| Mon 18 Apr 2011, 7:05 | | BWI - B & W Instrumentation and Electrical Limited - Reviewed consolidated |
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BWI
BWI
BWI - B & W Instrumentation and Electrical Limited - Reviewed consolidated
interim results for the six months ended 28 February 2011
B & W Instrumentation and Electrical Limited
Incorporated in the Republic of South Africa
(Registration number 2001/008548/06)
Share code: BWI
ISIN: ZAE000098687
("B&W" or "the company" or "the group")
Reviewed consolidated interim results for the six months ended 28 February
2011
Revenue up 55%
Order book R489 million
NPAT R12 million
EPS 6 cents
CONSOLIDATED STATEMENTs OF FINANCIAL POSITION
Reviewed Reviewed Audited
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
ASSETS
Non-current assets 64 000 61 179 63 477
Property, plant and equipment 35 801 31 853 36 939
Deferred tax 5 406 1 492 -
Goodwill 7 368 6 854 7 368
Intangible assets 2 978 3 829 3 404
Retention debtors 12 447 17 151 15 766
Current assets 352 447 276 879 400 914
Inventories 4 318 1 828 3 502
Loans to related parties - - 3 700
Other financial asset 3 525 - 3 484
Trade and other receivables 344 604 205 378 319 146
Cash and cash equivalents - 69 673 71 082
Total assets 416 447 338 058 464 391
EQUITY AND LIABILITIES
Equity 207 782 177 021 205 084
Share capital 38 583 32 285 38 583
Foreign currency translation reserve (144) - 315
Retained income 169 052 144 653 165 970
Minority interest 291 83 216
Non-current liabilities 14 136 11 516 11 813
Deferred tax 14 063 11 345 11 682
Finance lease obligation 73 171 131
Current liabilities 194 529 149 521 247 494
Loans from related parties 5 112 18 1 634
Financial liabilities 24 505 18 515 49 217
Current tax payable 13 424 1 819 6 841
Trade and other payables 105 034 127 387 181 079
Finance lease obligation 49 171 158
Directors` loans 5 329 - -
Bank overdraft 32 718 - -
Provisions 8 358 1 611 8 565
Total equity and liabilities 416 447 338 058 464 391
Number of ordinary shares in issue 204 373 959 200 000 000 204 373 959
Net asset value per share (cents) 101,7 88,5 100,4
Net tangible asset value per share 96,6 83,2 95,1
(cents)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed six Reviewed six Audited 12
months to 28 months to 28 months to 31
February February August 2010
2011 2010 R`000
R`000 R`000
Contract revenue 386 563 248 634 601 283
Cost of contracts (342 749) (191 493) (478 158)
Gross profit 43 814 57 141 123 125
Other income 31 3 278 1 040
Operating expenses (25 104) (18 534) (45 855)
Operating profit 18 741 41 885 78 310
Investment revenue 40 2 575 3 567
Finance costs (1 605) (21) (323)
Profit before taxation 17 176 44 439 81 554
Taxation (4 818) (13 482) (24 041)
Profit for the year 12 358 30 957 57 513
Other comprehensive income
Foreign currency translation (464) - 318
reserve
Total comprehensive income 11 894 30 957 57 831
Profit attributable to:
Owners of the parent 12 279 30 882 57 308
Non-controlling interest 79 75 205
12 358 30 957 57 513
Total comprehensive income
attributable to:
Owners of the parent 11 819 30 882 57 623
Non-controlling interest 75 75 208
11 894 30 957 57 831
Profit attributable to:
Owners of the parent 12 279 30 882 57 308
Adjustment for headline earnings (31) - (14)
- profit on sale of property,
plant and equipment
Headline earnings attributable to 12 248 30 882 57 294
ordinary shareholders
Weighted average number of 204 373 959 200 000 000 201 275 738
ordinary shares in issue
Earnings per ordinary share 6,0 15,5 28,5
(cents)
Headline earnings per ordinary 6,0 15,4 28,5
share (cents)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Foreign
capital premium shares currency
R`000 R`000 R`000 translation
reserve
R`000
Balance at 1 September 2009 2 43 552 (11 269) -
Net profit for the period - - - -
Dividends paid - - - -
Balance at 28 February 2010 2 43 552 (11 269) -
Issue of share capital - 6 298 - -
Net profit for the period - - - 315
Dividends paid - - - -
Balance at 31 August 2010 2 49 850 (11 269) 315
Net profit for the period - - - (459)
Dividends paid - - - -
Balance at 28 February 2011 2 49 850 (11 269) (144)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Distri- Minority Total
butable interest equity
reserve R`000 R`000
R`000
Balance at 1 September 2009 123 771 8 156 064
Net profit for the period 30 882 75 30 957
Dividends paid (10 000) - (10 000)
Balance at 28 February 2010 144 653 83 177 021
Issue of share capital - - 6 298
Net profit for the period 26 426 133 26 874
Dividends paid (5 109) - (5 109)
Balance at 31 August 2010 165 970 216 205 084
Net profit for the period 12 279 75 11 895
Dividends paid (9 197) - (9 197)
Balance at 28 February 2011 169 052 291 207 782
CONSOLIDATED CASH FLOW STATEMENT
Reviewed Reviewed Audited 12
six months six months months 31
28 Feb 28 Feb August
2011 2010 2010
R`000 R`000 R`000
Cash (utilised in)/generated from (77 704) 21 103 23 305
operations
Interest income 40 2 575 3 567
Finance costs (1 605) (21) (323)
Tax paid (1 260) (15 828) (19 347)
Net cash from operating activities (80 529) 7 829 7 202
Purchase of property, plant and (1 806) (2 394) (14 344)
equipment
Sale of property, plant and equipment 144 - 314
Business combinations/acquisition of - (5 354) (11 653)
subsidiary
Loans from related parties 7 178 (1 012) (3 097)
advanced/(repaid)
Purchase of financial assets (41) - (3 484)
Net cash from investing activities 5 475 (8 760) (32 264)
(Repayment of)/proceeds from financial (24 712) (59 502) (28 800)
liabilities
(Payments on)/inflow from finance (167) 342 289
lease
Dividends paid (9 197) (10 000) (15 109)
Proceeds on loans from directors 5 330 - -
Net cash from financing activities (28 746) (69 160) (43 620)
Total cash movement for the year (103 800) (70 091) (68 682)
Cash at the beginning of the year 71 082 139 764 139 764
Total cash at the end of the year (32 718) 69 673 71 082
SEGMENTAL REPORTING
2011
South Foreign Total
Africa Operations R`000
R`000 R`000
Profit and loss
Contract revenue 202 556 184 007 386 563
Contract costs (214 695) (128 054) (342 749)
Gross profit (12 139) 55 953 43 814
Other income 31 - 31
Operating expenses (14 569) (10 535) (25 104)
Operating profit (26 677) 45 418 18 741
Investment income 40 - 40
Finance costs (1 605) - (1 605)
(Loss)/profit before tax (28 242) 45 418 17 176
Assets and liabilities
Total assets 283 854 132 593 416 447
Total liabilities (103 678) (104 987) (208 665)
2010
South Foreign Total
Africa Operations R`000
R`000 R`000
Profit and loss
Contract revenue 126 763 121 871 248 634
Contract costs (101 885) (89 608) (191 493)
Gross profit 24 878 32 263 57 141
Other income 2 598 680 3 278
Operating expenses (18 031) (503) (18 534)
Operating profit 9 445 32 440 41 885
Investment income 2 570 5 2 575
Finance costs (21) - (21)
(Loss)/profit before tax 11 994 32 445 44 439
Assets and liabilities
Total assets 145 292 192 766 338 058
Total liabilities (60 693) (100 344) (161 037)
Basis of preparation
The accounting policies applied in the preparation of these reviewed
consolidated interim financial statements, which are based on reasonable
judgments and estimates, are in accordance with International Financial
Reporting Standards ("IFRS") and are consistent with those applied in the
audited annual financial statements for the year ended 31 August 2010. The
reviewed consolidated interim financial statements as set out in this report
have been prepared in terms of IAS 34: Interim Financial Reporting, the
Companies Act, 1973 (Act 61 of 1973), as amended, and the Listings
Requirements of JSE Limited.
Review opinion
The reviewed consolidated interim results for the period have been reviewed
by B&W`s auditors, Certified Master Auditors Inc. Their unqualified review
opinion is available for inspection at the company`s registered office.
Introduction
As anticipated, the reviewed consolidated interim results for the six months
ended 28 February 2011 ("the interim period") saw a reduction in earnings as
a result of the prevailing difficult trading conditions in the construction
industry. Operating margins continued to be eroded by intensified competition
in a contracting market, and were further impacted by the inevitable
renegotiation of terms on the reinstatement of projects which had been
previously delayed.
However, despite these challenges, B&W`s fundamentals remain sound and the
group`s resilience compares favourably to its peers. An increase in revenue
was driven mainly by reinstated projects.
The working capital cycle has been extended on work in South Africa and even
more so on cross-border contracts, placing increasing pressure on cash flow.
Group profile
B&W is one of South Africa`s top three niche providers of electrical and
instrumentation ("E&I") services as well as an earthing, lightning and surge
protection specialist. Clients range across the oil & gas, infrastructure,
industrial, utilities, mining, chemical and food & beverage industries in sub-
Saharan Africa. Specific services include equipment procurement, project
supervision, installation of the E&I system, post-installation commissioning
and ongoing maintenance.
Financial results
Revenue increased to R387 million from R249 million in the previous
comparative period. Lower operating margins resulted in a decrease in net
profit after tax ("NPAT") and earnings per share ("EPS"), respectively.
Cash on hand decreased from R70 million to a negative R33 million. The tough
market conditions severely impacted cash flow as the group is currently
executing large revenue projects where the bulk of the payment typically only
occurs towards the end of the contract.
Pontins (Proprietary) Limited ("Pontins") was equally impacted by harsh
market conditions and therefore performance was less than optimal.
Funding
B&W has, through discussion with its commercial bankers, introduced a credit
facility including overdraft, foreign exchange and performance bond
facilities. This will be assessed on an ongoing basis to ensure that it meets
the working capital requirements of the company.
Prospects
The group has a track record of over 35 years having successfully weathered
cyclical volatility. B&W will take advantage of the current lull to build
management capacity and position the group to capitalise on opportunities in
the upturn of the construction cycle.
Revenue is expected to remain high in the interim period ahead to year-end.
However, B&W intends to focus on strengthening operating margins and
stabilising cash flow. The critical initiatives to this end will erode
revenue to a certain extent in subsequent years.
There is an indication of initial recovery in the economy. However, the
construction sector, which typically lags the rest of the economy, remains
severely depressed. For B&W, this is compounded by the timing of its services
being at the end of the construction cycle. These conditions are expected to
continue for the rest of 2011 and into 2012. Beyond 2012 the market is
anticipated to normalise and B&W is optimistic about prospects in the longer
term. The group should start benefiting from the roll-out of mining
infrastructure once the current rise in commodity prices feeds through to the
initiation of new mining projects.
Little improvement in market conditions is expected in the short term.
Current market conditions and other prudent considerations are forcing the
group to be more selective of contracts. The order book in hand at 28
February 2011 stood at R489 million.
Directorate
Mr Ken Nel resigned from the board of directors of B&W ("the board") as an
executive director with effect from 31 January 2011, but remains with the
company in the capacity of employee.
Messrs Neels Minnie and Johan Rall, both alternate directors to executive
directors, resigned from the board with effect from 31 March 2011 and 30
April 2011, respectively.
Dividend
In light of the cash position no interim dividend has been declared. It
remains group policy to declare a final dividend of 25% of NPAT, cash flow
permitting.
Subsequent events
The board of directors is not aware of any material matters or circumstances
arising since the end of the interim period up to the date of this report.
Deferred tax
In the prior year, the deferred tax balances were disclosed as current and
non-current. In terms of IAS 1, deferred tax should always be presented as
non-current, even if a portion of the asset or liability will realise within
the next financial period.
As such, the amounts reflected in the statements of financial position, have
been reclassified as non-current.
The restatement has no impact on the net asset position, the statement of
comprehensive income, earnings per share and headline earnings per share.
Group
Statement of financial position February February
2010 2009
Deferred tax - current 10 528 12 503
Deferred tax - non-current (10 528) 12 503
Operating segments
Previously, the group was managed based on the geographical location of its
operations. The basis on which operations are managed has changed in the
period under review to areas of risk and this has necessitated a change to
the disclosures made under the Segmental Reporting Note. The amount
previously reported has also been restated to reflect the changes in the
structure of the group.
John Barrow Brian Harley
Chairman Chief Executive Officer
On behalf of the board
18 April 2011
Directors
John Barrow* (Chairman); Brian Harley (CEO); Danie Evert (Financial
Director); Johan Breedt; Tom Lombard; Dean Nevay; Gary Swanepoel; Sam
Vilakazi; Wolf Wassermeier*; Jimmy Oosthuizen*; Unati Mabandla*.
*Non-executive director
Independent
Registered office
42 Fourth Avenue, Alberton North, 1449
(PO Box 956, Alberton, 1450)
Designated Adviser
Merchantec Capital
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Company secretary
CIS Company Secretaries (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Investor Relations
Envisage Investor & Corporate Relations
Date: 18/04/2011 07:05:13 Produced by the JSE SENS Department.
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