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BEL
BEL
BEL - Bell equipment - Audited results for the year ended 31 December 2006
and dividend declaration
Bell Equipment Limited
(Incorporated in the Republic of South Africa)
Registration number 1968/013656/06
Share code: BEL ISIN: ZAE000028304
("Bell" or "the Company")
Audited results for the year ended 31 December 2006
- Profit after tax up R244 million
- Earnings per share up 258 cents
- Net asset value up 36,5%
- Cash generated from operations R292 million
Condensed consolidated balance sheet
Restated
At 31 December At 31 December
R`000 2006 2005
ASSETS
Non-current assets 368 315 295 765
Property, plant and equipment 318 140 229 755
Intangible assets 7 074 7 639
Investments and long-term receivables 20 637 50 885
Deferred taxation 22 464 7 486
Current assets 1 673 937 1 345 842
Inventory 1 219 834 928 838
Trade and other receivables 378 983 361 812
Current portion of long-term receivables 15 271 12 128
Prepayments 10 486 7 732
Taxation 1 623 2 194
Cash resources 47 740 33 138
Total assets 2 042 252 1 641 607
EQUITY AND LIABILITIES
Capital and reserves 954 912 699 259
Stated capital (Note 5) 226 185 225 946
Non-distributable reserves 55 490 36 921
Retained earnings 673 237 436 392
Non-current liabilities 158 371 89 401
Interest-bearing liabilities 2 319 4 754
Repurchase obligations and deferred
leasing income 133 253 69 176
Deferred warranty income 11 724 6 576
Long-term provisions and lease 11 075 8 895
escalation
Current liabilities 928 969 852 947
Trade and other payables 557 330 390 340
Current portion of interest-bearing
liabilities 2 467 2 731
Current portion of repurchase
obligations
and deferred leasing income 17 021 8 639
Current portion of deferred warranty
income 5 291 -
Current portion of provisions and lease
escalation 70 748 65 967
Taxation 88 741 -
Short-term interest-bearing debt 187 371 385 270
Total equity and liabilities 2 042 252 1 641 607
Number of shares in issue (`000) 94 817 94 763
Net asset value per share (cents) 1 007 738
Condensed consolidated income statement
For year ended
31 December 31 December
R`000 2006 2005
Revenue 3 533 177 3 209 233
Cost of sales 2 739 263 2 701 658
Gross profit 793 914 507 575
Other operating income 102 604 92 615
Distribution costs (415 194) (441 523)
Administration expenses (60 307) (62 615)
Other operating expenses (45 963) (48 773)
Profit from operating activities 375 054 47 279
Net finance costs (Note 2) 28 017 43 459
Profit before taxation (Note 3) 347 037 3 820
Taxation 110 880 12 017
Profit (loss) for the year 236 157 (8 197)
Earnings (loss) per share (basic)(cents)
(Note 4) 249 (9)
Earnings (loss) per share
(diluted)(cents) (Note 4) 249 (9)
Proposed dividend per share (cents) 25 -
Condensed cash flow statement
For year ended
Restated
31 December 31 December
R`000 2006 2005
Cash operating profit before working
capital changes 436 268 94 103
Cash invested in working capital (143 931) (23 146)
Cash generated from operations 292 337 70 957
Net finance costs paid (28 017) (43 459)
Taxation (paid) refunded (36 269) 501
Net cash generated from operating
activities 228 051 27 999
Net cash flow applied to investing
activities (100 904) (41 085)
Net cash flow from financing activities 85 354 33 422
Net cash inflow 212 501 20 336
Statement of changes in equity
for the year ended 31 December 2006
Retained
Stated Non- earnings
capital distributable (accumulated
R`000 reserves loss) Total
Balance at 31 December
2004 224 414 33 147 443 901 701 462
Share options exercised 1 532 - - 1 532
Effect of change in tax
rate on surplus on
revaluation of - 265 - 265
properties
Realisation of
revaluation reserve on
depreciation of - (688) 688 -
buildings
Exchange differences on
translation
of foreign operations - 2 666 - 2 666
Exchange difference on
foreign reserves - 1 531 - 1 531
Net loss for the year - - (8 197) (8
197)
Balance at 31 December
2005 225 946 36 921 436 392 699 259
Share options exercised 239 - - 239
Realisation of
revaluation reserve on
depreciation of - (688) 688 -
buildings
Exchange differences on
translation of
foreign operations - 18 577 - 18 577
Exchange difference on
foreign reserves - 680 - 680
Net profit for the year - - 236 157 236
157
Balance at 31 December
2006 226 185 55 490 673 237 954 912
Abbreviated notes to audited results
1. ACCOUNTING POLICIES
The financial statements from which these results have been summarised have been
prepared in accordance with International Financial Reporting Standards (IFRS)
and are consistent with those applied to the previous year, except for the
adoption of all of the new and revised Standards and Interpretations issued by
the International Accounting Standards Board (the IASB) and the International
Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are
relevant to the group`s operations and effective for annual reporting periods
beginning on 1 January 2006. The financial statements have been prepared on the
historical cost basis except for the revaluation of certain properties and
financial instruments, and adjustments, where applicable, in respect of
hyperinflation accounting. This abridged report complies with Interim Financial
Reporting (IAS 34).
For year ended
Restated
31 December 31 December
R`000 2006 2005
2. NET FINANCE COSTS
Net interest paid 21 127 22 404
Net currency exchange losses 6 890 21 055
Net finance costs 28 017 43 459
3. PROFIT BEFORE TAXATION
Profit before taxation is arrived at after taking into account:
Income
Import duty rebates 30 940 42 116
Royalties 30 419 1 133
Expenditure
Auditors` remuneration - audit and other
services 4 377 10 811
Amortisation of intangibles 249 551
Depreciation of property, plant and
equipment 39 910 31 015
Increase in warranty provision 4 831 16 212
Loss (surplus) on disposal of property,
plant and equipment 3 450 (2 372)
Operating lease charges
- equipment and motor vehicles 20 047 16 320
- properties 18 007 15 946
Research and development expenses
(excluding staff costs) 17 123 10 072
Staff costs 515 417 408 987
4. EARNINGS (LOSS) PER SHARE
The calculation of earnings (loss) per share is based on profit (loss) after
taxation and the weighted average number of ordinary shares in issue during the
year. The weighted average number of shares in issue for the year under review
was 94 770 619 (December 2005: 94 566 938).
On a diluted basis, the fully converted weighted average number of shares is 94
836 123 (December 2005: 94 633 599).
Headline earnings (loss) per share is arrived at as follows:
Profit (loss) for the year 236 157 (8 197)
Loss (surplus) on disposal of property,
plant and equipment 2 450 (2 372)
Headline earnings (loss) 238 607 (10 569)
Headline earnings (loss) per share 252 (11)
5. STATED CAPITAL
Authorised
100 000 000 (December 2005: 100 000 000)
ordinary shares of no par value - -
Issued
94 816 900 (December 2005: 94 763 400)
ordinary shares of no par value 226 185 225 946
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 5 531 475
Authorised but not contracted 95 309 44 591
Total capital expenditure commitments 100 840 45 066
7. ABBREVIATED SEGMENTAL ANALYSIS
Geographical segments
The group operates in two principal geographical areas
Operating
R`000 Revenue profit Assets Liabilities
December 2006
South Africa 1 720 506 295 573 1 458 397 758 821
Rest of world 1 812 671 79 481 583 855 328 519
Total 3 533 177 375 054 2 042 252 1 087 340
December 2005
South Africa 1 372 508 55 271 1 193 701 712 307
Rest of world 1 836 725 (7 992) 447 906 230 041
Total 3 209 233 47 279 1 641 607 942 348
Restated
at 31 at 31
December December
R`000 2006 2005
8. CONTINGENT LIABILITIES
8.1 The repurchase of units sold to customers and
financial institutions has been guaranteed by the
group for an amount of 41 305 134 900
In the event of repurchase, it is estimated that
these units would presently realise 49 262 151 078
(7 957) (16 178)
Less: provision for residual value risk (1 991) (4 477)
Net contingent liability - -
The provision for residual value risk is based on the assessment of the
probability of return of the units.
8.2 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 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 year-end the amount due by customers to
Wesbank
in respect of these transactions totalled 61 275 90 758
In the event of default, the units financed would
be recovered and it is estimated that they would
presently realise (60 482) (76 957)
793 13 801
Less: provision for non-recovery (14 700) (9 795)
Net contingent liability - 4 006
To the extent that customers are both in arrears with Wesbank and there is a
shortfall between the estimated realisation values of units and the balance due
by the customers to Wesbank, a provision for the full shortfall is made.
8.3 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 13 943 8 496
Less: provision for residual value risk (3 002) (3 650)
Net contingent liability 10 941 4 846
The provision for residual value risk is based on
the assessment of the probability of return of
the units.
8.4 Certain trade receivables have been
discounted
with financial institutions for an amount of 6 266 5 943
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 6 266 5 943
2006 2005
Weighted Year Weighted Year
average end average end
9. EXCHANGE RATES
The following major rates of
exchange
were used:
Euro: United States $ 1,26 1,32 1,24 1,18
SA Rand: United States $ 6,80 6,98 6,36 6,33
British GBP: United States $ 1,85 1,97 1,81 1,72
10. ANNUAL FINANCIAL STATEMENTS
The annual financial statements of the group have been audited by the company`s
auditors, Deloitte & Touche. Their unqualified report is available for
inspection at the registered office of the company.
Commentary
I am pleased to report that for the year under review the group has recorded the
highest pre and post-tax profit in its 54-year history, having earned for
shareholders a net profit after tax of R236,2 million for the year. Almost
without exception all subsidiaries and divisions worldwide were profitable and
our offshore operations produced record after tax profits of R78,9 million
Whilst revenue increased by only 10,09% to R3,533 billion our gross profit was
up by R286,3 million, an increase of 56,41% due to lower manufacturing costs, a
weaker Rand/Euro exchange rate and most importantly by improved price
realisation as a result of the re-negotiation of our previously unprofitable
North American supply contract. Profitability was also increased by the local
manufacture of the side shift Tractor Loader Backhoe and the expanded Front End
Loader product line, in South Africa, through collaboration with our partner
John Deere.
The worldwide increase in commodity prices particularly in the mining industry
and increased fixed investment has helped increase the demand for our range of
equipment and as a result, gross profit margins. The increase in parts and kits
turnover by R185,88 million (33,52%) has played a significant role in increasing
our overall gross profit and is a focus area for future growth both in terms of
customer service as well as revenue and gross profit. Exports were down R24,1
million but still represent 51,3% of our total revenues.
Operating profit for the year increased by R327,78 million to R375,05 million.
This stemmed from increased gross profit and other operating income, which grew
by 10,79% largely as a result of increased royalty income from our alliance
partner and shareholder John Deere, who substantially increased their production
of ADTs during the year under review.
Overheads were once again well contained with a total decrease of R31,45 million
or 5,69%, which is a great tribute to our ongoing cost containment exercise
driven through our Project 100 Plus Programme. Over the past few years we have
faced a relatively high level of warranty claims, which was 3,46% of total sales
in 2005. I am pleased to report that warranty has dropped to 2,30% of total
sales in 2006 as a result of the robust solutions and increased quality in our
design and manufacturing process.
Net finance costs dropped by R15,44 million as a result of lower borrowings and
improved treasury management. Our effective tax rate of 31,95% remains high but
this is expected to reduce with the new amendments to the Income Tax Act.
Once again our Southern African distribution operations have achieved excellent
results and I would particularly like to pay tribute to our operations in
Zambia, the Democratic Republic of Congo and Zimbabwe, which produced results
well in excess of their budgets in challenging circumstances. With the
unprecedented demand for minerals and commodities that the world is experiencing
we expect business in these countries to be particularly strong in the next few
years. Our Board is currently studying and debating further commitment to this
region, which could result in investment of over USD 15 million during the next
twelve months.
All of our European operations were profitable during the year and we were able
to maintain our market share with slightly improved margins. Our business in
South America, albeit relatively small, was up on previous years and for the
first time in many years we were able to supply more than one hundred units to
that continent.
The debt/equity ratio stands at 15%, this despite an increase in inventory both
in terms of value and days. Inventory management continues to be a challenging
area on which management is strongly focused. Trade cycle (working capital) days
deteriorated from 113 to 128 days as a direct result of increased inventory
levels of R291,0 million. Capital expenditure, excluding that on rental assets
during 2006, amounted to R31,96 million but is budgeted to be over R100 million
in 2007 as a result of restricted expenditure over the last two years in view of
profitability and cash flow constraints. Headline earnings are at 252 cents per
share as compared to the 11 cents per share loss in 2005 and the all-important
net asset value per share increased by R2,69 since the beginning of the year to
R10,07 per share. Bell has been able to generate positive cash flow of R212,50
million in the year under review.
With the Group`s return to profitability and positive cash flow it is now
possible to pay a dividend and the Board has declared a dividend of 25 cents per
share in respect of the year ended 31 December 2006, and it will be paid in
April of this year. Shareholders will appreciate that with the low profitability
over the past two years and cash being required to finance capital expenditure
the dividend needs to be conservative and is hence ten times covered. Hopefully
going forward we can reduce dividend cover depending upon the Group`s cash
requirements at the time of dividend declaration.
The current outlook for Bell is good and should exchange rates weaken further
and commodity prices remain stable, we are well placed to increase our
profitability. We need to continue and accelerate our efforts with sustainable
cost and working capital reductions. Our Project 100 Plus Programme will
continue to reduce both overhead and component costs in 2007.
HJ Buttery
Group Chairman
20 March 2007
Dividend declaration
Notice is hereby given that a final dividend of 25 cents per share (2005: nil)
was declared on 22 March 2007 payable to shareholders recorded in the register
of the company at the close of business on the record date appearing below. The
salient dates pertaining to the final dividend are as follows:
Last day to trade cum final dividend Friday, 13 April 2007
First day to trade ex final dividend Monday, 16 April 2007
Record date Friday, 20 April 2007
Payment date Monday, 23 April 2007
No share certificates may be dematerialised or rematerialised between Monday, 16
April and Friday, 20 April, 2007 both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable,
to certificated shareholders on the payment date. Dematerialised shareholders
will have their account with Central Securities Depository Participant or broker
credited on the payment date.
By order of the Board
DP Mahony
Company Secretary
22 March 2007
Directors: HJ Buttery (Group Chairman), GW Bell (Group Chief Executive),
DL Smythe, KJ van Haght, GP Harris, BW Schaffter*#, JW Kloet*#, DJJ Vlok*, PJC
Horne*,TO Tsukudu*, MA Mun-Gavin*, DM Gage*#
Alternate Directors: PA Bell, PC Bell, MA Campbell (*Non Executive Directors)
(#USA)
Company Secretary: DP Mahony Sponsor: Investec Corporate
Finance
Registered Office: 13 - 19 Carbonode Cell, Alton, Richards Bay
Transfer Secretaries: Link Market Services South Africa (Pty) Ltd
11 Diagonal Street, Johannesburg 2001
Bell Equipment Ltd
(Incorporated in the Republic of South Africa)
(Share code: BEL ISIN: ZAE000028304)
Registration number: 1968/013656/06 ("Bell")
www.bellequipment.com
Date: 22/03/2007 17:00:04 Produced by the JSE SENS Department.
