow Statement                                                  
                                       30 September    30 September             
Rm                                     2006            2005                     
Cash generated from operations         747             954                      
Finance costs and taxation paid       (436)           (539)                     
Dividends received                     7               11                       
Cash available from operations         318             426                      
Dividends paid                        (272)           (1 653)                   
Net cash inflow from operating                                                  
activities                             46             (1 227)                   
Acquisition of business               (5)             (93)                      
Disposal of business                   801             2 214                    
Purchase of property, plant                                                     
and equipment                         (548)           (492)                     
Purchase of intangible assets         (35)            (4)                       
Other investing cash flows, net        20             (251)                     
Net cash inflow from investing                                                  
activities                             233             1 374                    
Dividends and loans paid to                                                     
minorities                             -              (30)                      
(Decrease)/increase in borrowings     (8)              232                      
Buy-back of shares by a                                                         
subsidiary company                     -              (665)                     
Net cash (outflow) from financing                                               
activities                            (8)             (463)                     
Net increase/(decrease) in cash                                                 
and cash equivalents                   271            (316)                     
Cash and cash equivalents at                                                    
beginning of year                      162             478                      
Cash and cash equivalents at                                                    
end of year                            433             162                      
Summarised Statement of Changes in Equity                                       
Issued    Share     Other                
Rm                                     capital   premium   reserves             
Balance at 1 October 2005              15        537       122                  
Other movements                        -         -        (59)                  
Currency translation difference        -         -         15                   
Net profit for the year                -         -         -                    
Dividends declared                     -         -         -                    
Balance at 30 September 2006           15        537       78                   
Balance at 1 October 2004              17        537       121                  
Change in accounting policy            -         -        (4)                   
Restated balance                       17        537       117                  
Surplus on revaluation of properties   -         -         9                    
Other movements                        -         -        (3)                   
Currency translation difference        -         -        (1)                   
Net profit for the year                -         -         -                    
Dividends declared                               -         -                    
Purchase of shares by wholly-owned                                              
subsidiary (treasury shares)          (2)                                       
Balance at 30 September 2005           15        537       122                  
Summarised Statement of Changes in Equity (Continued)                           
Accumulated  Minority                      
Rm                                   profits      interest   Total              
Balance at 1 October 2005            958          12         1 644              
Other movements                      74           4          19                 
Currency translation difference      -            -          15                 
Net profit for the year              858          7          865                
Dividends declared                  (272)         -         (272)               
Balance at 30 September 2006         1 618        23         2 271              
Balance at 1 October 2004            1 988        753        3 416              
Change in accounting policy         (67)         (18)       (89)                
Restated balance                     1 921        735        3 327              
Surplus on revaluation of                                                       
properties                           -            -          9                  
Other movements                      3           (819)      (819)               
Currency translation difference      -                      (1)                 
Net profit for the year              1 350        96         1 446              
Dividends declared                  (1 653)                 (1 653)             
Purchase of shares by wholly-owned                                              
subsidiary (treasury shares)        (663)                   (665)               
Balance at 30 September 2005         958          12         1 644              
Accounting Policies                                                             
1. Basis of preparation                                                         
The condensed consolidated financial information ("financial information")      
announcement is based on the audited financial statements of the group for      
the year ended 30 September 2006, which have been prepared in accordance        
with International Financial Reporting Standards ("IFRS"), the listing          
requirements of the JSE Limited and the South African Companies Act (1973).     
The basis of preparation is consistent with the prior year except for the       
restatements as a result of the conversion to IFRS from SA GAAP.                
These financial statements have been prepared in accordance with IFRS 1.        
"First time adoption of International Financial Reporting Standards".           
In addition, we have adopted the guidance on accounting for adjustments to      
revenue where extended payment terms are made available to customers, by        
adjusting revenue with the cost of granting extended terms, and have            
restated prior year comparatives                                                
2. The effect of the IFRS changes on prior year Headline earnings and net       
asset value per share is as follows:                                            
                                                       Year ended               
                                                       30 September             
                                                       2005                     
Basic earnings per share - as previously                                        
reported (cents)                                       408,2                    
IFRS adjustments                                      (4,6)                     
Basic earnings per share - restated                   (403,6)                   
Headline earnings - as previously reported (cents)     142,6                    
IFRS adjustments                                      (14,7)                    
Headline earnings - restated                           127,9                    
Net asset value - as previously reported               557,3                    
IFRS adjustments                                      (26,1)                    
Net asset value - restated                             531,2                    
3. Share-based payments                                                         
The group has applied IFRS 2 from 1 October 2004 to those Share                 
Appreciation Rights, which had been issued but not vested by 1 October          
2004. The full liability for these amounts has been raised in the opening       
balance sheet and in the 2005 comparative income statement.                     
4. Leases                                                                       
Certain long-term operating leases of buildings have been reclassified as       
finance leases. This reclassification relates to Afrox Healthcare. The          
fixed assets and the loan finance have been recognised on the balance           
sheet.                                                                          
As a result of this the profit on sale of investment has been restated in       
the 2005 comparative numbers.                                                   
5. Taxation                                                                     
- Taxation has been provided on the restatement of reserves resulting from      
restatement of income statement amounts.                                        
- Deferred taxation has been provided against revaluation reserves arising      
on the revaluation of fixed assets.                                             
AUDIT OPINION                                                                   
The independent auditors PricewaterhouseCoopers Inc., have issued their         
opinion on the groups financial statements for the year ended 30 September      
2006.  A copy of their unqualified audit report is available for inspection     
at the companies registered office.                                             
Performance summary                                                             
African Oxygen Limited (Afrox) continues to produce financial results well      
above inflation.                                                                
During the year, Afrox completely disinvested from its healthcare interests     
by selling its remaining 20 percent shareholding in the Life Healthcare         
Group. The company is now a focused industrial company with a broad base of     
business operating in key areas of the economy.                                 
Revenue from industrial operations increased by 19 percent to reach R4          
billion. On a like-for-like basis, operating profit was 15 percent higher       
at R684 million with net profit 12 percent up at R437 million. This is the      
base off which Afrox will measure itself in the future.                         
These results mark the fifth anniversary of the step-change strategic           
initiatives taking Afrox into a new growth. During this period, profits         
from the core Industrial operations have shown strong growth.                   
Our objectives to defend base line growth, improve existing capabilities to     
extract upside, and identify offerings for step-out opportunities continue      
to bear fruit. These are now being reinforced by planned investment of over     
R500 million in capex over the next two to three years. This will               
accommodate the growing demands placed on the company by a diverse range of     
customers.                                                                      
Through the year the economic conditions remained favourable and demand for     
all gases and products reached high levels, resulting in considerable           
pressure in supply, mainly for atmospheric gas, carbon dioxide, Handigas,       
mig welding wire and certain welding products.                                  
Business review                                                                 
Afrox is an integrated, full spectrum gases business. Each of our value-        
adding segments is inter-dependent. This synergy, from bulk gas production      
through to retail, is key to the sustainability of performance. Our brand,      
reliability of supply and high quality of our products represent                
substantial intangible asset value.                                             
All businesses produced sound results, ahead of inflation. Our growth           
strategy focused on increasing capacity, upgrading manufacturing facilities     
and modernising infrastructure to improve efficiencies. We continue our         
efforts to improve customer service levels and product offerings.               
The bulk merchant business, a mainstay of Afrox, for which the industrial       
and special products business units are a vital internal customer, produced     
a good result with high levels of capacity utilisation. In addition this        
business is well on the way to commissioning its six new gas producing          
plants which will enhance product capacity over the next two years.             
Cylinder gases, gas equipment and welding products continued on their           
strong growth path, underpinned by strong orders from industrial customers      
as demand in the economy continued to increase.                                 
Exports continued to improve and profit growth was satisfactory in a            
competitive pricing environment.                                                
Modernisation of the Germiston Gases Operations Centre is in process.           
Notwithstanding the logistical difficulties of combining on-site                
construction with day-to-day business, we are on schedule to complete this      
state of the art facility by the end of the calendar 2007. In addition to       
this project, a further R150 million was spent this year on additional          
cylinder holding to meet growth in demand.                                      
The Medical Gases business is showing growth in line with the healthcare        
sector.                                                                         
A highlight of the year in our Handigas business was our effort, under          
extremely difficult circumstances, to minimise the disruptive effects of        
supply shortages of LPG from domestic refineries. This, however, resulted       
in considerably increased operating costs and a reduction in margins. As a      
result of the shortage, for the first time, Afrox instigated an import          
program to help ensure reliability of supply.                                   
Special Gases continues to produce good revenue and profit growth from its      
high value, comprehensive product range.                                        
Hospitality performed well in a low price inflation environment, benefiting     
from growth countrywide in retail outlets and fast food chains.                 
African Operations remains a long-term growth opportunity and continues to      
make pleasing gains.                                                            
Disposal of Healthcare interests                                                
Significant value has been released for shareholders in disposing of the        
residual interest in Life Healthcare. Cash of R850 million has been banked      
against an original investment of R375 million. A net profit of R362            
million was realised.                                                           
Dividend and special dividend                                                   
The results for the year under review have enabled the board to declare a       
final cash dividend of 40 cents per share covered 2,18 times by earnings.       
The board also resolved to pay a special cash dividend of 60 cents per          
share from the disposal of the company"s remaining shareholding in the Life     
Healthcare Group.                                                               
This, together with the interim of 48 cents a share, will result in a total     
distribution for the year 148 cents a share.                                    
New Parent Company                                                              
The takeover of The BOC Group by Linde AG was effective 6 September 2006.       
The two companies are highly complimentary with minimum geographic overlap.     
The Linde Group is now the world"s leading gases business with global sales     
of f12 billion, 55 000 employees, and operations in 70 countries on all         
continents.                                                                     
Outlook                                                                         
In 2007, the financial year-end will change from September to December          
2007, in line with The Linde Group. Prospects remain good and growth will       
be driven by a combination of the new bulk gas business, and continued          
expansion of the infrastructure of the economy. Afrox is well positioned        
for real growth in earnings for 2007.                                           
Kent Masters             Rick Hogben                 Johannesburg               
Chairman                 Managing Director           26 October 2006            
Dividend declaration                                                            
The board of directors has declared a final cash dividend of 40 cents per       
share (2005: 40 cents) for the year ended 30 September 2006. The board has      
further declared a special cash dividend of 60 cents per share (2005: 415       
cents). The total dividend is payable on Monday, 29 January 2007 to             
shareholders recorded in the books of the company at the close of business      
on Friday, 26 January 2007.                                                     
The last day to trade cum dividend will be Friday, 19 January 2007 and the      
shares will trade ex dividend from the commencement of business on Monday       
22 January 2007.                                                                
Share certificates may not be dematerialised or rematerialised between          
Monday, 22 January 2007 and Friday, 26 January 2007, both days inclusive.       
By order of the board                                                           
Johannesburg                                                                    
26 October 2006                                                                 
African Oxygen Limited                                                          
African Oxygen Limited (Incorporated in the Republic of South Africa).          
Registration number: 1927/000089/06.                                            
ISIN: ZAE000067120.  JSE code: AFX.  NSX code: AOX. ("Afrox").                  
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001.     
PO Box 5404, Johannesburg 2000. Telephone (+27 11) 490-0400.                    
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,       
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107.         
Telephone: (+27 11) 370-5000.                                                   
Sponsor in South Africa: Barnard Jacobs Mellet Corporate Finance (Pty)          
Limited.                                                                        
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited.                       
Directors:  JK Masters* (Chairman), RL Hogben (Managing Director), AJ           
Cullens**, AM Ferguson**, JA Ford**, DM Lawrence, LA MacNair, K Mokhele, SM     
Pityana, LL van Niekerk, CJPG van Zyl.                                          
Alternate director:  D Shook*                                                   
Company secretary:  ME Sanz                                                     
* American                                                                      
** British                                                                      
Date: 26/10/2006 03:47:16 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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