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Interim results for the six months ended 31 December 2014
Accéntuate Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/029691/06)
Share code: ACE ISIN code: ZAE000115986
www.accentuateltd.co.za
("Accéntuate" or "the group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014
HIGHLIGHTS
- Turnover up 9 %
- Operating profit up 39 %
- HEPS up 34 %
- Borrowings reduced
Condensed consolidated Financial Statements for the six months ended 31 December 2014
Condensed consolidated Statement of Profit and Loss and Comprehensive Income
Unaudited Reviewed Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2014 2013 2014
R'000 R'000 R'000
Revenue 170 520 156 802 308 101
Cost of sales (84 969) (74 811) (147 297)
Gross profit 85 551 81 991 160 804
Other income 988 878 1 876
Operating expenses excluding depreciation
and amortisation (76 160) (74 539) (146 607)
Earnings before interest, tax depreciation
and amortisation 10 379 8 330 16 073
Depreciation and amortisation (2 971) (3 019) (6 524)
Operating profit before interest and tax 7 408 5 311 9 549
Finance costs (1 146) (812) (2 101)
Profit before tax 6 262 4 499 7 448
Income tax (1 808) (1 305) (2 308)
Profit attributable to equity holders of the parent 4 454 3 194 5 140
Other comprehensive income for the period:
Net effect of revaluation of property (not classified) - - 5 480
Total comprehensive income attributable to
equity holders of the parent 4 454 3 194 10 620
Weighted average number of shares 118 570 928 111 511 421 114 635 975
Diluted average number of shares 118 570 928 113 327 263 115 111 585
Earnings Ratios:
Earnings per share (cents) 3,76 2,86 4,48
Diluted earnings per share (cents) 3,76 2,82 4,46
Notes to the Statement of Comprehensive Income:
Headline earnings per share (cents) 3,76 2,81 4,46
Diluted headline earnings per share (cents) 3,76 2,77 4,45
Reconciliation of Headline Earnings:
Profit for the period 4 454 3 194 5 140
Adjusted for:
(Profit)/Loss on disposal of property, plant - (40) (22)
and equipment net of taxation
Headline earnings attributable to shareholders
of the parent 4 454 3 154 5 118
Condensed consolidated Statement of Financial Position
Unaudited Reviewed Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2014 2013 2014
R'000 R'000 R'000
Assets
Non-current assets 91 602 86 291 94 249
Property, plant and equipment 50 295 44 538 52 576
Goodwill and intangible assets 38 614 38 564 38 827
Deferred taxation 2 693 3 189 2 846
Current assets 136 234 121 560 147 043
Inventories 72 898 67 419 76 018
Trade and other receivables 53 616 45 213 54 086
Other financial assets 7 188 5 794 7 175
Taxation receivables 2 173 2 897 2 173
Cash and bank 359 237 7 591
Total assets 227 836 207 851 241 292
Equity and liabilities
Total equity 157 116 148 682 152 379
Share capital 136 993 135 836 136 710
Shares to be issued to vendors - 1 484 -
Reserves 22 830 22 215 22 830
Accumulated loss (2 707) (10 853) (7 161)
Non-current liabilities 9 389 4 748 9 389
Deferred taxation 9 389 4 748 9 389
Current liabilities 61 324 54 421 79 524
Trade and other payables 47 102 39 865 45 612
Other financial liabilities - - 390
Operating lease liability 1 938 2 476 2 559
Taxation payable 480 - 758
Bank overdraft 11 804 12 080 30 205
Total liabilities 70 713 59 169 88 913
Total equity and liabilities 227 829 207 851 241 292
Notes to the Statement of Financial Position
Number of shares in issue 124 048 757 122 638 059 123 704 022
Net asset value per share (cents) 127 120 123
Tangible net asset value per share (cents) 96 89 92
Condensed consolidated Statement of Changes in Equity
Unaudited Reviewed Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2014 2013 2014
R'000 R'000 R'000
Capital and reserves – opening balance 152 379 134 550 134 550
Profit for the period 4 454 3 194 5 140
Other comprehensive income - - 5 480
Shares issued for acquisition of assets 283 9 454 10 328
Shares to be issued to vendors - 1 484 -
Net transfer of reserves - - (3 156)
Share-based payment expense - - 37
Capital and reserves – closing balance 157 116 148 682 152 379
Condensed consolidated Statement of Cash Flows
Unaudited Reviewed Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2014 2013 2014
R'000 R'000 R'000
Net cash from operating activities 11 843 (292) (6 629)
Net cash from investing activities (674) 351 (4 083)
Net cash from financing activities - (2 850) (2 850)
Net increase / (decrease) in cash and cash equivalents 11 169 (2 791) (13 562)
Cash and cash equivalents at beginning of the period (22 614) (9 052) (9 052)
Cash and cash equivalents at end of the period (11 445) (11 843) (22 614)
Segment Report
December 2014 Unaudited Unaudited Unaudited Unaudited
31 Dec 2014 31 Dec 2014 31 Dec 2014 31 Dec 2014
R'000 R'000 R'000 R'000
Environmental Corporate and
Flooring Solutions Eliminations Total
Total sales 135 646 39 183
Less: Inter-segmental sales (4 309)
Revenue 135 646 39 183 (4 309) 170 520
Gross Profit 64 024 21 527 85 551
Operating profit before
depreciation and amortisation 7 219 1 398 1 762 10 379
Depreciation and amortisation (2 126) (704) (141) (2 971)
Operating profit before interest
and tax 5 093 694 1 621 7 408
Segmental assets 173 499 31 551 22 786 227 836
Segmental liabilities 39 252 21 756 9 705 70 713
December 2013 Reviewed Reviewed Reviewed Reviewed
31 Dec 2013 31 Dec 2013 31 Dec 2013 31 Dec 2013
R'000 R'000 R'000 R'000
Environmental Corporate and
Flooring Solutions Eliminations Total
Total sales 121 849 38 279
Less: Inter-segmental sales (3 326)
Revenue 121 849 38 279 (3 326) 156 802
Gross Profit 60 032 21 959 - 81 991
Operating profit before
depreciation and
amortisation 7 286 907 137 8 330
Depreciation and
amortisation (2 066) (725) (228) (3 019)
Operating profit before
interest and tax 5 220 182 (91) 5 311
Segmental assets 160 517 29 758 17 576 207 851
Segmental liabilities 33 883 16 446 9 840 59 169
REVIEW OF PERFORMANCE
SUMMARY
Accentuate has produced pleasing results for the first half of the year after recovering from the severe impact of
the NUMSA strike in July. Trading for the remaining five months was steady with evidence of improved demand
and an increase in sales of 9% over the corresponding period. Expenses were managed extremely well resulting in
an increase in operating expenses of only 2,2% compared to the same period in 2013. The resultant increase in
operating profit for the period of 40%, together with effective control of working capital, resulted in borrowings
reducing by R11,6 million since June as well as lower working capital compared to the second half of the previous
financial year.
The increase in profits was achieved despite gross margins remaining under pressure - attributable to the reduced
volumes produced during the strike and the impact of increased competition. Nevertheless, profit before tax and
after tax increased by 39%. The headline earnings per share increased by 34% to 3,76 cents after taking account
of the increased number of shares in issue.
The NUMSA strike affected both FloorworX and Safic. Floorworx production came to an almost complete halt
during July as the workers at the East London production facility are members of NUMSA and they were not able
to work during the strike. The employees at many of Safic's customers, especially those in the metal and
engineering sectors, are affiliated to NUMSA and off-take was thus significantly reduced during the month due to
reduced activity.
Inventory levels reduced as planned during the first portion of the period. However, the levels of locally
manufactured product were deliberately increased during the last couple of months in anticipation of the impact
of load shedding by Eskom affecting production during the first part of 2015. Accounts receivable and payable
continue to be well managed and remain within target levels. Capital expenditure was in line with expectation.
FLOORING DIVISION
This division, which has been operational for more than 60 years, comprises the FloorworX business operations
and contributed 78% of the group revenue.
Sales increased by 11% following a marginal improvement in the demand during the period, particularly from
education departments. There are indications that this should continue during the second half of the year.
However, the demand from the general construction sector remained subdued. Selling prices were under
pressure as competition continued to increase. The plant operated efficiently once production resumed after the
strike. The gross margin of 47,2% was lower than the previous period. The higher fuel price during the period
under review when compared to the comparative period also contributed to a slight reduction in operating profit.
Load shedding impacted negatively on production recoveries during December - and has continued to disrupt
production during January and February.
ENVIRONMENTAL SOLUTIONS DIVISION
This comprises the SAFIC business operations and contributed 22% of the group revenue.
Safic continued to increase trading levels in the new markets targeted during recent years, especially the contract
cleaning, screeds and adhesives, speciality chemical and water treatment areas. This has off-set the decline in off-
take by the traditional mining and industrial customers which has been evident for some time. The business has
further reduced costs and increased efficiencies.
Turnover increased by 2,4% to R39,2 million while the gross profit was slightly reduced. However, a 3,5%
reduction in cash operating costs resulted in a significant increase in operating profit. This was a pleasing result
considering the lackluster state of the mining and manufacturing sectors and the impact of the NUMSA strike
which saw reduced sales to a large number of Safic customers who scaled back operations for most of July.
WATER TREATMENT DIVISION
This comprises the Ion Exchange Safic water treatment business, which is a partnership with Ion Exchange India,
and which is equity accounted by Accentuate as an associated company. The business continued making steady
progress in expanding its customer base and has received significantly more enquiries and opportunities to tender
for further business, and is involved in a number of discussions with potential customers on a broad range of
water treatment solutions. It has almost achieved a break-even trading level during the period under review.
PROSPECTS
All the trading divisions within the group are focusing considerable efforts on expanding their customer base
while reducing costs and improving efficiencies. This should enable the group to benefit from any improvement in
the economic sectors served. The reduction in fuel prices should benefit the second half results, although there is
not yet much evidence of lower prices in many other petro-chemical derivative products. The group continues to
focus on possible acquisitions which fit in with the approved strategic plans. Load shedding is a major concern
with the potential to impact negatively on both manufacturing recoveries and the cost of manufacturing.
Management is urgently investigating solutions to mitigate this risk and ensure that desired levels of productivity
and profitability are achieved. This will require additional capital expenditure during the second half of the year.
INTERIM DIVIDEND
The Accéntuate board deems it prudent not to declare an interim dividend. The group continues to evaluate and
investigate potential business opportunities 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 being
passed at the annual general meeting.
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.
CONTINGENT LIABILITY
There are non-executive directors' fees of R2,3 million payable subject to approval of the required special
resolutions.
EVENTS AFTER REPORTING DATE
There are no significant matters arising since the end of the period under review.
BASIS OF PREPARATION
The unaudited condensed consolidated results for the period ended 30 December 2014 have been prepared in
accordance with and containing the information required by International Accounting Standard (IAS) 34: Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, and
are in compliance with the Listings Requirements of the JSE Limited.
The accounting policies as well as the methods of computation used in the preparation of the results for the
period ended 31 December 2014 are in terms of International Financial Reporting Standards (IFRS) and are
consistent with those applied in the audited annual financial statements for the year ended 30 June 2014.
These condensed interim consolidated financial statements were prepared under the supervision of the chief
financial officer, Chris Povall CA(SA). These condensed consolidated financial results have not been audited or
reviewed by the group's independent auditors.
APPRECIATION
The board would like to take this opportunity to thank all the management teams and staff for their loyalty and
dedication in working tirelessly towards the achievement of the objectives that have been set. The board would
also like to thank all the customers, suppliers, partners, advisors, and, most importantly, the shareholders for
their ongoing support and faith.
DISCLAIMER
This announcement may contain certain forward-looking statements concerning Accentuate group operations,
business strategy, financial conditions, growth plans and expectations. These statements include, without
limitation, those concerning the economic outlook, business climate and changes in the market. Such views
involve both known and unknown risks, assumptions, uncertainties and important factors that could materially
influence the actual performance of the group. No assurance can be given that these will prove to be correct and
no representation or warranty, expressed or implied, is given as to the accuracy or completeness of such views
contained in this announcement.
CORPORATE INFORMATION
Non-executive directors: MDC Motlatla (Chairman)*
(* = independent) RB Patmore*
NE Ratshikhopha*
PS Kriel
A Mjamekwana (Alternate)
Executive directors: FC Platt (Chief Executive Officer)
CJ Povall (Chief Financial Officer)
DE Platt
Registered address: Accéntuate Business Park
32 Steele Street
Steeledale
Johannesburg
2197
Postal address: PO Box 1754
Alberton
1450
Website: www.accentuateltd.co.za
Email: info@accent.co.za
Twitter: @AccentuateLtd
Facebook: www.facebook.com/AccentuateLtd
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
Attorneys: Fullard Mayer Morrison
Investor relations: Keyter Rech Investor Solutions
2 March 2015
Date: 02/03/2015 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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