At the time of writing this report in May 2020, the 2019 financial year seems like a very long time ago. So much has changed globally since 31 December 2019.

The spread of the COVID-19 pandemic and measures taken to control the spread of the disease have had a significant impact on the global economy and changed the outlook for many companies, including the Bell group.

The JSE announced on 3 April 2020 that the outbreak of the COVID-19 pandemic and subsequent national lockdown in South Africa had caused significant challenges for issuers and that the Financial Sector Conduct Authority (‘FSCA’) would grant issuers with year-ends of 31 December 2019, 31 January 2020, 29 February 2020 and 31 March 2020 temporary relief of two additional months within which to complete their yearend financial reporting process should this be required by the issuers. The group has utilised this two-month extension in order to finalise its 2019 year-end financial results. Disclosures relating to the COVID-19 non-adjusting subsequent event has been included in the directors’ report and note 17 of the summarised consolidated financial statements.

Financial Performance

Revenue of R7,8 billion for 2019 fell significantly short of expectations, ending the year with a very modest increase of 3,8% on 2018. Profit after tax for the year of R61,0 million was significantly down on R276,4 million reported for 2018. The once-off, non-cash and non-tax deductible IFRS 2 sharebased  payment charges of R82,3 million relating to the BBBEE empowerment deal concluded in the group’s South African operations, BECSA and BESSA, in December 2019 had a significant impact on the 2019 financial results of the group. The further deterioration in the South African market which resulted in lower demand and tighter sales margins in this market than in 2018 was also a key driver of the reduction in profit in 2019, especially in the second half of the year. Interest costs were also higher in 2019 due to higher borrowings than in the prior year.

Headline earnings per share was 80 cents (2018: 278 cents). In light of the difficult market conditions and in order to preserve cash, no final dividend will be paid for the 2019 year. An interim dividend of 20 cents per share was paid. In the prior year, total dividends of 45 cents per share were paid.

The group conducts two main business operations. The first is the OEM operations comprising manufacturing, assembly and sales of equipment and aftermarket products to independent and group owned distributors and dealers. These OEM operations are conducted from South Africa and Europe. The second business is the direct sales business which comprises owned distribution operations in South Africa and Rest of Africa that are engaged in direct sales of own OE products, other third-party products and the supply of aftermarket support and products to the market.

The South Africa direct sales business comprises customer service centres in South Africa, Namibia and Swaziland. Rest of Africa comprises customer service centres in Zambia and Zimbabwe.

In the current year the group’s segment information has been restated to align with these two main business operations and the geographical areas they operate in.

As is evident from the segment results in note 9 of this report, the decline in group profitability in 2019 related mainly to the group’s South African operations.

The profit from operating activities of the OEM business in South Africa deteriorated in 2019 compared with 2018 as a result of a reduction in production volumes of certain product lines and unrecovered overheads at the Richards Bay facility. Total sales, including both external and inter-segment sales, increased by 5,5% in 2019. External revenue contributed 18,4% of group sales in 2019 compared with 15,1% in 2018. Due to pressure on sales margins globally, the OEM had to provide pricing assistance to support sales deals in all its markets. Higher than expected warranty costs were incurred on the E-series large truck. In addition, the majority of the once-off IFRS 2 share-based payment charges relating to the BBBEE transaction was in respect of the empowerment of the Richards Bay factory operation and was carried by this segment. This operation will be right-sized given the low volumes and poor profitability.

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