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BEL
BEL
BEL - Bell Equipment Limited - Reviewed interim report for the six months ended
30 June 2011
Bell Equipment Limited
("Bell" or "the group" or the "company")
(Incorporated in the Republic of South Africa)
(Share code: BEL)
ISIN: ZAE000028304 Registration number: 1968/013656/06
Reviewed interim report for the six months ended 30 June 2011
Condensed consolidated statement
of financial position as at
30 June 2011 Reviewed Reviewed Audited
30 June 30 June 31 December
R`000 2011 2010 2010
ASSETS
Non-current assets 734 757 733 242 733 472
Property, plant and equipment
(note 5) 499 998 453 898 481 023
Intangible assets 80 724 51 124 70 775
Interest-bearing investments and
long-term receivables 20 199 57 632 34 378
Deferred taxation 133 836 170 588 147 296
Current assets 2 448 546 1 972 427 1 911 808
Inventory 1 635 284 1 396 041 1 355 613
Trade and other receivables and
prepayments 695 621 496 570 457 890
Current portion of interest-bearing
long-term receivables 36 139 27 256 40 359
Other financial assets 461 2 054 -
Taxation 4 045 8 031 4 285
Cash resources 76 996 42 475 53 661
TOTAL ASSETS 3 183 303 2 705 669 2 645 280
EQUITY AND LIABILITIES
Capital and reserves 1 561 282 1 408 147 1 418 709
Stated capital (note 6) 228 605 228 605 228 605
Non-distributable reserves 110 529 99 852 90 488
Retained earnings 1 197 821 1 075 959 1 087 162
Attributable to equity holders of
Bell Equipment Limited 1 536 955 1 404 416 1 406 255
Non-controlling interest 24 327 3 731 12 454
Non-current liabilities 267 677 365 210 255 540
Interest-bearing liabilities 83 041 218 410 84 175
Repurchase obligations and deferred
leasing income 89 994 54 614 79 902
Deferred warranty income 70 888 73 072 66 735
Long-term provisions and lease
escalation 23 754 19 114 24 728
Current liabilities 1 354 344 932 312 971 031
Trade and other payables 944 588 511 343 699 158
Current portion of interest-bearing
liabilities 3 373 34 985 4 974
Current portion of repurchase
obligations and
deferred leasing income 62 390 26 620 61 926
Current portion of deferred warranty
income 22 785 18 733 23 852
Current portion of provisions and
lease escalation 42 796 36 815 41 783
Other financial liabilities 278 303 4 271
Taxation 23 599 11 744 23 138
Short-term interest-bearing debt 254 535 291 769 111 929
TOTAL EQUITY AND LIABILITIES 3 183 303 2 705 669 2 645 280
Number of shares in issue (`000) 94 958 94 958 94 958
Net asset value per share (cents) 1 644 1 483 1 494
Condensed consolidated
income statement
for the six months
ended 30 June 2011 Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2011 2010 2010
Revenue 2 141 708 1 502 344 3 410 691
Cost of sales (1 644 956) (1 177 975) (2 684 220)
Gross profit 496 752 324 369 726 471
Other operating income 63 787 63 496 132 180
Expenses (400 507) (350 773) (734 014)
Profit from operating activities
(note 2) 160 032 37 092 124 637
Net interest paid (note 3) (8 902) (36 013) (58 404)
Profit before taxation 151 130 1 079 66 233
Taxation (35 928) 9 669 (29 509)
Profit for the period 115 202 10 748 36 724
Profit for the period attributable
to:
- equity holders of Bell Equipment
Limited 103 329 8 323 25 576
- non-controlling interest 11 873 2 425 11 148
Earnings per share (basic)
(note 4) (cents) 109 9 27
Earnings per share (diluted)
(note 4) (cents) 109 9 27
Condensed consolidated statement
of comprehensive income
for the six months ended
30 June 2011 Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2011 2010 2010
Profit for the period 115 202 10 748 36 724
Other comprehensive income (loss)
Exchange differences arising during
the period 24 953 (23 797) (37 295)
Exchange differences on translating
foreign operations 25 611 (21 957) (34 823)
Reclassification to profit or loss
of foreign currency
translation reserve on discontinued
operation (3 340) - -
Exchange differences on foreign
reserves 2 682 (1 840) (2 472)
Loss arising on revaluation of
properties - - (4 054)
Taxation relating to components of
other comprehensive income (loss) - - 1 135
Other comprehensive income (loss)
for the period, net of tax 24 953 (23 797) (40 214)
Total comprehensive income (loss)
for the period 140 155 (13 049) (3 490)
Total comprehensive income (loss)
attributable to:
- equity holders of Bell Equipment
Limited 128 282 (15 474) (14 638)
- non-controlling interest 11 873 2 425 11 148
Condensed consolidated statement
of cash flows for the six months
ended 30 June 2011 Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2011 2010 2010
Cash operating profit before working
capital changes 232 335 67 313 202 325
Cash (utilised in) generated from
working capital (264 778) 133 617 418 724
Cash (utilised in) generated from
operations (32 443) 200 930 621 049
Net interest paid (8 902) (36 013) (58 404)
Taxation (paid) refunded (22 552) 1 183 1 624
Net cash (utilised in) generated from
operating activities (63 897) 166 100 564 269
Net cash flow utilised in investing
activities (63 160) (773) (90 381)
Net cash flow generated from (utilised
in) financing activities 7 786 (18 674) (136 209)
Net cash (outflow) inflow (119 271) 146 653 337 679
Net short-term interest-bearing debt
at beginning of the period (58 268) (395 947) (395 947)
Net short-term interest-bearing debt
at end of the period (177 539) (249 294) (58 268)
Consolidated statement of changes in equity
for the six months ended 30 June 2011
Attributable to equity holders of Bell Equipment Limited
Non-
distributable Retained
R`000 Stated capital reserves earnings Total
Balance at 31 December
2009 - audited 228 605 123 984 1 066 540 1 419 129
Recognition of
share-based payments - 761 - 761
Total comprehensive
(loss) income for the
period - (23 797) 8 323 (15 474)
Realisation of
revaluation reserve on
depreciation of
buildings - (1 522) 1 522 -
Deferred taxation on
realisation of
revaluation reserve on
depreciation of
buildings - 426 (426) -
Balance at 30 June
2010 - reviewed 228 605 99 852 1 075 959 1 404 416
Recognition of
share-based payments - 1 003 - 1 003
Total comprehensive
(loss) income for the
period - (16 417) 17 253 836
Realisation of
revaluation reserve on
depreciation of
buildings - (374) 374 -
Deferred taxation on
realisation of
revaluation reserve on
depreciation of
buildings - 105 (105) -
Transfer of debit
foreign currency
translation reserve to
retained earnings - 6 319 (6 319) -
Balance at 31 December
2010 - audited 228 605 90 488 1 087 162 1 406 255
Recognition of
share-based payments - 2 418 - 2 418
Total comprehensive
income for the period - 24 953 103 329 128 282
Realisation of
revaluation reserve on
depreciation of
buildings - (1 404) 1 404 -
Deferred taxation on
realisation of
revaluation reserve on
depreciation of
buildings - 393 (393) -
Reversal of prior year
transfer of debit
foreign currency
translation reserve to
retained earnings - (6 319) 6 319 -
Balance at 30 June
2011 - reviewed 228 605 110 529 1 197 821 1 536 955
Non-controlling Total capital
R`000 interest and reserves
Balance at 31 December
2009 - audited 1 306 1 420 435
Recognition of
share-based payments - 761
Total comprehensive
(loss) income for the
period 2 425 (13 049)
Realisation of
revaluation reserve on
depreciation of
buildings - -
Deferred taxation on
realisation of
revaluation reserve on
depreciation of
buildings - -
Balance at 30 June
2010 - reviewed 3 731 1 408 147
Recognition of
share-based payments - 1 003
Total comprehensive
(loss) income for the
period 8 723 9 559
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 - audited 12 454 1 418 709
Recognition of
share-based payments - 2 418
Total comprehensive
income for the period 11 873 140 155
Realisation of
revaluation reserve on
depreciation of
buildings - -
Deferred taxation on
realisation of
revaluation reserve on
depreciation of
buildings - -
Reversal of prior year
transfer of debit
foreign currency
translation reserve to
retained earnings - -
Balance at 30 June
2011 - reviewed 24 327 1 561 282
Abbreviated notes to interim report for the six months ended 30 June 2011
1. ACCOUNTING POLICIES
The accounting policies and methods of computation are consistent with those
applied in the financial statements for the year ended 31 December 2010, which
complied with International Financial Reporting Standards, except for the
adoption of new and revised Standards and Interpretations.
In the current period the group has adopted all of the new and revised Standards
and Interpretations relevant to its operations and effective for annual
reporting periods beginning 1 January 2011. The adoption of these new and
revised Standards and Interpretations has not had any significant impact on the
amounts reported in this interim report, but instead have primarily resulted in
disclosure changes.
The following revised Standards adopted in the current year affected the
disclosure in this interim report:
Amendments to IAS 34 - Interim Financial Reporting
The amendments clarified certain disclosures relating to events and transactions
that are significant to an understanding of the changes in the group`s
circumstances since the last annual financial statements. This interim report
reflects these amended disclosure requirements, where applicable.
This interim report complies with International Accounting Standard 34 - Interim
Financial Reporting, AC 500 Standards as issued by the Accounting Practices
Board, the disclosure requirements of the JSE Limited`s Listing Requirements and
the requirements of the Companies Act of South Africa. The preparation of this
interim report was supervised by the Group Financial Director, KJ van Haght CA
(SA).
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2011 2010 2010
2. PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is
arrived at after taking into account:
Income
Currency exchange gains 47 649 63 579 113 868
Decrease in warranty provision 3 006 1 695 -
Deferred warranty income 21 181 22 834 42 507
Import duty rebates 26 235 21 226 44 845
Royalties 2 240 1 120 2 677
Net surplus on disposal of property,
plant and equipment and intangible
assets 119 101 -
Expenditure
Amortisation of intangible assets 5 778 4 437 8 782
Auditors` remuneration - audit and other
services 3 739 3 789 8 629
Currency exchange losses 52 556 55 477 132 217
Depreciation of property, plant and
equipment 46 337 45 018 93 746
Increase in warranty provision - - 5 178
Net loss on disposal of property, plant
and equipment and intangible
assets - - 180
Operating lease charges
- equipment and motor vehicles 11 136 10 321 20 623
- land and buildings 30 703 29 688 59 500
Research expenses (excluding staff costs) 10 987 10 943 16 093
Staff costs 395 329 268 574 547 511
3. NET INTEREST PAID
Interest paid 14 731 43 205 69 890
Interest received (5 829) (7 192) (11 486)
Net interest paid 8 902 36 013 58 404
4. EARNINGS PER SHARE
Basic earnings per share is arrived at
as follows:
Profit for the period attributable to
equity holders of
Bell Equipment Limited (R`000) 103 329 8 323 25 576
Weighted average number of ordinary
shares in issue
during the period (`000) 94 958 94 958 94 958
Basic earnings per share (cents) 109 9 27
Diluted earnings per share is arrived at
as follows:
Profit for the period attributable to
equity holders of
Bell Equipment Limited (R`000) 103 329 8 323 25 576
Fully converted weighted average number
of shares (`000) 94 963 94 966 94 960
Diluted earnings per share (cents) 109 9 27
Headline earnings per share is arrived
at as follows:
Profit for the period attributable to
equity holders of
Bell Equipment Limited (R`000) 103 329 8 323 25 576
Net (surplus) loss on disposal of
property, plant and
equipment and intangible assets (R`000) (119) (101) 180
Tax effect of net (surplus) loss on
disposal of property,
plant and equipment and intangible
assets (R`000) 33 28 (50)
Reclassification of foreign currency
translation reserve
on discontinued operation (R`000) (3 340) - -
Headline earnings (R`000) 99 903 8 250 25 706
Weighted average number of
ordinary shares in issue during
the period (`000) 94 958 94 958 94 958
Headline earnings per share
(basic) (cents) 105 9 27
Diluted headline earnings per share is
arrived at as follows:
Headline earnings calculated
above (R`000) 99 903 8 250 25 706
Fully converted weighted average
number of shares (`000) 94 963 94 966 94 960
Headline earnings per share
(diluted) (cents) 105 9 27
5. PROPERTY, PLANT AND EQUIPMENT
Net book value at beginning of
the period 481 023 520 452 520 452
Loss on revaluation - - (4 054)
Additions 107 634 12 515 108 099
Disposals (48 877) (27 329) (36 457)
Depreciation (46 337) (45 018) (93 746)
Translation differences 6 555 (6 722) (13 271)
Net book value at end of the period 499 998 453 898 481 023
Additions for the six months ended June
2011 include rental assets reclassified
from inventory of R92,2 million (June
2010: R7,8 million).
6. STATED CAPITAL
Authorised
100 000 000 (June 2010: 100 000 000)
ordinary shares of no par value
Issued
94 958 000 (June 2010: 94 958 000)
ordinary shares of no par value 228 605 228 605 228 605
7. CAPITAL EXPENDITURE COMMITMENTS
Contracted 8 400 2 739 1 135
Authorised, but not contracted 34 415 26 748 58 240
Total capital expenditure commitments 42 815 29 487 59 375
8. ABBREVIATED
SEGMENTAL ANALYSIS Operating
R`000 Revenue profit (loss) Assets Liabilities
June 2011
South African
sales operation 1 170 073 57 682 766 584 684 712
South African
manufacturing and
logistics
operation 1 242 502 30 277 2 004 252 812 857
European operation 368 455 7 217 540 749 463 877
Rest of Africa and
other
international
operations 354 635 45 820 385 441 244 621
All other
operations - 1 854 397 416 34 312
Inter-segmental
eliminations (993 957) 17 182 (911 139) (618 358)
Total - reviewed 2 141 708 160 032 3 183 303 1 622 021
June 2010
South African
sales operation 883 078 19 448 849 143 815 842
South African
manufacturing and
logistics
operation 610 641 (21 380) 1 671 995 511 008
European operation 261 135 (7 560) 416 354 318 767
Rest of Africa and
other
international
operations 354 189 8 265 307 073 234 833
All other
operations - 1 836 398 250 35 858
Inter-segmental
eliminations (606 699) 36 483 (937 146) (618 786)
Total - reviewed 1 502 344 37 092 2 705 669 1 297 522
December 2010
South African
sales operation 2 049 623 63 748 784 432 742 630
South African
manufacturing and
logistics
operation 2 155 565 51 696 1 675 770 490 071
European operation 532 495 (34 006) 381 263 315 627
Rest of Africa and
other
international
operations 540 929 18 581 238 637 170 058
All other
operations - 5 064 362 975 29 470
Inter-segmental
eliminations (1 867 921) 19 554 (797 797) (521 285)
Total - audited 3 410 691 124 637 2 645 280 1 226 571
Abbreviated notes to interim report for the six months ended 30 June 2011
(continued)
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R`000 2011 2010 2010
9. CONTINGENT LIABILITIES
9.1 The repurchase of units sold to
customers and financial institutions
has been guaranteed by the group for
an amount of 3 476 1 618 3 105
In the event of repurchase, it is
estimated that these units would
presently realise 4 870 4 324 9 512
Net contingent liability - - -
9.2 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 period end the amount due by
customers to WesBank for which the
group is liable totalled 87 286 151 342 124 110
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 86 452 136 455 117 294
834 14 887 6 816
Less: provision for non-recovery 1 600 6 500 4 900
Net contingent liability - 8 387 1 916
Where customers are in arrears with
WesBank and there is a shortfall
between the estimated realisation values
of units and the balances due
by the customers to WesBank, an
assessment of any additional security is
done and a provision for any shortfall
is made.
9.3 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 8 843 15 484 12 985
Less: provision for residual value risk - 533 1 255
Net contingent liability 8 843 14 951 11 730
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.
10. RELATED PARTY TRANSACTIONS
Shareholders
John Deere Construction and Forestry
Company
- sales 87 643 15 488 61 367
- purchases 259 477 142 345 398 967
- amounts owing to 111 743 92 779 66 501
- amounts owing by 31 447 10 316 4 235
11. INDEPENDENT AUDITORS` REPORT
The financial information set out in the interim report has been reviewed, but
not audited, by the company`s auditors, Deloitte & Touche. Their unmodified
review report is available for inspection at the company`s registered office.
12. SUBSEQUENT EVENTS
No fact or circumstance material to the appreciation of this interim report has
occurred between 30 June 2011 and the date of this report.
Chairman and Chief Executive Officer`s review
INTRODUCTION
We are pleased to report on Bell`s positive financial results for the first six
months of the 2011 financial year. In particular, it is pleasing to advise
shareholders that the company has shown a sizeable improvement in profitability
and that with a full order book, it is envisaged that this will continue through
the second half of the current financial year.
ECONOMIC OVERVIEW
In recent weeks all eyes have been focused on the USA and their struggle to
address their liquidity crisis. Whilst it is encouraging to see that they have
overcome their immediate debt constraints, it is patently obvious that they are
not going to emerge from their economic problems overnight. This, together with
the various Eurozone concerns, suggests that global markets are going to take
years rather than months before they emerge from these troubled times.
Notwithstanding these difficulties, Bell has benefitted from the fact that such
times invariably result in increasing demand for commodities, resulting in
greater demand for the company`s products which service the mining industry.
FINANCIAL RESULTS
The company has recorded first half earnings of R115 million (June 2010: R11
million) which is equivalent to 109 cents per share (June 2010: 9 cents per
share). There were three major contributors to this significant improvement in
profitability: sales increased by 43%, gross profit margins improved to 23,2%
and interest on borrowings reduced by 75% to just R8,9 million for the period
under review.
The company`s net asset value per share has risen by a little under 11% since
June 2010 to 1,644 cents. Gearing has been more than halved over the past year
to 17% (June 2010: 36%) although this figure has risen since the last year- end
as a result of the additional inventory and receivables being carried in order
to accommodate the increased sales demand. The board and management are well
aware of the risks posed by allowing these two elements of the company`s working
capital to rise unchecked and it is expected that borrowings at year-end will
have reduced once more. In line with these increases, trade payables have
similarly risen reflecting the surge in business towards the end of the period
under review.
The statement of cash flows explains more fully the consequences of Bell`s
gearing up of its operations in the second quarter. The demands on its working
capital together with outflows due to taxation and investing activities have
resulted in a net outflow for the six months of R119 million. As alluded to
above, a positive cash flow is anticipated in the second half of the year.
OPERATIONS REVIEW
Despite the current uncertainties in the global markets, the ongoing demand for
our product and high order book has led Bell to increase production at its South
African and German factories. Coupled to the increased production an additional
approximately 1 000 people have been employed during the past 12 months.
Currently both manufacturing facilities are running at about 75% of capacity
bringing production and employment levels close to the company`s pre-recession
position.
A national strike in the Metal and Engineering industries at the beginning of
July impacted negatively on production. Production schedules have since been
adjusted to reduce the backlog over a relatively short period of time.
The first six months have been challenging in terms of the supply of production
materials, including castings, tyres and hydraulic components. Cost recovery
will continue to improve into the second half with cost escalation being fully
recovered through market pricing.
Overall the company has maintained its market share during this period. Although
certain products lost market share in South Africa due to supply constraints,
this situation should ease in the remaining six months. However, it is
particularly pleasing to note that the Bomag products have gained substantial
ground.
As part of Bell`s drive to offer a full product range, the company has signed a
distribution agreement with Liebherr to sell excavators into Africa and South
Africa. These machines will be launched in these territories in September and
should offer increased revenue during the second half of 2011.
While there is a high level of uncertainty in global markets, certain sectors
are active including some territories in sub-Saharan Africa where the mining and
agricultural industries have experienced a strong rebound, as well as
Australasia, which is being driven strongly by mining.
Government policies relating to infrastructure and industrialisation continue to
be positive for Bell. Good progress has been made with the Medium & Heavy
Commercial Vehicle Programme (M&HCV) and the Motor Industry Development
Programme (MIDP) review and it is possible that support will also be forthcoming
for other Bell products classified as "yellow metal" products, especially in
relation to research, development and localisation. Concerns remain around
effective implementation of steps for South Africa to become more competitive,
maintain a stable Rand and increase job creation.
Meanwhile Bell`s R&D teams continue to work to keep the company at the cutting
edge of technology and are forging ahead with future product upgrades. In a
recent development, Bell ADTs in Europe are now fitted with the Mercedes Benz
SCR (Selective Catalytic Reduction) engine, which is Stage 3b exhaust emissions
compliant, keeping the brand at the forefront of global innovation.
CAUTIONARY
As readers may be aware, Bell is presently trading under a cautionary
announcement. The issues being deliberated are nearing resolution but at the
date of this report are not complete, with the result that we are unable to
offer any further clarity at this stage.
PROSPECTS
We are confident that the second half to the financial year will continue to be
encouraging, notwithstanding the uncertain global economic situation. The rise
in commodity prices has resulted in increasing mining activity worldwide with
the result that Bell`s order book for mining related products is as full as it
has ever been.
Michael Mun-Gavin Gary Bell
Chairman Chief Executive
05 August 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)#, RM
Buchignani (USA)#, JR Barton*, B Harie*, TO Tsukudu*, DJJ Vlok*
Alternate directors: TA Averkamp (USA)#, GP Harris, AR McDuling
Resignations: D de Bastiani (26 July 2011)
Appointments: RM Buchignani (5 August 2011)
# Non-executive directors * Independent non-executive directors
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, 2000
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 10/08/2011 11:11:07 Produced by the JSE SENS Department.
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