AltX-listed B&W Instrumentation and Electrical (“B&W”) has successfully returned to profitability, as promised to stakeholders, and ended the year to August 2012 cash positive despite tough operating conditions. A focus on consolidation and a stamp-down on costs saw the group achieveits promised turnaround and strengthen its long-term sustainability. B&W currently has in hand an order book of R237 million.

As intended, revenue for the year decreased to R442 million from R683 million in line with the group’sstrategy for consolidation. Profit after tax totalled R2,6 million despite far higher operating expenses (due mainly to recruitment initiatives to position the group for growth from 2014 onwards.) Operating expensesreached a peak at R54 million, with the level now stabilised.

B&W ended the year in a stronger cash position with R15,2 million cash in hand, which is expected to improve further once final accounts on major projects are concluded in the first quarter of the new financial year.

CEO Brian Harley says he is satisfied with the group’s performance that saw the bottom line improve notwithstanding the year-on-year drop in revenue. He explains that the decrease in the top line was intentional as the group curbed project work in order to focus on successful consolidation within the organisation to position for future growth.

Harley points out that some of the healthy order book volumes were secured at lower margins in light of intensified competition and the stilldepressed market. However, he highlights that more recent project work has been secured at margins in line with the rest of the construction industry.

The group’s lightning and earthing specialist,Pontins,continued to perform well with good revenue growth for the year. Harley reiterates Pontins’ strategic value for the group in addition to a healthy contribution to results. “Pontins has the ability to drive cash flow for the group, with the company providing services right at the start of a project and balancing B&W’s involvement in E&I only towards the end.” To spur further growth, the group is currently developing new organic product lines in the business.

During the year B&W also launched a Small Projects division, a move which Harley describes as “strategic – to help us tap into the growth in smaller value E&I projects which offer some counter to the fallout from the economic crisis of recent years.” He adds that the group is able to service these smaller contracts with no further capital investment and the projects therefore offer a profitable vehicle for absorption of any excess capacity laid spare by the scarcity of larger projects. “With a number of new contracts secured over the next four to six years, I am confident the new division is already achieving its objectives and will bolster B&W’s growth.”

In addition the year saw the group improve its B-BBEE accreditation from Level 5 to Level 4, giving it an added advantage in securing new work.

Harley concludes that although the outlook for 2013 is brighter, with a reasonable pipeline of work, the year will remain challenging for the group. “We foresee economic conditions in the year ahead remaining beset by a competitive market and sluggish economy.” He says the group will focus on executing its aggressive fiveyear strategic growth plan starting in earnest from 2014,when there is an indication of sizable increase in work in most construction sectors.

B&W’s share closed Friday at R0.69

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