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AFX - African Oxygen Limited - audited results for the 15-month period ended 31

Release Date: 14/02/2008 15:03:02      Code(s): AFX
AFX - African Oxygen Limited - audited results for the 15-month period ended 31 
December 2007                                                                   
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")                                                         
Audited results for the 15-month period ended 31 December 2007                  
REVENUE R5,9 BILLION                                                            
CORE HEPS 217,5 CENTS PER SHARE                                                 
TOTAL DIVIDEND 100 CENTS PER SHARE                                              
CAPEX R1 BILLION                                                                
PERFORMANCE SUMMARY                                                             
Afrox changed its year-end to December to align itself with the financial year- 
end of its ultimate holding company, linde ag. Therefore this financial         
reporting period ended on 31 December 2007 covers 15 months. The comparative    
results hereby presented are for the 12 months reporting period ended 30        
September 2006.                                                                 
During the 15-month period ended 31 December 2007, revenue was                  
R 5,9 billion, operating profit R 1,1 billion, with core headline earnings per  
share(heps) 217,5 cents per share. On an annual comparable basis, revenue       
increased by 16% to R 4,8 billion, with operating profit up 19% to R 854 million
and core headline earnings of R 547 million up 19%. Annualised core heps, the   
basis for comparison in 2008, also increased 19% to 176,8 cents per share.      
Cash flow from operations for the 15 months was a robust R 1 billion but in turn
there were high demands in the form of R 1 billion in capex to add  capacity and
R 475 million in dividends to shareholders. A change in year-end, together with 
the acquisition of the Reco refrigeration business, had a distorting effect on  
working capital that will normalise in 2008.                                    
Fiscal 2007 marks the first full year of majority ownership by The Linde Group, 
itself a combination of two world-class gases companies, Linde and BOC. Afrox   
has earned a leading position in its markets but a number of shortfalls against 
both customer expectations and company high-performance benchmarks have been    
identified. A far-reaching assessment of the business has been undertaken,      
resulting in a revised operating model and realignment of our human capital.    
This process towards becoming a thoroughly modern gas and welding group, fit for
purpose in a demanding environment, remains work in progress; the full benefits 
thereof we expect to realise during 2008 and beyond.                            
Afrox traded in a broadly favourable economic climate during the period under   
review, with all units experiencing strong demand for product and operating at  
maximum capacity utilisation.                                                   
REVISED OPERATING MODEL                                                         
Merchant and Packaged Gases, Tonnage, LPG and Healthcare have been identified as
the four major business areas; each is responsible for strategy and the         
development of their markets. In turn, five operating units will implement the  
strategy - Manufacturing, Sales and Distribution, Technical, SHEQ and the       
African Operations. All will be supported by enabling functions. A renewed focus
on manufacturing excellence has resulted in new skills being introduced and     
personnel redeployed to ensure alignment with performance objectives.           
BUSINESS REVIEW                                                                 
Heightened competition from new entrants, escalating input prices, and refinery 
shortages proved to be challenging for LPG during the period. The import and    
storage facility at Richards Bay has been a timely addition. Volumes were 4%    
higher than prior year but below budgeted levels. Growth in bulk usage,         
particularly in the automotive sector, together with interest by customers in   
using gas as opposed to electricity, is a notable feature but a growth          
opportunity that will be difficult to harness unless additional product can be  
sourced. Management continues in its dialogue with government on the advantages 
of LPG as a supplementary energy source but a number of logistical hurdles      
remain to be overcome.                                                          
Tonnage commissioned three new air separation plants during the period, with R  
360 million spent to add capacity. Offtake for the merchant market, in addition 
to customer specific requirement, is also being obtained. Notable customer wins 
were secured. Knowledge transfer from Linde in Germany is having a beneficial   
impact on operational excellence. Product supply remained finely balanced       
against demand and                                                              
product shortages were experienced at stages in some product lines.             
The Healthcare business enjoyed strong gains from both public and private sector
customers in compressed and bulk medical oxygen. Strong growth in demand        
presented a service delivery challenge ahead of new capacity coming on stream.  
Merchant and Packaged Gases experienced considerable growth in demand from      
construction and fabrication customers. In particular the sheer scale of uplift 
in the infrastructure has required inventive thinking to alleviate supply       
bottlenecks across our portfolio of products. Afrox`s new C5 hydrogen electrode 
is leading the market in high-specification applications. Best-of-breed gas     
equipment continues to make inroads in export markets. All industrial gases     
experienced good trading conditions, and the complementary Safety offering      
continued to grow at double digit rates.                                        
African Operations, now in excess of 15% of group operating profit, continue to 
gain footprint. New capital expenditure on infrastructure and capacity places   
afrox in a strong position in vibrant markets outside of South Africa.          
Sales and Distribution, cutting across the four major business areas, is now    
fully functional and proving its worth in turning strategic imperatives into    
revenue and profit at the sharp end of the business.                            
Substantial resources have been expended on the SAP integrated business systems 
and we are on schedule to introduce live customer interfaces in May 2008.       
The Board has resolved to declare a final cash dividend of 46 cents per share.  
Together with the interim cash dividend of 54 cents per share, a total of 100   
cents per share (88 cents per share) is paid for the year and is covered 2,17   
times in earning. In the previous financial year a special dividend of 60 cents 
per share was declared.                                                         
Afrox, under new executive leadership and with full backing from Linde, is      
building on acknowledged strengths and systematically addressing deficiencies in
capacity and service delivery. Electricity shortages in South Africa require a  
concerted national effort in pursuit of the stated savings objective. Afrox is  
fully resolved to maximise                                                      
efficiencies, re-schedule production where feasible, and partner with affected  
customers to ensure minimal disruption. Afrox`s reach across the economy is such
that it has good defensive properties but is nevertheless well positioned in    
areas offering potential, not                                                   
least infrastructure. Real growth is budgeted for in the medium term,           
accelerated by profitability gains arising from the restructuring and re-focus  
on core capabilities.                                                           
Kent Masters               Tjaart Kruger                 Johannesburg           
Chairman                   Managing Director         14 February 2008           
Notice is hereby given that a cash dividend of 46,0 cents (2006: 40,0 cents) per
ordinary share, being the final dividend for the 15-month period ended 31       
December 2007, has been declared payable to all shareholders of African Oxygen  
Limited recorded in the register on Friday, 25 April 2008.                      
The salient dates for the declaration and payment of the final dividend are as  
Last day to trade ordinary shares "cum" dividend    Friday, 18 April            
Ordinary shares trade "ex" the dividend             Monday, 21 April            
Record date                                         Friday, 25 April            
Payment date                                        Tuesday, 29 April           
Share certificates may not be dematerialised or rematerialised between Monday,  
21 April 2008 and Friday, 25 April 2008, both days inclusive.                   
By order of the board                                                           
Mlawuli Manjingolo                                                              
Company Secretary                                                               
14 February 2008                                                                
CONDENSED CONSOLIDATED BALANCE SHEET                                            
As at         As at                
                                            31 December    30 September         
Rm                                           2007           2006                
Non-current assets                           3 303          2 333               
Property, plant, equipment and tangibles     2 615          1 978               
Investment in associates                     11             11                  
Other non-current assets                     677            344                 
Current assets                               1 714          1 630               
Inventories                                  684            452                 
Trade and other receivables                  934            730                 
Cash and cash equivalents                    96             448                 

Total assets                                 5 017          3 963               
EQUITY AND LIABILITIES                                                          
Total equity                                 2 559          2 305               
Issued capital                               15             15                  
Share premium                                537            537                 
Accumulated profits and reserves             1 980          1 730               
Minority interest                            27             23                  
Non-current liabilities                      866            478                 
Borrowings                                   490            311                 
Deferred tax liability                       376            167                 
Current liabilities                          1 592          1 180               
Trade and other payables                     961            960                 
Current portion of borrowings                300            205                 
Bank overdraft                               331            15                  
Total equity and liabilities                 5 017          3 963               
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
                                            15 months to   12 months to         
Rm                                           December       September           
                                            2007           2006                 
Revenue                                      5 849          3 914               
Operating profit                             1 051          630                 
Profit on sale of investment                 -              362                 
Profit from operations                       1 051          992                 
Net finance costs                             (89)           (22)               
Income from associates                       1                 100              
Profit before taxation                       963            1 070               
Income tax expense                            (350)          (284)              
Profit for the period                        613            786                 
Attributable to:                                                                
Equity holders of the company                603            779                 
Minority interest                            10             7                   
Profit for the period                        613            786                 
EARNINGS PER SHARE                                                              
15 months      Restated             
                                            ended          12 months to         
Rm                                           December       September           
                                            2007           2006                 
IAS 33 earnings                              603            779                 
Total remeasurements consist of:              4              (343)              
- IAS 28 gains on disposal of investment     -               (362)              
- IFRS 3 impairment of goodwill               -              21                 
- IAS 16 loss/(profit) on disposal of         4              (2)                
property, plant and equipment                                                   
Total tax effect or adjustments              -               76                 
Headline earnings                             607            512                
- profits from Life Healthcare                -              (115)              
- secondary taxation on companies on special  27            -                   
- other non-recurring items                   37             58                 
Total remeasurements to core headline         64             (57)               
Total tax effect or adjustments               -              (16)               
Core headline earnings                        671            439                
Basic earnings per ordinary share (BEPS) -   195,5          252,6               
Headline earnings per ordinary share (HEPS)  196,5          165,9               
- (cents)                                                                       
Core HEPS - (cents)                          217,5          142,3               
STATISTICS AND RATIOS                                                           
                                            15 months      Restated             
                                            ended          12 months to         
December       September            
                                            2007           2006                 
Average number of ordinary shares in issue                                      
during the period and on which earnings                                         
per share are based (`000)                   308 568        308 568             
Dividend per share (cents)                    100,0          148,0              
- Final                                      46,0            40,0               
- Special dividend                           -               60,0               
- Interim                                     54,0           48,0               
Interest cover (times)                       11,8           33,1                
Effective tax rate (%)                       36,3           26,6                
Gearing (%)                                  25,9           3,3                 
Dividend cover (excluding special)                                              
- core headline earnings - (times)           2,17           1,62                
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT                                     
                                            15 months to   12 months to         
Rm                                           December       September           
                                            2007           2006                 
Cash generated from operations               994            734                 
Finance costs, taxation paid and exceptional  (369)          (423)              
Dividends received                           -               7                  
Cash utilised from operations                625            318                 
Dividends paid                                (475)          (272)              
Net cash inflow from operating activities    150             46                 
Acquisition of business                       (132)          (5)                
Disposal of business                         -               801                
Purchase of property, plant and equipment     (799)          (515)              
Purchase of intangible assets                 (104)          (34)               
Expenditure on assets subject to embedded     (84)           (34)               
finance leases                                                                  
Other investing cash flows, net              33             20                  
Net cash (outflow)/inflow from investing     (1 086)         233                
Minorities                                    (6)           -                   
Increase/(decrease) in borrowings            274             (8)                
Net cash inflow/(outflow) from financing     268             (8)                
Net (decrease)/increase in cash and cash      (668)          271                
Cash and cash equivalents at beginning of    433            162                 
financial period                                                                
Cash and cash equivalents at end of          (235)          433                 
financial period                                                                
                                            15 months      12 months            
ended          ended                
                                            31 December    30 September         
Rm                                           2007           2006                
Foreign currency translation differences for  (9)            15                 
foreign operations                                                              
Effective portion of changes in fair value   (20)            22                 
of cash flow hedges                                                             
Defined benefit plan actuarial gains          224            114                
Other movements                               (7)            (4)                
Deferred tax released or charged for the     (65)            (33)               
Income and expenses recognised directly in   123             114                
Profit for the financial period               613            786                
Total recognised income and expense for the   736            900                
financial period                                                                
Attributable to:                                                                
Equity holders of the company                 726            889                
Minority interest                             10             11                 
Total recognised income and expenses for the 736            900                 
financial period                                                                
ACCOUNTING STANDARDS                                                            
BALANCE SHEET                                                                   
Rm                       As             IFRIC 4     IAS 19    Restated          
                        previously     effects     effects   as at              
                        reported                             30 September       
Non-current assets       2 297          36          -         2 333             
Current assets           1 618          12          -          1 630            
                        3 915          48          -         3 963              
Equity and liabilities                                                          
Capital and reserves     2 271          34          -         2 305             
Non-current liabilities  464            14          -         478               
Current liabilities      1 180          -           -         1 180             
3 915          48          -         3 963              
INCOME STATEMENT         As                         IAS 19    Restated          
Rm                       previously     IFRIC 4     effects   as at             
reported       effects               30 September       
Revenue                  3 914          -           -         3 914             
Gross margin             1 500           (10)       -         1 490             
Operating profit          1 116          (10)        (114)    992               
Net finance costs         (35)           13                    (22)             
Income from associates   100                                  100               
Profit before taxation   1 181           3           (114)     1 070            
Income tax expense        (316)          (1)         33        (284)            
Profit for the period     865           2            (81)      786              
Subsequent to the publication of the June 2007 results, the calculation of the  
effect of IFRIC 4 was reviewed in light of The Linde Group policies and the     
South African economy.                                                          
COMPARATIVE ANALYSIS                                                            
                                    15 months ended 31 December 2007            
Rm                                   operations   Other*      Total             
Revenue                              5 849        -           5 849             
Operating profit                     1 119        (68,0)      1 051             
Basic earnings                       671          (68,0)      603               
Headline earnings                    671          (64,0)      607               
BEPS (cents)                         217,5        (22,0)      195,5             
HEPS (cents)                         217,5        (21,0)      196,5             
                                    12 months ended 30 September 2006           
Core                     Total              
Rm                                   operations   Other**     restated          
Revenue                               3 914       -            3 914            
Operating profit                      668         38           630              
Basic earnings                       439          340         779               
Headline earnings                     439          73          512              
BEPS (cents)                         142,3        110,3       252,6             
HEPS (cents)                          142,3       23,7         165,9            
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 adjustments are for non-recurring items shown below:                       
FINANCE COSTS                                                                   
The company incurred R37 million additional finance costs in 2007, from a       
structured finance transaction challenged by the South African Revenue Service. 
This is further explained in note 1.                                            
SECONDARY TAX ON 2006 SPECIAL DIVIDEND                                          
A secondary tax charge of R27 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:s                                     
THE RESULTS OF LIFE HEALTHCARE                                                  
The share of results of the associate, Life Healthcare`s profit. 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.           
The profit on sale of the investment in Life Healthcare of R362 million pre tax 
and R286 million post tax.                                                      
SHARE APPRECIATION RIGHTS                                                       
Cost of R58 million pre tax and after tax of R42 million relating to share      
appreciation rights which vested early due to change in control.                
OTHER ADJUSTMENTS                                                               
These are goodwill impaired and loss on disposal of plant, property and         
NOTES TO THE CONDENSED FINANCIAL STATEMENTS                                     
1. FINANCE COSTS                                                                
In 2000, the company 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 African Revenue       
Service (SARS). SARS has disallowed certain interest deductions claimed by the  
financial institution, resulting in a settlement in the amount of R37 million   
being agreed as the full and final settlement to the financial institution of   
the taxation consequences of the arrangement. In terms of the agreement, Afrox  
bore the risk of adverse taxation consequences emanating from the transaction.  
Afrox is not exposed to any other structured finance transactions.              
ACCOUNTING POLICIES                                                             
BASIS OF PREPARATION                                                            
The condensed consolidated financial information ("financial information")      
announcement is based on the audited financial statements of the group for the  
15-month period ended 31 December 2007, which have been prepared in accordance  
with International Financial Reporting Standards (IFRS), and its interpretations
adopted by the International Accounting Standards Board (IASB), the listing     
requirements of the JSE Limited and the South African Companies Act (1973). The 
condensed financial statements have been prepared in accordance with the        
recognition requirements of IFRS and disclosure requirements of IAS 34 - Interim
Financial Reporting.                                                            
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 consolidated annual financial statements as at 31 December 2007.       
SIGNIFICANT CHANGES IN 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 adoption of IFRIC 4 - Determining where an arrangement contains a lease.  
This leads to certain assets subject to long-term leases being recognised as    
long-term lease receivables; whereas these had previously been classified as    
property, plant and equipment;                                                  
- the adoption of the Amendment to IAS 19 Employee Benefits - Actuarial Gains   
and Losses, Group Plans and Disclosures. This leads to the recognition of the   
full actuarial gains and loss on the defined benefits plans directly in equity, 
subject to the IAS 19 paragraph 58 limitation. This had been recognised in      
profit or loss in prior periods; and                                            
- the group has early adopted IFRS 8 (segmental reporting). This change was to  
align the group and company with the geographical reporting utilised by the     
holding company, Linde AG.                                                      
AUDIT OPINION                                                                   
The independent auditors, KPMG Inc., have issued their opinion on the group`s   
financial statements for the 15-month period ended 31 December 2007. A copy of  
their unqualified audit report is available for inspection at the company`s     
registered office.                                                              
GEOGRAPHICAL SEGMENTS                                                           
Rm                                 South        Rest of      Total              
                                  Africa       Africa                           
15 months ended 31 December 2007                                                
- revenue                           5 183        666          5 849             
- operating profit                 889           162          1 051             
12 months ended 30 September 2006                            Restated           
- revenue                          3 412        502           3 914             
- operating profit                  512          118         630                
AFRICAN OXYGEN LIMITED                                                          
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO  
Box 5404, Johannesburg 2000. Telephone +27 (0) 11 490-0400.                     
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70    
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107. Telephone  
+27 (0) 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, M
Malebye, DK Mokhele,  J Nowicki**, KJ Oliver, SM Pityana, LL van Niekerk, CJPG  
van Zyl, AM Watkins***                                                          
Company secretary: Mlawuli Manjingolo                                           
*American    **German     ***British                                            
Date: 14/02/2008 15:03:01 Supplied by www.sharenet.co.za                     
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information disseminated through SENS.                                          

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