Wrap Text
Reviewed results for the six months ended 31 December 2012
Accentuate Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/029691/06)
Share code: ACE
ISIN: ZAE000115986
("Accéntuate" or "the group")
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
HIGHLIGHTS
- Earnings per share up 43%
- Revenue and operating profit up 2%
- Headline earnings steady
Abridged Consolidated Financial Statements for the six months ended
31 December 2012
Abridged consolidated statement of financial position
Reviewed Reviewed Audited
(restated)
6 months to 6 months to Year to
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Assets
Non-current assets 86 398 89 022 87 401
Property, plant and equipment 44 184 46 487 45 078
Goodwill 34 928 34 928 34 928
Intangible assets 392 729 535
Other financial assets and investments 4 091 3 938 4 057
Deferred taxation 2 803 2 940 2 803
Current assets 97 746 109 069 115 206
Inventories 56 195 41 788 44 522
Trade and other receivables 36 595 41 732 43 220
Other financial assets 2 772 6 186 4 378
Current tax receivables 1 312 4 092 1 377
Cash and Bank 872 15 271 21 709
Total assets 184 144 198 091 202 607
Equity and liabilities
Equity attributable to
shareholders' of parent
Total equity 131 844 121 288 125 235
Share capital 126 379 125 384 126 077
Reserves 23 139 23 924 23 139
Accumulated loss (17 674) (28 020) (23 981)
Non-current liabilities 4 199 10 947 7 049
Other financial liabilities - 5 700 2 850
Deferred taxation 4 199 5 247 4 199
Current liabilities 48 101 65 856 70 323
Trade and other payables 33 668 30 801 38 315
Other financial liabilities 5 700 5 797 5 700
Finance lease obligations - 160 -
Operating lease liability 1 962 973 1 718
Current tax payable 369 2 896 385
Short term borrowings 6 402 25 229 24 205
Total equity and liabilities 184 144 198 091 202 607
Number of shares in issue 111 108 109 111 108 109 111 108 109
Net asset value per share (cents) 119 109 113
Tangible net asset
value per share (cents) 87 77 81
Abridged consolidated statement of comprehensive income
Reviewed Reviewed Audited
(restated)
6 months to 6 months to Year to
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Revenue 146 448 143 341 282 671
Cost of sales (67 712) (66 373) (133 940)
Gross profit 78 736 76 968 148 731
Other income 199 636 1 525
Operating expenses excluding
depreciation and amortisation (66 093) (64 513) (127 386)
Earnings before interest, tax,
depreciation and amortisation 12 842 13 091 22 870
Depreciation and amortisation (2 758) (3 198) (6 260)
Operating profit before
interest 10 084 9 893 16 610
Finance costs (816) (1 205) (2 297)
Profit before tax 9 268 8 688 14 313
Income tax (2 595) (2 345) (4 345)
Profit for the period from
continuing operations 6 673 6 343 9 968
Loss for the period from
discontinued operations - (1 935) (2 488)
Share of loss in associated company (366) - -
Profit for the period 6 307 4 408 7 480
Other comprehensive income for the
period net of taxation - - 967
Total comprehensive income for
the period attributable to
shareholders of the parent 6 307 4 408 8 447
Reconciliation of
headline earnings:
Profit for the period 6 307 4 408 7 480
Adjusted for:
Loss from discontinued operation - 1 935 2 824
Profit on disposal of property,
plant and equipment - - (161)
Tax effect of adjustments - - 45
Headline earnings attributable to
shareholders of the parent 6 307 6 343 10 188
Weighted average number of
shares in issue 104 932 950 104 809 755 104 103 060
Earnings per share (cents) 6,01 4,21 7,19
Headline earnings per share (cents) 6,01 6,05 9,79
Diluted earnings per share (cents) 6,01 4,21 7,13
Diluted headline earnings
per share (cents) 6,01 6,05 9,66
Abridged consolidated statement of cash flows
Reviewed Reviewed Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Cash flows from operating
activities 30 2 351 7 719
Cash flows from investing
activities (517) (3 374) 1 306
Cash flows from financing
activities (2 547) (3 169) (5 754)
Net (decrease)/ increase in
cash and cash equivalents (3 034) (4 192) 3 271
Cash and cash equivalents at
beginning of the period (2 496) (5 766) (5 767)
Cash and cash equivalents at
end of the period (5 530) (9 958) (2 496)
Abridged consolidated statement
of changes in equity
Reviewed Reviewed Audited
6 months to 6 months to year ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Capital and reserves opening
balance 125 235 117 052 117 052
Total comprehensive income for
the period as reported - 5 253 -
Effect of restatement (845)
Total comprehensive income for
the period 6 307 4 408 7 661
Share options exercised 302 - 625
Purchase of shares - (172) (103)
Capital and reserves closing
balance 131 844 121 288 125 235
Segmental Report
Reviewed Reviewed Reviewed Reviewed
31 Dec 2012 31 Dec 2012 31 Dec 2012 31 Dec 2012
R'000 R'000 R'000 R'000
Total
Infrastructure Environmental Corporate and Continuing
Supplies Solutions Eliminations Operations
Total sales 114 357 35 534
Less: Intersegment sales - (3 443)
Revenue 114 357 32 091 - 146 448
Gross profit 57 735 21 001 - 78 736
Operating profit before
depreciation and
amortisation 10 803 760 1 279 12 842
Depreciation and
amortisation (1 758) (728) (272) (2 758)
Operating profit before
interest 9 045 32 1 007 10 084
Segmental assets 137 998 24 904 21 242 184 144
Segmental liabilities 24 875 18 075 9 350 52 300
Capital expenditure 738 879 106 1 723
Reviewed
31 Dec 2012
R'000
Discontinued
Operations
Total sales -
Less: Intersegment sales -
Revenue -
Gross profit -
Operating profit before
depreciation and
amortisation -
Depreciation and
amortisation -
Operating profit before
interest -
Segmental assets -
Segmental liabilities -
Capital expenditure -
Reviewed Reviewed Reviewed Reviewed
(restated) (restated)
31 Dec 2011 31 Dec 2011 31 Dec 2011 31 Dec 2011
R'000 R'000 R'000 R'000
Total
Infrastructure Environmental Corporate and Continuing
Supplies Solutions Eliminations Operations
Total sales 105 603 36 081
Less: Intersegment sales - (3 392)
Revenue 105 603 32 689 5 049 143 341
Gross profit 52 244 20 414 4 310 76 968
Operating profit before
depreciation and
amortisation 10 454 2 410 227 13 091
Depreciation and
amortisation (1 889) (691) (618) (3 198)
Operating profit before
interest 8 565 1 719 (391) 9 893
Segmental assets 133 738 24 724 39 629 198 091
Segmental liabilities 31 750 16 925 28 128 76 803
Capital expenditure 463 379 78 920
Reviewed
31 Dec 2011
R'000
Discontinued
Operations
Total sales 6 286
Less: Intersegment sales -
Revenue 6 286
Gross profit 3 272
Operating profit before
depreciation and
amortisation (1 935)
Depreciation and
amortisation -
Operating profit before
interest (1 935)
Segmental assets -
Segmental liabilities -
Capital expenditure -
The restatement of assets and liabilities is included under the Corporate and
Eliminations segment.
REVIEW OF PERFORMANCE
SUMMARY
Accentuate results from continuing operations for the half year to December 2012 were very much in line with those of the
previous half year, with the operating profit increasing by 2%. These results reflect the incredible resilience of the group's
trading entities given the significant impact of the unprecedented industrial action within the mining industry and the
transport strike which affected trading for three of the six months in the period under review coupled with the tough trading
conditions which continue to prevail in the construction sector.
The effects of the widespread industrial unrest that crippled the mining sector for more than a quarter impacted quite
severely on some of the traditional markets serviced by SAFIC. The impact extended beyond just the affected mines to include
heavy engineering and other industrial suppliers to the mines. The protracted transport strike compounded the downturn in
the supply of consumables to these and other industrial sectors.
Finance charges were lower as the group continues to reduce its borrowings. This, together with the increased trading profit,
resulted in a slightly increased tax charge. Headline earnings per share were virtually unchanged from the previous period.
As anticipated and previously commented on, the inventory levels have increased substantially following the introduction of
new product ranges in both FloorworX and SAFIC and the holding of inventory at the end of December 2012 for a substantial
project to be delivered during the first part of 2013.
INFRASTRUCTURE SUPPLIES DIVISION
This division comprises the FloorworX business and contributes 78% of the group revenue.
Demand for flooring solutions provided by FloorworX remained relatively strong with revenue growth of 8% to R114 million
over the corresponding period. Trading margins remained under pressure, mainly impacted by cost drivers including fuel,
energy and petrochemical derivative inputs.
The reporting period saw the introduction of the new Superflex vinyl flooring range that had been in a planning phase for
some time. The acceptance of this range within the market has exceeded all expectations. Updating the range involves
significant costs in additional marketing activities as well as increased inventories vital to ensuring the competitiveness and
acceptance of this solution produced locally at the FloorworX facility in East London.
The new range introduction, coupled with holding the inventory for a significant project for delivery into Botswana in the first
quarter of 2013, resulted in an expected inventory increase at December of approximately R8m. The inventory level will
normalise over the 2013 calendar year.
Marketing activities remain focussed on ensuring that FloorworX maintains its leading position within the resilient flooring
sector. FloorworX recently launched an innovative Ipad application to assist professionals and specifiers. This is a first within
the flooring market in southern Africa and reinforces the leadership stance taken by FloorworX in both product and
technology as it celebrates 60 years in business during 2013.
ENVIRONMENTAL SOLUTIONS DIVISION
This comprises the SAFIC businesses and contributes 22% of the group revenue.
The net effect of the industrial unrest in the mining and transport sectors has mitigated the positive growth experienced in
other areas serviced by SAFIC, resulting in revenue being flat year on year and operating profit reducing. Although supply
arrangements seem to have mostly normalised, there has not been much opportunity to supply the volumes lost during this
disruption.
In line with SAFIC's stated objective of increasing recurring revenue streams, the contractual and managed account area of the
business grew 5% and now accounts for 50% of the total revenue of the division. The supply of adhesives, screeds and
maintenance products into the flooring market through FloorworX has been steady and remains a focus area of SAFIC.
Restructuring within the organisation and investment in the areas of sales and marketing has seen fixed sales expenditure
increase disproportionately, further impacting on the profitability of the division during the reporting period. This increased
focus was reinforced by the appointment of Mr Piet Odendaal as the sales and marketing director at SAFIC from January 2013.
Mr Odendaal has 40 years' experience in the group. His latest position was sales director at FloorworX, a position that he held
with distinction and in which he was a major contributor to their success. We look forward to the positive impact that his
appointment will have on SAFIC going forward.
ION EXCHANGE SAFIC
Accentuate launched its entry into the water treatment arena during the period under review. The Ion Exchange SAFIC
business is jointly owned with Ion Exchange India, a leading water treatment specialist company based in India and which
operates across a number of global markets. Considerable effort has been spent on establishing a presence in the market and
establishing the necessary capacity and infrastructure for this venture to become a serious player within the southern African
region.
Although Accentuate anticipates that this business will only begin to make a contribution to the Accentuate group results
within the 2013/14 financial year, encouraging progress has been made during the period under review. Initial indications
have reinforced management's view that this venture can become a meaningful contributor to the success of the group in the
years ahead. Even though these results reflect an equity accounted loss of R366 000, relating to the start-up costs of the
business, Ion Exchange SAFIC has already appointed some strategic distributors into identified sectors and a number of
contracts have been agreed or are being negotiated for the supply of both chemicals and equipment into the South African
and regional markets.
PROSPECTS
FloorworX continues to see good demand for its flooring solutions. The order book in volume terms at the end of December
2012 was 22% higher than the previous year. Management are cautiously optimistic within the generally challenging
construction environment. FloorworX, in this landmark 60th anniversary year, will focus on positioning and marketing locally
produced flooring products across a series of planned marketing initiatives.
Management remain confident about the growth potential that exists in the various markets serviced by SAFIC and that the
division can make a meaningful contribution towards the profitability of the group going forward.
According to Business Monitor economic growth is slowly ticking up, and a gradual improvement within the wider South
African construction sector is being felt. Their medium-term outlook for the sector is one of cautious and modest
improvement with a 3,6% real growth outlook for 2013.
Inefficient government spending, specifically the shortfall in achieving the proposed infrastructure spending targets, remains
both a question mark and a concern. Just two-thirds of the public infrastructure budget was spent in 2011, according to the
finance ministry. The government also has a R170 billion "infrastructure backlog" - things that should have been built and
upgraded but weren't - largely because regional departments have failed to effectively spend the money they were allocated.
The group continues to anticipate that some proposed infrastructure development will come to fruition; however none of the
current budgets take this potential business into account. The board of Accentuate remains cognisant of the substantial
impact this could potentially have on the revenue and profitability of the group, should government spending targets on
infrastructure be attained.
Opportunities remain buoyant in the area of water treatment. According to the Water and Environmental Affairs Minister,
investment in the country's water resources needs to double in the next 10 years if the country is to meet the growing
demand. The draft National Water Resource Strategy stated that South Africa would require investment of up to R670 billion
to strengthen the water sector adequately over the next ten years. Ion Exchange SAFIC is in a unique position to provide
comprehensive solutions that are suitable for the local conditions and which have been tried and tested in other emerging
economies.
SAFIC is actively pursuing an interesting opportunity relating to dust control. A revolutionary product, developed in
conjunction with a global technology partner, was introduced during the period under review. This product attracted much
attention and was due for testing by some mining groups during the latter half of 2012. Unfortunately trials were suspended
during the mining unrest and have only been scheduled to resume during the second quarter of 2013. Effective conclusion of
these trials and adoption of this system by the mining fraternity could have a material impact on the profitability of SAFIC.
The group continues to identify and consider potential acquisitions in line with the approved strategy to expand the business
in areas related to those sectors currently serviced by the group.
RESTATEMENT OF COMPARATIVE FIGURES
The finance cost and taxation charge figures for the comparative period to 31 December 2011 were understated and have
been restated in this report. Although these adjustments are not material, cumulatively they provide a more accurate and
realistic comparison of the group's earnings during the period under review. The net finance charge figure was understated
due to duplication of some entries and the reported taxation charge incorrectly took into account the losses on the CGA
business. The restated tax charge also takes into account the impact of the restated finance charge.
The figures for the year ended 30 June 2012 were correct and are not affected by this restatement.
As reported Effect of Restated
31 Dec 2011 restatement 31 Dec 2011
R 000's R 000's R 000's
Statement of comprehensive income
- Net finance charge 784 421 1 205
- Income tax 1 921 424 2 345
Statement of financial position
- Accumulated loss 27 175 845 28 020
- Trade and other payables 30 380 421 30 801
- Current tax payable 2 472 424 2 896
CHANGES TO THE BOARD
Dineo Molefe, who was previously an alternate director, was appointed to the board as a non-executive director in August
2012. Pieter Kriel was appointed as the alternate director 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.
DIVIDEND
The Accéntuate board deems it prudent not to declare 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.
CONTINGENT LIABILITY
There are directors' fees of R770 000 payable subject to approval of the required special resolution.
LITIGATION STATEMENT
Accéntuate has instituted legal proceedings against the vendors of the CGA business arising from the breach of certain
warranties provided when Accéntuate purchased the shares in CGA. The outstanding claim against the vendors is R9,2 million
and shareholders will be informed on any developments regarding this litigation.
RELATED PARTIES
During the year, certain subsidiaries, in the ordinary course of business, entered into various transactions with inter-group
companies on terms that are no less favourable than those arranged with third parties.
GOING CONCERN
The board of directors is satisfied that, after taking into account the current banking facilities, its utilisation thereof and the
budgeted profits and cash flows, the working capital available to Accéntuate will be sufficient to meet its requirements for the
next 12 months.
EVENTS AFTER REPORTING DATE
There are no significant matters arising since the end of the period under review.
BASIS OF PREPARATION
The reviewed abridged consolidated interim financial statements have been prepared in accordance and comply with
International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, the requirements of IAS 34: Interim Financial Reporting, the JSE Listing Requirements and the Companies Act, No.
71 of South Africa, 2008 as amended. They have been prepared on the historical cost basis, except for certain financial
instruments which are measured at fair value or at amortised cost, and are presented in South African rand, which is the
group's functional and presentation currency. The same accounting policies, presentation and methods of computation are
followed in these abridged financial statements as were applied in the presentation of the group's audited financial
statements for the year ended 30 June 2012.
The abridged consolidated interim financial statements have been prepared under the supervision of the chief financial
officer, Chris Povall CA(SA).
UNQUALIFIED REVIEW OPINION
The abridged consolidated financial statements for the six months ended 31 December 2012 have been reviewed by the
group's auditors, PKF (Gauteng) Inc. The review was conducted in accordance with ISRE2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. Their review report is available for inspection at the
group's registered office.
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 all the customers, partners,
advisors, suppliers and most importantly, the shareholders for their ongoing support and faith.
CORPORATE INFORMATION
Non-executive directors: MDC Motlatla (chairman)
RB Patmore
NE Ratshikhopha
D Molefe
PS Kriel (alternate)
Executive directors: FC Platt (chief executive officer)
DE Platt
CJ Povall (chief financial officer)
Registration number: 2004/029691/06
Registered address: Accéntuate Business Park
32 Steele Street
Steeledale
Johannesburg
2197
Postal address: PO Box 1754
Alberton
1450
Company secretary: PS Dayah
E-mail: pdayah@accent.co.za
Telephone: (011) 406 4100
Facsimile: (086) 509 3246
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated adviser: Bridge Capital Advisors (Pty) Limited
28 February 2013
Date: 28/02/2013 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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