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Preliminary audited results for the year ended 31 December 2015
BELL EQUIPMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/013656/06)
("Bell")
Share code: BEL
ISIN: ZAE000028304
PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2015 Audited Audited
R'000 2015 2014
ASSETS
Non-current assets 1 026 915 1 011 357
Property, plant and equipment 686 608 672 106
Intangible assets 213 305 203 078
Investments 665 548
Interest-bearing long-term receivables 29 763 45 357
Deferred taxation 96 574 90 268
Current assets 3 826 145 3 483 147
Inventory 2 862 652 2 403 437
Trade and other receivables 740 911 728 638
Current portion of interest-bearing long-term receivables 41 759 42 519
Prepayments 36 992 25 346
Other financial assets 12 783 2 071
Non-current assets held for sale - 11 850
Taxation 26 827 10 331
Cash resources 104 221 258 955
TOTAL ASSETS 4 853 060 4 494 504
EQUITY AND LIABILITIES
Capital and reserves 3 004 291 2 536 331
Stated capital (Note 5) 230 567 230 567
Non-distributable reserves 765 277 466 669
Retained earnings 2 001 086 1 831 459
Attributable to owners of Bell Equipment Limited 2 996 930 2 528 695
Non-controlling interest 7 361 7 636
Non-current liabilities 287 246 214 273
Interest-bearing liabilities 111 885 87 161
Repurchase obligations and deferred leasing income 3 820 -
Deferred income 66 543 65 616
Long-term provisions and lease escalation 51 376 44 813
Deferred taxation 53 622 16 683
Current liabilities 1 561 523 1 743 900
Trade and other payables 1 014 921 1 376 773
Current portion of interest-bearing liabilities 57 719 40 304
Current portion of repurchase obligations and
deferred leasing income 1 042 34 980
Current portion of deferred income 71 774 59 079
Current portion of provisions and lease escalation 53 783 65 941
Other financial liabilities 20 593 4 404
Taxation 37 898 28 640
Short-term interest-bearing debt 303 793 133 779
TOTAL EQUITY AND LIABILITIES 4 853 060 4 494 504
Number of shares in issue ('000) 95 147 95 147
Net asset value per share (cents) 3 158 2 666
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 31 December 2015
Audited Audited
R'000 2015 2014
Revenue 5 901 431 6 608 545
Cost of sales (4 554 157) (5 067 408)
Gross profit 1 347 274 1 541 137
Other operating income 184 523 148 597
Expenses (1 240 033) (1 504 643)
Profit from operating activities (Note 2) 291 764 185 091
Net interest expense (Note 3) (58 901) (54 818)
Profit before taxation 232 863 130 273
Taxation (64 008) (63 853)
Profit for the year 168 855 66 420
Profit for the year attributable to:
- Owners of Bell Equipment Limited 168 280 63 452
- Non-controlling interest 575 2 968
Earnings per share (basic)(cents) (Note 4) 177 67
Earnings per share (diluted)(cents) (Note 4) 177 66
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2015
Audited Audited
R'000 2015 2014
Profit for the year 168 855 66 420
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising during the year 297 520 (21 915)
Exchange differences on translating foreign operations 283 288 (5 715)
Exchange differences on foreign reserves 14 232 (711)
Reclassification to profit or loss of foreign currency translation reserve on
deregistered operations - (15 489)
Other comprehensive income (loss) for the year, net of taxation 297 520 (21 915)
Total comprehensive income for the year 466 375 44 505
Total comprehensive income attributable to:
- Owners of Bell Equipment Limited 465 800 41 537
- Non-controlling interest 575 2 968
SUMMARISED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 December 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
Total comprehensive income for the year - (21 915) 63 452 41 537 2 968 44 505
Recognition of share-based payments - 3 132 - 3 132 - 3 132
Share options exercised 33 - - 33 - 33
Increase in statutory reserves of foreign subsidiaries - 307 (307) - - -
Transactions with non-controlling interest - - 2 247 2 247 (2 247) -
Balance at 31 December 2014 - Audited 230 567 466 669 1 831 459 2 528 695 7 636 2 536 331
Total comprehensive income for the year - 297 520 168 280 465 800 575 466 375
Recognition of share-based payments - 1 585 - 1 585 - 1 585
Decrease in statutory reserves of foreign subsidiaries - (497) 497 - - -
Transactions with non-controlling interest - - 850 850 (850) -
Balance at 31 December 2015 - Audited 230 567 765 277 2 001 086 2 996 930 7 361 3 004 291
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2015
Audited Audited
R'000 2015 2014
Cash generated from operations before working capital changes 396 283 368 119
Cash (utilised in) generated from working capital (610 080) 571 458
Cash (utilised in) generated from operations (213 797) 939 577
Net interest paid (52 991) (54 818)
Taxation paid (45 167) (77 043)
Net cash (utilised in) generated from operating activities (311 955) 807 716
Net cash utilised in investing activities (54 194) (183 600)
Net cash generated from (utilised in) financing activities 41 401 (37 993)
Net cash (outflow) inflow (324 748) 586 123
Net cash (short-term interest-bearing debt) at beginning of the year 125 176 (460 947)
Net (short-term interest-bearing debt) cash at end of the year (199 572) 125 176
Comprising:
Short-term interest-bearing debt (303 793) (133 779)
Cash resources 104 221 258 955
Net (short-term interest-bearing debt) cash at end of the year (199 572) 125 176
ABBREVIATED NOTES TO THE PRELIMINARY AUDITED CONSOLIDATED RESULTS
for the year ended 31 December 2015
31 December 31 December
R'000 2015 2014
1 ACCOUNTING POLICIES
The summarised consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) and the policies and methods
of computation are consistent with those applied to the previous year, except for the
adoption of new and amended standards and interpretations and the changes as described
below.
In the current year 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 in this operation has been indexed against the US Dollar.
In the current year the group's internal organisational structure changed due to group
restructuring processes. This caused the composition of its reportable segments to change.
The operating segment information for the previous year has been restated accordingly.
The group has adopted all of the new and amended standards and interpretations relevant
to its operations and effective for annual reporting periods beginning 1 January 2015.
The adoption of these new and amended standards and interpretations has not had any
significant impact on the amounts reported in the financial statements and in this preliminary
report.
The summarised consolidated financial statements have been prepared on the historical
cost basis, except for the revaluation of properties and financial instruments. The summarised
consolidated financial statements are prepared in accordance with the requirements of the JSE
Limited's Listings Requirements for preliminary reports and the requirements of the Companies
Act in South Africa. The Listings Requirements require preliminary 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, Financial
Pronouncements as issued by the Financial Reporting Standards Council and the information
as required by IAS 34 Interim Financial Reporting. The preparation of this preliminary report
and consolidated financial statements from which these results are summarised 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 239 526 195 831
Deferred warranty income 51 627 41 500
Decrease in warranty provision 21 330 -
Import duty rebates 57 153 42 706
Reclassification to profit or loss of foreign currency translation reserve on
deregistered operations - 15 489
Royalties 4 447 4 647
Net surplus on disposal of non-current assets held for sale 7 073 -
Net surplus on disposal of property, plant and equipment and intangible assets 6 041 1 485
Expenditure
Amortisation of intangible assets 25 374 25 280
Amounts written off as uncollectible 11 924 -
Auditors' remuneration - audit and other services 9 683 10 214
Currency exchange losses 234 940 186 976
Depreciation of property, plant and equipment 143 304 114 881
Increase in provision for doubtful debts 6 412 69 887
Increase in warranty provision - 6 814
Operating lease charges 132 823 128 441
Research expenses (excluding staff costs) 29 978 35 072
Severance pay 26 240 21 378
Staff costs (including directors' remuneration) 1 213 065 1 234 012
3 NET INTEREST EXPENSE
Interest expense 70 787 67 722
Interest income (11 886) (12 904)
Net interest expense 58 901 54 818
4 EARNINGS PER SHARE
Basic earnings per share is arrived at as follows:
Profit for the year attributable to owners of Bell Equipment Limited (R'000) 168 280 63 452
Weighted average number of ordinary shares in issue ('000) 95 147 95 146
Earnings per share (basic) (cents) 177 67
Diluted earnings per share is arrived at as follows:
Profit for the year attributable to owners of Bell Equipment Limited (R'000) 168 280 63 452
Fully converted weighted average number of shares ('000) * 95 147 95 640
Earnings per share (diluted) (cents) 177 66
* There has been no dilutive effect in the current year as the
option exercise prices exceeded the average market price.
Headline earnings per share is arrived at as follows:
Profit for the year attributable to owners of Bell Equipment Limited (R'000) 168 280 63 452
Net surplus on disposal of property, plant and equipment, intangible assets
and non-current assets held for sale (R'000) (13 114) (1 485)
Taxation effect of net surplus on disposal of property, plant and equipment,
intangible assets and non-current assets held for sale (R'000) 3 672 416
Reclassification to profit or loss of foreign currency translation reserve on
deregistered operations - (15 489)
Headline earnings (R'000) 158 838 46 894
Weighted average number of ordinary shares in issue ('000) 95 147 95 146
Headline earnings per share (basic) (cents) 167 49
Diluted headline earnings per share is arrived at as follows:
Headline earnings calculated above (R'000) 158 838 46 894
Fully converted weighted average number of shares ('000) 95 147 95 640
Headline earnings per share (diluted) (cents) 167 49
5 STATED CAPITAL
Authorised
100 000 000 (2014: 100 000 000) ordinary shares of no par value
Issued
95 146 885 (2014: 95 146 885) ordinary shares of no par value 230 567 230 567
6 CAPITAL EXPENDITURE COMMITMENTS
Contracted 3 827 21 460
Authorised, but not contracted 46 260 59 418
Total capital expenditure commitments 50 087 80 878
7 ABBREVIATED SEGMENTAL ANALYSIS
Operating
R'000 Revenue profit (loss) Assets Liabilities
December 2015
South African sales operation 2 435 925 70 112 1 155 685 822 850
South African manufacturing and logistics operation 3 782 318 148 671 2 558 768 1 109 465
European operation 1 806 920 65 273 1 130 113 692 910
Rest of Africa operation 916 810 21 634 872 073 693 034
North American operation 560 413 301 95 996 29 152
All other operations - (40 360) 1 342 185 153 523
Inter-segmental eliminations * (3 600 955) 26 133 (2 301 760) (1 652 165)
Total 5 901 431 291 764 4 853 060 1 848 769
December 2014
South African sales operation 2 866 868 110 591 1 048 204 763 578
South African manufacturing and logistics operation (restated) ** 4 048 935 28 107 2 700 494 1 337 174
European operation 1 917 207 42 892 907 854 683 686
Rest of Africa operation (restated) ** 1 014 020 4 229 684 994 569 464
North American operation 374 200 (15 855) 60 719 16 934
All other operations - (36 913) 1 113 956 137 515
Inter-segmental eliminations (restated) * (3 612 685) 52 040 (2 021 717) (1 550 178)
Total 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 year-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.
** In the current period the group's internal organisational structure changed due
to group restructuring processes. This caused the composition of its reportable
segments to change. Previously revenue from independent dealers in Africa,
South America and Australasia was included under the Rest of Africa and other
international operations segment. This is now reported under the South African
manufacturing and logistics operation. The operating segment information for
the previous year has been restated accordingly.
R'000 31 December 31 December
8 CONTINGENT LIABILITIES 2015 2014
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 risks 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 year-end the group's credit risk exposure to WesBank under Bell-backed deals
for which the group carries all the credit risk totalled 211 581 204 829
At year-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 1 997 995
In the event of default, the equipment financed would be recovered and it is
estimated that on re-sale the equipment would presently realise the following
towards the above liabilities 319 208 243 954
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 year-end the group's credit risk exposure to these financial institutions totalled 14 566 21 645
In the event of default, the equipment financed would be recovered and it is
estimated that on re-sale the equipment would presently realise the following
towards the above liability 27 839 25 902
(13 273) (4 257)
Less: provision for non-recovery (262) (1 782)
Net contingent liability - -
Where customers are in arrears with these financial institutions and there is a shortfall
between the estimated realisation values of 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 945 4 420
In the event of repurchase, it is estimated that the equipment would presently realise 3 404 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.
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 28 335 8 457
Less: provision for residual value risk - (670)
Net contingent liability 28 335 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 2 072 2 867
Less: impairment of retention deposits (2 072) -
Net retention deposits and net contingent liability - 2 867
Total net contingent liabilities 28 335 10 654
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 the retention deposits are
based on an assessment of the market value of the equipment.
9 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.
10 INDEPENDENT AUDITOR'S REPORT
These summarised consolidated financial statements for the year ended 31 December 2015
have been audited by Deloitte & Touche, who expressed an unmodified opinion thereon.
The auditor also expressed an unmodified opinion on the consolidated financial statements
from which these summarised consolidated financial statements were derived.
A copy of the auditor's report on the summarised consolidated financial statements and of the
auditor's report on the consolidated financial statements are available for inspection at
the company's registered office, together with the financial statements identified in the
respective auditor's report.
The auditor's report does not necessarily report on all of 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 engagement they should obtain a copy of the
auditor's report together with the accompanying financial information from the issuer's
registered office.
11 SUBSEQUENT EVENTS
No fact or circumstance material to the appreciation of this report has occurred between
31 December 2015 and the date of this report.
COMMENTARY
Overview
The group's results reflect the extremely tough trading conditions of the past year,
brought about primarily by increased pressure on commodity prices and the resultant
further slowdown of the majority of world markets in which the group operates. Mining
dependent southern hemisphere markets contracted further and demand for the
group's primary ADT product is increasingly shifting to northern hemisphere markets.
Prices of copper and gold, commodities which the group's mining related customers are
dependent on, have reduced by 56% and 13% respectively in the last 5 years.
The Rand depreciated by 35% against the US Dollar and 21% against the Euro in 2015.
Although this provides the group as a local manufacturer with a competitive advantage
on pricing, in the medium to long term this is not good news for the local economy as a
whole and will drive costs up in due course.
The resilience of Bell should however not be underestimated and the board and
management will continue to take all reasonable steps to best position the company to
weather the on-going economic challenges.
Financial
Although the group recorded a profit after tax of R169 million, an increase of 154% in
comparison with the prior year, machine sales volumes and sales in Rand terms
reduced in all markets other than in North America. The impact of the weaker Rand on
translation of sales denominated in foreign currencies was not sufficient to offset the
impact of the reduction in sales volumes. Total comprehensive income attributable to
shareholders of Bell increased to R466 million in 2015 compared with R42 million in the
prior year. The current year's comprehensive income significantly exceeded the current
year's profit after tax due to the substantial depreciation of the Rand in 2015 and the
impact of this on exchange differences on the translation of the results and net assets of
foreign operations into Rand. This also contributed to the increase in shareholders'
wealth (capital and reserves), which rose by 18% to R3 billion and 3158 cents per share.
The right-sizing and cost reduction initiatives implemented in 2015 along with foreign
currency gains during the year due to the weakening of the South African Rand against
major world currencies and also the strengthening of the US Dollar against the Euro,
contributed to the improved profitability. Higher production volumes at both the
Richards Bay and Kindel facilities also aided profitability in 2015.
From a strategic perspective the business continues to focus on reducing production
costs without compromising on quality, managing the investment in working capital,
adding products and services to our distribution networks and further capturing
diversification opportunities. The investment in inventory at year-end was higher than
target and management will focus on improving these levels in 2016. Matching
production levels to an accurate prediction of market volumes in the current
unpredictable economic climate remains a challenge.
We are satisfied with the progress made in the North American market and are
particularly optimistic about future opportunities to increase market share in this, the
largest capital equipment market in the world.
Operational issues
In South Africa, political and economic challenges and concerns deepened in 2015,
particularly towards the end of the year when confidence in the current government
was tested and the currency depreciated sharply.
Concerns regarding the increasing cost of doing business in South Africa, including the
impact of price increases and interruption of electricity supply, remain.
Notwithstanding the above, the group continues to engage with government at various
levels and would encourage and support greater dialogue between industry and
government, especially regarding government's plans to expand its support in the value-
add and manufacturing sectors. We remain supportive of all initiatives to improve our
economy and to stimulate employment in our industry.
Transformation
Bell Equipment remains committed to transformation and BBBEE in South
Africa. Strategies and action plans have been developed to achieve compliance under
the Revised Codes of Good Practice. A key strategic element in achieving compliance
will be the introduction of a BBBEE equity partner at Bell Equipment Sales South Africa
Limited and the process to achieve this has commenced.
Directorate
On 1 January 2016 we welcomed Derek Lawrance and Hennie van der Merwe to the
board, as independent non-executive directors. Both men have vast experience that will
complement and add value to our board.
At the annual general meeting on 5 May 2016 we will bid farewell to Danie Vlok, who is
retiring after 20 years of exceptional service as an independent non-executive director.
His knowledge and perspectives have been greatly valued and we extend our
appreciation for his commitment to the company and best wishes in his retirement.
Outlook
The group expects markets to remain flat during 2016. Over the past two years the
group has made a significant investment into upgrading its branch infrastructure to be
able to offer modern, state-of-the-art facilities that better serve our customers' needs.
Going forward we will continue to deliver on our customer needs globally and count on
their ongoing support to see us through these difficult times.
Expansion of our dealer network will remain key to our business going forward with
positive results attributable to growing this network specifically in the Americas during
2015.
While prospects for 2016 are stagnant, the group's long-term strategies are innovative
and dynamic to position the company for growth and success once markets have
regained some of their lustre.
Any reference to the future financial performance of the company has not been
reviewed and reported on by the company's external auditors.
By Order of the Board
BELL EQUIPMENT LIMITED
11 March 2016
Directors
Non-executive
JR Barton* (Chairman), AJ Bell, B Harie*, DH Lawrance*, TO Tsukudu*,
HR van der Merwe*, DJJ Vlok*
*Independent
Appointed: DH Lawrance and HR van der Merwe were appointed as
directors with effect from 1 January 2016
Resignation: MA Mun-Gavin resigned as director on 4 May 2015
Executive
GW Bell (Group Chief Executive), KJ van Haght (Group Finance
Director), L Goosen (Chief Operating Officer)
Company Secretary
D McIlrath (appointed 1 March 2016)
Highway Corporate Services Proprietary Ltd
(resigned 29 February 2016)
Registered Office
13 - 19 Carbonode Cell Road, Alton, Richards Bay,
3900
Transfer Secretaries
Link Market Services South Africa Proprietary Ltd,
19 Ameshoff Street, Johannesburg, 2001
Sponsor
Rand Merchant Bank
(a division of FirstRand Bank Limited)
1 Merchant Place, Cnr Fredman Drive and
Rivonia Road, Sandton, 2196
Release date: 15 March 2016
www.bellequipment.com
Date: 15/03/2016 01:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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