Wrap Text
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').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.