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Unaudited interim report for the period ended 30 June 2015
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
UNAUDITED INTERIM REPORT FOR THE PERIOD ENDED 30 JUNE 2015
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited Reviewed Audited
as at 30 June 2015 30 June 30 June 31 December
R'000 2015 2014 2014
ASSETS
Non-current assets 1 045 783 992 666 1 011 357
Property, plant and equipment 706 028 679 081 672 106
Intangible assets 217 689 168 230 203 078
Investments 530 566 548
Interest-bearing long-term receivables 33 495 32 423 45 357
Deferred taxation 88 041 112 366 90 268
Current assets 3 790 123 3 737 307 3 483 147
Inventory 2 662 181 2 460 832 2 403 437
Trade and other receivables and prepayments 991 728 1 049 706 753 984
Current portion of interest-bearing long-term receivables 36 944 24 854 42 519
Other financial assets 3 207 2 835 2 071
Non-current assets held for sale 11 550 - 11 850
Taxation 18 363 12 279 10 331
Cash resources 66 150 186 801 258 955
TOTAL ASSETS 4 835 906 4 729 973 4 494 504
EQUITY AND LIABILITIES
Capital and reserves 2 626 110 2 561 116 2 536 331
Stated capital (Note 5) 230 567 230 567 230 567
Non-distributable reserves 455 011 497 249 466 669
Retained earnings 1 932 430 1 824 690 1 831 459
Attributable to owners of Bell Equipment Limited 2 618 008 2 552 506 2 528 695
Non-controlling interest 8 102 8 610 7 636
Non-current liabilities 281 420 236 677 214 273
Interest-bearing liabilities 137 916 100 399 87 161
Repurchase obligations and deferred leasing income - 12 772 -
Deferred warranty income 68 185 51 544 65 616
Long-term provisions and lease escalation 43 137 44 098 44 813
Deferred taxation 32 182 27 864 16 683
Current liabilities 1 928 376 1 932 180 1 743 900
Trade and other payables 1 181 151 1 319 482 1 376 773
Current portion of interest-bearing liabilities 72 242 50 678 40 304
Current portion of repurchase obligations and
deferred leasing income 20 583 57 677 34 980
Current portion of deferred warranty income 61 362 60 400 59 079
Current portion of provisions and lease escalation 50 506 63 199 65 941
Other financial liabilities 3 952 3 474 4 404
Taxation 34 950 39 647 28 640
Short-term interest-bearing debt 503 630 337 623 133 779
TOTAL EQUITY AND LIABILITIES 4 835 906 4 729 973 4 494 504
Number of shares in issue ('000) 95 147 95 147 95 147
Net asset value per share (cents) 2 760 2 692 2 666
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS Unaudited Reviewed Audited
for the period ended 30 June 2015 six months six months twelve months
ended ended ended
30 June 30 June 31 December
R'000 2015 2014 2014
Revenue 2 898 009 3 438 650 6 608 545
Cost of sales (2 199 741) (2 648 855) (5 067 408)
Gross profit 698 268 789 795 1 541 137
Other operating income 90 610 78 505 148 597
Expenses (621 527) (735 952) (1 504 643)
Profit from operating activities (Note 2) 167 351 132 348 185 091
Net interest paid (Note 3) (25 699) (37 583) (54 818)
Profit before taxation 141 652 94 765 130 273
Taxation (40 676) (34 447) (63 853)
Profit for the period/year 100 976 60 318 66 420
Profit for the period/year attributable to:
- Owners of Bell Equipment Limited 100 510 58 623 63 452
- Non-controlling interest 466 1 695 2 968
Earnings per share (basic)(cents) (Note 4) 106 62 67
Earnings per share (diluted)(cents) (Note 4) 106 61 66
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME Unaudited Reviewed Audited
for the period ended 30 June 2015 six months six months twelve months
ended ended ended
30 June 30 June 31 December
R'000 2015 2014 2014
Profit for the period/year 100 976 60 318 66 420
Other comprehensive (loss) income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the period/year (12 125) 10 726 (21 915)
Exchange differences on translating foreign operations (11 385) 10 607 (5 715)
Exchange differences on foreign reserves (740) 119 (711)
Reclassification to profit or loss of foreign currency translation reserve
on deregistered operations - - (15 489)
Other comprehensive (loss) income for the period/year, net of taxation (12 125) 10 726 (21 915)
Total comprehensive income for the period/year 88 851 71 044 44 505
Total comprehensive income attributable to:
- Owners of Bell Equipment Limited 88 385 69 349 41 537
- Non-controlling interest 466 1 695 2 968
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Reviewed
for the period ended 30 June 2015 Unaudited six months Audited
six months ended twelve months
ended Restated ended
30 June 30 June 31 December
R'000 2015 2014 2014
Cash operating profit before working capital changes (Note 6) 214 760 248 327 368 119
Cash (utilised in) generated from working capital (Note 6) (773 563) 233 406 571 458
Cash (utilised in) generated from operations (558 803) 481 733 939 577
Net interest paid (25 699) (37 583) (54 818)
Taxation paid (26 949) (41 373) (77 043)
Net cash (utilised in) generated from operating activities (611 451) 402 777 807 716
Net cash utilised in investing activities (Note 6) (34 013) (78 134) (183 600)
Net cash generated from (utilised in) financing activities 82 808 (14 518) (37 993)
Net cash (outflow) inflow (562 656) 310 125 586 123
Net cash (short-term interest-bearing debt) at beginning of the period/year 125 176 (460 947) (460 947)
Net (short-term interest-bearing debt) cash at end of the period/year (437 480) (150 822) 125 176
Comprising:
Cash resources 66 150 186 801 258 955
Short-term interest-bearing debt (503 630) (337 623) (133 779)
Net (short-term interest-bearing debt) cash at end of the period/year (437 480) (150 822) 125 176
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2015 Attributable to owners of Bell Equipment Limited
Non- Non- Total
Stated distributable Retained controlling capital and
R'000 capital reserves earnings Total interest reserves
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
Recognition of share-based payments - 1 754 - 1 754 - 1 754
Total comprehensive (loss) income for the period - (32 641) 4 829 (27 812) 1 273 (26 539)
Transactions with non-controlling interest - - 2 247 2 247 (2 247) -
Increase in statutory reserves of foreign subsidiaries - 307 (307) - - -
Balance at 31 December 2014 - audited 230 567 466 669 1 831 459 2 528 695 7 636 2 536 331
Recognition of share-based payments - 928 - 928 - 928
Total comprehensive (loss) income for the period - (12 125) 100 510 88 385 466 88 851
Decrease in statutory reserves of foreign subsidiaries - (461) 461 - - -
Balance at 30 June 2015 - unaudited 230 567 455 011 1 932 430 2 618 008 8 102 2 626 110
ABBREVIATED NOTES TO UNAUDITED INTERIM REPORT
for the period ended 30 June 2015 Unaudited Reviewed Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
R'000 2015 2014 2014
1 BASIS OF PREPARATION
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 amended
standards and the change in functional currency as described below.
In the current period the group has adopted all of the new and amended standards relevant
to its operations and effective for annual reporting periods beginning 1 January 2015. The
adoption of these new and amended standards 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 Mozambique
changed from Meticais 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.
The condensed consolidated interim report is prepared in accordance with the requirements
of the JSE Limited's Listings Requirements for interim reports and the requirements of the
Companies Act in South Africa. The Listings Requirements require interim reports to be
prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council and IAS 34 -
Interim Financial Reporting. The preparation of this interim report was supervised by the
Group Finance Director, KJ van Haght CA(SA).
2 PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is arrived at after taking into account:
Income
Currency exchange gains 117 158 94 089 195 831
Decrease in warranty provision 17 964 - -
Deferred warranty income 25 350 18 899 41 500
Import duty rebates 30 190 23 741 42 706
Reclassification to profit or loss of foreign currency translation reserve on deregistered operations - - 15 489
Royalties 2 139 2 216 4 647
Net surplus on disposal of property, plant and equipment and intangible assets 5 766 692 1 485
Expenditure
Amortisation of intangible assets 8 833 12 755 25 280
Auditors' remuneration - audit and other services 5 324 5 697 10 214
Currency exchange losses 92 173 96 042 186 976
Depreciation of property, plant and equipment 69 770 53 187 114 881
Increase in provision for doubtful debts 15 488 33 326 69 887
Increase in warranty provision - 5 739 6 814
Operating lease charges
- equipment and motor vehicles 19 669 19 754 42 205
- land and buildings 44 241 43 047 86 236
Research expenses (excluding staff costs) 13 428 13 607 35 072
Severance pay 22 573 - 21 378
Staff costs (including directors' remuneration) 628 840 626 496 1 234 012
3 NET INTEREST PAID
Interest paid 30 909 41 250 67 722
Interest received (5 210) (3 667) (12 904)
Net interest paid 25 699 37 583 54 818
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) 100 510 58 623 63 452
Weighted average number of ordinary shares in issue during the period ('000) 95 147 95 145 95 146
Earnings per share (basic) (cents) 106 62 67
Diluted earnings per share is arrived at as follows:
Profit for the period attributable to owners of Bell Equipment Limited (R'000) 100 510 58 623 63 452
Fully converted weighted average number of shares ('000) 95 147 96 400 95 640
Earnings per share (diluted) (cents) 106 61 66
Headline earnings per share is arrived at as follows:
Profit for the period attributable to owners of Bell Equipment Limited (R'000) 100 510 58 623 63 452
Net surplus on disposal of property, plant and equipment and intangible assets (R'000) (5 766) (692) (1 485)
Taxation effect of net surplus on disposal of property, plant and equipment and intangible assets (R'000) 1 614 194 416
Reclassification to profit or loss of foreign currency translation reserve on deregistered operations (R'000) - - (15 489)
Headline earnings (R'000) 96 358 58 125 46 894
Weighted average number of ordinary shares in issue during the period ('000) 95 147 95 145 95 146
Headline earnings per share (basic) (cents) 101 61 49
Diluted headline earnings per share is arrived at as follows:
Headline earnings calculated above (R'000) 96 358 58 125 46 894
Fully converted weighted average number of shares ('000) 95 147 96 400 95 640
Headline earnings per share (diluted) (cents) 101 60 49
5 STATED CAPITAL
Authorised
100 000 000 (June 2014: 100 000 000) ordinary shares of no par value
Issued
95 146 885 (June 2014: 95 146 885) ordinary shares of no par value 230 567 230 567 230 567
6 RECLASSIFICATION IN STATEMENT OF CASH FLOWS
Cash generated from working capital in the June 2014 comparative included an amount of
R33,3 million relating to the movement in the provision for doubtful debts. This non-cash
movement has been reclassified from cash generated from working capital to cash operating
profit before working capital changes.
Net cash utilised in investing activities in the June 2014 comparative included an amount of
R37,8 million relating to rental asset additions. These additions are working capital in nature
and accordingly has been reclassified from investing activities to cash generated from
working capital.
7 CAPITAL EXPENDITURE COMMITMENTS
Contracted 3 232 10 744 21 460
Authorised, but not contracted 36 419 59 240 59 418
Total capital expenditure commitments 39 651 69 984 80 878
8 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 (machines 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 2015
South African sales operation 1 247 877 44 591 1 181 268 854 281
South African manufacturing and logistics operation 1 889 229 43 507 2 448 233 1 048 779
European operation 919 819 40 800 1 016 512 669 574
Rest of Africa and other international operations 466 160 35 706 790 491 622 912
North American operation 244 989 5 257 155 273 103 007
All other operations - (6 319) 1 074 794 135 393
Inter-segmental eliminations * (1 870 065) 3 809 (1 830 665) (1 224 150)
Total - unaudited 2 898 009 167 351 4 835 906 2 209 796
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
December 2014
South African sales operation 2 866 868 110 591 1 048 204 763 578
South African manufacturing and logistics operation 3 757 830 (2 709) 2 684 551 1 307 601
European operation 1 917 207 42 892 907 854 683 686
Rest of Africa and other international operations 1 540 758 6 537 951 258 825 981
North American operation 374 200 (15 855) 60 719 16 934
All other operations - (36 913) 1 113 956 137 515
Inter-segmental eliminations * (3 848 318) 80 548 (2 272 038) (1 777 122)
Total - audited 6 608 545 185 091 4 494 504 1 958 173
* Inter-segmental eliminations above relate to the following:
i) Revenue - the elimination of intra-group sales transactions, mainly sales
from the South African manufacturing and logistics operation, to the distribution
operations.
ii) Operating profit (loss) - the elimination of profit (loss) on intra-group
transactions, mainly sales transactions from the South African manufacturing
and logistics operation to the distribution operations, where the inventory has
not yet been on-sold by the distribution operations to a third party at period end.
iii) Assets and liabilities - the intra-group transactions result in intra-group
receivables and payables balances and furthermore intra-group loans are in
place between certain group operations. These are eliminated on consolidation.
Unaudited Reviewed Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
9 CONTINGENT LIABILITIES 2015 2014 2014
9.1 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 169 823 172 344 204 829
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 2 590 6 101 995
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 206 317 189 605 243 954
(33 904) (11 160) (38 130)
Less: Provision for non-recovery - (315) -
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 20 165 23 660 21 645
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 31 029 18 551 25 902
(10 864) 5 109 (4 257)
Less: Provision for non-recovery (1 188) (400) (1 782)
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.
9.2 The repurchase of equipment sold to customers and financial institutions has been
guaranteed by the group for an amount of 853 25 854 4 420
In the event of repurchase, it is estimated that the equipment would presently
realise 3 192 33 089 19 037
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.
9.3 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 8 611 24 741 8 457
Less: Provision for residual value risk (525) (1 524) (670)
Net contingent liability 8 086 23 217 7 787
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 2 903 4 357 2 867
Less: Impairment of retention deposits (2 008) (436) -
Net retention deposits and net contingent liability 895 3 921 2 867
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.
10 RELATED PARTY TRANSACTIONS
Information regarding transactions with significant related parties is presented below.
Transactions are carried out on an arms length basis.
Shareholders
John Deere Construction and Forestry Company
- sales 56 987 87 854 185 029
- purchases 377 131 371 452 611 230
- amounts owing to 128 351 134 713 153 836
- amounts owing by 25 375 70 561 34 944
11 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 and is based on observable forward exchange rates
at period end.
- Available for sale financial asset comprising an unlisted equity investment at cost
for which a reliable fair value could not be determined.
12 POST FINANCIAL POSITION EVENTS
No fact or circumstance material to the appreciation of this
interim report has occurred between 30 June 2015 and the
date of this report.
COMMENTARY
MARKET OVERVIEW
Bell Equipment Limited has seen a modest improvement in the mid year results relative to 2014 despite
difficulties in a number of our major markets and industries. Favourable exchange rates as well as
efficiency improvements and a strategy to focus on our Northern Hemisphere construction equipment markets
have made a positive impact.
Restructuring actions taken in the early part of the year have better aligned our expenses to the current
lower level of activities encountered in our domestic market and other regions where we have traditionally
been more reliant on mining related business.
There is no expectation that there will be an improvement in commodity demand in the short term and factory
production rates have been adjusted accordingly.
FINANCIAL RESULTS
The profit after tax of R101 million and earnings per share of 106 cents for the first half, an increase
of 67% and 71% respectively on the first half of 2014, is an acceptable improvement under tougher market
conditions. Revenue for the period was R2,9 billion, down 16% from R3,4 billion in the same period
last year. The right-sizing and restructuring initiatives undertaken, improved efficiency at the factory
and foreign currency gains earned during the period were the main reasons for the improvement.
Due to markets being even more depressed than was expected at the start of the year, inventory levels
have increased by R259 million since the December 2014 year end. This, together with a record sales
month in June 2015 that resulted in high receivables at half year end, contributed to an increase in
net short-term interest-bearing debt of R563 million from the end of 2014. Receivables normalised in
July and plans are in place to bring inventory levels back in line with long term targets by year end.
OPERATIONS REVIEW
The decision to combine the control and management of all of our Southern African Sales operations under
a single structure has delivered the necessary efficiencies expected and together with a full line product
offering is well positioned to participate as and when the anticipated infrastructure activity accelerates.
A substantial investment has been made in upgrading a number of our key Customer Service Centers in the
region and the contribution from our aftermarket business continues to show steady gains.
Power supply interruptions across our South African operations and our more than one thousand domestic
suppliers of component parts and services, has been disruptive and has contributed to the increasing
costs of doing business in this country.
Engineering and research and development activity continues at Richards Bay and the final models of our
new E-Series range of Articulated Dump Trucks will be introduced shortly. The emphasis in design has been
to deliver machines offering a lower lifecycle cost and performance improvements.
Tough trading conditions are expected to endure and further initiatives are underway to ensure that our
cost structures are appropriate and will allow BELL to respond rapidly to any changes in demand.
John Barton Gary Bell
Chairman Chief Executive Officer
6 August 2015
Directors
Non-executive
JR Barton* (Chairman), AJ Bell, B Harie*, TO Tsukudu*, DJJ Vlok*
*Independent
Resignation: MA Mun-Gavin resigned as director on 4 May 2015
Executive
GW Bell (Chief Executive Officer), KJ van Haght (Group Finance
Director), L Goosen
Company Secretary
Highway Corporate Services Proprietary Limited,
14 Hillcrest Office Park, 2 Old Main Road,
Hillcrest, 3610
www.hicorp.co.za
Registered Office
13 - 19 Carbonode Cell Road, Alton, Richards Bay, 3900
Transfer Secretaries
Link Market Services South Africa Proprietary Limited,
19 Ameshoff Street, Johannesburg, 2001
Sponsor
Rand Merchant Bank
(a division of FirstRand Bank Limited)
Release date: 11 August 2015
www.bellequipment.com
Date: 11/08/2015 02:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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