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Bell Equipment Ltd - Interim Report for the six months ended 30 June 2003

Release Date: 07/08/2003 17:00
Code(s): BEL
Wrap Text

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 Date: 07/08/2003 05:00:37 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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