| Mon 29 Feb 2016, 7:30 | | ACCENTUATE LIMITED - Unaudited Condensed consolidated Financial Statements for the six months ended 31 December 2015 |
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ACE 201602290007A
Unaudited Condensed consolidated Financial Statements for the six months ended 31 December 2015
UNAUDITED INTERIM RESULTS FOR THE
SIX MONTHS ENDED 31 DECEMBER 2015
Accéntuate Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2004/029691/06)
Share Code: ACE ISIN Code: ZAE000115986
www.accentuateltd.co.za
("Accéntuate" or "the group" or "the company")
- OPERATING PROFIT UP 46%
- HEPS UP 53%
- NORMALISED HEPS UP 63%
Condensed consolidated Financial Statements
for the six months ended 31 December 2015
CONDENSED Unaudited Unaudited Audited
CONSOLIDATED 6 months to 6 months to Year to
STATEMENT OF 31 December 31 December 30 June
COMPREHENSIVE 2015 2014 2015
R'000 R'000 R '000
INCOME
Revenue 173 018 170 520 318 609
Cost of sales (85 619) (84 969) (154 138)
Gross profit 87 399 85 551 164 471
Other income 1 022 988 1 840
Other operating expenses (77 583) (79 131) (156 832)
Operating profit 10 838 7 408 9 479
Finance costs (1 159) (1 146) (2 485)
Profit before tax 9 679 6 262 6 994
Taxation (2 855) (1 808) (2 283)
Profit and total comprehensive income
attributable to owners of the parent 6 824 4 454 4 711
Earnings per share (cents) 5,75 3,76 3,97
Diluted earnings per share (cents) 5,75 3,76 3,97
Notes to the Statement of
Comprehesive Income:
Headline earnings per share (cents) 5,75 3,76 3,97
Diluted headline earnings per share
(cents) 5,75 3,76 3,97
Normalised earnings per share (cents) 5,75 3,53 5,07
Diluted normalised earnings per share
(cents) 5,75 3.53 5,07
Weighted average number of shares 118 687 089 118 570 928 118 628 531
Diluted average number of shares 118 687 089 118 570 928 118 628 531
Reconciliation of Headline Earnings:
Profit for the period 6 824 4 454 4 711
Adjusted for:
(Profit)/Loss on disposal of property,
plant and equipment – net of taxation - - (1)
Headline earnings attributable to share-
holders of the parent 6 824 4 454 4 710
Adjustment for directors' fees if recorded
in the correct period – net of taxation - (270) 1 302
Normalised earnings 6 824 4 184 6 012
CONDENSED Unaudited Unaudited Audited
CONSOLIDATED 6 months to 6 months to Year to
STATEMENT OF 31 December 31 December 30 June
FINANCIAL POSITION 2015 2014 2015
R'000 R'000 R '000
Assets
Non-current assets 92 154 91 602 92 468
Property, plant and equipment 50 572 50 295 50 845
Goodwill and intangible assets 38 712 38 614 38 779
Deferred taxation 2 870 2 693 2 844
Current assets 142 570 136 234 138 370
Inventories 81 289 72 898 76 280
Trade and other receivables 54 579 53 616 55 515
Other financial assets 4 685 7 188 4 530
Taxation receivables 1 875 2 173 1 875
Cash and bank 142 359 170
Total assets 234 724 227 836 230 838
Equity and liabilities
Total equity 164 386 157 116 157 562
Share capital 136 993 136 993 136 993
Reserves 22 632 22 830 22 632
Retained earnings / (accumulated loss) 4 761 (2 707) (2 063)
Non-current liabilities 9 354 9 396 9 354
Deferred taxation 9 354 9 396 9 354
Current liabilities 60 984 61 324 63 922
Trade and other payables 38 870 47 102 35 731
Operating lease liability 2 451 1 938 2 387
Taxation payable 776 480 1 236
Bank overdraft 18 887 11 804 24 568
Total liabilities 70 338 70 720 73 276
Total equity and liabilities 234 724 227 836 230 838
Notes to the Statement of
Financial Position:
Number of shares in issue 124 048 757 124 048 757 124 048 757
Net asset value per share (cents) 133 127 127
Tangible net asset value per share
(cents) 101 96 96
CONDENSED Unaudited Reviewed Audited
CONSOLIDATED 6 months to 6 months to Year to
STATEMENT OF 31 December 31 December 30 June
CHANGES IN EQUITY 2015 2014 2015
R'000 R'000 R'000
Capital and reserves – opening balance 157 562 152 379 152 379
Profit for the period 6 824 4 454 4 711
Shares issued for acquisition of assets - 283 283
Share-based payment expenses - - 189
Capital and reserves – closing balance 164 386 157 116 157 562
Comprising:
Share capital and premium 136 993 136 993 136 993
Reserves 22 632 22 830 22 632
Retained earnings / (accumulated loss) 4 761 (2 707) (2 063)
Total equity 164 386 157 116 157 562
CONDENSED Unaudited Reviewed Audited
CONSOLIDATED 6 months to 6 months to Year to
STATEMENT OF 31 December 31 December 30 June
CASH FLOWS 2015 2014 2015
R'000 R'000 R'000
Net cash flow from operating activities 7 858 11 843 (407)
Net cash flow from investing activities (2 205) (674) (1 377)
Net increase / (decrease) in cash
and cash equivalents 5 653 11 169 (1 784)
Cash and cash equivalents at
beginning of the period (24 398) (22 614) (22 614)
Cash and cash equivalents at end of
the period (18 745) (11 445) (24 398)
SEGMENTAL REPORT Unaudited Unaudited Unaudited Unaudited Unaudited
Six months ended 31 Dec 2015 31 Dec 2015 31 Dec 2015 31 Dec 2015 31 Dec 2015
31 December 2015 R '000 R'000 R'000 R'000 R'000
Environmental Water Corporate and
Flooring Solutions Treatment Eliminations Total
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 2377 10 838
Finance costs 106 499 554 1 159
Profit before tax 7 358 498 1 823 9 679
Share of loss from associate 0
Depreciation and amortisation 1 590 735 67 2 392
Capital expenditure 1 397 600 56 2 053
Segmental assets 172 724 31 016 30 984 234 724
Segmental liabilities 33 927 20 963 15 448 70 338
Six months ended Reviewed Reviewed Reviewed Reviewed Reviewed
31 December 2014 31 Dec 2014 31 Dec 2014 31 Dec 2014 31 Dec 2014 31 Dec 2014
R '000 R'000 R'000 R'000 R'000
Environmental Water Corporate and
Flooring Solutions Treatment Eliminations Total
Total sales 135 646 39 183 (4 309)
Less: Inter-segmental sales
Revenue 135 646 39 183 (4 309) 170 520
Gross Profit 64 024 21 527 - 85 551
Operating profit 5 093 694 1 621 7 408
Finance costs 22 577 547 1 146
Profit before tax 5 071 117 1 074 6 262
Share of loss from associate 0
Depreciation and amortisation 2 126 704 141 2 971
Capital expenditure 401 133 61 595
Segmental assets 173 499 31 551 22 786 227 836
Segmental liabilities 39 252 21 756 9 705 70 713
REVIEW OF PERFORMANCE
INTRODUCTION AND BACKGROUND TO THE RESULTS
Accéntuate produced pleasing results for the period under review in a generally
challenging economic environment. The slowdown in the local economy as well
as the weakness of the rand continues to affect the private and public construction
environments as well as the industrial and mining sectors. These are significant
markets in which the group operates. Notwithstanding these challenges,
Accentuate has successfully focused on increasing operational efficiency and
managing costs in order to increase profitability.
Turnover for the period increased 1,5% to R173 million and gross profit increased
by 2,2% on the back of a slight increase in the gross margin to 50,5%.
The concerted effort to contain costs resulted in a 2% reduction in operating
expenses and allowed operating profit to increase by 46% to R10,8 million.
Finance charges were virtually unchanged which resulted in the profit before tax
rising 55% to R7,9 million. Headline earnings per share of 5,75 cents were 53%
higher. Normalised headline earnings per share, which reflects the previous
period earnings if the non-executive directors' fees had been expensed in the
periods to which they actually related, shows an increase of 63%.
An increased focus on the internal audit function resulted during December
2015 in the identification of certain procedural irregularities at the Floorworx
facility in East London. These were immediately investigated and a number of
payments were discovered to have been fraudulent. The perpetrator, who was
the financial director of Floorworx based in East London, was immediately suspended
and both a criminal case opened and court orders obtained to freeze
and obtain copies of his and his immediate family's bank accounts. No other
employees are believed to have been involved. The fraudulent payments made
during the period under review amounted to R6,5 million and have been
accounted for in the results above.
The company is continuing with its internal investigations as well as assisting
authorities with their investigation. Based on the information currently available
to the board the extent of the fraud amounts to approximately R70 million over
a period of ten years. All these amounts have been accounted for in the results
published for the respective periods.
A number of steps have been taken to address the control deficiencies identified
and an independent review of all controls and division of duties will shortly be
undertaken. Furthermore, as detailed later in this announcement, an additional
non-executive director with extensive experience in auditing will be joining the
board and the audit committee. The FloorworX financial department will also
be strengthened and restructured as replacement financial staff are appointed.
FLOORING BUSINESS
The FloorworX business operation contributed 80% of the group revenue.
FloorworX again showed resilience in coping admirably during difficult trading
conditions. Management's ongoing focus on operating efficiency, flexible work
practices and exploring new markets resulted in operating profit increasing 47%
to almost R7,5 million despite only a 1,5% increase in turnover and a slight
improvement in the gross margin to 47,6%. The company maintained its market
share and successfully completed some important contracts, including the
Nelson Mandela Children's Hospital in Cape Town. Sales to government
departments remained sporadic, with some areas increasing spending while demand
from other areas reduced. Fortunately there was limited load shedding at
the factory during the period under review. The wood and laminate division was
affected by the reduced activity in the office and commercial construction
sectors, especially in the second quarter of the financial year. The corporate carpet
tile range introduced during the previous year continues to gain acceptance in
a depressed market.
The dedicated management team remain fully committed to ensuring that
FloorworX entrenches its leadership position within the resilient flooring market.
ENVIRONMENTAL SOLUTIONS BUSINESS
This comprises the Safic business operations and contributed 20% of the group
revenue.
Safic continued to make progress in its repositioning strategy. The business
has for some time been pursuing a strategy to expand further into sustainable,
recurring business within the commercial market segments as well as increasing
the range supplied of more specialised chemical products utilised in production
processes. This helped ensure that turnover was slightly higher despite
the very subdued demand from the industrial and mining sectors which Safic
has traditionally supplied. This bodes well for the business going forward in
ensuring Safic's trading platform is more sustainable and resilient.
The Degrachem acquisition into the specialty metal treatment sector made a
couple of years ago has provided some opportunities for further expansion into
the related process chemical markets. The provision of screeds and adhesives
to FloorworX, as well as sales of related maintenance products and equipment,
places the Accéntuate group in the unique position where it can supply a comprehensive
range of flooring solutions, including preparation and maintenance
products and equipment.
Safic revenue increased marginally to R39,2 million and further production efficiencies
facilitated the gross margin improvement to 56%. The increase in operating costs
was contained to less than 1% which resulted in the operating profit increasing 44%.
The provision of water treatment chemicals and solutions to Safic customers
remains a focus area, and the Ion Exchange joint venture provides products
and technical back-up that allows for growth opportunities in this sector.
WATER TREATMENT BUSINESS
This comprises the Ion Exchange Safic water treatment business, which is a
partnership between Accéntuate, Safic and Ion Exchange India. The business
is equity accounted by the group as an associate.
As has been widely reported, water is increasingly becoming a major area of
focus within the domestic economy. This has been especially so as the impact
of the current drought has become more pronounced. The joint venture
with India's leading water solutions company, Ion Exchange India, provides the
Accéntuate group with a unique strategic platform for becoming a significant
participant in the water treatment market and related infrastructure projects in
South Africa. The year has seen a focus on building the necessary capacity
within the operation and discussions on some significant projects while continuing
to expand the customer base for recurring business. Although the growth in
the business has taken longer than envisaged, management remains firm in its
view that this business has the potential to become a major contributor to the
growth and profitability of Accéntuate in the future.
PROSPECTS
It is anticipated that the challenging macroeconomic trading conditions will continue
for the foreseeable future. In addition to these we also anticipate that
the local government elections will have a negative impact on government
spending during the last quarter of the financial year. However, all the trading
entities within the group are well positioned and focused on expanding their
customer base and product offerings. We believe that the difficult trading conditions
will provide an opportunity to expand market share as well as to possibly
acquire suitable businesses at reasonable prices. Major opportunities exist for
expansion within the water treatment sector. The relative weakness of the rand
presents opportunities to increase exports of locally manufactured products,
including into substantial markets not previously supplied. Overall the group
remains cautiously optimistic that it will deliver acceptable returns to
shareholders in the foreseeable future.
CHANGES TO THE BOARD OF DIRECTORS
The company is pleased to announce that Mr. Thys du Preez has been appointed
a non-executive director of Accentuate with effect from 1 March 2016,
and will also serve on the Audit and Risk Committee from that date. Thys was a
partner at Ernst & Young for many years and has subsequently been involved
in managing a number of businesses.
DIVIDEND
The Accéntuate board deems it prudent not to declare an interim dividend.
GOING CONCERN
The board of directors 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 2015
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 ofIAS 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.
There are no significant reportable matters arising since the end of the period
under review.
The unaudited condensed consolidated results for the period ended 31
December 2015 were prepared under the supervision of the chief financial
officer, Chris Povall CA (SA). They were approved by the board of directors on
25 February 2016 and have not been reviewed or audited by the company's
auditors Mazars (Gauteng) Inc.
APPRECIATION
The board would like to thank the staff and management teams of all the operations
for their commitment 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.
29 February 2016
CORPORATE INFORMATION
Non executive directors:
RB Patmore (Chairman)
NE Ratshikhopha
PS Kriel
A Mjamekwana (alternate)
Executive directors:
FC Platt (Chief Executive Officer)
CJ Povall (Chief Financial Officer)
DE Platt
Registration number:
2004/029691/06
Registered address:
Accéntuate Business Park, 32 Steele
Street, Steeledale, Johannesburg, 2197
Postal address:
P.O. Box 1754, Alberton, 1450
Company secretary: PS Dayah
Email: pdayah@accent.co.za
Telephone: (011) 406 4100
Facsimile: (086) 509 3246
Website: www.accentuateltd.co.za
Email: info@accent.co.za
Social Media:
Twitter.com/AccentuateLtd
Facebook.com/AccentuateLtd
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
Designated adviser:
Bridge Capital Advisors (Pty) Ltd
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: 29/02/2016 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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