Bell: the company, not the distractions

After a year in which the focus was firmly on the shareholders of Bell Equipment rather than the company itself, the group will be pleased to report a solid set of numbers for the year ended 31 December 2021.

The focus now is on the operations rather than the other distractions, especially as investigations by the FSCA and JSE in response to complaints found no basis for legal action or evidence of breaches of JSE rules respectively.

Revenue increased 20% to over R8 billion as the business recovered after the Covid year. In any industrial business, operating leverage plays a substantial role i.e. the mix of fixed and variable costs. Thanks to fixed costs and the improved capacity utilisation that is a feature of a stronger revenue period, operating profit increased by such a huge percentage that it isn’t worth commenting on because it just isn’t relevant.

The absolute numbers are far more useful, with operating profit increasing from just R35.6 million to nearly R404 million.

This has been achieved despite the supply chain issues and civil unrest that plagued many businesses in 2021. Bell’s Richards Bay factory and several sales branches were closed during the unrest.

Generally, Bell’s offshore export markets performed well. There are highlights (like Bell UK’s record revenue year) and areas for improvement (like market share in Canada). The Russian business contributed 3% of group revenue in 2021. Importantly, machinery destined for that market in 2022 can be absorbed by other markets, so Bell’s model is flexible enough to minimise exposure to that market.

Interestingly, the net cash inflow headed in the opposite direction to profitability, down 54% to R81.6 million. There were substantial negative swings in working capital behind this result, along with good news stories like a substantial decrease in interest paid.

Headline earnings per share (HEPS) came in at 294 cents, a far prettier number than the headline loss per share of 31 cents in 2020. A final dividend of 50 cents per share has been declared.

Net asset value (NAV) per share increased by 10% to R40.38, so yesterday’s closing price of R14.75 still represents a large discount to NAV.

Based on this HEPS number, Bell is trading on a Price/Earnings multiple of 5x.

If you want to engage with the Bell management team and learn more about this company, then register for free for the next Unlock the Stock event happening on Thursday, 31 March at 12pm. This is a wonderful opportunity for retail investors to ask questions to the management team and participate in a professional Q&A session.

I co-host Unlock the Stock with Mark Tobin, who has experience running numerous such sessions in the Australian market under his Coffee Microcaps brand.

Attendance is free, but you must register at this link.

Don’t miss out on this opportunity to enhance your investment knowledge as an InceConnect reader!