Wrap Text
Reviewed Interim Report For The Period Ended 30 June 2014
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 PERIOD ENDED 30 JUNE 2014
LABOUR UNREST CONTRIBUTES TO 60% REDUCTION IN EPS
INVENTORY DOWN 11,6% FROM DECEMBER 2013
POSITIVE CASH GENERATED FROM OPERATIONS OF
R519 MILLION FOR THE SIX-MONTH PERIOD
NET SHORT-TERM INTEREST-BEARING DEBT DOWN R310 MILLION
FROM DECEMBER 2013
Condensed consolidated statement of financial position
as at 30 June 2014
Reviewed Reviewed Audited
30 June 30 June 31 December
R'000 2014 2013 2013
ASSETS
Non-current assets 992 666 790 480 957 032
Property, plant and equipment 679 081 580 834 691 631
Intangible assets 168 230 133 793 149 217
Investments 566 504 563
Interest-bearing long-term receivables 32 423 2 839 18 297
Deferred taxation 112 366 72 510 97 324
Current assets 3 737 307 3 778 988 3 799 301
Inventory 2 460 832 2 550 278 2 784 840
Trade and other receivables and prepayments 1 049 706 1 049 402 874 818
Current portion of interest-bearing long-term receivables 24 854 33 464 21 059
Other financial assets 2 835 2 190 578
Taxation 12 279 15 403 11 679
Cash resources 186 801 128 251 106 327
Total assets 4 729 973 4 569 468 4 756 333
EQUITY AND LIABILITIES
Capital and reserves 2 561 116 2 297 002 2 488 661
Stated capital (note 5) 230 567 229 343 230 534
Non-distributable reserves 497 249 340 036 485 145
Retained earnings 1 824 690 1 667 268 1 766 067
Attributable to owners of Bell Equipment Limited 2 552 506 2 236 647 2 481 746
Non-controlling interest 8 610 60 355 6 915
Non-current liabilities 236 677 277 807 247 690
Interest-bearing liabilities 100 399 102 701 113 271
Repurchase obligations and deferred leasing income 12 772 48 892 17 871
Deferred warranty income 51 544 78 531 52 596
Long-term provisions and lease escalation 44 098 45 516 40 382
Deferred taxation 27 864 2 167 23 570
Current liabilities 1 932 180 1 994 659 2 019 982
Trade and other payables 1 319 482 1 216 973 1 193 013
Current portion of interest-bearing liabilities 50 678 161 568 52 337
Current portion of repurchase obligations and deferred
leasing income 57 677 53 646 59 489
Current portion of deferred warranty income 60 400 17 443 48 483
Current portion of provisions and lease escalation 63 199 42 455 59 148
Other financial liabilities 3 474 1 074 4 937
Taxation 39 647 36 500 35 301
Short-term interest-bearing debt 337 623 465 000 567 274
Total equity and liabilities 4 729 973 4 569 468 4 756 333
Number of shares in issue ('000) 95 147 95 031 95 144
Net asset value per share (cents) 2 692 2 417 2 616
Condensed consolidated statement of profit or loss
for the period ended 30 June 2014 Reviewed
Reviewed 6 months Audited
6 months ended 12 months
ended 30 June ended
30 June 2013 31 December
R'000 2014 Restated 2013
Revenue 3 438 650 3 018 963 6 319 104
Cost of sales (2 648 855) (2 332 784) (4 890 116)
Gross profit 789 795 686 179 1 428 988
Other operating income 78 505 63 026 144 847
Expenses (735 952) (530 317) (1 233 760)
Profit from operating activities (note 2) 132 348 218 888 340 075
Net interest paid (note 3) (37 583) (13 219) (34 699)
Profit before taxation 94 765 205 669 305 376
Taxation (34 447) (48 578) (99 623)
Profit for the period/year 60 318 157 091 205 753
Profit for the period/year attributable to:
– Owners of Bell Equipment Limited 58 623 148 401 183 007
– Non-controlling interest 1 695 8 690 22 746
Earnings per share (basic) (note 4) (cents) 62 156 193
Earnings per share (diluted) (note 4) (cents) 61 153 189
Condensed consolidated statement
of profit or loss and other comprehensive income
for the period ended 30 June 2014
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R'000 2014 2013 2013
Profit for the period/year 60 318 157 091 205 753
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the period/year 10 726 140 225 252 300
Exchange differences on translating foreign operations 10 607 135 554 244 106
Exchange differences on foreign reserves 119 4 671 8 194
Items that may not be reclassified subsequently to profit or loss: – – 26 304
Surplus arising on revaluation of properties – – 37 616
Taxation relating to surplus arising on revaluation of properties – – (11 312)
Other comprehensive income for the period/year, net of taxation 10 726 140 225 278 604
Total comprehensive income for the period/year 71 044 297 316 484 357
Total comprehensive income attributable to:
– Owners of Bell Equipment Limited 69 349 288 626 461 611
– Non-controlling interest 1 695 8 690 22 746
Condensed consolidated statement of cash flows
for the period ended 30 June 2014
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R'000 2014 2013 2013
Cash operating profit before working capital changes 215 001 401 005 684 923
Cash generated from (utilised in) working capital 304 492 (626 202) (694 480)
Cash generated from (utilised in) operations 519 493 (225 197) (9 557)
Net interest paid (37 583) (13 219) (34 699)
Taxation paid (41 373) (23 375) (90 925)
Net cash generated from (utilised in) operating activities 440 537 (261 791) (135 181)
Net cash utilised in investing activities (115 894) (82 673) (237 108)
Net cash utilised in financing activities (14 518) (47 792) (144 165)
Net cash inflow (outflow) 310 125 (392 256) (516 454)
Net (short-term interest-bearing debt) cash at beginning
of the period/year (460 947) 55 507 55 507
Net short-term interest-bearing debt at end of the period/year (150 822) (336 749) (460 947)
Comprising:
Cash resources 186 801 128 251 106 327
Short-term interest-bearing debt (337 623) (465 000) (567 274)
Net short-term interest-bearing debt at end of the period/year (150 822) (336 749) (460 947)
Condensed consolidated statement of changes in equity
for the period ended 30 June 2014 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 2012 – audited 228 749 197 050 1 596 095 2 021 894 51 665 2 073 559
Share options exercised 594 – – 594 – 594
Recognition of share-based payments – 2 661 – 2 661 – 2 661
Total comprehensive income for the period – 140 225 148 401 288 626 8 690 297 316
Adjustment for non-controlling interest put valuation – – (39 137) (39 137) – (39 137)
Increase in statutory reserves of foreign subsidiaries – 100 (100) – – –
Dividends paid – – (37 991) (37 991) – (37 991)
Balance at 30 June 2013 – reviewed 229 343 340 036 1 667 268 2 236 647 60 355 2 297 002
Share options exercised 1 191 – – 1 191 – 1 191
Recognition of share-based payments – 2 043 – 2 043 – 2 043
Total comprehensive income for the period – 138 379 34 606 172 985 14 056 187 041
Transactions with non-controlling interest – – 68 880 68 880 (67 496) 1 384
Increase in statutory reserves of foreign subsidiaries – 4 687 (4 687) – – –
Balance at 31 December 2013 – audited 230 534 485 145 1 766 067 2 481 746 6 915 2 488 661
Share options exercised 33 – – 33 – 33
Recognition of share-based payments – 1 378 – 1 378 – 1 378
Total comprehensive income for the period – 10 726 58 623 69 349 1 695 71 044
Balance at 30 June 2014 – reviewed 230 567 497 249 1 824 690 2 552 506 8 610 2 561 116
Abbreviated notes to the reviewed interim report for the period ended 30 June 2014
1. BASIS OF PREPARATON
The accounting policies applied in the preparation of this interim report are in terms of International Financial Reporting Standards and
are consistent with those applied in the previous annual financial statements, except for the adoption of new and revised standards and
interpretations and the change in functional currency as described below.
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 2014. 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.
In the current period the functional currency of the group's operation in Zambia changed from Zambian Kwacha to United States Dollar
(US Dollar). The operation's primary economic environment is significantly influenced by the US Dollar. A significant portion of sales and
the cost of goods and services has been indexed against the US Dollar.
In the annual financial statements for the year ended 31 December 2013, the group reclassified foreign currency gains and losses
arising from inventory purchases from operating expenses to cost of sales. The reclassification took place after the release of the June
2013 results. Accordingly, the June 2013 consolidated statement of profit or loss in this interim report has been restated. The amount
reclassified for the six-month period ended 30 June 2013 was a net loss of R77 million.
This condensed consolidated interim report has been prepared in accordance with International Financial Reporting Standard IAS 34
– Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial
Pronouncements as issued by the Financial Reporting Standards Council and the 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 2014 2013 2013
2. PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is arrived at after taking into account:
Income
Currency exchange gains 94 089 93 080 181 880
Deferred warranty income 18 899 16 179 37 006
Import duty rebates 23 741 19 833 51 310
Royalties 2 216 1 488 2 641
Net surplus on disposal of property, plant and equipment and intangible assets 692 720 998
Expenditure
Amortisation of intangible assets 12 755 9 258 19 604
Auditors' remuneration – audit and other services 5 697 5 253 10 399
Currency exchange losses 96 042 131 058 269 826
Depreciation of property, plant and equipment 53 187 53 470 107 839
Increase in warranty provision 5 739 884 8 060
Operating lease charges
– equipment and motor vehicles 19 754 20 498 40 099
– land and buildings 43 047 39 455 82 440
Research expenses (excluding staff costs) 13 607 13 795 28 016
Staff costs 626 496 598 954 1 238 551
3. NET INTEREST PAID
Interest paid 41 250 17 105 42 047
Interest received (3 667) (3 886) (7 348)
Net interest paid 37 583 13 219 34 699
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) 58 623 148 401 183 007
Weighted average number of ordinary shares in issue
during the period ('000) 95 145 95 006 95 062
Earnings per share (basic) (cents) 62 156 193
Diluted earnings per share is arrived at as follows:
Profit for the period attributable to owners of Bell Equipment Limited (R'000) 58 623 148 401 183 007
Fully converted weighted average number of shares ('000) 96 400 96 971 96 933
Earnings per share (diluted) (cents) 61 153 189
Headline earnings per share is arrived at as follows:
Profit for the period attributable to owners of Bell Equipment Limited (R'000) 58 623 148 401 183 007
Net surplus on disposal of property, plant and equipment and
intangible assets (R'000) (692) (720) (998)
Taxation effect of net surplus on disposal of property, plant and
equipment and intangible assets (R'000) 194 202 279
Headline earnings (R'000) 58 125 147 883 182 288
Weighted average number of ordinary shares in issue
during the period ('000) 95 145 95 006 95 062
Headline earnings per share (basic) (cents) 61 156 192
Diluted headline earnings per share is arrived at as follows:
Headline earnings calculated above (R'000) 58 125 147 883 182 288
Fully converted weighted average number of shares ('000) 96 400 96 971 96 933
Headline earnings per share (diluted) (cents) 60 153 188
5. STATED CAPITAL
Authorised
100 000 000 (June 2013: 100 000 000) ordinary shares of no par value
Issued
95 146 885 (June 2013: 95 030 660) ordinary shares of no par value 230 567 229 343 230 534
The increase in issued share capital relates to 2 500 share options exercised
at an average share price of R13,06 per share.
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 10 744 7 333 68 472
Authorised, but not contracted 59 240 65 083 147 079
Total capital expenditure commitments 69 984 72 416 215 551
7. ABBREVIATED SEGMENTAL ANALYSIS
Information regarding the group's reportable segments is presented below. Information reported to the group's chief operating decision-maker for
purposes of resource allocation and assessment of segment performance is focused on geographical areas. Each reportable segment derives its
revenues from the sale of goods (machine and parts) and related services and rental income. The accounting policies of the reportable segments
are the same as the group's accounting policies.
Operating
Revenue profit (loss) Assets Liabilities
R'000 R'000 R'000 R'000
June 2014
South African sales operation 1 523 559 72 303 982 354 739 385
South African manufacturing and logistics operation 1 848 575 226 2 813 871 1 437 853
European operation 1 034 577 65 494 1 157 060 890 323
Rest of Africa and other international operations 697 340 (38 925) 1 108 422 975 469
North American operation 217 796 433 93 869 55 837
All other operations – 2 926 1 133 382 115 549
Inter-segmental eliminations (1 883 197) 29 891 (2 558 985) (2 045 559)
Total – reviewed 3 438 650 132 348 4 729 973 2 168 857
June 2013
South African sales operation 1 381 359 54 704 929 597 725 716
South African manufacturing and logistics operation 2 162 565 122 996 2 921 058 1 566 889
European operation 543 764 22 198 1 125 156 929 419
Rest of Africa and other international operations 958 666 112 764 1 082 471 890 146
North American operation 107 955 (7 670) 68 867 38 958
All other operations – (6 157) 978 326 151 019
Inter-segmental eliminations (2 135 346) (79 947) (2 536 007) (2 029 681)
Total – reviewed 3 018 963 218 888 4 569 468 2 272 466
December 2013
South African sales operation 2 826 034 94 234 878 142 677 524
South African manufacturing and logistics operation 4 391 050 206 850 2 809 933 1 394 737
European operation 1 564 810 48 348 1 279 303 1 053 743
Rest of Africa and other international operations 1 867 623 96 086 1 144 502 988 200
North American operation 337 176 (18 940) 177 094 141 351
All other operations – 8 447 1 143 113 145 743
Inter-segmental eliminations (4 667 589) (94 950) (2 675 754) (2 133 626)
Total – audited 6 319 104 340 075 4 756 333 2 267 672
Reviewed Reviewed Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
R'000 2014 2013 2013
8. CONTINGENT LIABILITIES
8.1 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
carries certain credit risks. These are considered to be financial guarantee contracts.
The group is liable for all credit risk and therefore the full balance due to WesBank
by default customers with regard to Bell-backed deals and a portion of the credit risk
and a portion of the balance due to WesBank by default customers with regard to
Bell-shared risk deals. In terms of the Bell-shared risk deals the group's exposure is
calculated as a percentage of the net selling price of the equipment.
At period end the group's credit risk exposure to WesBank under Bell-backed
deals for which the group carries all the credit risk totalled 172 344 32 057 110 356
At period end the group's credit risk exposure to WesBank under Bell-shared risk
deals for which the group carries a portion of the credit risk totalled 6 101 3 639 3 765
In the event of default, the equipment financed would be recovered and it is estimated
that they would presently realise the following towards the above liabilities 189 605 39 695 158 624
(11 160) (3 999) (44 503)
Less: provision for non-recovery 315 500 –
Net contingent liability – – –
The group has entered into similar shared risk arrangements with various other
institutions. These arrangements are first-loss undertakings and the group's exposure
remains fixed until the capital is repaid. These are considered to be financial
guarantee contracts.
At period end the group's credit risk exposure to these financial institutions totalled 23 660 16 028 18 400
In the event of default, the equipment financed would be recovered and it is
estimated that they would presently realise the following towards the above liability 18 551 16 246 21 870
5 109 – –
Less: provision for non-recovery 400 – –
Net contingent liability 4 709 – –
Where customers are in arrears with these financial institutions and there is a shortfall
between the estimated realisation values of the equipment and the balances due by
the customers to these financial institutions, an assessment of any additional security
is done and a provision for any residual credit risk is made on a deal-by-deal basis.
8.2 The repurchase of equipment sold to customers and financial institutions has
been guaranteed by the group for an amount of 25 854 2 114 2 224
In the event of repurchase, it is estimated that the equipment would
presently realise 33 089 8 005 6 234
Net contingent liability – – –
This relates to sales transactions with buy-back obligations where the probability
of return of the equipment by the customer at the end of the buy-back period has
been assessed as remote and revenue has been recognised upfront. A provision for
residual value risk is recognised subsequent to initial recognition of the sale on a
deal-by-deal basis, to the extent that the assessed market value of the equipment is
less than the cost of meeting the buy-back obligation.
8.3 The residual values of certain equipment sold to financial institutions have been
guaranteed by the group. The group's exposure is limited to the difference between
the group's guaranteed amount and the financial institution's predetermined estimate.
In the event of a residual value shortfall on this equipment,
the group would be exposed to a maximum amount of 24 741 4 477 16 418
Less: provision for residual value risk (1 524) (1 269) (1 458)
Net contingent liability 23 217 3 208 14 960
In certain other transactions the group has paid cash collateral as security for the
residual value risk. This cash collateral is recognised as retention deposits under
interest-bearing long-term receivables. In the event of a residual value shortfall on
this equipment, the group would be exposed to a maximum amount equal to the
cash collateral of 4 357 4 910 5 638
Less: impairment of retention deposits (436) (219) (668)
Net retention deposits and net contingent liability 3 921 4 691 4 970
This relates to sales transactions to financial institutions which lease the equipment
to customers for an agreed lease term. In certain cases, the group has a remarketing
agreement with the institution for the disposal of the equipment returned after the
lease term, but in all instances the group's risk is limited to the residual value risk
described above.
The provision for residual value risk and the impairment of retention deposits are
based on an assessment of the market value of the equipment.
9. RELATED PARTY TRANSACTIONS
Information regarding transactions with significant related parties is presented below.
Transactions are carried out on an arm's length basis.
Shareholders
John Deere Construction and Forestry Company
– sales 87 854 36 394 73 099
– purchases 371 452 395 935 690 110
– amounts owing to 134 713 153 290 127 171
– amounts owing by 70 561 4 977 22 487
10. FINANCIAL INSTRUMENTS
Categories of financial instruments included in the statement of financial position:
- Loans and receivables at amortised cost comprising interest-bearing long-term receivables, trade and other receivables and cash
resources. The directors consider that the carrying amount of loans and receivables at amortised cost approximates their fair value.
- Financial liabilities at amortised cost comprising interest-bearing liabilities, trade and other payables and short-term interest-bearing
debt.The directors consider that the carrying amount of financial liabilities at amortised cost approximates their fair value.
- Financial assets and liabilities carried at fair value through profit or loss include forward foreign exchange contracts and fair value is
determined based on a Level 2 fair value measurement. Level 2 fair value measurements are those derived from inputs other than
quoted prices.
- Available for sale financial asset comprising an unlisted equity investment at cost for which a reliable fair value could not be determined.
11. INDEPENDENT AUDITORS' REPORT
The condensed interim financial information for the half year ended 30 June 2014 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'. The auditor's review report does not necessarily report on all the information contained in this announcement.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor's review engagement, they
should obtain a copy of the auditor's review report together with the accompanying financial information from the company's registered
office. 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.
12. POST FINANCIAL POSITION EVENTS
No fact or circumstance material to the appreciation of this interim report has occurred between 30 June 2014 and the date of this report.
Commentary
BUSINESS ENVIRONMENT
We report on Bell Equipment's performance for the first six months of 2014. The challenging environment resulting from
lower economic activity in many of our global markets and continued uncertainty about the future, has led many of our
customers to take a more cautious approach to capital equipment purchases. Labour unrest and instability in South
Africa in recent months following protracted wage demands has also impacted negatively on our domestic market.
Although revenue for the six-month period was up some 14% on the comparative period of 2013, factory capacity
utilisation was planned at much lower levels to correct inventory levels and align to market demands. Lower levels of
mining activity have also impacted on profitability.
FINANCIAL RESULTS
The profitability of R60,3 million for the first half of 2014 is disappointing relative to the R157,1 million generated in the
first half of 2013. Revenue for the period was R3,4 billion, up from R3,0 billion in the corresponding period in 2013.
Low production volumes with a high fixed cost structure contributed to the major decrease in profitability for the period.
Inventory reduction plans have delivered an 11,6% reduction in total inventory relative to the December 2013 year-end,
and generated a R519 million positive cash flow from operations for the six-month period.
Net short-term interest-bearing debt is down R310 million from year-end and gearing has improved from 25% at the
end of 2013 to 12% at 30 June 2014.
OPERATIONS REVIEW
During the second half of the year we expect our Northern hemisphere markets of Europe and North America to continue
their gradual recovery and our plans to enhance and broaden our distribution channels are progressing well.
Lower order intake and sales as a result of subdued activity from the mining sector is expected to continue for some
time and measures have been implemented to improve profitability but there is still more work to be done.
The South African market is expected to deliver an acceptable return for the remainder of the year despite the fact that
the NDP plans for the construction sector are still to be implemented. Our comprehensive service network and full line
product offering are market leading and will allow us to maintain a dominant position in our important domestic market.
Shareholders are reminded that the company is still trading under a cautionary.
Michael Mun-Gavin Gary Bell
Chairman Chief Executive Officer
7 August 2014
Directors
MA Mun-Gavin* (Chairman)
GW Bell (Group Chief Executive)
KJ van Haght (Group Financial Director)
L Goosen, JR Barton*, B Harie*
TO Tsukudu*, DJJ Vlok*
*Independent non-executive director
Company Secretary
P van der Sandt
Registered office
13 – 19 Carbonode Cell Road, Alton, Richards Bay, 3900
Transfer secretaries
Link Market Services South Africa Proprietary Limited
PO Box 4844, Johannesburg, 2000
Sponsor
Rand Merchant Bank
(A division of FirstRand Bank Limited)
Release date: 11 August 2014
www.bellequipment.com
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