Against the backdrop of unprecedented global demand for equipment, the Bell Equipment group achieved record sales and production in 2023, which resulted in a rewarding outcome for the second consecutive year. We made great progress during 2023 on a number of exciting new strategic initiatives, including new product developments, the launch of our contract manufacturing division in Richards Bay and the growth of our independent forestry and agriculture product dealer network across South Africa.

We are exceptionally proud of the Bell team as they continued to demonstrate resilience and adaptability through the year and we commend them for the way in which they overcame considerable obstacles, most notably continued supply chain challenges, as well as port congestion in South Africa and labour shortages in Europe.

Port delays, affecting both incoming supplier orders and outgoing customer shipments, coupled with higher logistics costs and inventory buffers have impacted margins, inventory, debt levels, and return on invested capital (ROIC). Inventory levels remain high due in part to the remote location of our Richards Bay factory in relation to a majority of our component suppliers and customer base for our articulated dump truck (ADT) product line. The group also owns certain sales and distribution operations, such as in South Africa (BESSA) and the UK, which results in a longer working capital cycle and greater investment in inventory. We are implementing strategies that will, over several years, reduce our investment in inventory and increase the flexibility and resilience of the business.

We place great value on our reputation of offering strong reliable support to our customers, and during 2023 we made a significant investment in setting up our new American Logistics Centre (ALC), located in Charleston, South Carolina. This state of the art 55000 square feet facility has been established to back up our North American growth ambitions and is testament to our belief that if our customers succeed, then so will we.

Eskom electricity supply in South Africa remained a challenge through 2023, with the number of days where load shedding was experienced increasing to around double that during 2022. Our South African based suppliers have contingency plans in place for load shedding, such as alternative power sources, carrying more inventory, and flexible working hours to work around periods of load shedding. However, these measures drive up costs and the overall impact on the local economy is a huge concern.

We invested in solar power installations at both our Richards Bay factory and our Johannesburg sales and distribution facility. Although this is a long term cost saving project, it offers significant operational advantages by reducing the generator running costs and associated emissions that result from load shedding and municipality infrastructure failure.

We are pleased with the growth in revenue and profitability of 32% and 66% respectively, compared with the 2022 financial year. Inventory and receivables were higher than planned at year end and this impacted on debt levels. Reducing the level of investment in working capital is a priority as are our plans to reposition more ADT manufacturing closer to suppliers and key markets, in time.

Operations and product development

During 2023 the geographic breakdown of revenue across all products sold by the group was 48% into Africa (including South Africa), 28% North America, 16% Europe and the UK, and 8% Australasia.

The global demand for commodities translated into good ADT demand in general from Africa, South East Asia and Australia in mining. Further growth came from the USA, and parts of Europe driven largely by the construction sector, as infrastructure projects continued. The USA is the world’s largest ADT market and remains the greatest market opportunity for growth for our ADT business.

Demand for machines exceeded our ability to supply due to constraints and logistical challenges in our supply chain, which negatively impacted our market share in certain markets. With market demand and supply chain pressure normalising, we expect to recover some of our 2023 market share losses going forward.

Infrastructure projects in the UK were either scaled back or put on hold during 2023, which resulted in large fleets of equipment being under utilised and unforeseen pressure in this market.

Our small Russian operation has been on pause since the outbreak of the Ukraine war. Although sales in Russia previously only contributed approximately 5% of group sales, our challenge is recovering restricted cash that we hold on deposit in that country.

The aftermarket segment remains a critical aspect of our business. The group’s ability to provide parts and service support throughout the life of a Bell machine largely determines repeat purchases by customers and provides the group with a revenue stream for the life of the machine. In 2023, the group launched Bell BETA (Bell Equipment trusted alternative parts) in South Africa, a mid range offering to bridge the gap between premium Bell parts and remanufactured Bell components (ReMan). This gives customers a wider range of options to suit their needs and the assurance that comes from dealing with our dealer network. Plans are in place to roll out BETA parts to Bell UK and the dealer network in 2024.

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