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African Oxygen Limited - Results for the six months ended 31 March 2006
African Oxygen Limited
African Oxygen Limited
(Incorporated in the Republic of South Africa).
Registration number: 1927/000089/06.
ISIN: ZAE000067120
JSE code: AFX
NSX code: AOX
("Afrox").
AFROX
Afrox has an ongoing growth strategy, which includes building and upgrading gas
producing plants and the re-engineering of its Gases Operations Centre in
Germiston, which will be complete in 2007. This will result in capital
expenditure of over R600 million.
- Industrial revenue up 19% to R1,87 billion
- Operating profit from industrial operations up 16%
- HEPS at 93,7 cents
Dividend of 48,0 cents up 20%
The company has been awarded a BB rating for Black Economic Empowerment
African Oxygen Limited results for the six months ended 31 March 2006
Summarised Balance Sheet
IFRS
Restated IFRS
Unaudited Unaudited Restated
As at As at As at
31 March 31 March 30 September
R"000 2006 2005 2005
ASSETS
Non-current assets 2 360 943 2 035 204 2 178 944
Property, plant and equipment 1 768 383 1 582 312 1 664 795
Investment in associates 426 321 375 000 377 490
Other non-current assets 166 239 77 892 136 659
Current assets 1 137 329 2 861 337 1 065 360
Inventories 408 293 303 652 325 706
Trade and other receivables 660 428 552 357 572 235
Cash and cash equivalents 68 608 2 005 328 167 419
Total assets 3 498 272 4 896 541 3 244 304
EQUITY AND LIABILITIES
Capital and reserves 1 800 208 3 731 723 1 639 387
Issued capital 15 428 17 143 15 428
Share premium 537 314 537 314 537 314
Accumulated profits and
reserves 1 247 466 3 177 266 1 086 645
Minority interest 21 163 10 687 12 083
Non-current liabilities 632 103 167 351 591 936
Borrowings 507 419 11 303 466 856
Other non-current liabilities 124 684 156 048 125 080
Current liabilities 1 044 798 986 780 1 000 898
Current portion of borrowings 248 977 68 002 56 923
Provisions for liabilities
and charges 248 693 151 571 205 455
Other current liabilities 532 176 762 656 733 330
Bank overdraft 14 952 4 551 5 190
Total equity and liabilities 3 498 272 4 896 541 3 244 304
Summarised Income Statement
IFRS
Restated IFRS
Unaudited Unaudited Restated
6 months 6 months 12 months
to March to March to September
R"000 2006 2005 2005
Revenue 1 866 686 4 071 347 5 852 639
Operating profit 379 388 605 507 922 816
Profit on sale of investment - 1 084 777 1 084 777
Profit from operations 379 388 1 690 284 2 007 593
Finance (costs)/income (16 739) (20 854) 980
Income from associates 52 620 27 805 74 863
Profit before taxation 415 269 1 697 235 2 083 436
Income tax expense (123 908) (343 378) (637 466)
Profit for the period 291 361 1 353 857 1 445 970
Attributable to:
Equity holders of the company 288 531 1 260 448 1 350 390
Minority interest 2 830 93 409 95 580
Net profit for the period 291 361 1 353 857 1 445 970
Statistics and Ratios
IFRS IFRS
Restated Restated
6 months 6 months 12 months
to March to March to September
R"000 2006 2005 2005
Attributable net profit for
the period 288 531 1 260 448 1 350 390
Adjustments for headline
earnings
- Profit on sale of investment - (1 084 777) (1 084 777)
- Capital gains tax on sale of
investment - 143 937 143 937
- Other adjustments 471 5 070 18 273
Headline earnings 289 002 324 678 427 823
- Secondary tax on companies on
special dividend paid from the
profit on sale of investment - - 177 858
Headline earnings before
STC related to the special
dividend 289 002 324 678 605 681
Basic earnings per ordinary
share
- Group (cents) 93,5 367,6 403,6
Headline earnings per ordinary
share before Secondary Tax on
Companies (STC) relating to
special dividend
- Group (cents) 93,7 94,7 181,0
Headline earnings per
ordinary share
- Group (cents) 93,7 94,7 127,9
Statistics
Total number of shares in
issue excluding treasury
shares ("000) 308 568 342 853 308 568
Number of ordinary shares on
which earnings per share
are based ("000) 308 568 342 853 334 587
Dividends per share (cents) 48,0 40,0 80,0
Special dividend per
share (cents) - 415,0 415,0
Ratios
Interest cover (times) 22,7 81,1 >(100)
Effective tax rate (%) 29,8 20,2 30,6
Gearing (%) 26,5 (97,2) 16,1
Dividend cover -
Headline earnings -
Industrial business (times) 1,95 1,53 1,75
Summarised Cash Flow Statement
IFRS
Restated IFRS
Unaudited Unaudited Restated
6 months 6 months 12 months
to March to March to September
R"000 2006 2005 2005
Cash generated from
operations 281 164 577 291 954 487
Finance costs and taxation
paid (303 960) (250 238) (539 975)
Dividends received 7 140 - 11 020
Cash (utilized)/available
from operations (15 656) 327 053 425 532
Dividends paid (123 427) (106 295) (1 652 551)
Net cash(outflow)/inflow
from operating activities (139 083) 220 758 (1 227 019)
Acquisition of business - (42 905) (93 547)
Disposal of business - 2 214 243 2 214 243
Purchase of property, plant
and equipment (200 152) (308 291) (492 187)
Other investing cash flows,
net (1 955) (317 792) (254 567)
Net cash(outflow)/inflow
from investing activities (202 107) 1 545 255 1 373 942
Minorities - (29 788) (29 774)
Increase/(decrease) in
borrowings 232 617 (213 333) 232 166
Buy-back of shares by a
subsidiary company - - (664 971)
Net cash inflow/(outflow)
from financing activities 232 617 (243 121) (462 579)
Net (decrease)/increase in
cash and cash equivalents (108 573) 1 522 892 (315 656)
Cash and cash equivalents
at start of period 162 229 477 885 477 885
Cash and cash equivalents
at end of period 53 656 2 000 777 162 229
Summarised Statement of Changes in Equity
Re- Accumu-
Issued Share valuation lated
R"000 capital premium reserve profits Total
Balance at
1 October
2005 15 428 537 314 102 665 983 980 1 639 387
Surplus on
revaluation
of properties - - 488 - 488
Other
movements - - (1 048) (3 723) (4 771)
Net profit
for the
period - - - 288 531 288 531
Dividend
declared - - - (123 427) (123 427)
Balance at
31 March
2006 15 428 537 314 102 105 1 145 361 1 800 208
Balance at
1 October
2004 17 143 537 314 101 758 2 049 709 2 705 924
Change in
accounting
policy - - - (42 845) (42 845)
IFRS
restatement - - (24 360) (60 306) (84 666)
Restated
opening
balance 17 143 537 314 77 398 1 946 558 2 578 413
Surplus on
revaluation of
properties - - 200 - 200
Other
movements - - (495) (548) (1 043)
Net profit
for the
period - - - 1 247 251 1 247 251
Change in
accounting
policy 2005 - - - (4 290) (4 290)
IFRS
restatement
2005 - - - 17 487 17 487
Dividend
declared - - - (106 295) (106 295)
Balance at
31 March
2005 17 143 537 314 77 103 3 100 163 3 731 723
Reconciliation SA GAAP to IFRS
As at As at As at
31 March 30 September 30 September
2005 2005 2004
EQUITY R"000 R"000 R"000
Total equity under SA GAAP
Stated originally 3 798 902 1 719 622 2 705 924
Straight-lining of operating
lease expenses (47 135) - (42 845)
Restatement of sale of investment 47 135 - -
Restated under SA GAAP 3 798 902 *1 719 622 *2 663 079
Adjusted for the IFRS effect of:
Opening balances and reserve
movements (84 666) (64 956) (84 666)
IAS 12 - Income taxes (24 360) (4 650) (24 360)
IFRS 2 - Share based payments (41 218) (41 218) (41 218)
IAS 17 - Leases (36 890) (36 890) (36 890)
Minority interest in above 17 802 17 802 17 802
Income statement movements
Operating profits (24 791) (64 245)
IAS 17 - Leases (8 232) (8 232)
IFRS 2 - Share based payments (16 559) (56 013)
Restatement of sale of investment 34 051 34 051
Restatement of investment
in associate - (1 300)
IAS 12 - Income taxes 5 701 13 689
Minority interest in above 2 526 2 526
Total equity under IFRS 3 731 723 1 639 387 2 578 413
BALANCE SHEET
Total assets
As previously reported under
SA GAAP 4 896 541 *3 245 604
Adjusted as follows:
Investment in associates - (1 300)
Restated under IFRS 4 896 541 3 244 304
Total liabilities
As previously reported under
SA GAAP 1 086 952 *1 513 899
Adjusted as follows:
Deferred taxation 6 863 (20 835)
Provisions for liabilities
and charges 60 316 99 770
Restated under IFRS 1 154 131 1 592 834
Minorities as previously
reported under SA GAAP 10 687 *12 083
Total net assets under IFRS 3 731 723 1 639 387
INCOME STATEMENT
Net attributable profit
As previously reported under
SA GAAP 1 247 251 1 365 669
Straight-lining of operating
lease expenses (4 290) -
Restated under SA GAAP 1 242 961 *1 365 669
IFRS adjusted as follows:
Operating expenses (24 791) (64 245)
Profit on sale of investment 34 051 34 051
Income from associates - (1 300)
Taxation 5 701 13 689
Minority interest 2 526 2 526
Restated under IFRS 1 260 448 1 350 390
Basic earnings per ordinary share
(cents) 367,6 403,6
*Audited numbers
Accounting Policies
These results have been prepared in accordance with International Financial
Reporting Standards("IFRS"), IAS 34 - Interim Financial Reporting and the
listing requirements of the JSE Limited. These are Afrox"s first interim
financial statements under IFRS and the provisions of IFRS 1 - First-time
Adoption of IFRS have been applied. Afrox"s date of transition to IFRS is 1
October 2004 and at this date the group prepared its opening balance sheet under
IFRS. IFRS has been applied consistently to all periods presented on a
retrospective basis, except for certain exceptions and exemptions, as prescribed
by IFRS 1.
On 11 January 2006 a SENS announcement was made giving an overview of the
transition from SA GAAP to IFRS and the effect of IFRS compliance on previously
reported financial statements. Afrox"s financial results prepared in accordance
with SA GAAP for years ending 30 September 2004 and 30 September 2005 have
been audited.The IFRS restatements have not as yet been audited.
Although the IFRS restatement is based on management"s best knowledge of
expected standards and interpretations and current facts and circumstances, this
information may change. Therefore, until the Group prepares its first full IFRS
financial statements in respect of the year ending 30 September 2006, the
possibility cannot be excluded that this preliminary IFRS information may need
to be adjusted.
In August 2005 SAICA issued circular 7/2005 operating leases, a clarification of
the interpretation of IAS 17 - Leases, for South African Companies. This was
adopted in preparing the 2005 Annual Financial Statements. The comparative
figures for March 2005 have been restated accordingly.
Geographical Segments for Group
R"000 South Africa Rest of Africa Total
Six months ended
31 March 2006
Revenue 1 628 313 238 373 1 866 686
Operating profit before
finance costs 330 133 49 255 379 388
Six months ended
31 March 2005
Revenue 3 827 737 243 610 4 071 347
Operating profit before
finance costs 555 037 50 470 605 507
Year ended
30 September 2005
Revenue 5 382 696 469 943 5 852 639
Operating profit before
finance costs 826 148 96 668 922 816
Business Segments**
6 months ended 31 March 2006
Industrial
operations Industrial
R"000 % change Operations Healthcare Total
Revenue 19 1 866 686 - 1 866 686
Operating profit 16 360 395 - 360 395
Income from
healthcare - 18 993 18 993
Operating profit
before finance
costs 360 395 18 993 379 388
Finance(costs)/income (4 372) (12 367) (16 739)
Income from
associate 694 51 926 52 620
Profit before
taxation 16 356 717 58 552 415 269
Income tax expense (111 852) (12 056) (123 908)
Profit after
taxation 15 244 865 46 496 291 361
Minorities (2 830) - (2 830)
Total net profit
for the period
before sale of
investment 15 242 035 46 496 288 531
Net profit on sale
of shares in
investment after CGT - - -
Net profit for
the period
attributable to
equity holders 15 242 035 46 496 288 531
Basic earnings
per ordinary
share (cents) 27 78,4 15,1 93,5
**Based on
mangement"s allocation
Business Segments
IFRS Restated
6 months ended 31 March 2005
Industrial Exceptional
R"000 Operations Healthcare Profit Total
Revenue 1 563 173 2 508 174 - 4 071 347
Operating profit 311 466 294 041 - 605 507
Income from
healthcare - - - -
Operating profit
before finance
costs 311 466 294 041 - 605 507
Finance costs (4 943) (15 911) - (20 854)
Income from
associate - 27 805 - 27 805
Profit before
taxation 306 523 305 935 - 612 458
Income tax
expense (93 570) (105 871) - (199 441)
Profit after
taxation 212 953 200 064 - 413 017
Minorities (2 153) (91 256) - (93 409)
Total net profit
for the period
before sale of
investment 210 800 108 808 - 319 608
Net profit on sale
of shares in
investment
after CGT - - 940 840 940 840
Net profit for the
period attributable
to equity holders 210 800 108 808 940 840 1 260 448
Basic earnings
per ordinary
share (cents) 61,5 31,7 274,4 367,6
Business Segments
IFRS Restated
12 months ended 30 September 2005
Industrial Exceptional
R"000 Operations Healthcare Profit Total
Revenue 3 344 465 2 508 174 - 5 852 639
Operating profit 596 955 294 041 - 890 996
healthcare - 31 820 - 31 820
Operating profit
before finance
costs 596 955 325 861 - 922 816
Finance income/
(costs) 16 891 (15 911) - 980
Income from
associate 5 071 69 792 - 74 863
Profit before
taxation 618 917 379 742 - 998 659
Income tax expense (387 657) (105 872) - (493 529)
Profit after
taxation 231 260 273 870 - 505 130
Minorities (4 367) (91 213) - (95 580)
Total net profit
for the period
before sale of
investment 226 893 182 657 - 409 550
Net profit on sale
of shares in
investment
after CGT - - 940 840 940 840
Net profit for the
period attributable
to equity holders 226 893 182 657 940 840 1 350 390
Basic earnings
per ordinary
share (cents) 67,8 54,6 281,2 403,6
Performance summary
For the six months ended 31 March 2006, Afrox continued to show good growth in
its underlying businesses, highlighted by significant demand for industrial
products.
The industrial business saw a 19 percent increase in revenue to R1,87 billion
with operating profit increasing by 16 percent to R360,4 million and net profit
attributable to shareholders increasing 15 percent to R242,0 million. (This
comparison excludes the healthcare results). These results were achieved in
mixed trading conditions where overheads were well controlled, but the high oil
price impacted on both Handigas and company margins. In addition, closure of
three refineries in the first quarter of the financial year led to a national
liquefied petroleum gas shortage, which impacted negatively on our business.
Our growth strategy is focused on adding new plants, upgrading manufacturing
facilities and replacing infrastructure to maintain and grow market share into
the future. It is also designed to expand our range of product offerings and to
raise further the service levels to customers. The implementation of this
strategy is currently under way and is expected to realise benefits in 2007 and
beyond. In all, it includes construction of gas producing plants and the R100
million re-engineering and expansion of the Gas Operations Centre in Germiston.
Management"s continued focus on working capital once again produced a strong
balance sheet with gearing at 26,5 percent, which supports our growth plans.
Business review
Afrox is a broad based company with a wide range of business segments. Process
Gas Solutions (PGS) consists of large gas supply schemes and bulk liquid gases.
The Industrial and Special Products (ISP) line of business, 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.
Our range of cutting and welding products showed significant growth in demand
and this was strengthened by our keen focus on customer service and our efforts
to improve product offerings and quality.
We continue to expand our Gas & Gear retail outlets and now have 15 fully
operational. Our commitment to customers has been increased significantly
through our CustomerFirst initiative, which has improved service levels across
all business areas.
Our medical business has grown with the introduction of new medical product
offerings to customers. Other businesses such as Special Gases, Safety and
Hospitality performed satisfactorily and plans have been implemented to realise
further growth in these businesses.
Handigas was able to keep major customers supplied during the liquified
petroleum gas shortage and continued to perform well in spite of some margin
reduction.
PGS maintained market share and despite a shortage of carbon dioxide from
source, kept all customers supplied. This line of business now enters an
exciting growth phase as it has won and renewed several long-term gas contracts.
These new contracts will come on stream, in the main, in financial years 2007
and 2008.
In February, the board of directors approved a business case for the
implementation of SAP to replace our current commercial and financial systems.
Implementing SAP in Afrox will be managed within the company and the project
will be finalised in the first half of 2008.
Dividend
The results for the six months under review have enabled the board of directors
to declare an interim cash dividend of 48,0 cents per share (2005: 40,0 cents
per share), an increase of 20 percent on the comparable period last year. The
dividend is covered 1,95 times by earnings.
Changes to the board
In December 2005, Afrox welcomed three new independent non-executive directors
to the African Oxygen Limited board of directors. The new directors are Dr
Khotso Mokhele, President of the National Research Foundation, Sipho Pityana,
Chairperson of Izingwe Capital and David Lawrence, Executive Deputy Chairman of
Investec Bank. All three are leaders in their respective fields and will add
experience and depth to the board.
Dr Conrad Strauss and Rick Cottrell, independent non-executive directors,
reached retirement age and stepped down from the board at the end of February
2006. The company is indebted to them for their valued leadership and service
during their years as directors.
BEE rating
Empowerdex, the economic empowerment rating agency, awarded the company a BB
rating. This rating equates to a 26 percent legal BEE ownership and 16,7
percent BEE control. The company was particularly highly rated for preferential
procurement and skills development.
Acknowledgment
The company received special and singular recognition in the Deloitte"s Good
Governance Awards for 2005.
Outlook
Afrox"s strategy is to sustain our core business while using our strong
infrastructure, and product and service offerings to expand into new markets,
and new geographies. Our capital expenditure programme will help deliver this
strategy and ensure we are positioned to further improve earnings growth.
Kent Masters
Chairman
Rick Hogben
Managing Director
Johannesburg
26 April 2006
Notice of interim dividend declaration and salient features
Notice is hereby given that an interim cash dividend of 48,0 cents (2005: 40,0
cents) per ordinary share, being the interim dividend for the half year ended 31
March 2006, has been declared payable to all shareholders of African Oxygen
Limited recorded in the register on Friday, 28 July 2006.
The salient dates for the declaration and payment of the interim dividend are as
follows:
2006
Last day to trade ordinary shares "cum" dividend Friday, 21 July
Ordinary shares trade "ex" the dividend Monday, 24 July
Record date Friday, 28 July
Payment date Monday, 31 July
Share certificates may not be dematerialised or rematerialised between Monday,
24 July 2006 and Friday, 28 July 2006, both days inclusive.
By order of the Board
Ria Sanz
Company Secretary
Johannesburg 26 April 2006
www.afrox.com
African Oxygen Limited
African Oxygen Limited (Incorporated in the Republic of South Africa).
Registration number: 1927/000089/06.
ISIN: ZAE000067120.
JSE code: AFX.
NSX code: AOX. ("Afrox").
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), AJ Cullens**,
AM Ferguson**, JA Ford**, DM Lawrence, LA MacNair, K Mokhele, SM Pityana, LL van
Niekerk, CJPG van Zyl.
Alternate director: D Shook*
Company secretary: ME Sanz
* American
** British
Date: 26/04/2006 03:32:32 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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