Wrap Text
Unaudited Results for the Six Months Ended 31 December 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")
ACCÉNTUATE LIMITED
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
Condensed consolidated financial statements for the six months ended 31 December 2016
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months to 6 months to Year to 30
31 December 2016 31 December 2015 June 2016
R'000 R'000 R'000
Revenue 159 316 173 018 322 714
Cost of sales (86 287) (85 619) (160 648)
Gross profit 73 029 87 399 162 066
Other income 8 681 1 022 2 420
Other operating expenses (75 635) (77 583) (151 088)
Operating profit 6 075 10 838 13 398
Finance costs (1 268) (1 159) (2 817)
Profit before tax 4 807 9 679 10 581
Taxation (1 346) (2 855) (3 056)
Profit and total comprehensive income
attributable to owners of the parent 3 461 6 824 7 525
Earnings per share (cents) 2,65 5,75 6,33
Diluted earnings per share (cents) 2,61 5,75 5,74
Notes to the statement of comprehensive
income:
Headline earnings per share (cents) 2,66 5,75 6,32
Diluted headline earnings per share (cents) 2,62 5,75 5,73
Number of shares:
- Weighted average number of shares 130 487 285 118 687 089 118 852 355
- Diluted weighted average number of
shares 132 474 589 118 687 089 131 175 082
Reconciliation of headline earnings (R'000)
Profit for the year attributable to ordinary
shareholders 3 461 6 842 7 525
Loss/(profit) on disposal of property, plant
and equipment - net of taxation 4 - (9)
Headline earnings for the year attributable to
ordinary shareholders 3 465 6 824 7 516
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 2016 31 December 2015 0 June 2016
R'000 R'000 R'000
ASSETS
Non-current assets 89 641 92 154 91 242
Property plant and equipment 48 580 50 572 50 191
Goodwill 36 963 36 963 36 963
Intangible assets 1 564 1 749 1 663
Deferred taxation 2 534 2 870 2 425
Current assets 136 868 142 570 148 242
Inventories 93 488 81 289 104 147
Trade and other receivables 36 999 54 579 37 201
Other financial assets 1 369 4 685 1 913
Taxation receivables 4 800 1 875 4 800
Cash and bank 212 142 181
Total assets 226 509 234 724 239 484
EQUITY AND LIABILITIES
Total equity 164 430 164 386 153 469
Share capital 145 450 136 993 137 950
Reserves 22 354 22 632 22 354
Accumulated loss (3 374) 4 761 (6 835)
Non-current liabilities 9 033 9 354 7 312
Deferred taxation 8 767 9 354 7 312
Other financial liabilities 266 - -
Current liabilities 53 046 60 984 78 703
Trade and other payables 38 032 38 870 48 007
Operating lease liability 2 222 2 451 2 252
Other financial liabilities 30 - -
Current tax payables 84 776 84
Short-term borrowings 12 678 18 887 28 360
Total liabilities 62 079 70 338 86 015
Total equity and liabilities 226 509 234 724 239 484
Number of shares in issue 134 048 757 124 048 757 124 048 785
Net asset value per share (cents) 123 133 124
Tangible net asset value per share (cents) 94 101 93
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 2016 31 December 2015 30 June 2016
R'000 R'000 R'000
Capital and reserves - opening balance 153 469 157 562 144 879
Profit for the period 3 461 6 824 7 525
Shares issued for cash 7 500 - -
Share options exercised - - 957
Share-based payment expense - - 108
Capital and reserves - closing balance 164 430 164 386 153 469
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 2016 31 December 2015 30 June 2016
R'000 R'000 R'000
Cash flow from operating activities 8 016 7 858 (3 705)
Operating profit for period 6 075 10 838 13 398
Adjustment for non-cash items 2 293 2 455 4 626
Decrease / (increase) in working capital 916 (936) (15 094)
Tax paid - (3 340) (3 818)
Finance costs (1 268) (1 159) (2 817)
Cash flow from investing activities (69) (2 205) (1 032)
Net flows on capital items (69) (2 051) (3 649)
Decrease/(increase) in financial assets - (154) 2 617
Cash flow from financing activities 7 766 - 956
Proceeds from share issue 7 500 - -
Increase in financial liabilities 266 - -
Proceeds from share options exercised - - 956
Net increase/(decrease) in cash and
cash equivalents 15 713 5 653 (3 781)
Cash and cash equivalents at beginning
of the period (28 179) (24 398) (24 398)
Cash and cash equivalents at end of
the period (12 466) (18 745) (28 179)
SEGMENT REPORT
for the six months ended 31 December 2016
31 December 2016 R'000 R'000 R'000 R'000
Environmental Corporate and
Flooring Solutions Eliminations Group
Total sales 127 698 34 875
Less: inter-segmental sales (3 257)
Revenue 127 698 3 4 875 (3 257) 159 316
Gross profit 54 025 19 004 73 029
Operating profit 5 877 (899) 1 097 6 075
Finance (costs)/income (814) (502) 48 (1 268)
Profit before tax 5 063 (1 401) 1 145 4 807
Other information
Capital expenditure 521 62 52 635
Depreciation and amortisation 1 655 588 75 2 318
Segment assets 155 027 27 167 42 860 225 054
Segment liabilities 27 023 17 883 15 718 60 624
for the six months ended 31 December 2015
R'000 R'000 R'000 R'000
Environmental Corporate and
Flooring Solutions Eliminations Group
Total sales 137 634 39 229
Less: inter-segmental sales (3 845)
Revenue 137 634 39 229 (3 845) 173 018
Gross profit 65 442 21 957 - 87 399
Operating profit 7 464 997 2 377 10 838
Finance costs 106 499 554 1 159
Profit before tax 7 358 498 1 823 9 679
Other information
Capital expenditure 1 590 735 67 2 392
Depreciation and amortisation 1 397 600 56 2 053
Segment assets 172 724 31 016 30 984 234 724
Segment liabilities 33 927 20 963 15 448 70 338
INTRODUCTION TO THE RESULTS
The period under review has been one of the most difficult for Accentuate. The company has
always indicated the lag effect it experiences to trading in FloorworX, the largest operating
segment, when an election takes place. This is due to delays during the run-up to the
elections and likewise in the period immediately afterwards where no meaningful project
decisions are made or implemented by government departments and institutions. In these
vacuums the volume of orders received by FloorworX reduces considerably despite there
being numerous projects in planning. The impact of the municipal election held during the
period under review was particularly dramatic, with the lag being even longer than in
previous elections in metros where a change in the ruling party and administration were
made. This impact, coupled with the negative GDP growth in the manufacturing, mining and
construction sectors, resulted in reduced trading activity.
In light of the economic slowdown, the businesses have focused on maintaining market
share, continued reduction of costs and improved management of working capital. This was
done in a manner which will still allow the entities to successfully benefit from the projects
and opportunities anticipated in the not too distant future.
FloorworX has further reduced its production schedule in order to reduce the inventory
build-up reported on in the previous results. The lower production levels have negatively
impacted on the cost recoveries and the gross margins in the period. Stock levels continue to
reduce. Further initiatives to improve efficiencies and margins while operating at reduced
throughput are planned. The Safic business was impacted by volatility in the currency and
the ongoing reduction in volume off-take by many of the key customers.
The Ion Exchange Safic water treatment business, which is the partnership with Ion
Exchange India, continues to gain traction. The business is 40% owned by the group and is
equity accounted within Accentuate. A number of new customers have been secured and
considerable effort has been made to ensure that credentials are in place with some large
entities which have processes that can benefit from the water treatment services, solutions
and equipment offered by the business.
UPDATE ON THE FRAUD
Louis Schreuder, the former financial director of FloorworX, was found guilty on all counts of
fraud in the regional court in East London and received an 18-year prison sentence. A
confiscation order has been granted over certain of Schreuder's assets and the first auction
was held in December 2016 to liquidate most of these assets. Further legal steps are in
progress to realise the remaining identified assets, and further attachment awards have
been granted which are subject to ratification by the High Court.
REVIEW OF PERFORMANCE
Revenue for the period under review reduced by 7,9% to R159,3 million. The results
were impacted by lower sales in both FloorworX and Safic as markets remain
extremely constrained, particularly Government related buying. Small pockets of
growth in sales were experienced in the higher-end imported flooring products,
primarily for commercial and office developments use.
Gross margins were lower across both businesses due to intense competitiveness
and, in the case of FloorworX, due to the reduction in production volumes as
described above. The result was a drop of R14,4 million in gross profit as the margin
declined from 50,5% to 45,8%.
Other Income increased to R8,7 million following the recognition of R1,0 million for
the insurance claim received following the fraud and the recognition of R6,2 million
for the recoveries from the fraud which have been or are certain to be received.
Across the group further reductions in operating costs continue to be made with a
further 2,5% saving compared to the corresponding prior period, expenditure
reducing to R75,6 million from R77,6 million. The net result is an operating profit of
R6,1 million.
Finance costs of R1,27 million increased slightly compared to the first half of the
previous year but were 23% lower than the second half of the financial year to June
2016. The resulting profit after tax was R3,5 million and the Headline Earnings Per
Share (HEPS) of 2,66 cents per share (2015: 5,75 cents per share).
The focus on working capital management has seen the inventory levels reduce by
R10,7 million from June 2016 and receivables days outstanding remain virtually
unchanged during the period, which was pleasing in the prevailing economy.
Borrowings of R12,7 million are R15,7 million lower than June 2016, due to cash
generated from operations and the issue of 10 million new shares for R7,5 million in
July 2016.
There was no significant capital expenditure during the period under review.
FLOORING BUSINESS (100% OWNED)
The FloorworX business operations contributed 79% of group sales.
Revenue of R127,7 million was down by 7,2% compared to the previous period and the gross
margin reduced to 42,3% from 47,6%. The reduction in gross profit was partly off-set by the
other income from the fraud recoveries and the further reduction in operating costs.
FloorworX ended the period with an operating profit of R5,9 million compared to the R7,5
million in the corresponding period.
ENVIRONMENTAL SOLUTIONS BUSINESS (100% OWNED)
This comprises the Safic business operations and contributed 21% of group sales.
Revenue for the period in Safic declined by 11,1% to R34,9 million. Gross profit was R2,9
million lower on the back of reduced production levels and a volatile pricing environment
which reduced the gross margin to 54,5%. Although operating costs of R19,9 million were
5% less than the prior period, Safic posted an operating loss for the period of R899 000
compared to a profit in the previous corresponding period of R997 000.
GENERAL ISSUE OF SHARES FOR CASH
In terms of the resolution approved at the AGM, the board of directors ("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
Management believes that the extended lag in the implementation of government
infrastructure projects, particularly in transitioning metros, is over. However, although some
infrastructure spending decisions are imminent and the pipeline for FloorworX is looking
somewhat improved, the financial pressures within the fiscus are still resulting in a number
of planned projects not being undertaken.
For some time Accentuate was prohibited from achieving a level of growth the market
would have liked to see. Most of the factors which contributed to this are now behind the
group and management look forward to notifying the market of exciting developments as
the company designs a new way forward.
Management is taking active steps to grow the businesses to ensure critical mass is
achieved, particularly in the chemicals and water treatment sectors. The growth path
identified will be elaborated on as soon as possible, with the main objective being to
position Accentuate against the vulnerability of reduced spend by government on
infrastructure and upgrade projects.
Volatility will be further smoothed out and with a change in focus of the flooring business to
access export markets as well as further expansion into new product ranges, exposure to the
private sector will increase. Notwithstanding, the FloorworX manufacturing facility is
structured to quickly ramp up local manufacturing should this be required for large public
sector projects.
BOARD CHANGES
In the 2016 results announcement released in September 2016, the resignation of the Chief
Financial Officer Chris Povall with effect from the end of March 2017 was announced. On 2
February 2017 Accentuate announced the appointment of Maarten Coetzee as Executive
Financial Director with effect from 1 February 2017. A summary of Maarten's background
and credentials are available on SENS and on the Accentuate web-site. Chris and Maarten
will be working together during February and March to ensure there is an orderly hand-over.
Mr. Ockert Goosen was appointed as an alternate director to Mr. Thys du Preez with effect
from 17 November 2016. Ockert is a chartered accountant with an MBA degree and has
twenty five years' experience in investment banking, asset management, structured and
corporate finance, securitisation, treasury, and managing collective investment schemes.
DIVIDEND
The Board deems it prudent not to declare an interim dividend.
GOING CONCERN
The Board 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.
CONTINGENT LIABILITY
There are no contingent liabilities in the group.
BASIS OF PREPARATION
The unaudited condensed consolidated results for the period ended 31 December
2016 have been prepared in accordance with the requirements of the JSE Listings
Requirements for interim reports, the requirements of the Companies Act applicable
to summary financial statements, and the requirements of IAS 34: Interim Financial
Reporting as well as the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee. The accounting policies applied in the preparation
of the unaudited condensed consolidated results for the period are in terms of IFRS
and are consistent with the accounting policies applied in the preparation of the
results for the previous year. The information above has not been reviewed or
audited by the company's auditors.
There are no significant reportable matters arising since the end of the period under
review.
The unaudited condensed consolidated results for the period were prepared under
the supervision of Chris Povall CA (SA). They were approved by the Board on 23
February 2017.
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 on-going
support and faith.
27 February 2017
CORPORATE INFORMATION
Non-executive directors:
RB Patmore (chairman)
NE Ratshikhopha
PS Kriel
MM du Preez
A Mjamekwana (alternate)
OJ Goosen (alternate)
Executive directors:
FC Platt (chief executive officer)
DE Platt
MJ Coetzee (chief financial officer)
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
Independent Auditors:
PwC
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Designated Adviser:
Bridge Capital Advisors (Pty) Limited
Attorneys:
Fullard Mayer Morrison
Investor relations:
Keyter Rech Investor Solutions
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: 27/02/2017 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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