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BEL - Bell Equipment Limited - Audited results for the year ended
31 December 2011
Bell Equipment Limited
(Incorporated in the Republic of South Africa)
Registration number: 1968/013656/06
Share code: BEL ISIN: ZAE000028304
("Bell" or "the group" or the "company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
HIGHLIGHTS
REVENUE UP 49%
OPERATING PROFIT UP FROM R125 MILLION TO R436 MILLION
EARNINGS PER SHARE UP FROM 27 CENTS TO 290 CENTS PER SHARE
Condensed consolidated statement of financial position
as at 31 December 2011 Audited Audited
R`000 2011 2010
ASSETS
Non-current assets 735 704 733 472
Property, plant and equipment 529 037 481 023
Intangible assets 82 969 70 775
Interest-bearing long-term receivables 10 534 34 378
Deferred taxation 113 164 147 296
Current assets 3 134 505 1 911 808
Inventory 2 060 829 1 355 613
Trade and other receivables 882 170 446 787
Current portion of interest-bearing long-term
receivables 44 447 40 359
Prepayments 16 676 11 103
Other financial assets 4 479 -
Taxation 3 508 4 285
Cash resources 122 396 53 661
Total assets 3 870 209 2 645 280
EQUITY AND LIABILITIES
Capital and reserves 1 777 536 1 418 709
Stated capital (note 5) 228 605 228 605
Non-distributable reserves 144 089 90 488
Retained earnings 1 371 285 1 087 162
Attributable to equity holders of Bell Equipment
Limited 1 743 979 1 406 255
Non-controlling interest 33 557 12 454
Non-current liabilities 398 090 255 540
Interest-bearing liabilities 225 025 84 175
Repurchase obligations and deferred leasing income 79 582 79 902
Deferred warranty income 61 521 66 735
Long-term provisions and lease escalation 31 962 24 728
Current liabilities 1 694 583 971 031
Trade and other payables 1 210 210 699 158
Current portion of interest-bearing liabilities 21 845 4 974
Current portion of repurchase obligations and deferred
leasing income 54 717 61 926
Current portion of deferred warranty income 24 178 23 852
Current portion of provisions and lease escalation 51 902 41 783
Other financial liabilities 1 820 4 271
Taxation 48 093 23 138
Short-term interest-bearing debt 281 818 111 929
Total equity and liabilities 3 870 209 2 645 280
Number of shares in issue (`000) 94 958 94 958
Net asset value per share (cents) 1 872 1 494
Condensed consolidated income statement
for the year ended 31 December 2011 Audited Audited
R`000 2011 2010
Revenue 5 070 784 3 410 691
Cost of sales (3 871 958) (2 684 220)
Gross profit 1 198 826 726 471
Other operating income 142 715 132 180
Expenses (905 901) (734 014)
Profit from operating activities (note 2) 435 640 124 637
Net interest paid (note 3) (33 506) (58 404)
Profit before taxation 402 134 66 233
Taxation (105 249) (29 509)
Profit for the year 296 885 36 724
Profit for the year attributable to:
- Equity holders of Bell Equipment Limited 275 782 25 576
- Non-controlling interest 21 103 11 148
Earnings per share (basic) (note 4) (cents) 290 27
Earnings per share (diluted) (note 4) (cents) 290 27
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2011
Audited Audited
R`000 2011 2010
Profit for the year 296 885 36 724
Other comprehensive income (loss)
Exchange differences arising during the year 57 436 (37 295)
Exchange differences on translating foreign operations 56 950 (34 823)
Reclassification to profit or loss of foreign currency
translation reserve on discontinued operations (4 036) -
Exchange differences on foreign reserves 4 522 (2 472)
Loss arising on revaluation of properties - (4 054)
Taxation relating to components of other comprehensive loss - 1 135
Other comprehensive income (loss) for the year,
net of tax 57 436 (40 214)
Total comprehensive income (loss) for the year 354 321 (3 490)
Total comprehensive income (loss) attributable to:
- Equity holders of Bell Equipment Limited 333 218 (14 638)
- Non-controlling interest 21 103 11 148
Condensed consolidated statement of cash flows
for the year ended 31 December 2011 Audited Audited
R`000 2011 2010
Cash operating profit before working capital changes 603 325 202 325
Cash (utilised in) generated from working capital (628 331) 418 724
Cash (utilised in) generated from operations (25 006) 621 049
Net interest paid (33 506) (58 404)
Taxation (paid) refunded (45 386) 1 624
Net cash (utilised in) generated from operating
activities (103 898) 564 269
Net cash flow utilised in investing activities (147 389) (90 381)
Net cash flow generated from (utilised in) financing
activities 150 133 (136 209)
Net cash (outflow) inflow (101 154) 337 679
Net short-term interest-bearing debt at beginning of
the year (58 268) (395 947)
Net short-term interest-bearing debt at end of
the year (159 422) (58 268)
Consolidated statement of changes in equity
for the year ended 31 December 2011
Attributable to equity holders of Bell Equipment Limited
Non-distributable Retained
R`000 Stated capital reserves earnings Total
Balance at 31 December 2009 228 605 123 984 1 066 540 1 419 129
Recognition of
share-based payments - 1 764 - 1 764
Total comprehensive
(loss) income for the year - (40 214) 25 576 (14 638)
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 1 406 255
Recognition of share-based
payments - 4 506 - 4 506
Total comprehensive income
for the year - 57 436 275 782 333 218
Realisation of revaluation reserve
on depreciation of buildings - (2 808) 2 808 -
Deferred taxation on realisation
of revaluation reserve on
depreciation of buildings - 786 (786) -
Reversal of prior year
transfer of debit foreign
currency translation
reserve to retained earnings - (6 319) 6 319 -
Balance at 31 December 2011 228 605 144 089 1 371 285 1 743 979
Non-controlling Total capital
R`000 interest and reserves
Balance at 31 December 2009 1 306 1 420 435
Recognition of share-based payments - 1 764
Total comprehensive (loss) income for the year 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 12 454 1 418 709
Recognition of share-based payments - 4 506
Total comprehensive income for the year 21 103 354 321
Realisation of revaluation reserve on
depreciation of buildings - -
Deferred taxation on realisation of
revaluation reserve on depreciation of buildings - -
Reversal of prior year transfer of debit
foreign currency translation reserve to
retained earnings - -
Balance at 31 December 2011 33 557 1 777 536
Abbreviated notes to the audited consolidated results
for the year ended 31 December 2011
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 1 January 2011. 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. 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, and the requirements of the Companies Act of
South Africa.
The preparation of this abridged report was supervised by the Group Financial
Director, KJ van Haght, CA (SA).
31 December 31 December
R`000 2011 2010
2. PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is arrived at
after taking into account:
Income
Currency exchange gains 177 440 113 868
Deferred warranty income 47 598 42 507
Import duty rebates 44 385 44 845
Royalties 7 996 2 677
Net surplus on disposal of property, plant and
equipment and intangible assets 1 202 -
Expenditure
Amortisation of intangible assets 15 636 8 782
Auditors` remuneration - audit and other services 8 537 8 629
Currency exchange losses 163 515 132 217
Depreciation of property, plant and equipment 105 069 93 746
Increase in warranty provision 9 929 5 178
Net loss on disposal of property, plant and
equipment and intangible assets - 180
Operating lease charges 85 639 80 123
Research expenses (excluding staff costs) 28 328 16 093
Staff costs 892 986 547 511
3. NET INTEREST PAID
Interest paid 44 940 69 890
Interest received (11 434) (11 486)
Net interest paid 33 506 58 404
4. EARNINGS PER SHARE
Basic earnings per share is arrived at as follows:
Profit for the year attributable to equity holders
of Bell Equipment Limited (R`000) 275 782 25 576
Weighted average number of ordinary shares in
issue (`000) 94 958 94 958
Basic earnings per share (cents) 290 27
Diluted earnings per share is arrived at as
follows:
Profit for the year attributable to equity holders
of Bell Equipment Limited (R`000) 275 782 25 576
Fully converted weighted average number of shares
(`000) 95 154 94 960
Diluted earnings per share (cents) 290 27
Headline earnings per share is arrived at as follows:
Profit for the year attributable to equity holders
of Bell Equipment Limited (R`000) 275 782 25 576
Net loss (surplus) on disposal of property, plant
and equipment and intangible assets (R`000) (1 202) 180
Tax effect of net loss (surplus) on disposal of
property, plant and equipment
and intangible assets (R`000) 337 (50)
Reclassification to profit or loss of foreign
currency translation reserve on
discontinued operations (R`000) (4 036) -
Headline earnings (R`000) 270 881 25 706
Weighted average number of ordinary shares in
issue (`000) 94 958 94 958
Headline earnings per share (basic) (cents) 285 27
Diluted headline earnings per share is arrived at
as follows:
Headline earnings calculated above (R`000) 270 881 25 706
Fully converted weighted average number of shares
(`000) 95 154 94 960
Headline earnings per share (diluted) (cents) 285 27
5. STATED CAPITAL
Authorised
100 000 000 (December 2010: 100 000 000) ordinary
shares of no par value
Issued
94 958 000 (December 2010: 94 958 000) ordinary
shares of no par value 228 605 228 605
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 13 924 1 135
Authorised, but not contracted 175 223 58 240
Total capital expenditure commitments 189 147 59 375
7. ABBREVIATED SEGMENTAL ANALYSIS
Operating
R`000 Revenue profit (loss) Assets Liabilities
December 2011
South African
sales operation 2 512 464 133 613 815 199 702 143
South African
manufacturing and
logistics operation 2 947 343 73 222 2 455 027 1 184 581
European operation 847 882 33 227 808 228 701 779
International
operations 1 251 577 232 977 594 673 351 906
All other operations - 17 276 451 211 52 107
Inter-segmental
eliminations (2 488 482) (54 675) (1 254 129) (899 843)
Total 5 070 784 435 640 3 870 209 2 092 673
December 2010
South African
sales operation 2 049 623 63 748 784 432 742 630
South African
manufacturing and
logistics operation 2 155 565 51 696 1 675 770 490 071
European operation 532 495 (34 006) 381 263 315 627
International
operations 540 929 18 581 238 637 170 058
All other operations - 5 064 362 975 29 470
Inter-segmental
eliminations (1 867 921) 19 554 (797 797) (521 285)
Total 3 410 691 124 637 2 645 280 1 226 571
31 December 31 December
R`000 2011 2010
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 1 158 3 105
In the event of repurchase, it is estimated that
these units would presently realise 1 850 9 512
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 67 037 124 110
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 59 525 117 294
7 512 6 816
Less: provision for non-recovery 500 4 900
Net contingent liability 7 012 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 10 316 12 985
Less: provision for residual value risk - 1 255
Net contingent liability 10 316 11 730
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. INDEPENDENT AUDITORS` REPORT
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the year ended 31 December 2011.
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.
10. SUBSEQUENT EVENTS
No fact or circumstance material to the appreciation of this report has occurred
between 31 December 2011 and the date of this report.
Chairman`s and Chief Executive Officer`s Review
Overview
At the outset we wish to pay tribute to our founder, Mr Irvine Bell, who passed
away in October last year. Although no longer directly involved in the company,
he maintained an eager interest in the business which he founded in 1954. He
will be missed by all who knew him and in particular, by everyone associated
with the group in any way.
Financial
In most respects, 2011 proved to be a very good year for Bell. The group has
recorded profit after tax amounting to R297 million which compares with just R37
million in the prior year. Of this, R276 million is attributable to shareholders
of Bell (2010: R26 million). This translates into earnings per share for the
year under review of 290 cents (2010: 27 cents). The turnaround in profitability
can be attributed to a number of factors. Sales revenue has increased by 49% in
comparison with the previous year and encouragingly, these sales were achieved
at improved gross profit margins.
Another meaningful contributor to the turnaround has been the containment of
group overheads, particularly when related to the increased turnover referred to
above. The most meaningful part of this reduction was the improvement in
manufacturing and services labour and overhead recoveries of approximately R265
million directly as a result of increased production. We expect this trend to
continue as a result of the group`s current record order book. Offset against
this was a sizeable rise in staff costs which were directly attributable to the
increased production requirements and the fact that most staff were rewarded
with incentive bonuses, something that hadn`t been achieved in either of the
prior two years.
Whilst a considerable portion of Bell`s revenue is derived in foreign
currencies, we are fortunate that many of our costs are also incurred in foreign
currencies thereby affording the group an automatic measure of currency hedge
protection. The unhedged portion of the cash flows is monitored and managed very
carefully on a daily basis in order to limit our exposure to potential losses on
the currency front. As a result of the above management process and the fact
that during the course of the year we experienced a rapid weakening of the Rand,
the group benefited from net foreign currency gains of R14 million and from an
increase in the net foreign currency translation reserve of R57 million. This
resulted in Bell`s total comprehensive income for the year amounting to R354
million.
One area that requires continued focus and further improvement is the group`s
working capital management. Although management is endeavouring to address this
issue, both inventories and trade receivables are far too high, with the result
that borrowings are similarly higher than the levels expected by the board. This
will receive much attention during the year that lies ahead. Despite the
increase in receivables, management is satisfied that they are recoverable and
that impairment provisions are adequate.
The group`s capital and reserves have increased to approximately R1,8 billion
(2010: R1,4 billion) with net asset value having risen to R18,72 per share
(2010: R14,94).
In a geographic context, the Africa region constituted approximately 75% of
group sales in 2011. Certain of the European operations have shown pleasing
improvements in their turnover and hence profitability. In overall terms,
however, Europe has a long way to go before it reaches the heights of the period
immediately before the economic meltdown.
Sustainability
The 2008/9 global economic meltdown forced us as a group to take a hard look at
our existing structures and strategies. As a result of this introspection a
number of operational improvements were identified. Many 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 plan which the board approved a little
over a year ago is being regularly monitored and revised with the goal of
achieving certain targets by no later than the end of 2014.
Bell remains a market leader in the majority of its product range. Management`s
ongoing commitment to excellence through its research and development programmes
and its service to customers should ensure that the group maintains its pre-
eminent position in the markets which it serves. This in turn sustains the all
important annuity income which the group earns from its sale of parts and after
sales service.
The Risk and Sustainability Committee meets on a regular basis to review the
risks facing the group with specific focus on the implementation and continuing
effectiveness of the measures put in place to mitigate each identified risk.
Risks are classified in terms of their possible impact and probability of
occurrence and those with the highest perceived risk to the group`s operations
are then closely monitored by the committee and the board. All other risks and
their mitigation measures are monitored on an ongoing basis at executive
management level.
Governance
The group`s Audit Committee focuses on issues related to sound corporate
governance, concentrating specifically on issues such as the group`s internal
controls, legislative compliance and financial reporting. Considerable time and
effort is also spent on ensuring adherence to the principles embodied in the
King Code on Corporate Governance (King III) in addition to those items
specifically required of audit committees in the new Companies Act, 2008.
Operational issues
The increased demand for Bell`s products resulted in significantly improved
throughput in the group`s two production facilities which in turn required
rehiring of personnel following the downsizing which took place during 2009 and
2010. To illustrate the extent to which Bell has had to respond to the
increasing market, our work force increased by 25% during the course of the year
under review to stand at approximately 3 300 at year-end. Greater attention is
also being given to health and safety issues in the workplace. Although it has
always been an important issue within the group, greater focus is now being
placed on this issue by the Risk and Sustainability Committee and the board
itself, particularly as the rate of production increases.
Stakeholders will recall that Bell traded under a cautionary for approximately
three months last year. This was withdrawn in September 2011 when we announced
that changes to the commercial relationship between the group and John Deere
(Deere) were taking place following the planned launch by Deere of its own range
of articulated dump trucks (ADTs). In addition, Bell`s major shareholder, I A
Bell & Co (I A Bell), and Deere had entered discussions relating to the future
ownership of Deere`s 31,6% shareholding in Bell. These discussions have not yet
been finalised. They are, however, continuing and it is the board`s sincere hope
that the negotiations between the two shareholders will be concluded in the very
near future. From the group`s perspective, assuming Deere disposes of its
investment in Bell, the implications will be that various license agreements
between Deere and Bell which currently exist will be amended. The major change
will be the termination of the ADT agreement which in turn will mean the end of
certain exclusivity provisions. This will facilitate Bell`s entry into certain
strategic markets but will also mean that Deere will be free to sell its new
ADTs and other products worldwide. Notwithstanding these changes, both Deere and
Bell have expressed their intention to remain committed as partners in other
areas. In this regard it is planned that Bell`s role as Deere`s dealer of
construction and forestry equipment in South Africa and a number of other
countries in sub-Saharan Africa will continue. In addition, should Deere dispose
of its interest in Bell, the Deere nominated directors will step down as
directors of Bell. If not, the issue of possible conflicts of interest will have
to be addressed and it is for this reason that the board of Bell is so anxious
for the two major shareholders to come to terms and put this issue to bed.
Government initiatives
We continue to engage with government at various levels. As South Africa`s
leading earthmoving, construction, mining and materials handling equipment
provider, we remain 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 are 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 are encouraged by
the reference in the recent Budget Speech to the fact that the Department of
Trade and Industry will allocate a significant portion of its budget towards
stimulation of economic growth. This will include industrial development
incentives to support investment, competitiveness, employment creation and
equity. It appears that the manufacturing sector will gain the most and we were
pleased to read that a reasonable portion of the budget has been set aside for
developing infrastructure to increase the export of value-added commodities,
with specific reference to the Richards Bay Industrial Development Zone. 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.
Outlook
The outlook for the year ahead is encouraging. Bell has a record order book
which bodes well for the first half of 2012. There are clearly obstacles in the
face of the Eurozone turnaround but it appears that many economies are showing
signs of growth and although China is downgrading its estimates of growth in the
immediate future, the levels they are projecting are still enormous in a global
context. Certainly, within South Africa, the projected increase in
infrastructure spend should have a positive impact upon Bell. Prospects within
the rest of Africa continue to look good particularly with the prices of
commodities such as copper and coal holding up well.
Michael Mun-Gavin Gary Bell
Chairman Chief Executive
13 March 2012
Directors: MA Mun-Gavin* (Chairman), GW Bell (Group Chief Executive),
KJ van Haght (Group Financial Director), DM Gage (USA)#, L Goosen,
K Manning (USA)#, RM Buchignani (USA)#, JR Barton*, B Harie*,
TO Tsukudu*, DJJ Vlok*
Alternate directors: TA Averkamp (USA)#, GP Harris, AR McDuling
Resignations: D de Bastiani (26 July 2011)
Appointments: RM Buchignani (5 August 2011)
# Non-executive directors * Independent non-executive directors
Company Secretary: P van der Sandt (appointed 16 January 2012),
R Verster (resigned 30 September 2011); D McIlrath
(appointed 1 October 2011 and resigned 16 January 2012)
Registered office: 13 - 19 Carbonode Cell Road, Alton, Richards Bay, 3900
Transfer secretaries: Link Market Services South Africa (Pty) Limited,
PO Box 4844, Johannesburg, 2000
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
www.bellequipment.com
Date: 15/03/2012 13:00:01 Supplied by www.sharenet.co.za
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