Wrap Text
Audited results for the year ended 30 June 2012
Accentuate Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share Code: ACE ISIN Code: ZAE000115986
www.accentuateltd.co.za
("Accentuate" or "the group")
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2012
Highlights
- Strong performances from continuing operations
- HEPS of 9,79 cents per share (2011: loss of 3,51 cents)
- Revenue up 13% to R283 million
- Profit achieved of R7,5 million (2011: loss of R74 million)
Abridged Consolidated Financial Statements for the year ended 30 June 2012
Consolidated Statement of Financial Position
Audited Audited
30 June 30 June
2012 2011
R'000 R'000
Assets
Non-current assets 87 401 87 385
Property plant and equipment 45 078 48 348
Goodwill 34 928 34 928
Intangible assets 535 1 169
Other financial assets 4 057 -
Deferred taxation 2 803 2 940
Current assets 115 206 95 022
Inventories 44 522 41 360
Other financial assets 4 378 368
Current tax receivable 1 377 2 647
Trade and other receivables 43 220 34 918
Cash and cash equivalents 21 709 15 729
Assets relating to operation held for sale - 16 281
Total assets 202 607 198 688
Equity and Liabilities
Equity attributable to shareholders of parent
Total equity 125 235 117 051
Share capital 126 077 125 555
Reserves 23 139 23 924
Accumulated loss (23 981) (32 428)
Non-current liabilities 7 049 13 797
Other financial liabilities 2 850 8 550
Deferred taxation 4 199 5 247
Current liabilities 70 323 61 116
Other financial liabilities 5 700 6 007
Current tax payable 385 551
Finance lease obligations - 269
Operating lease liability 1 718 794
Trade and other payables 38 315 31 999
Bank overdraft 24 205 21 496
Liabilities relating to operation held for sale - 6 724
Total liabilities 77 372 81 637
Total equity and liabilities 202 607 198 688
Number of shares in issue 111 108 119 111 108 119
Net asset value per share (cents) 113 105
Tangible net asset value per share (cents) 81 73
Consolidated Statement of Comprehensive Income
Audited Audited
30 June 30 June
2012 2011
R'000 R'000
Revenue 282 671 249 390
Cost of sales (133 940) (113 556)
Gross profit 148 731 135 834
Other income 1 525 415
Other operating expenses (127 386) (114 351)
Earnings before interest, tax, depreciation,
amortisation and impairments 22 870 21 898
Depreciation and amortisation (6 260) (6 435)
Impairments - (70 836)
Profit / (loss) before interest and tax 16 610 (55 373)
Finance costs (2 297) (2 942)
Profit / (loss) before tax 14 313 (58 315)
Income tax (4 345) (3 738)
Profit / (loss) for the period from continuing
operations 9 968 (62 053)
Loss for the period from discontinued operations (2 488) (12 554)
Profit / (loss) for the year 7 480 (74 607)
Other comprehensive income for the year net of
taxation 967 417
Total comprehensive income /(loss) for the year
attributable to equity holders of the parent 8 447 (74 190)
Reconciliation of Headline Earnings:
Net profit /(loss) for the period 7 480 (74 607)
Adjusted for:
Loss on disposal of discontinued operation 2 824 -
(Profit) / loss on disposal of property plant and
equipment (161) 111
Impairment of assets - 70 836
Tax effect of adjustments 45 -
Headline earnings / (loss) attributable to the
equity holders of the parent 10 188 (3 660)
Weighted average number of shares in issue 104 103 060 104 231 138
Earnings Ratios (cents):
Earnings / (loss) per share 7,19 (71,58)
Earnings / (loss) per share from continuing
operations 9,58 (59,53)
Loss per share from discontinued operations (2,39) (12,04)
Headline earnings / (loss) per share 9,79 (3,51)
Headline earnings per share from continuing
operations 9,47 8,53
Diluted earnings / (loss) per share 7,13 (69,92)
Diluted headlines earnings / (loss) per share 9,66 (3,43)
Consolidated Statement of Cash Flows
Audited Audited
30 June 30 June
2012 2011
R'000 R'000
Cash flows from operating activities 7 719 9 880
Cash generated from operations 13 689 15 666
Investment income - 163
Finance costs (2 297) (2 949)
Taxation paid (3 673) (3 000)
Cash flows from investing activities 1 306 (2 623)
Proceeds on sale of property plant and
equipment 419 384
Acquisition of property plant and equipment (2 432) (2 834)
Acquisition of intangible assets (181) (173)
Sale of discontinued operation 3 500 -
Cash flows from financing activities (5 754) (8 438)
Proceeds from share options exercised 625 -
Repurchase of shares (103) -
Repayment of other financial liabilities (6 007) (6 002)
Finance lease payments (269) (228)
Dividends paid - (2 208)
Net increase / (decrease) in cash and cash
equivalents 3 271 (1 181)
Cash and cash equivalents at the beginning of
the year (5 767) (4 586)
Cash and cash equivalents at the end of the year (2 496) (5 767)
Consolidated Statement of Changes In Equity
Attributable to equity holders of the parent
Share Share Other Retained Total
capital premium Reserves profit /(loss) equity
R'000 R'000 R'000 R'000 R'000
Balance at 1 July 2010 1 124 915 10 557 43 984 179 457
Total comprehensive income / (loss) for
the year 13 368 (74 190) (60 822)
Share options exercised 639 639
Dividends paid (2 222) (2 222)
Balance at 30 June 2011 1 125 554 23 925 (32 428) 117 052
Total comprehensive (loss) / income for
the year (786) 8 447 7 661
Share options exercised 625 625
Purchase of own / treasury shares (103) (103)
Balance at 30 June 2012 1 126 076 23 139 (23 981) 125 235
Segmental Report
Audited Audited Audited Audited Audited
30 June 30 June 30 June 30 June 30 June
2012 2012 2012 2012 2012
R'000 R'000 R'000 R'000 R'000
Corporate Total
Environmental and Continuing Discontinued
Flooring Solutions Eliminations Operations Operations
Total sales 217 305 70 858 29 814 6 286
Less: inter-segmental sales - (6 800) (28 506) -
Revenue 217 305 64 058 1 308 282 671 6 286
Gross profit 106 647 40 776 1 308 148 731 3 272
Operating profit / (loss) (including
impairments) 14 689 2 394 (473) 16 610 (2 488)
Finance costs (339) (1 050) (908) (2 297) -
Segmental profit / (loss) before tax 14 350 1 344 (1 381) 14 313 (2 488)
Income tax (4 345) -
Profit / (loss) after tax 9 968 (2 488)
Segmental assets 139 952 25 950 36 704 202 606 -
Segmental liabilities 35 950 18 242 23 180 77 372 -
Depreciation and amortisation (3 842) (1 390) (1 028) (6 260) -
Capital expenditure 1 593 744 95 2 432 -
Audited Audited Audited Audited Audited
30 June 30 June 30 June 30 June 30 June
2011 2011 2011 2011 2011
R'000 R'000 R'000 R'000 R'000
Corporate Total
Environmental and Continuing Discontinued
Flooring Solutions Eliminations Operations Operations
Total sales 185 286 66 262 32 090 27 318
Less: inter-segmental sales (487) (6 820) (26 941) -
Revenue 184 799 59 442 5 149 249 390 27 318
Gross profit 91 553 39 132 5 149 135 834 4 587
Operating profit / (loss) (including
impairments) 12 860 2 058 (70 291) (55 373) (12 361)
Finance costs (637) (1 203) (1 102) (2 942) -
Segmental profit / (loss) before tax 12 223 855 (71 393) (58 315) (12 361)
Income tax (3 738) (193)
Loss after tax (62 053) (12 554)
Segmental assets 126 234 23 372 32 801 182 407 16 281
Segmental liabilities 32 697 16 600 25 616 74 913 6 724
Depreciation and amortisation (3 300) (1 482) (1 635) (6 417) (829)
Capital expenditure 1 625 319 127 2 071 763
COMMENTARY
INTRODUCTION
Accéntuate is a group of world-class companies operating in South Africa and
serving the construction and infrastructure development markets in southern
Africa. The group comprises of two segments: an Infrastructure Supplies
Division comprising of the FloorworX business and an Environmental
Solutions Division which houses the Safic specialist chemical and equipment
entities. The group is a market leader in the supply of products and services
to both the public and private sectors in most floor covering materials with the
majority of the revenue coming from this segment. The chemical blending
business is positioning itself to become a significant supplier to the public and
private sectors, through the supply of chemical cleaning and related products.
Safic also manufactures screeds, adhesives and maintenance products
supplied to the flooring business and in this way the two segments of
Accéntuate extract intra-group synergies.
THE OPERATING ENVIRONMENT
Macroeconomic conditions have remained depressed during the period under
review although there are early signs of some pick-up in the construction
industry. The recently released FNB/BER Construction Confidence Index
shows an increase in confidence in the sector with the second quarter report
indicating that confidence increased for the third consecutive quarter and, at
38 index points, is now at the highest level since the end of 2009. These
results are encouraging although a variety of factors could still hamper the
pace of recovery, in particular the state of the European economy.
An important feature of the industry during this period has been the slow but
consistent rise in construction activity. Factors which have contributed to this
increase include:
- Capital expenditure from provincial governments remained robust.
During their financial year ended 31 March 2012, provincial capital
expenditure was on average 21% higher year-on-year and likely to
continue, with a number of projects focused on healthcare, education
and waste water management.
- The recently published figures for the value of non-residential building
plans passed have shown a steady increase compared to the previous
year.
- In contrast, municipalities continue to struggle with only 41% of
available capital expenditure budgets having been spent during the first
nine months of the financial year and construction activity from the
private sector remains severely depressed.
Overall indications are towards a more positive outlook in the construction
sector despite the uncertainty around the potential impact of a struggling
European economy on the South African economy. Government's budgeted
R3 trillion infrastructure package, if properly implemented and managed, can
counter this potential impact and provide the necessary impetus for creating a
more buoyant local construction sector while addressing many of the
structural issues facing government including service delivery and
unemployment. Concerns do however exist around government's ability to
deliver on these projects given its history and the lack of effective managerial
capacity that inhibits the successful delivery of many infrastructure projects.
The current infrastructure backlogs are even more pronounced than was the
case at the start of the last construction upturn a decade ago, when the
infrastructure development companies recorded exponential growth. After
almost two years of disappointing performance there are signs that the
construction sector is slowly and cautiously easing out of the doldrums. The
lessons learnt from recent years, which has been one of the worst periods in
decades, will allow the industry and particularly Accéntuate to take advantage
of growth opportunities as they unfold.
DISPOSAL OF CENTURION GLASS AND ALUMINIUM ("CGA")
As previously announced, the glass and aluminium business of CGA was
disposed of effective 1 September 2011. This business had a severe negative
impact on the group in the previous year, especially an impairments charge of
R71 million. All remaining financial impacts of the disposal have been
absorbed during the current reporting period and management does not
anticipate any further negative consequences. Accéntuate has instituted legal
proceedings against the original vendors of CGA, and settlement has been
reached with two of them. Litigation against the remaining vendors continues
and management will keep shareholders appraised of developments in this
regard.
AGREEMENT WITH ION EXCHANGE, INDIA
Safic has recently signed of an agreement with India's leading water
treatment company, Ion Exchange India, to form a business focusing on the
supply of a comprehensive range of water treatment technologies into the
southern African market. The local entity, named Ion Exchange Safic,
commenced trading on 1 July 2012 and is 60% owned by Ion Exchange India
and 40% owned by Safic. The business will distribute both a comprehensive
range of water treatment chemicals as well as unique water infrastructure
technologies through Safic and other strategic channel partners. Management
anticipates that the local entity should begin contributing to the profitability of
the group during the 2013/14 financial year.
REVIEW OF OPERATIONS
Clear strategic direction and focus has resulted in an improved performance
from the group. The period under review saw a strong performance from
FloorworX as well as the effective implementation of a strategy at Safic aimed
at increasing the volume of recurring and contract orders. This has laid a solid
foundation for the growth of Accéntuate into the future. A major internal focus
has been the extraction of value-creating synergies between FloorworX and
Safic, and this remains a core driver of the group strategy. The current range
of adhesives produced by Safic for FloorworX has been increased with the
introduction of the FloorworX 62 adhesive providing a broader base of
potential applications.
The volatility of the local currency and the sharp fluctuations in commodity
pricing remain major challenges impacting the ability to effectively manage
input costs. The weaker rand does however assist with trade into Africa in
both the flooring and chemical business units as many of the products sold
into these markets are priced in US dollars.
Floorworx Infrastructure Supplies Division
FloorworX performed extremely well considering the prevailing conditions in
the construction industry. The flooring division managed to increase volumes
under enormously challenging trading conditions. Revenue for the period
increased to R217 million and profit before tax increased to R14,4 million,
both rising by more than 17%.
Safic - Environmental Solutions Division
Revenue increased to R71 million and profit before tax increased by over 50%
to R1,3 million. Gross margin reduced by 1,6% due to the growth achieved on
more sustainable revenue at slightly reduced margins. Operating overheads
only increased by 1,6% year on year. Safic continues to grow its presence
within identified markets, maximise efficiencies in operations, focus on
growing the supply of adhesive and cementitious products to FloorworX, while
maintaining excellent quality, environmental, health and safety standards. A
number of product enhancement initiatives are in the process of being
launched aimed at increasing the sale of specialist niche products which
normally trade at higher margins.
FINANCIAL RESULTS
Accentuate returned to profitability with attributable profit for the year of
R7,5 million compared to the loss of R74,6 million in the previous year, a
turnaround of R82,1 million. After eliminating the impact of the goodwill
impairments in the previous year, the headline earnings per share are
9,79 cents for the year compared to the headline loss of 3,51 cents per
share reported for the previous year.
The strong performance from continuing operations and return to
profitability for the group is extremely pleasing for the board and
management of Accentuate. Revenue increased by 13,3% to R283 million
and operating profit increased by 8,6% to R16,6 million. Costs were
impacted by the wrapping up of the sale of CGA. Direct costs included
legal fees relating to the sale and the ongoing litigation, additional audit
fees and various administrative costs. These costs totaled in excess of R1
million and were mostly non-recurring. The issues also required
substantial management attention.
The working capital continues to be well managed, although both
receivables and payables were impacted by the last day of June falling on
a Saturday this year. There has been a conscious strategy to invest
slightly more in inventories, which management believe is an investment
into future potential of the group. The net cash generation of R3,3 million
has resulted in a further reduction in the net borrowings.
The directors are not aware of any matter or circumstance occurring
between the financial year end and the date of this report that materially
affects the results of the group for the year ended 30 June 2012 or the
financial position at that date.
DIVIDEND
The Accéntuate board deems it prudent not to declare of a dividend at this
stage. There are potential business opportunities currently being
investigated which could require investment. The group also has certain
constraints on its cash management and funding arrangements as a result
of the special resolutions not having been passed at the annual general
meeting.
GOING CONCERN
The board of directors is satisfied that, after taking into account the current
borrowing facilities, its utilisation thereof and the budgeted profits and
cash flows for the year ending 30 June 2013, the working capital available
to Accentuate will be sufficient to meet its requirements for the next 12
months.
CONTINGENT LIABILITY
There are directors' fees of R502 000 payable subject to approval of the
required special resolution.
PROSPECTS
Current indications are that the economic environment within which
Accéntuate operates will remain challenging for at least the next year.
Management is however confident that the strong position that FloorworX
holds within the resilient flooring market, coupled with the strategic initiatives
underway throughout the group, will produce acceptable results for the
coming financial year. The current focus remains on expanding the product
offering into a well-established customer base while at the same time
expanding the geographical footprint. The outlook for the flooring division
remains generally positive and management is confident that the momentum
currently being seen will continue through the remainder of the coming
financial year.
Safic will continue its focus on further building strong annuity income streams
in the institutional markets and growing the opportunities identified in
conjunction with group companies and the Thebe invested companies.
Expansion within the construction chemical sector is also envisaged with a
number of exciting initiatives planned for rollout in the coming year.
In addition to the Ion Exchange agreement, a number of other international
cooperation agreements are currently being considered.
CHANGES TO THE BOARD
Lindiwe Gadd resigned in June 2012 due to changes in responsibilities at
Thebe Investment Corporation, having served Accéntuate diligently since May
2010. The board would like to thank her for her contribution and wish her well
in her future endeavours.
Dineo Molefe, who served as Lindiwe's alternate, was appointed to the board
as a non-executive director in August 2012. Pieter Kriel joins the board as the
alternate to Dineo. Pieter brings a wealth of experience and knowledge with
him. The board of Accéntuate welcomes Pieter and looks forward to a long
and valued working relationship.
During the period under review Andreas Voogt resigned as financial director.
Chris Povall was appointed as the executive financial director from 1 June
2012. Chris is a qualified chartered accountant with substantial listed
company experience and the board welcomes his appointment and looks
forward to his contribution to the group.
BASIS OF PREPARATION
The abridged consolidated annual financial results have been prepared in
accordance and comply with International Financial Reporting Standards, the
AC 500 standards and interpretations, the requirements of IAS 34: Interim
Financial Reporting, the JSE Limited Listings Requirements and the
Companies Act, No 71 of 2008.
The financial statements are based on appropriate accounting policies,
consistently applied with those in the audited financial statements for the
previous year, which are supported by reasonable and prudent judgments and
estimates.
The annual financial statements were prepared under the supervision of the
chief financial officer, Chris Povall (CA (SA)).
AUDITORS' OPINION
The abridged consolidated annual financial results have been audited by
Accentuate's auditors, PKF (Gauteng) Inc. Their unqualified audit report is
available for inspection at the company's registered office.
APPROVAL OF FINANCIAL STATEMENTS
The annual financial statements were approved by the board of directors on
26 September 2012.
APPRECIATION
The board would like to take this opportunity to thank the various
management teams for their loyalty and dedication towards the achievement
of the objectives that have been set. The board would also like to thank its
business partners, advisors and suppliers, and most importantly the
shareholders for their ongoing support and faith in the group.
FC Platt CJ Povall
Chief Executive Officer Chief Financial Officer
27 September 2012
Corporate Information
Non executive directors: MDC Motlatla
R Patmore
E Ratshikhopha
D Molefe
PS Kriel (alternate)
Executive directors: FC Platt
DE Platt
CJ Povall
Registration number: 2004/029691/06
Registered address: 32 Steele Street
Steeledale
2197
Postal address: P.O. Box 1754
Alberton
1450
Website: www.accentuateltd.co.za
Company secretary: PS Dayah
Telephone: 011 406 4100
Facsimile: 086 509 3246
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Bridge Capital Advisors (Pty) Limited
Date: 27/09/2012 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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