AAFRICAN AFRICAN OXYGEN LIMITED Results 40. th annual results since listing

Transcription

1 AAFRICAN AFRICAN OXYGEN LIMITED 2004 Results 40 th annual results since listing 1 AAFROX

2 Presenters Rick Hogben Cor van Zyl CE African Oxygen Limited Financial Director, African Oxygen Limited Panel Mike Flemming CE Afrox Healthcare Limited Roger Hogarth General Manager Finance Afrox Healthcare Limited 2 AAFROX

3 Agenda Introduction highlights results Afrox 2004 year end results Afrox as an industrial business Update of AHealth sale Conclusion Questions Rick Hogben Cor van Zyl Rick Hogben 3 AAFROX

4 Introduction Rick Hogben 4 AAFROX

5 Excellent results in a difficult economy 5 AAFROX

6 Economy The Rand has continued to strengthen versus US $: (average exchange rates) ? Oil price remains exceedingly high, touching over $ ?... JSE Securities Exchange reaches all-time high Business confidence index at 15 year high Prime lending rate at lowest in 23 11% Inflation ± 4.5% BUT: a recovery driven by consumer spending Difficult economy, especially for industrial business 6 AAFROX

7 Manufacturing output has been in sharp decline, but is improving GROWTH IN MANUFACTURING PRODUCTION GROWTH % Source - Econometrics 7 AAFROX

8 Manufacturing output accelerated ahead of retail sales, driven by an export boom on the back of a cheap Rand this has now reversed and manufacturing is in decline while retail sales rise but manufacturing is starting to recover INDEX 1997= MANUFACTURING PRODUCTION VS RETAIL SALES Retail Manufacturing Export bubble Source - Econometrics 8 AAFROX

9 Producer inflation fell into negative territory which as severely limited our ability to price but is moving back to positive territory GROWTH (%) INFLATION : CONSUMER VS PRODUCER CONSUMER PRODUCER IP pricing challenge Source - Econometrics 9 AAFROX

10 The prices of imported goods have fallen by 10%, making us vulnerable to cheaper imports. This remains a challenge PRODUCER INFLATION : LOCAL COMMODITIES VS IMPORTED GOODS GROWTH (%) LOCAL GOODS Vitemax/Mig Price competition -5 IMPORTED GOODS Source - Econometrics 10 AAFROX

11 Performance Highlights: Industrial Product service offering and customer focus enhances performance Efficiency enhancing initiatives on track and delivering Positive production efficiency gains Zero growth in overheads Afrox Industrial grows OP by 18% Cost productivity improves by 4,5% Increased market share in all sectors Restructured two businesses for further growth - Africa operations - Scientific, packaged chemicals, Helium & refrigerant services 11 AAFROX

12 Performance Highlights: Healthcare Afrox Healthcare grows OP by 16% 28% to 74% in Wilgeheuwel New 124 bed Roseacres Clinic New 194 bed Fourways Hospital under way NHS, UK performing well R242 million capex on 20 new revenue enhancing projects Period of increased government regulation 12 AAFROX

13 Afrox results highlights Revenue R7.835m Operating Profit before finance costs R1.278m Cash Generated from operating activities R1.611m 13 AAFROX

14 Afrox has received significant, and very often, unsolicited recognition List of awards and recognitions for 2004: Winner: Finalist: o o o o o o o o SRI index 1 of 51 will attract offshore institutional investors A+ Global Credit Rating A+ (single A plus for long term) A1 (single A one for short term) Rating placed on positive outlook Design Excellence Award for IVR (SABS) Most Outstanding Technical Innovation/AfroxPac (Dti: Design Institute) Numerous safety awards, including international winner for supply of electricity, gas and water sector (NOSA) Affirmative Procurement (EmpowerDex) Sustainable Growth (over 5 years) AHealth In three of four categories in Deloitte Good Governance awards Board of effectiveness Corporate ethics and integrity Corporate sustainable development 14 AAFROX

15 Afrox Winner of Mail & Guardian Investing in the Future Awards On Friday we learnt that on the 10 th Anniversary of our Community Involvement Programme we won of the Best Corporate Employee Involvement award at the Mail & Guardian Investing in the Future Awards for 2004 Afrox was also a finalist in the category Best Corporate Social Responsibility Report 15 AAFROX

16 African Oxygen Limited 2004 year end results Cor van Zyl 16 AAFROX

17 Financial highlights for the year Revenue + R7.835m Operating profit R1.278m Net profit R 623m HEPS 187,5 cents 17 AAFROX

18 Highlights Group Income Statement Interest paid down by 20% to R98m 23% decrease in Industrial 18% decrease in Healthcare 18 AAFROX

19 Highlights Group Income Statement Interest paid down by 20% to R98m 23% decrease in Industrial 18% decrease in Healthcare Net profit up 12% to R623m 16% increase in Industrial 6% increase in Healthcare 70 % contribution to earnings Healthcare shows sustained good growth, but Industrial has accelerated ahead since b Healthcare Industrial AAFROX

20 Summarised income statement % Continuing Operations Rm Rm Revenue Operating profit before finance costs Taxation (136) (183) +35 Net profit for the year Discontinuing Operations Revenue Operating profit before finance costs Healthcare disposal costs - (16) - Taxation and minority interest (317) (406) +28 Net profit for the year Total net profit for the year AAFROX

21 Increase in tax - FY2004 vs FY2003 Continuing business Tax effect Tax rate 28,0% increase to 31,2% due to: Deferred tax credit on assessed loss R 3m in FY2003 no STC charge due to credits and portion of dividend paid as scrip dividend FY2004 no STC credit from R13m discontinued business Discontinuing business Tax rate 30,9% increase to 34,9% due to: Deferred tax credit on assessed losses in FY2003 R22m FY2004 Healthcare disposal costs R 5m 21 AAFROX

22 Dividend per share Afrox Group FY2003 FY2004 Basic earnings per share cents Dividend per share cents Basic earnings per share cents Dividend per share cents Continuing business Discontinuing business Group Times cover continuing business Continuing business % Interim Final AAFROX

23 HEPS & DPS growth CAGR in HEPS = 15% , , DPS HEPS CONTINUING BUSINESS CONTINUING BUSINESS DIVIDEND 23 AAFROX

24 Highlights - Balance Sheet & Cash Flow statement Cash generated from operations increased by 12% to R1,61bn AAFROX

25 Highlights - Balance Sheet & Cash Flow statement Cash generated from operations increased by 12% to R1,61bn Cash generated from operations 126% of operating profit (R m) Profit from operations Cash generated from operations AAFROX

26 Highlights Balance Sheet & Cash Flow Statement Cash generated from operations increased by 12% to R1,61bn Cash generated from operations 126% of operating profit Gearing down from 12.5% to 4.6% AAFROX

27 Highlights Balance Sheet & Cash Flow Statement Cash generated from operations increased by 12% to R1,61bn Cash generated from operations 126% of operating profit Gearing down from 12.5% to 4.6% Total capex of R494m 27 AAFROX

28 Highlights Balance Sheet & Cash Flow Statement Cash generated from operations increased by 12% to R1,61bn Cash generated from operations 126% of operating profit Gearing down from 12.5% to 4.6% Total capex of R494m Return on capital employed up from 31% to 34% 35 % AAFROX

29 Summarised Industrial income statement Rm Rm % Revenue Operating profit before finance costs Finance cost (net) (33) (25) (23) Profit before taxation Taxation (136) (183) 35 Profit after taxation Minority interest (3) (3) 18 Net profit for the year AAFROX

30 Industrial business geographic contributions by revenue (R m) South Africa Rest of Africa AAFROX

31 Industrial business geographic contributions operating profit before finance costs (R m) % 20.7% ,1% 22.7% South Africa Rest of Africa 2003 Operating profit before finance costs 2004 Operating profit before finance costs 31 AAFROX

32 Published Healthcare income statement Rm Rm % Revenue Operating profit before finance costs Finance cost (net) (89) (72) (18) Share of profits of associates Profit before taxation Taxation (162) (219) 35 Profit after taxation Minority interest (60) (75) 25 Net profit for the year AAFROX

33 Afrox as an industrial business Rick Hogben 33 AAFROX

34 Industrial businesses Industrial & Special Products (ISP) Industrial products Cutting & welding Medical gases Hospitality Scientific gases, packaged chemicals, helium and refrigerated services Handigas - mega bulk, industrial, retail and Autogas Manufacturing Safety products including AfroxPac Process Gas Solutions (PGS) Production operations Distribution Customer Engineering Services (CES) Merchant & On-sites Tonnage CryoStar 34 AAFROX

35 The Afrox Industrial business model SOURCE PRODUCT Air Separation Units Bulk Liquid Long term gas supply contracts, Oxygen, Nitrogen, Argon Product Streams PGS Core Compressed AfroxPac CO 2,Helium, Amonia Refineries ISP Handigas Welding, consumables, gas equipment, safety products, acetylene, nitrous oxide Own Manufactured Machines, etc Bought in products Hospitality Welding & Cutting Handigas Special Products Medical Gas Africa 35 AAFROX

36 Afrox services the following major customers in South Africa PGS Anglo American Coca Cola Bottlers BHP Billiton Petronas (Engen) PFG Columbus Stainless Steel Xstrata Ispat Iscor ISP State Contract Anglo American AngloGold AngloPlats Steel Goldfields Automotive: Daimler Chrysler, BMW Toyota VW, General Motors, Nissan Component Manufacturers Iscor & Saldanha Steel Belgatex BHP Sasol Afrox Healthcare and MediClinic Etc.etc. 36 AAFROX

37 Growth Strategy We will achieve sustainable and superior growth, and exceed shareholder expectations. We will do this through the delivery of a tailored range of Product Service Offers, using the industry s strongest brand, and most comprehensive and efficient distribution network. We will continue to develop and drive a growth agenda, defending existing markets and entering new ones We will grow profits at a rate which represents a premium to GDP+PPI: 37 AAFROX

38 Key Elements of the Strategy 1. We will seek superior growth through the triple strategy of: Defend: Defend existing high markets shares and high margin businesses Improve: Customer focused Product Service Offerings & sales & marketing effectiveness Grow Identify and exploit growth opportunities within existing defined markets: Products Geography And we will find new step out opportunities off the back of our existing core competencies 2. We will continue to improve the effectiveness and efficiency of our business processes Develop processes and infrastructure Improving our operating efficiencies and grow profits by using Best Operating practise Best Commercial practise 3. We will continue to roll out our BEE strategy 4. We see our people as a key pillar of this strategy, and will seek to attract develop and retain the best possible people resource. 38 AAFROX

39 Growth opportunities Presently tracking 51 growth opportunities Low gearing at 4,6%, allows us to do this Some things we are looking at: Safety products PPE growing well Retail Gas & Gear outlets one per month LPG low income housing market JV pilot Refrigerant services Hudson Technology Fire suppression - JV Expansion into Africa (incl. West Coast oil fields) Enhanced CO 2 and atmospheric gas capacity 39 AAFROX

40 Challenges we have to address Impact on AOL of the Healthcare disposal Communicating Afrox as a focused industrial business Compliance with the Competition Act Skills development and retention We are a target of predator employers Becoming accustomed to lower % growth in low inflation environment Strong Rand, low inflation weak mining, particularly gold export manufacturing sector & foreign competition 40 AAFROX

41 History & update of AHealth sale Deal announced in 2003 as largest empowerment deal outside mining sectors. Transaction recommended for approval by Competition Commission. Serious opposition encountered at Competition Tribunal from competitors due to MediClinic involvement. Application made to set aside Section 311 Scheme of Arrangement (both driven by competitors and competitive bidders). Tribunal hearings deferred until Q1, 2005 due to unavailability of counsel and Tribunal. Discussions aimed at removing the basis for the objectives ongoing. 41 AAFROX

42 In conclusion Afrox Healthcare free to pursue own strategic objectives Low gearing of 4,6%, allows for growth An Industrial-focused company Multiple growth plan operational Strong cash generating ability Positive outlook in the medium term 3 year horizon Have some concerns about the next 6 9 months 42 AAFROX

43 Thank you Questions to Panel? 43 AAFROX

44 Addendum 44 AAFROX

45 Group Income Statement FY2003 FY2004 R000 R000 % Revenue 7,325,895 7,835,144 7 Operating profit 1,089,835 1,277, Costs of Healthcare disposal - (16,167) - Finance costs (121,944) (97,854) 20 Income from associates 42,841 51, Profit before taxation 1,010,732 1,215, Taxation (298,324) (402,164) (35) Profit after Taxation 712, , Minority interest (157,970) (190,393) (21) Net profit from ordinary activities 554, , AAFROX

46 Group Balance Sheet ASSETS FY2003 R000 FY2004 R000 EQUITY AND LIABILITIES FY2003 R000 FY2004 R000 Non-current assets 3,269,797 3,530,712 Property, plant and equipment 2,857,588 3,051,133 Intangibles 2,180 1,271 Goodwill 133, ,685 Investments in associates 121, ,925 Other investments - trade 36,407 22,239 Non-current receivables 40,532 55,212 Retirement benefit asset 9,798 32,198 Deferred tax 68,247 77,049 Current assets 1,942,527 2,100,642 Inventories 416, ,544 Trade and other receivables 1,257,353 1,198,927 Group companies 7,975 14,222 Cash and cash equivalents 260, ,949 Total assets 5,212,324 5,631,354 Capital and reserves 2,377,131 2,705,924 Issued capital 17,143 17,143 Share premium 537, ,314 Reserves 102, ,758 Accumulated profits 1,719,929 2,049,709 Minority interest 626, ,791 Non-current liabilities 783, ,378 Interest bearing borrowings 565, ,533 Property finance leases 58,733 44,570 Deferred taxation 160, ,275 Current liabilities 1,425,155 1,568,261 Trade and other payables 1,051, ,898 Provisions 178, ,912 Current portion of interest bearing borrowings 87, ,056 Group companies 2,633 6,777 Taxation 103, ,554 Bank overdraft 1,377 3,064 Total equity and liabilities 5,212,324 5,631, AAFROX

47 Group Cash Flow FY2003 FY2004 R000 R000 Cash flows from operating activities Cash generated from operations 1,444,615 1,611,376 Interest received 28,155 26,972 Interest paid (153,554) (123,790) Dividend received 897 1,096 Dividends paid (55,850) (284,568) Normal Taxation paid (341,537) (345,009) Secondary taxation on companies paid (22,634) (30,213) Net cash inflow/(outflow) from operating activities 900, ,864 Cash flows from investing activities (Acquisition)/ disposal of subsidiaries (66,624) (46,408) Purchase of property, plant and equipment (485,261) (493,713) Disposal of shares 2,000 - Proceeds from sale of property, plant and equipment 45,229 43,423 Associates and investments 11,729 35,964 Non current receivables (10,472) (14,680) Intangibles acquired (459) (258) Net cash outflow from investing activities (503,858) (475,672) Cash flows from financing activities Minorities (75,711) (48,889) Repayment of long term borrowings 75,423 (248,208) (Repayment of) / proceeds from short term borrowings (113,789) 149,778 Repayment of capital element of finance lease liabilities (11,580) (14,163) Movement on retirement benefit obligation (62,604) - Net cash (outflow ) / inflow from financing activities (188,261) (161,482) Net (decrease) / increase in cash and cash equivalents 207, ,710 Cash and cash equivalents at beginning of year 51, ,175 Cash and cash equivalents at end of year 259, , AAFROX

48 Industrial s pro forma Income Statement R000 FY2003 % ch FY2004 Revenue Operating profit Net interest paid Profit before tax Tax Profit after taxation Outside shareholders interest Earnings Earnings per share (cents) 103,0 117,0 Headline earnings per share 102,1 117,0 48 AAFROX

49 Industrial s pro forma Balance Sheet R000 FY2003 FY2004 EMPLOYMENT OF CAPITAL Fixed Assets Current Assets Stocks Debtors - Trade Other Current liabilities Creditors - Trade Cylinder deposits Other Net Current Assets Operating Assets Goodwill Associate co s & trade inv Long term assets 28 0 Taxation CAPITAL EMPLOYED Share Capital Reserves Shareholders Funds Outside Shareholders Interest Deferred Taxation Borrowings Post retirement benefits AAFROX