Wrap Text
African Oxygen Limited - Audited results for the year ended 30 September 2005
African Oxygen Limited
(Incorporated in the Republic of South Africa)
Registration number: 1927/000089/06
JSE code: AFX
NSX code: AOX
ISIN: ZAE000067120
("Afrox" or "the company" or "the Group")
Audited results for the year ended 30 September 2005
Basic earnings per share +128%
Final dividend + 29%
Cash generated from industrial operations +30%
Gearing at 16%
Summarised Balance Sheet
As at As at
30 September 30 September
R"000 2005 2004
ASSETS
Non-current assets 2 180 244 3 530 712
Property, plant and equipment 1 664 795 3 048 255
Investment in associates 378 790 120 925
Other non-current assets 136 659 361 532
Current assets 1 065 360 2 100 642
Inventories 325 706 406 544
Trade and other receivables 572 235 1 213 149
Cash and cash equivalents 167 419 480 949
Total assets 3 245 604 5 631 354
EQUITY AND LIABILITIES
Capital and reserves 1 719 622 2 663 079
Share capital 15 428 17 143
Share premium 537 314 537 314
Accumulated profits and reserves 1 166 880 2 108 622
Minority interest 12 083 752 594
Non-current liabilities 612 771 538 910
Borrowings 466 856 415 103
Other non-current liabilities 145 915 123 807
Current liabilities 901 128 1 676 771
Current portion of borrowings 56 923 237 056
Provisions for liabilities and
charges 105 685 220 912
Trade payables and other
current liabilities 733 330 1 215 739
Bank overdraft 5 190 3 064
Total equity and liabilities 3 245 604 5 631 354
Summarised Income Statement
30 September % 30 September
R"000 2005 Change 2004
Group
Revenue 5 852 639 (25) 7 835 144
Operating profit 987 061 (21) 1 256 001
Profit on sale of investment 1 050 726 (16 167)
Profit from operations 2 037 787 1 239 834
Finance income/(costs) 980 (97 854)
Income from associates 76 163 51 770
Profit before taxation 2 114 930 77 1 193 750
Income tax expense (651 155) (395 715)
Profit after taxation 1 463 775 83 798 035
Minority interest (98 106) (183 713)
Net profit for the year 1 365 669 122 614 322
Adjustments for headline earnings
- Profit on sale of investment (1 050 726) 16 167
- Capital gains tax on sale
of investment 143 937 -
- Transaction costs within
associate investment 9 268 -
- Impairment of trade and
subsidiary investments 3 344 -
- Goodwill impaired 8 416 10 075
- Profit on disposal of property,
plant and equipment (2 755) (6 222)
Headline earnings 477 153 634 342
- Secondary tax on companies(STC)
on special dividend paid from the
profit on sale of investment 177 858 -
Headline earnings before STC
related to the special dividend 655 011 3 634 342
Basic earnings per ordinary share
- Group (cents) 408,2 128 179,2
Headline earnings per ordinary
share before STC relating to
special dividend - Group (cents) 195,8 6 185,0
Headline earnings per ordinary
share - Group (cents) 142,6 (23) 185,0
Segmental Information
R"000 Industrial Healthcare Total
Year ended 30 September 2005
Revenue 3 344 465 2 508 174 5 852 639
Operating profit 684 788 302 273 987 061
Year ended 30 September 2004
Revenue 2 921 362 4 913 782 7 835 144
Operating profit 612 711 643 290 1 256 001
Summarised Cash Flow Statement
30 September 30 September
R"000 2005 2004
Cash generated from operations 954 487 1 611 376
Finance costs and taxation paid (539 975) (472 040)
Dividends received 11 020 1 096
Cash available from operations 425 532 1 140 432
Dividends paid (1 652 551) (284 568)
Net cash (outflow)/inflow from
operating activities (1 227 019) 855 864
Acquisition of business (93 547) (49 329)
Disposal of business 2 214 243 2 921
Purchase of property, plant and
equipment (492 187) (493 713)
Other investing cash flows, net (254 567) 64 449
Net cash inflow/(outflow) from
investing activities 1 373 942 (475 672)
Dividends and loans paid to
minorities (29 774) (48 889)
Increase/(decrease) in borrowings 232 166 (112 593)
Buy-back of shares by a subsidiary
company (664 971) -
Net cash outflow from financing
activities (462 579) (161 482)
Net (decrease)/increase in cash and
cash equivalents (315 656) 218 710
Cash and cash equivalents at
beginning of year 477 885 259 175
Cash and cash equivalents at
end of year 162 229 477 885
Consolidated Statement of Changes in Equity
Issued Share Other Accumulated
R"000 capital premium reserves profits Total
Balance at
1 October 2004 17 143 537 314 101 758 2 006 864 2 663 079
Surplus on
revaluation of
properties - - 8 660 - 8 660
Other movements - - (2 873) 3 873 1 000
Currency
translation
difference - - (230) (1 034) (1 264)
Net profit for
the year - - - 1 365 669 1 365 669
Dividends declared - - - (1 652 551)(1 652 551)
Purchase of shares
by wholly-owned
subsidiary
(treasury shares) (1 715) - - (663 256) (664 971)
Balance at
30 September 2005 15 428 537 314 107 315 1 059 565 1 719 622
Balance at
1 October 2003 17 143 537 314 102 413 1 720 261 2 377 131
Surplus on
revaluation of
properties - - 47 - 47
Other movements - - (318) (35 901) (36 219)
Currency
translation
difference - - (384) (7 250) (7 634)
Net profit for
the year - - - 614 322 614 322
Dividends declared - - - (284 568) (284 568)
Balance at
30 September 2004 17 143 537 314 101 758 2 006 864 2 663 079
Statistics and Ratios
30 September 30 September
2005 2004
Statistics
Total number of shares in issue
excluding treasury shares ("000) 308 568 342 853
Number of ordinary shares on which
earnings per share are based ("000) 334 587 342 853
Dividends per share (cents) - Group 495,0 64,0
- Final 40,0 31,0
- Special dividend 415,0 -
- Interim 40,0 33,0
Ratios
Interest cover (times) >(100) 12,8
Effective tax rate (%) 30,8 33,1
Gearing (%) 16,1 4,7
Dividend cover - (from
remaining industrial
operations) 2,0 1,83
Accounting policies
These results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice. The accounting policies are consistent
with those of the previous financial year, with the exception of the
implementation of South African Statements of Generally Accepted Accounting
Practice, AC140 (IFRS 3): Business combinations, AC128 (IAS 36) Impairment of
assets and AC129 (IAS 38): Intangible assets. All companies in the group have
followed these policies in all material respects.
The change in accounting policies described above has been made in accordance
with the transition provisions of the respective standards. AC140 (IFRS 3):
Business combinations have been applied prospectively from 1 October 2004, while
AC128 (IAS 36) Impairment of assets and AC129 (IAS 38): Intangible assets have
been applied retrospectively. There has been no impact on the opening retained
earnings at 1 October 2004 as a result of the adoption of these standards. In
addition we have adopted the guidance to straight line rental payments made
under operating leases with escalation clauses over the period of the lease, and
have restated the prior year comparatives.
African Oxygen Limited will adopt all further mandatory International Financial
Reporting Statements in its 2006 financial year.
Due to the changed circumstances whereby African Oxygen Limited became a 20.1
percent investor in Life Healthcare Group (Pty) Limited, the 2004 income
statement, which was previously split into continuing and discontinuing
operations, has been restated to reflect a diminution in holding.
Performance summary
For the year ended 30 September 2005, African Oxygen Limited posted strong
results in mixed trading conditions.
The year was also an eventful one for the group. The sale of Afrox Healthcare
Limited was concluded at the end of March 2005 with a black owned consortium
comprising Brimstone Investment Corporation Ltd and Mvelaphanda Strategic
Investments (Pty) Ltd, and the company is continuing to operate very
successfully under the name of Life Healthcare Group (Pty) Limited. Afrox
retained a 20,1 percent share in the business. These financial results include
this interest in Life Healthcare.
We continued to produce results well above inflation in an economy where certain
manufacturing sectors remain difficult.
Shareholders received an excellent cash distribution of 687 cents a share due to
increased dividends, a special dividend as a result of the healthcare sale and
the compulsory buy back of shares.
The interpretation of the results is complicated as a result of the Healthcare
sale and the compulsory share buy back. The results for financial year 2004
include fully consolidated results of Afrox Healthcare Limited. Financial year
2005 has the fully consolidated results of Afrox Healthcare Limited for six
months, the exceptional profit on the sale of Afrox Healthcare Limited and the
Life Healthcare Group associate profits for six months. Any comparisons should
be made with care.
The business presently includes gases, welding and related products, and a 20,1
percent shareholding in Life Healthcare. On this basis, revenue increased 14
percent to R3,3 billion, operating profit was higher by 12 percent at R685
million. The cash generated from these operations increased by 30 percent to
R829 million.
Overheads were well controlled, growing 7 percent against a sales increase of 14
percent resulting in margin growth of 10 percent. Rising fuel prices increased
distribution costs, despite improved efficiencies in costs per cylinder
delivered, and per kilometre travelled.
High oil prices influenced the pricing of liquefied petroleum gas (LPG).
Nevertheless we were successful in countering increasing input costs and
sustaining margins by increasing LPG prices. Our manufacturing operations had to
contend with rising steel prices - a key raw material in our manufacturing
processes. In addition, the demand for MIG wire exceeded our supply capacity and
necessitated more expensive imports.
Afrox"s balance sheet is a hallmark of our results and this year our strong
asset management continued. Debtors and stocks were managed well, net current
assets showed a decline against the previous year and the return on capital
employed (operating profit to net assets) was 32,7 percent. Gearing remained
low at 16,1 percent and will allow Afrox the opportunity for expansion.
Audit report
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the
group"s financial statements for the year ended 30 September 2005. A copy of
their unqualified report is available for inspection at the company"s registered
office.
Business review
Afrox supplies gas, welding and related products and services which includes
medical gases, hospitality, LPG in its various forms, scientific gases,
refrigerants and packaged chemicals. Considerable progress has been made in
capturing the opportunities that have evolved from these sectors.
Handigas performed well and is now the largest contributor to revenue. We had to
increase prices to mitigate the upward trend in the oil price and fluctuations
in the rand/dollar exchange rate.
Afrox Safety was formed as an extension of our portfolio and will specialise in
the provision of safety products and services. It includes the Afrox miners"
RescuPak business and the newly acquired Twinco. Excluding the Twinco
acquisition, the Safety operation grew sales by 98 percent.
Greater activity in the merchant market and good tonnage growth led to a strong
increase in turnover for Process Gas Solutions, while the food and beverage
industries boosted demand for nitrogen and carbon dioxide. New gases contracts
were negotiated which requires the expansion of capacity at Pietermaritzburg,
and at Roodekop.
A world-class calibration and filling facility, commissioned in Germiston, has
improved our scientific offering, particularly to the petroleum industry. All
South African refineries now use Afrox calibration mixtures and pure instrument
grade gases.
Eleven new Afrox Gas & Gear retail outlets opened and we plan to have 40
operating by the end of 2007. The outlets are stocked with a wide range of
specially merchandised equipment aimed at smaller collect customers.
We have improved the quality of our medical product offerings and were pleased
to win the State contract for gases - the major portion of which was for medical
gases - as well as the State home care contract for respiratory therapies, home
medical equipment and medical gases.
Exports are an increasing part of our business and we expanded into the European
market with our range of medical and scientific regulators, welding equipment
and accessories, and other industrial products.
Among our African Operations, Malawi and Zambia performed exceptionally well. We
have expertise in developing new markets and view cross border expansion as a
strong growth area for Afrox.
Several new projects made 2005 a significant year for Afrox. Construction
started on the R100 million expansion of Afrox"s gases operations centre in
Germiston. This project will enlarge what is already the biggest gas production,
cylinder filling and distribution centre in the southern hemisphere, improving
our levels of customer service. A new nitrous oxide facility will address
environmental issues. At our Brits welding consumable factory capacity is to be
expanded to satisfy growing demand.
Dividend
The results for the financial year under review have enabled the board of
directors to declare a final cash dividend of 40 cents per share (2004: 31 cents
per share), an increase of 29 percent on last year. The dividend is covered
twice by earnings from remaining industrial operations.
Outlook
Afrox has the resilience to perform well across economic cycles. We will do this
by optimising our human capital, design, manufacturing and marketing
capabilities to increase productivity and global competitiveness. Long-term
contracts, established branch and distribution networks, strong branding and
steady revenues from cylinder rentals underpin our businesses. We have a strong
balance sheet and are well positioned for future growth.
Kent Masters Rick Hogben
Chairman Managing director
Dividend declaration
From the remaining industrial operations, the board of directors has declared a
final cash dividend of 40 cents per share (2004: 31 cents) for the year ended 30
September 2005.
The dividend is payable on Monday, 30 January 2006 to shareholders recorded in
the books of the company at the close of business on Friday, 27 January 2006.
The last day to trade "cum" dividend will be Friday, 20 January 2006 and the
shares will trade "ex" dividend from the commencement of business on Monday 23
January 2006.
Share certificates may not be dematerialised or rematerialised between Monday,
23 January 2006 and Friday, 27 January 2006, both days inclusive.
By order of the board
Johannesburg
3 November 2005
The photo in the masthead shows Afrox"s medical integrated valve regulator. This
forms part of a lightweight cylinder designed to supply medical gases at pre-
determined controlled flow rates for use in hospitals, home care or by emergency
services. This product won an award for design excellence.
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 2005. The annual general meeting will be held on
28 February 2006, and notice thereof will be given in the annual report.
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO
Box 5404, Johannesburg 2000.
Telephone (+27 11) 490-0400.
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107. Telephone:
(+27 11) 370-5000.
Sponsor in South Africa: Barnard Jacobs Mellet Corporate Finance (Pty) Limited.
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited.
Directors: JK Masters* (Chairman), RL Hogben (Managing Director), RG Cottrell,
AJ Cullens**, A Ferguson**, JA Ford**, LA MacNair,
CB Strauss, LL van Niekerk, CJPG van Zyl.
Alternate director: D Shook*
Company secretary: ME Sanz
* American
** British
www.afrox.com
Date: 03/11/2005 03:19:34 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
Sharenet Sites 
