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ACE
ACE
ACE - Accentuate - Reviewed Interim Results For The Period Ended
31 December 2008
Accentuate Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share Code: ACE
ISIN Code: ZAE000115986
("Accentuate" or "the group")
(Previously known as Safic Holdings Limited)
REVIEWED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2008
HIGHLIGHTS
Revenue up 32%
EBITDA up 23%
Earnings after tax up 25%
Chemical Division becomes net contributor to the group
Consolidated balance sheet
6 months 6 months Year
ended ended ended
31 31 30 June
December December 2008
2008 2007 Audited
Reviewed Reviewed
R`0000 R`0000 R`000
Assets
Non current assets
Property, plant and equipment 40 402 25 063 39 143
Goodwill 91 791 90 304 91 791
Intangible assets 5 552 1 621 1 435
Other financial assets - 9 -
Deferred tax 2 827 101 2 731
140 572 117 098 135 100
Current Assets
Inventories 59 179 40 405 50 118
Trade and other receivables 43 598 55 370 45 817
Cash and cash equivalents 9 337 6 662 11 660
112 114 102 437 107 595
Total assets 252 686 219 535 242 695
Equity and liabilities
Capital and reserves 168 888 146 631 161 640
Non-current liabilities 28 856 6 055 7 619
Current liabilities 54 942 66 849 73 436
Total equity and liabilities 252 686 219 535 242 695
Number of shares in issue 106 108 97 657 105 408
119 725 119
Net asset value per share 159 150 153
(cents)
Tangible net asset value per 67 56 65
share (cents)
Consolidated income statement
6 months 6 months Year ended
ended ended 30 June
31 December 31 December 2008
2008 2007 Audited
Reviewed Reviewed R`000
R`000 R`000
Revenue 161 002 121 883 257 767
Gross profit 81 912 66 315 139 136
Other income / 845 (167) 2 752
(expenses)
Operating costs (67 438) (53 653) (116 796)
Earnings before 15 319 12 495 25 092
interest, tax,
depreciation and
amortization
Depreciation and (2 369) (1 589) (4 021)
amortization
Profit before interest 12 950 10 906 21 071
and taxation
Net interest paid (1 526) (590) (1 146)
Profit before taxation 11 424 10 316 19 925
Taxation (2 490) (3 173) (3 215)
Net profit for the 8 934 7 143 16 710
period
Reconciliation of
headline earnings
Profit attributable to 8 934 7 143 16 710
ordinary shareholders
Adjusted for profit on - (29) (266)
disposal of property,
plant and equipment
Option revaluation - 180
-
Loss on sale of - 559 558
subsidiary
Headline earnings 8 934 7 853 17 002
attributable to
ordinary shareholders
Weighted average number 100 563 266 80 260 061 86 806 290
of shares in issue
Basic earnings per 8.9 8.9 19.2
share (cents)
Headline earnings per 8.9 9.8 19.6
share (cents)
Diluted earnings per 8.6 8.5 18.6
share (cents)
Consolidated cash flow statement
6 months 6 months Year ended
ended ended 31 30 June
31 December 2008
December 2007 Audited
2008 Reviewed R`000
Reviewed R`000
R`000
Cash generated from (3 280) 3 920 21 716
operating activities
Finance cost (1 526) (590) (803)
Tax paid (10 050) (1 569) (5 998)
Expenses recognized (4) - -
directly in equity
Cash flows from (14 860) 1 761 14 915
operating activities
Cash flows from (11 954) (12 246) (37 135)
investing activities
Cash flows from 21 685 6 309 7 916
financing activities
Cash flows for the (5 129) (4 176) (14 304)
period
Cash and cash (3 466) 10 838 10 838
equivalents at
beginning of period
Cash and cash (8 595) 6 662 (3 466)
equivalents at end of
period
Consolidated statement of changes of equity
For the year ended 30 June 2008
Share Share Total Reserves Revalua
capital premium share for own tion
capital shares / reserve
R`000 R`000 R`000 Share
repurchase
reserve
Balance at 1 July 1 73 753 73 754 319 2 163
2007
Changes in equity
Fair value gains: 10 698
Land and buildings
Revaluation surplus (315)
recognised directly
to retained income
Deferred tax on (1 498)
revaluation surplus
Net income 8 885
(expenses
recognized directly
in equity
Profit for the year
Total recognized 8 885
income and expenses
for the year
Issue of shares 52 672 52 672
Purchase of own / (3 884) (3 884)
treasury shares
Business (180)
combinations
Balances at 30 June 1 122 541 122 542 139 11 047
2008
Consolidated statement of changes of equity (Continued)
For the year ended 30 June 2008
Retained Total Minority Total
income attributabl interest equity
e to equity
holders of
the group /
company
Balance at 1 July 10 873 87 109 13 87 122
2007
Changes in equity
Fair value gains: 10 698 10 698
Land and buildings
Revaluation surplus 315 - -
recognised directly
to retained income
Deferred tax on (1 498) (1 498)
revaluation surplus
Net income 315 9 200 9 200
(expenses
recognized directly
in equity
Profit for the year 16 710 16 710 16 710
Total recognized 17 025 25 910 25 910
income and expenses
for the year
Issue of shares 52 672 52 672
Purchase of own / (3 884) (3 884)
treasury shares
Business (180) (180)
combinations
Balances at 30 June 27 899 161 627 13 161 640
2008
Consolidated statement of changes of equity
For the 6 month period ended 31 December 2008
Share Share Total Reserves Revaluation
capital premium share for own reserve
capital shares /
R`000 R`000 R`000 Share
repurcha
se
reserve
Balance at 1 122 541 122 542 139 11 047
1 July 2008
Revaluation (235)
surplus
recognised
directly to
retained
income
Deferred tax (33)
on
revaluation
surplus
Net income (268)
(expenses
recognized
directly in
equity
Profit for
the 6 months
Total (268)
recognized
income and
expenses for
the year
Issue of 658 658
shares
Purchase of (367) (367)
own /
treasury
shares
Issued from 2 232 2 232
treasury
Dividends
Balances at 1 125 064 125 065 139 10 779
30 June 2008
Consolidated statement of changes of equity (Continued)
For the 6 month period ended 31 December 2008
Retained Total Minority Total
income attributable interest equity
to equity
holders of
the group /
company
Balance at 27 899 161 627 13 161 640
1 July 2008
Revaluation 235 0
surplus
recognised
directly to
retained income
Deferred tax on (33) (33)
revaluation
surplus
Net income 235 (33) (33)
(expenses
recognized
directly in
equity
Profit for the 6 8 934 8 934 8 934
months
Total recognized 9 169 8 902 8 902
income and
expenses for the
year
Issue of shares 658 658
Purchase of own (367) (367)
/ treasury
shares
Issued from 2 232 2 232
treasury
Dividends (4 176) (4 176) (4 176)
Balances at 30 32 892 168 876 13 168 888
June 2008
Segment Report
For the 6 month period ended 31 December 2007
R`000 Environmental Infrastructural Elimination Combination
Solutions Development
Revenue 40 316 88 207 (6 640) 121 883
Segment result (1 196) 11 512 10 316
Income taxes 3 173
Profit for the 7 143
period
Equity settled (180) (180)
share based
payment
revaluation
Loss on sale (559) (559)
of investment
Capital 1 590 1 590
expenditure
Depreciation (717) (999) (1 716)
and
amortization
Segment assets 121 817 201 393 (188 679) 134 531
Segment (110 294) (58 015) 101 460 (66 849)
liabilities
Reconciliation
of segment
assets to
consolidated
assets
Segment assets 134 531
Goodwill 90 304
Treasury (5 300)
shares
Assets per 219 535
balance sheet
Segment Report
For the 6 month period ended 31 December 2008
R`000 Environmental Infrastructural Elimination Combination
Solutions Development
Revenue 39 037 126 385 (4 420) 161 002
Segment result 2 890 8 534 11 424
Income tax (2 490)
Profit for the 8 934
period
Segment assets 214 758 126 591 (180 453) 160 896
Segment 84 226 44 135 (44 563) 83 798
liabilities
Capital 258 2 513 2 771
expenditure
Depreciation 1 025 1 344 2 369
and
amortisation
Reconciliation
of segment
assets to
consolidated
assets
Segment assets 160 895
Goodwill 91 791
Assets per 252 686
balance sheet
Segment 83 798
liabilities
Liabilities 83 798
per balance
sheet
INTRODUCTION
The directors are pleased to present the reviewed interim financial results of
Accentuate Limited for the 6 months ended 31 December 2008.
OPERATIONAL REVIEW
Accentuate is engaged in the manufacturing and distribution of infrastructural
supplies and maintenance solutions including flooring, glass & aluminium,
chemical cleaning and related products and services. The group reports
segmentally across two divisions:
Infrastructure Development
Overall an acceptable level of performance was once again achieved by the group
under often challenging conditions. Government infrastructure spending
accelerated during the period under review resulting in massive increase in
demand, especially for the flooring products, services and solutions offered by
the group.
Under extremely challenging trading conditions, the group focused on further
entrenching its leadership position in the domestic infrastructure supply arena
while at the same time managing input costs and extracting synergies across the
group. The full impact of rising fuel costs, petrochemical derivative input
costs, unbudgeted energy cost increases and the deterioration of the domestic
currency was felt during the period under review. This resulted in the erosion
of margins in the region of 4% across the group.
Demand for the flooring product range remained buoyant with an average increase
in volume over the corresponding period. The flooring division further entrench
its dominance in the domestic market with an increased market share of
approximately 4% taking its total market share to 68% of the resilient flooring
market in South Africa.
The acquisition of Interior Wooden Floors ("IWF") was concluded in September
2008 with the integration of the business into FloorworX effective October 2008.
With emphasis on extracting synergies between the respective businesses and the
implementation of group systems and procedures, this business unit has already
started making a contribution towards both the profitability and the
sustainability of the group. Focusing on the high end, solid wooden flooring,
and this acquisition further complements an already impressive range of
resilient flooring options provided by the group.
Demand for the products offered by Centurion Glass and Aluminium also remained
relatively static with increased pressure on margins. Certain industry sectors
such as motor showroom construction and domestic residential complexes remain
depressed and this has impacted slightly on the activities of the glass and
aluminium division during the period under review.
Environmental Solutions
Although demand remained relatively static within the chemical division,
increased efficiencies, effective cost control measures and repositioning of the
brand saw the first phase of the restructuring program completed resulting in a
much improved position regarding profitability and cash flow with this division.
The Environmental Solutions Division is now a net contributor to the
profitability of the group for the first time since listing in 2006.
Summary
Price increases across the group lagged cost increases resulting in an under
recovery of margin during the period of around 4% or R6.4m.
The reduction of commodity prices, most notably that of fuel, petrochemical
derivative inputs as well as the price increases taken in January 2009 will
however see a major recovery of margin and even some recovery of the margin lost
during the period under review. Overhead costs were positively contained during
the period with a 1% reduction therein as a percentage of revenue.
In summary, the group experienced a period where demand for products supplied
remained exceptionally strong and overall market conditions were buoyant.
Increased input cost pressures as a result of inflated commodity costs and the
depreciating domestic currency resulted in margin pressure, but despite this
management is confident that margin recovery will occur in the coming six
months.
FINANCIAL RESULTS
The group achieved a net profit of R8.9m (2007: R7.1m) for the six months ended
31 December 2008. This is an increase of 25% on the previous corresponding
period. On a turnover growth of 32% the group increased EBITDA by 23% from the
corresponding reporting period. Due to the competitive trading conditions and
severe pressure experienced on the input costs, gross margin has reduced from
54.4% to 50.9%.
Negative cash flow is reported mainly due to increased trade liabilities at the
beginning of the period under review due to the cyclical nature of the flooring
market and a significant export order. The increased trade liabilities have been
settled in the period under review.
The decline in headline earnings per share to 8.9cents per share from 9.8 cents
per share was purely the result of an increase in the weighted average number of
shares in issue from 80 260 061 to 100 563 266.
CORPORATE ACTION
On 8 August 2008, Accentuate signed a heads of agreement to purchase the
business of Interior Wooden Floors as a going concern as announced on SENS on 12
August 2008. The transaction was successfully concluded as reported on SENS on
21 October 2008. The business has successfully been integrated into Accentuate.
The detail of the transaction is as follows:
Fair value of assets acquired R`000
Property, plant and equipment 637
Intangible assets 3 405
Inventories 6 547
Trade and other receivables 3 428
Trade and other payables (3 017)
11 000
Consideration paid
Cash (8 250)
Equity (2 750)
11 000
Net cash outflow on acquisition
Cash consideration paid (8 250)
Cash acquired -
(8 250)
PROSPECTS
The outlook for the foreseeable future remains bullish with emphasis on
government`s infrastructure spending programme on schools, hospitals, public
transport, and general social upliftment. Numerous projects have already come on
line with the existing project pipeline in which Accentuate is able to
participate stretching well beyond 2010.
The second half of the year should see increased activity in the areas of the
world cup stadiums, airports and public transport infrastructure impacting on
both the flooring and glass and aluminium divisions. The hospital revitalization
program as well as the announced increase of R4.6bn for school and clinic
building projects will further increase demand for the products.
The focus on identified "blue chip" customers by the chemical division should
continue to produce the positive results seen during the first half of the
financial year with the contribution from this division becoming meaningful
during the latter half of the year.
In addition to the anticipated increase in activity during the second half of
the year and into 2010 and beyond, we are also confident that margins will
return to the levels that were experienced prior to 2008. The reduction in the
diesel price will have a substantially positive impact on the profitability of
the group especially on that of the flooring division situated at least 1000km
from the major markets.
The strategic entrance of the company into the adhesive market (for flooring
products) and the introduction of a variety of new products during the next six
months will further contribute towards both the competitive position of the
company and flow through to revenue and profitability of the overall business.
BASIS OF PREPARATION
The abridged report complies with International Accounting Standard 34 - Interim
Financial Reporting, as well as with Schedule 4 of the South African Companies
Act and disclosure requirements of the JSE Limited`s Listing Requirements. The
abridged report has been prepared using policies that comply with International
Financial Reporting Standards (IFRS). The accounting policies are consistent
with those applied in previous financial periods. The directors are not aware of
any matter or circumstance occurring between the balance sheet date and the date
of this report that materially affects the results of the group for the interim
period ended 31 December 2008.
AUDITORS` OPINION
The interim results have been reviewed by Accentuate`s auditors, PKF Pta Inc.
Their unqualified review report is available for inspection at the company`s
registered office.
DIVIDEND
No interim dividend has been declared during this period which is in line with
the group policy to only declare a dividend once a year, should the board of
Accentuate deem it to be appropriate.
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 its business partners,
advisors and suppliers, and most importantly the shareholders for their ongoing
support and faith in the group.
By order of the Board
25 February 2009
F C Platt A J Voogt
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non executive M D C Motlatla
directors: G M Salanje
Executive directors: F C Platt
A J Voogt
Dr. D E Platt
A J Kerrod
Registration number: 2004/029691/06
Registered address: 32 Steele Street
Steeledale
2197
Postal address: P.O. Box 1754
Alberton
1450
Company secretary: G W Delport
Telephone: 0860 4 72342
Facsimile: 0861 4 72342
Transfer secretaries: Computershare Investor Services (Pty)
Limited
Designated Adviser: Exchange Sponsors (Pty) Limited
Date: 25/02/2009 07:30:01 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 the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
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howsoever arising, from the use of SENS or the use of, or reliance on,
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