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Audited condensed consolidated annual results for the year ended 31 August 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')
Audited condensed consolidated annual results for the year ended 31 August 2013
www.bwie.co.za
Condensed consolidated statement of financial position
as at 31 August 2013
2013 2012
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 27 784 27 081
Goodwill 7 368 7 368
Intangible assets 851 1 702
Other financial assets - 250
Deferred tax 19 415 4 304
Retention debtors 2 317 4 329
57 735 45 034
Current assets
Inventories 20 438 15 449
Other financial assets 911 3 567
Current tax receivable 109 -
Trade and other receivables 193 546 221 392
Cash and cash equivalents 15 206 15 155
230 210 255 563
Total assets 287 945 300 597
Equity and liabilities
Equity
Equity attributable to equity
holders of parent
Share capital 38 583 38 583
Reserves 2 624 246
Retained income 108 592 144 425
149 799 183 254
Non-controlling interest 421 151
150 220 183 405
Liabilities
Non-current liabilities
Finance lease obligation 385 554
Current liabilities
Loans from related parties 2 965 3 630
Loans from shareholders 3 926 4 628
Financial liabilities 8 411 20 144
Current tax payable 5 723 4 357
Finance lease obligation 169 201
Trade and other payables 100 263 79 342
Provisions 4 865 4 336
Bank overdraft 11 018 -
137 340 116 638
Total liabilities 137 725 117 192
Total equity and liabilities 287 945 300 597
Net asset value per share (cents) 73,3 89,7
Net tangible asset per share (cents) 69,3 85,3
Condensed consolidated statement of comprehensive income
for the year ended 31 August 2013
2013 2012
R'000 R'000
Contract revenue 399 860 442 374
Contract costs (358 397) (374 888)
Gross profit 41 463 67 486
Other income 1 865 1 876
Operating expenses (89 302) (53 590)
Operating (loss)/profit (45 974) 15 772
Investment revenue 76 45
Finance costs (4 712) (5 548)
(Loss)/profit before taxation (50 610) 10 269
Taxation 14 848 (7 683)
(Loss)/profit for the year (35 762) 2 586
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation reserve gross
movement 2 577 (1 235)
Other comprehensive income/(loss) for
the year net of taxation 2 577 (1 235)
Total comprehensive (loss)/income for
the year (33 185) 1 351
(Loss)/profit attributable to:
Owners of the parent (36 010) 2 882
Non-controlling interest 248 (296)
(35 762) 2 586
Total comprehensive (loss)/income
attributable to:
Owners of the parent (33 455) 1 659
Non-controlling interest 270 (308)
(33 185) 1 351
(Loss)/earnings per share (cents)
Per share information
Basic and diluted (loss)/earnings per
share (cents) (17,6) 1,4
Reconciliation of headline earnings
2013 2012
R000 R000
Weighted average number of shares
Shares in issues for the full year ('000) 204 374 204 374
Reconciliation between earnings/(loss)
and headline earnings/(loss)
Profit/(loss) attributable to ordinary
shareholders (36 010) 2 882
Adjusted for:
(Profit)/loss on disposal of property, plant
and equipment (net of tax) 50 (109)
(35 960) 2 773
Headline (loss)/earnings per share
Basic and diluted (cents) (17,6) 1,4
Condensed consolidated statement of changes in equity
for the year ended 31 August 2013
Foreign
currency Share-
Total trans- based
Share Share Treasury share lation payment
capital premium shares capital reserve reserve
R'000 R'000 R'000 R'000 R'000 R' 000
Group
Balance at 1 September 2011 2 49 850 (11 269) 38 583 500 -
Total comprehensive income for the year - - - - (1 223) -
Equity-settled share-based payment - - - - - 1 736
Transfer from reserves - - - - - (767)
Total changes - - - - (1 223) 969
Balance at 1 September 2012 2 49 850 (11 269) 38 583 (723) 969
Total comprehensive
loss for the year - - - - 2 555 -
Transfer from reserves - - - - - (177)
Total changes - - - - 2 555 (177)
Balance at 31 August 2013 2 49 850 (11 269) 38 583 1 832 792
Total
attribut-
Total able to
share equity Non-
capital Re- holders control-
and tained of the ling Total
reserves income group interest equity
R'000 R'000 R'000 R'000 R'000
Group
Balance at 1 September 2011 39 083 140 776 179 859 459 180 318
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 reserves (767) 767 - - -
Total changes (254) 3 649 3 395 (308) 3 087
Balance at 1 September 2012 38 829 144 425 183 254 151 183 405
Total comprehensive
loss for the year 2 555 (36 010) (33 455) 270 (33 185)
Transfer from reserves (177) 177 - - -
Total changes 2 378 (35 833) (33 455) 270 (33 185)
Balance at 31 August 2013 41 207 108 592 149 799 421 150 220
Condensed consolidated statement of cash flows
for the year ended 31 August 2013
2013 2012
R'000 R'000
Cash flows from operating activities
Cash generated from/(utilised in) operations 4 191 49 256
Interest income 76 45
Finance costs (4 712) (5 548)
Tax refunded/(paid) 994 (13 748)
Net cash from operating activities 549 30 005
Cash flows from investing activities
Purchase of property, plant and equipment (5 842) (4 283)
Sale of property, plant and equipment 554 4 420
Loans from related parties advanced - 7 932
Loans from related parties repaid (665) (260)
Proceeds from financial assets 2 906 -
Acquisition of financial assets - (250)
Receipts from retention debtors 4 329 -
Advances to retention debtors (2 317) (4 329)
Net cash from investing activities (1 035) 3 230
Cash flows from financing activities
Repayment of financial liabilities (11 733) -
Advances from financial liabilities - 20 144
Repayment of shareholder's loan (702) (3 195)
Finance lease inflows - 770
Finance lease outflows (201) (114)
Net cash from financing activities (12 636) 17 605
Total cash movement for the year (13 122) 50 840
Cash at the beginning of the year 15 155 (34 453)
Effect of exchange rate movement
on cash balances 2 155 (1 232)
Total cash at the end of the year 4 188 15 155
Segmental reporting
The group's segmental analysis is based on the economic environments in which it operates as presented below. All the business activities are related to the construction and erection of electrical plant and instrumentation.
Transactions reflected below between segments are carried out on an arm's length basis.
South Foreign
Africa operations Total
2013 2013 2013
R'000 R'000 R'000
Contract revenue 312 760* 87 100** 399 860***
Contract costs (280 725)* (77 672)** (358 397)***
Gross profit 32 035 9 428 41 463
Other income 1 865 - 1 865
Operating expenses (69 948) (19 354) (89 302)
Operating loss (36 048) (9 926) (45 974)
Investment revenue 76 - 76
Finance costs (4 712) - (4 712)
Loss before taxation (40 684) (9 926) (50 610)
Taxation 16 026 (1 178) 14 848
Loss for the year (24 658) (11 104) (35 762)
Note
Included in operating expenses are:
Bad debts 37 008 - 37 008
Depreciation and amortisation 4 953 839 5 792
Assets and liabilities
Total assets 243 599 44 346 287 945
Total liabilities (121 814) (15 911) (137 725)
121 785 28 435 150 220
* South African segment sales and cost of sales have been reduced by R21 300 000 (2012: R8 600 000) and R3 700 000 (2012: R17 700 000), respectively due to inter-segment sales.
** Foreign operations segment sales and cost of sales have been reduced by RNil (2012: R16 800 000) and R17 600 000 (2012: R7 700 000), respectively, due to inter-segment sales.
*** Included above are inter-company sales of R21 300 000 (2012: R25 400 000) and cost of sales of R21 300 000 (2012: R25 400 000).
Commentary
Basis of preparation
These preliminary condensed audited consolidated financial statements have been prepared in accordance with the framework concepts, the recognition and measurement principles of International Financial Reporting Standards ('IFRS'), the presentation and disclosure requirements of IAS 34: Interim Financial Statements, the SAICA Financial Reporting Guides issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listing Requirements of the JSE Limited and the requirements of the South African Companies Act. The financial information does not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial results of the group as at and for the year ended 31 August 2013.
The condensed consolidated financial information is presented in South African Rand rounded to the nearest thousand, which is the company's functional and the group's reporting currency. The accounting policies applied in the presentation of the condensed consolidated financial information are consistent with those applied for the year ended 31 August 2012, except for new standards and interpretations that became effective on 1 September 2012 and deemed applicable to the group. The adoption of these standards and interpretations had no impact on the results for the year nor has it required the restatement of any prior period figures.
These financial statements were prepared under the supervision of Mr Danie Evert, the Financial Director of the group.
Audit opinion
The unmodified audit report of Certified Master Auditors Inc., the independent auditors, on the consolidated annual financial statements for the year ended 31 August 2013, dated 15 November 2013, is available for inspection at the registered office of the company.
Directors' responsibility
The directors take full responsibility for the preparation of these preliminary condensed audited financial statements and the financial information has been correctly extracted from the underlying group financial statements.
Introduction
As anticipated the year was challenging in light of macroeconomic conditions and the collapse of the mining industry and resultant delays and cancellations of projects. Notwithstanding these negative impacts the second half of the year saw the group posting improved profitability with net profit of R5 million for the six months ended August. In a year of two halves the prior six months to February were negatively impacted by low project volumes and the final R33 million bad debt on the Madagascar project.
B&W has now concluded its consolidation phase, reducing both operating expenses and cost of sales. The consolidation phase included restructuring and right sizing operations, which have now positioned the group to capitalise on new opportunities.
At year-end the order book totalled R401,0 million (August 2012: R237,0 million) with all contracts at slightly improved margins. Anticipated new orders total approximately R50,0 million to R58,0 million, over the short- to medium-term.
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
Contract revenue decreased 9,6% to R399,9 million from R442,4 million in the prior year. B&W posted a loss after tax of R35,8 million compared to a profit of R2,6 million for the year ended 31 August 2012. This equated to a loss per share of 17,6 cents compared to earnings per share of 1,4 cents in the prior year. Bad debts of R37,0 million put pressure on operating expenses, which totalled R89,3 million (August 2012: R53,6 million).
At year-end the group's net cash position was R4,2 million (August 2012: R15,2 million).
Funding
The company maintains no long-term interest bearing borrowings.
Operations
South Africa accounted for 78% of group revenue with Africa accounting for 22%. With increased focus on opportunities in Africa, the region accounts for 44% of current work in hand, with the balance in South Africa.
B-BBEE
B&W formed a new subsidiary with B-BBEE shareholding in excess of 26%, in line with mining charter requirements.
Prospects
B&W is progressing with its five-year strategic plan, which includes selective targeted projects with a minimum acceptable profit levels and payment behaviour. This strategy, marketing and sales efforts have produced a reasonable robust order book for 2014 despite challenging conditions and created a sound framework to build momentum into the future for sustained growth. Notably all new orders secured are at margins above the threshold set by B&W.
Notwithstanding continued challenging trading conditions as a result of a subdued economy, a sluggish mining industry, and uncertainty in the construction sector tender activity has increased.
Given the prolonged downturn in the economy generally and the construction sector specifically, we have adopted a more cautious approach to 2014 and 2015.
Cross-border activity remains promising and the group has targeted selective countries to secure future long term work, but will continue to pursue opportunities on a project by project basis in other regions with our preferred clients. The group expects to even the South Africa: Africa split going forward. The targeted countries are Mozambique, Kenya, Namibia, Ghana, Tanzania, Botswana, Zambia and Uganda.
B&W will seek a more normalised revenue split between sectors, thereby lowering the dependency on the mining sector. The revenue split for the year per sector was as follows: mining 59%, industrial 15%, oil & gas 11%, power generation 5%, earthing lightning and surge protection 10%. A more even split is expected in the next 12 to 18 months.
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.
Changes to the board of directors
As announced on SENS on 26 November 2012:
- Mr Thomas Lombard resigned as an executive director with effect from 23 November 2012; and
- Mr Jimmy Oosthuizen retired as an independent non-exective director with effect from 18 January 2013.
Subsequent events
Other than the joint cautionary announcement released on SENS with ELB Group Limited on 4 November 2013, the board of directors is not aware of any material matters or circumstances arising since year-end up to the date of this report, which has not been disclosed.
Appreciation
The board extends its appreciation to management and staff for their hard work and dedication during a challenging year. 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.
18 November 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: 18/11/2013 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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