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AFROX - RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2004
AFRICAN OXYGEN LIMITED
African Oxygen Limited
(Incorporated in the Republic of South Africa).
Registration number: 1927/000089/06.
ISIN: ZAE000030920. South African share code: AFX. Namibian share code: AOX.
("Afrox" or "the Company").
AFROX
RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2004
NET PROFIT UP 21%
HEADLINE EARNINGS PER SHARE UP 15%
GEARINGAT 17%
DEAR SHAREHOLDERS
PERFORMANCE SUMMARY
Despite a difficult economy, during the six months to
31 March 2004, the group achieved a growth in net profit of
21% to R305 million (2003: R253 million), headline earnings increased by 15%, to
89,9 cents (2003: 78,4 cents), and revenue
by 4%. Cash generated from operations increased by 10% to reach R589,5 million
(2003: R537,0 million) and gearing decreased and
now stands at 17%.
The results reflect Afrox Healthcare as a fully consolidated subsidiary, but the
income statement has been segmented into `continuing" - Afrox"s industrial
interests - and `discontinuing" - Afrox"s Healthcare interest, due to the
potential sale of Afrox Healthcare which is accounted for in terms of AC117.
Continuing operations
Afrox produced pleasing growth in operating profit which grew by 13%, net profit
increased by 19%, and profit before tax was 22% higher. Revenue was lower at
R1,39 billion (2003: R1,43 billion), due to the difficult trading conditions
that prevailed during the six months under review. The strength of the rand
impacted on manufacturing output to the mining sector and also on export
revenue.
Discontinuing operations
Afrox Healthcare performed well in the first six months, with a 9% growth in
revenue, 14% increase in operating profit, and 26% increase in net profit to
reach R98 million (2003: R78 million).
BUSINESS REVIEW
Continuing operations
Industrial & Special Products (ISP) and Process Gas Solutions (PGS) constitute
the industrial businesses. ISP involves cylinder and liquid fabrication gases,
special and medical gases, Handigas, welding products and two welding product
factories, as well as safety products and other consumer focused products
supplied through our national retail centre network. PGS tailors solutions to
meet the needs of large consumers of product in key market sectors by supplying
dedicated on-site production units, either by pipeline, or in liquid form by
tanker.
Revenue for the six-month period decreased by 3% when compared with the same
period last year. The key factor impacting on performance was a decrease in the
selling price of Handigas due to the lower rand price of oil and consequent
reduction in the selling price of petroleum products.
Despite this the 19% increase in net profit demonstrates the company"s inherent
ability to manage costs, increase efficiencies, and produce acceptable results
in challenging times. Operating profits improved in all sectors and finance
costs reduced owing to a focus on working capital management, as well as a
reduction in interest rates and tax.
Although the manufacturing and mining industries were depressed, Afrox
manufactures and supplies products and services to many other sectors, including
hospitality, medical gases and, retail sales through our national network of
retail sales centres. We were able to improve our market position in most
sectors in which we operate, with positive growth in sales to the smaller
customers who were unaffected by the manufacturing downturn. The company also
benefits from long-term bulk gas contracts and annuity rental of cylinders.
Process Gas Solutions maintained its market share and posted strong results
considering the economic climate.
Discontinuing operations
Afrox Healthcare again performed well with increases in revenues and profits.
New opportunities and initiatives contributed to improved activity levels. An
affordable, quality healthcare model offered to patients, providing a
comprehensive set of primary healthcare services, has expanded the market. The
acquisition of control of the Wilgeheuwel Hospital also enhanced growth.
Sale of Afrox Healthcare
For 20 years Afrox has derived substantial growth from its healthcare business,
which has attained the requisite scale and level of sophistication to enable it
to pursue its own growth initiatives. Afrox and Afrox Healthcare have divergent
needs and the time has come for both companies to focus on their own individual
growth areas without being constrained by core interests that are not
comfortably aligned.
On 17 November 2003, we announced that we would dispose of Afrox"s 69%
shareholding in Afrox Healthcare to Bidco. A BEE consortium, led by Brimstone
Investments Corporation Limited and Mvelaphanda Strategic Investments (Pty)
Limited, will acquire 75% of Bidco.
The approval by the Competition Tribunal is the only outstanding condition
precedent for the acquisition by Bidco of all the shares in Afrox Healthcare
including Afrox"s 69% shareholding in Afrox Healthcare. Once this approval has
been obtained, the Board will consider the distribution of the proceeds. In
terms of the transaction no interim dividend is payable arising out of the
earnings from discontinuing operations.
ACCOUNTING POLICIES
These results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice. The accounting policies for the six
months are consistent with those applied at 30 September 2003.
OUTLOOK
After the sale of Afrox Healthcare, Afrox will be a more keenly focused company
comprising, in addition to our core gases and welding businesses, a number of
interrelated industrial businesses that supply products and services to a wide
spectrum of the economy. Afrox is a customer-centric company with high service
levels and excellent world benchmark products. Our attention is focused on
bottom line profits, efficiencies, cash flow and return on equity, and the
safety of our employees and customers.
Despite difficult trading conditions during the first half of the financial
year, Afrox has sustained good profit growth. However, the uncertain domestic
and international economic climate makes it unwise to predict performance,
beyond that we expect cash flow to remain strong and profits for the full year
to exceed those of last year on a like-for-like basis.
John Walsh Rick Hogben Johannesburg
Chairman Managing Director 29 April 2004
NOTICE OF INTERIM DIVIDEND DECLARATION AND SALIENT FEATURES
Notice is hereby given that, from the continuing operations, an interim cash
dividend of 33,0 cents (2003: 33,0 cents) per ordinary share, being the interim
dividend for the half year ended 31 March 2004, has been declared payable to all
shareholders of African Oxygen Limited recorded in the register on Friday, 23
July 2004.
The salient dates for the declaration and payment of the interim dividend are as
follows:
2004
Last date to trade ordinary shares "cum" dividend Friday, 16 July
Ordinary shares trade "ex" the dividend Monday, 19 July
Record date Friday, 23 July
Payment date Monday, 26 July
Share certificates may not be dematerialised or rematerialised between Monday,
19 July 2004 and Friday, 23 July 2004, both days inclusive.
By order of the Board
Ria Sanz Johannesburg
Company Secretary 29 April 2004
Summarised Balance Sheet
Unaudited Unaudited Audited
as at as at as at
R"000 31 March 2004 31 March 2003 30 Sept 2003
ASSETS
Non-current assets 3 443 223 3 127 790 3 269 797
Property, plant and
equipment 2 972 894 2 800 236 2 857 588
Other non-current assets 470 329 327 554 412 209
Current assets 1 864 693 1 870 304 1 942 527
Inventories 425 434 415 047 416 647
Receivables and prepayments 1 401 051 1 386 521 1 265 328
Cash and cash equivalents 38 208 68 736 260 552
Total assets 5 307 916 4 998 094 5 212 324
EQUITY AND LIABILITIES
Capital and reserves 2 497 968 2 109 610 2 377 131
Issued capital 17 143 16 834 17 143
Share premium 537 314 450 292 537 314
Accumulated profits and
reserves 1 943 511 1 642 484 1 822 674
Minority interest 665 955 565 227 626 165
Non-current liabilities 787 160 810 014 783 873
Borrowings 621 440 559 493 623 735
Other non-current
liabilities 165 720 250 521 160 138
Current liabilities 1 356 833 1 513 243 1 425 155
Current portion of
borrowings 91 571 338 821 87 278
Provisions for liabilities
and charges 175 553 109 428 178 616
Other current liabilities 1 083 801 1 063 938 1 157 884
Bank overdraft 5 908 1 056 1 377
Total equity and
liabilities 5 307 916 4 998 094 5 212 324
Statistics and Ratios
Six months to Six months to 12 months to
March 2004 March 2003 Sept 2003
Statistics
Total number of shares in
issue ("000) 342 853 336 675 342 853
Number of ordinary shares
on which earnings per share
are based ("000) 342 853 330 715 335 767
Dividends and capitalisation
share award,
per share (cents) 33,0 33,0 83,0
Ratios
Interest cover (times) 11,3 7,3 8,9
Effective tax rate (%) 33,0 33,0 29,5
Gearing (%) 17,0 22,1 12,5
Dividend cover
- headline earnings (times) 1,9 2,3 2,0
Summarised Income Statement
Unaudited Unaudited Audited
Six months to % Six months to 12 months to
R"000 March 2004 Change March 2003 Sept 2003
Continuing
operations
Revenue 1 391 439 (3) 1 430 271 2 851 066
Operating profit
before finance
costs 312 541 13 276 879 518 640
Finance costs (13 985) (32 571) (33 245)
Profit before
taxation 298 556 22 244 308 485 395
Income tax expense (89 567) (67 170) (135 954)
Profit after
taxation 208 989 18 177 138 349 441
Minorities (1 631) (2 546) (4 349)
Net profit for the
period 207 358 19 174 592 345 092
Discontinuing
operations
Revenue 2 343 426 9 2 151 909 4 474 829
Operating profit
before finance
costs 285 757 14 250 033 571 196
Finance costs (38 957) (39 802) (88 699)
Income from
associates 26 046 17 999 42 841
Profit before
taxation 272 846 20 228 230 525 338
Income tax expense (98 920) (89 000) (162 370)
Profit after
taxation 173 926 25 139 230 362 968
Minority interest (75 984) (61 228) (153 622)
Net profit for the
period 97 942 26 78 002 209 346
Total net profit for
the period 305 300 21 252 594 554 438
Adjustments for headline earnings
- Exceptional items - 703 -
- Goodwill amortised 5 725 4 832 8 689
- (Profit)/loss on
disposal of property,
plant and equipment (2 693) 1 197 (4 029)
Headline earnings 308 332 19 259 326 559 098
Basic earnings per
ordinary share
- Group (cents) 89,0 17 76,4 165,1
- Continuing
operations (cents) 60,4 15 52,8 102,8
- Discontinued
operations (cents) 28,6 21 23,6 62,3
Headline earnings
per ordinary share
- Group (cents) 89,9 15 78,4 166,5
- Continuing
operations (cents) 61,7 15 53,6 102,4
- Discontinuing
operations (cents) 28,2 14 24,8 64,1
Segmental Information
Geographical segments
for continuing operations
R"000 South Africa Rest of Africa Total
Six months ended 31 March 2004
Revenue 1 216 786 174 653 1 391 439
Operating profit before
finance costs 267 309 45 232 312 541
Six months ended 31 March 2003
Revenue 1 254 118 176 153 1 430 271
Operating profit before
finance costs 230 899 45 980 276 879
Year ended 30 September 2003
Revenue 2 502 516 348 550 2 851 066
Operating profit before
finance costs 454 840 63 800 518 640
Summarised Cash Flow Statement
Unaudited Unaudited Audited
Six months to Six months to 12 months to
R"000 March 2004 March 2003 Sept 2003
Cash generated from
operations 589 494 537 009 1 444 615
Finance costs and
taxation paid (273 501) (288 548) (489 570)
Net dividends paid (171 427) (32 078) (54 953)
Net cash inflow from
operating activities 144 566 216 383 900 092
Acquisition of business (45 269) (42 756) (66 624)
Disposal of shares - 2 000 -
Purchase of property,
plant and equipment (230 868) (255 968) (485 261)
Other investing cash
flows, net 14 904 6 800 48 027
Net cash outflow from
investing activities (261 233) (289 924) (503 858)
Minorities (58 895) (48 294) (75 711)
(Decrease)/increase in
borrowings (51 313) 138 313 (49 946)
Movement on retirement
benefit obligation - - (62 604)
Net cash (outflow)/
inflow from financing
activities (110 208) 90 019 (188 261)
Net (decrease)/increase
in cash and cash
equivalents (226 875) 16 478 207 973
Cash and cash equivalents
at start of period 259 175 51 202 51 202
Cash and cash equivalents
at end of period 32 300 67 680 259 175
Summarised Statement of Changes in Equity
Reval- AC133
Issued Share uation hedging
R"000 capital premium reserve reserve
Balance at
1 October 2003 17 143 537 314 102 745 (332)
Surplus on revaluation
of properties - - 648 -
Other movements - - (1 063) 332
Net profit for the
period - - - -
Dividend declared - - - -
Balance at
31 March 2004 17 143 537 314 102 330 -
Balance at
1 October 2002 16 515 360 478 104 371 -
Change in accounting
policy - - - -
Restated balance 16 515 360 478 104 371 -
Surplus on revaluation
of properties - - 1 259 -
Other movements - - (2 269) -
Net profit for the
period - - - -
Dividend declared - - - -
Issue of share capital 319 89 814 - -
Balance at 31 March 2003 16 834 450 292 103 361 -
Summarised Statement of Changes in Equity
(continuied)
Accumul-
ated
R"000 profits Total
Balance at 1 October 2003 1 720 261 2 377 131
Surplus on revaluation of properties - 648
Other movements (12 953) (13 684)
Net profit for the period 305 300 305 300
Dividend declared (171 427) (171 427)
Balance at 31 March 2004 1 841 181 2 497 968
Balance at 1 October 2002 1 411 164 1 892 528
Change in accounting policy 13 563 13 563
Restated balance 1 424 727 1 906 091
Surplus on revaluation of properties - 1 259
Other movements (15 987) (18 256)
Net profit for the period 252 594 252 594
Dividend declared (122 211) (122 211)
Issue of share capital - 90 133
Balance at 31 March 2003 1 539 123 2 109 610
This is a summarised commentary and results announcement. The interim report,
which complies with AC127, will be mailed to shareholders during May 2004.
Stakeholder enquiries may be addressed per e-mail to: rick.hogben@afrox.boc.com
AFRICANOXYGENLIMITED
African Oxygen Limited (Incorporated in the Republic of South Africa).
Registration number: 1927/000089/06.
ISIN: 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 Limited, 70 Marshall Street, Johannesburg
2001. PO Box 61051, Marshalltown 2107.
Telephone (+27 11) 370-5000. Sponsor in South Africa and Namibia: Nedbank
Capital.
Directors: JLWalsh**** (Chairman), RLHogben (Managing Director), RGCottrell, N
Deeming*, CMDFlemming, AE Isaac*, LAMacNair,
R Medori**, GL Sedgwick***, GS Sibiya, CB Strauss, CJPG van Zyl.
Alternate director: RK Lourey***
* British, ** French, *** Australian, **** American.
Company Secretary: ME Sanz
www.afrox.com
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