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04 FEBRUARY 1999
ADDRESS TO 71ST ANNUAL GENERAL MEETING BY ROYDEN VICE, CHAIRMAN AND MANAGING
DIRECTOR, AFRICAN OXYGEN LIMITED
THE PAST FINANCIAL YEAR WAS ONE OF THE TOUGHEST FOR A VERY LONG TIME, BUT IT
ALSO DEMONSTRATED THAT WE ARE A COMPANY OF RESILIENCE, AND ARE ABLE TO ADAPT TO
ALL ECONOMIC CYCLES.
THE REASONS FOR THE POOR STATE OF THE ECONOMY HAVE BEEN WELL DOCUMENTED AND WE
ARE FULLY AWARE OF THEM. HOWEVER, AFROX DEMONSTRATED ITS ABILITY TO OUT-PERFORM
THE ECONOMY IN RECESSIONARY CONDITIONS AND SHOWED A 10 PERCENT INCREASE IN
HEADLINE EARNINGS PER SHARE. WE INCREASED TURNOVER BY 15 PERCENT, REAL
OPERATING PROFIT BY 16 PERCENT, AND DECLARED A FINAL DIVIDEND OF 37,7 CENTS
WHICH WAS COVERED 1,7 TIMES BY EARNINGS.
OUR TIGHT ASSET MANAGEMENT SAW BORROWINGS REDUCED BY R79 MILLION AND GEARING
DECLINING FROM 41 PERCENT TO 38 PERCENT. WE ALSO CONTINUE TO GENERATE
SIGNIFICANT CASH IN THE BUSINESS AS IS EVIDENT BY THE CASH GENERATED FROM
OPERATIONS OF R424 MILLION.
THE POOR STATE OF THE ECONOMY, AGGRAVATED BY THE ASIAN MARKET, AND COUPLED WITH
INCREASING LOCAL AND INTERNATIONAL COMPETITION, LED US TO TAKE A KEEN LOOK AT
THE WAY WE DO BUSINESS.
THIS EXERCISE HAS RESULTED IN A COMPLETE RENEWAL OF AFROX, WHICH I AM PLEASED
TO REPORT IS WELL DOWN THE ROAD AND IS ALREADY SHOWING SUBSTANTIAL COST
SAVINGS, WHILE IMPROVING OUR ABILITY TO SERVICE OUR CUSTOMERS.
OUR RENEW INITIATIVES ARE DIVIDED INTO THREE DISTINCT AREAS:
- PRODUCTIVITY IMPROVEMENT, INCLUDING AN ELEMENT OF RESTRUCTURE;
- ASSET MANAGEMENT AND COST CONTROL; AND
- GROWING THE BUSINESS, ORGANICALLY AND BY ACQUISITION.
OVERRIDING THIS IS OUR CLEAR OBJECTIVE OF CONTINUING TO PRODUCE EARNINGS, WELL
ABOVE INFLATION, AND FIERCELY DEFENDING OUR # 1 POSITION IN MARKET SHARE AND
CUSTOMER SERVICE.
IN MY CHAIRMAN'S STATEMENT, I OUTLINED OUR INITIATIVES IN SOME DETAIL, BUT
WOULD LIKE TO HIGHLIGHT A FEW OF THE MORE IMPORTANT POINTS.
FIRSTLY, IN THE PAST 14 MONTHS WE HAVE EVOLVED INTO A LEANER, MORE COMMERCIALLY
AGILE COMPANY WHICH IS NOW WELL POSITIONED TO TAKE ADVANTAGE OF THE NEXT
ECONOMIC UPTURN.
WE HAVE ALIGNED OUR BUSINESS WITH OUR PARENT, THE BOC GROUP, AND THIS CURRENT
FINANCIAL YEAR WE WILL START REAPING THE FINANCIAL REWARDS THROUGH ADOPTING
BEST OPERATING PRACTICES AND INCREASING OUR PRODUCT OFFERINGS TO OUR 100,000
PLUS CUSTOMER BASE. WE ARE ALSO STARTING TO ACHIEVE SIGNIFICANT COST SAVINGS BY
CENTRALISING SERVICES, AND BY LEVERAGING GLOBAL ENGINEERING, IT, FINANCE AND
ADMINISTRATION, AND HUMAN RESOURCES SYSTEMS. THE WORKPLACE PRODUCTIVITY
EXERCISE UNDERTAKEN IN EARLY 1998 HAS REALISED A SAVING OF R21 MILLION AND WE
HAVE REDUCED SOME 400 POSTS IN THE COMPANY. THIS WILL CONTINUE INTO THE NEW
FINANCIAL YEAR AND WE EXPECT TO REDUCE THE WORKFORCE FURTHER.
OUR INVENTORY PROJECT REALISED AN R11 MILLION REDUCTION IN WELDING STOCKS, THE
COVER WAS REDUCED FROM 1,5 MONTHS TO 1,1 MONTHS WITHOUT AFFECTING CUSTOMER
SERVICE.
THE ELEMENT OF RESTRUCTURE I REFERRED TO EARLIER IS ALMOST IN PLACE. WE HAVE
CONSOLIDATED OUR SIX INDUSTRIAL REGIONS INTO THREE AND HAVE COMPLETED THE
RESTRUCTURE OF THE COMPANY INTO THREE DISTINCT CUSTOMER AND MARKET SECTOR
FOCUSED LINES OF BUSINESS OF:
- INDUSTRIAL AND SPECIAL PRODUCTS (ISP) (WELDING PRODUCTS, CYLINDER GASES,
SPECIAL GASES AND HANDIGAS);
- TONNAGE AND APPLIED GAS SOLUTIONS (TAGS) (LARGE GAS PRODUCING PLANTS AND BULK
LIQUID GASES); AND
- HEALTHCARE, WHICH CONSISTS OF OUR 28 HOSPITALS WITH 3,250 BEDS AND SEVERAL
SPECIALISED HEALTHCARE SERVICES COMPANIES.
THIS IS IN PLACE AND HAS BEEN DONE WITH SPEED AND EFFICIENCY.
GROWING THE BUSINESS, BOTH ORGANICALLY AND BY EXPANSION REMAINS A FIRM
OBJECTIVE, FOR BOTH OUR INDUSTRIAL AND HEALTHCARE BUSINESS.
ON THE INDUSTRIAL SIDE:
- WE ARE DEVELOPING A NEW GASEOUS CHEMICAL BUSINESS.
- WE HAVE A CLEAR EXPORT FOCUS, AND 50 PERCENT OF THE PRODUCT OUTPUT OF OUR GAS
WELDING EQUIPMENT FACTORY WILL BE DESTINED FOR GLOBAL MARKETS.
- WE ARE INCREASING PRODUCT OFFERINGS THROUGHOUT SUB-SAHARAN AFRICA AND WE ARE
NEGOTIATING FURTHER EXPANSION IN AFRICA, NAMELY IN MOZAMBIQUE AND TANZANIA.
- WE CONTINUE TO GROW OUR LPG BUSINESS IN AFRICA AND SHOULD SOON ACHIEVE THE #
1 POSITION IN ALL OUR TERRITORIES IN SUB-SAHARAN AFRICA. FURTHER EXCITING
OPPORTUNITIES ARE BEING CONSIDERED HERE.
ON THE HEALTHCARE SIDE:
- OUR HOSPITALS CONTINUE TO GROW AND MEET EXPECTATIONS WHILE OUR HEALTHCARE
SERVICES BUSINESS PORTFOLIO IS SHOWING EXCEPTIONAL GROWTH AND WE ARE EXPANDING
THIS AREA RAPIDLY. A SMALL ACQUISITION IS BEING CONSIDERED IN THE HEALTHCARE
SERVICES AREA.
- WE ARE INVESTING IN EXCESS OF R100 MILLION ON UPGRADING MANY OF OUR
HOSPITALS, DOUBLING THE SIZE OF THE VINCENT PALLOTTI IN CAPE TOWN AND THE
HEIDELBERG CLINIC, AND WILL SHORTLY BUILD A NEW HOSPITAL IN BOTSWANA.
I ANNOUNCED ON TUESDAY THE APPOINTMENT OF MR RICK HOGBEN TO THE POSITION OF
MANAGING DIRECTOR, HEALTHCARE. RICK'S APPOINTMENT FOLLOWS THE TRAGIC AND
UNTIMELY DEATH OF DICK WILLIAMSON IN NOVEMBER, LAST YEAR. HIS CONTRIBUTION AS A
DIRECTOR OF YOUR BOARD AND, AS EXECUTIVE DIRECTOR OF HEALTHCARE FOR THE PAST 12
YEARS, WAS IMMEASURABLE. DICK WAS A MANAGER OF THE HIGHEST CALIBRE AND, LEFT
BEHIND A VERY EXPERIENCED AND DEDICATED TEAM.
RICK HAS BEEN WITH AFROX FOR FIVE YEARS HEADING OUR HEALTHCARE SERVICES
BUSINESSES. IN THIS TIME, HE HAS GROWN THESE FLEDGLING OPERATIONS INTO A VERY
STRONG PROFIT CONTRIBUTOR FOR THE COMPANY.
I AM CONFIDENT RICK WILL BE A GREAT ASSET IN HIS NEW ROLE.
THIS PAST YEAR, I DECIDED TO STRENGTHEN THE NON-EXECUTIVE REPRESENTATION OF THE
AFROX BOARD TO EIGHT, BY INVITING DR EDITH MOHAPI TO JOIN THE BOARD. DR
MOHAPI'S INPUT AND GUIDANCE IS ALREADY PROVING VALUABLE, AND ON BEHALF OF HER
FELLOW DIRECTORS, I WELCOME HER TO THE BOARD AND THE COMPANY.
THIS PAST YEAR HAS BEEN EXTRAORDINARILY DEMANDING ON OUR MANAGERS AND STAFF. WE
COULD NOT HAVE ACHIEVED THESE CHANGES WITHOUT THE SORT OF QUALITY PEOPLE WE
HAVE IN AFROX. THEY HAVE GONE THE EXTRA MILE TO DELIVER THE CHANGES AND I THANK
THEM FOR THIS SPECIAL EFFORT.
ISSUED BY AFRICAN OXYGEN LIMITED (AFROX)
FOR FURTHER INFORMATION: CHRIS FIELDGATE (011) 490-0430
BACKGROUND INFORMATION ON AFROX IS AVAILABLE ON THE INTERNET: WWW.AFROX.BOC.COM
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