Wrap Text
Unaudited consolidated interim results for the 6 months ended 31 December 2019
Accéntuate Limited (Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share code: ACE ISIN code: ZAE000115986
(“Accéntuate” or “the group” or “the company”)
Unaudited results
for the 6 months ended 31 December 2019
Commentary The dissenting shareholder holds 5,250,000 ordinary shares in
the authorised and issued share capital of the company, equal
to 3.77% of the issued share capital. The company has engaged
with the dissenting shareholder in terms of the procedure as set
out in section 164 of the Act, 2008 and discussions are currently
Introduction to the results in progress.
Accéntuate is a group of companies involved the flooring
market, water treatment, chemical blending, industrial and Discontinued operation
commercial cleaning and metal treatment sectors. Accéntuate The group received an offer for one of the subsidiaries within the
is a truly South African company, partnered with local and group, with an effective date of 31 December 2019. The offer
international leaders in their field, and in this way is able to was accepted by the Board at a special board meeting held on
fulfil the mandate of consciously supporting economic 25 March 2020 and will result in the disposal of the
transformation in the country. Environmental Solutions segment from the group once all the
conditions precedent have been met. As a result of the firm offer,
Demand remained subdued during the first 6 months of the and the criteria per IFRS 5: Non-current assets held for sale and
financial year, negatively impacting revenue. The challenges discontinued operations, having been met, the subsidiary as at
faced by the major companies in the construction sector have 31 December 2019 was reported in the financial results for the
also had a negative impact on the business during the period 6 months ended 31 December 2019 as a discontinued
under review. Lastly, the volatile exchange rate and the rising operation. Financial information relating to the discontinued
price of Brent Crude during this period, has negatively operation for the reporting period has been included separately
influenced petrol/diesel prices as well as petrochemical within the financial results.
derivative input costs in both the chemical and flooring
manufacturing facilities.
Review of financial performance
Although the results for the 6 months under review are
Sale of Pentafloor disappointing and slower than anticipated, they reflect the
In the release of the Company’s financial results for the year general performance of the construction industry in which
ended 30 June 2019, a detailed update on the sale of Accéntuate operates. Revenue was negatively impacted by the
Pentafloor Proprietary Limited (“Pentafloor”) was provided. lowest demand levels experienced in recent memory and the
The general meeting of shareholders to approve the current state of infrastructure spend and the depressed macro-
repurchase of shares, the corporate action involved, as well economic environment.
as the action relating to the subordinated convertible loan
agreements, was held on 22 November 2019 (“General Growth in market share and margin maintenance,
Meeting”) and all resolutions passed by the required majority. notwithstanding lower production volumes, has however seen
operational performance in line with the previous year. Major
Small related party transaction cost reduction initiatives were instituted and have assisted with
On 3 April 2019, Accéntuate announced that it had entered the resilience. Since the impact of the Pentafloor disposal and
into subordinated convertible loan agreements with Frederick the costs associated with restructuring were taken into account,
Cornelius Platt, the chief executive officer, Pruta Securities we are starting to see a positive trend emerge.
(Jersey) Limited, Jacana Assets Limited and TBI Strategic
Partners Proprietary Limited. The action relating to Revenue for the 6 months to December 2019, excluding
subordinate convertible loan agreements, was tabled at the discontinued operations, was R94.5 million (2018: R120.4
General Meeting on 22 November 2019 and the requisite million, which included R27.1 million revenue from Pentafloor).
resolution was passed by the required majority and excluded The gross margins increased by 7% from 38% (December
the related parties from voting. 2018) to 45% (December 2019), mainly as a result of cost
containment measures.
Dissenting shareholder
Shareholders are advised that, prior to the General Meeting Operating expenses decreased to R54.9 million (2018: R61.4
held, the company received a dissenting shareholder’s notice million, which included operating expenses for Pentafloor
in terms of Section 164(3) of the Companies Act, 2008 as amounting to R11.1 million). Despite the negative impact of
amended (“the Act”).
Unaudited consolidated interim results for the 6 months ended 31 December 2019 1
once-off cost restructuring throughout the group, normal Water treatment business (40% owned by Safic)
operating costs have been reduced during the period, including Ion Exchange Safic, the joint venture between Ion Exchange
a significantly reduced rental charge as a result of renegotiated India and Safic, continues with the implementation of its
terms with the landlord of the Steeledale premises. Finance strategy, which includes the appointment of distributors,
costs were maintained at R2.2 million for the period (this amount building local engineering and execution capacity and collabo-
included R0.7 million finance charge for operating leases on rating with execution partners with regards to identified projects.
application of IFRS 16). Much progress has been made in building capacity and
establishing credibility, all of which will stand the company in
Earnings per share (“EPS”) is a negative 8,58 cents per share good stead as the need for innovative and cost-effective water
in the current year, compared to negative 12.05 cents in 2018. solutions become critical to the sustainable growth of the South
Headline earnings per share (“HEPS”) was 8.58 cents per African economy.
share, while the comparative period was 7.75 cents per share.
Outlook
Cash and cash equivalents at the end of the period amount to The focus in the period ahead will remain on sustainable growth
negative R22.8 million (December 2018: R15.7million), a R7.0 that will see Accéntuate weather the current deep cycle to
million reduction from prior period under review. remain relevant and profitable into the future. Much focus has
been placed on both cost containment and efficiencies that will
Operational review allow a focused approach to the anticipated increase in
Notwithstanding the challenging market conditions, much time infrastructure activity specifically in the areas of healthcare and
and attention was spent by the executive team in developing education.
plans that address costs, sustainability and the growth of market
share, all of which have contributed to an organisation that is Subsequent events
leaner, and more focused. Strengthening the statements of Subsequent to the reporting date, the company has agreed to
financial position remains a high priority for the executive team key terms for a proposed transaction for the disposal of its 100%
and the Board. shareholding in Safic Proprietary Limited a subsidiary of the
company. The proposed transaction has received Board
Flooring business (100% owned) approval. The disposal is subject to the fulfilment of various
The flooring business operations contributed 74% of group conditions precedent. The proposed transaction has been
sales. classified as a Category 1 transaction requiring shareholder
approval and accordingly a circular will be distributed to
FloorworX, the largest contributor of revenue to the group, Shareholders in this regard. This proposed transaction will
experienced a major decline in demand which negatively result in the disposal of the Environmental Solutions and Water
impacted sales and production volumes. This was especially Treatment segment, to enable the company to strategically
noticeable in the areas of Government spend on education and focus on the flooring business.
healthcare. Despite this, it has maintained and grown market
share, whilst actively managing costs and ensuring a On 6 March 2020, Accéntuate Management Services
sustainable platform. Proprietary Limited was found to be in breach of the Facility
Agreement with First National Bank (the Bank), in terms of
Due to the dramatic reduction in activity within Government refinancing the business per agreed timelines. The breach
infrastructure spend, the strategy of diversification into the resulted in the overdraft facilities of R23 million being reduced
commercial market has borne fruit, with strong growth in the to R22 million. The Bank is continuously monitoring the facility
areas of soft and specialised floor coverings. and assessing conditions on a continuous basis and are
committed to working with management to ensure that the
Environmental solutions business (100% owned) facilities are maintained. The going concern status of the group
This comprises the chemical blending business operations of is dependent on these facilities remaining available.
Safic, which contributed 26% to group sales.
Going concern
Safic experienced a slight increase in revenue over the period In determining the appropriate basis of preparation of the
under review. This was achieved predominantly as a result of financial results for the 6 months ended 31 December 2019, the
growth within the commercial, food and beverage as well as directors are required to consider whether the group and
metal treatment sectors. Traditional high-volume market sectors company can continue in operational existence for the
such as manufacturing and heavy engineering remained foreseeable future.
constrained. A comprehensive market development plan has
been implemented, which Accéntuate believes will impact Despite incurring major operational losses, the group’s current
positively on the performance of the division. The gross profit assets of R99.7 million exceed current liabilities of R79.4 million
margin has declined marginally due to a reduction in chemical and therefore the group’s solvency ratio remains sufficient.
sales and an increase in equipment sales at a lower margin.
Total operating costs declined by 1.3% but was negatively
Short-term liquidity, impacted by difficult trading conditions and
impacted by increased administration costs, the increase in
petrochemical derivative inputs as well as the increased costs exacerbated by the Coronavirus Disease 2019 (Covid-19)
of logistics. pandemic, remains a priority for the Board. Currently
discussions with various financing options continue to ensure
As mentioned, a firm offer was received and the Board the sustainability of the group. At the same time, Covid-19 has
approved the disposal of Safic subject to the conditions also presented opportunities for FloorworX in the roll out of
precedent being met. Shareholders are referred to the firm
flooring solutions in the health and educational sectors.
intention announcement released on SENS on 6 April 2020.
Unaudited consolidated interim results for the 6 months ended 31 December 2019 2
As the only local vinyl flooring manufacturer, FloorworX is Contingent liability
working closely with Government to provide the necessary There are no contingent liabilities in the group.
facilities necessitated by the pandemic and operates as an
essential service during the lockdown. Basis of preparation
The accounting policies and methods of computation applied to
The group is also in the midst of a restructuring and include these condensed consolidated financial statements are in
accordance with the framework concepts and the measurement
the disposal of Safic as described above. and recognition requirements of International Financial Reporting
Standards (“IFRS”) and the SAICA Financial Reporting Guides as
Board changes issued by the Accounting Practices Committee and Financial
The Board refers shareholders to the company’s 2019 Pronouncements as issued by the Financial Reporting Standards
integrated annual report distributed to shareholders on 11 Council and are consistent with those applied in the previous
November 2019 wherein they were advised that the audit and annual consolidated financial statements except for the adoption
of IFRS 16: Leases on 1 July 2019. IFRS 16 became effective for
risk committee had initiated a process which might result in
periods starting 1 January 2019.
the termination of the contract of the chief financial officer.
IFRS 16 introduced a single, on-balance sheet accounting model
Shareholders are referred to the SENS announcement for lessees. As a result, the group, as a lessee, has recognised
released on 2 December 2019 wherein they were advised right-of-use assets representing its rights to use the underlying
that Maarten Coetzee’s contract with the company had been assets and lease liabilities representing its obligation to make
terminated with effect from 29 November 2019. lease payments. The group has applied IFRS 16 using the
modified retrospective approach. Accordingly, the comparative
The group financial manager, Desigan Moodley CA(SA), information presented for 2018 has not been restated – i.e. it is
acted as chief financial officer to 28 February 2020. The presented, as previously reported, under IAS 17 and related
FloorworX financial director, Wisdom Mushohwe CA(SA), was interpretations. The details of the changes in accounting policies
appointed as the chief financial officer of Accéntuate Limited are disclosed below.
on 25 March 2020.
The group now assesses whether a contract is or contains a lease
Fred Platt resigned as chief executive officer effective 31 based on the new definition of a lease. Under IFRS 16, a contract
August 2020. Dr Donald Platt will work with Fred Platt during is, or contains, a lease if the contract conveys a right to control the
his six-month notice period and be appointed as chief use of an identified asset for a period of time in exchange for
executive officer effective 1 September 2020. consideration. At inception or on reassessment of a contract that
contains a lease component, the group allocates the
Dividend consideration in the contract to each lease and non-lease
The Board deems it prudent not to declare a dividend. component on the basis of their relative standalone prices.
Litigation As a lessee, the group previously classified leases as operating,
A case has been lodged against Mazars relative to the or finance leases based on its assessment of whether the lease
fraudulent activities identified by FloorworX during 2016. transferred substantially all of the risks and rewards of ownership.
Under IFRS 16, the group recognises right-of-use assets and
Shareholders will be appraised of any development in this
lease liabilities for most leases. However, the group has elected
regard. Mazars was the external auditors of the company not to recognise right-of-use assets and lease liabilities for some
during 2016. leases, as allowed by the standard, for the following:
? Short-term leases (term of one year or less) and low value
A notion of motion was received from the dissenting leases (where the right-of-use asset would have been lower
shareholder on 6 March 2020 and is being attended to by the than R72 000) were not capitalised and were recognised an
Board. expense on a straight-line basis over the lease term.
? Leases with less than one year remaining on the contract as
at 1 January 2019 were excluded from capitalisation.
The effects of IFRS 16 on the Statement of financial position and
statement of comprehensive income is set out as follows:
Impact of change in accounting policy on the financial statements on 1 July 2019 01-Jul-19
Statement of Financial Position R’000
Assets
Right-of-use assets presented in property, plant & equipment 15 704
Liabilities
Operating lease liability 16 208
Equity
Retained earnings (opening balance) 505
Unaudited consolidated interim results for the 6 months ended 31 December 2019 3
Effects of changes in accounting policy IFRS 16 Leases on the current period 31-Dec-19
Statement of Comprehensive income R’000
Group
Rent paid reduction/reversal (2 872)
Increase in depreciation on right-of-use asset 2 452
Increase in interest on right of use liabilities 680
Taxation (73)
Net movement due to changes 187
The group, in prior year, adopted IFRS 9: Financial instruments The directors take full responsibility for the preparation of the
and IFRS 15: Revenue from contracts with customers; the interim report and that the financial information has been
adoption had no material impact on the financial results in prior correctly extracted from the underlying annual financial
year and current period. statements.
The condensed consolidated financial statements are Forward looking statements
prepared in accordance with the requirements of the JSE Any forward-looking statements contained in this announcement
Limited’s Listings Requirements (“Listings Requirements”) for have not been reviewed nor reported on by the company’s
interim reports and the Act. The Listings Requirements require external auditors.
interim reports to be prepared in accordance with and
containing the information required by IAS 34 Interim Financial
Reporting, as well as the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting
Standards Council. The preparation of this interim report was Steeledale
supervised by the chief financial officer, Wisdom Mushohwe 30 April 2020
CA(SA).
Unaudited consolidated interim results for the 6 months ended 31 December 2019 4
Condensed statement of financial position
Group
Unaudited Unaudited
6 months to 6 months to
31-Dec-19 31-Dec-18
R’000 R’000
Assets
Non-current assets 66 632 73 867
Property, plant and equipment 52 921 58 688
Right-of-use asset 5 310 -
Investment Property 2 800 -
Goodwill - 3 985
Intangible assets - 6 782
Deferred tax 5 599 4 412
Current assets 99 684 130 542
Inventories 45 233 87 907
Trade and other receivables 17 957 31 767
Other financial assets 208 -
Current tax receivables 1 143 2 173
Cash and cash equivalents 2 635 8 695
Non-current assets and disposal groups classified as held for sale 32 508 -
Total assets 166 316 204 409
Equity and liabilities
Total equity 81 507 94 090
Stated capital 150 557 150 557
Accumulated loss (101 765) (83 670)
Revaluation reserve 32 373 27 094
Share based payment reserve 342 109
Non-current liabilities 5 454 1 810
Borrowings/Loans payable 5 454 1 810
Current liabilities 79 354 108 508
Trade and other payables 31 512 76 127
Borrowings 636 12 232
Operating lease liability - 655
Lease liability 5 003 1 579
Current tax payable - 2 194
Bank overdraft 22 893 15 721
Liabilities associated with non-current assets and disposal groups classified as held for
19 310 -
sale
Total equity and liabilities 166 316 204 408
Unaudited consolidated interim results for the 6 months ended 31 December 2019 5
Condensed statement of profit or loss and other
comprehensive income
Group up
Unaudited Unaudited
6 months to 6 months to
31-Dec-19 31-Dec-18
R’000 R’000
Revenue 94 530 120 429
Cost of sales (52 057) (75 303)
Gross profit 42 474 45 126
Other income 159 117
Operating expenses (54 901) (61 447)
Operating loss before finance costs (12 269) (16 205)
Finance income -
Finance costs (2 197) (2 205)
Loss before tax (14 465) (18 410)
Taxation 1 611 3 524
Loss after tax from continuing operations (12 854) (14 886)
Profit/(loss) after tax from discontinued operations 1 391 (1 243)
Loss for the year (11 463) (16 129)
Earnings per share (cents)
Loss per share (cents) (8,58) (12,05)
Diluted loss per share (cents) (8,58) (11,80)
Net asset value per share (cents) 58,48 67,51
Notes to the statement of comprehensive income: - -
Headline loss per share (cents) (8,58) (7,75)
Diluted headline loss per share (cents) (8,58) (7,58)
Number of shares:
Weighted average number of shares 133 609 965 133 827 505
Diluted weighted number of shares 133 609 965 136 724 476
Number of shares in issue 139 366 188 139 366 188
Reconciliation of headline and normalised earnings (R’000)
Loss for the period attributable to ordinary shareholders (11 463) (16 129)
Loss on disposal of property, plant and equipment – net of taxation (6) (6)
Pentafloor goodwill write off - 5 766
Headline earnings attributable to ordinary shareholders (11 469) (10 369)
Unaudited consolidated interim results for the 6 months ended 31 December 2019 6
Condensed statement of changes in equity
Group
Unaudited Unaudited
6 months to 6 months to
31-Dec-19 31-Dec-18
R’000 R’000
Capital and reserves opening balance 91 556 110 341
Net equity adjustments for changes in accounting policy (25) -
Loss for the year (11 463) (16 129)
Asset revaluation surplus 1 171 (122)
Share-based payment expense 269 -
Capital and reserve closing balance 81 507 94 091
Condensed statement of cash flow
Group
Unaudited Unaudited
6 months to 6 months to
31-Dec-19 31-Dec-18
R’000 R’000
Net cash flow provided by operating activities from continuing operations (7 204) (4 225)
Net cash flow provided by operating activities from discontinued operations (2 431)
Net cash flow provided by operating activities (9 635) (4 225)
Net cash flow used in investing activities by operating activities from continuing
(3 558)
operations
Net cash flow used in investing activities by operating activities from discontinued
3 844
operations
Net cash flow from investment activities 286 9549
Net cash used in financing activities by operating activities from continuing operations 7 109
Net cash flow used in financing activities by operating activities from discontinued
(998)
operations
Net cash used in financing activities 6 111 (1 090)
Net increase in cash and cash equivalents (3 238) 4 234
Cash and cash equivalents at beginning of period (15 918) (11 260)
Cash and cash equivalents at end of period (19 156) (7 026)
Unaudited consolidated interim results for the 6 months ended 31 December 2019 7
Condensed consolidated segment Information
Corporate (and
Flooring Consolidated
eliminations)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months to 6 months to 6 months to 6 months to 6 months to 6 months to
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
R’000 R’000 R’000 R’000 R’000 R’000
Comprehensive income
Total sales 94 533 121 011 11 949 - 106 482 121 011
Less” Inter-segmental sales - (582) (11 949) - (11 949) (582)
Revenue 94 533 120 429 - - 94 533 120 429
Gross profit 42 474 48 536 (249) (3 410) 42 225 45 126
Operational (loss)/profit (5 588) (9 932) (4 670) (6 272) (10 258) (16 204)
Finance income 18 - (18) - - -
Finance costs - (47) (100) (1 127) (100) (1 174)
(Loss)/profit before tax (5 869) (9 979) (4 588) (7 400) (10 457) (17 379)
Share of profit/(loss) from
- - - - - -
associate
Other information -
Capital expenditure 426 179 240 21 666 200
Depreciation and amortisation 2 732 1 894 111 432 2 843 2 326
Segment assets 132 106 178 573 3 930 (1 764) 136 036 176 809
Segment liabilities 32 860 63 820 (3 957) 19 464 28 903 83 284
Unaudited consolidated interim results for the 6 months ended 31 December 2019 8
Segment Information - Discontinued Operation
Environmental Solutions segment has been disclosed as a discontinued operation with financial results included in the group results.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below and reported as a
separate segment for the interim period ended 31 December 2019.
Environmental Solutions
(Discontinued operations)
Unaudited Unaudited
6 months to 6 months to
31-Dec-19 31-Dec-18
R’000 R’000
Comprehensive income
Total sales 34 825 34 361
Less” Inter-segmental sales (2 064) (361)
Revenue 32 762 34 000
Gross profit 19 839 20 529
Operational (loss)/profit (1 688) (1 712)
Finance income - -
Finance costs (1 808) (1 045)
(Loss)/profit before tax (3 496) (2 757)
Share of profit/(loss) from associate - -
Other information
Capital expenditure 340 71
Depreciation and amortisation 1 436 462
Segment assets 30 280 27 598
Segment liabilities 43 955 27 033
Unaudited consolidated interim results for the 6 months ended 31 December 2019 9
Corporate information
Accéntuate Limited Company secretary
(Incorporated in the Republic of South Africa) Juba Statutory Services Proprietary Limited
(Registration Number: 2004/029691/06) (represented by Sirkien van Schalkwyk)
Share Code: ACE ISIN Code: ZAE000115986
www.accentuateltd.co.za Transfer secretary
Computershare Investor Services Proprietary
Non-executive directors Limited
RB Patmore (Independent chairman)
NE Ratshikhopha Designated advisor
PS Kriel Bridge Capital Advisors Proprietary Limited
A Mjamekwana
Attorneys
Executive directors Fullard Mayer Morrison Inc.
FC Platt (Chief Executive Officer)
W Mushohwe (Chief Financial Officer) Investor relations
DE Platt Keyter Rech Investor Solutions
Registered address External auditors
Accentuate Business Park Moore Johannesburg Inc.
32 Steele Street
Steeledale
2197
PO Box 1754
Alberton
1450
Telephone: 011 406 4100
Facsimile: 086 509 3246
Website: www.accentuateltd.co.za
E-mail: info@accent.co.za
The full announcement is also available at https://senspdf.jse.co.za/documents/2020/jse/isse/ACE/FY2020H1.pdf
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.
Unaudited consolidated interim results for the 6 months ended 31 December 2019
10
Date: 04-05-2020 07:05:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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