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Provisional Summarised Audited Consolidated Financial Statements for the year ended 30 June 2016
ACCÉNTUATE LIMITED
PROVISIONAL AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2016
Accéntuate Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share Code: ACE ISIN Code: ZAE000115986
www.Accéntuateltd.co.za
("Accéntuate" or "the group" or "the company")
Provisional Summarised Audited Consolidated Financial Statements for the
year ended 30 June 2016
SUMMARISED AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2016
Audited Restated
30 June 2016 30 June 2015
R'000 R'000
Revenue 322 714 318 609
Cost of sales (160 648) (160 599)
Gross profit 162 066 158 010
Other income 2 420 1 840
Other operating expenses (151 088) (156 832)
Operating profit 13 398 3 018
Finance costs (2 817) (2 485)
Profit before tax 10 581 533
Taxation (3 056) (474)
Total comprehensive income attributable to owners of
the parent 7 525 59
Earnings per share (cents) 6,33 0,05
Diluted earnings per share (cents) 5,74 0,05
Notes to the statement of comprehensive income:
Headline earnings per share (cents) 6,32 0,05
Diluted headline earnings per share (cents) 5,73 0,05
Number of shares:
- Weighted average number of shares 118 852 355 118 628 531
- Diluted weighted average number of shares 131 175 083 118 628 531
Reconciliation between earnings and headline earnings (R'000):
Profit for the year attributable to ordinary shareholders 7 525 59
Profit on disposal of property, plant and equipment - net of taxation (9) (1)
Headline earnings for the year attributable to ordinary shareholders 7 516 58
SUMMARISED AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Restated Restated
30 June 2016 30 June 2015 30 June 2014
R'000 R'000 R'000
ASSETS
Non-current assets 91 242 92 468 94 249
Property plant and equipment 50 191 50 845 52 576
Goodwill 36 963 36 963 36 963
Intangible assets 1 663 1 816 1 864
Deferred taxation 2 425 2 844 2 846
Current assets 148 242 120 755 135 889
Inventories 104 147 76 280 76 018
Trade and other receivables 37 201 37 900 42 932
Other financial assets 1 913 4 530 7 175
Taxation receivable 4 800 1 875 2 173
Cash and bank 181 170 7 591
Total assets 239 484 213 223 230 138
EQUITY AND LIABILITIES
Total equity 153 469 144 879 144 348
Share capital 137 950 136 993 136 710
Reserves 22 354 22 632 22 830
Accumulated loss (6 835) (14 746) (15 192)
Non-current liabilities 7 312 4 422 6 266
Deferred taxation 7 312 4 422 6 266
Current liabilities 78 703 63 922 79 524
Trade and other payables 48 007 35 731 45 612
Operating lease liability 2 252 2 387 2 559
Current tax payable 84 1 236 758
Other financial liabilities - - 390
Short-term borrowings 28 360 24 568 30 205
Total liabilities 86 015 68 344 85 790
Total equity and liabilities 239 484 213 223 230 138
Notes to the Statement of Financial Position
Number of shares in issue 124 048 757 124 048 757 123 704 022
Net asset value per share (cents) 124 117 117
Tangible net asset value per share (cents) 93 86 85
SUMMARISED AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Restated
30 June 2016 30 June 2015
R'000 R'000
Capital and reserves - opening balance previously reported 152 379
Effect of restatement (8 031)
Capital and reserves - opening balance 144 879 144 348
Total comprehensive income 7 525 59
Share options exercised 957 -
Shares issued for acquisition of assets - 283
Share-based payment expense 108 189
Capital and reserves - closing balance 153 469 144 879
Comprising:
Share Capital and Share Premium 137 950 136 993
Reserves 22 354 22 632
Accumlated loss (6 835) (14 746)
Capital and reserves - closing balance 153 469 144 879
SUMMARISED AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
30 June 2016 30 June 2015
R'000 R'000
Cash flow from operating activities (3 705) (407)
Cash flow from investing activities (1 032) (1 377)
Cash flow from financing activities 956 -
Net decrease in cash and cash equivalents (3 781) (1 784)
Cash and cash equivalents at beginning of the year (24 398) (22 614)
Cash and cash equivalents at end of the year (28 719) (24 398)
SEGMENT REPORT
For the year ended 30 June 2016
Audited R'000
Environmental Corporate and
Flooring Solutions Eliminations Group
Total sales 254 839 74 094
Less: inter-segmental sales (6 219)
Revenue 254 839 74 094 (6 219) 322 714
Gross profit 120 831 41 235 - 162 066
Operating profit 10 875 1 288 1 235 13 398
Finance costs (719) (1 005) (1 093) (2 817)
Profit before tax 10 156 283 142 10 581
Other information
Capital expenditure 2 789 841 105 3 735
Depreciation and amortisation 3 317 884 267 4 468
Segment assets 178 558 31 312 29 614 239 484
Segment liabilities 50 398 20 597 15 020 86 015
For the year ended 30 June 2015
Restated R'000
Environmental Corporate and
Flooring Solutions Eliminations Group
Total sales 250 578 74 943
Less: inter-segmental sales (6 912)
Revenue 250 578 74 943 (6 912) 318 609
Gross profit 115 393 42 617 158 010
Operating profit/(loss) (9) 2 787 240 3 018
Finance costs (214) (1 112) (1 159) (2 485)
Profit/(loss) before tax (223) 1 675 (919) 533
Other information
Capital expenditure 3 367 371 131 3 869
Depreciation and amortisation 3 801 1 131 267 5 199
Segment assets 152 377 29 140 31 706 213 223
Segment liabilities 31 410 19 445 17 489 68 344
INTRODUCTION AND BACKGROUND TO THE RESULTS
Accentuate shareholders were advised during the year of fraudulent activities identified in
December 2015 at Floorworx Africa Proprietary Limited, a 100% subsidiary of Accentuate.
The fraud was detected as part of an internal audit investigation and had a material impact
on the business. As announced in our interim results, a number of steps have been taken to
fully understand the extent of the fraud, evaluate the control environment to detect any
further weaknesses and to take the necessary remedial action in order to avoid a
recurrence, as well as ensure a strong and reliable reporting foundation for the anticipated
growth across the organization.
The strengthening of the board and the audit committee has assisted management in
evaluating the control environment and taking certain dramatic steps to provide
shareholders with the comfort that the concerns over the control environment have been
addressed and furthermore to provide more accurate comparative information on which to
base investment decisions.
The following measures have been implemented:
- Fraud and theft charges have been instituted against the perpetrator and he has
been charged and found guilty of such. Sentencing is imminent. In addition a number
of assets have been confiscated and handed over to Accentuate. We will advise once
more information becomes available.
- An external review of the control environment at Floorworx has been concluded and
a number of recommendations have been implemented.
- Although management was of the view that the total amount misappropriated had
been expensed through the income statement, subsequent investigations have
revealed that an amount of R17,6 million had been incorrectly reflected in the
balance sheet in order to account for the funds misappropriated. To ensure that
shareholders are provided with the correct comparative information and to ensure
compliance to the highest reporting and accounting standards, the board deemed it
appropriate to restate the previous financial results to reflect these transactions in
the periods in which they occurred. The effect of the restatement is noted below.
- A reportable irregularity on the matter was reported to the Independent Regulatory
Board for Auditors. All necessary measures have been taken to ensure that the fraud
is no longer continuing and that the reportable irregularity is closed.
- Restructuring and strengthening the financial, accounting and internal auditing
disciplines within the organization are in progress and remain a priority.
- The fraudulent expenses recorded in the statement of comprehensive income during
the period under review amounted to R5,36 million (2015: 11,06 million).
Based on these actions, the Board is satisfied that this matter has received the necessary
attention and that the business can now continue with the necessary controls in place to
avoid a recurrence.
REVIEW OF PERFORMANCE
Given the challenges outlined above, Accéntuate delivered a strong operational
performance during the year under review. Despite the very challenging economic
environment, the group has successfully focused on maintaining market share, increasing
operational efficiency and managing costs in order to increase profitability. The downturn in
the local economy continued and GDP growth slowed to virtually zero during the second
half of the year under review. The impact of the challenging economic environment was
compounded by the slowdown in the allocation of government contracts in the run-up to
the municipal elections held in August 2016. The weakness in the private and public
construction environment as well as in the industrial and mining sectors impacted on the
group turnover due to the significance of these sectors in its operations. The effect of the
significant currency volatility made it difficult to manage input costs and pricing.
Turnover for the year increased by 1,3% to R322,7 million and gross profit increased by 2,6%
to R162,1 million. The ongoing focus on containing costs manifested in operating
expenditure being 3,7% less than the previous year. The operating profit increased to
R13,4 million. Profit after tax increased to R7,5 million and headline earnings per share
increased to 6,32 cents.
Finance costs increased as a result of increased working capital, particularly inventory. This
was attributable to a number of factors including the introduction of new ranges, the
increased cost of products resulting from the weakening rand, and higher quantities of
certain items due to the slower than anticipated sales in the last quarter.
FLOORING BUSINESS (100% owned)
The FloorworX business operations contributed 79% of the group sales.
FloorworX again showed resilience in coping admirably during extremely difficult trading
conditions. Management's ongoing focus on operating efficiency, flexible work practices and
exploring new products and markets resulted in operating profit increasing to R10,9 million.
Turnover increased 1,7% and the gross margin increased by 1,3%.
The company maintained its leadership position within the resilient flooring market and
successfully completed some important contracts, including the Nelson Mandela Children's
Hospital in Cape Town. Sales to government departments remained sporadic, with some
areas increasing spending while demand from other areas reduced, especially during the
last quarter in the run-up to the municipal elections.
The wood and laminate division was affected by the reduced activity in the office,
commercial and housing construction sectors, noticeably in the second half of the financial
year. The corporate carpet tile range introduced during the previous year continues to gain
acceptance in a depressed market, and the introduction of a new range of luxury vinyl
products during the second half of the year has been well received by the market. The
extreme volatility in the rand negatively impacted the division, and the recent strengthening
of the rand is placing further pressure on the ability to penetrate new export markets.
ENVIRONMENTAL SOLUTIONS BUSINESS (100% owned)
This comprises the Safic business operations and contributed 21% of the group sales.
The business continued with its strategy to expand further into sustainable, recurring
business, as well as increasing the range of specialty chemical products supplied. The
increase in revenue from these markets did not off-set the reduced demand from the
industrial and mining sectors, resulting in the decrease of 1% in turnover. The increased
sales in the newer markets bode well for the business going forward in ensuring Safic's
future trading platform is more sustainable and resilient.
The lower revenue and a decrease in gross margin contributed to a reduced operating profit
at the division. The net increase in operating costs was contained to less than 1%.
The Degrachem acquisition has allowed some expansion into the related process chemical
markets. The provision of screeds and adhesives to FloorworX, as well as sales of related
maintenance products and equipment, places the Accéntuate group in a unique position to
supply a comprehensive range of flooring solutions, including preparation and maintenance
products and equipment.
WATER TREATMENT BUSINESS (40% owned)
This comprises the Ion Exchange Safic water treatment business, which is a partnership
between Accéntuate and Ion Exchange India. The business is equity accounted by the group
as an associate.
The year has seen a focus on building the necessary capacity within the operation and
discussions on some significant projects, while continuing to expand the customer base of
recurring business. A pleasing improvement in new business, particularly in the second half
of the financial year, has been evident. Management remains firm in its view that this
business has the potential to become a major contributor to the growth and profitability of
Accéntuate in the future.
A major step towards expanding the business is the agreement of understanding signed
with Stefanutti Stocks in July 2016. In terms of the agreement, the parties will work together
on water projects which require both water treatment technology and construction
components. Ion Exchange Safic will be responsible for the process, design, engineering and
procurement of process equipment and Stefanutti Stocks will be responsible for the
execution, construction and civil works required on such projects. The group envisages
major benefits emerging from this arrangement, especially from the supply to larger water
utilities, municipalities and public private partnerships.
EFFECT OF THE RESTATEMENT
Previously
Restated reported
Year ended Year ended
30 June 30 June
2015 Change 2015
R'000 R'000 R'000
Effect on the consolidated statement
of financial position:
ASSETS
Current assets 120 755 (17 615) 138 370
Trade and other receivables (note 1) 37 900 (17 615) 55 515
Total assets 213 223 (17 615) 230 838
EQUITY AND LIABILITIES
Accumulated loss (note 2) (14 746) (12 683) (2 063)
Total equity 144 879 (12 683) 157 562
Deferred tax (note 3) 4 422 (4 932) 9 354
Total equity and liabilities 213 223 (17 615) 230 838
Effect on the consolidated statement
of comprehensive income:
Cost of sales (160 599) (6 461) (154 138)
Gross profit 158 010 (6 461) 164 471
Operating profit 3 018 (6 461) 9 479
Profit before tax 533 (6 461) 6 994
Taxation (474) 1 809 (2 283)
Total comprehensive income for the
period 59 (4 652) 4 711
Effect on earnings per share:
Earnings per share (cents) 0,05 (3,92) 3,97
Diluted earnings per share (cents) 0,05 (3,92) 3,97
Headline earnings per share (cents) 0,05 (3,92) 3,97
Diluted headline earnings per share
(cents) 0,05 (3,92) 3,97
The restatement had no effect on the consolidated statement of cashflow for the financial year ending 30 June 2015.
Note 1 The restated trade and other receivables includes adjustments of R6 461 000 relating to the 2015
financial year and R11 154 000 relating to the 2014 and prior years. The previously reported figure for 2014
was R54 086 000 and the restated figure is R42 932 000.
Note 2 The restated retained profit/(loss) includes adjustments of R4 652 000 (R6 461 000 adjustment to cost
of sales less deferred taxation of R1 809 000) relating to the 2015 financial year and R8 031 000 (R11 154 000
adjustment to cost of sales less deferred taxation of R3 123 000) relating to the 2014 and prior years. The
accumulated profit/(loss) previously reported in 2014 was (R7 161 000) and the restated figure is
(R15 192 000).
Note 3 The restated deferred taxation liability includes adjustments of R1 809 000 relating to the 2015
financial year and R3 123 000 relating to the 2014 and prior years. The deferred taxation liability previously
reported in 2014 was R6 543 000 and the restated figure is R3 420 000.
UPDATE ON SHAREHOLDING
During the financial year Trustee Board Investments ("TBI") acquired an initial 25,2%
interest in Accéntuate, which has, through the year, increased to 29,9%. This marked a
pivotal moment for Accéntuate, as shareholders are now fully aligned to the strategy and
vision of the group. We welcome TBI on board as a shareholder and value its contribution
to the board.
GENERAL ISSUE OF SHARES FOR CASH
In terms of the resolution approved at the AGM, the board authorised the issue of
10 million additional shares at 75 cents per share to service the increased working capital
requirements. These shares were allotted and subscribed for early in July 2016.
PROSPECTS
Enhanced growth for flooring division depends on export initiatives which are actively
being pursued, as well as government's roll-out of infrastructure, including the building
and upgrading of school classrooms, clinics and hospitals. It is anticipated that a number of
projects which were in the pipeline should come to fruition once normal government
spending resumes. The division expects some growth in the corporate market segment,
including private healthcare. The dedicated management team remains fully committed to
ensuring that FloorworX entrenches its leadership position within the resilient flooring
market.
The provision of water treatment chemicals and solutions to Safic customers remains a
focus area, and the Ion Exchange joint venture provides products and technical back-up
that allows for growth opportunities in this sector. As indicated we are of the firm belief
that the water market holds tremendous potential for the Accentuate group and we
remain confident that this will become a major contributor to the profitability of
Accentuate in the not too distant future.
A greater marketing focus, increased contract-based business and process chemical
supply, and the return of traditional markets to some form of normality, will see Safic
increase its contribution to the performance of the group. In order to gain critical mass,
further acquisitions are being assessed.
The group remains cautiously optimistic that it will show growth in the foreseeable future
as the initiatives underway are implemented and the economic climate improves.
CHANGES TO THE BOARD OF DIRECTORS
The board welcomes Mr Thys du Preez, a chartered accountant, as a non-executive
director of Accéntuate and as a member of the audit and risk committee, effective from
1 March 2016.
Mr Chris Povall, the chief financial officer, has informed the board that he has resigned and
will be leaving at the end of March 2017. The board has begun a review process for new
candidates and Mr. Povall has committed himself to ensuring a smooth transition and
handover once his successor has been appointed.
DIVIDEND
The Accéntuate board deemed it prudent not to declare a dividend.
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 the group will be sufficient to meet its requirements for the next
12 months.
BASIS OF PREPARATION
The provisional summarised audited consolidated financial statements are prepared in
accordance with the requirements of the JSE Listings Requirements for provisional reports,
the requirements of the Companies Act applicable to summary financial statements, the
framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee, and contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the
consolidated financial statements, from which the summarised consolidated financial
statements were derived, are in terms of International Financial Reporting Standards and
are consistent with the accounting policies applied in the preparation of the previous
consolidated annual financial statements.
These summary audited consolidated financial statements have been derived from the
Group's consolidated annual financial statements. The contents of this announcement are
extracted from audited information, although the announcement is not itself audited. The
directors take full responsibility for the preparation of the provisional report and the
financial information has been correctly extracted from the underlying consolidated
annual financial statements. There are no significant matters arising since the end of the
year under review other than as disclosed herein.
The audited summarised consolidated financial statements were prepared under the
supervision of the chief financial officer, Chris Povall CA (SA).
UNMODIFIED AUDIT OPINION
The auditors, Mazars (Gauteng) Inc., have issued an unmodified opinion on the Group's
consolidated annual financial statements for the year ended 30 June 2016. The auditor's
report contained the following paragraph with respect to a reportable irregularity:
In accordance with our responsibilities in terms of sections 44(2) and 44(3) of the Auditing
Profession Act, we report that we were made aware of certain unlawful acts committed by
a person responsible for the management of FloorworX Pty Ltd, a 100% owned subsidiary
of Accentuate Limited, which constitute a reportable irregularity in terms of the Auditing
Profession Act, and have reported such matter to the Independent Regulatory Board for
Auditors. The matter pertaining to the reportable irregularity has been described in Note 1
to the financial statements.
A copy of the auditor's report together with the underlying audited annual financial
statements is available for inspection at the Company's registered office.
The auditor's report does not necessarily report on all the information contained in this
announcement. Shareholders are therefore advised that, in order to obtain a full
understanding of the nature of the auditor's engagement, they should obtain a copy of the
auditor's report together with the accompanying financial information from the
Company'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.
27 September 2016
CORPORATE INFORMATION
Non-executive directors:
RB Patmore (chairman)
NE Ratshikhopha
PS Kriel
MM du Preez
A Mjamekwana (alternate)
Executive directors:
FC Platt (chief executive office)
CJ Povall (chief financial officer)
DE Platt
Registered address:
Accéntuate Business Park
32 Steele Street
Steeledale
2197
Postal address:
P.O. Box 1754
Alberton
1450
Company secretary:
PS Dayah
pdayah@accent.co.za
Telephone:
011 406 4100
Facsimile:
086 509 3246
Website:
www.Accéntuateltd.co.za
Email:
info@accent.co.za
Twitter:
@AccéntuateLtd
Facebook:
www.facebook.com/AccéntuateLtd
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Designated Adviser:
Bridge Capital Advisors (Pty) Ltd
Attorneys:
Fullard Mayer Morrison
Disclaimer
This announcement may contain certain forward-looking statements concerning
Accéntuate's 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.
Date: 28/09/2016 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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