After a challenging start to the year AltX-listed B&W Instrumentation and Electrical (“B&W”) delivered a stronger performance in the second half of the 2013 financial year delivering a net profit of R5 million for the six months to 31 August 2013. However, this was not sufficient to overcome the challenging macroeconomic conditions coupled with the deferral of major projects and the R33 million write-off of the first half of the year. The group reported a 9,6% decrease in revenue for the full year. Notably the group’s order book remains robust at R401 million with slightly improving market conditions pushing up margins on all projects.

Revenue declined to R399,9 million compared to R442,4 million in the prior year. B&W posted a loss after tax of R35,8 million compared to a profit of R2,6 million at 31 August 2012. This equated to a loss per share of 17,6 cents compared to earnings per share of 1,4 cents in the prior year. At year-end the group’s net cash position was R4,2 million compared to R15,2 million at the previous year end.

CEO Brian Harley says while the group has been faced with significant hurdles in the year under review it is ending the year in a more positive position with a strong order book at higher margins. “The group’s improved performance in the second half of the year to some extent reflects achievements of management’s consolidation which included restructuring and rightsizing operations.”

While Harley remains cautious in his outlook for the short- to medium–term he comments that given the group’s operating context and internal woes of loss-making projects, delayed payments and unresolved claims the group is “in reasonable good shape.” He says: “The delays and cancellations of projects, the current state of the mining industry and the prevailing general economic downturn will continue to impact but with our solid order book and a possible R50,0 million to R58,0 million new orders in the pipeline we are moving forward from a solid foundation.”

In the first half of the year the impact of the prolonged downturn in the construction sector was exacerbated for B&W with the resolution of the Madagascar project which necessitated accepting a R33,3 million loss to ensure some guaranteed payment. Harley reiterates that this is behind them and points out that the order book is made up of new orders.

Harley adds that tough trading conditions of the last few years necessitated refining group strategy to focus on the key aspects of the group’s day-to-day business. “We have addressed reducing operating expenses, service delivery, project capacity and cash management and are seeing the benefits of this in a stabilised cash flow and a significant reduction in operational expenses.”

B&W is currently in negotiations with ELB Group Limited as per the cautionary announcement published on SENS on 4 November 2013. B&W’s share closed Friday at R0.33.

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