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BELL EQUIPMENT LIMITED - INTERIM REPORT FOR SIX MONTHS ENDED 30/06/98

Release Date: 17/09/1998 16:13
Code(s): BEL
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BELL EQUIPMENT LIMITED

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 1998 CONSOLIDATED INCOME STATEMENT
UNAUDITED AUDITED
6 MONTHS 10 MONTHS
ENDED ENDED
30 JUNE 31 AUG. 31 DEC.
R000 1998 1997 1997
TURNOVER 456 268 534 713 849 220 OPERATING (LOSS) INCOME
(NOTE 1) (3 840) 45 705 34 155
NET FINANCE COSTS (NOTE 2) 4 008 11 767 22 880
(LOSS) INCOME BEFORE TAXATION (7 848) 33 938 11 275
TAXATION 1 294 7 703 4 376
(LOSS) INCOME AFTER TAXATION (9 142) 26 235 6 899 ATTRIBUTABLE TO OUTSIDE
SHAREHOLDERS (424) 74 (296) (LOSS) INCOME ATTRIBUTABLE TO
SHAREHOLDERS (8 718) 26 309 6 603
NO. OF SHARES IN ISSUE (000) 63 248 63 248 63 248 WEIGHTED AVERAGE NUMBER
OF SHARES IN ISSUE (000) 63 248 63 243 63 243 (LOSS) EARNINGS PER
SHARE (CENTS) (14) 42 10
DIVIDEND PER ORDINARY SHARE (CENTS) - - - CONSOLIDATED BALANCE SHEET
UNAUDITED AUDITED
AT AT
30 JUNE 31 AUG. 31 DEC.
R000 1998 1997 1997 CAPITAL EMPLOYED
STATED CAPITAL 41 641 41 641 41 641
NON-DISTRIBUTABLE RESERVES 61 562 48 796 52 750
RETAINED INCOME 97 782 126 974 107 275
SHAREHOLDERS' EQUITY 200 985 217 411 201 666
OUTSIDE SHAREHOLDERS INTEREST 2 848 4 682 5 245
TOTAL SHAREHOLDERS' FUNDS 203 833 222 093 206 911
BORROWINGS 38 748 39 255 40 215
DEFERRED TAX 7 562 11 312 8 861
TOTAL CAPITAL EMPLOYED 250 143 272 660 255 987 EMPLOYMENT OF CAPITAL
FIXED ASSETS 102 805 96 779 103 857
INVESTMENTS AND ASSOCIATES 1 363 1 938 1 999
INVENTORY 389 817 355 814 348 998
RECEIVABLES 173 489 176 132 128 439
PAYABLES (180 492) (208 865) (131 252)
TAXATION 2 563 (9 455) 5 046 NET SHORT TERM INTEREST
BEARING DEBT (239 402) (139 683) (201 100) TOTAL EMPLOYMENT OF
CAPITAL 250 143 272 660 255 987 NET ASSET VALUE PER SHARE
(CENTS) 318 344 319 ABBREVIATED CASH FLOW STATEMENT
UNAUDITED AUDITED
6 MONTHS 10 MONTHS
ENDED ENDED
30 JUNE 31 AUG. 31 DEC.
R000 1998 1997 1997 OPERATING INCOME BEFORE WORKING
CAPITAL CHANGES 6 689 54 662 40 046 CASH INVESTED IN WORKING
CAPITAL (36 629) (85 493) (108 565)
NET FINANCE COSTS PAID (4 751) (12 584) (24 117)
TAXATION PAID (110) (1 162) (14 244)
DIVIDENDS - (4 427) (4 427)
NET CASH FLOW (34 801) (49 004) (111 307) INVESTED IN FIXED ASSETS
AND INVESTMENTS (2 777) (4 209) (8 890)
SHARE CAPITAL ISSUED - 30 30
NET BORROWINGS INCREASED (37 578) (53 183) (120 167) NOTES
UNAUDITED AUDITED
6 MONTHS 10 MONTHS
ENDED ENDED
30 JUNE 31 AUG. 31 DEC.
R000 1998 1997 1997
1. OPERATING (LOSS) INCOME IS ARRIVED AT AFTER ALLOWING FOR:
- DEPRECIATION OF FIXED ASSETS 4 440 5 097 8 706 - OPERATING LEASE CHARGES
- EQUIPMENT AND MOTOR VEHICLES 4 695 4 818 7 919
- PROPERTIES 3 089 4 069 6 028
- RESTRUCTURING COSTS 4 903 - - 2. NET FINANCE COSTS
NET INTEREST PAID 13 878 13 315 25 542
NET CURRENCY EXCHANGE GAINS (9 127) (731) (1 425)
NET FINANCE COSTS PAID 4 751 12 584 24 117
FINANCIAL INSTRUMENT INCOME (743) (817) (1 237)
NET FINANCE COSTS 4 008 11 767 22 880 3. CAPITAL EXPENDITURE R'000 EXPENDED 3 351 AUTHORISED OR COMMITTED 500 TOTAL CAPITAL EXPENDITURE 3 851 4. YEAR 2000 COMPLIANCE
THE COMPANY DOES NOT FORESEE ANY MATERIAL OPERATIONAL DIFFICULTIES (OR RESULTING LIABILITIES) ARISING IN ANY OF THE GROUP'S INFORMATION TECHNOLOGY SYSTEMS AS A RESULT OF PROBLEMS ASSOCIATED WITH THE ADVENT OF THE YEAR 2000. OUR BUSINESS USES, IN THE MAIN, "PACKAGED" SOFTWARE ACQUIRED FROM REPUTABLE SUPPLIERS, WHICH IS ALREADY YEAR 2000 COMPLIANT. WE HAVE A PLAN OF ACTION IN PLACE TO ENSURE ALL SYSTEMS WILL BE COMPLIANT BY THE MIDDLE OF 1999. COSTS INCURRED TO DATE ARE NOT SIGNIFICANT.
5. COMMENTARY TO THE INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 1998 5.1 THE BELL GROUP HAS EXPERIENCED VERY DIFFICULT TRADING CONDITIONS IN THE TEN MONTHS ENDED 30 JUNE. LOSSES FOR THE SIX MONTHS TO 30 JUNE AMOUNT TO R9,1 MILLION AFTER TAX COMPARED WITH AN AFTER TAX LOSS OF R19,3 MILLION FOR THE FOUR MONTHS TO DECEMBER 1997. LOSSES FOR JANUARY AND FEBRUARY 1998 AMOUNTED TO R18,9 MILLION AND IN THE SUBSEQUENT FOUR MONTHS A PROFIT WAS MADE EACH MONTH, AND THIS CONTINUED INTO JULY AND AUGUST 1998.
5.2 THE DIFFICULT TRADING CONDITIONS HAVE ARISEN FROM A NUMBER OF FACTORS INCLUDING THE CONTINUED POLITICAL AND ECONOMIC CRISES IN OUR SOUTH EAST ASIAN MARKETS AND THE SUBSEQUENT NEGATIVE IMPACT ON DEMAND, THE INCREASED LEVEL OF COMPETITION IN OUR TRADITIONAL AFRICAN MARKETS AND THE OVERALL DEPRESSED ECONOMIC ACTIVITY IN SOUTHERN AFRICA, OUR LARGEST MARKET.
5.3 EARLY IN THE YEAR THE GROUP IMPLEMENTED A WIDE RANGE OF STEPS TO COUNTERACT THESE DIFFICULT TRADING CONDITIONS AND TO RESTORE THE OPERATION TO
PROFITABILITY. THE FULL IMPACT OF THESE MEASURES WILL ONLY BE EVIDENCED IN THE SECOND SIX-MONTH REPORTING PERIOD. THE STEPS INCLUDE THE LAUNCH OF OUR "C" SERIES PRODUCT RANGE, DISPOSAL AND CURTAILMENT OF CERTAIN OFFSHORE OPERATIONS, RE-STRUCTURING OF THE SOUTHERN AFRICAN OPERATIONS AND A TIGHTER CONTROL AND THE REDUCTION IN OVERHEADS.
5.4 WORKING CAPITAL HAS CONTINUED TO BE A HIGH FOCUS AREA AND WHILST THERE HAS BEEN AN INCREASE IN GEARING TO AN UNACCEPTABLE LEVEL, MANY OF THE PLANS IMPLEMENTED OVER THE PREVIOUS SIX MONTHS WILL REDUCE DEBT. THE SALES OF R57 MILLION WORTH OF PROPERTY AND AIRCRAFT ARE IN THE FINAL STAGES OF COMPLETION AND CASH PROCEEDS FROM THESE SALES WILL BE COLLECTED BEFORE YEAR END. THE RESULT OF THESE MEASURES WILL BE EVIDENCED IN THE SECOND SIX MONTH PERIOD WHERE THE LOWER BORROWINGS WILL EASE THE PRESSURE OF SERVICING INTEREST BEARING DEBT. WE EXPECT A POSITIVE CASH FLOW FOR THIS PERIOD.
5.5 IN RECENT YEARS THERE HAVE BEEN A NUMBER OF MAJOR CONSOLIDATIONS IN THE HEAVY MACHINERY BUSINESS WORLD WIDE AND OUR GROUP IS ACTIVELY PURSUING A STRATEGIC ALLIANCE WITH A NUMBER OF MAJOR INTERNATIONAL PLAYERS. SUCH AN ALLIANCE WILL SUBSTANTIALLY INCREASE THE THROUGHPUT IN THE RICHARDS BAY MANUFACTURING FACILITY AND ALSO IN OUR MAJOR DISTRIBUTION OPERATIONS IN SOUTHERN AFRICA. THE BOARD IS ALSO ACTIVELY PURSUING THE INTRODUCTION OF NEW INVESTORS IN THE GROUP TO PROVIDE THE REQUIRED CAPITAL TO REDUCE DEBT AND TO INJECT WORKING CAPITAL. H J BUTTERY G W BELL CHAIRMAN CHIEF EXECUTIVE REVIEW BY INDEPENDENT AUDITORS
THE FINANCIAL INFORMATION SET OUT ABOVE HAS BEEN REVIEWED BUT NOT AUDITED BY DELOITTE & TOUCHE AND THEIR UNQUALIFIED REPORT IS AVAILABLE AT THE REGISTERED OFFICE. DIRECTORS
G W BELL, P A BELL, P C BELL, H J BUTTERY, M A CAMPBELL,
D I CAMPBELL (ALT), G P HARRIS, P J C HORNE*, M MABUYAKHULU*,
R D MARCUS*, D J J VLOK* (*NON-EXECUTIVE DIRECTORS) BELL EQUIPMENT (REG. NO. 68/13656/06) REGISTERED OFFICE: 13 - 19 CARBONODE CELL, ALTON RICHARDS BAY, 3900 TRANSFER SECRETARIES: MERCANTILE REGISTRARS LIMITED, PO BOX 1053, JOHANNESBURG, 2000

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