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B&W INSTRUMENTATION & ELECTRICAL LD - Audited consolidated annual results for the year ended 31 August 2012

Release Date: 19/11/2012 07:40
Code(s): BWI     PDF:  
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Audited consolidated annual results for the year ended 31 August 2012

B & W Instrumentation and Electrical Limited

Audited consolidated annual results for the year ended 31 August 2012
Incorporated in the Republic of South Africa (Registration number 2001/008548/06) Share code: BWI ISIN: ZAE000098687 ("B&W" or "the company" or "the group")
www.bwie.co.za

- Cash up R50,8 million
- Order book R237,0 million
- NPAT R2,6 million
- EPS 1,4 cents

Consolidated statement of financial position

                                Audited     As at 31 August As at 31 August
                        as at 31 August            restated        restated
                                   2012                2011            2010
                                  R'000               R'000           R'000
Assets                                                                           
Non-current assets                                                               
Property, plant and              27 081              32 543          36 939              
equipment                                                                                
Goodwill                          7 368               7 368           7 368              
Intangible assets                 1 702               2 553           3 404              
Other financial                     250                   -               -              
assets                                                                                   
Deferred tax                      4 304              10 924               -              
Retention debtors                 4 329                   -          15 766              
                                 45 034              53 388          63 477             
Current assets                                              
Inventories                      15 449               2 547           3 502              
Loans to related                      -               8 904           3 700              
parties                                                                                  
Other financial                   3 567               3 567           3 484              
assets                                                                                   
Trade and other                 221 392             337 407         319 146              
receivables                                                                              
Cash and cash                    15 155              12 876          71 082              
equivalents                                                                              
                                255 563             365 301         400 914             
Total assets                    300 597             418 689         464 391              
Equity and liabilities                                                           
Equity                                                                           
Equity attributable to equity 
holders of parent                                  
Share capital                    38 583              38 583          38 583             
Reserves                            246                 500             315             
Retained income                 144 425             140 776         165 970             
                                183 254             179 859         204 868            
Non-controlling                     151                 459             216             
interest                                                                                 
                                183 405             180 318         205 084            
Liabilities                                                             
Non-current liabilities                                        
Finance lease                       554                  47             131             
obligation                                                                               
Deferred tax                          -                   -          11 682             
                                    554                  47          11 813            
Current liabilities                                            
Loans from related                3 630               4 862           1 634             
parties                                                                                  
Loans from                        4 628               7 823               -             
shareholders                                                                             
Financial                        20 144                   -               -             
liabilities                                                                              
Current tax payable               4 357              17 042           6 841             
Finance lease                       201                  52             158             
obligation                                                                               
Trade and other                  79 342             154 385         230 296             
payables                                                                                 
Provisions                        4 336               6 831           8 565             
Bank overdraft                         -             47 329               -             
                                116 638             238 324         247 494            
Total liabilities               117 192             238 371         259 307             
Total equity and                300 597             418 689         464 391             
liabilities                                                                               
Net asset value per                89,7                88,2           100,4             
share (cents)                                                                           
Net tangible asset                 85,3                83,4            95,1             
value per share                                                                                                                        
(cents)    

Consolidated statement of comprehensive income

                                Audited          Year ended     Year ended
                             year ended           31 August      31 August
                              31 August            restated       restated
                                   2012                2011           2010
                                  R'000               R'000          R'000
Revenue                         442 374             683 384        601 283  
Contract costs                (374 888)           (661 500)      (478 158)  
Gross profit                     67 486              21 884        123 125  
Other income                      1 876                 224          1 040  
Operating expenses             (53 590)            (45 714)       (45 855)  
Operating                        15 772            (23 606)         78 310  
profit/(loss)                                                               
Investment revenue                   45                  40          3 567  
Finance costs                   (5 548)             (3 619)          (323)  
Profit/(loss) before             10 269            (27 185)         81 554  
taxation                                                                    
Taxation                        (7 683)              11 429       (24 041)  
Profit/(loss) for                 2 586            (15 756)         57 513  
the year                                                                    
Other comprehensive income:  
Foreign currency                (1 235)                 187            318  
translation reserve                                                         
movement                                                                    
Total comprehensive               1 351            (15 569)         57 831  
income/(loss)                                                               
Profit/(loss) attributable to:  
Owners of the parent              2 882            (15 997)         57 308  
                                                                            
Non-controlling                   (296)                 241            205  
interest                                                                    
                                  2 586            (15 756)         57 513  
Total comprehensive income/(loss) 
attributable to:   
Owners of the parent              1 659            (15 812)         57 623  
                                                                            
Non-controlling                   (308)                 243            208  
interest                                                                    
                                  1 351            (15 569)         57 831  
Earnings per share  
Earnings/(loss) per share 
Basic and diluted 
EPS                                 1,4               (7,8)           28,5




Consolidated statement of changes in equity
                                                                                                                  
                                                                                      Share-      Foreign       
                                                                             Total     based     currency      
                                          Share      Share     Treasury      share   payment  translation   
R'000                                   capital    premium       shares    capital   reserve      reserve       
Group                                              
Balance at 1 September 2010                   2     49 850      (11 269)    38 583         -          315           
Changes in equity                                  
Total comprehensive loss for the year         -          -             -         -         -          185           
Dividends                                     -          -             -         -         -            -             
Total changes                                 -          -             -         -         -          185           
Balance at 1 September 2011                   2     49 850      (11 269)    38 583         -          500           
Changes in equity                                  
Total comprehensive income for the year       -          -             -         -         -      (1 223)       
Equity-settled share-based payment            -          -             -         -     1 736            -             
Transfer from reserve                         -          -             -         -     (767)            -             
Total changes                                 -          -             -         -       969      (1 223)       
Balance at 31 August 2012                     2     49 850      (11 269)    38 583       969        (723)

Consolidated statement of changes in equity continued            

					  Total                  Total
					  share           attributable
					capital              to equity        Non-
					    and    Retained holders of controlling        Total
				       reserves      income  the group    interest       equity
R'000                                   
Group                                   
Balance at 1 September 2010              38 898     165 970    204 868         216      205 084
Changes in equity                        
Total comprehensive loss for the year       185    (15 997)   (15 812)         243     (15 569)
Dividends                                     -     (9 197)    (9 197)           -      (9 197)
Total changes                               185    (25 194)   (25 009)         243     (24 766)
Balance at 1 September 2011              39 083     140 776    179 859         459      180 318
Changes in equity                        
Total comprehensive income for the year (1 223)       2 882      1 659       (308)        1 351
Equity-settled share-based payment       1 736           -       1 736           -        1 736
Transfer from reserve                     (767)         767          -           -            -
Total changes                             (254)       3 649      3 395       (308)        3 087
Balance at 31 August 2012                38 829     144 425    183 254         151      183 405
         																																																																					  
Consolidated statement of cash flows

                                Audited          Year ended     Year ended
                             year ended           31 August      31 August
                              31 August            restated       restated
                                   2012                2011           2010
                                  R'000               R'000          R'000
Cash flows from 
operating activities
Cash generated                   49 256            (95 404)        (5 495)            
from/(used in) operations                                                                            
Interest income                      45                  40          3 567            
Finance costs                   (5 548)             (3 619)          (323)            
Tax paid                       (13 748)               (977)       (19 347)            
Net cash from                    30 005            (99 960)       (21 598)            
operating activities                                                                  
                                                                                      
Cash flows from 
investing activities           
Purchase of                     (4 283)             (2 168)       (14 344)            
property, plant and                                                                   
equipment                                                                             
Sale of property,                 4 420                 215            314            
plant and equipment                                                                   
Business                              -                   -       (11 653)            
combinations/acquisition                                                                  
of subsidiary                                                                    
Loans to related                  7 672             (1 975)        (3 097)            
parties                                                                               
advanced/(repaid)                                                                     
Acquisition of                    (250)                (83)        (3 484)            
financial assets                                                                      
Advances to                     (4 329)                   -              -            
retention debtors                                                                     
Loan advanced by                      -               7 823              -            
shareholders                                                                          
Repayment of                    (3 195)                   -              -            
shareholders loan                                                                     
Net cash from                        35               3 812       (32 264)            
investing activities                                                                  
                                                                                      
Cash flows from financing 
activities 
Advance of financial             20 144                   -              -            
liabilities                                                                           
Inflow/(outflow)                    656               (190)            289            
from finance lease                                                                    
Dividends paid                        -             (9 197)       (15 109)            
Net cash from                    20 800             (9 387)       (14 820)            
financing activities                                                                  
                                                                                      
Total cash movement              50 840           (105 535)       (68 682)            
for the year                                                                          
Cash at the                    (34 453)              71 082        139 764            
beginning of the                                                                      
year                                                                                  
Effect of exchange              (1 232)                   -              -            
rate movement on                                                                      
cash balances                                                                         
Total cash at the                15 155            (34 453)         71 082            
end of the year 


Segmental reporting                                                           
                                                    Foreign
                      	    South Africa          operations          Total
R'000							
2012
Profit and loss    
Contract revenue               258 853*           183 521**     442 374***     
Contract costs               (169 777)*         (205 111)**   (374 888)***     
Gross profit/(loss)              89 076            (21 590)         67 486     
Other income                        875               1 001          1 876     
Investment income                    45                   -             45     
Finance costs                   (5 548)                   -        (5 548)     
Depreciation and                (5 181)             (1 147)        (6 328)     
amortisation                                                                   
Operating expenses             (26 675)            (20 587)       (47 262)     
Taxation                       (13 370)               5 687        (7 683)     
Profit/(loss) after              39 222            (36 636)          2 586     
tax                                                                            
Total assets                    276 839              23 758        300 597     
Total liabilities             (107 793)             (9 399)      (117 192)     
Total                           169 046              14 359        183 405     
2011                                                                          
Profit and loss     
Contract revenue               338 390*           344 994**     683 384***     
Contract costs               (332 600)*         (328 900)**   (661 500)***     
Gross profit                      5 790              16 094         21 884     
Other income                        224                   -            224     
Investment income                    40                   -             40     
Finance costs                   (3 619)                   -        (3 619)     
Depreciation and                (5 949)             (1 081)        (7 030)     
amortisation                                                                   
Operating expenses             (19 182)            (19 502)       (38 684)     
Taxation                         15 759             (4 330)         11 429     
Loss after tax                  (6 937)             (8 819)       (15 756)     
Assets and liabilities     
Total assets                    321 054              97 635        418 689     
Total liabilities             (215 617)            (22 754)      (238 371)     
Total                           105 437              74 881        180 318                                                                                                                                                                                                                                                                                  
* South African segment sales and cost of sales have been reduced by R8 600 000 (2011: R24 100 000) and R17 700 000 (2011: R32 600 000) respectively due to intersegment sales.
** Foreign operations segment sales and cost of sales have been reduced by R16 800 000 (2011: R32 600 000) and R7 700 000 (2011: R24 100 000) respectively, due to intersegment sales.
*** Included above are intercompany sales of R25 400 000 (2011: R56 700 000) and cost of sales of R25 400 000 (2011: R56 700 000).

Commentary

Basis of preparation
The accounting policies applied in the preparation of these audited consolidated annual financial statements, which are based on reasonable judgements and estimates, are in accordance with International Financial Reporting Standards ("IFRS") and are consistent with those applied in the audited annual financial statements for the previous year ended 31 August 2011. The audited consolidated annual financial statements as set out in this report have been prepared in terms of IAS 34: Interim Financial Reporting, the Companies Act, 2008 (Act 71 of 2008) and the Listings Requirements of the JSE Limited. The results have been prepared under the supervision of Financial Director, Danie Evert.

Audit opinion
The audited consolidated annual financial results for the year ended 31 August 2012 ("the year") have been audited by B&W's auditors, Certified Master Auditors Inc. Their unqualified audit opinion is available for inspection at the company's registered office.

Introduction
The year under review marked a period of consolidation for the group. Revenue for the year declined as expected in response to continued challenging trading conditions, but B&W returned to profitability and improved cash flow to end the year in a cash positive position with only incurring short-term debt of R20,1 million and without incurring any long-term debt. 

The group completed a successful restructuring of its operations, underwent a comprehensive risk identification process improving governance and risk management substantially, and set a five-year strategic plan, paving the way for continued performance improvement and growth into FY2013.

Group profile
B&W is one of South Africa's top three niche providers of electrical and instrumentation ("E&I") services as well as an earthing, lightning and surge protection specialist. Clients range across the oil and gas, infrastructure, industrial, utilities, mining, chemical, renewable energy and food and beverage industries in South Africa and sub-Saharan Africa. Specific services include equipment procurement, project supervision, installation of the E&I system, post-installation commissioning and ongoing maintenance. 

Financial results
Revenue decreased 35,3% as expected to R442,4 million from R683,4 million in the previous year, as part of the group's planned consolidation. Profit after tax of R2,6 million marked B&W's return to profitability. Group operating expenses increased to R53,6 million compared to R45,7 million in the previous year, as a result of recruitment initiatives driven by the group's consolidation process. 

Operating expenses stabilised while the negative cash balance of R34,5 million at the previous year-end turned into a positive cash balance of R15,2 million at year-end. Capital expenditure remained well contained at a historic minimum, while non-productive plant and equipment was sold. It is anticipated that CAPEX will increase conservatively in FY2013 to accommodate expected moderate growth.

Funding
The company maintains a position of no long-term debt with only minimal short-term debt incurred.

Operations
At year-end the order book totalled R237,0 million at lower margins than is customary for B&W due to the highly competitive market and current trading conditions. 
Anticipated orders of approximately R308,0 million will be secured at slightly improved margins. However, these projects are only due to commence construction from February 2013 onwards. 

Coming off the low base of the previous year the order book will enable B&W to record some growth in most sectors of the business from the third and fourth quarter of 2013. 

The next six months (to February 2013) are expected to remain challenging and are likely not to meet expectations as a result of the current state of the economy and the turmoil in the mining industry over the past four to five months, projects being put on hold and project pipelines being moved out. 

Throughout the year emphasis was placed on accurate timekeeping and project cost control. To this end current software was evaluated and configured to a more user-friendly and effective system, which is expected to come online during the second quarter of FY2013.

A Small Projects division was initiated during FY2012, leveraging the group's core competencies and securing a reasonable volume of work. B&W believes that there is significant opportunity over the next four to six years to capitalise on smaller E&I projects at acceptable margins, to assist in offsetting the impact of delays in the award of larger projects. 

The group is researching new organic product lines to expand its service offering and drive future growth potential. 

B&W improved its B-BBEE accreditation from Level 5 to a Level 4. The group will continue to explore ongoing initiatives for further improvement and transformation. B&W also maintained an exemplary safety record, once again achieving five-star ratings at the group's head office and in the Secunda region, as well as a Noscar Safety Award at the group's head office.

Prior period reclassification
Comparative figures for advances from customers have been reclassified from financial liabilities to trade and other payables as the advances from customers do not meet the definition of a financial liability. 

The effects of the reclassification are as follows:

						 Group
	                         	R'000      R'000      R'000
Statement of financial position
Financial liabilities          	            -   (17 508)   (49 217)
Trade and other payables                    -     17 508     49 217

Subsequent events
The board of directors is not aware of any material matters or circumstances arising since year-end up to the date of these results.

Prospects
FY2013 is expected to remain challenging in a fiercely competitive market and subdued, uncertain economic environment.

Medium-term growth will depend on markets and regions of operation resuming some form of stability and consistency. Local infrastructure spend and a healthy, investor-friendly environment should spearhead some escalation of confidence and momentum in the currently depressed construction sector. Projects now on hold, particularly mining projects, will further strengthen confidence levels if they are reactivated. 

A decent volume of work in South Africa and Africa has been identified for FY2013. Looking further ahead, a pipeline of substantial work in most of the construction sectors is indicated - oil and gas is anticipated to demonstrate growth from 2014 onwards, including mining and general infrastructure spend in Africa. Further, renewable energy offers promising opportunities and a number of budget pricings have been submitted to various global and local clients for consideration in projects rolling-out during 2014. 

Order in-take is currently sluggish, but is expected to improve in the second quarter of FY2013 with more attractive opportunities in the longer-term that will enable the group to return to former levels of growth. B&W's aggressive five-year strategic growth plan will inevitably require additional working capital. The board will therefore consider undertaking capital raising initiatives going forward given the potential positive returns for shareholders. 

The group will continue to expand into Africa, and this growth will be accelerated in the medium to long-term.

Directorate
George Robertson joined B&W as an independent non-executive director on 27 January 2012 and was appointed as Chairman of the Audit & Risk Committee on 23 March 2012. Roger Pitt was appointed to the board as an independent non-executive director and member of the Audit & Risk Committee with effect from 17 September 2012.

Johan Breedt, Sam Vilakazi and Stephen Pinkney resigned from the board as executive directors with effect from 20 January 2012, 24 February 2012 and 30 April 2012, respectively. The board thanks Johan, Sam and Stephen for their considerable contribution and wishes them well in their future endeavours.

Dividend
No dividend has been declared for the year in line with the group's undertaking of consolidation. It remains the group's policy to declare annual dividends going forward, cash flow permitting.

Appreciation
The board extends its utmost appreciation to all management and staff for their ongoing commitment and support during a difficult year that helped successfully steer the group back to profit. We also thank our business partners, suppliers, advisers and our valued clients and shareholders for their continued confidence in the group.

John Barrow		Brian Harley
Chairman		Chief Executive Officer


On behalf of the board

19 November 2012


Directors
John Barrow* (Chairman); Brian Harley (CEO); Danie Evert (Financial Director); Tom Lombard; Dean Nevay; Gary Swanepoel; Wolf Wassermeier*#; Jimmy Oosthuizen*#; Unati Mabandla*#; George Robertson*#;Roger Pitt*#
* Non-executive director # Independent

Registered office
42 Fourth Avenue, Alberton North, 1456 
(PO Box 956, Alberton, 1450)

Designated Adviser
Merchantec Capital

Transfer secretaries
Computershare Investor Services (Proprietary) Limited 
70 Marshall Street, Johannesburg, 2001 
(PO Box 61051, Marshalltown, 2107)

Company secretary
CIS Company Secretaries (Proprietary) Limited 
70 Marshall Street, Johannesburg, 2001 
(PO Box 61051, Marshalltown, 2107)

Investor Relations
Envisage Investor & Corporate Relations
Date: 19/11/2012 07:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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