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AFRICAN OXYGEN LIMITED
RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2002
- Revenue up 21%
- Operating profit up 23%
- Headline earnings per share up 26%
- R326 million invested in growth
DEAR SHAREHOLDERS
PERFORMANCE
Afrox has produced excellent results for the first six months, with revenue
up 21 percent and headline earnings per share up 26 percent.
During this period, the business benefited from increased activity in the
industrial business, mainly as a result of improved manufacturing and export
conditions. This firming in demand, coupled with Afrox's strategic business
development programme, has contributed to real volume and market share
growth, particularly in the gases and welding businesses. The healthcare
business continued to perform very well through organic growth, operating
efficiencies and certain key strategic acquisitions that were made in the
first half.
GROWTH
Following a time of consolidation in the previous year, the focus has been
on growth in this period. Overall capital expenditure, including
acquisitions and other growth spend, has amounted to R388 million for the
six-month period.
Acquisitions include the 700-bed, four-hospital Amahosp group in KwaZulu-
Natal, the 341-bed Wilgers Hospital in Pretoria, and the Queenstown
Hospital. These acquisitions are in line with Afrox Healthcare's selective
expansion strategy and acquiring majority stakes in hospitals where the
business owns minority shareholdings.
The Amahosp shareholding was increased from 20 percent to full control and
the Wilgers Hospital stake was increased from 43 percent to 96 percent. The
Queenstown Hospital was an outright purchase.
Revenue enhancing industrial projects include focused volume growth
programmes in industrial gases and Handigas, welding products export growth
initiatives, and the upgrading of many retail outlets that are realising
average additional sales growth of more than 25 percent. Additionally there
was further development of the packaged chemicals and hospitality business,
and, the commissioning of a new dedicated oxygen producing plant in Mali,
West Africa.
FINANCIAL RESULTS
Revenue increased by 21 percent to R3,1 billion (2001: R2,5 billion) with
Industrial and Special Products (ISP), Process Gas Solutions (PGS) and
Healthcare all recording increased activity levels.
Operating profits before investment income and finance costs increased by 23
percent to R440 million (2001: R359 million). Operating margins were
improved for all businesses. Handigas margins were considerably improved in
the ISP business, and improved operating efficiencies were achieved in all
the business units.
Net interest paid increased by 8 percent to R81,5 million (2001: R75,5
million). Borrowings for most of this period were lower than for the
previous year.
Minority interests increased by 35 percent to R56,8 million (2001: R42,0
million) reflecting the reduction of the shareholding in Afrox Healthcare
Limited from 82 percent to 72 percent, as a result of Real Africa Holdings
exercising its option to acquire a further 9,4 percent of Afrox Healthcare
in January 2002.
The major portion of the exceptional loss of R9,8 million relates to the
loss incurred in exercising these rights.
Although this was a period of significant expansionary capital expenditure,
gearing has improved to 31 percent (2001: 34 percent) reflecting prudent
asset management. The second six months of the year are traditionally a time
of high cash flows and we expect gearing to improve further over this
period.
ACCOUNTING POLICIES
The accounting policies in respect of the financial year ended 30 September
2001 have been consistently applied to the results for the period ended 31
March 2002, except for the new statement on investment properties. The
policies conform with South African statements of Generally Accepted
Accounting Practices.
The new accounting statement on investment properties (AC135) was adopted
with effect from 1 October 2001. The effect is that all buildings owned by
the Group are now depreciated over their expected remaining useful life.
Comparative figures have been restated to reflect the effect of the
depreciation on buildings.
BUSINESS REVIEW
ISP and PGS performed very well, with both increasing their revenue, trading
profits, volume growth and market share. The growth was entirely organic as
there have been no acquisitions.
New bulk gas supply contracts were signed, and a new dedicated oxygen
producing plant was commissioned in March to supply Anglogold's Sadiola mine
in Mali.
Handigas performed well. A new mega bulk contract was signed, which will
increase volumes. In addition, price stability was maintained with a new
pricing model necessitated by the fluctuating rand/dollar exchange rate.
Afrox's focus on enhancing its customer offer continued to achieve
considerable success. This multi-faceted offer is specially tailored to meet
the needs of specific customer groupings.
Welding products saw very solid growth for the first time in some years.
Sales were helped by a stronger demand in South Africa and by excellent
sales growth in exports resulting from a carefully planned strategy to
package and distribute gas equipment and welding products through Afrox's
BOC associates abroad. This growth is expected to continue.
Good performances were achieved in medical gases and the new packaged
chemicals business, with strong operating profit performances from the non-
South African operations, most notably Botswana, Namibia, Zambia and
Mozambique.
Healthcare, once again, performed very well. Growth was mainly organic,
although several acquisitions were made during the period. These
acquisitions will increase contributions to earnings for the full year.
The acquisitions will improve the potential for doctor referrals, which will
add considerable value to Healthcare's eight acute care hospitals and same-
day surgical centres in Pretoria, and its six acute care hospitals in
KwaZulu-Natal. At the same time, the new hospitals will give Healthcare the
critical mass to improve operating efficiencies further, leading to cost
savings and other benefits.
DIVIDEND AND CAPITALISATION SHARE AWARD
The directors have declared an increased dividend of 25,5 cents a share
(2001: 20,5 cents), up 24 percent. The 25,5 cents dividend is covered 2,4
times by headline earnings of 61,0 cents. Shareholders will have the option
of taking a cash dividend or a capitalisation share award.
OUTLOOK
Afrox has a broad business base with a business development strategy that
seeks to increase product and services supply in key high growth market
sectors. The company should continue to show sound increases in revenue and
profit for the full year.
John Walsh Rick Hogben
Chairman Managing Director
NOTICE OF CAPITALISATION AWARD AND OPTION TO TAKE INTERIM CASH DIVIDEND
Notice is hereby given that the Board of directors has approved a
capitalisation award with an option to receive a cash dividend of 25,5 cents
(2001: 20,5 cents) per share for the six-month period ended 31 March 2002,
payable to all shareholders recorded in the register at the close of
business on the record date being Friday, 26 July 2002.
Terms of the capitalisation award will be forwarded to shareholders by way
of circular and announced in the press.
The salient dates of the capitalisation award and payment of the interim
dividend are as follows:
2002
Last date to trade ordinary shares "CUM" dividend Friday, 19 July
Ordinary shares trade "EX" the dividend Monday, 22 July
Record date Friday, 26 July
Payment/Issue date Monday, 29 July
Share certificates may not be dematerialised or rematerialised between
Monday, 15 July 2002 and Friday, 26 July 2002, both days inclusive.
By order of the Board
IvorMatthee Johannesburg
Company Secretary 29 April 2002
The directors report that the interim results for the six months ended 31
March 2002 are as follows:
CONDENSED BALANCE SHEET
Unaudited Unaudited Audited
as at as at as at
31 March 31 March 30 Sept
R'000 2002 2001 2001
ASSETS
Non-current assets 2 717 667 2 460 723 2 449 259
Property, plant and equipment 2 580 224 2 183 812 2 196 785
Other non-current assets 137 443 276 911 252 474
Current assets 1 830 730 1 566 739 1 442 600
Inventories 407 114 326 785 350 323
Receivables and prepayments 1 304 983 1 100 506 1 045 283
Cash and cash equivalents 118 633 139 448 46 994
Total assets 4 548 397 4 027 462 3 891 859
EQUITY AND LIABILITIES
Capital and reserves 1 740 323 1 512 075 1 630 602
Issued capital 16 277 16 045 16 277
Share premium 298 756 244 466 298 756
Accumulated profits and reserves 1 425 290 1 251 564 1 315 569
Minority interest 495 718 375 464 391 431
Non-current liabilities 644 777 658 262 669 755
Borrowings 564 593 550 748 470 190
Other non-current liabilities 80 184 107 514 199 565
Current liabilities 1 667 579 1 481 661 1 200 071
Current portion of borrowings 639 064 608 831 210 276
Provisions for liabilities
and charges 89 131 60 491 108 209
Other current liabilities 939 384 812 339 881 586
Total equity and liabilities 4 548 397 4 027 462 3 891 859
CONDENSED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
to March % to March to Sept
R'000 2002 Change 2001 2001
Revenue 3 053 643 21 2 520 511 5 239 374
Cost of sales (2 377 282) (1 912 494) (3 853 831)
Gross profit 676 361 608 017 1 385 543
Other operating
income - 7 295 10 368
Administration and
other expenses (236 240) (256 670) (674 304)
Operating profit
before finance costs 440 121 23 358 642 721 607
Exceptional items (9 782) - 23 768
Finance costs (81 537) (75 486) (146 233)
Income from
associates 13 395 12 651 30 465
Profit before
taxation 362 197 22 295 807 629 607
Income tax expense (115 814) (99 744) (188 990)
Profit after taxation 246 383 26 196 063 440 617
Minority interest (56 830) (41 966) (90 294)
Net profit for the
period 189 553 23 154 097 350 323
Adjustments for
headline earnings
- Exceptional items 9 782 - (23 768)
- Taxation effect - - (7 210)
Headline earnings 199 335 29 154 097 319 345
Basic earnings per
ordinary share (cents)58,2 20 48,6 109,2
Headline earnings per
ordinary share (cents)61,2 26 48,6 99,5
CONDENSED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
to March to March to Sept
R'000 2002 2001 2001
Cash generated from
operations 331 114 314 770 947 194
Finance costs and taxation
paid (210 611) (192 128) (338 859)
Dividends received - 7 295 10 368
Net cash inflow from
operating activities 120 503 129 937 618 703
Acquisition of business (244 239) - (32 365)
Disposal of shares 95 069 - -
Purchase of property,
plant and equipment (143 272) (119 334) (256 565)
Other investing cash flows,
net 36 916 (17 949) 148 812
Net cash used in investing
activities (255 526) (137 283) (140 118)
Dividends paid (102 168) (66 232) (77 495)
Minorities (22 004) (66 543) (68 141)
Increase/(decrease) in
borrowings 330 834 133 379 (432 145)
Net cash generated/(used) in
financing activities 206 662 604 (577 781)
Net increase/(decrease) in
cash and cash equivalents 71 639 (6 742) (99 196)
Cash and cash equivalents at
start of period 46 994 146 190 146 190
Cash and cash equivalents at
end of period 118 633 139 448 46 994
CONDENSED STATEMENT OF CHANGES IN EQUITY
Issued Share Revaluation Accumulated
R'000 capital premium reserve profits Total
Balance at
1 October 2001 16 277 298 756 87 807 1 315 965 1 718 805
Change in
accounting
policy - - - (88 203) (88 203)
Restated
balance 16 277 298 756 87 807 1 227 762 1 630 602
Deficit on
revaluation of
properties - - (640) - (640)
Other
movements - - 3 328 19 648 22 976
Net profit for
the period - - - 189 553 189 553
Dividends - - - (102 168) (102 168)
Balance at
31 March 2002 16 277 298 756 90 495 1 334 795 1 740 323
Balance at
1 October 2000 15 924 221 642 84 801 1 065 120 1 387 487
Change in
accounting
policy - - - (74 583) (74 583)
Restated
balance 15 924 221 642 84 801 990 537 1 312 904
Surplus on
revaluation of
properties - - 1 129 - 1 129
Other
movements - - 1 883 19 117 21 000
Net profit for
the period - - - 154 097 154 097
Issue of share
capital 121 22 824 - - 22 945
Balance at
31 March 2001 16 045 244 466 87 813 1 163 751 1 512 075
STATISTICS AND RATIOS
6 months 6 months 12 months
to March to March to Sept
R'000 2002 2001 2001
Statistics
Total number of shares in
issue ('000) 325 542 320 902 325 542
Number of ordinary shares on
which earnings per share are
based ('000) 325 542 320 141 320 828
Dividends and capitalisation
share award, per share
(cents) 25,5 20,5 52,0
Ratios
Interest cover (times) 5,4 4,8 4,9
Effective tax rate (%) 32,0 33,7 30,0
Gearing (%) 31,0 34,0 22,5
Dividend cover - headline
earnings (times) 2,4 2,3 1,9
SEGMENTAL INFORMATION
Health- Corporate
R'000 PGS ISP care costs Group
Six months
ended
31 March 2002
Revenue 175 871 1 069 861 1 807 911 - 3 053 643
Operating
profit 40 412 223 600 175 705 404 440 121
Six months
ended
31 March 2001
Revenue 143 182 917 581 1 459 748 - 2 520 511
Operating
profit 29 037 192 544 143 284 - 364 865
Change in
accounting
policy - (1 245) (4 978) - (6 223)
Restated
operating
profit 29 037 191 299 138 306 - 358 642
Year ended
30 September
2001
Revenue 293 381 1 891 223 3 054 770 - 5 239 374
Operating
profit 58 516 351 653 332 529 (7 471) 735 227
Change in
accounting
policy - (2 724) (10 896) - (13 620)
Restated
operating
profit 58 516 348 929 321 633 (7 471) 721 607
EARNINGS POSITIVE SINCE 1927
This year marks Afrox's 75th anniversary. Since listing in 1963, Afrox has
declared increased dividends, with the exception of one year where the
dividend remained unchanged.
Afrox is a continuous renewal company and, today, more than 60 percent of
its revenues are derived from new products, services, applications and
markets not serviced 10 to 15 years ago.
Afrox is sub-Saharan Africa's market leader in gases, welding products and
healthcare with a market capitalisation of over R3,9 billion and 325 million
shares in circulation. Of these shares, 55 percent are owned by the BOC
Group plc - one of the world's leading gases companies, with operations in
50 countries on five continents.
AFRICANOXYGENLIMITED
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001.
PO Box 5404, Johannesburg 2000. Telephone (27 11) 490-0400 Transfer
secretaries: Computershare Services Limited, 8th Floor, Anglo Building, 11
Diagonal Street, Johannesburg 2001. PO Box 1053, Johannesburg 2000.
Telephone (27 11) 370-5000 Sponsor in South Africa: HSBC Investment
Services (Africa) (Pty) Limited. Sponsoring broker in Namibia: HSBC. Member
of the Namibian Stock Exchange, trading as HSBC Securities (Namibia) (Pty)
Limited. Directors: JLWalsh**** (Chairman), RLHogben (Managing Director),
RGCottrell, N Deeming*, CMDFlemming, AE Isaac*, LAMacNair, R M dori**, GL
Sedgwick***, GS Sibiya, CB Strauss. Alternate director: RK Lourey*** *
British, ** French, *** Australian, **** American.
Company Secretary: IMMatthee.
African Oxygen Limited (Incorporated in the Republic of South Africa)
Registration number: 1927/000089/06 ISINCode: ZAE000030920 South African
Share Code: AFX Namibian Share Code: AOX ("Afrox" or "the Company")
www.afrox.com
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