| Mon 14 Nov 2011, 7:06 | | BWI - B & W Instrumentation and Electrical Limited - Audited condensed |
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BWI
BWI
BWI - B & W Instrumentation and Electrical Limited - Audited condensed
consolidated results for the year ended 31 August 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")
Audited condensed consolidated results for the year ended 31 August 2011
Revenue up 13,7%
Order book R360 million
Loss after tax R15,8 million
Loss per share 7,8 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited as Audited as
at 31 August at 31 August
2011 2010
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 32 543 36 939
Goodwill 7 368 7 368
Intangible assets 2 553 3 404
Investments in subsidiaries - -
Deferred tax 10 924 -
Retention debtors - 15 766
53 388 63 477
Current assets
Inventories 2 547 3 502
Loans to related parties 8 904 3 700
Other financial assets 3 567 3 484
Trade and other receivables 337 407 319 146
Cash and cash equivalents 12 876 71 082
365 301 400 914
Total assets 418 689 464 391
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of parent
Share capital 38 583 38 583
Foreign currency translation reserve 500 315
Retained income 140 776 165 970
179 859 204 868
Non-controlling interest 459 216
180 318 205 084
Liabilities
Non-current liabilities
Finance lease obligations 47 131
Deferred tax - 11 682
47 11 813
Current liabilities
Loans from related parties 4 862 1 634
Loans from shareholders 7 823 -
Financial liabilities 17 508 49 217
Current tax payable 17 042 6 841
Finance lease obligations 52 158
Trade and other payables 136 877 181 079
Provisions 6 831 8 565
Bank overdraft 47 329 -
238 324 247 494
Total liabilities 238 371 259 307
Total equity and liabilities 418 689 464 391
Number of ordinary shares in issue 204 373 959 204 373 959
Net asset value per share (cents) 88,2 100,4
Net tangible asset value per share (cents) 83,4 95,1
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year ended year ended
31 August 31 August
2011 2010
R`000 R`000
Contract revenue 683 384 601 283
Cost of sales (661 500) (478 158)
Gross profit/(loss) 21 884 123 125
Other income 224 1 040
Operating expenses (45 714) (45 855)
Operating (loss)/profit (23 606) 78 310
Investment revenue 40 3 567
Finance costs (3 619) (323)
(Loss)/profit before taxation (27 185) 81 554
Taxation 11 429 (24 041)
(Loss)/profit for the year (15 756) 57 513
Other comprehensive income:
`Foreign currency translation reserve 187 318
movement
Total comprehensive/(loss) income (15 569) 57 831
(Loss)/profit attributable to:
Owners of the parent (15 997) 57 308
Non-controlling interest 241 205
(15 756) 57 513
(Loss)/profit attributable to:
Owners of the parent (15 997) 57 308
Adjustment for headline earnings - 170 (14)
(profit)/loss on sale of property,
plant and equipment
Headline (loss)/earnings attributable (15 827) 57 294
to ordinary shareholders
Weighted average number of ordinary 204 373 959 201 275 738
shares in issue
Basic and diluted (loss)/earnings per (7,8) 28,5
ordinary share (cents)
Headline (loss)/earnings per ordinary (7,7) 28,5
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R`000 Share Share Treasury Total Foreign
capital premium shares share currency
capital translation
reserve
Group
Balance at 2 43 552 (11 269) 32 285 -
1 September 2009
Changes in equity
Total comprehensive - - - - 315
income for the year
Issue of shares - 6 298 - 6 298 -
Dividends - - - - -
Total changes - 6 298 - 6 298 315
Balance at 2 49 850 (11 269) 38 583 315
1 September 2010
Changes in equity
Total comprehensive - - - - 185
loss for the year
Dividends - - - - -
Total changes - - - - 185
Balance at 2 49 850 (11 269) 38 583 500
31 August 2011
R`000 Total Retained Total Non- Total
reserves income attributable controlling equity
to equity interest
holders of
the group
Group
Balance at 32 285 123 771 156 056 8 156 064
1 September 2009
Changes in equity
Total comprehensive 315 57 308 57 623 208 57 831
income for the year
Issue of shares 6 298 - 6 298 - 6 298
Dividends - (15 109) (15 109) - (15 109)
Total changes 6 613 42 199 48 812 208 49 020
Balance at 38 898 165 970 204 868 216 205 084
1 September 2010
Changes in equity
Total comprehensive 185 (15 997) (15 812) 243 (15 569)
loss for the year
Dividends - (9 197) (9 197) - (9 197)
Total changes 185 (25 194) (25 009) 243 (24 766)
Balance at 39 083 140 776 179 859 459 180 318
31 August 2011
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year ended year ended
31 August 31 August
2011 2010
R`000 R`000
Cash flows from operating activities
Cash generated from/(used in) operations (63 695) 23 305
Interest income 40 3 567
Finance costs (3 619) (323)
Tax paid (977) (19 347)
Net cash from operating activities (68 251) 7 202
Cash flows from investing activities
Purchase of property, plant and equipment (2 168) (14 344)
Sale of property, plant and equipment 215 314
Business combinations/acquisition of subsidiary - (11 653)
Loans to related parties repaid (1 975) (3 097)
Purchase of financial assets (83) (3 484)
Loan advanced by shareholders 7 823 -
Net cash from investing activities 3 812 (32 264)
Cash flows from financing activities
Repayment of other financial liabilities (31 709) (28 800)
(Outflow)/Inflow from finance leases (190) 289
Dividends paid (9 197) (15 109)
Net cash from financing activities (41 096) (43 620)
Total cash movement for the year (105 535) (68 682)
Cash at the beginning of the year 71 082 139 764
Total cash at end of the year (34 453) 71 082
Segmental reporting
South Africa Foreign Total
R`000 operations R`000
R`000
2011
Profit and loss
Contract revenue 338 390* 344 994** 683 384***
Contract costs (332 600)* (328 900)** (661 500)***
Gross profit 5 790 16 094 21 884
Other income 224 - 224
Operating profit 6 014 16 094 22 108
Investment income 40 - 40
Finance costs (3 619) - (3 619)
Depreciation and amortisation (5 949) (1 081) (7 030)
Operating expenses (19 182) (19 502) (38 684)
Taxation 15 759 (4 330) 11 429
Loss after tax (6 937) (8 819) (15 756)
Assets and liabilities
Total assets 321 054 97 635 418 689
Total liabilities (215 617) (22 754) (238 371)
Total 105 437 74 881 180 318
2010
Profit and loss
Contract revenue 320 142* 281 141** 601 283***
Contract costs (263 527)* (214 631)** (478 158)***
Gross profit 56 615 66 510 123 125
Other income 1 040 - 1 040
Operating profit 57 655 66 510 124 165
Investment income 3 567 - 3 567
Finance costs (323) - (323)
Depreciation and amortisation (5 715) (1 183) (6 898)
Operating expenses (20 742) (18 215) (38 957)
Taxation (6 095) (17 946) (24 041)
Profit after tax 28 347 29 166 57 513
Assets and liabilities
Total assets 412 525 51 866 464 391
Total liabilities (228 759) (30 548) (259 307)
Total 183 766 21 318 205 084
* South African segment sales and cost of sales have been reduced by
R24,1 million (2010: R9,8 million) and R32,6 million (2010: R9,8 million)
respectively, due to intersegment sales.
** Foreign operations segment sales and cost of sales have been reduced
by R32,6 million (2010: R9,8 million) and R24,1 million (2010: R9,8
million) respectively, due to intersegment sales.
*** Included above are intercompany sales of R56,7 million (2010: R9,8
million) and cost of sales of R56,7 million (2010: R9,8 million).
COMMENTARY
Basis of preparation
The accounting policies applied in the preparation of these audited
condensed consolidated results ("the results"), 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 annual financial statements for the previous year ended 31
August 2010. The results as set out in this report have been prepared in
terms of IAS 34: Interim Financial Reporting, the Companies Act, 2008
(Act 71 of 2008), and the Listings Requirements of JSE Limited.
Audit opinion
The results for the year ended 31 August 2011 ("the year") have been
audited by B&W`s auditors, Certified Master Auditors Inc. Their
unqualified audit opinion is available for inspection at the company`s
registered office.
Introduction
As indicated, the results for the year reflect a disappointing
performance despite an increase in revenue. The year marked the toughest
in the group`s 38-year history, with significant macro-economic and
operational challenges severely impacting performance (see `Operations`
below).
Nonetheless, B&W`s resilience and sustainability were clearly affirmed by
the successful navigation of the severe cash flow crisis without the
assumption of any long-term debt or capital raising initiatives.
The satisfactory order book in hand at year-end of R360 million and the
anticipated resumption of positive cash flow before December 2011, will
provide the necessary platform to embark on a process of consolidation in
the year ahead that should see a return to profitability by end FY2012.
Group profile
B&W is one of South Africa`s top three niche providers of Electrical and
Instrumentation ("E&I") services and is also 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 to a lesser extent ongoing
maintenance.
Financial results
Revenue increased 13,7% to R683,4 million from R601,3 million in the
previous year. Cross-border (non-South African) work accounted for 50,5%
of group revenue.
Notwithstanding the topline growth, the group recorded a net loss after
tax of R15,8 million (Aug 2010: NPAT R57,5 million) and a decline in
gross margins from 20,5% to 3,2% for the year. This was mainly
attributable to a contract loss incurred in certain foreign contracts and
discounts offered to clients to secure some interim payment pending the
outcome of final fee negotiations. The latter measure was deemed
necessary to manage cash flow. In light of the order book and positive
developments in the first quarter of the current year, B&W is targeting a
return to profitability by the end of FY2012.
Group operating expenses remained constant. Internal re-organisation for
an optimally efficient workforce, including retrenchments will reduce
group costs going forward.
The reduction in the cash balance from R71,1 million to a negative R34,5
million at year-end was primarily due to an increased working capital
cash flow cycle resulting from growth on projects and protracted final
fee negotiations. Although the company`s cash flow deteriorated
substantially as a result, B&W is expected to be cash neutral and moving
to cash positive by December 2011, still without additional long-term
debt.
Capital expenditure has been contained for the year and will be minimal
for the 2012 year. The group`s fleet and equipment are well positioned
for the consolidation phase ahead.
Dividends
In light of the cash position, no dividend has been declared for the
year. It remains group policy to declare a final dividend of 25% of NPAT,
cash flow permitting.
Funding
During the year B&W changed bankers to Standard Bank in view of their
complementary move into Africa and better understanding of the nature of
B&W`s business. In addition, the group secured overdraft facilities of
R50 million in a difficult market.
Operations
Fee negotiations on most major projects delayed final payments and
negatively impacted on profit recognition, margins and cash flow. The
group was compelled to follow the lengthy claims protocols as set out in
the respective contracts. In addition the adverse effect on resources
meant B&W was prevented from taking on additional work at times.
The problem contracts have been successfully concluded and/or resolved
since year-end.
In contrast, Pontins delivered a strong performance maintaining revenue
year-on-year and growing profit.
To counter local pressures B&W continued to aggressively seek work in
Africa.
B&W achieved Level 5 B-BBEE status. Ongoing initiatives are aimed at
improving this further going forward. B&W also maintained an exemplary
safety record, with achievements including the record-breaking 13 million
injury free hours on the Sishen project and 4,5 million injury free hours
on the Ambatovy Project in Madagascar for the E&I works alone.
Subsequent events
The board of directors is not aware of any material matters or
circumstances arising since year-end up to the date of this report.
Prospects
As previously stated the difficult trading and macro-economic conditions
in the group`s sectors of operation are expected to continue for another
12-18 months, with the start of a slow improvement towards the end of
2012. The construction sector`s prospects are closely aligned with the
extent and sustainability of global economic recovery, while power
generation (and renewable energy) looks promising only if regulatory and
environmental issues do not delay or prevent roll-out of projects. Oil &
gas offers more steady prospects, although the first signs of growth have
yet to translate into significant project volumes.
Leveraging Pontins` client base, core business and foothold, B&W intends
to diversify into new revenue streams in the year ahead, namely
commercial and infrastructure projects. The focus will remain primarily
on Africa, albeit with caution and translating previous experience over
the past year into bottom line benefit for the group.
B&W`s order book at year-end, although lower than at the previous year-
end, is satisfactory given the current economic environment and the
group`s consolidation phase ahead. Longer-term opportunities should see a
recovery in order intake and B&W`s pipeline for identified projects
therefore remains substantial.
The directors are confident of resuming a cash positive position before
the end of the 2011 calendar year and are targeting a return to
profitability by the end of FY2012. Key areas of focus for management in
the year ahead will be cash flow and operational efficiencies for margin
improvement. Any general forecast information included in this commentary
has not been reviewed and reported on by the company`s auditors.
Directorate
The following changes to the board of directors took place during the
year:
Appointments
Stephen Pinkney was appointed as an executive director effective 24 June
2011.
Resignations
Ken Nel resigned as executive director effective 31 January 2011. Neels
Minnie and Johan Rall resigned as alternate directors effective 31 March
2011 and 30 April 2011, respectively.
Change in function
During the year John Barrow`s designation changed from executive Chairman
to non-executive Chairman.
Appreciation
We thank our tenacious management teams and determined employees for
their efforts in an extremely challenging year, and our fellow directors
for continuing to guide us through. We also thank our business partners,
clients and shareholders whose ongoing faith in the group has been
inspiring.
John Barrow
Chairman
Brian Harley
Chief Executive Officer
On behalf of the board
14 November 2011
Directors:
John Barrow* (Chairman); Brian Harley (CEO); Danie Evert (Financial
Director); Johan Breedt; Tom Lombard; Dean Nevay; Stephen Pinkney;
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: 14/11/2011 07:06:41 Produced by the JSE SENS Department.
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