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BELL EQUIPMENT LIMITED - Reviewed interim report for the six months ended 30 June 2012

Release Date: 13/08/2012 12:05
Code(s): BEL     PDF:  
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Reviewed interim report for the six months ended 30 June 2012

Bell Equipment Limited
("Bell" or "the group" or the "company") 
(Incorporated in the Republic of South Africa) 
(Share code: BEL)
ISIN: ZAE000028304 
Registration number: 1968/013656/06

Reviewed interim report
for the six months ended 30 June 2012

Highlights
- Revenue up 35%
- Operating profit up 40%
- Earnings per share up 31%

Condensed consolidated statement of financial position
as at 30 June 2012                                               Reviewed     Reviewed       Audited
                                                                  30 June      30 June   31 December
R'000                                                                2012         2011          2011
ASSETS
Non-current assets                                                 735 392     734 757       735 704
Property, plant and equipment                                      526 770     499 998       529 037
Intangible assets                                                  101 111      80 724        82 969
Interest-bearing long-term receivables                               8 902      20 199        10 534
Deferred taxation                                                   98 609     133 836       113 164
Current assets                                                   3 117 200   2 448 546     3 134 505
Inventory                                                        2 033 898   1 635 284     2 060 829
Trade and other receivables and prepayments                        959 842     695 621       898 846
Current portion of interest-bearing long-term receivables           31 728      36 139        44 447
Other financial assets                                               1 389         461         4 479
Taxation                                                             8 527       4 045         3 508
Cash resources                                                      81 816      76 996       122 396
Total assets                                                     3 852 592   3 183 303     3 870 209
EQUITY AND LIABILITIES
Capital and reserves                                             1 931 552   1 561 282     1 777 536
Stated capital (note 5)                                            228 749     228 605       228 605
Non-distributable reserves                                         146 690     110 529       144 089
Retained earnings                                                1 507 088   1 197 821     1 371 285
Attributable to owners of Bell Equipment Limited                 1 882 527   1 536 955     1 743 979
Non-controlling interest                                            49 025      24 327        33 557
Non-current liabilities                                            386 951     267 677       398 090
Interest-bearing liabilities                                       208 390      83 041       225 025
Repurchase obligations and deferred leasing income                  71 614      89 994        79 582
Deferred warranty income                                            71 883      70 888        61 521
Long-term provisions and lease escalation                           35 064      23 754        31 962
Current liabilities                                              1 534 089   1 354 344     1 694 583
Trade and other payables                                           967 080     944 588     1 210 210
Current portion of interest-bearing liabilities                     34 559       3 373        21 845
Current portion of repurchase obligations
  and deferred leasing income                                       40 761      62 390        54 717
Current portion of deferred warranty income                         23 113      22 785        24 178
Current portion of provisions and lease escalation                  58 972      42 796        51 902
Other financial liabilities                                                       278         1 820
Taxation                                                            28 857      23 599        48 093
Short-term interest-bearing debt                                   380 747     254 535       281 818
Total equity and liabilities                                     3 852 592   3 183 303     3 870 209
Number of shares in issue                               ('000)      94 974      94 958        94 958
Net asset value per share                              (cents)       2 034       1 644         1 872

Condensed consolidated income statement
for the six months ended 30 June 2012                  Reviewed      Reviewed       Audited
                                                       6 months      6 months     12 months
                                                          ended         ended         ended
                                                        30 June       30 June   31 December
R'000                                                      2012          2011          2011
Revenue                                               2 901 405     2 141 708     5 070 784
Cost of sales                                       (2 262 873)   (1 644 956)   (3 871 958)
Gross profit                                            638 532       496 752     1 198 826
Other operating income                                   52 473        63 787       142 715
Expenses                                              (467 175)     (400 507)     (905 901)
Profit from operating activities (note 2)               223 830       160 032       435 640
Net interest paid (note 3)                             (29 861)       (8 902)      (33 506)
Profit before taxation                                  193 969       151 130       402 134
Taxation                                               (42 698)      (35 928)     (105 249)
Profit for the period                                   151 271       115 202       296 885
Profit for the period attributable to:
 Owners of Bell Equipment Limited                      135 803       103 329       275 782
 Non-controlling interest                               15 468        11 873        21 103
Earnings per share (basic) (note 4)         (cents)         143           109           290
Earnings per share (diluted) (note 4)       (cents)         141           109           290

Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2012                    Reviewed    Reviewed      Audited
                                                         6 months    6 months    12 months
                                                            ended       ended        ended
                                                          30 June     30 June  31 December
R'000                                                        2012        2011         2011
Profit for the period                                     151 271     115 202      296 885
Other comprehensive income
Exchange differences arising during the period                159      24 953       57 436
Exchange differences on translating foreign operations        494      25 611       56 950
Reclassification to profit or loss of foreign currency
  translation reserve on discontinued operation                      (3 340)      (4 036)
Exchange differences on foreign reserves                    (335)       2 682        4 522
Other comprehensive income for the period, net of tax         159      24 953       57 436
Total comprehensive income for the period                 151 430     140 155      354 321
Total comprehensive income attributable to:
 Owners of Bell Equipment Limited                        135 962     128 282      333 218
 Non-controlling interest                                 15 468      11 873       21 103

Condensed consolidated statement of cash flows
for the six months ended 30 June 2012                             Reviewed    Reviewed      Audited
                                                                  6 months    6 months    12 months
                                                                     ended       ended        ended
                                                                   30 June     30 June  31 December
R'000                                                                 2012        2011         2011
Cash operating profit before working capital changes               311 692     232 335      603 325
Cash utilised in working capital                                 (265 372)   (264 778)    (628 331)
Cash generated from (utilised in) operations                        46 320    (32 443)     (25 006)
Net interest paid                                                 (29 861)     (8 902)     (33 506)
Taxation paid                                                     (50 680)    (22 552)     (45 386)
Net cash utilised in operating activities                         (34 221)    (63 897)    (103 898)
Net cash flow utilised in investing activities                    (79 597)    (63 160)    (147 389)
Net cash flow (utilised in) generated from financing activities   (25 691)       7 786      150 133
Net cash outflow                                                 (139 509)   (119 271)    (101 154)
Net short-term interest-bearing debt at beginning of the period  (159 422)    (58 268)     (58 268)
Net short-term interest-bearing debt at end of the period        (298 931)   (177 539)    (159 422)
Comprising:
Cash resources                                                      81 816      76 996      122 396
Short-term interest-bearing debt                                 (380 747)   (254 535)    (281 818)
Net short-term interest-bearing debt at end of the period        (298 931)   (177 539)    (159 422)

Consolidated statement of changes in equity
for the six months ended 30 June 2012                                                                                 Attributable to owners of Bell Equipment Limited
                                                                                                                         Non-distributable              Retained                     Non-controlling   Total capital
R'000                                                                                              Stated capital                 reserves              earnings              Total         interest    and reserves
Balance at 31 December 2010  audited                                                                     228 605                   90 488             1 087 162          1 406 255           12 454       1 418 709
Recognition of share-based payments                                                                                                 2 418                                   2 418                           2 418
Total comprehensive income for the period                                                                                          24 953               103 329            128 282           11 873         140 155
Realisation of revaluation reserve on depreciation of buildings                                                                   (1 404)                 1 404                                                 
Deferred taxation on realisation of revaluation reserve on depreciation of buildings                                                  393                 (393)                                                 
Reversal of prior year transfer of debit foreign currency translation reserve to retained earnings                                (6 319)                 6 319                                                 
Balance at 30 June 2011  reviewed                                                                        228 605                  110 529             1 197 821          1 536 955           24 327       1 561 282
Recognition of share-based payments                                                                                                 2 088                                   2 088                           2 088
Total comprehensive income for the period                                                                                          32 483               172 453            204 936            9 230         214 166
Realisation of revaluation reserve on depreciation of buildings                                                                   (1 404)                 1 404                                                 
Deferred taxation on realisation of revaluation reserve on depreciation of buildings                                                  393                 (393)                                                 
Balance at 31 December 2011  audited                                                                     228 605                  144 089             1 371 285          1 743 979           33 557       1 777 536
Share options exercised                                                                                       144                                                             144                             144
Recognition of share-based payments                                                                                                 2 442                                   2 442                           2 442
Total comprehensive income for the period                                                                                             159               135 803            135 962           15 468         151 430
Balance at 30 June 2012  reviewed                                                                        228 749                  146 690             1 507 088           1 882 527          49 025       1 931 552

Abbreviated notes to the interim report
for the six months ended 30 June 2012
1.   BASIS OF PREPARATION
     The accounting policies and methods of computation are consistent with those applied in the financial statements for the year ended
     31 December 2011, which complied with International Financial Reporting Standards, except for the treatment of the revaluation reserve
     and the adoption of new and revised Standards and Interpretations.

     In terms of IAS 16, Property Plant and Equipment, the revaluation surplus included in equity in respect of an item of property, plant and
     equipment may be transferred directly to retained earnings when the asset is derecognised. This may involve transferring the whole of the
     surplus when the asset is retired or disposed; alternatively, some of the surplus may be transferred as the asset is used by an entity.
     The previous treatment was to release a portion of the revaluation surplus over the useful life of the asset. In the current year, management
     has elected to rather defer the transfer of the revaluation surplus to retained earnings until such time as the asset is derecognised. This
     change in accounting policy did not have a significant impact on the reported results.

     In the current period 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 2012. The adoption of these new and revised Standards and Interpretations has not had
     any significant impact on the amounts reported in the interim report or the disclosures herein.

     This interim report has been prepared in accordance with the framework concepts and the measurement and recognition criteria of
     International Financial Reporting Standards (IFRS) and complies with International Accounting Standard 34  Interim Financial Reporting,
     AC 500 Standards as issued by the Accounting Practices Board, the disclosure requirements of the JSE Limited's Listings Requirements
     and the requirements of the Companies Act of South Africa. The interim report has been reviewed in compliance with any applicable
     requirements of the Companies Act of South Africa. The preparation of this interim report was supervised by the Group Financial Director,
     KJ van Haght CA (SA).

                                                                                                    Reviewed   Reviewed      Audited
                                                                                                    6 months   6 months    12 months
                                                                                                       ended      ended        ended
                                                                                                     30 June    30 June  31 December
     R'000                                                                                              2012       2011         2011
2.   PROFIT FROM OPERATING ACTIVITIES
     Profit from operating activities is arrived at after taking into account:
     Income
     Currency exchange gains                                                                         116 658     47 649      177 440
     Decrease in warranty provision                                                                              3 006            
     Deferred warranty income                                                                         17 868     21 181       47 598
     Import duty rebates                                                                               8 861     26 235       44 385
     Royalties                                                                                         1 293      2 240        7 996
     Net surplus on disposal of property, plant and equipment and intangible assets                      175        119        1 202
     Expenditure
     Amortisation of intangible assets                                                                 9 395      5 778       15 636
     Auditors' remuneration  audit and other services                                                 4 763      3 739        8 537
     Currency exchange losses                                                                        116 727     52 556      163 515
     Depreciation of property, plant and equipment                                                    57 122     46 337      105 069
     Increase in warranty provision                                                                    5 199                  9 929
     Operating lease charges
      equipment and motor vehicles                                                                   13 236     11 136       22 521
      land and buildings                                                                             34 123     30 703       63 118
     Research expenses (excluding staff costs)                                                        15 229     10 987       28 328
     Staff costs                                                                                     462 871    395 329      892 986
3.   NET INTEREST PAID
     Interest paid                                                                                    32 674     14 731       44 940
     Interest received                                                                               (2 813)    (5 829)     (11 434)
     Net interest paid                                                                                29 861      8 902       33 506
4.   EARNINGS PER SHARE
     Basic earnings per share is arrived at as follows:
     Profit for the period attributable to owners of Bell Equipment Limited              (R'000)     135 803    103 329      275 782
     Weighted average number of ordinary shares in issue during the period                (000)      94 961     94 958       94 958
     Basic earnings per share                                                            (cents)         143        109          290
     Diluted earnings per share is arrived at as follows:
     Profit for the period attributable to owners of Bell Equipment Limited              (R'000)     135 803    103 329      275 782
     Fully converted weighted average number of shares                                    ('000)      96 407     94 963       95 154
     Diluted earnings per share                                                          (cents)         141        109          290
     Headline earnings per share is arrived at as follows:
     Profit for the period attributable to owners of Bell Equipment Limited              (R'000)     135 803    103 329      275 782
     Net surplus on disposal of property, plant and equipment and intangible assets      (R'000)       (175)      (119)      (1 202)
     Tax effect of net surplus on disposal of property, plant and equipment
       and intangible assets                                                             (R'000)          49         33          337
     Reclassification to profit or loss of foreign currency translation reserve
       on discontinued operation                                                         (R'000)               (3 340)      (4 036)
     Headline earnings                                                                   (R'000)     135 677     99 903      270 881
     Weighted average number of ordinary shares in issue during the period                ('000)      94 961     94 958       94 958
     Headline earnings per share (basic)                                                 (cents)         143        105          285
     Diluted headline earnings per share is arrived at as follows:
     Headline earnings calculated above                                                  (R'000)     135 677     99 903      270 881
     Fully converted weighted average number of shares                                    ('000)      96 407     94 963       95 154
     Headline earnings per share (diluted)                                               (cents)         141        105          285
5.   STATED CAPITAL
     Authorised
     100 000 000 (June 2011: 100 000 000) ordinary shares of no par value
     Issued
     94 974 000 (June 2011: 94 958 000) ordinary shares of no par value                              228 749    228 605      228 605
     The increase in issued share capital relates to 16 000 share options exercised at
     an average share price of R9,00 per share.
6.   CAPITAL EXPENDITURE COMMITMENTS
     Contracted                                                                                       15 658      8 400       13 924
     Authorised, but not contracted                                                                   73 809     34 415      175 223
     Total capital expenditure commitments                                                            89 467     42 815      189 147

7.   ABBREVIATED SEGMENTAL ANALYSIS                                      Operating                               
R'000                                                     Revenue    profit (loss)        Assets   Liabilities   
June 2012                                                                                                        
South African sales operation                           1 429 772           81 715       761 695       596 634   
South African manufacturing and logistics operation     1 505 329           26 488     2 483 881     1 371 564   
European operation                                        575 030           28 796       782 510       648 441   
Rest of Africa and other international operations         757 485           79 133       627 772       407 008   
All other operations                                                      (6 491)       704 508        59 262   
Inter-segmental eliminations                          (1 366 211)           14 189   (1 507 774)   (1 161 869)   
Total  reviewed                                        2 901 405          223 830     3 852 592     1 921 040   
June 2011                                                                                                        
South African sales operation                           1 170 073           57 682       766 584       684 712   
South African manufacturing and logistics operation     1 242 502           30 277     2 004 252       812 857   
European operation                                        368 455            7 217       540 749       463 877   
Rest of Africa and other international operations         354 635           45 820       385 441       244 621   
All other operations                                                        1 854       397 416        34 312   
Inter-segmental eliminations                            (993 957)           17 182     (911 139)     (618 358)   
Total  reviewed                                        2 141 708          160 032     3 183 303     1 622 021   
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   
Rest of Africa and other 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  audited                                         5 070 784          435 640     3 870 209     2 092 673   


                                                                                        Reviewed   Reviewed     Audited   
                                                                                        6 months   6 months   12 months   
                                                                                           ended      ended       ended   
                                                                                         30 June    30 June 31 December   
R'000                                                                                       2012       2011        2011   
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                                                             3 476       1 158   
In the event of repurchase, it is estimated that these units would presently realise                 4 870       1 850   
Net contingent liability                                                                                               
The guarantees expired during the current period.                                                                         
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 period end the amount due by customers to WesBank for which the group is                                               
liable totalled                                                                           63 604     87 286      67 037   
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               63 104     86 452      59 525   
                                                                                             500        834       7 512   
Less: provision for non-recovery                                                             500      1 600         500   
Net contingent liability                                                                                        7 012   
Where customers are in arrears with WesBank and there is a shortfall between                                              
the estimated realisation values of units and the balances 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                                                                                  9 872      8 843      10 316   
Less: provision for residual value risk                                                                                
Net contingent liability                                                                   9 872      8 843      10 316   
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.   RELATED PARTY TRANSACTIONS                                                                                           
Shareholders                                                                                                              
John Deere Construction and Forestry Company                                                                              
 sales                                                                                   78 079     87 643     164 250   
 purchases                                                                              198 477    259 477     463 444   
 amounts owing to                                                                       100 918    111 743      78 060   
 amounts owing by                                                                        19 002     31 447      19 899   

10. INDEPENDENT AUDITORS' REPORT
    The condensed interim financial information for the half year ended 30 June 2012 has been reviewed by the group's auditors,
    Deloitte & Touche. The review was conducted in accordance with ISRE 2410 Review of Interim Financial Information performed
    by the Independent Auditor of the Entity'. A copy of their unmodified review 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 interim report has occurred between 30 June 2012 and the date of
    this report.

Chairman's and Chief Executive Officer's review
INTRODUCTION
We are pleased to report on Bell's performance for the first six months of the 2012 financial year, particularly
as the group has shown a meaningful improvement in profitability over the corresponding period in the previous
year.

ECONOMIC OVERVIEW
As we write this review all economists' eyes remain focused on the volatility in global economies, especially the
Eurozone and their struggle to address their liquidity problems. In our review this time last year we expressed
the concern that global markets were going to take years rather than months before they emerged from these
troubled times. Little has changed to alter that view. Notwithstanding these difficulties, Bell has benefited
from strong demand for the group's products which support the mining industry. This will be addressed more
comprehensively below.

FINANCIAL RESULTS
The group has recorded first half earnings of R151 million (2011 first half: R115 million) which is equivalent to
143 cents per share (2011: 109 cents per share). The major contributor to this significant improvement in
profitability was an increase in sales of 35%. Countering this was a minor decrease in gross profit margins
and a R21 million increase in net interest paid following a slightly slower start to the year than was anticipated.

On the statement of financial position, the net asset value per share has risen by almost 24% since June 2011 to
2 034 cents. Gearing has risen to 28% (June 2011: 17%) as a result of the additional inventory and receivables
being carried in order to accommodate the increased sales demand. At the time of this review and following solid
positive cash flows since the period end, gearing has returned to 20% which is more in line with the group's
strategic objectives.

OPERATIONS REVIEW
Despite rather lacklustre global economic growth, Bell Equipment has been able to maintain its strong position in
the domestic market and at the same time grown market share in Europe, Australasia and sub-Saharan Africa.

As mentioned earlier, mining sector business has been positive and Bell is well positioned to take advantage of
the substantial infrastructure spend contemplated by the South African government in the years ahead.

Earlier in the year, Bell took the opportunity to reveal its new state-of-the-art Truck range at the Intermat Exhibition
in Paris. These machines will ensure that we maintain our technological advantage in the market and give our
customers the added benefits of higher productivity, greater durability and lower life-time operating costs.

Initiatives aligned to our global strategy will see several new market opportunities open up for us in the next six
to twelve months which should provide greater throughput for both our South African and German factories.

SHAREHOLDER DISCUSSIONS
Stakeholders may recall that we have made mention in our last two reviews, both in June last year and the
Integrated Report issued earlier this year, that the two major shareholders were in discussions over John Deere's
continued ownership of its shares in Bell. These discussions have still not been finalised, however John Deere
have indicated that in view of the imminent launch of their ADT in competition with Bell, they plan to have
their current nominated directors, who are all executives within the Deere Group, resign from the Bell board of
directors. Their replacements have yet to be decided upon.

PROSPECTS
We are confident that the solid first half-year results will continue into the second half of the financial year, unless
there is a major decline in market demand.

Michael Mun-Gavin                                                                                            Gary Bell
Chairman                                                                                       Chief Executive Officer

7 August 2012

Bell Equipment Limited
("Bell" or "the group" or the "company") (Incorporated in the Republic of South Africa) (Share code: BEL)
ISIN: ZAE000028304 Registration number: 1968/013656/06

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
# Non-executive directors * Independent non-executive directors

Company Secretary: D McIlrath (appointed 1 October 2011 and resigned 16 January 2012);
P van der Sandt (appointed 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


13 August 2012

Date: 13/08/2012 12:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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