| Mon 14 Mar 2011, 10:00 | | BEL - Bell Equipment Limited - Audited results for the year ended 31 December |
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BEL
BEL
BEL - Bell Equipment Limited - Audited results for the year ended 31 December
2010
Bell Equipment Limited
(Incorporated in the Republic of South Africa)
Registration number: 1968/013656/06
ISIN: ZAE000028304
Share code: BEL
("Bell" or "group" or the "company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
Condensed consolidated statement of financial position
as at 31 December 2010
31 December 31 December
R`000 2010 2009
ASSETS
Non-current assets 733 472 798 445
Property, plant and equipment 481 023 520 452
Intangible assets 70 775 39 873
Interest-bearing investments and long-term
receivables 34 378 73 982
Deferred taxation 147 296 164 138
Current assets 1 911 808 2 127 669
Inventory 1 355 613 1 618 728
Trade and other receivables 446 787 412 008
Current portion of interest-bearing long-term
receivables 40 359 37 409
Prepayments 11 103 16 932
Other financial assets - 430
Taxation 4 285 10 280
Cash resources 53 661 31 882
TOTAL ASSETS 2 645 280 2 926 114
EQUITY AND LIABILITIES
Capital and reserves 1 418 709 1 420 435
Stated capital (note 5) 228 605 228 605
Non-distributable reserves 90 488 123 984
Retained earnings 1 087 162 1 066 540
Attributable to equity holders of Bell Equipment
Limited 1 406 255 1 419 129
Non-controlling interest 12 454 1 306
Non-current liabilities 255 540 374 654
Interest-bearing liabilities 84 175 218 404
Repurchase obligations and deferred leasing income 79 902 49 724
Deferred warranty income 66 735 89 047
Long-term provisions and lease escalation 24 728 17 479
Current liabilities 971 031 1 131 025
Trade and other payables 699 158 530 151
Current portion of interest-bearing liabilities 4 974 52 830
Current portion of repurchase obligations and
deferred leasing income 61 926 46 639
Current portion of deferred warranty income 23 852 17 599
Current portion of provisions and lease escalation 41 783 37 199
Other financial liabilities 4 271 3 922
Taxation 23 138 14 856
Short-term interest-bearing debt 111 929 427 829
TOTAL EQUITY AND LIABILITIES 2 645 280 2 926 114
Number of shares in issue (`000) 94 958 94 958
Net asset value per share (cents) 1 494 1 496
Condensed consolidated income statement
for the year ended 31 December 2010
31 December 31 December
R`000 2010 2009
Revenue 3 410 691 2 699 149
Cost of sales (2 684 220) (2 164 082)
Gross profit 726 471 535 067
Other operating income 132 180 143 477
Expenses (734 014) (941 970)
Profit (loss) from operating activities (note 2) 124 637 (263 426)
Net interest paid (note 3) (58 404) (108 605)
Profit (loss) before taxation 66 233 (372 031)
Taxation (29 509) 100 325
Profit (loss) for the year 36 724 (271 706)
Profit (loss) for the year attributable to:
- Equity holders of Bell Equipment Limited 25 576 (259 744)
- Non-controlling interest 11 148 (11 962)
Earnings (loss) per share (basic) (note 4) (cents) 27 (274)
Earnings (loss) per share (diluted) (note 4) (cents) 27 (274)
Condensed consolidated
statement of comprehensive income
for the year ended 31 December 2010
31 December 31 December
R`000 2010 2009
Profit (loss) for the year 36 724 (271 706)
Other comprehensive loss
Exchange differences arising during the year (37 295) (77 433)
Exchange differences on translating foreign
operations (34 823) (74 954)
Exchange differences on foreign reserves (2 472) (2 479)
Loss arising on revaluation of properties (4 054) -
Taxation relating to components of other
comprehensive loss 1 135 -
Other comprehensive loss for the year, net of tax (40 214) (77 433)
Total comprehensive loss for the year (3 490) (349 139)
Total comprehensive loss attributable to:
- Equity holders of Bell Equipment Limited (14 638) (337 177)
- Non-controlling interest 11 148 (11 962)
Condensed consolidated statement of cash flows
for the year ended 31 December 2010
31 December 31 December
R`000 2010 2009
Cash operating profit (loss) before working
capital changes 202 325 (223 592)
Cash generated from working capital 418 724 784 160
Cash generated from operations 621 049 560 568
Net interest paid (58 404) (108 605)
Taxation refunded (paid) 1 624 (95 526)
Net cash generated from operating activities 564 269 356 437
Net cash flow utilised in investing activities (90 381) (117 316)
Net cash flow (utilised in) generated from
financing activities (136 209) 33 138
Net cash inflow 337 679 272 259
Net short-term interest-bearing debt at beginning
of the year (395 947) (668 206)
Net short-term interest-bearing debt at end of the
year (58 268) (395 947)
Consolidated statement of changes in equity
for the year ended 31 December 2010
Attributable to equity holders of Bell Equipment Limited
Stated Non-distributable Retained
R`000 capital reserves earnings
Balance at 31 December 2008 228 586 200 940 1 326 761
Share options exercised 19 - -
Total comprehensive loss for the year - (77 433) (259 744)
Realisation of revaluation reserve
on depreciation of buildings - (3 418) 3 418
Deferred taxation on realisation
of revaluation reserve on
depreciation of buildings - 957 (957)
Increase in statutory reserves of
foreign subsidiaries - 2 938 (2 938)
Balance at 31 December 2009 228 605 123 984 1 066 540
Recognition of share-based payments - 1 764 -
Total comprehensive (loss) income
for the year - (40 214) 25 576
Realisation of revaluation reserve
on depreciation of buildings - (1 896) 1 896
Deferred taxation on realisation
of revaluation reserve on
depreciation of buildings - 531 (531)
Transfer of debit foreign currency
translation reserve to retained
earnings - 6 319 (6 319)
Balance at 31 December 2010 228 605 90 488 1 087 162
Non-controlling Total capital and
R`000 Total interest reserves
Balance at 31 December 2008 1 756 287 13 268 1 769 555
Share options exercised 19 - 19
Total comprehensive loss
for the year (337 177) (11 962) (349 139)
Realisation of revaluation
reserve on depreciation of
buildings - - -
Deferred taxation on
realisation of revaluation
reserve on depreciation of
buildings - - -
Increase in statutory
reserves of foreign
subsidiaries - - -
Balance at 31 December 2009 1 419 129 1 306 1 420 435
Recognition of share-based
payments 1 764 - 1 764
Total comprehensive (loss)
income for the year (14 638) 11 148 (3 490)
Realisation of revaluation
reserve on depreciation of
buildings - - -
Deferred taxation on
realisation of revaluation
reserve on depreciation of
buildings - - -
Transfer of debit foreign
currency translation
reserve to retained earnings - - -
Balance at 31 December 2010 1 406 255 12 454 1 418 709
Abbreviated notes to audited consolidated results
for the year ended 31 December 2010
1 ACCOUNTING POLICIES
The financial statements from which these results are summarised have been
prepared in accordance with International Financial Reporting Standards (IFRS)
and the policies and methods of computation are consistent with those applied to
the previous year, except for the adoption of new and revised Standards and
Interpretations.
In the current year the group has adopted all of the new and revised Standards
and Interpretations relevant to its operations and effective for annual
reporting periods beginning on 1 January 2010. The adoption of these new and
revised Standards and Interpretations has not had any significant impact on the
amounts reported in the financial statements and in this abridged report.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain properties and financial instruments, and
adjustments, where applicable, in respect of hyperinflation accounting. The
condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting.
31 December 31 December
R`000 2010 2009
2 PROFIT (LOSS) FROM OPERATING ACTIVITIES
Profit (loss) from operating activities is arrived
at after taking into account:
Income
Currency exchange gains 113 868 184 078
Decrease in warranty provision - 17 398
Deferred warranty income 42 507 36 428
Import duty rebates 44 845 75 340
Royalties 2 677 -
Net surplus on disposal of property, plant and
equipment and intangible assets - 826
Expenditure
Amortisation of intangible assets 8 782 8 137
Auditors` remuneration - audit and other services 8 629 7 842
Currency exchange losses 132 217 190 788
Depreciation of property, plant and equipment 93 746 94 144
Impairment loss recognised on interest-bearing
long-term receivables - 39 790
Increase in warranty provision 5 178 -
Net loss on disposal of property, plant and
equipment and intangible assets 180 -
Operating lease charges 80 123 81 354
Research expenses (excluding staff costs) 16 093 17 791
Staff costs 547 511 604 847
3 NET INTEREST PAID
Interest paid 69 890 121 912
Interest received (11 486) (13 307)
Net interest paid 58 404 108 605
4 EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is arrived at as follows:
Profit (loss) for the year attributable to equity
holders of Bell Equipment Limited (R`000) 25 576 (259 744)
Weighted average number of ordinary shares
in issue (`000) 94 958 94 952
Basic earnings (loss) per share (cents) 27 (274)
Diluted earnings (loss) per share is arrived at as follows:
Profit (loss) for the year attributable to equity
holders of Bell Equipment Limited (R`000) 25 576 (259 744)
Fully converted weighted average number of shares
(`000) 94 960 94 955
Diluted earnings (loss) per share (cents) 27 (274)
Headline earnings (loss) per share is arrived at as follows:
Profit (loss) for the year attributable to equity
holders of Bell Equipment Limited (R`000) 25 576 (259 744)
Net loss (surplus) on disposal of property, plant
and equipment and intangible assets (R`000) 180 (826)
Tax effect of net loss (surplus) on disposal of
property, plant and equipment
and intangible assets (R`000) (50) 231
Headline earnings (loss) (R`000) 25 706 (260 339)
Weighted average number of ordinary shares in
issue (`000) 94 958 94 952
Headline earnings (loss) per share (basic) (cents) 27 (274)
Diluted headline earnings (loss) per share is
arrived at as follows:
Headline earnings (loss) calculated above (R`000) 25 706 (260 339)
Fully converted weighted average number
of shares (`000) 94 960 94 955
Headline earnings (loss) per share (diluted) (cents) 27 (274)
5 STATED CAPITAL
Authorised
100 000 000 (December 2009: 100 000 000) ordinary
shares of no par value
Issued
94 958 000 (December 2009: 94 958 000) ordinary
shares of no par value 228 605 228 605
6 CAPITAL EXPENDITURE COMMITMENTS
Contracted 1 135 58
Authorised, but not contracted 58 240 29 487
Total capital expenditure commitments 59 375 29 545
7 ABBREVIATED SEGMENTAL ANALYSIS
Operating
R`000 Revenue profit (loss)
December 2010
South African sales operation 2 049 623 63 748
South African manufacturing and logistics
operation 2 155 565 51 696
European operation 532 495 (34 006)
Rest of Africa and other international operations 540 929 18 581
All other operations - 5 064
Inter-segmental eliminations (1 867 921) 19 554
Total 3 410 691 124 637
December 2009 - restated
South African sales operation 1 693 975 (29 332)
South African manufacturing and logistics
operation 1 135 860 (254 200)
European operation 391 448 (68 731)
Rest of Africa and other international operations 845 665 (11 742)
All other operations - (9 197)
Inter-segmental eliminations (1 367 799) 109 776
Total 2 699 149 (263 426)
R`000 Assets Liabilities
December 2010
South African sales operation 784 432 742 630
South African manufacturing and logistics
operation 1 675 770 490 071
European operation 381 263 315 627
Rest of Africa and other international operations 238 637 170 058
All other operations 362 975 29 470
Inter-segmental eliminations (797 797) (521 285)
Total 2 645 280 1 226 571
December 2009 - restated
South African sales operation 931 261 906 041
South African manufacturing and logistics
operation 1 773 631 598 598
European operation 527 842 409 453
Rest of Africa and other international operations 323 332 250 425
All other operations 546 423 154 146
Inter-segmental eliminations (1 176 375) (812 984)
Total 2 926 114 1 505 679
The group`s reportable segments changed in the current year as a result of
changes in the structure of the internal organisation.
Amounts reported for the prior year have been restated accordingly.
31 December 31 December
2010 2009
8 CONTINGENT LIABILITIES
8.1 The repurchase of units sold to customers and
financial institutions has been guaranteed by
the group for an amount of 3 105 6 903
In the event of repurchase, it is estimated that
these units would presently realise 9 512 17 475
Net contingent liability - -
8.2 The group has assisted customers with the
financing of equipment purchased through a
financing venture with WesBank, a division of
FirstRand Bank Limited.
In respect of the different categories of
financing provided by WesBank, the group is liable
for the full balance due to WesBank by default customers
with regard to Bell-backed deals and a portion
of the balance with regard to Bell-shared risk deals.
At year-end the amount due by customers to WesBank
for which the group is liable totalled 124 110 151 517
In the event of default, the units financed would
be recovered and it is estimated that they would
presently realise the following towards the above
liability 117 294 146 862
6 816 4 655
Less: provision for non-recovery 4 900 6 239
Net contingent liability 1 916 -
Where customers are in arrears with WesBank and
there is a shortfall between the estimated
realisation values of units and the balance due by
the customers to WesBank, an assessment of
any additional security is done and a provision
for any shortfall is made.
8.3 The residual values of certain equipment sold
to financial institutions has been guaranteed
by the group.
In the event of a residual value shortfall, the
group would be exposed to an amount of 12 985 12 100
Less: provision for residual value risk 1 255 844
Net contingent liability 11 730 11 256
The above includes deposits held by financial institutions as security for
residual values on units guaranteed by the group. The recoverability of these
deposits is dependent on the units realising the guaranteed residual values at
the end of the guarantee period. The provision for residual value risk is based
on the assessment of the probability of return of the units.
9 DIRECTORS` UPDATE ON GOING CONCERN
The going concern risks experienced by the group in the last two years have been
mitigated. Sales and production volumes reflect a steady upward trend, the
restructured cost base has been maintained and the group has reported a modest
profit for the year. Initiatives implemented to optimise inventory levels
continue to show results and inventory and borrowings reduced further in 2010.
The group has substantial reserves to meet the challenges and opportunities that
arise in the period ahead. The strategy is to continue driving the initiatives
that will secure the long-term sustainability of the business. Cash generation
and liquidity remain a priority. Sales forecasts for 2011 reflect further
improvement in the market and this will also have a positive impact on the
trading results. The directors believe that the going concern assumption is
appropriate.
10 INDEPENDENT AUDITORS` REPORT
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the year ended 31 December 2010.
The audit was conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. These abridged results have been
derived from the group financial statements and are consistent in all material
respects with the group financial statements. A copy of their audit report is
available for inspection at the company`s registered office. Any reference to
future financial performance included in this announcement has not been reviewed
or reported on by the company`s auditors.
11 SUBSEQUENT EVENTS
No fact or circumstance material to the appreciation of this report has occurred
between 31 December 2010 and the date of this report.
Chairman`s review
I am pleased to bring you my first annual Chairman`s review since having assumed
the chairmanship of Bell Equipment Limited during the course of the financial
year.
Financial overview
The aftermath of the global economic crisis of 2008/9 continued to be felt
throughout most of 2010. Fortunately, however, the severe austerity measures
taken by management during 2009 and 2010 under the board`s direction have paid
off and have resulted in a dramatic turnaround in the group`s results. The
losses incurred in the 2009 financial year are a thing of the past and the
current year`s results now reflect a profit of R37 million (2009: R272 million
loss). In earnings per share terms this translates into 27 cents per share as
compared with the loss per share of 274 cents in the prior year. Whilst the
earnings for the year under review are modest, they represent a significant
improvement, something we hope will continue through 2011 and the next few years
that follow thereafter.
Possibly the most significant aspect of the group`s financial results was the
generation of cash - R338 million for the year under review. This will be
expanded upon when I address the improvements in Bell`s statement of financial
position below.
The turnaround in profitability can be attributed to a number of factors. Sales
revenue has increased by 26% in comparison with the previous year with fourth-
quarter sales, in particular, showing significant growth over each of the other
three quarters.
Another meaningful contributor to the turnaround has been the reduction in group
overheads, which dropped by R208 million to R734 million. The most significant
part of this reduction was the improvement in manufacturing and services labour
and overhead recoveries of R128 million. This was as a direct result of the
increased sales volumes, and hence production, in the second half of the year.
Whilst on the subject of production, it is worth noting that Bell`s two
production facilities, in Richards Bay and Kindel, Germany, are operating at
well below their respective optimum capacities. The group therefore has little
need for any major capital expansion in the immediate future.
The second major contribution towards the reduction in group overheads was a
drop in staff costs of R56 million.
As readers of Bell`s financial results will see, the company has made
significant strides during 2010 in reducing its borrowings and hence the net
interest paid. This latter expense has been almost halved to R58 million (2009:
R109 million). Through much better management of the group`s working capital and
the relatively modest profits achieved during the year, Bell generated a
positive cash flow of R338 million, thereby enabling net short-term interest
bearing debt to be reduced to R58 million - a far cry from the R668 million
which existed a mere 24 months ago. Non-current interest bearing liabilities
have also been significantly reduced to R84 million from R218 million a year
prior.
The remainder of the statement of financial position of the group has also
improved by comparison with the previous year-end. Inventories are down to R1,36
billion, a R263 million reduction. In terms of days inventory on hand at the
year-end, this measure has been improved to 184 days by comparison with 273 days
at the end of the previous financial year. Trade and other receivables are
slightly higher - R447 million (2009: R412 million) - but this is only because
of the dramatically improved sales in the months of November and December 2010.
If measured in terms of days of sales outstanding, year-end receivables
represent 48 days, a 14% improvement on the same measure in 2009. Management is
committed to reducing both of these ratios even further in the year ahead.
The group`s capital and reserves have remained virtually unchanged at R1,4
billion with net asset value amounting to R14,94 per share.
In a geographic context, the European operations remained depressed for much of
the year under review. Signs of activity started emerging in certain European
countries during the second half of 2010 with the result that the German factory
has recommenced production, albeit only on a modest scale. Enquiries have
continued into 2011 which is encouraging for the year ahead. The Africa region
constituted approximately 80% of group sales in 2010 and with prices of most
commodities having risen to the extent that they have, many new mining projects
are coming on stream and existing mining operations are being expanded. This
helped Bell in the latter part of 2010 and should continue to provide the group
with opportunities for its earth moving equipment going forward. It has also
become evident that many customers chose to run their fleets longer than would
normally be the case as a result of the economic downturn. It is likely that in
a number of these instances customers will need to start replacing their older
machines thereby adding further impetus to demand.
Sustainability and corporate governance
As is often the case, economic downturns force companies to take a hard look at
their existing structures and strategies. This was no different for Bell
following the 2008/9 global meltdown. As a result of this introspection a number
of operational improvements were identified. Some of these have already been
implemented and are bearing fruit. Others require a process and will only start
to bear fruit in time to come. The board has approved a plan proposed by
management which should see significant gains being reaped over the next three
years. This plan has been broken down into a number of different business
improvement projects and progress will be closely monitored by the board at its
quarterly meetings.
During the course of 2010, the board decided to split the functions of risk and
audit overview. As a result, a new Risk and Sustainability Committee was
established to strengthen the focus on risk and sustainability issues. The Audit
Committee`s terms of reference were amended to allow it to concentrate on the
group`s internal control, legislative compliance and financial reporting issues.
Transformation
We continue to engage with government at various levels on a meaningful basis.
As South Africa`s leading earthmoving, construction, mining and materials
handling equipment provider, we are extremely supportive of all initiatives to
bolster our economy and improve prospects for the creation of employment in our
industry, and in particular, for the communities surrounding our Richards Bay
factory. In this context, we remain fully supportive of the Industrial Policy
Action Plan (IPAP2) with its purpose of expanding production in the value- added
sectors where high employment and growth multipliers are present. We look
forward to ongoing interaction with government as we seek to find ways in which
we can profitably develop the local supply base and increase employment. The
group is continually endeavouring to develop an employee profile in its local
operations that is more inclusive and representative of the South African
demographic mix.
Outlook
The outlook for the year ahead is encouraging notwithstanding the fact that the
economies of many of the countries in which Bell operates still look fragile and
are only likely to show modest growth. Fortunately for the group, the rises in
commodity prices are resulting in considerably increased mining activity which
in turn has seen a sizeable improvement in our order book for mining related
products. The construction industry is showing only modest signs of recovery and
is unlikely to have a dramatic impact on improving turnover in the year ahead.
The difficulty of obtaining financing facilities by our customers over the past
two or three years has undoubtedly had a retarding effect on our sales. However,
we are now experiencing an improving borrowing environment for our customer base
and this will significantly enhance their propensity to purchase new equipment.
Finally, management are in the process of securing new products to complete the
range of Bell`s offering and this too will be positive for the group going
forward.
Appreciation
I conclude this report by congratulating management on turning the financial
position of the group around and thanking them for their tireless efforts in
doing so. They, like the board, know that the job is far from complete and
understand the need to continue the programme of improvement in order to deliver
to our stakeholders their rightful expectations of a successful global
organisation. To my fellow directors, I also express my sincere thanks for their
support and dedicated and professional input into the affairs of the group.
Michael Mun-Gavin
Non-executive Group Chairman
9 March 2011
Directors: MA Mun-Gavin* (Chairman), GW Bell (Group Chief Executive),
KJ van Haght (Group Financial Director), DM Gage (USA)#, L Goosen,
K Manning (USA)#, D de Bastiani (USA)#, J R Barton*, B Harie*, TO Tsukudu*,
DJJ Vlok*
Alternate directors: TA Averkamp (USA)#, GP Harris, AR McDuling
# Non-executive directors * Independent non-executive directors
Changes in the composition of the board since 1 July 2010:
Mr BW Schaffter resigned as a director on 1 November 2010
Mr D de Bastiani was appointed as a director on 1 November 2010
Mr TA Averkamp was appointed as an alternate director on 1 November 2010
Ms B Harie was appointed as a director on 19 November 2010
Mr JW Kloet, who was an alternate director, passed away on 14 January 2011
Company Secretary: R Verster
Registered office: 13 - 19 Carbonode Cell Road, Alton, Richards Bay, 3900
Transfer secretaries: Link Market Services South Africa (Pty) Limited,
PO Box 4844, Johannesburg
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
www.bellequipment.com
Date: 14/03/2011 10:00:04 Produced by the JSE SENS Department.
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