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Afx - Afrox - Interim Financial Results For The Nine-month Period Ended

Release Date: 26/07/2007 15:50:13      Code(s): AFX
AFX - Afrox - Interim financial results for the nine-month period ended         
              30 June 2007 and dividend declaration                             
African Oxygen Limited                                                          
(Incorporated in the Republic of South Africa).                                 
Registration number: 1927/000089/06.                                            
ISIN: ZAE000067120.                                                             
JSE code: AFX.                                                                  
NSX code:                                                                       
AOX. ("Afrox").                                                                 
Interim financial results for the nine-month period ended 30 June 2007          
-    Revenue R3,3 billion                                                       
-    Operating profit R605 million                                              
-    Core HEPS at 124,4 cents                                                   
-    Dividend of 54,0 cents                                                     
Afrox`s Pietermaritzburg plant where a new liquefier has been installed to      
increase product capacity of liquid oxygen and nitrogen.                        
PERFORMANCE SUMMARY African Oxygen Limited (Afrox) continued to produce sound   
results in a buoyant market where demand for certain of our products outstripped
supply.                                                                         
During the year, the company changed its year-end from September to December in 
order to align itself with its holding company, The Linde Group, the world`s    
foremost industrial gases and engineering company. As a result, the new interim 
period now ends 30 June 2007.  However, in this commentary, the figures have not
been compared as they are for the different periods of six and nine months.     
The results for the nine-month period ended 30 June 2007, show revenue at R3,3  
billion with profit from operations at R605 million and net profit at R362      
million.                                                                        
Headline earnings per share were 117,0 cents and core headline earnings per     
share were 124,4 cents. The board of directors believes that core headline      
earnings is an appropriate measure of operating performance as it adjusts for   
non-recurring and non-operational items.                                        
The balance sheet remains strong with cash flow for the period at R560 million. 
Gearing is at an acceptable level of 24,5 percent, despite the current increased
investment programme.                                                           
The buoyant demand situation in the reporting period produced challenges for the
business from a supply perspective. As previously announced, the company        
embarked on an extensive investment programme initiated during the 2006         
financial year.                                                                 
The capital expenditure for the nine-month period was R607 million and three air
separation plants have already been commissioned, and they include Afrox`s      
Pietermaritzburg plant and two customer on-site plants at Xstrata and Scaw      
Metals. The two customer on-site plants will also produce for the merchant      
market. The full benefit of the capex programme will be realised in the 2008    
financial year. LPG shortages were addressed by the commissioning of a 3 600-ton
importation and storage facility at Richards Bay in May, 2007. This will make a 
significant contribution to meeting growing demand into the future.             
DIVIDEND                                                                        
The board of directors declared an interim cash dividend of 54,0 cents per share
(2006: 48,8 cents) which is an increase of 12,5 percent. The dividend is covered
2,30 times by core headline earnings.                                           
ANNUAL RATINGS                                                                  
Afrox`s credit rating remains unchanged for the third successive year at a high 
AA- for long-term, and A1+ for short-term. It has also improved its annual BEE  
rating from a BB to BBB, and is graded a level 5 contributor.                   
CHANGES TO THE BOARD                                                            
Tjaart Kruger (47) has joined the company as Managing Director, effective 1     
April 2007. He joins Afrox from the Tiger Brands Group where he held several    
senior executive positions. He succeeds Rick Hogben, the previous Managing      
Director, who retired from the board at the end of March 2007. Alan Ferguson and
Jim Ford, non-executive directors and Daniel Shook, an alternate director,      
resigned from the board with effect 30 March 2007, following their resignations 
from The Linde Group.                                                           
James Cullens resigned from Linde and the Afrox board, effective 13 July 2007.  
Alan Watkins and Jurgen Nowicki were appointed to the board as non-executive    
directors with effect from 4 April 2007. They both hold executive positions with
The Linde Group. Nazmi Adams, from Linde, was appointed an alternate director.  
Mlawuli Manjingolo has joined Afrox as Company Secretary.                       
OUTLOOK                                                                         
Afrox`s current investment programme will go a long way to mitigating the supply
situation and the company will also benefit from the expected high              
infrastructure spend in South Africa over the next few years. The company is,   
therefore, well positioned for real growth in earnings.                         
Kent Masters        Tjaart Kruger         Johannesburg                          
Chairman            Managing Director     26 July 2007                          
NOTICE OF INTERIM DIVIDEND DECLARATION AND SALIENT FEATURES                     
Notice is hereby given that an interim cash dividend of 54,0 cents (2006: 48,0  
cents) per ordinary share, being the interim dividend for the period ended 30   
June 2007, has been declared payable to all shareholders of African Oxygen      
Limited recorded in the register on Friday, 12 October 2007.                    
The salient dates for the declaration and payment of the interim dividend are as
follows:                                                                        
                                               2007                             
Last day to trade ordinary shares "cum"                                         
dividend                                        Friday, 5 October               
Ordinary shares trade "ex" the dividend         Monday, 8 October               
Record date                                     Friday, 12 October              
Payment date                                    Monday, 15 October              
Share certificates may not be dematerialised or rematerialised between Monday, 8
October 2007 and Friday, 12 October 2007, both days inclusive.                  
By order of the board                                                           
Mlawuli Manjingolo                                                              
Company Secretary                                                               
26 July 2007                                                                    
Johannesburg                                                                    
Condensed consolidated balance sheet                                            
Restated     Restated                   
                            Unaudited   Unaudited    Audited                    
                            As at       As at        As at                      
                            30 June     31 March     30 Sept                    
Rm                           2007        2006         2006                      
ASSETS                                                                          
Non-current assets           2 863       2 400        2 337                     
Property, plant and          2 471       1 741        2 029                     
equipment                                                                       
Investment in associates     11          426          11                        
Other non-current assets     381         233          297                       
Current assets               1 580       1 137        1 618                     
Inventories                  596         408          452                       
Trade and other receivables  858         660          718                       
Cash and cash equivalents    126         69           448                       
Total assets                 4 443       3 537        3 955                     
EQUITY AND LIABILITIES                                                          
Capital and reserves         2 327       1 848        2 299                     
Issued capital               15          15           15                        
Share premium                537         537          537                       
Accumulated profits and      1 748       1 276        1 724                     
reserves                                                                        
Minority interest            27          20           23                        
Non-current liabilities      764         644          476                       
Borrowings                   500         507          311                       
Other non-current            264         137          165                       
liabilities                                                                     
Current liabilities          1 352       1 045        1 180                     
Current portion of           423         249          205                       
borrowings                                                                      
Trade and other payables     900         781          960                       
Bank overdraft               29          15           15                        
Total equity and             4 443       3 537        3 955                     
liabilities                                                                     
Condensed consolidated income statement                                         
                                        Restated     Restated                   
Unaudited   Unaudited    Audited                    
                            9 months    6 months     12 months                  
                            to June     to March     to Sept                    
Rm                           2007        2006         2006                      
Revenue                      3 288       1 837*       3 897                     
Operating profit             605         376          749                       
Profit on sale of            -           -            362                       
investment                                                                      
Profit from operations       605         376          1 111                     
Finance costs                (47)**      (14)         (30)                      
Income from associates       -           37           100                       
Profit before taxation       558         399          1 181                     
Income tax expense           (196)       (108)        (316)                     
Profit for the period        362         291          865                       
Attributable to:                                                                
Equity holders of the        358         289          858                       
company                                                                         
Minority interest            4           2            7                         
Net profit for the period    362         291          865                       
*Refer to note 2    **Refer to note 3                                           
Statistics and ratios                                                           
                                        Restated     Restated                   
                            Unaudited   Unaudited    Audited                    
                            9 months    6 months     12 months                  
to June     to March     to Sept                    
Rm                           2007        2006         2006                      
Total net profit for the                                                        
period attributable to                                                          
equity holders of the                                                           
company                                                                         
                            358         289          858                        
Adjustments for headline     2           1            (267)                     
earnings                                                                        
Headline earnings            360         290          591                       
Adjustments for core         23          (86)         (154)                     
headline earnings                                                               
Core headline earnings       383         204          437                       
Basic earnings per ordinary  116,3       93,5         278,1                     
share (BEPS) - (cents)                                                          
Headline earnings per        117,0       93,7         191,4                     
ordinary share (HEPS)                                                           
-(cents)                                                                        
Core HEPS - (cents)          124,4       66,2         141,6                     
Statistics                                                                      
Average number of ordinary                                                      
shares in                                                                       
issue during the period and  308 568     308 568      308 568                   
on which earnings per share                                                     
are based (`000)                                                                
Dividend per share (cents)   54,0        48,0         148,0                     
Ratios                                                                          
Interest cover (times)       12,9        26,9         37,0                      
Effective tax rate (%)       35,1        27,1         26,8                      
Gearing (%)                  24,5        26,1         3,3                       
Dividend cover (excluding    2,30        1,38         1,61                      
special) - core headline                                                        
earnings (times)                                                                
Geographical segments                                                           
                                                     Restated                   
Rm                     South Africa  Rest of Africa   Total                     
Nine months ended 30                                                            
June 2007                                                                       
- revenue              2 879         409              3 288                     
- operating profit     510           95               605                       
Six months ended 31                                                             
March 2006                                                                      
- revenue              1 598          239             1 837                     
- operating profit     327           49               376                       
Year ended 30                                                                   
September 2006                                                                  
- revenue              3 395         502              3 897                     
- operating profit     631           118              749                       
Condensed consolidated cash flow statement                                      
                                          Restated   Restated                   
                               Unaudited  Unaudited  Audited                    
                               9 months   6 months   12 months                  
to June    to March   to Sept                    
Rm                              2007       2006       2006                      
Cash generated from operations  560        281        747                       
Finance costs and taxation      (281)      (304)      (436)                     
paid                                                                            
Dividends received              -          7          7                         
Cash available/(utilised) from  279        (16)       318                       
operations                                                                      
Dividends paid                  (309)      (123)      (272)                     
Net cash (outflow)/inflow from  (30)       (139)      46                        
operating activities                                                            
Acquisition of business         (114)      -          (5)                       
Disposal of business            -          -          801                       
Purchase of property, plant     (568)      (200)      (549)                     
and equipment                                                                   
Purchase of intangible assets   (39)       -          (34)                      
Other investing cash flows,     9          (2)        20                        
net                                                                             
Net cash (outflow)/inflow from  (712)      (202)      233                       
investing activities                                                            
Minorities                      (2)        -          -                         
Increase/(decrease) in          408        233        (8)                       
borrowings                                                                      
Net cash inflow/(outflow) from  406        233        (8)                       
financing activities                                                            
Net (decrease)/increase in      (336)      (108)      271                       
cash and cash equivalents                                                       
Cash and cash equivalents at    433        162        162                       
beginning of period                                                             
Cash and cash equivalents at    97         54         433                       
end of period                                                                   
Reconciliation of restatement of prior year                                     
results due to change in accounting standards                                   
                                        As at        As at                      
                                        31 March     30 Sept                    
BALANCE SHEET - Rm                       2006         2006                      
Total assets                                                                    
As previously reported                   3 497        3 915                     
Adjusted for retrospective adjustments                                          
- increase in finance leases             83           77                        
- decrease in property, plant and        (43)         (37)                      
equipment                                                                       
Restated total assets                    3 537        3 955                     
TOTAL EQUITY AND LIABILITIES                                                    
As previously reported                                                          
Adjusted for retrospective adjustments   3 497        3 915                     
- increase in equity (accumulated        28           28                        
profits and reserves)                                                           
- increase in other non-current          12           12                        
liabilities                                                                     
Restated total equity and liabilities    3 537        3 955                     
INCOME STATEMENT                                                                
The net effect on profit is nil for                                             
both periods                                                                    
Condensed consolidated statement of changes in equity                           
                                  Issued   Share                                
share    pre-      Other                      
Rm - (Restated)                    capital  mium      reserves                  
Balance at 1 October 2006          15       537       78                        
Other movements                    -        -         (23)                      
Net profit for the period          -        -         -                         
Dividend declared                  -        -         -                         
Balance at 30 June 2007            15       537       55                        
Balance at 1 October 2005          15       537       122                       
Change in accounting policy        -        -          -                        
Other movements                    -        -         6                         
Net profit for the period          -        -         -                         
Dividend declared                  -        -         -                         
Balance at 31 March 2006           15       537       128                       
Condensed consolidated statement of changes in equity (continued)               
                                  Accu-                                         
                                  mulated  Minority                             
Rm - (Restated)                    profits  interest  Total                     
Balance at 1 October 2006          1 646    23        2 299                     
Other movements                    (2)      -         (25)                      
Net profit for the period          358      4         362                       
Dividend declared                  (309)    -         (309)                     
Balance at 30 June 2007            1 693    27        2 327                     
Balance at 1 October 2005          958      12        1 644                     
Change in accounting policy        28       -         28                        
Other movements                    (4)      6         8                         
Net profit for the period          289      2         291                       
Dividend declared                  (123)    -         (123)                     
Balance at 31 March 2006           1 148    20        1 848                     
Comparative analysis                                                            
                            9 months ended 30 June 2007                         
                            Core        Adjustment*  Total                      
Rm                           operations                                         
Revenue                      3 288       -            3 288                     
Operating profit             605         -            605                       
Headline earnings            383         (23)         360                       
BEPS (cents)                 123,7       (7,4)        116,3                     
HEPS (cents)                 124,4       (7,4)        117,0                     
Comparative analysis (continued)                                                
                      Restated                                                  
                      6 months ended 31 March 2006                              

                      Core             Adjustment**  Total                      
Rm                     operations                     restated                  
Revenue                1 795            42            1 837                     
Operating profit       315              61            376                       
Headline earnings      204              86            290                       
BEPS (cents)           65,9             27,6          93,5                      
HEPS (cents)           66,2             27,5          93,7                      
Comparative analysis (continued)                                                
                         Restated                                               
                         12 months ended 30 September 2006                      
                                                                                
Core         Adjustment***  Total                      
Rm                        operations                  restated                  
Revenue                   3 897        -              3 897                     
Operating profit          679          70             749                       
Headline earnings         437          154            591                       
BEPS (cents)              141,6        136,5          278,1                     
HEPS (cents)              141,6        49,8           191,4                     
Core operations                                                                 
Core operations represent the sustainable business of the company. The results  
under core operations also exclude non-recurring and non-operational items.     
*The adjustment relates to the following:                                       
Finance costs                                                                   
The company incurred R36 million additional finance costs in 2007, from a       
structured finance transaction challenged by the South African Revenue Services.
This is further explained in note 3. To date, the company has accounted for R9  
million of this finance cost.                                                   
Secondary tax and special dividend                                              
A secondary tax charge of R14 million on a special dividend declared in October 
2006 has been charged. The special dividend was based on the profits on disposal
of the Life Healthcare business.                                                
**   The adjustment relates to the following:                                   
The results of Life Healthcare                                                  
The results of the share of associate, Life Healthcare`s profit have been       
excluded. This associate was disposed of in 2006. At operating profit level the 
adjustment was R19 million. The adjustment is a reduction in net profit of R56  
million.                                                                        
Restatement of cylinder rental income                                           
The treatment of annual cylinder rental contracts has been changed to recognise 
rental income as revenue over the period of the rental, even though billed and  
received annually. Therefore revenue and operating profit for the period ended  
31 March 2006, has been reduced by R42 million representing rental income not   
yet earned at that date. The net effect on profit is an adjustment of           
R30 million.                                                                    
Discounting of credit sales                                                     
The treatment of credit sales has been adjusted by discounting these sales using
the average debtors collection period and prime lending rate. This is in line   
with the accounting policy adopted from September 2006. The revenue has been    
decreased by R22 million. Operating profit is not affected.                     
***  The adjustment relates to the following:                                   
The results of Life Healthcare                                                  
The results of the share of associate, Life Healthcare`s profit have been       
excluded. This associate was disposed of in 2006. At operating profit level the 
adjustment was R16 million. The adjustment is a reduction in net profit of R115 
million.                                                                        
Pension fund                                                                    
Net gain on valuation of the pension fund of R113 million pre tax and R81       
million after tax was excluded for the period as it is a non-operational item.  
Share appreciation rights                                                       
Cost of R59 million pre tax and after tax of R42 million relating to share      
appreciation rights vested early due to change in control.                      
Notes to the condensed financial statements                                     
1. Financial period                                                             
African Oxygen Limited changed its year-end to December to align itself with the
financial year-end of its holding company, The Linde Group. This financial year 
will therefore end on 31 December 2007 and will cover fifteen months. The       
interim results hereby presented are for nine months ended 30 June 2007 and the 
comparative period covers six months ended 31 March 2006.                       
2. Restatement of comparatives for the six-month period ended 31 March 2006     
The comparative results as of 31 March 2006 have been adjusted by the           
discounting of credit sales in accordance with the accounting policy adopted    
from September 2006. The discounting has been effected with reference to the    
prime lending rate and average debtors collection period. The revenue as at 31  
March 2006 has been decreased by R22 million. The operating profit is not       
affected.                                                                       
Reconciliation of 2006 turnover                                                 
                              6 months to    12 months to                       
                               March 2006       Sept 2006                       
RM                                                                              
Turnover as previously reported      1 867           3 914                      
Discounting of credit sales                                                     
(accounting policy change                                                       
effected in September 2006)           (22)              -                       
1 845            3 914                       
Effect of IFRIC 4 accounting                                                    
policy change (accounting policy                                                
change effected this year)             (8)             (17)                     
Restated turnover                    1 837*           3 897*                    
*See comparative analysis                                                       
3. Finance costs                                                                
In 2000, Afrox entered into a structured finance arrangement with a financial   
institution, the substance of which was a loan transaction. This arrangement has
subsequently been challenged by the South Africa Revenue Service (SARS). SARS   
has disallowed certain interest deductions claimed by the financial institution,
resulting in a settlement in the amount of R36 million being agreed as the full 
and final settlement to the financial institution of taxation consequences of   
the arrangement. In terms of the agreement, Afrox bore the risk of adverse      
taxation consequences emanating from the transaction. Afrox has accounted for R9
million of the 36 million. The balance will be accounted for in the remainder of
the financial year. Afrox is not exposed to any other structured finance        
transactions.                                                                   
Afrox accounting policies                                                       
Basis of preparation                                                            
These interim financial statements have been prepared in accordance with        
International Financial Reporting Standards ("IFRS"), and it`s interpretations  
adopted by the International Accounting Standards Board (IASB), the preparation 
and disclosure requirement of IAS 34 (Interim Financial Reporting) and the      
listing requirements of the JSE Limited and Schedule 4 of the South African     
Companies Act.                                                                  
These financial statements do not contain all the information and disclosures   
required in the annual financial statements, and should be read in conjunction  
with the company consolidated annual financial statements as at 30 September    
2006.                                                                           
Significant accounting policies                                                 
The accounting policies applied in these condensed financial statements are     
compliant with IFRS and consistent with those used in the preparation of the    
financial statements for the year ended 30 September 2006, except for the first 
time adoption of IFRIC 4 - Determining whether an Arrangement contains a        
Lease(Embedded Leases).                                                         
IFRIC4 requires reclassification of certain assets subject to embedded lease    
arrangements and recognition of long-term lease receivables.                    
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), TN Kruger (Managing Director), DM Lawrence, 
LA MacNair, DK Mokhele, J Nowicki**                                             
SM Pityana, LL van Niekerk, CJPG van Zyl, AM Watkins***,                        
Alternate director:  MN Adams       Company secretary:  Mlawuli Manjingolo      
*American    **German ***British                                                
Afrox is a member of The Linde Group                                            
www.afrox.com                                                                   
Date: 26/07/2007 15:50:11 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  



                                        
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