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Bell - Abridged Audited Results For The Year Ended 31 December 2005
BELL EQUIPMENT LTD
(Incorporated in the Republic of South Africa)
(Share code: BEL & ISIN: ZAE000028304)
Registration number 1968/013656/06
("Bell")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005
Consolidated Balance Sheet
Restated
At 31 December At 31 December
R"000 2005 2004
ASSETS
Non-current assets 295 765 276 796
property, plant and equipment 237 394 219 200
Investments and long-term receivables 50 885 57 553
Deferred taxation 7 486 43
Current assets 1 345 842 1 322 650
Inventory 928 838 1 056 828
Trade and other receivables 361 812 213 139
Current portion of long-term receivables 12 128 11 264
Prepayments 7 732 6 881
Taxation 2 194 21 457
Cash resources 33 138 13 081
Total assets 1 641 607 1 599 446
EQUITY AND LIABILITIES
Capital and reserves 699 259 701 462
Stated capital (Note 5) 225 946 224 414
Non-distributable reserves 36 921 33 147
Retained earnings 436 392 443 901
Non-current liabilities 89 401 53 289
Interest-bearing 4 754 6 669
Repurchase obligations and deferred
leasing income 69 176 34 431
Long-term provisions 15 471 12 189
Current liabilities 852 947 844 695
Trade and other payables 391 670 392 111
Current portion of interest-bearing
liabilities 2 731 3 684
Current portion of repurchase obligations
and deferred leasing income 8 639 14 617
Current portion of provisions 64 637 48 734
Short-term interest bearing debt 385 270 385 549
Total equity and liabilities 1 641 607 1 599 446
Number of shares in issue ("000) 94 763 94 246
Net asset value per share (cents) 738 744
Consolidated Income Statement
Restated
For year ended
31 December 31 December
2005 2004
R"000
Revenue 3 209 233 2 526 488
Cost of sales 2 701 658 2 053 943
Gross profit 507 575 472 545
Other operating income 92 615 84 228
Distribution costs (441 523) (429 821)
Administration expenses (62 615) (57 135)
Other operating expenses (48 773) (44 466)
Profit from operating activities 47 279 25 351
Net finance costs (Note 2) 43 459 31 833
Profit (loss) before taxation (Note 3) 3 820 (6 482)
Taxation 12 017 6 169
Loss for the year (8 197) (12 651)
Loss per share (basic) (cents) (Note 4) (9) (13)
Loss per share (diluted) (cents) (Note 4) (9) (13)
Headline loss per share (basic) (cents) (Note 4) (11) (14)
Headline loss per share (diluted) (cents) (Note 4) (11) (14)
Proposed dividend per share (cents) - -
Abbreviated Cash Flow Statement
Restated
For year ended
31 December 31 December
2005 2004
R"000
Cash operating profit before working capital
changes 100 679 16 705
Cash invested in working capital (23 146) (89 712)
Cash generated from (applied to) operations 77 533 (73 007)
Net finance costs paid (43 459) (31 833)
Taxation refunded (paid) 501 (28 984)
Net cash generated from (applied to) operating
activities 34 575 (133 824)
Invested in property, plant, equipment, investments
and long-term receivables (41 670) (46 692)
Increase in interest-bearing liabilities,
repurchase obligations
and deferred leasing income 25 899 46 251
Proceeds from shares issued 1 532 62
Net cash inflow (outflow) 20 336 (134 203)
Statement of Changes in Equity
Restated
For year ended
31 December 31 December
R"000 2005 2004
Equity at the beginning of the year 701 462 711 257
Changes in share capital 1 532 62
Issue of share capital 1 532 62
Changes in non-distributable reserves 3 774 (1 736)
Surplus on revaluation of properties - 16 820
Deferred taxation on revaluation of properties - (5 046)
Effect of change in tax rate on surplus on
revaluation of properties 265 -
Realisation of revaluation reserve on
depreciation of buildings (688) (241)
Increase (decrease) in foreign currency
translation reserve
of foreign subsidiaries 2 666 (11 934)
Exchange differences on foreign reserves 1 531 (1 335)
Changes in retained earnings (7 509) (8 121)
Effect of adoption of IFRS:
Adjustment to opening retained earnings in
respect of depreciation on property
plant and equipment previously taken into account - 13 443
Prior year adjustments:
Adjustment in respect of amortised lease
escalation - (4 057)
Correction to income tax treatment of profits
earned by a controlled foreign company
of the group - (5 097)
Net loss for the year (8 197) (12 651)
Transfer from revaluation reserve on
depreciation of buildings 688 241
Equity at the end of the year 699 259 701 462
Abbreviated Notes to Audited Results
for the year ended 31 December 2005
1. ACCOUNTING POLICIES
In the current year, the group has adopted International Financial Reporting
Standards ("IFRS") for the first time. The adoption of IFRS has resulted in
changes to the Group"s accounting policies in the following area that has
affected the amounts reported for the current or previous years:
Property, Plant and Equipment (IAS 16)
The impact of this change in accounting policy is disclosed in Note 10.
This abridged report complies with Interim Financial Reporting (IAS 34).
Restated
For year ended
31 December 31 December
R"000 2005 2004
2. NET FINANCE COSTS
Net interest paid 22 404 24 408
Net currency exchange losses 21 055 7 425
Net finance costs 43 459 31 833
3. PROFIT (LOSS) BEFORE TAXATION
Profit (loss) before taxation is arrived at
after taking into account:
Income
Import duty rebates 42 116 38 197
Decrease in warranty provision - 30 042
Net surplus on disposal of property, plant and
equipment 2 372 454
Expenditure
Auditors" remuneration - audit and other
services 10 811 3 795
Depreciation of property, plant and equipment 31 566 26 364
Increase in warranty provision 16 212 -
Operating lease charges
- equipment and motor vehicles 16 320 11 497
- properties 15 946 16 188
Research and development expenses - excluding
staff costs 14 175 9 718
Staff costs 409 018 337 856
4. LOSS PER SHARE
The calculation of loss per share is based on
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 94 566
938 (December 2004: 94 236 555). On a diluted
basis, the fully converted
weighted average number of shares is 94 633 599
(December 2004: 94 616 206).
Headline loss 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 (December 2004: 100 000 000)
ordinary shares of no par value - -
Issued
94 763 400 (December 2004: 94 246 400) ordinary
shares of no par value 225 946 224 414
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 475 488
Authorised, but not contracted 44 591 18 286
Total capital expenditure commitments 45 066 18 774
7. ABBREVIATED SEGMENTAL ANALYSIS
Geographical segments
The group operates in two principal geographical areas:
Operating
R"000 Revenue profit Assets Liabilities
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
December 2004 - Restated
South Africa 1 244 794 22 049 1 087 711 657 614
Rest of world 1 281 694 3 302 511 735 240 370
Total 2 526 488 25 351 1 599 446 897 984
Restated
For year ended
31 December 31 December
R"000 2005 2004
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 134 900 248 713
In the event of repurchase, it is estimated
that these units would presently realise 151 078 242 699
(16 178) 6 014
Less: Provision for residual value risk (8 127) (4 669)
Net contingent liability - 1 345
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 90 758 133 202
In the event of default, the units financed
would be recovered and it is estimated
that they would presently realise (76 957) (94 645)
13 801 38 557
Less: Provision for non-recovery (9 795) (18 248)
Net contingent liability 4 006 20 309
To the extent that both customers are 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 8 496 8 564
8.4 Certain trade receivables have been
discounted with financial institutions
for an amount of 5 943 1 467
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 5 943 1 467
9. EXCHANGE RATES
2005 2004
Weighted Year Weighted Year
average end average end
The following major rates of
exchange were used:
Euro: United States $ 1.24 1.18 1.25 1.36
SA Rand: United States $ 6.36 6.33 6.37 5.63
British GBP: United States $ 1.81 1.72 1.84 1.93
10. COMPARATIVE INFORMATION
Comparative information has been restated for the effects of adopting
International Financial Reporting Standards and the prior year adjustments
referred to in note 11 below. The aggregate effect of the restatements is as
follows:
Prior year
Previously IFRS adjustment
stated adjustment - taxation
Retained earnings - 1 January 2004 452,022 13,443 (5,097)
For the year ended 31 December 2004
Property, plant and equipment 202,464 16,736 -
Trade and other payables 390,989 - 963
Long term provisions 6,937 - -
Deferred taxation asset 3,709 (5,020) -
Taxation asset 26,809 - (5,352)
Non-distributable reserves 34,874 (1,727) -
Opening retained earnings -
1 January 2004 452,022 13,443 (5,097)
Net finance costs 31,428 - 405
Loss before taxation (6,077) - (405)
Taxation 5,356 - 813
Net loss for the year (11,433) - (1,218)
Prior year
adjustment
- lease escalation Restated
Retained earnings - 1 January 2004 (4,057) 456,311
For the year ended 31 December 2004
Property, plant and equipment - 219,200
Trade and other payables 159 392,111
Long term provisions 5,252 12,189
Deferred taxation asset 1,354 43
Taxation asset - 21,457
Non-distributable reserves - 33,147
Opening retained earnings - 1 January 2004 (4,057) 456,311
Net finance costs - 31,833
Loss before taxation - (6,482)
Taxation - 6,169
Net loss for the year - (12,651)
There has been no restatement to net loss for the year ended 31 December 2004
as a result of the adoption of IFRS as the effect on net loss for that year
is immaterial.
11. PRIOR YEAR ADJUSTMENTS
11.1 Correction recognised in respect of leases previously accounted for
incorrectly on the contractual basis. Prior year figures have been
appropriately restated to account for leases on the straight line basis in
terms of IAS 17.
11.2 Correction recognised in respect of the income tax treatment of profits
earned by a controlled foreign company of the group. Prior year figures
have been appropriately restated.
The effect of these adjustments is reflected in Note 10.
12. INDEPENDENT AUDITORS" REPORT
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
For the second year in succession the group has recorded a small net loss after
taxation. The profitability recorded in the first six months of R12,63 million
was reduced to a loss of R8,20 million for the year as a result of a loss after
tax of R20,83 million in the second half of the year. The group was profitable
before tax but not so after tax due to the South African subsidiaries having
taxable profits whilst most of the foreign operations incurred losses with no
tax relief. We also decided to write-off foreign deferred tax assets at a cost
of R3,29 million. Our offshore operations incurred a total after tax loss of
R18,26 million for the year. We have taken the necessary action to turn this
result around.
Due to strong demand in South Africa, Europe and North America our revenues
increased by 27%. Exports were up R555,03 million and now represents 57,2% of
our worldwide turnover. Parts sales increased by 45% and as their contribution
to group turnover increased from 14,4% to 16,5%, nevertheless whilst both sales
and volumes were substantially up on 2004, our gross profit dropped by 3
percentage points to 16%. This was as a result of increased competition, the
continuing strength of the Rand and the loss-making contract to supply
Articulated Dump Trucks (ADTs) to North America. Operating profit for the year
increased by R21,93 million to R47,28 million as a result of increased gross
profit, albeit a lower percentage, and other operating income.
Overheads were well contained with a total increase of 4%, this despite a large
increase in warranty costs which was made up of actual warranties incurred
during the year to which any increase or decrease in the provision for future
warranties must be added or deducted.
Warranty costs aside, our overheads dropped by 10,11% year-on-year, which is a
great tribute to our cost containment exercise driven through our Project 100
Plus programme. We are confident we will be able to obtain more than the
targeted R100 million in sustainable savings of cost from this project.
Cash flow for the first time in some years was positive with the better
performance in the first six months of the year. Capital expenditure of R41,67
million, being R10,1 million more than depreciation added to the cash flow
challenge. R37,62 million of our capex relates to our investment in rental
assets as a result of the accounting rules relating to revenue recognition. Net
asset value dropped by 6 cents per share whilst capital and reserves was
maintained at R700 million due to a small increase in share capital and an
increase in foreign reserves during the year. Of significant interest to all
shareholders, John Deere Construction & Forestry Company (Deere) gave notice
that they were not going to exercise their option to acquire the shares owned
by I.A. Bell & Company (Pty) Ltd in our company.
Along with the success in reducing overheads the Project 100 Plus was able to
provide considerable assistance in seeing inventory being reduced by R127,99
million year-on-year due to management"s unrelenting efforts to drive down
our working capital. Unfortunately our debtors increased by R148,67 million as
compared to December 2004 due primarily to very high revenue of R335,78 million
in December 2005.
Cash flow for the first two months of 2006 has continued to be positive and our
focus on working capital reduction continues. Gearing for the year dropped by
4% to 51% as we continue to strive to reach our target of 40% gearing. Trade
cycle (working capital) days improved from 133 days to 95 days as a direct
result of improved inventory levels.
The initial contract to supply Deere with ADTs ceased on 31 December 2005 and
during the last six months we have been able to supply ADT kits to the new
Deere ADT plant in Davenport (USA). The kits are supplied on a total factory
warehouse cost basis plus an agreed profit margin and we also now earn
royalties from Deere on their sale of US manufactured ADTs. The assembly and
partial manufacture of Tractor Loader Backhoes (TLBs) in South Africa commenced
during the year under review. The product has been extremely well received in
the market place with the best sales month ever being recorded in February
2006. Front-End Loader (FEL) kits are being imported from Deere and assembled
in our Richards Bay plant. The cost of manufacture of both the TLBs and the
FELs has been substantially reduced and we are seeing a great improvement in
the gross profit margins earned on both these products.
Until the group returns to profitability and positive cash flow, the Board has
suspended the payment of any dividend; therefore there will be no dividend in
respect of the year ended 31 December 2005.
The current outlook for Bell is more positive and we are already seeing the
benefits of our cost and working capital initiatives. The improvement in our
margin on our sales to North America and a firm handle on our warranty expenses
should see us return to profitability. As mentioned previously the roll out of
our Project 100 Plus programme will help reduce both overhead and component
costs in 2006.
Howard J Buttery
Group Chairman
17 March 2006
Directors: HJ Buttery (Group Chairman), GW Bell (Group Chief Executive),
DL Smythe,JP du Toit, GP Harris, BW Schaffter*#, JW Kloet*#,
RL Bridges*#, DJJ Vlok*, PJC Horne*, TO Tsukudu*, MA Mun-Gavin*
Alternate Directors: PA Bell, PC Bell, MA Campbell, DM Gage*#
(*Non Executive Directors) (#USA)
Company Secretary: DP Mahony Sponsor: Investec Bank Limited
Registered Office: 13 - 19 Carbonode Cell, Alton, Richards Bay
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg
Date: 17/03/2006 01:03:09 PM Supplied by www.sharenet.co.za
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