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Reviewed consolidated interim results for the six months ended 28 February 2013
B & W Instrumentation and Electrical Limited
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")
Reviewed consolidated interim results for the six months ended 28 February 2013
www.bwie.co.za
Consolidated statements of financial position
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
R'000 R'000 R'000
ASSETS
Non-current assets 58 211 54 977 45 034
Property, plant and equipment 27 511 28 782 27 081
Deferred tax 18 471 12 374 4 304
Goodwill 7 368 7 368 7 368
Intangible assets 1 276 2 128 1 702
Retention debtors 3 585 4 325 4 329
Other financial assets - - 250
Current assets 255 786 256 881 255 563
Inventories 23 047 3 360 15 449
Other financial asset 1 817 3 567 3 567
Trade and other receivables 220 171 213 632 221 392
Cash and cash equivalents 10 751 36 322 15 155
Total assets 313 997 311 858 300 597
EQUITY AND LIABILITIES
Equity 142 162 180 512 183 405
Share capital 38 583 38 583 38 583
Reserves (197) 399 246
Retained income 103 627 140 987 144 425
Non-controlling interest 149 543 151
Non-current liabilities 472 19 554
Finance lease obligation 472 19 554
Current liabilities 171 363 131 327 116 638
Loans from related parties 3 361 4 608 3 630
Financial liabilities 20 139 20 120 20 144
Current tax payable 3 568 15 874 4 357
Trade and other payables 102 848 39 227 79 342
Finance lease obligation 181 54 201
Loans from shareholders 3 803 6 326 4 628
Bank overdraft 36 075 43 692 -
Provisions 1 388 1 426 4 336
Total equity and liabilities 313 997 311 858 300 597
Number of ordinary shares in issue 204 373 959 204 373 959 204 373 959
Net asset value per share (cents) 69,6 88,3 89,7
Net tangible asset value per share (cents) 65,3 83,7 85,3
Consolidated statements of comprehensive income
Reviewed Reviewed Audited
six months to six months to 12 months to
28 February 29 February 31 August
2013 2012 2012
R'000 R'000 R'000
Contract revenue 185 091 272 888 442 374
Contract costs (176 673) (243 757) (374 888)
Gross profit 8 418 29 131 67 486
Other income 1 533 - 1 876
Operating expenses (61 999) (23 275) (53 590)
Operating (loss)/profit (52 048) 5 856 15 772
Investment revenue 53 5 45
Finance costs (2 660) (2 413) (5 548)
(Loss)/profit before taxation (54 655) 3 448 10 269
Taxation 13 860 (3 152) (7 683)
(Loss)/profit for the period (40 795) 296 2 586
Other comprehensive (loss)/income
Foreign currency translation reserve (448) (101) (1 235)
Total comprehensive (loss)/income (41 243) 195 1 351
(Loss)/profit attributable to:
Owners of the parent (40 798) 211 2 882
Non-controlling interest 3 85 (296)
(40 795) 296 2 586
Total comprehensive (loss)/income
attributable to:
Owners of the parent (41 241) 111 1 659
Non-controlling interest (2) 84 (308)
(41 243) 195 1 351
(Loss)/profit attributable to:
Owners of the parent (40 798) 211 2 882
Adjustment for headline earnings - profit
on sale of property, plant and equipment (4) 33 (109)
Headline (loss)/earnings attributable to
ordinary shareholders (40 802) 244 2 773
Weighted average number of ordinary shares
in issue 204 373 959 204 373 959 204 373 959
(Loss)/earnings per ordinary share (cents) (20,0) 0,1 1,4
Headline (loss)/earnings per ordinary
share (cents) (20,0) 0,1 1,4
Note
Included in the operating expenses are bad debts recognised of R35,3 million. This comprises:
- a write down on the Madagascar accounts receivable amount; and
- the partial impairment of the other financial assets item: loans and receivables - Linear products.
Consolidated statement of changes in equity
Share-
based
Share Share Treasury payment
capital premium shares reserve
R'000 R'000 R'000 R'000
Balance at 1 September 2011 2 49 850 (11 269) -
Total comprehensive income for the period - - - -
Balance at 29 February 2012 2 49 850 (11 269) -
Total comprehensive income for the period - - - -
Equity-settled share-based payment - - - 1 736
Transfer from reserve - - - (767)
Balance at 31 August 2012 2 49 850 (11 269) 969
Total comprehensive loss for the period - - - -
Balance at 28 February 2013 2 49 850 (11 269) 969
Consolidated statement of changes in equity
Foreign
currency Distribu-
translation table Minority Total
reserve reserve interest equity
R'000 R'000 R'000 R'000
Balance at 1 September 2011 500 140 776 459 180 318
Total comprehensive income for the period (101) 211 84 194
Balance at 29 February 2012 399 140 987 543 180 512
Total comprehensive income for the period (1 122) 2 671 (392) 1 157
Equity-settled share-based payment - - - 1 736
Transfer from reserve - 767 - -
Balance at 31 August 2012 (723) 144 425 151 183 405
Total comprehensive loss for the period (443) (40 798) (2) (41 243)
Balance at 28 February 2013 (1 166) 103 627 149 142 162
Consolidated cash flow statement
Reviewed Reviewed Audited
six months six months 12 months
28 February 29 February 31 August
2013 2012 2012
R'000 R'000 R'000
Cash (used in)/generated from operations (35 533) 24 295 49 256
Interest income 53 5 45
Finance costs (2 660) (2 413) (5 548)
Tax paid (1 096) (5 770) (13 748)
Net cash from operating activities (39 236) 16 117 30 005
Purchase of property, plant and equipment (2 934) (817) (4 283)
Sale of property, plant and equipment 147 2 046 4 420
Repayment on loans from directors (825) (1 497) (3 195)
Loans to related parties (repaid)/advanced (268) - 7 672
Proceeds from loans from group companies - 8 648 -
Sale/(purchase) of financial assets 2 000 - (250)
Movements on retention debtors 744 - (4 329)
Net cash from investing activities (1 136) 8 380 35
(Repayment of)/proceeds from
financial liabilities (5) 2 612 20 144
(Payments on)/inflow from finance lease (102) (26) 656
Net cash from financing activities (107) 2 586 20 800
Total cash movement for the period (40 479) 27 083 50 840
Cash at the beginning of the period 15 155 (34 453) (34 453)
Effect of exchange rate movement on
cash balances - - (1 232)
Total cash at the end of the period (25 324) (7 370) 15 155
Segmental reporting
South Foreign
Africa operations Total
R'000 R'000 R'000
Six months to February 2013
Profit and loss
Contract revenue 156 024 29 067 185 091
Contract costs (149 062) (27 611) (176 673)
Gross profit 6 962 1 456 8 418
Other income 1 533 - 1 533
Operating expenses (53 943) (8 056) (61 999)
Operating loss (45 448) (6 600) (52 048)
Investment income 53 - 53
Finance costs (2 660) - (2 660)
Loss before tax (48 055) (6 600) (54 655)
Assets and liabilities
Total assets 283 852 30 145 313 997
Total liabilities (144 293) (27 542) (171 835)
Six months to February 2012
Profit and loss
Contract revenue 109 272 163 616 272 888
Contract costs (73 206) (170 551) (243 757)
Gross profit/(loss) 36 066 (6 935) 29 131
Other income - - -
Operating expenses (9 320) (13 955) (23 275)
Operating profit/(loss) 26 746 (20 890) 5 856
Investment income 5 - 5
Finance costs (2 413) - (2 413)
Profit/(loss) before tax 24 338 (20 890) 3 448
Assets and liabilities
Total assets 242 132 69 726 311 858
Total liabilities (125 751) (5 595) (131 346)
Commentary
Basis of preparation
The accounting policies applied in the preparation of these reviewed consolidated interim 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 2012. The reviewed
consolidated interim financial statements as set out in this report have been prepared in terms of IAS 34: Interim Financial Reporting, SAICA Financial Reporting Guides, the Companies Act, 2008
(Act 71 of 2008), and the Listings Requirements of the JSE Limited. These results were prepared under the supervision of Financial Director Danie Evert.
Review opinion
The consolidated interim financial results for the six months ended 28 February 2013 ("the period") have been reviewed by B&W's auditors, Certified Master Auditors Inc. Their unqualified review
opinion is available for inspection at the company's registered office.
Introduction
As anticipated the period proved challenging, which resulted in a weak performance. The severity of the trading conditions was exacerbated by the write-off of bad debts.
B&W is reaching the end of a two-year consolidation phase, which has seen the company approach contract acquisition selectively. At period-end the order book totalled R454,0 million, with all
projects at acceptable margins. New orders make up R383,0 million, the majority of which are from the mining sector.
During the period low project volumes as a result of delays resulted in a decline in revenue. Further, the period reflected the final R33,3 million write-down on the Madagascar project. A strategic
decision was taken to settle the outstanding debt on the project for R12,5 million, in light of the questionable long-term sustainability of the debtor corporation. As a historical contract which
reached resolution in the period following protracted negotiations, this is not a true reflection of current trading conditions in which collections on all contracts, locally and in Africa, are seamless.
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
& gas, infrastructure, industrial, utilities, mining, chemical, renewable energy and power generation 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 32,2% to R185,1 million from R272,9 million in the comparative period. B&W posted a loss after tax of R40,8 million compared to a profit of R296 000 at 29 February 2012.
This equated to a loss per share of 20 cents compared to earnings per share of 0,1 cent in the comparative period. Lower project volumes put pressure on operating expenses, which totalled
R62,0 million (February 2012: R23,3 million).
At period-end the group had a negative cash balance of R25,3 million, compared to the negative R7,4 million in the comparative period. The reduction in cash resources was a factor mainly of the
invoicing cycle, and has already seen a correction post period-end.
Funding
The company maintains no material long-term interest-bearing borrowings.
Operations
Since period-end only 3,5%, or R13,5 million, of the new orders have commenced construction. This is indicative of the prevailing state of the E&I construction industry. A number of projects have
been cancelled or postponed, and targeted projects have to take account of scarce project availability with commencement in the short-term.
Africa accounts for 44% of the group's total new orders, with the balance in South Africa. This is expected to equalise going forward in light of greater volumes of work outside South Africa.
B&W's Africa contracts have commenced largely post period-end.
Further, B&W expects a more normalised revenue split between sectors (still largely mining dominated) in the next financial year and into FY2015. While mining will remain the largest driver of top
line growth, its expected contribution to total revenue should reduce as that from other sectors increases.
BEE
As previously announced on 6 March 2013, B&W and Regiments Capital Proprietary Limited ("Regiments Capital") have mutually agreed not to proceed with the B-BBEE transaction which would
have seen Regiments Capital become a 32,5% shareholder. B&W has commenced a restructuring process at a group level to ensure the B-BBEE shareholding at a subsidiary level exceeds 26%.
Prospects
B&W will continue to pursue its five-year strategic plan, with target measurables based on the number of projects rather than revenue. This will include selective targeting projects with a minimum
acceptable profit levels and payment behaviour.
The first quarter of 2013 has remained challenging, and B&W is expecting to turn the corner during the last quarter of the calendar year and heading into 2014. The group is positive looking to
2014/5, with clearly defined projects and improved margins.
In addition cash flow is progressively improving and has stabilised post period-end. It is expected to strengthen further going forward.
Relative to competitors, the order book remains satisfactorily strong.
Directorate
During the period Thomas Lombard resigned as an executive director, with effect from 23 November 2012. Jimmy Oosthuizen retired as an independent non-executive director at the annual
general meeting on 18 January 2013.
The board thanks Thomas and Jimmy for their contributions to the company and wishes them well in their future endeavours.
Dividend
No interim dividend has been declared in line with the group's strategy of consolidation. It remains the group's policy to declare a final dividend at year-end of 25% of NPAT, cash flow permitting.
Subsequent events
The board of directors is not aware of any material matters or circumstances arising since the end of the period up to the date of this report, which have not been disclosed.
Appreciation
The board thanks all management, in particular Project Director Gary Swanepoel, and staff for their tenacity and efforts during a challenging period. We also thank our business partners, suppliers,
advisors and our valued clients and shareholders for their continued confidence in the group.
John Barrow
Chairman
Brian Harley
Chief Executive Officer
On behalf of the board.
22 April 2013
Directors
John Barrow* (Chairman)
Brian Harley (CEO)
Danie Evert (Financial Director)
Dean Nevay
Gary Swanepoel
Wolf Wassermeier*^
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)
Auditors
Certified Master Auditors Inc.
1, 2nd Road
Midrand
1685
(Private Bag X168, Halfway House, 1685)
Investor Relations
Envisage Investor & Corporate Relations
Date: 22/04/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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