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BEL - Bell Equipment Limited - Audited results for the year ended 31 December
2007 and cash dividend declaration
BELL EQUIPMENT LIMITED
("Bell" or "the company")
(Incorporated in the Republic of South Africa)
(Share code: BEL ISIN: ZAE000028304)
Registration number: 1968/013656/06 ("Bell")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 AND CASH DIVIDEND
DECLARATION
Revenue up 31%
Earnings per share up 55%
Net asset value per share up 45%
Dividend up to 40 cents per share
CONDENSED CONSOLIDATED BALANCE SHEET
At 31 At 31
December December
2007 2006
R`000 R`000
ASSETS
Non-current assets 473 633 368 315
Property, plant and equipment 426 649 318 140
Intangible assets 8 328 7 074
Investments and long-term receivables 24 695 20 637
Deferred taxation 13 961 22 464
Current assets 2 408 034 1 673 937
Inventory 1 698 820 1 219 834
Trade and other receivables 662 828 378 983
Current portion of long-term receivables 10 499 15 271
Prepayments 13 314 10 486
Taxation 1 865 1 623
Cash and bank balances 20 708 47 740
Total assets 2 881 667 2 042 252
EQUITY AND LIABILITIES
Capital and reserves 1 380 869 954 912
Stated capital (Note 5) 226 293 226 185
Non-distributable reserves 140 040 55 490
Retained earnings 1 014 536 673 237
Non-current liabilities 214 779 158 371
Interest-bearing liabilities 76 624 2 319
Repurchase obligations and deferred
leasing
income 83 695 133 253
Deferred warranty income 50 740 11 724
Long-term provisions and lease escalation 3 720 11 075
Current liabilities 1 286 019 928 969
Trade and other payables 758 984 557 330
Current portion of interest-bearing 31 838 2 467
liabilities
Current portion of repurchase obligations
and
deferred leasing income 20 638 17 021
Current portion of deferred warranty 2 497 5 291
income
Current portion of provisions and lease 51 048 70 748
escalation
Taxation 52 927 88 741
Short-term interest bearing debt 368 087 187 371
Total equity and liabilities 2 881 667 2 042 252
Number of shares in issue (`000) 94 858 94 817
Net asset value per share (cents) 1 456 1 007
CONDENSED CONSOLIDATED INCOME STATEMENT
For year ended
31 December 31 December
2007 2006
R`000 R`000
Revenue 4 624 961 3 533 177
Cost of sales 3 647 808 2 739 263
Gross profit 977 153 793 914
Other operating income 70 894 102 604
Distribution costs (453 548) (415 194)
Administration expenses (54 816) (60 307)
Other operating expenses (45 421) (52 853)
Profit from operating activities (Note 2) 494 262 368 164
Net finance costs (Note 3) (19 696) (21 127)
Profit before taxation 474 566 347 037
Taxation (109 657) (110 880)
Profit for the year 364 909 236 157
Earnings per share (basic) (cents) (Note 385 249
4)
Earnings per share (diluted) (cents) 384 249
(Note 4)
Dividend per share (cents) 25 -
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For year ended
31 31
December December
2007 2006
R`000 R`000
Cash operating profit before working 533 797 429 378
capital changes
Cash invested in working capital (564 (143
005) 931)
Cash (utilised) generated from operations (30 208) 285 447
Net finance costs paid (19 696) (21 127)
Taxation paid (158 (36 269)
285)
Net cash (utilised) generated from (208 228 051
operating activities 189)
Net cash flow utilised from investing (69 745) (100
activities 904)
Net cash flow from financing activities 70 186 85 354
Net cash (outflow) inflow (207 748) 212 501
Net short-term interest bearing debt at
beginning of the year (139 631) (352 132)
Net short-term interest bearing debt at (347 379) (139 631)
end of the year
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Stated distributable Retained
capital reserves earnings Total
R`000 R`000 R`000 R`000
Balance at 31 December 2005 225 36 921 436 392 699
946 259
Realisation of revaluation
reserve on depreciation of - (688) 688 -
buildings
Exchange differences on
translation of foreign - 18 577 - 18
operations 577
Exchange differences on
foreign reserves - 680 - 680
Net income recognised
directly in equity - 18 569 688 19
257
Net profit for the year - - 236 157 236
157
Total recognised income and
expense - 18 569 236 845 255
414
Share options exercised 239 - - 239
Balance at 31 December 2006 226 55 490 673 237 954
185 912
Surplus on revaluation of - 95 042 - 95
properties 042
Deferred taxation on
revaluation of properties - (20 835) - (20
835)
Realisation of revaluation
reserve on depreciation of - (688) 688 -
buildings
Increase in legal reserves
of foreign subsidiaries - 589 (589) -
Exchange differences on
translation of foreign - 10 476 - 10
operations 476
Exchange differences on
foreign reserves - (34) - (34)
Net income recognised
directly in equity - 84 550 99 84
649
Net profit for the year - - 364 909 364
909
Total recognised income and
expense - 84 550 365 008 449
558
Share options exercised 108 - - 108
Dividend paid - - (23 (23
709) 709)
Balance at 31 December 2007 226 140 040 1 014 1 380
293 536 869
ABBREVIATED NOTES TO AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31
DECEMBER 2007
1 ACCOUNTING POLICIES
The financial statements from which these results are summarised have been
prepared in accordance with International Financial Reporting Standards
(IFRS) and the policies and methods of computation are consistent with those
applied to the previous year, except for the following changes:
* Adoption of IFRS 7 - Financial Instruments: Disclosures;
* Adoption of IAS1 - Presentation of Financial Statements: Amendment to add
disclosures about an entity`s capital
The adoption of these new and revised standards resulted in additional
disclosures in the annual report. 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
International Accounting Standard 34 - Interim Financial Reporting; Schedule
4 of the South African Companies Act and the disclosure requirements of the
JSE Limited`s Listing Requirements.
For year ended
31 31
December December
2007 2006
R`000 R`000
2 PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is
arrived at after taking into account:
Income
Currency exchange gains 137 373 134 840
Import duty rebates 9 956 30 940
Royalties 12 994 30 419
Decrease (increase) in warranty 22 090 (4 831)
provision
Net surplus (loss) on disposal of
property, plant and equipment 743 (3 450)
Expenditure
Auditors` remuneration - audit and 5 129 4 377
other services
Amortisation of intangible assets 459 249
Currency exchange losses 154 962 141 730
Depreciation of property, plant and 60 515 39 910
equipment
Operating lease charges
- equipment and vehicles 20 126 20 047
- land and buildings 22 315 18 007
Research and development expenses
(excluding staff costs) 26 980 17 123
Staff costs 656 257 515 417
3 NET FINANCE COSTS
Interest paid 33 387 27 818
Interest received 13 691 6 691
Net finance costs 19 696 21 127
Currency exchange gains and losses
have been reclassified from net
finance costs to other operating
expenses and comparative information
has been restated. This had no impact
on the results of the group.
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 year.
The weighted average number of shares
in issue for the
year under review was 94 839 508
(December 2006:
94 770 619). On a diluted basis, the
fully converted weighted average
number of shares is 94 920 655
(December 2006: 94 836 123).
Headline earnings per share is arrived
at as follows:
Profit for the year 364 909 236 157
Net (surplus) loss on disposal of
property, plant and equipment and (743) 3 450
intangible assets
Tax effect of net (surplus) loss on
disposal of property, plant and 215 (1 000)
equipment and intangible assets
Headline earnings 364 381 238 607
Headline earnings per share (cents) 384 252
Diluted headline earnings per share is
arrived at as follows:
Headline earnings calculated above 364 381 238 607
Fully converted weighted average 94 920 94 836
number of shares 655 123
Headline earnings per share (diluted) 384 252
(cents)
5 STATED CAPITAL
Authorised
100 000 000 (December 2006:100 000
000) ordinary shares of no par value
Issued
94 857 900 (December 2006:94 816 900)
ordinary shares of no par value 226 293 226 185
6 CAPITAL EXPENDITURE COMMITMENTS
Contracted 9 228 5 531
Authorised, but not contracted 131 643 95 309
Total capital expenditure commitments 140 871 100 840
7 ABBREVIATED SEGMENTAL ANALYSIS
Geographical
segments:
The group
operates in two
principal Profit from
geographical
areas
Revenue operating Assets Liabilities
R`000 activities R`000 R`000
R`000
December 2007
South Africa 2 095 281 684 1 998 1 142 537
564 712
Rest of world 2 529 212 578 882 358 261
397 955
Total 4 624 494 262 2 881 1 500 798
961 667
December 2006
South Africa 1 720 287 770 1 458 758 821
506 397
Rest of world 1 812 80 394 583 328 519
671 855
Total 3 533 368 164 2 042 1 087 340
177 252
31 December 31 December
2007 2006
R`000 R`000
8 CONTINGENT LIABILITIES
8.1 The repurchase of units sold to
customers and financial institutions
has been guaranteed by the group for 29 306 41 305
an amount of
In the event of repurchase, it is
estimated that
these units would presently realise (31 794) (49 262)
(2 488) (7 957)
Less: provision for residual value - (1 991)
risk
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 11 816 61 275
transactions totalled
In the event of default, the units
financed would
be recovered and it is estimated that
they would
presently realise (26 151) (60 482)
(14 335) 793
Less: provision for non-recovery - (14 700)
Net contingent liability - -
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 have been
guaranteed by the group.
In the event of a residual value
shortfall, the
group would be exposed to an amount 15 180 13 943
of
Less: provision for residual value (299) (3 002)
risk
Net contingent liability 14 881 10 941
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 - 6 266
amount of
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)
Net contingent liability - -
9 RELATED PARTY TRANSACTIONS
Details of transactions and balances
between the
group and other related parties are
disclosed in the annual report. There
are no material changes in
related party transactions in the
current year.
10 EXCHANGE RATES 2007 2006
The following major rates Weighted Year Weighted Year
of exchange were used: average end average end
United States $: Euro 1,38 1,47 1,26 1,32
SA Rand: United States $ 7,00 6,81 6,80 6,98
United States $: British 2,01 2,00 1,85 1,97
GBP
11 INDEPENDENT AUDITOR`S
REPORT
The annual financial
statements of the group
have been audited by the
company`s auditors,
Deloitte & Touche. Their
unmodified report is
available for inspection
at the registered office
of the company.
CHAIRMAN`S COMMENTARY ON THE RESULTS
For the second successive year I am pleased to advise all stakeholders that
the group has recorded the highest pre- and post-tax profits in its history.
The profitability earned for shareholders in the first six months of R182,1
million was maintained in the second half of the year to an annual net profit
of R364,9 million. Without exception all subsidiaries and divisions worldwide
were profitable and our combined offshore operations produced record after
tax profits of R181,2 million as compared with last year`s R64,3 million.
Revenue increased by 30,9% to R4,625 billion and at the same time gross
profit reached an all time high of R977,2 million, up R183,2 million on the
previous year. Gross profit as a percentage of revenue remained consistent
due to continued efforts by management to maintain price realisation on sales
in competitive markets and effective control of component and production
costs. Unprecedented demand in the mining industry worldwide as a result of
strong commodity prices has seen the requirement for our range of equipment
at its strongest levels ever.
Our focus area on the lifetime revenue stream from the sale of parts and
service has once again been significant with revenue increasing by 25,5%.
Parts business continues to be a focus area for growth, both in terms of
customer service as well as revenue and gross profit, and generates 16% of
our turnover. It is our long-term objective to increase this to 22% of our
turnover through an increased plant park, improved service and availability.
Exports reached an all time high at R2,529 billion, up R717 million (39,5%)
on the previous year. The bulk of our exports, (28%) of our total turnover,
was sold in Europe and 19% of our total turnover was sold in Africa outside
of
South Africa. Exports now represent 54,7% of our global turnover as compared
with 51,3% in 2006. We expect this trend of growth and exports to continue
going forward with sustained demand being experienced in all offshore
markets. We intend to expand our operations to several key African countries
during the coming years in view of the strong demand for the quality products
that we distribute.
As a result of increased turnover, operating profit for the year increased by
R126,1 million to R494,3 million. This was despite a decrease of R31,7
million in other income which is due to a decrease in royalty income from our
alliance partner and shareholder, John Deere, and our removal from the
Government MIDP Programme as from 9 February 2007. The decrease in royalty
income is due to a drop in the sales of Articulated Dump Trucks in North
America as a result of reduced sales in that segment of the market in the
USA.
One of the features of the Bell Equipment group`s financial performance over
the past few years has been our ability to contain overheads despite large
increases in business volumes and turnover, and the inflationary pressures
that are brought to bear upon us in many of the countries in which we
operate. The increase in overheads of R25,4 million represents a 4,8%
increase on the previous year which is contained at a level well below the
weighted average inflation rate of the countries in which we operate.
In previous reports I have made reference to our concerns regarding warranty
costs within the group and I am pleased to report that this expense decreased
to 1,7% of total sales in 2007. This again is a tribute to our engineering
and technical teams as well as our production teams where they have increased
quality and provided robust solutions in our design and manufacturing
process. It is through the cost of warranty that we are able to evaluate and
benchmark our performance. We have benefited during 2007 from a reversal of
prior year warranty provisions amounting to R22 million which were no longer
required,
but going forward our budgeting demands a warranty cost of no more than 1,75%
of total sales, which is well below the worldwide industry average of 2%.This
enhances our ability to offer our customers a very important lower operating
cost per tonne base.
Net finance costs decreased by R1,4 million as a result of lower borrowings
and improved treasury management. Our effective tax rate of 23,1% is now at a
level that is more in line with global competitors. We are now benefiting
from the research and development allowances that Government introduced
during late 2006 and going forward we would expect a tax rate of 25%.
In reviewing our balance sheet, our debt/equity ratio stands at 33%. This
planned increase is due to a change in the trade cycle days, which have gone
from 128 days in 2006 to 147 days in 2007. There has been a slight increase
in inventory days but the biggest increase has been in trade and other
receivables where we have taken an active decision to fund export sales of
units on an interest-bearing basis to certain selected customers. This will
provide us with a revenue opportunity in the form of interest receivable
which income has doubled year on year. Capital expenditure excluding that on
rental assets during 2007 amounted to R92 million but is budgeted to be over
R130 million in 2008. We were not able to implement all of our capital
expenditure programmes in 2007 and some of those budgeted for will be carried
forward into 2008. Headline earnings are at 384 cents per share as compared
to 252 cents in 2006. The all-important net asset value per share has
increased by R4,49 since the beginning of the year under review to R14,56 per
share.
A disappointing feature of the results has been the negative cash flow of
R207,7 million in the year under review as a consequence of the increase in
working capital. One of the most difficult challenges that our group has ever
faced is the current supply chain and component shortage problem. In view of
the unprecedented demand from every manufacturer in our industry our
suppliers have not been able to keep pace with the orders and delivery dates
that we have expected of them. These component shortages are causing us
working capital problems in that we are unable to meet our due date
deliveries with the resultant increase in work-in-progress. I would advise
shareholders to note the seriousness of this problem and the effects it could
potentially have on future profitability and the unprecedented demand it will
place on our working capital requirements.
In the first weeks of January 2008, we were able to roll out our BBBEE
initiative. In 2007, and prior years we conducted extensive negotiations with
over 20 potential BEE partners and were very proud to be able to announce on
31 October 2007 that Kagiso Trust Investment had taken a 22,5% stake in our
newly formed company, Bell Equipment Sales South Africa Limited with a
further 7,5% stake being taken up by our employees. This is one of the most
significant transactions that Bell Equipment has concluded in its history and
will be actively driven to ensure that our customers get all the benefits
resulting
from the transformation of our South African operations.
With the group`s continued profitability the board has declared the payment
of a dividend. This is done despite negative cash flow and the constraints
of working capital, which I have dealt with in previous paragraphs. We have
declared a dividend of 40 cents per share in respect of the year ended 31
December 2007, (2006 - 25 cents) which will be paid in April of this year.
This represents a dividend ten times covered, which is lower than last year
but is still constrained by the group`s cash requirements. The current
outlook for Bell is very encouraging and orders for our range of products are
at record levels. We are competing successfully with global giants in both
local and global markets and continue to strengthen our distribution channels
and product offerings.
HJ Buttery
Group Chairman
12 March 2008
CASH DIVIDEND DECLARATION
The directors of Bell have declared a dividend of 40 cents per share for the
year ended 31 December 2007.
The salient dates are as follows:
Last day to trade cum the dividend Friday, 4 April 2008
Shares commence trading "ex" Monday, 7 April 2008
distribution
Record date Friday, 11 April 2008
Payment date Monday, 14 April 2008
Share certificates may not be dematerialised or rematerialised between
Monday, 7 April 2008 and Friday, 11 April 2008 both days inclusive.
Directors: HJ Buttery (Group Chairman), GW Bell (Group Chief Executive),
DM Gage*#, PJC Horne*, MA Mun-Gavin*, BW Schaffter*#, DL Smythe,
TO Tsukudu*, KJ van Haght, DJJ Vlok*, K Manning*#
Alternate directors: PA Bell, PC Bell, MA Campbell, GP Harris, JW Kloet *#
(*Non-executive directors) (#USA)
Company Secretary: DP Mahony
Registered Office: 13 - 19 Carbonode Cell, Alton, Richards Bay
Transfer Secretaries: Link Market Services South Africa (Pty) Ltd,
PO Box 4844, Johannesburg 2000
Sponsor: RMB Corporate Finance
www.bellequipment.com
Date: 17/03/2008 10:54:04 Supplied by www.sharenet.co.za
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