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AFRICAN OXYGEN LIMITED
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2000
PERFORMANCE HIGHLIGHTS
* REVENUE UP 28% * INTEGRATION BENEFITS OF R20 MILLION
FOLLOWING PRESMED MERGER - AHEAD OF
PLAN
* ATTRIBUTABLE EARNINGS UP 17% * IMPLEMENTATION OF WORLD-CLASS SERVICE
CENTRES
* GEARING AT 44%
DEAR SHAREHOLDERS
WE ARE PLEASED TO AGAIN REPORT SOLID RESULTS FOLLOWING A PERIOD OF
CONSOLIDATION FOR THE HEALTHCARE BUSINESS, WHICH RESULTED IN THE EFFICIENT AND
EFFECTIVE INTEGRATION OF THE PRESMED AND LIFECARE GROUPS. IN ADDITION, WE
EXPERIENCED A PERIOD IN WHICH THE PERFORMANCE OF THE INDUSTRIAL BUSINESS WAS
NEGATIVELY IMPACTED BY THE SLUGGISH MANUFACTURING ECONOMY AND THE EFFECT OF OUR
LPG BUSINESS BY THE RECENT RAPID RISE IN THE OIL PRICE, COUPLED WITH THE
DECLINE IN THE RAND/DOLLAR EXCHANGE RATE.
FINANCIAL RESULTS
REVENUE INCREASED BY 28 PERCENT FROM R3,6 BILLION TO A RECORD R4,7 BILLION. THE
HEALTHCARE BUSINESS RECORDED AN IMPRESSIVE 43 PERCENT INCREASE IN REVENUE TO
R2,8 BILLION WITH BOTH THE HOSPITAL AND HEALTHCARE SERVICES BUSINESSES
RECORDING EXCELLENT GAINS. THE INDUSTRIAL BUSINESS GREW 10 PERCENT TO R1,9
BILLION ON THE BACK OF STRONG HANDIGAS BULK SALES, INCREASED WELDING EXPORT
SALES AND GROWTH OF THE GASEOUS CHEMICAL, MEDICAL AND HOSPITALITY BUSINESSES.
PROFIT BEFORE TAX INCREASED BY 24 PERCENT FROM R411 MILLION TO R508 MILLION. AT
THE TRADING PROFIT LEVEL THE HEALTHCARE BUSINESS RECORDED AN INCREASE OF 46
PERCENT TO R305 MILLION, WHILE THE INDUSTRIAL BUSINESS RECORDED AN INCREASE OF
3 PERCENT TO R403 MILLION. STRONG MARGIN GAINS WERE RECORDED BY THE HEALTHCARE
BUSINESS DUE TO REDUCING PHARMACY COSTS AND CONTAINING OVERHEAD GROWTH
FOLLOWING THE ACHIEVEMENT OF INTEGRATION SAVINGS OF R20 MILLION IN THE CURRENT
FINANCIAL YEAR - WELL AHEAD OF THE TARGETED R10 MILLION.
MARGINS FOR THE INDUSTRIAL BUSINESS WERE MAINTAINED WITH THE EXCEPTION OF LPG
WHERE THERE WAS MARGIN EROSION PARTICULARLY IN THE LATTER SIX MONTHS FOLLOWING
THE SIGNIFICANT OIL PRICE INCREASES. VALUE DRIVER INITIATIVES IN THE AREA OF
PURCHASING, MARKET SEGMENTATION, SUPPLY CHAIN MANAGEMENT AND CUSTOMER SERVICE
LEVELS YIELDED PRODUCTIVITY GAINS.
THE IMPLEMENTATION OF THE WORLD-CLASS SERVICE CENTRES FOR FINANCE, CUSTOMER
SERVICES, HUMAN RESOURCES AND DISTRIBUTION SCHEDULING RESULTED IN SAVINGS IN
THE CURRENT FINANCIAL YEAR, AS WELL AS DELIVERING SIGNIFICANT BENEFITS IN
STANDARDISATION OF PROCESSES AND EFFECTIVE MANAGEMENT OF ASSETS. AT THE SAME
TIME, CUSTOMER SERVICE WAS SIGNIFICANTLY ENHANCED.
NET INTEREST PAID INCREASED BY 14 PERCENT TO R139 MILLION IN LINE WITH HIGHER
BORROWING LEVELS. AS EXPECTED, THERE WAS SOME DETERIORATION IN WORKING CAPITAL
MANAGEMENT IMMEDIATELY FOLLOWING THE CENTRALISATION OF DEBTORS, STOCK AND
CREDITORS MANAGEMENT, BUT THIS SITUATION WAS WELL UNDER CONTROL AT THE
FINANCIAL YEAR END WITH IMPROVED STOCK AND DEBTORS DAYS OUTSTANDING AS COMPARED
TO THE PREVIOUS YEAR.
FINANCIAL POSITION
THE GROUP HAS RETAINED ITS STRONG FINANCIAL BASE DURING A THREE-YEAR PERIOD OF
ENORMOUS CHANGE, FOLLOWING MAJOR ACQUISITIONS, RESTRUCTURING OF OPERATIONS AND
ESTABLISHMENT OF CENTRALISED SERVICE CENTRES.
CASH GENERATED FROM OPERATIONS WAS IMPRESSIVE AT R363 MILLION AND IN SPITE OF
CAPEX EXPENDITURE OF R315 MILLION, INTEREST BEARING BORROWINGS ONLY INCREASED
BY R91 MILLION TO R828 MILLION. THE BORROWINGS RATIO OF 44 PERCENT IS
SATISFACTORY.
IT IS BELIEVED THAT WITH THE SETTLING DOWN OF THE NEWLY ESTABLISHED SERVICE
CENTRES AND THE FOCUS ON SPECIFIC PROJECTS RELATING TO SUPPLY CHAIN MANAGEMENT,
ORDER TO CASH AND REQUISITION TO PAYMENT PROCESSES, THE WORKING CAPITAL BASE
FOR THE GROUP CAN BE FURTHER REDUCED.
BUSINESS REVIEW
AFROX'S INDUSTRIAL BUSINESS (GASES, WELDING PRODUCTS AND HANDIGAS) CONTINUED TO
GROW SALES AND MARKET SHARE DESPITE INTENSE COMPETITION AND A DIFFICULT ECONOMY
IN THE SECOND HALF.
THE BULK GASES BUSINESS, PROCESS GAS SOLUTIONS, SIGNED SEVERAL BULK GAS
CONTRACTS AND COMMISSIONED FOUR NEW PRESSURE SWING ADSORPTION GAS-PRODUCING
PLANTS, ONE OF WHICH IS THE LARGEST IN AFRICA AT A RATED CAPACITY OF 40 TONS A
DAY OF NITROGEN. THE CARBON DIOXIDE BUSINESS WAS SIGNIFICANTLY RECAPITALISED
WITH THE PURCHASE OF A PLANT IN KWAZULU-NATAL, THE UPGRADING AND REPOSITIONING
OF TWO PLANTS AND, INCREASED STORAGE CAPACITY. AFROX IS NOW MORE
SELF-SUFFICIENT IN THE PRODUCTION OF CARBON DIOXIDE AND THE RE-SITING OF THE
PLANTS GIVES THE COMPANY A MORE STRATEGIC POSITION FROM WHICH TO FURTHER GROW
THIS PRODUCT.
THE NEW GASEOUS CHEMICALS BUSINESS GAINED SIGNIFICANT MARKET SHARE AND A NEW
REFRIGERANT GAS FACILITY WAS COMMISSIONED IN GAUTENG, FOLLOWING THE EXCLUSIVE
HALOCARBON SUPPLY AGREEMENT WITH ICI, ONE THE WORLD'S LARGEST PRODUCERS.
HANDIGAS CONTINUED TO GAIN LARGE BULK BUSINESS AND STRONG GROWTH WAS
EXPERIENCED IN EXPORTS OF WELDING PRODUCTS. TO CATER FOR THIS GLOBAL GROWTH, A
SECOND ASSEMBLY LINE WAS COMMISSIONED AT THE GAS EQUIPMENT FACTORY, GERMISTON,
AND THE FLUX MIXING PLANT AT THE BRITS ELECTRODE FACTORY WAS AUTOMATED INTO A
WORLD-CLASS FACILITY. AT THE SAME TIME, OUTPUT WAS INCREASED, ALLOWING FOR A
FULL TWENTY PERCENT TO BE SOLD INTO GLOBAL MARKETS.
IN THE FIRST FULL YEAR OF OPERATION AS A PUBLIC COMPANY, HEALTHCARE PRODUCED
OUTSTANDING RESULTS. WE BELIEVE, HOWEVER, THE MOST NOTABLE ACHIEVEMENT WAS THE
PROFESSIONALISM, SPEED AND EFFICIENCY WITH WHICH MANAGEMENT INTEGRATED AFROX'S
HEALTHCARE INTERESTS WITH PRESMED TO FORM A UNITED COMPANY WITH A SINGLE,
FOCUSED VISION.
DESPITE MANAGED CARE LIMITING STAYS, OCCUPANCIES INCREASED AND, AS A RESULT,
GROWTH WAS GAINED. THIS WAS LARGELY ACHIEVED BY ATTRACTING ADDITIONAL
HIGH-QUALITY DOCTORS, COMMISSIONING MODERN MEDICAL EQUIPMENT IN MANY OF OUR
HIGH-TECHNOLOGY ACUTE CARE HOSPITALS, AND EXPANDING AND UPGRADING OTHER
FACILITIES.
ADDED TO THIS OUTSTANDING PERFORMANCE IS THE FACT THAT INCREASED PROFITS WERE
ACHIEVED DESPITE THE LOWER THAN INFLATION TARIFF INCREASES WHICH ONLY BECAME
EFFECTIVE IN OUR SECOND QUARTER.
DIVIDEND
YOUR BOARD OF DIRECTORS DECLARED A FINAL DIVIDEND OF 28,0 CENTS, HIGHER BY 8
PERCENT. THIS IS COVERED 1,9 TIMES BY EARNINGS OF 88,5 CENTS. SHAREHOLDERS WILL
HAVE THE OPTION OF A CASH DIVIDEND OR TAKING UP CAPITALISATION SHARES.
SHAREHOLDING
LAST YEAR, ON 13 JULY THE BOARD OF THE BOC GROUP, OUR PARENT COMPANY, AGREED
TERMS FOR A GBP7,2 BILLION CASH OFFER FOR THE COMPANY BY AIR LIQUIDE OF FRANCE
AND AIR PRODUCTS OF AMERICA. THE OFFER FELL THROUGH AFTER A TEN-MONTH VERY
UNSETTLING PERIOD. NEVERTHELESS YOUR COMPANY ADOPTED A BUSINESS AS USUAL
STRATEGY AND CONTINUED TO WIN BUSINESS AND GROW DURING THIS DIFFICULT PERIOD.
ACCOUNTING POLICIES
THE ACCOUNTING POLICIES ADOPTED FOR THE PURPOSES OF THIS REPORT COMPLY IN ALL
MATERIAL ASPECTS WITH SOUTH AFRICAN STATEMENTS OF GENERALLY ACCEPTED ACCOUNTING
PRACTICE AS WELL AS WITH APPLICABLE LEGISLATION.
THESE ACCOUNTING POLICIES ARE ALSO CONSISTENT WITH THOSE OF THE PREVIOUS YEAR
WITH THE EXCEPTION OF DEFERRED TAXATION WHICH IS IN ACCORDANCE WITH THE CURRENT
ACCOUNTING STATEMENTS.
FUTURE PROSPECTS
THE AFROX RENEW PROGRAMME IS ON TRACK, IN PLACE AND DELIVERING. AFROX NOW HAS A
WORLD-CLASS OPERATING MODEL WHICH IS FULLY OPERATIONAL. WE ALSO HAVE THE
ENVIABLE ADVANTAGE OF BEING PART OF A MAJOR GLOBAL GROUP WHO CAN NOT ONLY
PROVIDE US WITH THE LATEST BUSINESS METHODS BUT ALSO PROVIDE US WITH ACCESS TO
MARKETS IN 50 COUNTRIES. THIS THEY ARE ALREADY DOING AND IN THE YEARS AHEAD WE
PLAN TO LEVERAGE BOC'S GLOBAL PRESENCE FURTHER WITH OUR WELDING EQUIPMENT AND
OTHER PRODUCT OFFERINGS.
THE BUSINESS IS WELL PLACED FOR FUTURE GROWTH.
R T VICE J M MARRIOTT
CHAIRMAN MANAGING DIRECTOR
DIVIDEND
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 1 DECEMBER 2000 BY WAY OF A CAPITALISATION
OF DISTRIBUTABLE RESERVES ACCORDING TO THE FOLLOWING FORMULA PER SHARE:
28,0 CENTS
97,5% OF RULING PRICE AT CLOSE OF BUSINESS ON
THE JOHANNESBURG STOCK EXCHANGE (JSE) ON 1 DECEMBER 2000.
SHAREHOLDERS MAY ELECT TO DECLINE THE AWARD IN RESPECT OF ALL OR PART OF THEIR
SHAREHOLDING AND INSTEAD RECEIVE A CASH DIVIDEND OF 28,0 CENTS (1999: 26,0
CENTS) PER SHARE FOR THE TWELVE MONTH PERIOD ENDED 30 SEPTEMBER 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 24 JANUARY 2001.
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 8 DECEMBER 2000.
IN ORDER TO BE VALID, COMPLETED ELECTION FORMS MUST BE RECEIVED BY THE TRANSFER
SECRETARIES BY NOT LATER THAN 12H00 ON 19 JANUARY 2001.
IT IS EXPECTED THAT THE SHARE CERTIFICATES IN RESPECT OF THE NEW SHARES AND/OR
PAYMENTS WILL BE ISSUED/MADE ON OR BY 24 JANUARY 2001.
A FURTHER ANNOUNCEMENT WILL BE PUBLISHED ON WEDNESDAY 24 JANUARY 2001,
DETAILING THE RESULTS OF THE CAPITALISATION SHARE AWARD AND CASH ELECTION.
BY ORDER OF THE BOARD
I M MATTHEE
COMPANY SECRETARY
JOHANNESBURG
2 NOVEMBER 2000
THE DIRECTORS REPORT THAT THE AUDITED RESULTS FOR THE YEAR ENDED
30 SEPTEMBER 2000 ARE AS FOLLOWS:
INCOME STATEMENT
AUDITED AUDITED
30 SEPT 30 SEPT
2000 % 1999
RM CHANGE RM
REVENUE 4653 28 3648
OPERATING PROFIT BEFORE INTEREST 649 14 569
EXCEPTIONAL ITEMS (18) (45)
NET INTEREST PAID (139) (122)
RETAINED EARNINGS OF ASSOCIATES 16 9
PROFIT BEFORE TAXATION 508 24 411
TAXATION (163) (129)
PROFIT AFTER TAXATION 345 22 282
OUTSIDE SHAREHOLDERS' INTEREST (65) (42)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 280 17 240
DIVIDEND (149) 12 (134)
BALANCE SHEET
ASSETS
NON-CURRENT ASSETS 2356 2225
FIXED ASSETS 2029 1895
ASSOCIATED COMPANIES AND INVESTMENTS 157 165
OTHER LONG-TERM ASSETS 170 165
CURRENT ASSETS 1326 1203
TOTAL ASSETS 3682 3428
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 1358 1198
OUTSIDE SHAREHOLDERS' INTEREST 402 396
NON-CURRENT LIABILITIES 942 849
INTEREST-BEARING BORROWINGS 828 737
DEFERRED TAX 112 102
RETIREMENT BENEFIT OBLIGATION 2 10
CURRENT LIABILITIES 980 985
TOTAL EQUITY AND LIABILITIES 3682 3428
CASH FLOW STATEMENT
NET CASH INFLOW FROM OPERATING ACTIVITIES 549 387
CHANGES IN WORKING CAPITAL (186) 50
CASH GENERATED FROM OPERATIONS 363 437
INTEREST AND TAXATION PAID (247) (228)
DIVIDENDS PAID (105) (88)
CASH RETAINED FROM OPERATING ACTIVITIES 11 121
PURCHASE OF FIXED ASSETS FOR EXPANSION (106) (160)
ACQUISITION OF BUSINESSES (32) (144)
DISINVESTING/(INVESTING) ACTIVITIES 37 (6)
CASH INFLOW FROM FINANCING ACTIVITIES 106 277
NET INCREASE IN CASH AND CASH
EQUIVALENTS 16 88
STATEMENT OF CHANGES IN EQUITY
SHARE SHARE REVALUATION ACCUM
CAPITAL PREMIUM RESERVE PROFIT TOTAL
BALANCE AT 1 OCTOBER 1999 16 185 83 919 1203
CHANGES IN ACCOUNTING POLICY (5) (5)
RESTATED BALANCE 16 185 83 914 1198
DEFICIT ON REVALUATION OF
PROPERTIES (3) (3)
TRANSFER TO DISTRIBUTABLE
RESERVES 4 (4) 0
OTHER MOVEMENTS (5) (5)
NET GAINS NOT RECOGNISED
IN INCOME STATEMENT 16 185 84 905 1190
NET PROFIT FOR THE PERIOD 280 280
DIVIDENDS (149) (149)
ISSUE OF SHARE CAPITAL 37 37
BALANCE AT 30 SEPTEMBER 2000 16 222 84 1036 1358
STATISTIC AND RATIOS
AUDITED AUDITED
30 SEPT 30 SEPT
2000 % 1999
RM CHANGE RM
HEADLINE EARNINGS CALCULATED AS FOLLOWS:
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 280 17 240
- EXCEPTIONAL ITEMS 18 45
- TAX EFFECT (1) (5)
HEADLINE EARNINGS 297 6 280
STATISTICS
TOTAL NUMBER OF SHARES IN ISSUE ('000) 318488 315134
NUMBER OF ORDINARY SHARES ON WHICH
EARNINGS PER SHARE ARE BASED ('000) 316719 312731
EARNINGS PER SHARE (CENTS) 88,5 15 76,9
HEADLINE EARNINGS PER SHARE (CENTS) 93,9 89,7
EXCEPTIONAL ITEMS PER SHARE (CENTS) (5,4) (12,8)
DIVIDEND (CENTS) 47,0 11 42,5
RATIOS
INTEREST COVER 4,7 TIMES 4,7 TIMES
EFFECTIVE TAX RATE 32,1% 31,4%
GEARING 44,0% 43,2%
DIVIDEND COVER 1,9 TIMES 1,8 TIMES
RETURN ON NET ASSETS 24,0% 23,3%
CURRENT ASSETS TO SALES 28,5% 33,0%
REGISTERED OFFICE
AFROX HOUSE, 23 WEBBER STREET
SELBY, JOHANNESBURG, 2001
PO BOX 5404, JOHANNESBURG, 2000
TELEPHONE (011) 490-0400
WEBSITE: WWW.AFROX.COM
AFRICAN OXYGEN LIMITED
REGISTRATION NUMBER 1927/000089/06
TRANSFER SECRETARY
MERCANTILE REGISTRARS LIMITED
ANGLO BUILDING
8TH FLOOR
11 DIAGONAL STREET
JOHANNESBURG, 2000
TELEPHONE +27(11) 370-5000
DIRECTORS:
R T VICE (CHAIRMAN), J M MARRIOTT (MANAGING DIRECTOR), R G COTTRELL, A E
ISAAC*, L A MACNAIR, R MEDORI**, E Q MOHAPI#, D B RILEY, G L SEDGWICK***, G S
SIBIYA, C B STRAUSS.
ALTERNATE DIRECTOR: R K LOUREY***
*BRITISH #LESOTHO **FRENCH ***AUSTRALIAN
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