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Condensed Consolidated Financial Statements for the six months ended 31 December 2017
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" or "the company")
Condensed Consolidated Financial Statements for the six months ended 31 December 2017
ACHIEVEMENT
- Successful Pentafloor acquisition
INTRODUCTION TO THE RESULTS
Accentuate Limited is a company with underlying investments involved in infrastructure supplies,
with a focus on flooring, the water treatment and chemical sectors.
These sectors, have over the past six-months, suffered from depressed macroeconomic conditions,
political uncertainty and a lack of confidence in the country. In order to counter these direct
impacts, Accentuate has established a clear, defined and detailed growth plan for immediate
implementation. The focal point of the strategy is to ensure that advantage is taken of
opportunities in the respective sectors.
RESTATEMENT
The opening balances of the comparative results, being 31 December 2016, have been restated to
reflect the impairment of goodwill amounting to R36 963 000. The restatement was recorded in
the integrated annual report for the year ended 30 June 2017 and full disclosure of the
restatement has been made in note 33 to the annual financial statements.
REVIEW OF PERFORMANCE
Results for the six-months ended 31 December 2017 are in line with management's expectations
given the macroeconomic and market conditions for the period under review, and provide a solid
foundation for growth.
Revenue for the year decreased by 1,3% to R157,3 million (2016: R159,3 million), mainly
resulting from lower sales volumes in FloorworX. Gross profit decreased by R3 million and the
gross profit margin from 45,8% to 44,5%, as a result of the mentioned reduction in sales volumes.
Other income decreased by 95% to R0,4 million (2016: R8,7 million) mainly as a result of the
recognition of recoveries relating to the court order granted to Accentuate after the fraud
conviction of the previous financial director of FloorworX amounting to R6,5 million during
the period ending 31 December 2016.
Operating cost decreased by 4,8%, largely due to the reduced activity in FloorworX and the
impact of ongoing cost saving initiatives.
Finance costs reduced by 51% from R1,2 million in the previous period to R0,6 million in the
current year as a result of a conscious effort by management to improve working capital management.
The additional contribution of the newly acquired access flooring business, Pentafloor, (for a
three-month period) amounted to a net profit of R3,3 million and countered the impact of the
reduced sales activity in the flooring segment.
FLOORING BUSINESS
(100% OWNED)
The Flooring business operations contributed 78% of group sales.
Revenue of R121,3 million was down by 5,0% compared to the previous six-months but the
gross margin increased to 45,6% from 42,3%.
Production volumes at the East London manufacturing facility were purposefully managed down as
a result of low demand from government infrastructure including classrooms, clinics and hospitals.
This action reduced inventories and ensured resilience through cash generation. The product category
of "other flooring products" showed stable growth with a consolidation and growth in market share.
Margins were impacted by local production activity which was the single largest negative impact
on margins, coupled with currency volatility, since a significant proportion of FloorworX product
is imported from overseas.
ACQUISITION
The Pentafloor acquisition was concluded by the end of September 2017. Pentafloor is a leading supplier
in the access flooring market in South Africa and the acquisition provides Accentuate with a product
category in flooring that is not currently in its repertoire and will add significantly to the overall
business positioning.
During its first three months in the Accentuate Group, Pentafloor delivered results which are in line
with projections. Growth opportunities exist in the rest of Africa which the Pentafloor management
team is evaluating.
ENVIRONMENTAL SOLUTIONS BUSINESS (100% OWNED)
This comprises the chemical blending, Safic business operations which contributed 22% of group sales.
Revenue was flat at R34,9 million (2016:
R34,8 million). Increasing costs results in an operating loss of R2,1 million (2016: R0,9 million).
Sales volumes were affected by lulls in the manufacturing and mining sectors. The gross margin
percentage increased 8% to 59,3%, mainly due to a change in the sales demand to other products
of Safic.
A new Sales Director was appointed and focused on gaining market share in specialist chemical
sectors. Several expansive projects including the supply of manufactured chemicals to a mining
operation in Angola and to a number of local parastatals were identified. The supply of white
labelling of chemicals for major blue-chip companies, as a result of the above mentioned efforts,
is also being considered.
WATER TREATMENT BUSINESS
(40% OWNED)
This comprises the Ion Exchange Safic water treatment business, which is a partnership between
Accentuate and Ion Exchange India. The business is equity accounted by the group as an associate.
Each period we make inroads into obtaining projects in the industrial sector. The technical
expertise from India and on the ground in South Africa is exceptional and structures have been
developed for the implementation of major projects that we are currently negotiating. We are
expecting the mentioned developments to deliver positive results in the near future.
OUTLOOK
Shareholders will be aware that the flooring division has, and continues to be the largest
contributor to the group. A strategic decision has been made to continue with the expansion
of the flooring portfolio and this will be supported through possible acquisitions, increasing
market presence and marketing.
These commitments, coupled with the five strategic imperatives discussed in the year-end results
commentary of 30 June 2017 which include inter alia (a) transformation, (b) support for the chemical
expansion strategy and (c) implementation of the water strategy - remain in place for the management
team to achieve.
Although Accentuate is excited about the prospects identified, together with a clear implementation
plan, we do anticipate that the local economy will remain under pressure for the remainder of the
financial period. We are, however, cautiously optimistic for the remainder of the calendar year and
excited about future opportunities that a change in leadership and confidence in the South African
economy will bring. A slight increase in activity is already visible.
The dire water situation in the Western Cape and other parts of South Africa, has elevated the topic
of water as a scarce but vital commodity. The recent media coverage received on this topic has led to
the possibility of interesting new water projects, including possible acquisitions and large projects
that may be pursued in the future.
BOARD CHANGES
There were no changes to the board in this six-month period.
DIVIDEND
The board deems it prudent not to declare a dividend.
GOING CONCERN
The board is satisfied that, after considering 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 summary consolidated financial statements are prepared in accordance with the requirements of the
JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act
applicable to summary financial statements. The Listings Requirements require preliminary reports to
be prepared in accordance with 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 Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, 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 summary consolidated financial statements were derived are in
terms of International Financial Reporting Standards and are consistent with those accounting
policies applied in the preparation of the previous consolidated annual financial statements.
There are no significant reportable matters arising since the end of the period under review.
The directors take full responsibility for the preparation of the preliminary report and that the
financial information has been correctly extracted from the underlying annual financial statements.
The unaudited condensed consolidated results for the period were prepared under the supervision
of MJ Coetzee CA (SA). They were approved by the board on 22 February 2018.
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.
23 February 2018
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
6 months to 6 months to Unaudited
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Revenue 157 320 159 316 300 026
Cost of sales (87 321) (86 287) (173 453)
Gross profit 69 999 73 029 126 573
Other income 423 8 681 12 384
Other operating expenses (72 020) (75 635) (136 099)
Operating (loss)/profit before finance costs (1 598) 6 075 2 858
Investment income - - 145
Finance costs (618) (1 268) (2 420)
Profit before tax (2 216) 4 807 583
Taxation 441 (1 346) 334
(Loss)/profit for the period (1 775) 3 461 917
Other comprehensive (loss)/profit for the period
Transfer of revaluation reserve (220) (139) (252)
Asset revaluation surplus - - 7 673
Gross revaluation surplus - - 9 402
Deferred tax - - (1 729)
Total comprehensive income attributable
to owners of the parent (1 995) 3 322 8 338
Earnings/(loss) per share (cents) (1,31) 2,65 0,70
Diluted earnings/loss per share (cents) (1,28) 2,61 0,69
Net asset value per share (cents) 96 97 102
Notes to the statement of comprehensive income:
Headline earnings/(loss) per share (cents) (1,31) 2,66 0,74
Diluted headline earnings/(loss) per (1,28) 2,62 0,72
share (cents)
Number of shares:
- Weighted average number of shares 135 471 498 130 487 285 130 405 641
- Diluted weighted number of shares 135 368 469 130 474 589 133 302 612
- Number of shares in issue 139 366 188 134 048 757 134 048 757
Reconciliation of headline and normalised
earnings (R'000)
Profit/(loss) for the year attributable to
ordinary shareholders 1 775 3 461 917
(Profit)/loss on disposal of property, plant and
equipment - net of taxation - 4 46
Headline earnings for the year attributable
to ordinary shares 1 775 3 465 963
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
Unaudited Restated
6 months to 6 months to Unaudited
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
ASSETS
Non-current assets 84 114 52 678 58 885
Property plant and equipment 63 074 48 580 54 339
Goodwill 9 751 - -
Intangible assets 7 505 1 564 1 500
Deferred taxation 3 784 2 534 3 046
Current assets 137 163 136 868 130 567
Inventories 82 272 93 488 80 157
Trade and other receivables 47 840 36 999 47 266
Other financial assets 302 1 369 1 726
Taxation receivables 1 230 4 800 1 217
Cash and cash equivalents 5 519 212 201
Total assets 221 277 189 546 189 452
EQUITY AND LIABILITIES
Total equity 134 021 126 746 132 556
Stated capital 150 803 147 613 147 613
Retained earnings (45 461) (41 492) (43 686)
Reserves 27 394 20 291 27 614
Share based payment reserve 1 285 334 1 015
Non-current liabilities 23 171 8 767 6 613
Deferred taxation 9 137 8 767 6 613
Long term liabilities 14 034 - -
Current liabilities 64 085 54 033 50 283
Other financial liabilities - 296 579
Trade and other payables 45 049 38 753 38 761
Operating lease liability 1 475 2 222 1 530
Short-term portion of long-term liabilities 4 098 - 127
Current tax payable 4 792 84 500
Bank overdraft 8 671 12 678 8 786
Total equity and liabilities 221 277 189 546 189 452
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited
Unaudited Restated
6 months to 6 months to Unaudited
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Capital and reserves - opening balance 132 556 116 506 116 506
Correction of error in equity - (721) (721)
Profit/(loss) for the year (1 775) 3 461 917
Shares issued for cash - 7 500 7 500
Shares issued as consideration for 3 190 - -
business combination
Asset revaluation surplus (220) - 7 673
Share-based payment expense 270 - 681
Capital and reserves - closing balance 134 021 126 746 132 556
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Unaudited
6 months to 6 months to 30 June
31 December 31 December 2017
2017 2016 R'000
R'000 R'000
Cash flow from operating activities 7 104 8 016 12 477
Cash flow from investing activities (17 092) (69) (510)
Cash flow from financing activities 15 421 7 766 7 627
Net increase/(decrease) in cash and
cash equivalents 5 433 15 713 19 594
Cash and cash equivalents at beginning (8 585) (28 179) (28 179)
of the period
Cash and cash equivalents at end of the period (3 152) (12 466) (8 585)
SEGMENT REPORT
Environmental Corporate and
Flooring Solutions Eliminations Group
Unaudited 31 December 2017 R'000 R'000 R'000 R'000
Total sales 121 301 34 993 6 193 162 487
Less: inter-segmental sales - (2 963) (2 204) (5 167)
Revenue 121 301 32 030 3 989 157 320
Gross profit 55 307 20 756 (6 064) 69 999
Operating profit/(loss) 1 381 (2 054) (926) (1 598)
Finance costs (107) (629) 118 (618)
Profit/(loss) before tax 1 274 (2 683) (808) (2 216)
Share of profit/(loss) from associate - - - -
Other information
Capital expenditure 658 35 230 923
Depreciation and amortisation 2 855 511 272 3 638
Segment assets 183 710 25 589 11 805 221 104
Segment liabilities 47 623 20 322 19 301 87 256
Unaudited 31 December 2016
Total sales 127 698 34 875 3 125 168 698
Less: inter-segmental sales - (3 299) (3 083) (6 382)
Revenue 127 698 31 576 42 159 316
Gross profit 54 025 19 004 - 73 029
Operating profit/(loss) 5 877 (899) 1 097 6 075
Finance costs (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 7 352 189 546
Segment liabilities 27 023 17 883 17 894 62 800
CONTACT 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)
- MJ Coetzee (Chief Financial Officer)
- DE Platt
Registration number:
2004/029691/06
Registered address:
Accentuate Business Park, 32 Steele Street
Steeledale, 2197
Postal address:
PO Box 1754, Alberton, 1450
Company secretary:
Juba Statutory Services (Pty) Limited
Represented by Sirkien van Schalkwyk
Telephone: 011 406 4100
Facsimile: 086 509 3246
Website: www.accentuateltd.co.za
Email: info@accent.co.za
Twitter: @AccentuateLtd
Facebook: www.facebook.com/AccentuateLtd
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 Accentuate'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: 23/02/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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