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BEL - Bell Equipment Limited - Audited results for the year ended 31 December

Release Date: 14/03/2011 10:00
Code(s): BEL
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BEL - Bell Equipment Limited - Audited results for the year ended 31 December 2010 Bell Equipment Limited (Incorporated in the Republic of South Africa) Registration number: 1968/013656/06 ISIN: ZAE000028304 Share code: BEL ("Bell" or "group" or the "company") AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010 Condensed consolidated statement of financial position as at 31 December 2010 31 December 31 December
R`000 2010 2009 ASSETS Non-current assets 733 472 798 445 Property, plant and equipment 481 023 520 452 Intangible assets 70 775 39 873 Interest-bearing investments and long-term receivables 34 378 73 982 Deferred taxation 147 296 164 138 Current assets 1 911 808 2 127 669 Inventory 1 355 613 1 618 728 Trade and other receivables 446 787 412 008 Current portion of interest-bearing long-term receivables 40 359 37 409 Prepayments 11 103 16 932 Other financial assets - 430 Taxation 4 285 10 280 Cash resources 53 661 31 882 TOTAL ASSETS 2 645 280 2 926 114 EQUITY AND LIABILITIES Capital and reserves 1 418 709 1 420 435 Stated capital (note 5) 228 605 228 605 Non-distributable reserves 90 488 123 984 Retained earnings 1 087 162 1 066 540 Attributable to equity holders of Bell Equipment Limited 1 406 255 1 419 129 Non-controlling interest 12 454 1 306 Non-current liabilities 255 540 374 654 Interest-bearing liabilities 84 175 218 404 Repurchase obligations and deferred leasing income 79 902 49 724 Deferred warranty income 66 735 89 047 Long-term provisions and lease escalation 24 728 17 479 Current liabilities 971 031 1 131 025 Trade and other payables 699 158 530 151 Current portion of interest-bearing liabilities 4 974 52 830 Current portion of repurchase obligations and deferred leasing income 61 926 46 639 Current portion of deferred warranty income 23 852 17 599 Current portion of provisions and lease escalation 41 783 37 199 Other financial liabilities 4 271 3 922 Taxation 23 138 14 856 Short-term interest-bearing debt 111 929 427 829 TOTAL EQUITY AND LIABILITIES 2 645 280 2 926 114 Number of shares in issue (`000) 94 958 94 958 Net asset value per share (cents) 1 494 1 496 Condensed consolidated income statement for the year ended 31 December 2010 31 December 31 December R`000 2010 2009 Revenue 3 410 691 2 699 149 Cost of sales (2 684 220) (2 164 082) Gross profit 726 471 535 067 Other operating income 132 180 143 477 Expenses (734 014) (941 970) Profit (loss) from operating activities (note 2) 124 637 (263 426) Net interest paid (note 3) (58 404) (108 605) Profit (loss) before taxation 66 233 (372 031) Taxation (29 509) 100 325 Profit (loss) for the year 36 724 (271 706) Profit (loss) for the year attributable to: - Equity holders of Bell Equipment Limited 25 576 (259 744) - Non-controlling interest 11 148 (11 962) Earnings (loss) per share (basic) (note 4) (cents) 27 (274) Earnings (loss) per share (diluted) (note 4) (cents) 27 (274) Condensed consolidated statement of comprehensive income for the year ended 31 December 2010 31 December 31 December R`000 2010 2009 Profit (loss) for the year 36 724 (271 706) Other comprehensive loss Exchange differences arising during the year (37 295) (77 433) Exchange differences on translating foreign operations (34 823) (74 954) Exchange differences on foreign reserves (2 472) (2 479) Loss arising on revaluation of properties (4 054) - Taxation relating to components of other comprehensive loss 1 135 - Other comprehensive loss for the year, net of tax (40 214) (77 433) Total comprehensive loss for the year (3 490) (349 139) Total comprehensive loss attributable to: - Equity holders of Bell Equipment Limited (14 638) (337 177) - Non-controlling interest 11 148 (11 962) Condensed consolidated statement of cash flows for the year ended 31 December 2010 31 December 31 December R`000 2010 2009 Cash operating profit (loss) before working capital changes 202 325 (223 592) Cash generated from working capital 418 724 784 160 Cash generated from operations 621 049 560 568 Net interest paid (58 404) (108 605) Taxation refunded (paid) 1 624 (95 526) Net cash generated from operating activities 564 269 356 437 Net cash flow utilised in investing activities (90 381) (117 316) Net cash flow (utilised in) generated from financing activities (136 209) 33 138 Net cash inflow 337 679 272 259 Net short-term interest-bearing debt at beginning of the year (395 947) (668 206) Net short-term interest-bearing debt at end of the year (58 268) (395 947) Consolidated statement of changes in equity for the year ended 31 December 2010 Attributable to equity holders of Bell Equipment Limited
Stated Non-distributable Retained R`000 capital reserves earnings Balance at 31 December 2008 228 586 200 940 1 326 761 Share options exercised 19 - - Total comprehensive loss for the year - (77 433) (259 744) Realisation of revaluation reserve on depreciation of buildings - (3 418) 3 418 Deferred taxation on realisation of revaluation reserve on depreciation of buildings - 957 (957) Increase in statutory reserves of foreign subsidiaries - 2 938 (2 938) Balance at 31 December 2009 228 605 123 984 1 066 540 Recognition of share-based payments - 1 764 - Total comprehensive (loss) income for the year - (40 214) 25 576 Realisation of revaluation reserve on depreciation of buildings - (1 896) 1 896 Deferred taxation on realisation of revaluation reserve on depreciation of buildings - 531 (531) Transfer of debit foreign currency translation reserve to retained earnings - 6 319 (6 319) Balance at 31 December 2010 228 605 90 488 1 087 162 Non-controlling Total capital and R`000 Total interest reserves Balance at 31 December 2008 1 756 287 13 268 1 769 555 Share options exercised 19 - 19 Total comprehensive loss for the year (337 177) (11 962) (349 139) Realisation of revaluation reserve on depreciation of buildings - - - Deferred taxation on realisation of revaluation reserve on depreciation of buildings - - - Increase in statutory reserves of foreign subsidiaries - - - Balance at 31 December 2009 1 419 129 1 306 1 420 435 Recognition of share-based payments 1 764 - 1 764 Total comprehensive (loss) income for the year (14 638) 11 148 (3 490) Realisation of revaluation reserve on depreciation of buildings - - - Deferred taxation on realisation of revaluation reserve on depreciation of buildings - - - Transfer of debit foreign currency translation reserve to retained earnings - - - Balance at 31 December 2010 1 406 255 12 454 1 418 709 Abbreviated notes to audited consolidated results for the year ended 31 December 2010 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 adoption of new and revised Standards and Interpretations. In the current year the group has adopted all of the new and revised Standards and Interpretations relevant to its operations and effective for annual reporting periods beginning on 1 January 2010. The adoption of these new and revised Standards and Interpretations has not had any significant impact on the amounts reported in the financial statements and in this abridged 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. The condensed financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board and the information as required by IAS 34: Interim Financial Reporting. 31 December 31 December R`000 2010 2009 2 PROFIT (LOSS) FROM OPERATING ACTIVITIES Profit (loss) from operating activities is arrived at after taking into account: Income Currency exchange gains 113 868 184 078 Decrease in warranty provision - 17 398 Deferred warranty income 42 507 36 428 Import duty rebates 44 845 75 340 Royalties 2 677 - Net surplus on disposal of property, plant and equipment and intangible assets - 826 Expenditure Amortisation of intangible assets 8 782 8 137 Auditors` remuneration - audit and other services 8 629 7 842 Currency exchange losses 132 217 190 788 Depreciation of property, plant and equipment 93 746 94 144 Impairment loss recognised on interest-bearing long-term receivables - 39 790 Increase in warranty provision 5 178 - Net loss on disposal of property, plant and equipment and intangible assets 180 - Operating lease charges 80 123 81 354 Research expenses (excluding staff costs) 16 093 17 791 Staff costs 547 511 604 847 3 NET INTEREST PAID Interest paid 69 890 121 912 Interest received (11 486) (13 307) Net interest paid 58 404 108 605 4 EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is arrived at as follows: Profit (loss) for the year attributable to equity holders of Bell Equipment Limited (R`000) 25 576 (259 744) Weighted average number of ordinary shares in issue (`000) 94 958 94 952 Basic earnings (loss) per share (cents) 27 (274) Diluted earnings (loss) per share is arrived at as follows: Profit (loss) for the year attributable to equity holders of Bell Equipment Limited (R`000) 25 576 (259 744) Fully converted weighted average number of shares (`000) 94 960 94 955 Diluted earnings (loss) per share (cents) 27 (274) Headline earnings (loss) per share is arrived at as follows: Profit (loss) for the year attributable to equity holders of Bell Equipment Limited (R`000) 25 576 (259 744) Net loss (surplus) on disposal of property, plant and equipment and intangible assets (R`000) 180 (826) Tax effect of net loss (surplus) on disposal of property, plant and equipment and intangible assets (R`000) (50) 231 Headline earnings (loss) (R`000) 25 706 (260 339) Weighted average number of ordinary shares in issue (`000) 94 958 94 952 Headline earnings (loss) per share (basic) (cents) 27 (274) Diluted headline earnings (loss) per share is arrived at as follows: Headline earnings (loss) calculated above (R`000) 25 706 (260 339) Fully converted weighted average number of shares (`000) 94 960 94 955 Headline earnings (loss) per share (diluted) (cents) 27 (274) 5 STATED CAPITAL Authorised 100 000 000 (December 2009: 100 000 000) ordinary shares of no par value Issued 94 958 000 (December 2009: 94 958 000) ordinary shares of no par value 228 605 228 605 6 CAPITAL EXPENDITURE COMMITMENTS Contracted 1 135 58 Authorised, but not contracted 58 240 29 487 Total capital expenditure commitments 59 375 29 545 7 ABBREVIATED SEGMENTAL ANALYSIS Operating
R`000 Revenue profit (loss) December 2010 South African sales operation 2 049 623 63 748 South African manufacturing and logistics operation 2 155 565 51 696 European operation 532 495 (34 006) Rest of Africa and other international operations 540 929 18 581 All other operations - 5 064 Inter-segmental eliminations (1 867 921) 19 554 Total 3 410 691 124 637 December 2009 - restated South African sales operation 1 693 975 (29 332) South African manufacturing and logistics operation 1 135 860 (254 200) European operation 391 448 (68 731) Rest of Africa and other international operations 845 665 (11 742) All other operations - (9 197) Inter-segmental eliminations (1 367 799) 109 776 Total 2 699 149 (263 426) R`000 Assets Liabilities December 2010 South African sales operation 784 432 742 630 South African manufacturing and logistics operation 1 675 770 490 071 European operation 381 263 315 627 Rest of Africa and other international operations 238 637 170 058 All other operations 362 975 29 470 Inter-segmental eliminations (797 797) (521 285) Total 2 645 280 1 226 571 December 2009 - restated South African sales operation 931 261 906 041 South African manufacturing and logistics operation 1 773 631 598 598 European operation 527 842 409 453 Rest of Africa and other international operations 323 332 250 425 All other operations 546 423 154 146 Inter-segmental eliminations (1 176 375) (812 984) Total 2 926 114 1 505 679 The group`s reportable segments changed in the current year as a result of changes in the structure of the internal organisation. Amounts reported for the prior year have been restated accordingly. 31 December 31 December 2010 2009 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 3 105 6 903 In the event of repurchase, it is estimated that these units would presently realise 9 512 17 475 Net contingent liability - - 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 the different categories of financing provided by WesBank, the group is liable for the full balance due to WesBank by default customers with regard to Bell-backed deals and a portion of the balance with regard to Bell-shared risk deals. At year-end the amount due by customers to WesBank for which the group is liable totalled 124 110 151 517 In the event of default, the units financed would be recovered and it is estimated that they would presently realise the following towards the above liability 117 294 146 862 6 816 4 655 Less: provision for non-recovery 4 900 6 239 Net contingent liability 1 916 - Where 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, an assessment of any additional security is done and a provision for any 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 12 985 12 100 Less: provision for residual value risk 1 255 844 Net contingent liability 11 730 11 256 The above includes deposits held by financial institutions as security for residual values on units guaranteed by the group. The recoverability of these deposits is dependent on the units realising the guaranteed residual values at the end of the guarantee period. The provision for residual value risk is based on the assessment of the probability of return of the units. 9 DIRECTORS` UPDATE ON GOING CONCERN The going concern risks experienced by the group in the last two years have been mitigated. Sales and production volumes reflect a steady upward trend, the restructured cost base has been maintained and the group has reported a modest profit for the year. Initiatives implemented to optimise inventory levels continue to show results and inventory and borrowings reduced further in 2010. The group has substantial reserves to meet the challenges and opportunities that arise in the period ahead. The strategy is to continue driving the initiatives that will secure the long-term sustainability of the business. Cash generation and liquidity remain a priority. Sales forecasts for 2011 reflect further improvement in the market and this will also have a positive impact on the trading results. The directors believe that the going concern assumption is appropriate. 10 INDEPENDENT AUDITORS` REPORT The auditors, Deloitte & Touche, have issued their opinion on the group`s financial statements for the year ended 31 December 2010. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. These abridged results have been derived from the group financial statements and are consistent in all material respects with the group financial statements. A copy of their audit report is available for inspection at the company`s registered office. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the company`s auditors. 11 SUBSEQUENT EVENTS No fact or circumstance material to the appreciation of this report has occurred between 31 December 2010 and the date of this report. Chairman`s review I am pleased to bring you my first annual Chairman`s review since having assumed the chairmanship of Bell Equipment Limited during the course of the financial year. Financial overview The aftermath of the global economic crisis of 2008/9 continued to be felt throughout most of 2010. Fortunately, however, the severe austerity measures taken by management during 2009 and 2010 under the board`s direction have paid off and have resulted in a dramatic turnaround in the group`s results. The losses incurred in the 2009 financial year are a thing of the past and the current year`s results now reflect a profit of R37 million (2009: R272 million loss). In earnings per share terms this translates into 27 cents per share as compared with the loss per share of 274 cents in the prior year. Whilst the earnings for the year under review are modest, they represent a significant improvement, something we hope will continue through 2011 and the next few years that follow thereafter. Possibly the most significant aspect of the group`s financial results was the generation of cash - R338 million for the year under review. This will be expanded upon when I address the improvements in Bell`s statement of financial position below. The turnaround in profitability can be attributed to a number of factors. Sales revenue has increased by 26% in comparison with the previous year with fourth- quarter sales, in particular, showing significant growth over each of the other three quarters. Another meaningful contributor to the turnaround has been the reduction in group overheads, which dropped by R208 million to R734 million. The most significant part of this reduction was the improvement in manufacturing and services labour and overhead recoveries of R128 million. This was as a direct result of the increased sales volumes, and hence production, in the second half of the year. Whilst on the subject of production, it is worth noting that Bell`s two production facilities, in Richards Bay and Kindel, Germany, are operating at well below their respective optimum capacities. The group therefore has little need for any major capital expansion in the immediate future. The second major contribution towards the reduction in group overheads was a drop in staff costs of R56 million. As readers of Bell`s financial results will see, the company has made significant strides during 2010 in reducing its borrowings and hence the net interest paid. This latter expense has been almost halved to R58 million (2009: R109 million). Through much better management of the group`s working capital and the relatively modest profits achieved during the year, Bell generated a positive cash flow of R338 million, thereby enabling net short-term interest bearing debt to be reduced to R58 million - a far cry from the R668 million which existed a mere 24 months ago. Non-current interest bearing liabilities have also been significantly reduced to R84 million from R218 million a year prior. The remainder of the statement of financial position of the group has also improved by comparison with the previous year-end. Inventories are down to R1,36 billion, a R263 million reduction. In terms of days inventory on hand at the year-end, this measure has been improved to 184 days by comparison with 273 days at the end of the previous financial year. Trade and other receivables are slightly higher - R447 million (2009: R412 million) - but this is only because of the dramatically improved sales in the months of November and December 2010. If measured in terms of days of sales outstanding, year-end receivables represent 48 days, a 14% improvement on the same measure in 2009. Management is committed to reducing both of these ratios even further in the year ahead. The group`s capital and reserves have remained virtually unchanged at R1,4 billion with net asset value amounting to R14,94 per share. In a geographic context, the European operations remained depressed for much of the year under review. Signs of activity started emerging in certain European countries during the second half of 2010 with the result that the German factory has recommenced production, albeit only on a modest scale. Enquiries have continued into 2011 which is encouraging for the year ahead. The Africa region constituted approximately 80% of group sales in 2010 and with prices of most commodities having risen to the extent that they have, many new mining projects are coming on stream and existing mining operations are being expanded. This helped Bell in the latter part of 2010 and should continue to provide the group with opportunities for its earth moving equipment going forward. It has also become evident that many customers chose to run their fleets longer than would normally be the case as a result of the economic downturn. It is likely that in a number of these instances customers will need to start replacing their older machines thereby adding further impetus to demand. Sustainability and corporate governance As is often the case, economic downturns force companies to take a hard look at their existing structures and strategies. This was no different for Bell following the 2008/9 global meltdown. As a result of this introspection a number of operational improvements were identified. Some of these have already been implemented and are bearing fruit. Others require a process and will only start to bear fruit in time to come. The board has approved a plan proposed by management which should see significant gains being reaped over the next three years. This plan has been broken down into a number of different business improvement projects and progress will be closely monitored by the board at its quarterly meetings. During the course of 2010, the board decided to split the functions of risk and audit overview. As a result, a new Risk and Sustainability Committee was established to strengthen the focus on risk and sustainability issues. The Audit Committee`s terms of reference were amended to allow it to concentrate on the group`s internal control, legislative compliance and financial reporting issues. Transformation We continue to engage with government at various levels on a meaningful basis. As South Africa`s leading earthmoving, construction, mining and materials handling equipment provider, we are extremely supportive of all initiatives to bolster our economy and improve prospects for the creation of employment in our industry, and in particular, for the communities surrounding our Richards Bay factory. In this context, we remain fully supportive of the Industrial Policy Action Plan (IPAP2) with its purpose of expanding production in the value- added sectors where high employment and growth multipliers are present. We look forward to ongoing interaction with government as we seek to find ways in which we can profitably develop the local supply base and increase employment. The group is continually endeavouring to develop an employee profile in its local operations that is more inclusive and representative of the South African demographic mix. Outlook The outlook for the year ahead is encouraging notwithstanding the fact that the economies of many of the countries in which Bell operates still look fragile and are only likely to show modest growth. Fortunately for the group, the rises in commodity prices are resulting in considerably increased mining activity which in turn has seen a sizeable improvement in our order book for mining related products. The construction industry is showing only modest signs of recovery and is unlikely to have a dramatic impact on improving turnover in the year ahead. The difficulty of obtaining financing facilities by our customers over the past two or three years has undoubtedly had a retarding effect on our sales. However, we are now experiencing an improving borrowing environment for our customer base and this will significantly enhance their propensity to purchase new equipment. Finally, management are in the process of securing new products to complete the range of Bell`s offering and this too will be positive for the group going forward. Appreciation I conclude this report by congratulating management on turning the financial position of the group around and thanking them for their tireless efforts in doing so. They, like the board, know that the job is far from complete and understand the need to continue the programme of improvement in order to deliver to our stakeholders their rightful expectations of a successful global organisation. To my fellow directors, I also express my sincere thanks for their support and dedicated and professional input into the affairs of the group. Michael Mun-Gavin Non-executive Group Chairman 9 March 2011 Directors: MA Mun-Gavin* (Chairman), GW Bell (Group Chief Executive), KJ van Haght (Group Financial Director), DM Gage (USA)#, L Goosen, K Manning (USA)#, D de Bastiani (USA)#, J R Barton*, B Harie*, TO Tsukudu*, DJJ Vlok* Alternate directors: TA Averkamp (USA)#, GP Harris, AR McDuling # Non-executive directors * Independent non-executive directors Changes in the composition of the board since 1 July 2010: Mr BW Schaffter resigned as a director on 1 November 2010 Mr D de Bastiani was appointed as a director on 1 November 2010 Mr TA Averkamp was appointed as an alternate director on 1 November 2010 Ms B Harie was appointed as a director on 19 November 2010 Mr JW Kloet, who was an alternate director, passed away on 14 January 2011 Company Secretary: R Verster Registered office: 13 - 19 Carbonode Cell Road, Alton, Richards Bay, 3900 Transfer secretaries: Link Market Services South Africa (Pty) Limited, PO Box 4844, Johannesburg Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited) www.bellequipment.com Date: 14/03/2011 10:00:04 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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