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Bell Equipment Ltd - Interim Report For The Six Months Ended 30 June 2003
Release Date: 07/08/2003 17:00:02 Code(s): BEL
Bell Equipment Ltd - Interim Report for the six months ended 30 June 2003
Bell Equipment Ltd
(Incorporated in the Republic of South Africa)
(Share code: BEL ISIN: ZAE000028304)
Registration number 1968/013656/06
("BELL" or "the company")
2003 INTERIM REPORT for the six months ended 30 June 2003
* Revenue up 32%
* Net asset value per share up 2%
Consolidated Balance Sheet
Unaudited Audited at
at 30 June at 30 June 31 December
R"000 2003 2002 2002
ASSETS
Non-current assets 217 120 170 356 178 027
Property, plant and equipment 154 180 136 088 142 284
Investments and long-term receivables 48 681 34 268 30 440
Deferred taxation 14 259 - 5 303
Current assets 1 268 839 1 074 915 1 145 056
Inventory 914 904 716 000 843 994
Trade and other receivables 306 009 281 917 253 171
Current portion of long-term receivables 20 062 40 783 8 250
Prepayments 23 362 24 008 33 714
Taxation 1 518 1 296 1 121
Cash resources 2 984 10 911 4 806
TOTAL ASSETS 1 485 959 1 245 271 1 323 083
EQUITY AND LIABILITIES
Capital and reserves 722 264 708 494 717 688
Stated capital (Note 5) 224 336 223 401 224 308
Non-distributable reserves 47 002 95 845 65 310
Retained earnings 450 926 389 248 428 070
Non-current liabilities 28 461 31 452 6 221
Long-term borrowings 8 840 22 927 6 221
Deferred taxation - 8 525 -
Warranty provision 19 621 - -
Current liabilities 735 234 505 325 599 174
Trade and other payables 383 185 333 184 430 493
Current portion of long-term borrowings 2 792 5 138 2 073
Warranty provision 47 724 32 505 38 794
Taxation - 31 613 20 796
Short-term interest bearing debt 301 533 102 885 107 018
TOTAL EQUITY AND LIABILITIES 1 485 959 1 245 271 1 323 083
Number of shares in issue ("000) 94 219 93 855 94 210
Net asset value per share(cents) 767 755 762
Consolidated Income Statement
Unaudited Audited
6 months 6 months 12 months
ended ended ended
Percentage 30 June 30 June 31 December
R"000 change 2003 2002 2002
Revenue 32 1 457 672 1 106 679 2 386 356
Cost of sales 48 1 144 815 772 949 1 768 707
Gross profit (6) 312 857 333 730 617 649
Other operating income 7 37 261 34 780 73 202
Distribution costs 17 (197 582) (168 812) (336 378)
Administration expenses (25) (32 884) (43 823) (82 016)
Other operating expenses 10 (23 950) (21 867) (41 231)
Profit from operating activities (29) 95 702 134 008 231 226
Net finance costs (Note 2) 155 42 298 16 557 56 144
Profit before taxation (Note 3) (55) 53 404 117 451 175 082
Taxation (60) 12 488 31 201 49 481
Net profit for the period (53) 40 916 86 250 125 601
Earnings per share (basic) (cents)
(Note 4) (53) 43 92 134
Earnings per share (diluted) (cents)
(Note 4) (53) 43 91 133
Headline earnings per share (basic)
(cents) (Note 4) (53) 43 92 133
Headline earnings per share (diluted)
(cents) (Note 4) (53) 43 91 132
Proposed dividend per share (cents) - - - 15
Abbreviated Cash Flow Statement
Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R"000 2003 2002 2002
Cash operating profit before
working capital changes 114 104 122 670 211 408
Cash invested in working capital (160 704) (19 272) (30 917)
Cash (applied to) generated from operations (46 600) 103 398 180 491
Net finance costs paid (42 298) (18 393) (57 718)
Taxation paid (42 637) (21 703) (64 402)
Net cash (applied to) from operating
activities 131 535) 63 302 58 371
Dividend paid (14 131) (9 385) (9 385)
Invested in property, plant, equipment,
investments and long-term receivables (54 037) (49 698) (16 814)
Net cash (outflow) inflow (199 703) 4 219 32 172
Proceeds from shares issued 28 46 953
Net increase in (repayment of) borrowings 199 675 (4 265) (33 125)
Funding requirement (cash surplus applied) 199 703 (4 219) (32 172)
Statement of Changes in Equity
Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R"000 2003 2002 2002
Equity at the beginning of the period 717 688 661 553 661 259
Changes in share capital 28 46 953
Issue of share capital 28 46 953
Changes in non-distributable reserves (18 308) (29 673) (60 208)
Realisation of revaluation reserve on
depreciation of buildings (121) (120) (241)
Increase in legal reserve of foreign
subsidiary 319 417 773
Decrease in currency translation reserve (18 191) (29 597) (63 569)
Exchange differences on foreign reserves (315) (373) 2 829
Changes in retained earnings 22 856 76 568 115 684
Effect of adoption of AC133:
Adjustment to opening retained income in respect
of fair value of embedded forward exchange
derivatives in sales contracts (3 731) - -
Net profit for the period 40 916 86 250 125 601
Transfer from revaluation reserve on
depreciation of buildings 121 120 241
Transfer to legal reserve of foreign subsidiary (319) (417) (773)
Dividend (14 131) (9 385) (9 385)
Equity at the end of the period 722 264 708 494 717 688
Notes to Interim Report
Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R"000 2003 2002 2002
1. ACCOUNTING POLICIES
The accounting policies of the group
comply with South African
Statements of Generally Accepted Accounting
Practice applicable
to Interim Financial Reporting, and,
except for the adoption of
AC133, Financial Instruments: Recognition
and Measurement, are consistent with those
applied for the previous year.
As a result of adopting AC133, embedded
forward exchange derivatives in sales
contracts, which were previously not recognised
in the financial statements, are now
accounted for on the balance sheet at fair
value, with all changes in fair value
being recognised in
the income statement in the period to
which they relate.
2. NET FINANCE COSTS
Net interest paid 8 243 10 662 12 947
Net currency exchange losses 34 055 7 731 44 771
Net finance costs paid 42 298 18 393 57 718
Financial instrument income - (1 836) (1 574)
Net finance costs 42 298 16 557 56 144
3. PROFIT BEFORE TAXATION
Profit before taxation is arrived
at after taking into account:
Income
Import duty rebates 17 452 19 092 41 236
Net surplus on disposal of property, plant
and equipment 30 83 320
Expenditure
Auditors" remuneration 1 868 2 214 3 540
Depreciation of property, plant
and equipment 12 118 9 518 19 904
Operating lease charges - equipment and
motor vehicles 2 119 2 157 9 012
- properties 5 747 4 701 9 934
Research and development expenses 21 537 19 177 38 950
Staff costs 175 257 161 205 320 617
Increase in warranty provision 28 551 9 423 15 486
4. EARNINGS PER SHARE
The calculation of earnings per share is based on profit after
taxation and the weighted average number of ordinary shares
in issue during the period. The weighted average number of
shares in issue for the period under review was 94 214 225
(June 2002: 93 846 539). On a diluted basis, the fully converted
weighted average number of shares is 94 976 175
(June 2002: 94 977 689).
Headline earnings is arrived at after excluding the net surplus on
disposal of property, plant and equipment as reflected in Note 3.
5. STATED CAPITAL
Authorised
100 000 000 (June 2002: 100 000 000)
ordinary shares of no par value
Issued
94 218 800 (June 2002: 93 854 800)
ordinary shares of no par value 224 336 223 401 224 308
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 4 875 - 323
Authorised, but not contracted 10 171 4 865 49 925
Total capital expenditure commitments 15 046 4 865 50 248
7. SEGMENTAL ANALYSIS
Geographical segments
The group operates in two principal geographical areas:
Operating
R"000 Revenue profit Assets Liabilities
June 2003
South Africa 680 406 46 079 1 100 870 679 873
Rest of world 777 266 49 623 385 089 83 822
Total 1 457 672 95 702 1 485 959 763 695
June 2002
South Africa 610 577 129 147 977 284 479 133
Rest of world 496 102 4 861 267 987 57 644
Total 1 106 679 134 008 1 245 271 536 777
Unaudited at Audited at
30 June 30 June 31 December
R"000 2003 2002 2002
8. CONTINGENT LIABILITIES
8.1 An action has been instituted against
a subsidiary of the
company for a substantial amount.
As previously reported,
the action is being defended and the
continuing view of the
company"s legal advisersis that the
company has good grounds
for successfully opposing the claims.
After consideration and
based on this legal advice, the Board is
satisfied that the
company will not suffer any material loss.
8.2 The group has guaranteed the
repurchase of units sold for an
amount of 178 440 165 407 164 536
In the event of repurchase, these units,
in the opinion of the
directors, would realise at least the
value stated above. The risk
of a shortfall between repurchase
price and realisable value
has been insured.
9. EXCHANGE RATES
The following major rates of 30 June 2003 30 June 2002 31 December 2002
exchange were used: Weighted Weighted Weighted
average Closing average Closing average Closing
Euro:
United States $ 1,12 1,15 0,90 0,99 0,95 1,05
SA Rand:
United States $ 7,88 7,48 10,81 10,21 10,32 8,58
British GBP:
United States $ 1,62 1,65 1,45 1,53 1,51 1,61
10 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 unqualified report is available for
inspection at the company"s registered office.
Chairman"s Statement
As expected, results for the six months are disappointing but are consistent
with the 27% strengthening of the Rand against the US dollar over the past 12
months. Revenue for the six months was at an all time high, up 32% on the
comparable period last year, of which 53% were exports. During the six months
ended June 2002, we obtained an average Rand rate of R10,81 for each US dollar
earned from export proceeds whilst we only earned R7,88 for each US dollar
export in this six month period. In terms of volume, sales for the six months
were up nearly 50% on the comparable period.
Net operating profit was R96 million as compared to R134 million and there
was a R105 million drop in gross profit as compared with the budget, both caused
exclusively by the strengthening of the Rand.
The net asset value has increased by 5 cents per share to R7,67 since the
beginning of the year after a 15-cent per share dividend was paid in the period
under review. The strengthening Rand also reduced the currency translation
reserves, and thereby equity, by R19 million, equating to 20 cents per share.
Cash flow was R200 million negative despite an improvement in working capital
(trade cycle) days down from 136 to 121 days year on year. With an increase in
turnover and volumes coupled with capital expenditure of R54 million and below
budgeted profits, it is to be expected that borrowings will come under pressure.
Inventory days at 145 are lower than budget and are 29 days better than at the
last year end, however, inventory is up in value by R71 million due to increased
trading activity. Financing charges have increased by R26 million compared with
June 2002 due to currency exchange losses arising from a strengthening Rand. R15
million was charged to finance charges in the period in compliance with the new
accounting standard AC133 - Financial Instruments: Recognition and Measurement.
Net interest paid was lower than the comparable period last year.
Another feature of our results is the decision by the directors to provide,
on a more conservative basis, for specific future warranties in an ongoing
comprehensive product improvement programme. This additional provision has
resulted in a charge of R33 million against profits for the six-month period.
The consequences of a strong Rand are of great concern, as South Africa is
fast becoming an import favourable led economy. This is going to force Bell to
increase the import of third party products and at the same time change the
focus of our German plant, due to be commissioned in October, from assembly to
manufacture. Our desire is for South Africa to be an export led economy but this
needs a realistic exchange rate to be competitive. The next six months" trading
results are dependent on future exchange rates.
In view of the disappointing results and continued strength of the Rand,
management has increased its resolve to aggressively reduce overheads and
working capital in the coming six months. It is anticipated that this programme
will see an improvement in debt equity ratios, manufacturing efficiency, costs
and quality.
H J Buttery
7 August 2003
Bell Equipment Ltd
(Incorporated in the Republic of South Africa)
(Share code: BEL ISIN: ZAE000028304)
Registration number 1968/013656/06
("BELL" or "the company")
Directors: H J Buttery (Group Chairman), G W Bell (Group Chief Executive),
P C Bell, M A Campbell, *P J C Horne, *D J J Vlok, *T D Kgobe,
*P LeRoy (USA), *G P Harris, *J W Kloet (USA), *M O Rysa (Finnish)
(*Non-executive Directors)
Alternate Directors: P A Bell, D I Campbell, D B Rhind, C D Anderson (USA),
MA Guinn (USA)
Company Secretary: D P Mahony
Registered Office Transfer Secretaries
13 - 19 Carbonode Cell Computershare Limited
Alton 70 Marshall Street
Richards Bay Johannesburg
