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AFRICAN OXYGEN LIMITED - ANNOUNCEMENT
Strong recovery from gases and welding supports earnings growth
Revenue up 24%
Operating profit up 29%
HEADLINE Earnings per share up 32%
CASH INFLOWS EXCEED R1 BILLION
DEAR SHAREHOLDERS
In its 75th year of operation in southern Africa, and its 39th as a listed
company, African Oxygen Limited (Afrox) has once again produced excellent
results. All three lines of business, Industrial and Special Products (ISP),
Process Gas Solutions (PGS) and Healthcare showed marked increases in revenue,
trading profit and cash flow.
Afrox increased its total dividend for the year by 20 per cent, to 62,5 cents.
Since listing, Afrox has never reduced a dividend.
The strong growth in revenue was attributable to increased activity levels in
all three lines of business. In addition, new marketing initiatives, new product
launches and growing exports in the industrial businesses also contributed
towards the improved results. Healthcare showed strong growth through the
acquisition of several hospitals and through organic projects.
During the year, Real Africa Holdings Limited exercised its option to acquire a
further 12 per cent of Afrox Healthcare Limited. As a result, Afrox`s interest
in Afrox Healthcare reduced from 82 per cent to 70 per cent and minority
interests increased.
Segmental information on Afrox`s three lines of business is detailed in this
announcement.
Financial results
Revenue increased by 24 per cent to R6,5 billion (2001: R5,2 billion) with
operating profits increasing by 29 per cent to R896 million (2001: R694
million).
Within the Industrial and Special Products (ISP) business, Handigas margins
showed good recovery and operating efficiencies supported improved margins for
both ISP and Process Gas Solutions (PGS).
The exceptional items of R15 million (2001: a R23,8 million profit) resulted
mainly from the effect of Real Africa Holdings Limited excercising its option in
Afrox Healthcare Limited.
Cash generated from operations achieved a record R1,17 billion (2001: R947
million). Good operating profits and excellent working capital management
contributed to this very favourable result. The extra cash so generated was used
to finance acquisition and capital expenditure of R608 million and improve
gearing to 22 per cent (2001: 24 per cent).
Net interest paid increased by 8 per cent to R157,3 million (2001: R146,2
million), in spite of interest rates increasing by 400 basis points during the
year. Good profitability and working capital management resulted in lower
borrowings.
Accounting policies
The accounting policies at 30 September 2002 are consistent with those applied
at 30 September 2001, except for changes in accounting policies with regard to
retirement benefits and depreciation of owner-occupied buildings. These results
have been prepared in accordance with South African Statements of Generally
Accepted Accounting Practice including AC116 and AC135 which became applicable
for the first time this year. Comparative amounts have been appropriately
restated.
Audit report
The auditors, PricewaterhouseCoopers Inc., have issued their opinion on the
group`s financial statements for the year ended 30 September 2002. A copy of
their unqualified report is available for inspection at the company`s registered
office.
Business review
The industrial business of ISP and PGS benefited from overall growth in the
manufacturing industry. This growth was supported by a newly launched marketing
programme focusing on market segmentation and improved customer service levels.
It was pleasing to record positive volume growth of 5 per cent from the core
industrial cutting and welding products business.
Additional features of the improved operating performance were a strong recovery
in Handigas margins, export sales growth of 60 per cent leveraging off the
company`s local welding manufacturing expertise, and the launch of new products.
The AfroxPac 35
achieved sales of R59 million, mainly in the second half of the year. PGS gained
both oxygen and nitrogen volumes through increased orders and a PSA plant was
sold to Anglo American in Mali.
Operational achievements included excellent working capital reductions, the
implementation of world-class supply chain management, and the achievement of 5-
star NOSA ratings for all operational sites.
The Healthcare business grew both organically and from hospital acquisitions.
These acquisitions included the four hospitals in the Amahosp group, the Wilgers
and the Queenstown hospitals. In addition, continuing organic growth was
realised from the new Eugene Marais Cathlab, new maternity and paediatric units
at Anncron and Empangeni and renal dialysis and bone marrow transplant units at
the Flora. Further efficiencies and integration benefits were achieved leading
to cost savings.
Outlook
Afrox`s growth strategy, developed in association with BOC, to expand the
business is based on defending the core business, while actively seeking new
marketing offers to customers. The focus includes growing new products and the
export sales model, with a continuing emphasis on best operating and commercial
practices to enhance efficiencies and improve profitability. Many of these
initiatives are in place and already showing excellent results. This trend
should continue in 2003.
John Walsh Rick Hogben
Chairman Managing Director
Johannesburg 31 October 2002
AUDITED results for the YEAR ended 30 SEPTEMBER 2002
Summarised Balance Sheet
30 September 30 September
R`000 2002 2001
ASSETS
Non-current assets 2 988 843 2 434 923
Property, plant and equipment 2 687 938 2 192 798
Other non-current assets 300 905 242 125
Current assets 1 662 426 1 442 600
Inventories 404 319 350 323
Trade and other receivables 1 206 905 1 045 283
Cash and cash equivalents 51 202 46 994
Total assets 4 651 269 3 877 523
EQUITY AND LIABILITIES
Capital and reserves 1 892 528 1 585 247
Share capital 16 515 16 277
Share premium 360 478 298 756
Accumulated profits and reserves 1 515 535 1 270 214
Minority interest 560 342 385 213
Non-current liabilities 794 673 706 992
Borrowings 550 365 470 190
Other non-current liabilities 244 308 236 802
Current liabilities 1 403 726 1 200 071
Current portion of borrowings 201 067 210 276
Provisions 113 347 108 209
Other current liabilities 1 089 312 881 586
Total equity and liabilities 4 651 269 3 877 523
Statistics and Ratios
30 September 30 September
2002 2001
Statistics
Total number of shares
in issue (`000) 330 301 325 542
Number of ordinary share on which
earnings per share are based (`000) 326 363 320 828
Dividends and capitalisation
share award, per share (cents) 62,5 52,0
- Final 37,0 31,5
- Interim 25,5 20,5
Ratios
Interest cover (times) 5,6 4,9
Effective tax rate (%) 32,5 30,2
Gearing (%) 22,0 24,0
Dividend cover - headline
earnings (times) 2,0 1,8
Summarised Income Statement
30 September % 30 September
R`000 2002 Change 2001
Revenue 6 511 510 24 5 239 374
Cost of sales (4 732 843) (3 870 490)
Gross profit 1 778 667 30 1 368 884
Other operating income - 10 368
Administration and other
expenses (882 191) (685 227)
Operating profit 896 476 29 694 025
Exceptional items (15 033) 23 768
Profit from operations 881 443 23 717 793
Finance costs (157 275) (146 233)
Income from associates 27 139 30 465
Profit before taxation 751 307 25 602 025
Income tax expense (244 018) (181 559)
Profit after taxation 507 289 21 420 466
Minority interest (117 040) (90 294)
Net profit for the year 390 249 18 330 172
Adjustments for headline earnings
- Exceptional items 15 033 (23 768)
- Taxation effect (1 370) (7 210)
- Goodwill amortised 5 916 1 734
- (Profit)/loss on sale of
property plant and equipment (2 622) 1 569
Headline earnings 407 206 35 302 497
Basic earnings per ordinary
share (cents) 120 16 103
Headline earnings per ordinary
share (cents) 125 32 94
Segmental Information
R`000 Health- Corporate
PGS ISP care costs Group
Year ended
30 September 2002
Revenue 369 314 2 256 160 3 886 036 - 6 511 510
Operating profit 79 638 391 512 429 266 (3 940) 896 476
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 (982) (21 507) (18 713) - (41 202)
Restated
operating profit 57 534 330 146 313 816 (7 471) 694 025
Summarised Cash Flow Statement
30 September 30 September
R`000 2002 2001
Cash generated from operations 1 168 010 947 195
Finance costs and taxation paid (374 370) (338 859)
Dividends received - 10 368
Dividends paid (123 221) (77 495)
Net cash inflow from operating
activities 670 419 541 209
Acquisition of business (227 653) (32 365)
Disposal of shares 111 097 -
Purchase of property, plant
and equipment (380 804) (256 565)
Other investing cash flows, net 6 333 148 812
Net cash outflow from
investing activities (491 027) (140 118)
Minorities (38 375) (68 141)
Decrease in borrowings (136 422) (418 523)
Movement on retirement
benefit obligation (387) (13 623)
Net cash outflow from
financing activities (175 184) (500 287)
Net increase/(decrease) in cash and
cash equivalents 4 208 (99 196)
Cash and cash equivalents
at beginning of year 46 994 146 190
Cash and cash equivalents at
end of year 51 202 46 994
Summarised Statement of Changes in Equity
Revalua- Accumula-
Issued Share tion ted
R`000 capital premium reserve profits Total
Balance at
1 October 2001 16 277 298 756 87 807 1 182 407 1 585 247
Surplus on
revaluation of
properties - - 15 940 - 15 940
Other movements - - 624 10 104 10 728
Currency
translation
difference - - - 13 586 13 586
Net profit
for the year - - - 390 249 390 249
Dividends - - - (185 182) (185 182)
Issue of share
capital 238 61 722 - - 61 960
Balance at
30 September
2002 16 515 360 478 104 371 1 411 164 1 892 528
Balance at
1 October 2000 15 924 221 642 84 801 982 562 1 304 929
Changes in
accounting
policies - - - (99 787) (99 787)
Restated balance 15 924 221 642 84 801 882 775 1 205 142
Surplus on
revaluation of
properties - - 1 419 - 1 419
Other movements - - (1 087) 37 919 36 832
Transfer between
reserves - - 2 674 (2 674) -
Net profit for
the year - - - 330 172 330 172
Dividends - - - (65 785) (65 785)
Issue of share
capital 353 77 114 - - 77 467
Restated balance
at 30 September
2001 16 277 298 756 87 807 1 182 407 1 585 247
This is a summarised commentary and results announcement. A full annual report
will be published on the Internet and a hard copy will be mailed to shareholders
in the first week of December 2002. The results can be viewed on the website
www.afrox.com.
AFRICANOXYGENLIMITED
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").
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 Mdori**, GL Sedgwick***, GS Sibiya, CB Strauss.
Alternate director: RK Lourey***
* British, ** French, *** Australian, **** American.
Company Secretary: IMMatthee.
Date: 31/10/2002 03:15:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department