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BELL EQUIPMENT LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 68/13656/06)
("BELL")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 1998
CONSOLIDATED INCOME STATEMENT
12 MONTHS 10 MONTHS
R'000 DEC 1998 DEC 1997
REVENUE 942 685 849 220
CONTINUING OPERATIONS 898 238 784 055
DISCONTINUED OPERATIONS 44 447 65 165
OPERATING INCOME 22 297 26 266
NET FINANCE COSTS (29 817)_ (22 880)
(LOSS)/INCOME FROM DISCONTINUED OPERATIONS (16 546) 7 889
RESTRUCTURING COSTS (8 497) -
(LOSS)/INCOME BEFORE TAXATION (32 553) 11 275
TAXATION 149 4 376
(LOSS)/INCOME AFTER TAXATION (32 702) 6 899
ATTRIBUTABLE TO OUTSIDE SHAREHOLDERS 1 243 (296)
ATTRIBUTABLE TO SHAREHOLDERS (31 459) 6 603
SHARES IN ISSUE 000 (WEIGHTED AVERAGE) 63 248 63 248
(LOSS)/EARNINGS PER SHARE (CENTS) (50) 10
HEADLINE (LOSS)/EARNINGS PER SHARE (60) 9
DIVIDEND PER ORDINARY SHARE - -
NET ASSET VALUE PER SHARE (CENTS) 266 319
CONSOLIDATED BALANCE SHEET
CAPITAL EMPLOYED
STATED CAPITAL 41 641 41 641
NON-DISTRIBUTABLE RESERVES 17 165 52 750
RETAINED INCOME 103 311 107 275
SHAREHOLDERS' EQUITY 162 117 201 666
OUTSIDE SHAREHOLDERS - 5 245
NET BORROWINGS 262 229 243 980
DEFERRED TAX 4 290 8 861
TOTAL CAPITAL EMPLOYED 428 636 459 752
PROPERTY, PLANT AND EQUIPMENT 29 782 103 857
INVESTMENTS 16 070 1 999
INVENTORY 359 986 348 998
ACCOUNTS RECEIVABLE 121 587 128 439
ACCOUNTS PAYABLE (102 733) (126 587)
TAXATION 3 944 5 046
TOTAL CAPITAL EMPLOYED 428 636 459 752
ABBREVIATED CASH FLOW STATEMENT
CASH OPERATING INCOME BEFORE
WORKING CAPITAL CHANGES 1 217 40 046
CASH INVESTED IN WORKING CAPITAL (29 990) (108 565)
NET FINANCE COSTS PAID (31 585) (24 117)
TAXATION PAID (2 846) (14 244)
NET CASH UTILISED (63 204) (106 880)
DIVIDENDS PAID - (4 427)
NET PROCEEDS FROM (INVESTED IN)
PROPERTY, PLANT AND EQUIPMENT
AND INVESTMENTS 48 432 (8 890)
SHARE CAPITAL ISSUED - 30
OUTSIDE SHAREHOLDERS (5 245) 705
NET INCREASED BORROWINGS 20 017 119 462
1. COMMENTARY ON RESULTS
THE FINANCIAL YEAR ENDED 31 DECEMBER 1998 SAW A CONTINUATION OF 1997'S POOR
RESULTS. AFTER MAKING LOSSES IN THE FIRST QUARTER, THE SECOND AND THIRD
QUARTERS WERE PROFITABLE. HOWEVER, THE LAST QUARTER SAW A SIGNIFICANT DROP IN
DEMAND. INCREASED COMPETITION ACTIVITY SAW A SERIOUS DECLINE IN GROSS PROFIT
RESULTING IN A LOSS OF R30,8 MILLION FOR THE FOURTH QUARTER. EXTREMELY HIGH
INTEREST RATES AND THE FLUCTUATING RAND/DOLLAR RATE OF EXCHANGE AGGRAVATED THE
LACK OF SALES RESULTING IN HIGHER LEVELS OF WORKING CAPITAL. DURING THE YEAR
SEVERAL OFFSHORE OPERATIONS WERE DISCONTINUED AND THE SOUTH AFRICAN
MANUFACTURING AND DISTRIBUTION OPERATIONS WERE RESTRUCTURED, INCURRING ONCE OFF
COSTS OF R8,5 MILLION. THE FULL BENEFITS OF THE RATIONALISATION PROGRAMME
ANNOUNCED LAST YEAR WILL BE FELT DURING THE CURRENT YEAR.
THE BOARD WAS AND STILL IS EXTREMELY RELUCTANT TO FURTHER CUT BACK PRODUCTION
WITH RESULTANT JOB LOSSES AND LOSS OF TRAINED PERSONNEL. WE NEED OUR EMPLOYEES
TO DEAL WITH THE EXPECTED UPTURN IN THE MARKET PLACE WITHOUT INCURRING TRAINING
COSTS AND SO THAT THERE IS NO DELAY IN TAKING ADVANTAGE OF THE BENEFITS OF THE
STRATEGIC ALLIANCE. FOR THIS REASON IT HAS NOT BEEN POSSIBLE TO REDUCE
OVERHEADS IN LINE WITH THE REDUCED TURNOVER AND MARGINS.
DESPITE THE SLOW START TO THE CURRENT YEAR THE BOARD IS CONFIDENT OF THE LONGER
TERM PROSPECTS GIVEN THE CHANGES IN OUR INTERNATIONAL DISTRIBUTION RESULTING
FROM OUR PARTNERSHIP WITH DEERE. WE HAVE HAD SUCCESS IN EUROPE AND HOPEFULLY
AFTER THE CONCLUSION OF THE GENERAL ELECTIONS IN SOUTH AFRICA, CONFIDENCE WILL
RETURN TO THE LOCAL MARKET. THE MARKET ACCEPTANCE OF THE "C" SERIES MODELS
WORLDWIDE WILL RESULT IN BETTER MEDIUM TERM PROSPECTS.
THE INJECTION OF CAPITAL WILL REDUCE THE INTEREST COSTS AND THIS WILL
SIGNIFICANTLY ASSIST THE GROUP TO RETURN TO OVERALL PROFITABILITY.
2. Y2K COMPLIANCE
THE GROUP IS IMPLEMENTING A STRATEGY TO ACHIEVE ACCEPTABLE LEVELS OF YEAR 2000
COMPLIANCE BY OCTOBER 1999. FORMAL STRUCTURES AND PROCESSES HAVE BEEN
ESTABLISHED WITHIN A PROJECT STRUCTURE FOCUSING ON MAJOR EXPOSURES.
3. DIVIDEND
IN VIEW OF THE LOSSES AND NEGATIVE CASH FLOW, THE BOARD OF DIRECTORS HAS
DECIDED NOT TO DECLARE A DIVIDEND FOR THE YEAR.
4. STRATEGIC ALLIANCE PARTNERSHIP
AS WAS ANNOUNCED ON 19 MARCH 1999 THE COMPANY HAS ENTERED INTO VARIOUS
AGREEMENTS WITH JOHN DEERE CONSTRUCTION EQUIPMENT AND ITS AFFILIATES. THESE
INCLUDE:
* A SUBSCRIPTION FOR 30 MILLION NEW SHARES AT R6,00 PER SHARE FOR A 32%
INTEREST IN YOUR COMPANY;
* SOLE DISTRIBUTION RIGHTS FOR ARTICULATED DUMP TRUCKS FOR DEERE IN NORTH,
CENTRAL AND SOUTH AMERICA;
* A SHAREHOLDERS' AGREEMENT IN TERMS OF WHICH THE BELL FAMILY WHO CONTROL
NEARLY 45 MILLION SHARES, HAVE GRANTED DEERE AN OPTION TO PURCHASE THEIR SHARES
AT US$1.45 PER SHARE PLUS OR MINUS ANY INCREASE OR DECREASE IN THE NET ASSET
VALUE OF R2,56 UP TO DATE OF PURCHASE. THIS OPTION IS VALID FOR SEVEN YEARS.
THESE TRANSACTIONS ARE STILL SUBJECT TO A HART SCOTT RODINE FILING IN NORTH
AMERICA, BUT NO PROBLEMS ARE FORESEEN DUE TO THE COMPLEMENTARY NATURE OF THE
GROUP'S OPERATIONS.
FULL DETAILS OF THESE TRANSACTIONS WILL BE CONTAINED IN A CIRCULAR TO BE SENT
TO SHAREHOLDERS SHORTLY AND ARE SUBJECT TO APPROVAL BY SHAREHOLDERS AND THE
RELEVANT AUTHORITIES.
ON BEHALF OF THE BOARD
HJ BUTTERY GW BELL
CHAIRMAN CHIEF EXECUTIVE
DIRECTORS
GW BELL, PA BELL, PC BELL, HJ BUTTERY, MA CAMPBELL, DI CAMPBELL (ALT), GP
HARRIS, PJC HOME*, M MABUYAKHULU*, RD MARCUS*, DJJ VLOK* (*NON-EXECUTIVE
DIRECTORS).
