Wrap Text
Provisional audited consolidated resultsfor the year ended 31 December 2018and cash dividend declaration
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
PROVISIONAL AUDITED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2018
AND CASH DIVIDEND DECLARATION
Salient features
Audited Audited %
2018 2017 Change
Revenue R billion 7,5 6,9 10
NPAT R million 276,4 272,1 2
HEPS cents 278 270 3
Final dividend cents 25 25 -
Chairman and CEO report
Overview
We are pleased to report that during the year under
review the group has maintained the positive
momentum sparked in 2017 by delivering another
set of solid results despite a significant currency
devaluation loss in Zimbabwe as detailed below.
Encouraging achievements were made in the
strategic focus areas of growing our Articulated
Dump Truck (ADT) sales and aftermarket business
globally and increasing production rates for creating
long-term value and ensuring sustainable growth.
The majority of our offshore focus markets for the ADT
product - Europe, the US and Southeast Asia - have
enjoyed good economic performance and as such, we
are encouraged by the outlook for these markets. The
market adoption of our products in Southeast Asia
through established dealer networks was positive
due in part to the fact that mining conditions and
operations are very similar to those in Africa.
In the US, the world's largest ADT market, residential
development is driving the current demand for ADTs,
which are used for the provision of bulk earthworks.
Demand also improved in Canada thanks to more
stable commodity prices.
Ongoing massive infrastructure projects in Europe,
including the United Kingdom's Hinkley Point nuclear
power station in Somerset and the upcoming high-
speed railway project, HS2, are generating increased
demand for ADTs but we are mindful of the potential
impact Brexit negotiations may have on this market.
Sales are low and remain under pressure at our
South African and African subsidiaries. Positive
management interventions in the DRC and
Mozambique operations are mitigating against
the challenges experienced by the group in those
countries in the past, however, the currency crisis
in Zimbabwe has resulted in a significant loss for
the group.
Although commodity prices have improved, investor
appetite for the South African mining industry
remained under pressure during 2018.
During the course of 2018, Bell continued to position
itself as a global ADT specialist by expanding its
range of 4x4 articulated trucks to complement
its traditional ADT offering. This provides those
customers not affected by poor underfoot conditions
with a practical alternative to tipper trucks and rigid
dump trucks.
Financial
Revenue and gross profit for 2018 both increased by
10% to R7,5 billion and R1,5 billion respectively. Profit
after tax of R276,4 million was 2% up on 2017, in
what would have been a good result if it was not for a
substantial devaluation of RTGS dollar denominated
monetary assets and liabilities in Zimbabwe
following the announcement of a new local currency
in that country and also higher interest charges on
group borrowings. The Zimbabwe devaluation of
R87,4 million is included in foreign currency exchange
losses in the statement of profit or loss. Headline
earnings per share is up from 270 cents per share
to 278 cents per share.
The Rand was very volatile but on average weaker
in 2018 compared with the 2017 financial year,
particularly in the second half of 2018, and this has
had a positive impact on sales and margins. The
weaker Rand also contributed to an increase in the
reported Rand value of operating expenses that
are denominated in foreign currencies. Expenses,
excluding the foreign currency loss referred to
above, were generally well contained, increasing
by a modest 5%.
Operations
Bell continues to be a sizeable employer with
approximately 3 200 employees worldwide, of which
2 835 are located in South Africa. During 2018, 275
of our employees around the world celebrated long
service milestones with the group. This is the largest
group in the history of Bell to do so and evidences the
long term benefits of our intrinsic approach of caring
for our people and providing an environment for
personal development and growth.
2018 saw the introduction of a new group structure,
which has been a positive change and is working
extremely well.
In October 2018, Kanu Equipment was appointed as
an authorised distributor in the DRC following the
decision to sell assets in that country and migrate
to a dealer model. The Kanu Group distributes and
supports Bell earthmoving equipment in a number
of African countries and we are confident that their
strong management team in the DRC will drive the
business and provide our customers with the level of
service and support that they expect and deserve.
Bell recently acquired Matriarch Equipment, giving
us a renewed energy and focus in the agriculture and
forestry equipment sector, the group's cornerstone
industry in its formative years. We see great potential
in strengthening and growing this important aspect
of our business. The range of Matriarch products
complements our range and enables us to better
provide a tailor-made, full line solution to our
customers.
The Kobelco range of excavators, introduced in the
second half of 2017, continues to enjoy acceptance
across all industries in southern Africa. We
subsequently introduced three mini excavator models
at the beginning of 2018, and these smaller units are
proving equally popular in the light construction and
forestry sectors.
The uptake of the Kamaz range of heavy-duty trucks
in the southern African mining and construction
industries was slightly slower than anticipated,
with plans for the localisation and production of
these trucks in Richards Bay having been delayed
until market demand makes this investment
more feasible. Bell is currently investigating other
applications for the product to make faster headway
in this highly competitive market.
Sustainability
We recognise the importance of being a
sustainable business and the risks associated
with not aggressively pursuing this as a goal. Our
sustainability journey is therefore managed through
the strategic planning process, and involves the direct
participation of the board.
Our focus remains growing global ADT volumes and
optimising the lifetime revenue stream from our
machines through value adding aftermarket services
and products. The group is also cognisant that
geographic, product and industry diversity are all key
elements that contribute to the overall sustainability
of our operations.
During 2018, an American Logistics Centre (ALC)
was opened in North Carolina to better serve
our customers in that region and to support the
aftermarket requirements necessitated by the
increased uptake of our products in the US.
Following the completion of the new European
Logistics Centre (ELC) in Alsfeld, Germany in 2017,
the group commenced the second phase expansion
of our factory in Eisenach-Kindel in mid-2018.
The facility, scheduled for completion in the third
quarter of 2019, will incorporate state-of-the-art
manufacturing equipment geared towards reducing
operational and product costs as well as improving
our flexibility and supporting our growth in the
Northern Hemisphere markets.
Given the more buoyant global conditions the board
took a strategic decision to increase production and
aftermarket working capital to respond more rapidly
to higher demand across our spectrum of client
industries.
Corporate governance
Our commitment to being a good corporate citizen
pervades our total approach to the business and
we endeavour to act in a responsible, balanced and
commercially sensible manner.
We are ever conscious of the impact on the
environment and we have made pleasing progress,
as detailed in our stakeholder report, as we continue
to measure and mitigate these risks.
Bell is committed to the highest standards of
corporate governance. Details of governance
structures and the extent to which we apply relevant
principles of corporate governance, including King IV
and regulatory requirements, are provided in the
integrated annual report.
Transformation
Bell supports transformation in South Africa and
is committed to transformation at all levels across
our operations. A planned third B-BBEE transaction
will allow customers to maximise procurement
spend when purchasing from BESSA and will assist
in meeting the procurement goals as set out in the
2018 Mining Charter.
To accelerate transformation of the construction
industry and open doors for black-owned and
managed Construction Industry Development Board
(CIDB) graded contractors, Bell became the first
OEM to sign a Memorandum of Understanding with
SANRAL. This undertaking is aimed at enabling CIDB
graded contractors to participate more meaningfully
in major construction projects by providing access to
earthmoving machinery, finance, leasing and rental
options, training and maintenance services.
Outlook
We continue our focus on research and development,
with a new series truck prototype due in the second
quarter of 2019. An extensive product upgrade for
the small ADT truck range will also be launched at the
end of the year.
Our manufacturing plant expansion in Germany, will
be completed in the third quarter of 2019 with a
testing phase preceding full production. Investment
into the Northern Hemisphere will continue at our
ALC where we will implement our SAP software
systems so that all three of our logistics centres are
on a similar platform to enable us to provide parts
online. The world is changing and our customer base
increasingly requires online solutions, and thus we
are investing in these.
There continues to be many external factors that
could impact both our global and local businesses.
While our order book remains strong and our
business continues to grow in the US and the EU,
we recognise the risks that Brexit and the trade
war between the US and China may have on
business globally.
Closer to home, Zimbabwe is experiencing ongoing
currency and economic troubles and there is
considerable uncertainty in Zambia and also in
South Africa leading up to the national election
on 8 May 2019, which we are monitoring closely.
We are confident that we have an excellent and
resilient team coupled with a strategy that is capable
of overcoming any challenges and capitalising on the
opportunities 2019 may bring.
Dividends
The board has declared a final dividend of 25 cents
per share which added to the interim dividend of 20
cents amounts to a total dividend of 45 cents for the
year, the same as for 2017.
Board changes
On 1 June 2018, Gary Bell stepped down as the chief
executive and assumed the role of non-executive
chairman of the board, thus paving the way for Leon
Goosen to take over as the chief executive in line with
the group's succession plans as outlined in last year's
report. The board is pleased to appoint Leon as the
best candidate after a global search.
Following the seamless handover the group
continues to enjoy the full support of stakeholders
and employees.
Our outgoing chairman, John Barton, has assumed
the role of lead independent non-executive director
to ensure adherence to good governance principles,
in compliance with the King IV requirements. We are
grateful for his continued invaluable input into the
board and thank him for his three years as chairman
and his dedication to the group.
Appreciation
On behalf of the board we would like to thank
executive management and our 1-Bell team for
being fully committed, living our 1-Bell principles, of
Customers, Teamwork, Quality, Efficiency and Safety,
and going the extra mile to build on the Bell legacy.
We are also grateful to all of our stakeholders for
their continued support and confidence in the group.
A special thanks to our extended family of customers
and dealers around the world who continues to show
confidence in our products and entrust us with the
ongoing support of their Bell machines.
We further extend our appreciation to our fellow
board members for their hard work and guidance.
The hard work, teamwork and dedication that were
demonstrated during 2018 to achieve production
targets, entrench new products into the range and
grow new markets have enabled us to continue on
our upward trajectory.
Summarised consolidated statement of financial position
AS AT 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
ASSETS
Non-current assets 1 344 560 1 111 406
Property, plant and equipment 885 966 691 429
Intangible assets 237 964 224 766
Investments 23 584 574
Interest-bearing receivables 69 226 92 774
Deferred taxation 127 820 101 863
Current assets 5 183 673 4 246 208
Inventory 3 905 188 3 047 119
Trade and other receivables 868 519 778 555
Current portion of interest-bearing receivables 209 781 96 053
Prepayments 31 636 51 912
Other financial assets 6 757 13 139
Current taxation assets 13 347 9 179
Cash and bank balances 148 445 250 251
Total assets 6 528 233 5 357 614
EQUITY AND LIABILITIES
Capital and reserves 3 371 509 2 988 602
Stated capital (note 5) 232 499 232 244
Non-distributable reserves 679 411 530 281
Retained earnings 2 440 926 2 214 236
Attributable to owners of Bell Equipment Limited 3 352 836 2 976 761
Non-controlling interest 18 673 11 841
Non-current liabilities 606 095 351 819
Interest-bearing liabilities 385 044 113 183
Repurchase obligations and deferred leasing income - 1 243
Deferred income 118 897 106 568
Long-term provisions and lease escalation 33 324 42 074
Deferred taxation 68 830 88 751
Current liabilities 2 550 629 2 017 193
Trade and other payables 1 142 521 1 094 742
Current portion of interest-bearing liabilities 750 381 215 414
Current portion of repurchase obligations and deferred leasing income - 746
Current portion of deferred income 135 243 94 171
Current portion of provisions and lease escalation 70 947 60 825
Other financial liabilities 10 648 20 272
Current taxation liabilities 23 194 25 675
Bank overdrafts and borrowings on call 417 695 505 348
Total equity and liabilities 6 528 233 5 357 614
Summarised consolidated statement of profit or loss
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
Restated*
Revenue 7 534 438 6 873 471
Cost of sales (6 049 887) (5 526 784)
Gross profit 1 484 551 1 346 687
Other operating income 195 514 137 477
Expenses (1 226 314) (1 080 707)
Profit from operating activities (note 2) 453 751 403 457
Net interest expense (note 3) (48 470) (99)
Profit before taxation 405 281 403 358
Taxation (128 864) (131 308)
Profit for the year 276 417 272 050
Profit for the year attributable to:
- Owners of Bell Equipment Limited 269 585 260 209
- Non-controlling interest 6 832 11 841
Earnings per share (basic) (note 4) (cents) 283 273
Earnings per share (diluted) (note 4) (cents) 281 273
* Refer to restatements of prior periods in note 11.
Summarised consolidated statement of profit or loss and other comprehensive income
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
Profit for the year 276 417 272 050
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange gains (losses) arising during the year 134 602 (22 311)
Exchange gains (losses) on translating foreign operations 131 351 (23 744)
Exchange gains on foreign reserves 3 251 1 433
Items that may not be reclassified subsequently to profit or loss: 15 384 (3 124)
Surplus arising on revaluation of properties - 258
Taxation relating to revaluation of properties - (3 382)
Fair value gain on investments designated as at fair value through other
comprehensive income 15 384 -
Other comprehensive income (loss) for the year, net of taxation 149 986 (25 435)
Total comprehensive income for the year 426 403 246 615
Total comprehensive income attributable to:
- Owners of Bell Equipment Limited 419 571 234 774
- Non-controlling interest 6 832 11 841
Summarised consolidated statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
Restated*
Cash operating profit before working capital changes 657 730 665 069
Cash utilised in working capital (767 720) (533 369)
Cash (utilised in) generated from operations (109 990) 131 700
Net interest paid (29 785) (29 635)
Taxation paid (182 945) (112 262)
Net cash utilised in operating activities (322 720) (10 197)
Purchase of property, plant and equipment and intangible assets (265 933) (135 842)
Proceeds on disposal of property, plant and equipment and intangible assets 7 600 7 975
Purchase of listed investments (7 560) -
Increase in interest-bearing receivables (22 474) (9 303)
Net cash utilised in investing activities (288 367) (137 170)
Interest-bearing liabilities raised 1 359 836 247 316
Interest-bearing liabilities repaid (720 262) (73 996)
Proceeds from share options exercised 255 105
Dividends paid (42 895) (19 062)
Net cash generated from financing activities 596 934 154 363
Net cash (outflow) inflow (14 153) 6 996
Net bank overdrafts and borrowings on call at beginning of the year (255 097) (262 093)
Net bank overdrafts and borrowings on call at end of the year (269 250) (255 097)
Comprising:
Cash and bank balances 148 445 250 251
Bank overdrafts and borrowings on call (417 695) (505 348)
Net bank overdrafts and borrowings on call at end of the year (269 250) (255 097)
* Refer to restatements of prior periods in note 11.
Summarised consolidated statement of changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2018
Attributable to owners of Bell Equipment Limited
Non- Non- Total
Stated distributable Retained controlling capital and
capital reserves earnings Total interest reserves
R'000 R'000 R'000 R'000 R'000 R'000
Balance at
31 December 2016 - audited 232 139 553 298 1 972 810 2 758 247 - 2 758 247
Total comprehensive (loss)
income for the year - (25 435) 260 209 234 774 11 841 246 615
Transfer between reserves - (172) 172 - - -
Transfer to retained earnings
relating to expired share options - (107) 107 - - -
Increase in equity-settled
employee benefits reserve - 498 - 498 - 498
Share-based payment
relating to B-BBEE ownership
transaction - 2 199 - 2 199 - 2 199
Share options exercised 105 - - 105 - 105
Dividends paid - - (19 062) (19 062) - (19 062)
Balance at
31 December 2017 - audited 232 244 530 281 2 214 236 2 976 761 11 841 2 988 602
Total comprehensive income
for the year - 149 986 269 585 419 571 6 832 426 403
Decrease in equity-settled
employee benefits reserve - (856) - (856) - (856)
Share options exercised 255 - - 255 - 255
Dividends paid - - (42 895) (42 895) - (42 895)
Balance at
31 December 2018 - audited 232 499 679 411 2 440 926 3 352 836 18 673 3 371 509
Summarised notes to the provisional audited consolidated results
FOR THE YEAR ENDED 31 DECEMBER 2018
1. BASIS OF PREPARATION
The consolidated financial statements, from which these summarised consolidated financial statements have
been derived, 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 standards and the changes as described below. The consolidated financial statements have
been prepared on the historical cost basis, except for the revaluation of properties and financial instruments.
The group has adopted all of the new accounting standards relevant to its operations and effective for annual
reporting periods beginning 1 January 2018, including IFRS 9 Financial Instruments ("IFRS 9") and IFRS 15
Revenue from Contracts with Customers ("IFRS 15"). The adoption of IFRS 15 has not had any significant impact
on the results in the summarised consolidated financial statements or the disclosures herein, but resulted
merely in the reclassification of certain transactions in previously published results as disclosed in note 11.
With regards to IFRS 9 the comparative periods have not been restated because the impact of adoption was not
significant. In the current year the group corrected reclassification errors in the group's statement of cash flows
and in the operating segmental analysis. Details of these prior period corrections are disclosed in note 11.
These summarised consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited's Listings Requirements for provisional reports and the requirements of the Companies Act in
South Africa applicable to summarised financial statements. The Listings Requirements of the Johannesburg
Stock Exchange require provisional reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of 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 at a minimum as required by IAS 34 Interim Financial Reporting. The preparation
of this provisional report and consolidated financial statements from which these results are summarised was
supervised by the Group Finance Director, KJ van Haght CA (SA).
Audited Audited
2018 2017
R'000 R'000
2. PROFIT FROM OPERATING ACTIVITIES
Profit from operating activities is arrived at after taking into account:
Income
Currency exchange gains 149 634 156 361
Production incentives 120 418 84 612
Net surplus on disposal of property, plant and equipment
and intangible assets 5 716 3 038
Expenditure
Amortisation of intangible assets 26 072 33 240
Amounts written off as uncollectible 1 535 13 618
Auditors' remuneration - audit and other services 11 253 9 739
Consulting fees 24 931 27 844
Currency exchange losses 277 014 157 426
Depreciation of property, plant and equipment 119 776 152 902
Operating lease charges 101 862 116 456
Research expenses (excluding staff costs) 43 364 46 298
Staff costs (including directors' remuneration) 1 332 218 1 272 171
Summarised notes to the provisional audited consolidated results
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
3. NET INTEREST EXPENSE
Interest expense 89 101 43 350
Interest income (restated)* (40 631) (43 251)
Net interest expense 48 470 99
* Refer to restatements of prior periods in note 11.
4. EARNINGS AND NET ASSET VALUE PER SHARE
Basic earnings per share is arrived at as follows:
Profit for the year attributable to owners of
Bell Equipment Limited (R'000) 269 585 260 209
Weighted average number of ordinary shares in issue
during the year ('000) 95 403 95 307
Earnings per share (basic) (cents) 283 273
Diluted earnings per share is arrived at as follows:
Profit for the year attributable to owners of
Bell Equipment Limited (R'000) 269 585 260 209
Fully converted weighted average number of shares* ('000) 95 778 95 454
Earnings per share (diluted) (cents) 281 273
* The number of shares has been adjusted for the effect of the dilutive potential ordinary shares
relating to the unexercised options in the group's share option scheme.
Audited Audited
2018 2017
R'000 R'000
Headline earnings per share is arrived at as follows:
Profit for the year attributable to owners of
Bell Equipment Limited (R'000) 269 585 260 209
Net surplus on disposal of property, plant and equipment
and intangible assets (R'000) (5 716) (3 038)
Taxation effect of net surplus on disposal of property,
plant and equipment and intangible assets (R'000) 1 512 237
Impairment loss recognised on revaluation of buildings (R'000) - 2 597
Taxation effect of impairment loss recognised on
revaluation of buildings (R'000) - (909)
Reversal of impairment loss in respect of property,
plant and equipment rental assets (R'000) - (1 942)
Headline earnings (R'000) 265 381 257 154
Weighted average number of ordinary shares in issue
during the year ('000) 95 403 95 307
Headline earnings per share (basic) (cents) 278 270
Diluted headline earnings per share is arrived at as follows:
Headline earnings calculated above (R'000) 265 381 257 154
Fully converted weighted average number of shares ('000) 95 778 95 454
Headline earnings per share (diluted) (cents) 277 269
Net asset value per share is arrived at as follows:
Total capital and reserves (R'000) 3 371 509 2 988 602
Number of shares in issue ('000) 95 629 95 307
Net asset value per share (cents) 3 526 3 136
Summarised notes to the provisional audited consolidated results
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
5. STATED CAPITAL
Authorised
100 000 000 (2017: 100 000 000) ordinary shares of no par value
Issued
95 629 385 (2017: 95 306 885) ordinary shares of no par value 232 499 232 244
The increase in share capital relates to 322 500 (2017: 10 000) share
options exercised at an average share price of R11,34 per share.
6. CAPITAL EXPENDITURE COMMITMENTS
Contracted 45 393 60 089
Authorised, but not contracted 126 973 282 774
Total capital expenditure commitments 172 366 342 863
This capital expenditure is to be financed from internal resources and long-term facilities.
7. SUMMARISED 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, except for
the All other operations 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 Total Total
Revenue profit (loss) assets liabilities
R'000 R'000 R'000 R'000
December 2018
South African sales operation 3 297 532 115 895 1 736 469 1 573 991
South African manufacturing
and logistics operation 5 155 229 307 963 3 877 173 2 023 168
European operation 2 409 322 73 235 1 865 348 1 360 782
Rest of Africa operation 673 076 (25 716) 352 101 358 486
North American operation 995 002 18 695 115 190 35 373
All other operations - (42 124) 2 082 949 49 596
Inter-segmental eliminations* (4 995 723) 5 803 (3 500 997) (2 244 672)
Total - audited 7 534 438 453 751 6 528 233 3 156 724
Operating Total Total
Revenue profit (loss) assets liabilities
R'000 R'000 R'000 R'000
December 2017
South African sales operation (restated)** 2 988 414 157 356 1 516 718 1 369 180
South African manufacturing and
logistics operation (restated)** 4 479 587 195 949 3 408 012 1 795 870
European operation (restated)** 2 311 137 84 913 1 010 515 587 383
Rest of Africa operation (restated)** 619 872 (70 000) 421 968 405 072
North American operation (restated)** 1 198 016 49 980 233 896 170 066
All other operations - (83 267) 2 040 945 113 310
Inter-segmental eliminations* (restated)** (4 723 555) 68 526 (3 274 440) (2 071 869)
Total - audited 6 873 471 403 457 5 357 614 2 369 012
* 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.
** The segment information has been adjusted for the restatements as disclosed in note 11.
Summarised notes to the provisional audited consolidated results
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
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 year-end the group's credit risk exposure to WesBank under
Bell-backed deals for which the group carries all the credit risk totalled 264 235 176 091
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 2 208 1 872
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 323 892 228 782
(57 449) (50 819)
Less: impairment - (1 549)
Net contingent liability - -
Audited Audited
2018 2017
R'000 R'000
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 3 089 6 123
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 2 289 7 935
800 (1 812)
Less: provision for non-recovery - -
Net contingent liability - -
The group's credit backing enables the customer to obtain funding
from WesBank and the other financial institutions, but provides
no interest benefit to the customer. Therefore there is no interest
differential and no fair value at initial recognition. Subsequent to
initial recognition, where customers are in arrears with WesBank
and there is a shortfall between the estimated realisation values of
the equipment and the balances due by the customers to WesBank,
an assessment of any additional security is done and a provision for
any residual credit risk is made on a deal-by-deal basis to the extent
of the group's liability towards the financial institution. In assessing
the group's credit risk exposure to these transactions, the group also
uses an expected default rate based on historical trends to measure
expected credit losses on a portfolio basis.
8.2 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 19 775 41 952
Net contingent liability 19 775 41 952
The transactions described in note 8.2 above relate 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.
Summarised notes to the provisional audited consolidated results
FOR THE YEAR ENDED 31 DECEMBER 2018
Audited Audited
2018 2017
R'000 R'000
9. RELATED PARTY TRANSACTIONS
Information regarding significant transactions with related parties is
presented below. Transactions are carried out on an arms length basis.
Shareholders
John Deere Construction and Forestry Company
- sales 20 298 22 101
- purchases 511 298 594 738
- amounts owing to 57 724 136 858
- amounts owing by 4 476 5 144
Enterprises over which directors and shareholders are able to exercise
significant influence and/or in which directors and shareholders have a
beneficial interest
Ario Properties Limited
- property purchase commitment - 51 537
- property purchase 52 330 -
10. FINANCIAL INSTRUMENTS
Categories of financial instruments included in the summarised consolidated statement of financial position:
Financial assets
- financial assets at fair value through profit or loss;
- financial assets at amortised cost; and
- financial assets at fair value through other comprehensive income.
Classification is determined by both the group's business model as well as the contractual cash flow
characteristics of the asset. Financial assets carried on the statement of financial position include cash and bank
balances, investments, interest-bearing long-term receivables, trade and other receivables and forward foreign
exchange contracts.
Financial liabilities
- financial liabilities at fair value through profit or loss; and
- financial liabilities at amortised cost.
Financial liabilities as disclosed in the statement of financial position include interest-bearing liabilities, trade
and other payables, bank overdrafts and borrowings on call and forward foreign exchange contracts.
Fair value of financial instruments
Financial assets comprising interest-bearing long-term receivables, trade and other receivables and cash and
bank balances are measured at amortised cost. The directors consider that the carrying amount of financial
assets at amortised cost approximates their fair value.
Financial liabilities comprising interest-bearing liabilities, trade and other payables and bank overdrafts and
borrowings on call are measured at amortised cost. 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 presented in the statement of financial position as other financial assets or liabilities. The group
measures forward foreign exchange contracts at fair value on a recurring basis based on the market approach,
using inputs other than quoted prices (Level 2). The fair value of these contracts is based on observable forward
exchange rates at year-end from an independent provider of financial market data.
Investments carried at fair value through other comprehensive income include listed and unlisted equity
instruments. These investments are measured at fair value on a recurring basis. The fair value of listed
investments is based on quoted market prices (Level 1).
For its unlisted investment, the group used the market approach to estimate the fair value of its investment
as the group does not have access to future forecast information with regards to the investment entity. The
entity operates within the dealer and distribution network of the heavy equipment industry. In estimating the
fair value, the group used an average price to book ratio of 1,81 applied to the estimated net asset value of the
entity as at 31 December 2018. The price to book ratio of 1,81 represents an average of observable price to
book ratios of a number of entities within the heavy equipment industry. The fair value measurement has been
classified as a Level 3 measurement. For a 10% change in the price to book ratio, there would have been an
equal impact on the fair value of the investment. The fair value gain of R16,0 million was accounted for in other
comprehensive income. A reconciliation of this investment is presented below:
Audited Audited
2018 2017
R'000 R'000
Opening balance 574 568
Translation difference 66 6
Fair value gains recognised in other comprehensive income 16 021 -
Closing balance 16 661 574
There was no change in the valuation techniques for forward foreign exchange contracts (Level 2).
During the current year the group measured its unlisted investment (Level 3) at fair value for the first time as a
result of the adoption of IFRS 9.
For all fair value measurements disclosed above, there was no transfer between levels of the fair value
hierarchy during the year.
11. PRIOR PERIOD RESTATEMENTS AND CORRECTION OF ERRORS
In the current year, the group has applied IFRS 15 Revenue from Contracts with Customers which is effective for
annual periods beginning on or after 1 January 2018.
The group applied the standard retrospectively and used the following practical expedients:
- contracts that began and ended in 2017 were not restated.
- contracts that were completed contracts at 1 January 2017 were not restated.
The restatement adjustments below only relate to reclassifications of the following transactions within the
group's statement of profit or loss:
i) income from extended warranty contracts sold has been reclassified from other operating income to
revenue;
ii) warranty expenses relating to standard warranties and extended warranties have been reclassified from
distribution and other expenses to cost of sales;
iii) where it was identified that the group acted as principal in transport revenue transactions, income and
expenses from transport services relating to the sale of goods, previously included in cost of sales,
distribution and other expenses on a net basis, have been reclassified to revenue and cost of sales on a gross
basis; and
iv) the interest component on extended warranty contracts and service contracts sold, where the contract
periods exceed twelve months, has been reclassified from revenue and other operating income to interest
income included in net interest expense.
In addition, in the current year the group has corrected the following errors in the consolidated statement of
cash flows for June 2018 and in the operating segmental analysis for December 2017:
- unrealised exchange differences have been reclassified from cash generated from operations before working
capital changes to cash generated from operations; and
- the allocation of revenue to operating segments was adjusted.
There was no impact on the statement of financial position.
11.1 The IFRS 15 reclassifications have the following impacts on the summarised consolidated statement of
profit or loss:
Audited
As previously
reported Adjustment Restated
R'000 R'000 R'000
December 2017
Revenue 6 766 586 106 885 6 873 471
Cost of sales (5 328 636) (198 148) (5 526 784)
Gross profit 1 437 950 (91 263) 1 346 687
Other operating income (refer to (i) above) 221 431 (83 954) 137 477
Expenses (refer to (ii) and (iii) above) (1 226 135) 145 428 (1 080 707)
Profit from operating activities 433 246 (29 789) 403 457
Net interest expense (refer to (iv) above) (29 888) 29 789 (99)
Profit before taxation 403 358 - 403 358
11.2 The following items within the summarised consolidated statement of cash flows were impacted by the
IFRS 15 reclassifications in the previous period:
As previously
reported Adjustment Restated
R'000 R'000 R'000
December 2017
Cash operating profit before working capital
changes 665 069 - 665 069
Within which the following were impacted:
Profit from operating activities 433 246 (29 789) 403 457
Increase in deferred income 33 753 29 789 63 542
11.3 The IFRS 15 reclassifications have the following impacts on the Summarised Segmental Analysis:
As previously
reported at
December Restatement As reported at
2017 adjustment June 2018 Adjustment* Restated
Revenue R'000 R'000 R'000 R'000 R'000
December 2017
South African sales
operation 2 991 387 (34 438) 2 956 949 31 465 2 988 414
South African
manufacturing and
logistics operation 4 376 792 102 795 4 479 587 - 4 479 587
European operation 2 324 683 614 2 325 297 (14 160) 2 311 137
Rest of Africa operation 618 845 665 619 510 362 619 872
North American
operation 1 151 199 (24) 1 151 175 46 841 1 198 016
Inter-segmental
eliminations (4 696 320) 37 273 (4 659 047) (64 508) (4 723 555)
Total 6 766 586 106 885 6 873 471 - 6 873 471
* This adjustment relates to the correction of an error in the June 2018 interim announcement.
As previously
reported Adjustment Restated
R'000 R'000 R'000
Operating profit (loss)
December 2017
South African sales operation 159 513 (2 157) 157 356
South African manufacturing and logistics operation 223 581 (27 632) 195 949
European operation 84 913 - 84 913
Rest of Africa operation (70 000) - (70 000)
North American operation 49 980 - 49 980
All other operations (83 267) - (83 267)
Inter-segmental eliminations 68 526 - 68 526
Total 433 246 (29 789) 403 457
Net interest (expense) income
December 2017
South African sales operation (40 748) 2 157 (38 591)
South African manufacturing and logistics operation (4 393) 27 632 23 239
European operation (21 391) - (21 391)
Rest of Africa operation (11 987) - (11 987)
North American operation (4 065) - (4 065)
All other operations 52 768 - 52 768
Inter-segmental eliminations (72) - (72)
Total (29 888) 29 789 (99)
11.4 The following items within the summarised consolidated statement of cash flows were impacted by the
correction of a prior period error:
Correction
of error:
Reclassification
of unrealised
As previously exchange
reported differences Restated
R'000 R'000 R'000
June 2018
Cash operating profit before working capital
changes 374 146 71 194 445 340
Cash utilised in working capital (238 971) (71 194) (310 165)
12. SUBSEQUENT EVENTS
On 1 February 2019 a wholly owned subsidiary of the company acquired the business of Matriarch Equipment CC
as a going concern. As Matriarch was effectively controlled by Ashley Bell, a non-executive director of the
company at the time, in terms of the JSE Listings Requirements the transaction was deemed to be a small
related party transaction. The related party transaction was deemed to be fair by the expert Deloitte & Touche.
No other fact or circumstance material to the appreciation of this report has occurred between
31 December 2018 and the date of this report.
13. INDEPENDENT AUDITOR'S REPORT
These summarised consolidated financial statements for the year ended 31 December 2018 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.
Copies 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 consolidated financial statements.
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.
Any reference to future financial performance, included in this announcement, has not been reviewed or
reported on by the company's auditors.
14. CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a gross final cash dividend of 25 cents per ordinary share
for the year ended 31 December 2018 payable to ordinary shareholders in accordance with the timetable below.
The net final dividend is 20 cents per share for ordinary shareholders who are not exempt from dividends tax.
The dividend withholding tax rate is 20 percent. The dividend has been declared from income reserves.
The company's income tax reference number is 9022169206.
The issued share capital at the declaration date is 95 629 385 ordinary shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Tuesday, 2 April 2019
Shares commence trading "ex" dividend Wednesday, 3 April 2019
Record date Friday, 5 April 2019
Payment date Monday, 8 April 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 3 April 2019 and Friday,
5 April 2019, both days inclusive.
By order of the board
14 March 2019
Directors
Non-executive
GW Bell (Chairman), JR Barton* (Lead Independent), DH Lawrance*, HR van der Merwe*, ME Ramathe*, R Naidu*
*Independent
Appointed: GW Bell was appointed as Chairman and JR Barton was appointed as Lead Independent Director on 1 June 2018.
Executive
L Goosen (Group Chief Executive), A Goordeen (Alternate), KJ van Haght (Group Finance Director), AJ Bell
Retired: GW Bell retired as Group Chief Executive on 31 May 2018.
Appointed: L Goosen was appointed as Group Chief Executive on 1 June 2018.
From 1 February 2019, AJ Bell's designation changed from non-executive director to executive director.
Company Secretary
D McIlrath
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
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196
Auditors
Deloitte & Touche
Release date: 18 March 2019
www.bellir.co.za
Date: 18/03/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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