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AFRICAN OXYGEN LIMITED
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 1999
TURNOVER UP 13%
PROFIT AFTER TAX UP 19%
HEADLINE EARNINGS UP 19%
GEARING DOWN TO 44%
PRODUCTIVITY AND RESTRUCTURING INITIATIVES, NEARING COMPLETION.
DEAR SHAREHOLDERS
PERFORMANCE
I AM PLEASED TO ANNOUNCE A STRONG PERFORMANCE, WITH SALES INCREASING 13 PERCENT
AND HEADLINE EARNINGS UP 19 PERCENT, IN AN ECONOMY BORDERING ON RECESSION.
THIS IMPROVEMENT IN PERFORMANCE IS A DIRECT RESULT OF THE COMPANY'S AGGRESSIVE
GROWTH STRATEGY AND THE FAR-REACHING PRODUCTIVITY AND RESTRUCTURING INITIATIVES
WHICH ARE NOW NEARING COMPLETION. AS PART OF OUR RESTRUCTURING INITIATIVES, WE
HAVE ABSORBED R3 MILLION IN ONCE-OFF COSTS, AND THE TOTAL FOR THE YEAR SHOULD
BE AROUND R10 MILLION.
SALES REACHED R1 412 MILLION (1998: R1 254 MILLION), UP 13 PERCENT, AND PROFIT
AFTER TAX IMPROVED 19 PERCENT TO R131 MILLION (1998: R110 MILLION).
INTEREST AT R49 MILLION (1998: R50 MILLION) WAS BELOW THE PREVIOUS YEAR IN
SPITE OF CONSIDERABLY HIGHER INTEREST RATES. THIS WAS ACHIEVED THROUGH A
COMBINATION OF GOOD ASSET AND BORROWINGS MANAGEMENT.
THE REDUCED EFFECTIVE TAX RATE OF 28 PERCENT (1998: 33 PERCENT) WAS A DIRECT
RESULT OF THE REDUCTION IN THE COMPANY TAX RATE FROM 35 PERCENT TO 30 PERCENT,
AS ANNOUNCED BY THE MINISTER OF FINANCE IN HIS BUDGET SPEECH.
BUSINESS REVIEW
AFROX'S INDUSTRIAL BUSINESS (GASES, WELDING PRODUCTS AND HANDIGAS) SHOWED REAL
IMPROVEMENT IN OPERATING PROFIT, MAINLY DUE TO THE PRODUCTIVITY INITIATIVES.
COMPETITION REMAINED STRONG BUT ALL DIVISIONS NEVERTHELESS MAINTAINED OR GREW
MARKET SHARE, AND DEVELOPED NEW MARKETS - A VERY COMMENDABLE ACHIEVEMENT IN AN
ECONOMY SHOWING NEGATIVE GROWTH IN THIS SECTOR.
HANDIGAS, AFROX'S BRAND OF LIQUEFIED PETROLEUM GAS, CONTINUED TO SHOW STRONG
VOLUME GROWTH AND THIS SHOULD IMPROVE EVEN FURTHER IN THE SECOND HALF IF WE
EXPERIENCE A COLD WINTER.
AFROX HEALTHCARE, CONSISTING OF 28 HOSPITALS WITH 3 200 BEDS AND SEVERAL
HEALTHCARE SERVICES COMPANIES, PRODUCED OUTSTANDING RESULTS.
ALL HOSPITALS OPERATED AT NEAR CAPACITY AND, MANY OF THE HEALTHCARE SERVICES
COMPANIES CONTINUED TO PERFORM EXTREMELY WELL. THE PERFORMANCE OF THE
HEALTHCARE SERVICES COMPANIES IS PARTICULARLY GRATIFYING CONSIDERING THEY WERE
FORMED LESS THAN SIX YEARS AGO, AND ARE NOW ALL LEADERS IN THEIR FIELD OF
EXPERTISE.
CASH FLOW AND DIVIDENDS
CASH GENERATED FROM OPERATIONS, EXCLUDING CAPITAL EXPENDITURE, INCREASED BY 16
PERCENT TO R179 MILLION (1998: R155 MILLION). CAPITAL EXPENDITURE TO EXPAND
OPERATIONS INCREASED SIGNIFICANTLY TO R100 MILLION (1998: R52 MILLION)
REFLECTING THE INVESTMENT IN GROWTH INITIATIVES.
YOUR BOARD OF DIRECTORS HAS DECLARED AN INCREASED DIVIDEND AS A RESULT OF THE
SOUND PERFORMANCE. SHAREHOLDERS WILL HAVE THE OPTION OF EITHER A CASH DIVIDEND
OR TAKING UP CAPITALISATION SHARES. THE DIVIDEND IS UP 16 PERCENT TO 16,5 CENTS
(1998: 14,2 CENTS). IT IS COVERED 2,3 TIMES (1998: 2,3 TIMES).
PRODUCTIVITY INITIATIVES
IN MY LAST INTERIM REPORT, I EMPHASISED THE NEED OF ACCELERATING OUR MAJOR
PRODUCTIVITY AND RESTRUCTURING PROGRAMME, WHICH IS DESIGNED TO INCREASE SALES,
IMPROVE EFFICIENCIES AND TO REDUCE COSTS. THIS HAS RESULTED IN THE TOTAL RENEW
OF AFROX, AND I AM PLEASED TO REPORT THAT THIS INITIATIVE IS NEARING COMPLETION
ANNUALISED SAVINGS OF R45 MILLION IN COSTS WILL BE ACHIEVED FROM OUR
PRODUCTIVITY INITIATIVES BY MID-2000.
WE HAVE STREAMLINED OUR STRUCTURE, SHORTENED LINES OF COMMUNICATIONS AND ARE
NOW PLACING ADDED FOCUS ON STRETCHING FINANCIAL AND CUSTOMER SERVICE
PERFORMANCE TARGETS. WE HAVE MADE OUR 100 STRONG BRANCH NETWORK MORE SALES AND
CUSTOMER FOCUSED AND RATIONALISED OUR SEVEN SALES REGIONS INTO FOUR. WE ARE IN
THE PROCESS OF CENTRALISING AND IMPROVING SERVICES FUNCTIONS LIKE FINANCE,
HUMAN RESOURCES, CUSTOMER ORDERS, DEBT MANAGEMENT AND DELIVERY SCHEDULING. BY
DOING THIS, WE WILL ACHIEVE OPTIMUM EFFICIENCY AND STANDARDISATION OF ALL
SYSTEMS AND PROCEDURES.
OVERHEADS FOR THE INDUSTRIAL BUSINESS ARE 3 PERCENT LOWER THAN THIS TIME LAST
YEAR, SHOWING THE POSITIVE BENEFITS STARTING TO COME THROUGH FROM OUR RENEW
PROGRAMME.
TO DATE, THE INITIATIVES HAVE MAINLY FOCUSED ON OUR INDUSTRIAL BUSINESS
ALTHOUGH OUR HEALTHCARE WARDS AND THEATRES, AND OUTSOURCING OF SERVICES
PROGRAMME WILL REALISE R13 MILLION IN ANNUALISED SAVINGS BY YEAR END.
ASSET MANAGEMENT
HIGH REAL INTEREST RATES HAVE CREATED AN ENVIRONMENT WHICH MAKES TIGHT ASSET
MANAGEMENT MORE ESSENTIAL THAN EVER. STRINGENT FOCUS IN THIS AREA HAS, HOWEVER,
RESULTED IN NET WORKING ASSETS INCREASING BY ONLY 11 PERCENT TO R379 MILLION
(1998: R340 MILLION). BORROWINGS ARE DOWN FROM R583 MILLION TO R575 MILLION
WITH GEARING REDUCING TO 44 PERCENT (1998: 47,6 PERCENT).
EXPANSION
WE CONTINUE TO EXPLORE SYNERGISTIC ACQUISITIONS IN ALL OUR BUSINESSES, AND ARE
INCREASING OUR PRODUCT OFFERINGS BY LOOKING FOR NICHE MARKETS IN OUR 100 000
PLUS INDUSTRIAL CUSTOMER BASE. WE HAVE ALSO CONCLUDED MAJOR EXPORTS OF GAS
WELDING EQUIPMENT WHICH NOW ACCOUNT FOR 50 PERCENT OF THE OUTPUT OF OUR GAS
EQUIPMENT FACTORY.
PRESENTLY, SEVERAL MEANINGFUL EXPANSION OPTIONS ARE BEING NEGOTIATED AND SHOULD
BE FINALISED BY YEAR END.
IN THE PAST SIX MONTHS, WE HAVE FURTHER DEVELOPED OUR FLEDGLING GASEOUS
CHEMICALS BUSINESS, EXPANDED OUR HANDIGAS DISTRIBUTION NETWORK AND, LAID FIRM
PLANS TO MARKET HANDIGAS IN SEVERAL SUB-SAHARAN AFRICAN COUNTRIES.
ON THE HEALTHCARE SIDE, OUR R90 MILLION EXPANSION OF THE VINCENT PALLOTTI, CAPE
TOWN, WILL BE COMPLETED WITHIN THE NEXT SIX MONTHS. OTHER DEVELOPMENTS INCLUDE
THE CONSTRUCTION OF A SECOND HOSPITAL IN BOTSWANA, AND THE UPGRADING OF
FACILITIES AT SIX HOSPITALS.
JSE SECTOR CHANGE
IN FEBRUARY, THE LISTING DIVISION OF THE JOHANNESBURG STOCK EXCHANGE CONFIRMED
THAT AFROX WOULD BE MOVED FROM THE ENLARGED ENGINEERING, BUILDING, CONSTRUCTION
AND ALLIED SUB-SECTOR AND WOULD BE CLASSIFIED UNDER THE CHEMICALS, OILS AND
PLASTICS SUB-SECTOR OF THE NON-MINING RESOURCES SECTOR OF THE MAIN BOARD.
WE HAVE CERTAIN RESERVATIONS ON THIS CLASSIFICATION AS ONE OF AFROX'S MAIN
STRENGTHS IS THAT IT IS NON-CYCLICAL AND NOT SUBJECT TO GLOBAL COMMODITY
CYCLES. OUR ABILITY TO PRODUCE CONSISTENT EARNINGS OFF A HIGH BASE, WHATEVER
THE ECONOMIC CLIMATE, IS ALMOST DIAMETRICALLY OPPOSED TO MANY CHEMICAL
COMPANIES AND TO THIS SECTOR AS A WHOLE. SECONDLY, THE MAJORITY OF OUR PRODUCTS
AND SERVICES ARE NOT CHEMICALLY RELATED.
YEAR 2000 COMPLIANCE
OUR PLANS FOR THE YEAR 2000 ARE BEING IMPLEMENTED WITH SUCCESS AND WE DO NOT
FORESEE ANY MAJOR PROBLEMS. SAFETY MARGINS AND CONTINGENCY PLANS HAVE ALSO BEEN
BUILT INTO OUR COMPLIANT SYSTEMS PROGRAMME.
FUTURE PROSPECTS
WHILE THE ECONOMY REMAINS RELATIVELY STAGNANT, MUCH OF OUR GROWTH WILL COME
FROM DEVELOPING EXISTING BUSINESSES, CREATING NICHE MARKET OPPORTUNITIES,
EXPANDING OUR PRODUCTS AND SERVICES AND, ACQUIRING SYNERGISTIC BUSINESSES FOR
BOTH OUR INDUSTRIAL AND HEALTHCARE BUSINESSES.
OUR RENEW PROCESS WILL PLACE US IN A STRONG POSITION TO FURTHER INCREASE BOTH
EARNINGS AND SALES WHEN THE ECONOMY FIRMS.
WE EXPECT LOWER INTEREST RATES AND THE REMOVAL OF THE PRE-ELECTION UNCERTAINTY
TO BENEFIT THE ECONOMY DURING THE SECOND HALF OF THE CALENDAR YEAR. OUR FOCUS
ON STRETCHING FINANCIAL AND CUSTOMER SERVICE PERFORMANCE TARGETS, SHOULD
CONTRIBUTE TO SOUND GROWTH DURING THE REMAINDER OF THE FINANCIAL YEAR.
ROYDEN T VICE
CHAIRMAN AND MANAGING DIRECTOR
CAPITALISATION SHARE AWARD AND CASH OPTION
THE BOARD OF DIRECTORS OF AFRICAN OXYGEN LIMITED (AFROX) HAS RESOLVED TO MAKE
AN AWARD OF NEW FULLY PAID ORDINARY SHARES ("THE NEW SHARES") BY WAY OF A
CAPITALISATION OF DISTRIBUTABLE RESERVES TO SHAREHOLDERS REGISTERED IN THE
BOOKS OF THE COMPANY AT CLOSE OF BUSINESS ON FRIDAY, 11 JUNE 1999, ACCORDING TO
THE FORMULA PER SHARE.
16,5 CENTS
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96% OF THE RULING PRICE AT THE CLOSE OF BUSINESS ON FRIDAY, 11 JUNE 1999.
SHAREHOLDERS WILL BE ENTITLED TO ELECT TO DECLINE THE AWARD IN RESPECT OF ALL
OR PART OF THEIR SHAREHOLDING AND INSTEAD MAY ELECT TO RECEIVE A CASH DIVIDEND
OF 16,5 CENTS (1998: 14,2 CENTS) IN RESPECT OF THE SIX MONTH PERIOD.
ALL FRACTIONS OF NEW SHARES WILL BE AGGREGATED AND SOLD ON THE JOHANNESBURG
STOCK EXCHANGE (JSE) FOR THE BENEFIT OF THE RELEVANT SHAREHOLDERS. SUBJECT TO
THE APPROVAL OF THE JSE AND THE NAMIBIAN STOCK EXCHANGE (NSX) A LISTING OF THE
NEW SHARES TO BE ISSUED PURSUANT TO THE AWARD WILL COMMENCE ON WEDNESDAY, 21
JULY 1999.
DOCUMENTATION, WHICH IS SUBJECT TO THE APPROVAL OF THE JSE AND NSX, DEALING
WITH THE CAPITALISATION AWARD AND ELECTION FORMS IN RESPECT OF THE CASH
DIVIDEND WILL BE POSTED TO AFROX SHAREHOLDERS ON FRIDAY, 18 JUNE 1999. IN ORDER
TO BE VALID, COMPLETED ELECTION FORMS MUST BE RECEIVED BY THE TRANSFER
SECRETARIES BY NO LATER THAN 12H00 ON FRIDAY, 16 JULY 1999. IT IS EXPECTED THAT
THE SHARE CERTIFICATES IN RESPECT OF THE NEW SHARES AND/OR PAYMENTS WILL BE
ISSUED/MADE ON OR ABOUT WEDNESDAY, 21 JULY 1999. A FURTHER ANNOUNCEMENT WILL BE
PUBLISHED ON WEDNESDAY, 21 JULY 1999, DETAILING THE RESULTS OF THE
CAPITALISATION SHARE AWARD AND CASH ELECTION.
BY ORDER OF THE BOARD.
IVOR M MATTHEE
COMPANY SECRETARY
29 APRIL 1999
THE DIRECTORS REPORT THAT THE INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH
1999 ARE AS FOLLOWS:
INCOME STATEMENT
6 MONTHS TO 6 MONTHS TO YEAR TO
31 MARCH 31 MARCH 30 SEPT
1999 1998 1998
UNAUDITED) % (UNAUDITED) (AUDITED)
RM CHANGE RM RM
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TURNOVER 1 412 13 1 254 2 633
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HISTORICAL COST
OPERATING PROFIT 253 10 231 486
ADDITIONAL
DEPRECIATION (10) (10) (19)
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CCA PROFIT BEFORE
INTEREST 243 10 221 467
NET INTEREST PAID (49) (50) (99)
PROPERTY FINANCE
LEASE CHARGES (7) (6) (12)
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PROFIT BEFORE
EXCEPTIONAL ITEMS 187 13 165 356
EXCEPTIONAL ITEMS (3) - (22)
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PROFIT BEFORE
TAXATION 184 165 334
TAXATION (53) (55) (116)
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PROFIT AFTER
TAXATION 131 19 110 218
EQUITY ACCOUNTED
PROFIT/(LOSS) 1 (1) 2
OUTSIDE SHARE-
HOLDERS' INTEREST (12) (7) (18)
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PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 120 17 102 202
ADJUSTMENT FOR
HEADLINE EARNINGS
EXCEPTIONAL ITEMS 3 - 22
- TAX EFFECT (1) - (5)
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HEADLINE
EARNINGS 122 19 102 219
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BALANCE SHEET
EMPLOYMENT OF CAPITAL
FIXED ASSETS 1 645 1 533 1 570
ASSOCIATE COMPANIES AND
TRADE INVESTMENTS 51 69 36
OTHER LONG-TERM
ASSETS 194 234 187
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1 890 1 836 1 793
CURRENT ASSETS
(EXCLUDING CASH) 932 830 859
CURRENT LIABILITIES
(EXCLUDING SHORT-
TERM BORROWINGS) (654) (588) (693)
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2 168 2 078 1 959
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CAPITAL EMPLOYED
SHAREHOLDERS'
FUNDS 1 351 1 240 1 254
OUTSIDE SHAREHOLDERS'
INTEREST 70 65 70
DEFERRED TAXATION 63 65 74
POST RETIREMENT
BENEFITS 22 38 25
NET BORROWINGS 575 583 449
PROPERTY FINANCE
LEASES 87 87 87
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2 168 2 078 1 959
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CASH FLOW STATEMENT
CASH GENERATED FROM
TRADING ACTIVITIES 276 285 583
INCREASE IN WORKING CAPITAL
AND ACQUISITIONS (97) (130) (83)
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CASH GENERATED BEFORE REPLACEMENT
OF FIXED ASSETS 179 16 155 500
REPLACEMENT OF
FIXED ASSETS (58) (25) (76)
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CASH GENERATED
FROM OPERATIONS 121 130 424
INTEREST AND
TAXATION PAID (97) (86) (209)
DIVIDENDS PAID (50) (47) (81)
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CASH (UTILISED IN)/RETAINED FROM
OPERATIONS (26) (3) 134
NET INVESTMENT
ACTIVITIES (100) (52) (55)
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NET CASH FLOW (126) (55) 79
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STATISTICS AND RATIOS
STATISTICS
TOTAL NUMBER OF SHARES IN
ISSUE (MILLION) 314 309 310
NUMBER OF ORDINARY SHARES ON
WHICH EARNINGS PER SHARE ARE
BASED (MILLION) 311 308 309
HEADLINE EARNINGS
PER SHARE (CENTS) 39,0 17 33,2 71,4
REAL EARNINGS PER
SHARE (CENTS) 38,5 16 33,2 65,9
DIVIDEND AND
CAPITALISATION
SHARE AWARD PER
SHARE (CENTS) 16,5 16 14,2 37,7
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RATIOS
INTEREST COVER
(TIMES) 4,3 3,9 4,2
EFFECTIVE TAX
RATE (%) 28,5 33,2 34,7
GEARING (%) 44,0 47,6 37,6
DIVIDEND COVER - CCA EARNINGS
TIMES) 2,3 2,3 1,7
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AFRICAN OXYGEN LIMITED
REGISTRATION NUMBER 05/00089/06
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
REGISTERED OFFICE
AFROX HOUSE
23 WEBBER STREET, SELBY JOHANNESBURG 2001
PO BOX 5404, JOHANNESBURG 2000
TELEPHONE (011) 490-0400
WEBSITE: WWW.AFROX.COM
TRANSFER SECRETARIES
MERCANTILE REGISTRARS LIMITED
ANGLO BUILDING, 8TH FLOOR
11 DIAGONAL STREET
JOHANNESBURG 2000
PO BOX 1053, JOHANNESBURG 2000
TELEPHONE (011) 370-5000
DIRECTORS:
RT VICE (CHAIRMAN AND MANAGING DIRECTOR), DF BEATTIE*, AE ISAAC*, LA MACNAIR,
JM MARRIOTT, EQ MOHAPI~, DB RILEY,
FD ROSENKRANZ*, GS SIBIYA,CB STRAUSS.
* BRITISH ~ LESOTHO
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