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AFRICAN OXYGEN LIMITED
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2000
OPERATING PROFIT UP 33%
HEADLINE EARNINGS UP 22%
RETURN ON NET ASSETS INCREASE TO 29,4% ON AN ANNUALISED BASIS
ASSET BASE INCREASES BY R1,1 BILLION
DEAR SHAREHOLDERS
PERFORMANCE
I AM PLEASED TO ANNOUNCE A VERY STRONG PERFORMANCE FOR THE FIRST HALF YEAR. THE
BENEFITS OF A SIGNIFICANTLY EXPANDED GROUP STRUCTURE, FOLLOWING THE ACQUISITION
OF PRESMED AND LIFECARE IN THE SECOND HALF OF THE PREVIOUS FINANCIAL YEAR, HAVE
EXCEEDED EXPECTATION.
TURNOVER INCREASED BY 46 PERCENT TO R2,243 MILLION (1999: R1532 MILLION) AND
HEADLINE EARNINGS BY 22 PERCENT TO R158,7 MILLION (1999: R130,2 MILLION). THE
OVERALL GROUP EARNINGS TO SALES RATIO HAS DECLINED AS A RESULT OF THE CHANGING
PROFILE OF THE GROUP WITH THE SIGNIFICANTLY EXPANDED HEALTHCARE OPERATION. BOTH
THE INDUSTRIAL AND HEALTHCARE BUSINESSES, HOWEVER, IMPROVED THEIR RESPECTIVE
PROFITABILITY MARGINS DURING THE PERIOD AND THE OVERALL RETURN ON NET ASSETS
IMPROVED FROM 28,7 PERCENT TO 29,4 PERCENT ON AN ANNUALISED EQUIVALENT.
THESE RESULTS FOR THE FIRST SIX MONTHS OF THE FINANCIAL YEAR REFLECT A RENEWED
AND REVITALISED AFROX. OUR RENEW PROGRAMME, IMPLEMENTED OVER THE PAST TWO
YEARS, HAS MADE AFROX ONE OF A HANDFUL OF COMPANIES UTILISING GLOBAL BUSINESS
BEST PRACTICES, WITH THE RESULTANT EFFICIENCIES AND COST SAVINGS.
WE HAVE THE LATEST TECHNOLOGY IN OUR BUSINESS TO ACHIEVE THIS POSITION, HAVING
BENCHMARKED OURSELVES AGAINST GLOBAL COMPANIES AND COMPETITORS. WE HAVE HIGHLY
EFFECTIVE, EFFICIENT AND FOCUSED SERVICE CENTRES THAT ARE NOW FULLY
OPERATIONAL. THESE CENTRES IMPACT ON EVERY PART OF OUR BUSINESS, FROM CUSTOMER
ORDERS AND DELIVERY SCHEDULING TO ALL ASPECTS OF DAY-TO-DAY FINANCIAL CONTROL
AND PEOPLE MANAGEMENT.
THE IMPROVED RETURNS AND PROFITABILITY WERE A DIRECT RESULT OF THE ENLARGED
HEALTHCARE GROUP AND AS A CONSEQUENCE OF THE PRODUCTIVITY INITIATIVES
UNDERTAKEN WITHIN THE INDUSTRIAL BUSINESSES.
PRODUCTIVITY INITIATIVES
DURING THIS PERIOD WE HAVE FOCUSED ON INTEGRATING THE NEWLY LISTED HEALTHCARE
BUSINESS AND FINALISING AND BEDDING DOWN THE INDUSTRIAL RESTRUCTURING
INITIATIVES.
THE HEALTHCARE BUSINESS IS WELL ON ITS WAY TO ACHIEVING THE TARGETED FIRST YEAR
SYNERGISTIC SAVINGS OF R10 MILLION.
WE REFERRED IN OUR YEAR-END REPORT TO THE ANNUALISED PRODUCTIVITY SAVINGS OF
R40MILLION ACHIEVED IN THE INDUSTRIAL BUSINESS. THIS PERIOD HAS SEEN THE
LAUNCHING OF OUR CUSTOMER, FINANCIAL, AND HUMAN RESOURCES SERVICE CENTRES.
THESE HI-TECHNOLOGY CENTRES, BASED ON GLOBAL BEST PRACTICES, ARE SHOWING MARKED
EFFICIENCIES WITH THEIR STANDARDISED PROCESSES, AND WILLYIELD ADDITIONAL COST
SAVINGS OF R10 MILLION IN THE CURRENT FINANCIAL YEAR.
FOCUS ON A SPECIFIC VALUE DRIVER PROGRAMME WITHIN THE INDUSTRIAL BUSINESS HAS
YIELDED BENEFITS IN EXCESS OF R25 MILLION, MAINLY AROUND MORE EFFICIENT
PRICING, THIRD PARTY PROCUREMENT SAVINGS AND FOCUSED HANDIGAS VOLUME GROWTH.
BUSINESS REVIEW
AFROX'S INDUSTRIAL BUSINESS (GASES, WELDING PRODUCTS AND HANDIGAS) CONTINUED TO
SHOW REAL IMPROVEMENT IN SALES AND OPERATING PROFITS REFLECTING FIRST, AN
IMPROVEMENT IN THE ECONOMY AND SECOND, WIDER PRODUCT OFFERINGS AND MARKET
PENETRATION.
NEW BULK GAS CONTRACTS WERE GAINED DURING THE PERIOD. SIGNIFICANT
RECAPITALISATION OF THE CARBON DIOXIDE BUSINESS SAW THE INSTALLATION OF
ADDITIONAL BULK STORAGE IN THE WESTERN AND EASTERN CAPE, INCREASED CAPACITY AT
OUR SASOL AND MOSSGAS PLANTS AND, THE PURCHASE OF A CO2 PLANT AND DRY ICE
FACILITY IN KWAZULU-NATAL.
THE NEW GASEOUS CHEMICALS BUSINESS SHOWED EXCELLENT GROWTH. A NEW REFRIGERANT
GAS FACILITY WAS COMMISSIONED ADJACENT TO THE ROODEKOP PROPELLANT FACILITY.
WELDING AND CUTTING, COMPRISING CYLINDER GASES AND WELDING PRODUCTS,
EXPERIENCED ENCOURAGING GROWTH, HELPED BY INCREASED ECONOMIC ACTIVITY AND
STRONG EXPORTS OF GAS WELDING PRODUCTS TO AUSTRALIA, MALAYSIA, OTHER PACIFIC
RIM COUNTRIES, EUROPE AND ASIA.
HANDIGAS, NOW ONE OF AFROX'S MAJOR BUSINESSES AS A RESULT OF SUSTAINED ORGANIC
GROWTH AND ACQUISITIONS OVER THE PAST SIX YEARS, HAS CONTINUED VOLUME GROWTH.
NEW BULK CONTRACTS WERE SIGNED WITH INDUSTRIAL, DOMESTIC AND COMMERCIAL MARKETS
EXPANDING CONSIDERABLY.
HEALTHCARE HAD AN OUTSTANDING SIX MONTHS. THE BENEFITS OF THE LARGER GROUP ARE
BEING REALISED WITH ENCOURAGING FUTURE GROWTH PROSPECTS. ADDITIONALLY, ORGANIC
GROWTH WAS STRONG.
SEVERAL PROJECTS STARTED IN 1999 ARE NOW FULLY OPERATIONAL AND CONTRIBUTING
TOWARDS SOLID GROWTH. THESE INCLUDE THE VINCENT PALLOTTI HOSPITAL IN CAPE TOWN
WHICH IS MEETING PLAN, THE OPENING OF A NEW WING AT THE SUIKERBOSRAND HOSPITAL,
HEIDELBERG WHICH DOUBLED ITS BED CAPACITY, UPGRADING THE KINGSBURY AND
CLAREMONT HOSPITAL IN THE WESTERN CAPE AND OPENING A NEW PAEDIATRIC WING AND
ICU AT ST DOMINIC'S IN EAST LONDON.
STATE-OF-THE-ART UNITS COMMISSIONED WERE THE ONCOLOGY CENTRE AT THE FLORA,
JOHANNESBURG, THE ENT CENTRE AT THE ENTABENI HOSPITAL, DURBAN, AND AN ONCOLOGY
CENTRE AND NEW MEDICAL CENTRE AT THE GABORONE PRIVATE HOSPITAL.
HEALTHCARE'S STRONG GROWTH IN SALES AND PROFITS WERE ACHIEVED DESPITE LOWER
THAN INFLATION TARIFF INCREASES WHICH WERE AGREED AFTER A RATHER PROTRACTED
PUBLIC DEBATE.
DIVIDENDS AND CAPITALISATION SHARE AWARDS
YOUR BOARD OF DIRECTORS DECLARED AN INCREASED DIVIDEND OF 19,0 CENTS (16,5
CENTS), UP 15 PERCENT. THIS IS COVERED 2,5 TIMES BY EARNINGS OF 48,2 CENTS.
SHAREHOLDERS WILL HAVE THE OPTION OF A CASH DIVIDEND OR TAKING UP
CAPITALISATION SHARES.
BOC SHARES IN AFROX
IN JULY 1999, A #7,2 BILLION PRE CONDITIONAL OFFER FOR THE BOC GROUP WAS MADE
BY AIR PRODUCTS AND AIR LIQUIDE. AS BOC HOLDS 56 PERCENT OF THE SHARES IN
AFROX, THIS HOLDING WILL EITHER PASS TO AIR PRODUCTS OR AIR LIQUIDE IF THE BID
IS SUCCESSFULLY CONCLUDED. IT IS NOT POSSIBLE TO PROVIDE A PRECISE TIMETABLE,
OR WHAT THE FINAL DECISION WILL BE REGARDING THIS SHAREHOLDING.
PRESENTLY, THE PRE CONDITIONAL OFFER PERIOD HAS BEEN EXTENDED TO 12 MAY 2000
AND IS DEPENDENT UPON THE FINDINGS OF THE UNITED STATES FEDERAL TRADE
COMMISSION. ONCE THESE ARE KNOWN, AND IF THE BID GOES THROUGH, A PROCESS TAKING
SEVERAL MONTHS IN SOUTH AFRICA WILL INCLUDE APPROVALS BY THE AFROX BOARD,THE
COMPETITION COMMISSION AND THE SECURITIES REGULATION PANEL.
YEAR 2000
AS ANTICIPATED, THE COMPANY DID NOT EXPERIENCE ANY PROBLEMS RELATED TO THE DATE
CHANGE TO 2000. THE DATE CHANGE, HOWEVER, DID ALLOW US TO UPGRADE SYSTEMS WHICH
HAVE BEEN SUCCESSFULLY COMMISSIONED IN THE BUSINESS.
FUTURE PROSPECTS
WE ANTICIPATE CONTINUED GROWTH IN OUR BUSINESSES IN THE SECOND SIX MONTHS.
THIS GROWTH COUPLED WITH THE CONTINUED HEALTHCARE INTEGRATION BENEFITS AND THE
INDUSTRIAL PRODUCTIVITY INITIATIVES SHOULD RESULT IN CONTINUED EARNINGS
IMPROVEMENT.
ROYDEN T VICE
CHAIRMAN AND MANAGING DIRECTOR
JOHANNESBURG
4 MAY 2000
REGISTERED OFFICE
AFROX HOUSE, 23 WEBBER STREET
SELBY, JOHANNESBURG, 2001
PO BOX 5404, JOHANNESBURG, 2000
TELEPHONE (011) 490-0400
AFRICAN OXYGEN LIMITED
REGISTRATION NUMBER 05/00089/06
DIRECTORS:
RT VICE (CHAIRMAN AND MANAGING DIRECTOR), DF BEATTIE*, AE ISAAC*, LA MACNAIR,
JM MARRIOTT, EQ MOHAPI , DB RILEY, GS SIBIYA, CB STRAUSS.
*BRITISH #LESOTHO
COMPANY SECRETARY: IMMATTHEE
TRANSFER SECRETARY: MERCANTILE REGISTRARS LIMITED
ANGLO BUILDING, 8TH FLOOR, 11 DIAGONAL STREET, JOHANNESBURG, 2001
TELEPHONE (011) 370-5000
THESE RESULTS CAN ALSO BE VIEWED ON THE WEBSITE WWW.AFROX.COM
THE DIRECTORS REPORT THAT THE UNAUDITED RESULTS FOR THE SIX MONTHS PERIOD ENDED
31 MARCH 2000 ARE AS FOLLOWS:
INCOME STATEMENTS
UNAUDITED UNAUDITED AUDITED
SIX SIX TWELVE
MONTHS TO MONTHS TO MONTHS TO
MARCH MARCH SEPTEMBER
2000 % 1999 1999
R'000 CHANGE R'000 R'000
TURNOVER 2 242 752 46 1 532 473 3 647 579
PROFIT BEFORE
INTEREST 336 579 33 252 748 568 757
EXCEPTIONAL ITEMS (6 731) (2 651) (45 020)
NET INTEREST PAID (74 406) (56 436) (121 921)
RETAINED EARNINGS OF
ASSOCIATES 6 633 587 6 384
PROFIT BEFORE TAXATION 262 075 35 194 248 408 200
TAXATION (79 913) (53 493) (122 550)
PROFIT AFTER TAXATION 182 162 29 140 755 285 650
OUTSIDE SHAREHOLDERS'
INTEREST (29 508) (12 299) (41 416)
PROFIT ATTRIBUTABLE TO
SHAREHOLDERS 152 654 19 128 456 244 234
ADJUSTMENT FOR HEADLINE
EARNINGS
- EXCEPTIONAL ITEMS 6 731 2 651 45 020
- TAX EFFECT (729) (928) (4 818)
HEADLINE EARNINGS 158 656 22 130 179 284 436
DIVIDEND AND
CAPITALISATION SHARE
AWARD (60 249) (51 737) (133 672)
BALANCE SHEETS
ASSETS
NON-CURRENT ASSETS 2 290 589 1 739 827 2 224 954
FIXED ASSETS 1 963 166 1 495 473 1 895 416
ASSOCIATED COMPANIES AND
INVESTMENTS 167 176 50 538 165 443
OTHER LONG-TERM ASSETS 160 247 193 816 164 095
CURRENT ASSETS 1 499 847 934 935 1 318 443
TOTAL ASSETS 3 790 436 2 674 762 3 543 397
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 1 312 884 1 161 492 1 197 509
OUTSIDE SHAREHOLDERS'
INTEREST 377 034 69 733 395 612
NON-CURRENT LIABILITIES 596 944 534 564 532 053
INTEREST BEARING
BORROWINGS 488 886 409 127 419 642
DEFERRED TAX 99 096 103 192 101 786
RETIREMENT BENEFIT
OBLIGATION 8 962 22 245 10 625
CURRENT LIABILITIES 1 503 574 908 973 1 418 223
TOTAL EQUITY AND
LIABILITIES 3 790 436 2 674 762 3 543 397
CASH FLOW STATEMENTS
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING ACTIVITIES 392 535 283 986 597 336
CHANGES IN WORKING
CAPITAL (259 247) (97 433) 79 619
CASH GENERATED FROM
OPERATIONS 133 288 186 553 676 955
INTEREST AND TAXATION
PAID (117 500) (104 090) (228 073)
DIVIDENDS PAID (59 294) (49 993) (88 214)
CASH (UTILISED IN)/RETAINED
FROM OPERATING ACTIVITIES (43 506) 32 470 360 668
PURCHASE OF FIXED ASSETS (138 992) (158 224) (376 155)
ACQUISITION OF BUSINESSES (32 046) - (144 213)
CASH OUTFLOW FROM
INVESTING ACTIVITIES (214 544) (125 754) (159 700)
CASH INFLOW FROM
FINANCING ACTIVITIES 175 953 100 224 247 107
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS (38 591) (25 530) 87 407
STATISTICS AND RATIOS
STATISTICS
TOTAL NUMBER OF SHARES
IN ISSUE ('000) 317 102 313 561 315 134
NUMBER OF ORDINARY
SHARES ON WHICH EARNINGS
PER SHARE ARE
BASED ('000) 316 473 311 274 312 731
HEADLINE EARNINGS PER
SHARE (CENTS) 50,1 20 41,8 91,0
EARNINGS PER SHARE (CENTS) 48,2 17 41,3 78,1
DIVIDENDS AND
CAPITALISATION SHARE
AWARD (CENTS) 19,0 15 16,5 42,5
RATIOS
INTEREST COVER TIMES 4,5 4,5 4,7
EFFECTIVE TAX RATE % 30,5 27,5 30,0
GEARING % 51,2 48,8 41,4
DIVIDEND COVER TIMES 2,5 2,5 1,8
AFRICAN OXYGEN LIMITED - CAPITALISATION SHARE AWARDS
AFRICAN OXYGEN LIMITED
REGISTRATION NUMBER 05/00089/06
CAPITALISATION SHARE AWARD AND CASH OPTION
NOTICE IS HEREBY GIVEN THAT AN AWARD OF NEW FULLY PAID ORDINARY SHARES ("THE
NEW SHARES") WILL BE DISTRIBUTED TO SHAREHOLDERS REGISTERED IN THE BOOKS OF THE
COMPANY AT THE CLOSE OF BUSINESS ON THURSDAY, 15 JUNE 2000 BY WAY OF A
CAPITALISATION OF DISTRIBUTABLE RESERVES ACCORDING TO THE FOLLOWING FORMULA PER
SHARE:
19,0 CENTS
97,5% OF THE RULING PRICE AT THE CLOSE OF BUSINESS ON THURSDAY, 15 JUNE 2000.
SHAREHOLDERS MAY ELECT TO DECLINE THE AWARD IN RESPECT OF ALL OR PART OF THEIR
SHAREHOLDING AND INSTEAD RECEIVE A CASH DIVIDEND OF 19,0 CENTS (1999: 16,5
CENTS) FOR THE 6 MONTHS PERIOD ENDED 31 MARCH 2000.
ALL FRACTIONS OF NEW SHARES WILL BE AGGREGATED AND SOLD ON THE JOHANNESBURG
STOCK EXCHANGE ("THE JSE") FOR THE BENEFIT OF THE RELEVANT SHAREHOLDERS.
SUBJECT TO THE APPROVAL OF THE JSE AND THE NAMIBIAN STOCK EXCHANGE ("THE NSX"),
A LISTING OF THE NEW SHARES TO BE ISSUED PURSUANT TO THE AWARD WILL COMMENCE ON
FRIDAY, 28 JULY 2000.
DOCUMENTATION, SUBJECT TO THE APPROVAL OF THE JSE AND NSX, DEALING WITH THE
CAPITALISATION AWARD AND ELECTION FORM IN RESPECT OF EACH DIVIDEND, WILL BE
POSTED TO SHAREHOLDERS ON OR ABOUT FRIDAY, 23 JUNE 2000. IN ORDER TO BE VALID,
COMPLETED ELECTION FORMS MUST BE RECEIVED BY THE TRANSFER SECRETARIES BY NO
LATER THAN 12H00 ON FRIDAY, 21 JULY 2000.
IT IS EXPECTED THAT THE SHARE CERTIFICATES IN RESPECT OF THE NEW SHARES AND/OR
PAYMENTS WILL BE ISSUED/MADE ON OR BY FRIDAY, 28 JULY 2000.
A FURTHER ANNOUNCEMENT WILL BE PUBLISHED ON FRIDAY, 28 JULY 2000, DETAILING THE
RESULTS OF THE CAPITALISATION SHARE AWARD AND CASH ELECTION.
BY ORDER OF THE BOARD
IVOR M MATTHEE
COMPANY SECRETARY
JOHANNESBURG
4 MAY 2000
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