JSE-listed Bell Equipment, emerging from one of the most challenging years in its history, on Thursday said it did not achieve its goal of delivering financially sustainable results in 2016.
Hit with tough trading conditions, the discovery of fraud and mismanagement in the group's operation in the Democratic Republic of Congo (DRC), the subsequent losses reported by that entity during the “clean-up process” and rand volatility, besides others, Bell reported a significant contraction in earnings for the year ended December 31.
“The very modest profit of R39-million for the year represents a significant decline on the previous year’s profit of R142-million,” the company outlined in a statement on Thursday.
Headline earnings a share and basic earnings a share plunged to 39c in 2016, from a respective 138c and 148c in 2015.
The group’s markets contracted further in 2016 and group sales were flat on the previous year, with sales volumes of alliance partner products in Southern Africa declining year-on-year.
Revenue increased from R5.9-billion in 2015 to R6-billion 2016.
“The right-sizing and cost reduction initiatives implemented in 2015 were not sufficient to mitigate against weak market conditions,” Bell explained.
The depreciation of the British pound following Brexit also had a negative impact on the important UK market.
However, despite the challenges, the group generated positive cash flow of R88-million from operating activities.
Moving forward, Bell will prioritise the further alignment of costs with market conditions in certain regions, pursue more responsible credit control in Africa and enhance the control environment and systems of internal control throughout the group.
“We still expect some further trading losses in the DRC operation in the first half of 2017 while the operation undergoes further right-sizing,” Bell concluded.