| Thu 23 Feb 2012, 7:13 | | ACE - Accentuate Limited - Reviewed results for the six months ended |
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ACE
ACE
ACE - Accentuate Limited - Reviewed results for the six months ended
31 December 2011
Accentuate Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/029691/06)
Share code: ACE
ISIN: ZAE000115986
("Accentuate" or "the group" or "the company")
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
HIGHLIGHTS
- HEPS increase by 99% to 6.86 cents per share
- Revenue up 12.21%
- Successful disposal of Centurion Glass and Aluminium
Consolidated Abridged Financial Statements for the six months ended
31 December 2011
Consolidated abridged statement of financial position
Reviewed 6 months Audited Reviewed 6 months
ended 31 December 30 June ended 31 December
2011 2011 2010
R`000 R`000 R`000
Assets
Non-current assets 89 022 87 385 103 025
Property, plant and equipment 46 487 48 348 35 311
Goodwill 34 928 34 928 62 424
Intangible assets 729 1 169 1 778
Other financial assets 3 938 - -
Deferred taxation 2 940 2 940 3 512
Current assets 109 069 95 022 107 490
Inventories 41 788 41 360 42 230
Other financial assets 6 186 368 368
Current tax receivables 4 092 2 647 3 115
Trade and other receivables 41 732 34 918 61 324
Cash and Bank 15 271 15 729 453
Assets of disposal group - 16 281 -
Total assets 198 091 198 688 210 515
Equity and liabilities
Equity
Equity attributable to
Equity holders of parent
Capital and reserves
Share capital 125 384 125 555 125 713
Reserves 23 924 23 924 10 557
Accumulated (loss) / earnings (27 175) (32 428) 11 433
122 133 117 051 147 703
Non-current liabilities
Other financial liabilities 5 700 8 550 11 498
Finance lease obligations - - 432
Deferred taxation 5 247 5 247 2 915
10 947 13 797 14 845
Current liabilities
Other financial liabilities 5 797 6 007 6 006
Finance lease obligations 160 269 292
Trade and other payables 30 380 31 999 34 488
Operating lease liability 973 794 427
Current tax payable 2 472 551 1 268
Cash and Bank 25 229 21 496 5 486
65 011 61 116 47 967
Liabilities of disposal group - 6 724 -
Total equity and liabilities 198 091 198 688 210 515
Number of shares in issue 111 108 109 111 108 109 111 108 109
Net asset value per
share (cents) 110 105 133
Tangible net asset
value per share (cents) 78 73 75
Consolidated abridged statement of comprehensive income
Reviewed 6 months Audited Reviewed 6 months
ended 31 December 30 June 2011 ended 31 December
2011 R`000 2010
R`000 R`000
Revenue 143 341 249 390 127 744
Cost of sales (66 373) (113 556) (61 349)
Gross profit 76 968 135 834 66 395
Other income 636 415 139
Other operating expenses (64 513) (114 351) (55 189)
Earnings before interest,
tax, depreciation and
amortisation 13 091 21 898 11 345
Depreciation and amortisation (3 198) (6 435) (3 203)
Goodwill impairment - (70 836) (33 866)
Profit before interest
and taxation 9 893 (55 373) (25 724)
Interest received 125 - 4
Finance costs (909) (2 942) (1 642)
Profit / (loss)
before interest and tax 9 109 (58 315) (27 362)
Income taxation expense (1 921) (3 738) (964)
Profit / (loss) for
the period from
continuing operations 7 188 (62 053) (28 326)
Profit / (loss) for
the period from
discontinuing operations (1 935) (12 554) (2 003)
Profit / (loss) for the period 5 253 (74 607) (30 329)
Other comprehensive
income for the period
net of taxation - 417 -
Total comprehensive
income / (loss) for the period
Attributable to: 5 253 (74 190) (30 329)
Equity holders of the parent 5 253 (74 190) (30 329)
Reconciliation of
headline earnings 5 253 (74 190) (30 329)
Net profit / (loss)
for the period 5 253 (74 607) (30 329)
Adjusted for (profit)
/ loss on disposal of
property, plant and equipment - 111 (20)
Impairment of goodwill - 70 836 33 866
Loss on disposal group sold 2 247 - -
Tax effect of adjustments (315) - -
Headline earnings /
(loss) attributable
to the equity
holders of the parent 7 185 (3 660) 3 517
Weighted average
number of shares in issue 104 809 755 104 231 138 101 854 248
Earnings (loss) per share
from continuing operations(cents) 6.86 (59.53) (27.81)
Earnings / (loss) per share from
Combined operations (cents) 5.01 (71.58) (29.78)
Diluted earnings /(loss) per share
(cents) 5.01 (71.58) (29.78)
Headline earnings per
share (cents) 6.86 (3.72) 3.45
Diluted headline earnings
per share (cents) 6.86 (3.72) 3.45
Consolidated abridged statement of cash flows
Reviewed 6 months ended Audited Reviewed 6 months
31 December 30 June ended 31 December
2011 2011 2010
R`000 R`000 R`000
Cash flows from operating
activities 2 351 9 881 5 459
Cash generated from operations 4 164 15 667 7 469
Interest received 422 163 4
Taxation paid (1 326) (3 000) (323)
Finance costs (909) (2 949) (1 691)
Cash flows from
investing activities (3 374) (2 623) (671)
Proceeds on sale of
property, plant and 4 384 563
equipment
Acquisition of property,
plant and equipment (878) (2 834) (1 220)
Acquisition of
intangible assets (42) (173) (14)
Proceeds on sale of investments 20 - -
Increase in financial assets
Cash flow from
discontinued operations (975) - -
(1 503) - -
Cash flows from
financing activities (3 169) (8 438) (5 235)
(Decrease) in financial
liabilities (3 060) (6 002) (3 020)
(Decrease) in finance
lease liabilities (109) (228) (13)
Dividends paid - (2 208) (2 202)
Net decrease in cash
and cash equivalents (4 192) (1 180) (447)
Cash and cash equivalents
at the beginning of (5 766) (4 586) (4 586)
the period
Cash and cash equivalents
at the end of the period (9 958) (5 766) (5 033)
Consolidated abridged statement of changes in equity
Attributable to equity holders of the parent
Share capital Share premium Reserves for
R`000 R`000 own shares
R`000
Balance at 1 July 2010 1 124 915 139
Total comprehensive loss
for the period - - -
Revaluation of property,
plant and equipment - - -
Share options exercised - 639 -
Dividends - - -
Balance at 30 June 2011 1 125 554 139
Total comprehensive income
for the period - - -
Purchase of own / - (171) -
treasury shares
Balance at 31 1 125 383 139
December 2011
Revaluation Retained
reserve earnings / (loss) Total
R`000 R`000 R`000
Balance at 1 July 2010 10 418 43 984 179 457
Total (354) (74 190) (74 544)
comprehensive loss
for the period
Revaluation of 13 721 13 721
property, plant and equipment
Share options exercised 639
Dividends (2 222) (2 222)
Balance at 30 June 2011 23 785 (32 428) 117 051
5 253 5 253
Total comprehensive
income for the period
Purchase of own / (171)
treasury shares
Balance at 31 23 785 (27 175) 122 133
December 2011
Segment Report
Reviewed Reviewed Reviewed
31 Dec 2011 31 Dec 2011 31 Dec 2011
R`000 R`000 R`000
Infrastructure Supplies Division Environmental
Solutions Division
Flooring Glass and Environmental
Aluminium Solutions
Discontinued
Revenue
External sales 105 603 6 286 32 689
Intersegment sales 3 392
Total segment 105 603 6 286 36 081
revenue
Results
Segment result 10 385 (1 935) 1 907
before depreciation and
amortisation
Depreciation and (1 889) - (691)
amortisation
Segment 8 496 (1 935) 1 216
operating result
Discontinued operations
Income taxation expense
Profit from
ordinary activities
Other information
Capital expenditure 463 - 379
Statement of
financial position
Assets
Segment assets
excluding goodwill 129 239 - 24 724
Goodwill 4 499 - -
Consolidated 133 738 - 24 724
total assets
Liabilities
Segment liabilities 31 750 - 16 925
Consolidated 31 750 - 16 925
total liabilities
Reviewed Reviewed
31 Dec 2011 31 Dec 2011
R`000 R`000
Corporate and Total
eliminations
Revenue
External sales (1 237) 143 341
Intersegment sales (3 392)
Total Segment (4 629) 143 341
Revenue
Results
Segment result 1 950 12 307
before depreciation, amortisation
Depreciation and (618) (3 198)
amortisation
Segment 1 332 9 109
operating result
Discontinued (1 935)
operations
Income taxation expense (1 921)
Profit from
ordinary activities 5 253
Other information
Capital expenditure 78 920
Statement of Financial Positiont
Assets
Segment assets
excluding goodwill 9 202 163 165
Goodwill 30 427 34 926
Consolidated 39 629 198 091
total assets
Liabilities
Segment liabilities 27 283 75 958
Consolidated 27 283 75 958
total liabilities
Segment report
Reviewed Reviewed Reviewed
31 Dec 2010 31 Dec 2010 31 Dec 2010
R`000 R`000 R`000
Infrastructure Supplies Division Environmental
Solutions Division
Flooring Glass and Environmental
Aluminium Solutions
Discontinued
Revenue
External sales 96 180 20 785 26 530
Intersegment sales 3 236
Total Segment 96 180 20 785 29 766
Revenue
Results
Segment result 6 413 (1 244) 1 766
before depreciation,
amortisation
Depreciation and (1 626) (404) (737)
amortisation
Segment 4 787 (1 648) 1 029
operating result
Discontinued operations
Income taxation expense
(Loss) from
ordinary activities
Other information
512 446 127
Capital expenditure
Statement of
financial position
Assets
Segment assets
excluding goodwill 97 328 37 162 24 007
Goodwill 4 499 - -
Consolidated 101 827 37 162 24 007
total assets
Liabilities
Segment 27 633 19 429 16 905
liabilities
Consolidated 27 633 19 429 16 905
total liabilities
Reviewed Reviewed
31 Dec 2010 31 Dec 2010
R`000 R`000
Corporate and Total
eliminations
Revenue
External sales (15 751) 127 744
Intersegment sales (3 236)
Total segment (18 987) 127 744
revenue
Results
Segment result (31 094) (24 159)
before depreciation and amortisation
Depreciation and (436) (3 203)
amortisation
Segment (31 530) (27 362)
operating result
Discontinued (2 003)
operations
Income taxation expense (964)
(Loss) from (30 329)
ordinary activities
Other information
135 1 220
Capital expenditure
Statement of
financial position
Assets
Segment assets excluding
goodwill (10 406) 148 091
Goodwill 57 925 62 424
Consolidated 47 519 210 515
total assets
Liabilities
Segment liabilities (1 155) 62 812
Consolidated (1 155) 62 812
total liabilities
Commentary
INTRODUCTION
Accentuate is a group of world-class companies serving the construction and
infrastructure development markets in South Africa and essentially operates in
two segments: an Infrastructure Supplies Division comprising of flooring and an
Environmental Solutions Division which houses Safic, a specialist chemical
blending business. The company is a market leader in the supply of products and
services to both the public and private sectors in most floor covering materials
with majority of the revenue contribution coming from this segment. The chemical
blending business is positioning itself to become a significant supplier in the
public and private sectors, through the supply of chemical cleaning and related
products. Safic is also a manufacturer of screeding and products supplied to the
flooring business and in this way the two segments of Accentuate extract intra-
group synergies.
HIGHLIGHTS
The period under review has seen a dramatic turnaround within Accentuate Limited
resulting in an increase in HEPS from 3.45 cents per share to 6.86 cents per
share in December 2011. This as a result of effective strategic interventions
coupled with increased activity within the market niche within which Accentuate
operates. The reporting period also saw the following:
- The effective disposal of CGA Fenestrations (Pty) Limited and minimising
further losses associated with this division.
- A return to the core competencies that brought Accentuate to the market.
- Earnings per share increase to 5.01 cents from a loss of 29.78c for the
corresponding period.
- An exceptional performance by FloorworX.
- General increase in activity within the sectors within which Accentuate
operates.
- Increased market share within the resilient flooring market while maintaining
and even increasing margins.
THE OPERATING ENVIRONMENT
The interim reporting period ending 31 December 2011 are presented within the
context of a macro-economic environment that has yet to show any significant
activity within the industry.
As mentioned in the results commentary for the year ended 30 June 2011, the
construction and construction supply industries have seen a dramatic
deterioration in demand in the post "world cup" period. Once again there has
been no meaningful pick up in private project driven construction activity
during the period under review. Generally the view from a macro-economic
perspective remains largely negative. In addition to the relative weakness of
private construction spend, South Africa still experiences a situation where
national departments and provincial and local governments continue to hand back
unspent capital budgets to Treasury.
The multilevel government commission was unveiled last year in an effort to deal
with what the State recognises as the current lack of coordination and
integrated planning surrounding key infrastructure projects, as well as poor or
delayed project execution. There is much current debate around the state of
government infrastructure spend and although government has indicated that
infrastructural funding is available, the lack of capacity, at especially
provincial and local government levels is still to a large degree, impeding the
delivery thereof. In the public and private sectors, access to finance in the
current economic climate remains a serious constraint.
From the above, it is evident that Accentuate is still operating within a
largely depressed macro-economic environment. The company has experienced a
significant increase in demand in a number of areas of Government infrastructure
spend, particularly classrooms for the Education Department as well as
hospitals, clinics and residences for the Department of Health. In addition to
this, a significant increase in refurbishment activity across a number of
sectors of the market is coming through.
Management is proud to announce a very acceptable set of financial results under
what can only be termed to be very difficult market and operating conditions. In
returning to its core competencies, Accentuate has experienced a turnaround
strategy delivering on its promises and management remain confident that the
company will be in a position to provide sustainable organic and sound
acquisitory growth over the short and medium term in order to deliver on the
promises made to the market upon listing in 2006.
Disposal of CGA
As indicated in our results announcement for the year ending June 2011,
Management embarked on a process of disposing of CGA Fenestrations (Pty)
Limited. The reason for this disposal was that CGA had not delivered on either
of the strategic imperatives that motivated the original acquisition and in
addition to this; the business required a disproportionate amount of management
time and resources. At this time a commitment was made that the disposal of this
business would be concluded without delay and that wherever possible no
additional losses relating to the disposal of this company are anticipated. The
disposal of CGA was concluded and announcements in this regard were published on
SENS. The effective date of the transaction is 1 September 2011 and the
financial results presented include the trading results of CGA Fenestrations
(Pty) Limited up and until 31 August 2011.
Management would like to take this opportunity of thanking Wesley Delport,
Managing Director of CGA for his hard work and loyalty to Accentuate and wish
him and his team all the best for the future.
Operational review
The strategic interventions implemented at a divisional level of Accentuate are
starting to deliver the anticipated results with an exceptional performance from
FloorworX within a generally depressed market and encouraging progress within
the Safic stable towards the achievement of the strategy embarked on during the
past three years.
In line with the original strategic direction of the organisation, management
has aligned its efforts in order to leverage off the dominant position that
FloorworX has within the resilient flooring market and to expand both its
product offering and its footprint in the Southern African market.
The period under review has thus been one of repositioning and refocusing the
organisation along the original vision that brought Accentuate to the market in
2006. Management is confident that with the disposal of CGA and a focus on the
identified core competencies, Accentuate can now put the difficulties
experienced behind us and focus on what is an exciting purpose and direction for
Accentuate.
The extraction of value creating synergies between FloorworX and Safic continue
to progress and intercompany trade is becoming increasingly significant. The
vinyl adhesive manufactured by Safic and distributed by FloorworX continues to
grow as is the range of cementatious screeds. Much emphasis continues to be
placed on exploring and extracting these synergies and expansion of this
collaboration is envisaged into the future.
The volatility in the local currency has impacted negatively on the ability to
plan effectively with large swings in the Rand against the major global
currencies having been experienced. This has also had the effect of fluctuating
commodity input prices in both the flooring and chemical business units. The
weaker Rand during the period under review has however had some positive impact
on export sales into the African continent as many of the products sold into
these markets are essentially US Dollar denominated commodities.
Generally operational efficiency has increased significantly and this coupled
with slightly better margins within the flooring sector, contributed to a
significantly better set of financial results for the group as a whole.
FINANCIAL RESULTS
Management is pleased with the rise in revenue by 12% to R143 million (2010:
R128 million), driven primarily by increased project work in both segments and a
slight increase in annuity income for Safic. The six months ended 31 December
2011 saw Accentuate return to profitability with net profit for the period
increasing to R5 million from a loss of R30 million in the comparable period.
This shift is largely due to the curtailment of losses from CGA since the sale
of the business. The result is an increase in headline earnings per share from
3.45 cents per share to 6.86 cents per share.
The trading results relating to CGA Fenestrations for the two months ended 31
August 2011 equates to a net trading loss of R1.9 million.
Once again the Infrastructure Suppliers Divisions contributed strongly to
overall revenue of the Group, with FloorworX contributing 74% to total revenue.
This is almost 10% higher than the comparable period. Net margins for FloorworX
are up from 5% to 8% of revenue. Within this segment a small contribution from
CGA is still recognised for two months, amounting to R6 million. This revenue
will not occur into the future due to the conclusion of the sale of CGA on 1
September 2011.
The remaining 25% of revenue was brought in by Safic and amounts to R36 million
up from R29 million in the previous period. The rise in revenue is attributable
to increased annuity income and project work. The profitability has increased by
18% against the comparable period.
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 period ended 31 December 2011 or the financial
position at that date.
Accentuate management find it prudent, at this stage, not to declare an interim
dividend. Cash flow remains constrained due to working capital requirements by
FloorworX to support increased activity, and the inability to grant inter-
related entities financial assistance as the special resolution was voted down
by shareholders at the annual general meeting.
PROSPECTS
Although it is anticipated that the macro-environment within which Accentuate
operates will remain challenging in the second half of the financial year,
management is confident that the dominant position it holds within the niche in
which it operates will offer the necessary protection in order to ensure that
Accentuate continues to deliver an acceptable set of results for the full year
through to June 2012.
The focus of the business going forward remains expanding both our product range
into a well established customer base as well as expanding the geographical
distribution footprint. This will be achieved through collaboration with leading
global players within the floor coverings market. Other focus areas include the
maintenance of margins through effective pricing, cost control and productivity
initiatives as well as minimising the effect of currency fluctuations, the rise
in commodity prices and rampant energy escalations.
The outlook for the flooring division remains generally positive and management
is confident that the momentum currently being seen will continue through the
next half and well into the 2012/13 financial year.
Safic will continue its focus on building strong annuity income streams in the
institutional markets and through extraction between group companies and the
Thebe invested companies. Expansion within the construction chemical sector is
also envisaged.
Africa remains a major potential market for the products and services offered by
Accentuate and focused attention will be paid to expanding our distribution
presence on the continent.
Government infrastructure has started to impact positively on the results and
activity within Accentuate and even limited spend in the areas of education and
healthcare has a significant impact on the performance of FloorworX and
Accentuate. Positive Government spending within the areas of healthcare and
education will have a material impact on the profitability of FloorworX.
Accentuate`s growth strategy includes both targeted organic growth within
predetermined market segments as well as targeted acquisitions that meet our
stringent criteria for growth that is earnings enhancing.
LITIGATION STATEMENT
As announced in the final results for the year ended June 2010, Accentuate
instituted legal proceedings against vendors of the CGA business for the breach
of warranties. During recent dealings with the alleged misconduct, which is the
basis of our warranty claim, we discovered evidence of certain subversive
activity which we have interpreted to be a means of preventing our legal claims
and actions being processed. Shareholders will be informed as the proceeding
unfolds.
BASIS OF PREPARATION
The reviewed abridged consolidated interim financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), and in terms of IAS 34 - Interim Financial Reporting, the AC 500
standards as issued by the Accounting Practices Board and in compliance with the
Listings Requirements of the JSE Limited and the South African Companies Act, 71
of 2008. The accounting policies and method of measurement and recognition
applied in preparation of these reviewed condensed consolidated interim
financial statements are consistent with those applied in the audited annual
financial statements for the period ended 30 June 2011. The reviewed condensed
consolidated interim financial statements have been prepared by the Financial
Director, AJ Voogt CA(SA).
REVIEW OPINION
The reviewed abridged consolidated financial statements for the six months ended
31 December 2011 have been reviewed by Accentuate`s auditors, PKF Gauteng Inc.
The review was conducted in accordance with ISRE 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity". Their
review report is available for inspection at the company`s registered office.
CHANGES TO THE BOARD
Mr A Voogt has resigned as Financial Director from 24 January 2012. The board,
through the appropriate sub-committees, has already begun a review process for
new candidates and Mr Voogt has also committed himself to ensuring a smooth
transition and handover once his successor has been appointed. The board wishes
to thank Mr Voogt for his leadership and significant contribution he has made,
and wishes him every success with his career.
APPRECIATION
I would like to take this opportunity to thank the executive team for their
absolute dedication, loyalty and hard work displayed during what can only be
described as an extremely challenging year. The support received from the
Chairman and the Non-executive directors enabled us to concentrate on the vision
that we hold for this great organisation notwithstanding the fact that we have
been unable to remunerate them. We would also like to take this opportunity to
thank our customers and suppliers without whom we will not exist. The faith that
our shareholders have shown in us and the loyalty and support of our employees
have ultimately ensured that we can address the necessary issues in order to
position Accentuate for growth within the years ahead.
By order of the Board
23 February 2012
FC Platt AJ Voogt
Chief Executive Officer Financial Director
CORPORATE INFORMATION
Non-executive directors: MDC Motlatla
R Patmore
L Gadd
D Molefe (Alternate)
E Ratshikhopha
Executive directors: FC Platt
AJ Voogt
Dr DE Platt
Registration number: 2004/029691/06
Registered address: 32 Steele Street
Steeledale
2197
Postal address: PO Box 1754
Alberton
1450
Company secretary: PS Dayah
Telephone: (011) 406 4100
Facsimile: (011) 688 5210
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated adviser: Bridge Capital Advisors (Pty) Limited
Date: 23/02/2012 07:13:06 Produced by the JSE SENS Department.
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