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Bell - Unaudited Interim Report For The Six Months Ended 30 June 2004
BELL EQUIPMENT LIMITED
(Incorporated in the Republic of South Africa)
Share code: BEL ISIN: ZAE000028304
Registration number 1968/013656/06
(`Bell`)
UNAUDITED INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2004
CONSOLIDATED BALANCE SHEET Unaudited Audited
at 30 June at 30 June at 31 December
R`000 2004 2003 2003
ASSETS
Non-current assets 231,963 217,120 227,768
Property, plant and equipment 147,375 154,180 154,819
Investments and long-term
receivables 67,454 48,681 56,389
Deferred taxation 17,134 14,259 16,560
Current assets 1,111,106 1,268,839 1,170,959
Inventory 810,032 914,904 855,791
Trade and other receivables 258,460 306,009 191,518
Current portion of long-term
receivables 21,579 20,062 20,167
Prepayments 6,684 23,362 39,724
Taxation 4,960 1,518 15
Cash resources 9,391 2,984 63,744
TOTAL ASSETS 1,343,069 1,485,959 1,398,727
EQUITY AND LIABILITIES
Capital and reserves 696,257 722,264 711,257
Stated capital (Note 5) 224,380 224,336 224,352
Non-distributable reserves 25,600 47,002 34,883
Retained earnings 446,277 450,926 452,022
Non-current liabilities 20,030 28,461 29,293
Long-term borrowings 8,540 8,840 8,612
Long-term warranty provision 11,490 19,621 20,681
Current liabilities 626,782 735,234 658,177
Trade and other payables 348,363 383,185 291,291
Current portion of long-term
borrowings 3,803 2,792 4,538
Current portion of warranty
provision 40,277 47,724 56,849
Taxation - - 3,490
Short-term interest bearing
debt 234,339 301,533 302,009
TOTAL EQUITY AND LIABILITIES 1,343,069 1,485,959 1,398,727
Number of shares in issue
(`000) 94,234 94,219 94,224
Net asset value per
share(cents) 739 767 755
CONSOLIDATED INCOME
STATEMENT Unaudited Audited
6 months 6 months 12 months
ended ended ended
R`000 30 June 2004 30 June 2003 31 December 2003
Revenue 1,356,616 1,457,672 2,778,279
Cost of sales 1,091,216 1,144,815 2,173,237
Gross profit 265,400 312,857 605,042
Other operating income 24,366 37,261 66,940
Distribution costs -212,052 -197,582 -411,995
Administration expenses -27,322 -32,884 -59,847
Other operating expenses -24,732 -23,950 -47,431
Profit from operating
activities 25,660 95,702 152,709
Net finance costs (Note
2) 30,035 42,298 76,001
(Loss) profit before
taxation (Note 3) -4,375 53,404 76,708
Taxation 1,491 12,488 40,054
Net (loss) profit for
the period -5,866 40,916 36,654
(Loss) earnings per
share (basic)(cents)
(Note 4) -6 43 39
(Loss) earnings per
share (diluted)(cents)
(Note 4) -6 43 39
Headline (loss) earnings
per share (basic)(cents)
(Note 4) -6 43 39
Headline (loss) earnings
per share
(diluted)(cents) (Note
4) -6 43 39
Proposed dividend per
share (cents) - - -
ABBREVIATED CASH FLOW STATEMENT Unaudited Audited
6 months 6 months 12 months
ended ended ended
R`000 30 June 2004 30 June 2003 31 December 2003
Cash operating profit
before working
capital changes 3,221 114,104 187,237
Cash generated from
(invested in) working capital 68,929 -160,704 -95,356
Cash generated from
(applied to) operations 72,150 -46,600 91,881
Net finance costs paid -30,035 -42,298 -80,492
Taxation paid -10,500 -42,637 -62,599
Net cash generated from
(applied to) operating
activities 31,615 -131,535 -51,210
Dividend paid - -14,131 -14,131
Invested in property, plant ,
equipment, investments
and long-term receivables -17,519 -54,037 -75,612
Net cash inflow (outflow) 14,096 -199,703 -140,953
Proceeds from shares issued 28 28 44
Net (repayment of) increase
in borrowings -14,124 199,675 140,909
(Cash surplus applied) funding
requirement -14,096 199,703 140,953
STATEMENT OF CHANGES IN EQUITY Unaudited Audited
6 months 6 months 12 months
ended ended ended
R`000 30 June 2004 30 June 2003 31 December 2003
Equity at the beginning
of the period 711,257 717,688 717,688
Changes in share capital 28 28 44
Issue of share capital 28 28 44
Changes in non-distributable
reserves -9,283 -18,308 -30,427
Realisation of revaluation
reserve on depreciation
of buildings -121 -121 -240
Increase in legal reserves
of foreign subsidiaries - 319 687
Decrease in foreign currency
translation reserve
of foreign subsidiaries -8,571 -18,191 -31,082
Exchange differences on
foreign reserves -591 -315 208
Changes in retained earnings -5,745 22,856 23,952
Effect of adoption of AC133:
Adjustment to opening retained
earnings in respect of fair value
of embedded forward exchange
derivatives in purchases
and sales contracts - -3,731 829
Net (loss) profit for the period -5,866 40,916 36,654
Transfer from foreign currency
translation reserve on
liquidation of foreign subsidiary - - 1,047
Transfer from revaluation
reserve on depreciation
of buildings 121 121 240
Transfer to legal reserve
of foreign subsidiary - -319 -687
Dividend - -14,131 -14,131
Equity at the end of the period 696,257 722,264 711,257
NOTES TO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2004
Unaudited Audited
6 months 6 months 12 months
ended ended ended
R`000 30 June 2004 30 June 2003 31 December 2003
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
are consistent with those
applied for the previous year.
2 NET FINANCE COSTS
Net interest paid 13,688 8,243 21,233
Net currency exchange losses 16,347 34,055 59,259
Net finance costs paid 30,035 42,298 80,492
Effect of adoption of AC133:
Transitional provision
- currency exchange gains - - -4,491
Net finance costs 30,035 42,298 76,001
3 (LOSS) PROFIT BEFORE TAXATION
(Loss) profit before taxation
is arrived at after taking
into account:
Income
Import duty rebates 11,125 17,452 30,267
Decrease in warranty provision 25,763 - -
Net surplus on disposal of
property,plant and equipment 49 30 -
Expenditure
Auditors` remuneration 2,301 1,868 3,080
Depreciation of property,
plant and equipment 12,535 12,118 24,162
Net loss on disposal of
property, plant and equipment - - 54
Operating lease charges
- equipment and motor vehicles 1,668 2,119 10,313
- properties 7,943 5,747 12,935
Research and development
expenses 11,215 21,537 53,069
Staff costs 167,344 175,257 351,007
Increase in warranty provision - 28,551 38,736
4 (LOSS) EARNINGS PER SHARE
The calculation of (loss) earnings per share is based on (loss) 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 94,228,800 (June 2003: 94,214,225). On a diluted basis,the fully
converted weighted average number of shares is 94,674,328
(June 2003:94,976,175).
Headline (loss) 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 2003:100 000 000)
ordinary shares of no par value
Issued
94 233 500 (June 2003:94 218 800)
ordinary shares of no par
value 224,380 224,336 224,352
6 CAPITAL EXPENDITURE COMMITMENTS
Contracted 1,005 4,875 497
Authorised,but not contracted 5,353 10,171 24,197
Total capital expenditure
commitments 6,358 15,046 24,694
7 SEGMENTAL ANALYSIS
Geographical segments
The group operates in two principal geographical
areas Operating
R`000 Revenue profit
June 2004
South Africa 664,796 8,820
Rest of world 691,820 16,840
Total 1,356,616 25,660
June 2003
South Africa 680,406 46,079
Rest of world 777,266 49,623
Total 1,457,672 95,702
Geographical segments
The group operates in two principal geographical
areas
R`000 Assets Liabilities
June 2004
South Africa 1,024,239 556,935
Rest of world 318,830 89,877
Total 1,343,069 646,812
June 2003
South Africa 1,100,870 679,873
Rest of world 385,089 83,822
Total 1,485,959 763,695
Unaudited Audited
at 30 June at 30 June at 31 December
2004 2003 2003
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 advisers is that the
company has good grounds for
successfully opposing the
claim.
After consideration and based
on this legal advice, the
Board is satisfied that the
company
will not suffer any material
loss.
8.2 The repurchase of units
sold to customers and
financial institutions has
been guaranteed by the
group for an amount of 275,673 231,188 277,056
In the event of repurchase, it
is estimated that these units
would presently realise 274,548 235,386 280,814
8.3 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 a certain
category of this financing
provided
and in the event of default by
customers, the group is at
risk for the full balance due
to Wesbank by the customers.
At period end the amount due
by customers to Wesbank
in respect of these
transactions totalled 160,483 69,618 142,942
In the event of default, the
units financed would be
recovered and it is estimated
that they would presently
realise -153,627 -89,600 -148,898
Net contingent liability
(asset) 6,856 -19,982 -5,956
8.4 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 11,974 - 3,800
8.5 Certain trade receivables
have been discounted
with financial institutions
for an amount of 21,088 12,160 20,028
These transactions are with
recourse to the group.
In the event of default,
certain units could be
recovered and it is estimated
that these units would
presently realise 17,489 9,776 21,091
9 EXCHANGE RATES
30 June 2004
Weighted
The following major rates of exchange were used average Closing
Euro: United States $ 1.22 1.22
SA Rand: United States $ 6.60 6.21
British GBP: United States $ 1.82 1.81
30 June 2003
Weighted
The following major rates of exchange were used average Closing
Euro: United States $ 1.12 1.15
SA Rand: United States $ 7.88 7.48
British GBP: United States $ 1.62 1.65
31 December 2003
Weighted
The following major rates of exchange were used average Closing
Euro: United States $ 1.14 1.26
SA Rand: United States $ 7.40 6.62
British GBP: United States $ 1.65 1.78
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 FOR SIX MONTHS ENDED 30 JUNE 2004
Much as expected, the results for the six months ended 30 June 2004 are
disappointing but are consistent with the 17% strengthening of the Rand against
the US dollar over the past twelve months. Revenue for the six months was down
7% but at the same time, volume was up 3% on the comparative period. Exports as
a percentage of sales were 51%, down from the comparative period, but export
volumes were up 12%. During the six months ended June 2003 we obtained an
average rate of R7,88 for each US dollar earned from export proceeds whilst we
only earned R6,60 for converting each US dollar in this six month period. 56%
of our exports are sold in Euros and 44% in US dollars, fortunately the
strengthening of the Euro against the dollar by 9% in the comparative period
assisted sales greatly. Bell has now converted all its export sales to Euros
except sales directly to the United States.
Net operating profit was R25,7 million as compared to R95,7 million and there
was a R47,5 million drop in gross profit from the comparable period, both caused
predominantly by the strengthening of the Rand. If management actions had not
been taken the drop would have been larger. Net asset value has decreased by 16
cents per share since the beginning of the year. The strengthening Rand also
reduced the currency translation reserves, and thereby equity, by R9,2 million
equating to 10 cents per share of the above reduction.
One pleasing aspect of these results was the R14,1 million positive cash flow
achieved through the improvement in working capital (trade cycle) days down from
122 to 111 days. With an increase in volumes coupled with capital expenditure
and increase in investments and long term receivables of R17,5 million and
losses, this achievement is a tribute to management`s continued commitment to
reduce working capital. The increase in volumes through our German assembly
plant has played a large role in driving down inventory days. With the increase
in production that we expect through this plant in the next six month period, we
believe that even further working capital reductions can be obtained.
Total overheads of R264,1 million are only 4% higher than the comparative period
despite the increase in volumes.
As a consequence of the continued and seemingly sustainable strong Rand, the
strategic focus of Bell is changing. We are now committed to managing our
company with an ever-present strong Rand and the executive team has been re-
structured so as to manage the company and to return it to profitability under
these conditions. We are increasing imports of third party products into South
Africa and we are looking at increasing the sourcing of European manufactured
components for our German assembly plant. Our focus on exports needs to be Euro
driven and the next six months trading results are dependent upon the speed at
which we can implement the changes in our strategic focus and are also once
again dependent on the Rand exchange rates.
Management continues to aggressively reduce product and operating costs, improve
quality and reduce working capital. By far the most pleasing aspect of the past
six months has been the implementation of a profit improvement programme known
as the `Vital Few` that is expected to add significantly to profitability over
the next 12 - 18 months. These plans will also help us leverage the strong
supply management capabilities of Deere and Company to gain the benefits of our
combined purchasing power.
HOWARD J BUTTERY
Group Chairman
26 August 2004
Directors: *CD Anderson (USA), GW Bell (Group Chief Executive), PC Bell,
MA Campbell, HJ Buttery (Group Chairman), GP Harris, *PJC Horne,
*DJJ Vlok, *PE Leroy (USA), *JW Kloet (USA), *SCM Nyembezi,
*TO Tsukudu (*Non Executive Directors)
Alternate Directors: PA Bell, *DM Gage (USA), *MA Guinn (USA), DI Campbell,
DB Rhind, *MO Rysa (Finnish).
Company Secretary: D P Mahony
Registered Office
13 - 19 Carbonode Cell
Alton
Richards Bay
Sponsor
Investec Bank Limited
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Limited Limited
70 Marshall Street
Johannesburg
Date: 25/08/2004 05:15:23 PM Produced by the JSE SENS Department
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