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African Oxygen Limited - Audited results for the year ended
30 September 2006 and dividend declaration
(Incorporated in the Republic of South Africa)
(Registration number 1927/000089/06)
JSE Share code: AFX
NSX Share code: AOX
ISIN: ZAE000067120
("Afrox" or "the company" or "the Group")
African Oxygen Limited audited results for the year ended 30 September 2006
- Revenue from industrial operations up 19% to R4 billion
- Operating profit from Industrial operations up 15% to R684 million
- Net profit from Industrial operations up 12% to R437 million
- Total normal dividend per share up 10% to 88 cents per share
- Special dividend of 60 cents per share
Afrox imports LPG for the first time
To end the liquefied petroleum gas (LPG) shortage in the Western and
Eastern Cape the largest distributor in southern Africa, Afrox, started
importing gas for the first time. Here part of the first shipment is
offloaded into road tankers at Saldanha. The ship then sails to Port
Elizabeth to offload further product.
Summarised Balance Sheet
As at As at
30 September 30 September
Rm 2006 2005
ASSETS
Non-current assets 2 297 2 178
Property, plant and equipment 2 016 1 665
Investments in associates 11 377
Other non-current assets 270 136
Current assets 1 618 1 066
Inventories 452 326
Trade and other receivables 664 565
Financial instruments 54 8
Cash and cash equivalents 448 167
Total assets 3 915 3 244
EQUITY AND LIABILITIES
Capital and reserves 2 271 1 644
Share capital 15 15
Share premium 537 537
Accumulated profits and reserves 1 696 1 080
2 248 1 632
Minority interest 23 12
Non-current liabilities 464 599
Borrowings 311 467
Other non-current liabilities 153 132
Current liabilities 1 180 1 001
Current portion of borrowings 205 57
Provisions for liabilities and
charges - 52
Trade payables and other current
liabilities 960 887
Bank overdraft 15 5
Total equity and liabilities 3 915 3 244
Summarised Income Statement
30 September 30 September
Rm 2006 2005
Group
Revenue 3 914 5 754
Operating profit 754 923
Profit on sale of investment 362 1 085
Profit from operations 1 116 2 008
Finance (costs) (39) (61)
Finance income 4 62
Income from associates 100 60
Profit before taxation 1 181 2 069
Income tax expense (316) (623)
Profit for the year 865 1 446
Attributable to:
Equity holders of the company 858 1 350
Minority Interest 7 96
Net profit for the year 865 1 446
Earnings per share
30 September 30 September
Rm 2006 2005
Total net profit for the year
attributable to equity holders
of the company 858 1 350
Adjustments for headline earnings
- Profit on sale of investment (362) (1 085)
- Capital gains tax on sale of
investment 76 144
- Transaction costs within associate
investment - 10
- Impairment of trade and subsidiary
investment - 4
- Goodwill impaired 21 8
- Profit on disposal of property,
plant and equipment (2) (3)
Headline earnings 591 428
Basic earnings per ordinary
share - Group (cents) 278,1 403,6
Headline earnings per ordinary
share - Group (cents) 191,4 127,9
Statistics and Ratios
30 September 30 September
2006 2005
Statistics
Total number of shares in issue
(net of treasury shares
issued) ("000) 308 568 308 568
Number of ordinary shares on which
earnings per share are based ("000) 308 568 334 587
Dividends per share (cents) - Group 148,0 495,0
- Final 40,0 40,0
- Special dividend 60,0 415,0
- Interim 48,0 40,0
Ratios
Interest cover (times) 21,7 >100
Effective tax rate (%) 26,8 30,1
Gearing (%) 3,3 16,1
Dividend cover - (interim and final
dividend for current year) 2,18 1,75
Segmental information
Industrial
operations 2006
Rm % change Industrial Other* Total
Revenue 19 3 914 - 3 914
Operating profit 15 684 70 754
Net profit for the year 12 437 421 858
HEPS (cents) 19 141,6 49,8 191,4
*Relates to the Healthcare earnings, profit on the sale of the healthcare
investment, pension fund surplus and other non-recurring items.
Segmental information (continued)
2005
Rm Industrial Other* Total
Revenue 3 279 2 475 5 754
Operating profit 597 326 923
Net profit for the year 391 959 1 350
HEPS (cents) 118,9 9,0 127,9
*Relates to the Healthcare earnings, profit on the sale of the healthcare
investment, pension fund surplus and other non-recurring items.
Summarised Cash Flow Statement
30 September 30 September
Rm 2006 2005
Cash generated from operations 747 954
Finance costs and taxation paid (436) (539)
Dividends received 7 11
Cash available from operations 318 426
Dividends paid (272) (1 653)
Net cash inflow from operating
activities 46 (1 227)
Acquisition of business (5) (93)
Disposal of business 801 2 214
Purchase of property, plant
and equipment (548) (492)
Purchase of intangible assets (35) (4)
Other investing cash flows, net 20 (251)
Net cash inflow from investing
activities 233 1 374
Dividends and loans paid to
minorities - (30)
(Decrease)/increase in borrowings (8) 232
Buy-back of shares by a
subsidiary company - (665)
Net cash (outflow) from financing
activities (8) (463)
Net increase/(decrease) in cash
and cash equivalents 271 (316)
Cash and cash equivalents at
beginning of year 162 478
Cash and cash equivalents at
end of year 433 162
Summarised Statement of Changes in Equity
Issued Share Other
Rm capital premium reserves
Balance at 1 October 2005 15 537 122
Other movements - - (59)
Currency translation difference - - 15
Net profit for the year - - -
Dividends declared - - -
Balance at 30 September 2006 15 537 78
Balance at 1 October 2004 17 537 121
Change in accounting policy - - (4)
Restated balance 17 537 117
Surplus on revaluation of properties - - 9
Other movements - - (3)
Currency translation difference - - (1)
Net profit for the year - - -
Dividends declared - -
Purchase of shares by wholly-owned
subsidiary (treasury shares) (2)
Balance at 30 September 2005 15 537 122
Summarised Statement of Changes in Equity (Continued)
Accumulated Minority
Rm profits interest Total
Balance at 1 October 2005 958 12 1 644
Other movements 74 4 19
Currency translation difference - - 15
Net profit for the year 858 7 865
Dividends declared (272) - (272)
Balance at 30 September 2006 1 618 23 2 271
Balance at 1 October 2004 1 988 753 3 416
Change in accounting policy (67) (18) (89)
Restated balance 1 921 735 3 327
Surplus on revaluation of
properties - - 9
Other movements 3 (819) (819)
Currency translation difference - (1)
Net profit for the year 1 350 96 1 446
Dividends declared (1 653) (1 653)
Purchase of shares by wholly-owned
subsidiary (treasury shares) (663) (665)
Balance at 30 September 2005 958 12 1 644
Accounting Policies
1. Basis of preparation
The condensed consolidated financial information ("financial information")
announcement is based on the audited financial statements of the group for
the year ended 30 September 2006, which have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), the listing
requirements of the JSE Limited and the South African Companies Act (1973).
The basis of preparation is consistent with the prior year except for the
restatements as a result of the conversion to IFRS from SA GAAP.
These financial statements have been prepared in accordance with IFRS 1.
"First time adoption of International Financial Reporting Standards".
In addition, we have adopted the guidance on accounting for adjustments to
revenue where extended payment terms are made available to customers, by
adjusting revenue with the cost of granting extended terms, and have
restated prior year comparatives
2. The effect of the IFRS changes on prior year Headline earnings and net
asset value per share is as follows:
Year ended
30 September
2005
Basic earnings per share - as previously
reported (cents) 408,2
IFRS adjustments (4,6)
Basic earnings per share - restated (403,6)
Headline earnings - as previously reported (cents) 142,6
IFRS adjustments (14,7)
Headline earnings - restated 127,9
Net asset value - as previously reported 557,3
IFRS adjustments (26,1)
Net asset value - restated 531,2
3. Share-based payments
The group has applied IFRS 2 from 1 October 2004 to those Share
Appreciation Rights, which had been issued but not vested by 1 October
2004. The full liability for these amounts has been raised in the opening
balance sheet and in the 2005 comparative income statement.
4. Leases
Certain long-term operating leases of buildings have been reclassified as
finance leases. This reclassification relates to Afrox Healthcare. The
fixed assets and the loan finance have been recognised on the balance
sheet.
As a result of this the profit on sale of investment has been restated in
the 2005 comparative numbers.
5. Taxation
- Taxation has been provided on the restatement of reserves resulting from
restatement of income statement amounts.
- Deferred taxation has been provided against revaluation reserves arising
on the revaluation of fixed assets.
AUDIT OPINION
The independent auditors PricewaterhouseCoopers Inc., have issued their
opinion on the groups financial statements for the year ended 30 September
2006. A copy of their unqualified audit report is available for inspection
at the companies registered office.
Performance summary
African Oxygen Limited (Afrox) continues to produce financial results well
above inflation.
During the year, Afrox completely disinvested from its healthcare interests
by selling its remaining 20 percent shareholding in the Life Healthcare
Group. The company is now a focused industrial company with a broad base of
business operating in key areas of the economy.
Revenue from industrial operations increased by 19 percent to reach R4
billion. On a like-for-like basis, operating profit was 15 percent higher
at R684 million with net profit 12 percent up at R437 million. This is the
base off which Afrox will measure itself in the future.
These results mark the fifth anniversary of the step-change strategic
initiatives taking Afrox into a new growth. During this period, profits
from the core Industrial operations have shown strong growth.
Our objectives to defend base line growth, improve existing capabilities to
extract upside, and identify offerings for step-out opportunities continue
to bear fruit. These are now being reinforced by planned investment of over
R500 million in capex over the next two to three years. This will
accommodate the growing demands placed on the company by a diverse range of
customers.
Through the year the economic conditions remained favourable and demand for
all gases and products reached high levels, resulting in considerable
pressure in supply, mainly for atmospheric gas, carbon dioxide, Handigas,
mig welding wire and certain welding products.
Business review
Afrox is an integrated, full spectrum gases business. Each of our value-
adding segments is inter-dependent. This synergy, from bulk gas production
through to retail, is key to the sustainability of performance. Our brand,
reliability of supply and high quality of our products represent
substantial intangible asset value.
All businesses produced sound results, ahead of inflation. Our growth
strategy focused on increasing capacity, upgrading manufacturing facilities
and modernising infrastructure to improve efficiencies. We continue our
efforts to improve customer service levels and product offerings.
The bulk merchant business, a mainstay of Afrox, for which the industrial
and special products business units are a vital internal customer, produced
a good result with high levels of capacity utilisation. In addition this
business is well on the way to commissioning its six new gas producing
plants which will enhance product capacity over the next two years.
Cylinder gases, gas equipment and welding products continued on their
strong growth path, underpinned by strong orders from industrial customers
as demand in the economy continued to increase.
Exports continued to improve and profit growth was satisfactory in a
competitive pricing environment.
Modernisation of the Germiston Gases Operations Centre is in process.
Notwithstanding the logistical difficulties of combining on-site
construction with day-to-day business, we are on schedule to complete this
state of the art facility by the end of the calendar 2007. In addition to
this project, a further R150 million was spent this year on additional
cylinder holding to meet growth in demand.
The Medical Gases business is showing growth in line with the healthcare
sector.
A highlight of the year in our Handigas business was our effort, under
extremely difficult circumstances, to minimise the disruptive effects of
supply shortages of LPG from domestic refineries. This, however, resulted
in considerably increased operating costs and a reduction in margins. As a
result of the shortage, for the first time, Afrox instigated an import
program to help ensure reliability of supply.
Special Gases continues to produce good revenue and profit growth from its
high value, comprehensive product range.
Hospitality performed well in a low price inflation environment, benefiting
from growth countrywide in retail outlets and fast food chains.
African Operations remains a long-term growth opportunity and continues to
make pleasing gains.
Disposal of Healthcare interests
Significant value has been released for shareholders in disposing of the
residual interest in Life Healthcare. Cash of R850 million has been banked
against an original investment of R375 million. A net profit of R362
million was realised.
Dividend and special dividend
The results for the year under review have enabled the board to declare a
final cash dividend of 40 cents per share covered 2,18 times by earnings.
The board also resolved to pay a special cash dividend of 60 cents per
share from the disposal of the company"s remaining shareholding in the Life
Healthcare Group.
This, together with the interim of 48 cents a share, will result in a total
distribution for the year 148 cents a share.
New Parent Company
The takeover of The BOC Group by Linde AG was effective 6 September 2006.
The two companies are highly complimentary with minimum geographic overlap.
The Linde Group is now the world"s leading gases business with global sales
of f12 billion, 55 000 employees, and operations in 70 countries on all
continents.
Outlook
In 2007, the financial year-end will change from September to December
2007, in line with The Linde Group. Prospects remain good and growth will
be driven by a combination of the new bulk gas business, and continued
expansion of the infrastructure of the economy. Afrox is well positioned
for real growth in earnings for 2007.
Kent Masters Rick Hogben Johannesburg
Chairman Managing Director 26 October 2006
Dividend declaration
The board of directors has declared a final cash dividend of 40 cents per
share (2005: 40 cents) for the year ended 30 September 2006. The board has
further declared a special cash dividend of 60 cents per share (2005: 415
cents). The total dividend is payable on Monday, 29 January 2007 to
shareholders recorded in the books of the company at the close of business
on Friday, 26 January 2007.
The last day to trade cum dividend will be Friday, 19 January 2007 and the
shares will trade ex dividend from the commencement of business on Monday
22 January 2007.
Share certificates may not be dematerialised or rematerialised between
Monday, 22 January 2007 and Friday, 26 January 2007, both days inclusive.
By order of the board
Johannesburg
26 October 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").
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: 26/10/2006 03:47:16 PM Supplied by www.sharenet.co.za
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