ACCENTUATE LIMITED - Unaudited summarised results for the year ended 30 June 2018

Release Date: 12/10/2018 17:05
Code(s): ACE
 
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Unaudited summarised results for the year ended 30 June 2018

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”)


Unaudited summarised results for the year ended 30 June 2018


Commentary
Introduction to the results 
Accentuate Limited is a company with underlying investments involved in infrastructure supplies, with a focus on
flooring, water treatment and the chemical sectors. 

The past year was marked by an extremely challenging operating environment, a result of the critical situation in 
the South African construction sector and exacerbated by policy uncertainty. The focus for the year was on market 
share retention and cost-optimisation initiatives. 


Review of financial performance
Revenue for the year was R295 million and in conjunction with gross margin was supplemented by the acquisition 
of Pentafloor, together with a slight increase in sales from Safic. Revenue for the flooring business (excluding 
Pentafloor) was significantly impacted as a result of a decline in activity in the construction industry, which 
caused a lack of throughput in the factory in East London.

Operating expenses increased by 10% to R144,1 million (2017: R131,1 million). This increase was, however, mainly 
as a result of the acquisition and consolidation of the results of Pentafloor. Cost containment was the key focus 
during the year under review, with operating costs being well contained. 

This resulted in an operating loss of R23,5 million. Across the year the flooring business experienced no volume
growth, which had a massive limitation on throughput at the East London FloorworX factory, where fixed cost 
recovery was not possible.

Finance costs increased from R2,4 million in 2017 to R3,5 million in the current year, predominantly due to the
financing of the Pentafloor transaction with a loan from First National Bank.

The group decided not to recognise certain deferred tax assets as a result of the uncertainty in the South African 
market and this resulted in an additional loss of R3 million.

Earnings per share slumped to negative 16,53 cents per share in the current year, compared to negative 0,88 cents 
in 2017. 

Cash and cash equivalents at the end of the year amount to negative R11,3 million (2017: (R8,6 million)). 


Flooring business (100% owned)
The flooring business operations contributed 78% of group sales.

FloorworX, the largest contributor of revenue to the group, experienced a dramatic decline in sales volumes,
especially in the areas of government spend on education and healthcare. Despite this, the business maintained 
market share, and the operation experienced positive growth in soft flooring and other specialised floor 
coverings.

Pentafloor, the acquisition concluded during the past financial year that added access flooring to Accentuate’s
repertoire of products, was impacted by operating costs such as fuel increases, as well as exchange rate 
volatility. The business managed costs successfully, but the slowdown across the construction and building sector 
has resulted in a reduced profit compared to the previous year.

Environmental solutions business (100% owned)
This comprises the chemical blending business operations of Safic, which contributed 22% to group sales.

Safic experienced an increase in production volume in line with a slight increase in sales volumes. This, 
together with revised pricing agreements, resulted in margin increases. This operation has put a comprehensive 
development plan in place to increase volumes, which is starting to show results. Costs have increased slightly 
due to additional sales people being recruited to drive the new strategy. 


Water treatment business (40% owned)
This comprises the Ion Exchange Safic water treatment business, a partnership between Accéntuate and Ion Exchange
India. The business is equity accounted by the group as an associate. 

Ion Exchange Safic has developed a new strategy, part of which includes the appointment of several distributors, a
process which is well under way. Negotiations with global engineering, procurement and construction contracts have 
begun to take place.


Outlook
Despite poor market indicators and conditions this environment creates opportunities, more so than Accéntuate has seen
in the past.

The dire water situation across the country with the Western Cape slowly recovering from a devastating drought as well
as water restrictions in many other parts of the country, have served to underline the calamitous position the country
will be in if something is not done quickly. In line with this Accéntuate is a participant in the country’s “Water War
Room”. This provides the group with a platform to assist in making recommendations to government.

The flooring division has benefited from the diversification that Pentafloor provided: for now the focus remains on 
the opportunities in the water and chemical blending segments to better balance the profitability of the group.


Going concern
In determining the appropriate basis of preparation of the financial statements, the directors are required to
consider whether the group and company can continue in operational existence for the foreseeable future. 

The group's results during the financial year under review were severely impacted by the adverse trading conditions 
in the South African construction industry. As a result, the group incurred a net loss after taxation of R22 million,
mainly as a result of significantly reduced production volumes at our East London facilities. 

Despite incurring significant operational losses the group's current assets of R144 million exceeds its current
liabilities of R110 million and the group's solvency ratio remains sufficient.

A number of turnaround initiatives have been launched within the group during the course of the current financial
year:
• A restructuring plan was implemented in FloorworX, which included the execution of a retrenchment plan and
  reorganisation within the functions of the company.
• The renegotiation of the lease on the Steeledale premises, which has resulted in a R7 million saving per annum.

The group currently makes extensive use of its main overdraft facilities of R28 million with its financiers and it 
is critical that these facilities are maintained. At year end, the group had R16,74 million in overdraft facilities
available to manage its working capital. The covenants relating to these facilities and the bank loan, with an 
outstanding balance of R14,8 million at 30 June 2018, were breached as a result of poor trading conditions. The 
bank loan has, as a result, been classified as a current liability. Our financiers are, however, assessing 
conditions on a continuous basis and are committed to work closely with management to ensure that the facilities 
are maintained. The going concern status of the group is dependent on these facilities being available.

The cash generating ability the group remains under close scrutiny and a 12-month cash flow forecast based on the 
budget for the group indicated that, if realised, the group will be able to generate sufficient cash to sustain 
its operations and service its financing obligations.

Given the results and conditions mentioned above, management is aware of the fact that the implementation of the
initiatives mentioned is critical to maintain and grow operations in the group. The Accéntuate group is therefore 
dependant on management generating the additional cash flow from the initiatives mentioned as well as our financiers 
continuing to provide overdraft facilities to the group, which gives rise to a material uncertainty regarding the 
going concern status of the group. 

The board considers the group to be liquid but will monitor actual cash flows on a monthly basis against those 
forecasted, to ensure that timeous and appropriate action is implemented, should a material deviation occur.


Board changes
There were no changes to the board in the period under review. 


Dividend
The board deems it prudent not to declare a dividend.


Contingent liability
There are no contingent liabilities in the group.


Basis of preparation
The accounting policies and methods of computation applied in the preparation of these summarised consolidated
financial statements are in terms of International Financial Reporting Standards and are consistent with those 
applied in the previous annual consolidated financial statements, except for the adoption of new accounting 
standards.

The group adopted all of the new accounting standards relevant to its operations and effective for annual 
reporting periods beginning 1 January 2018, including IFRS 9 Financial Instruments and IFRS 15 Revenue from 
Contracts with Customers. The adoption of these new accounting standards has not had any significant impact on 
the results in the summarised consolidated financial statements or the disclosures herein, but resulted merely 
in the reclassification of certain transactions in previously published results. 

The summarised consolidated interim financial statements are prepared in accordance with the requirements of 
the JSE Limited's Listings Requirements for interim reports and the requirements of the Companies Act of South 
Africa. The Listings Requirements require 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 supervised by the chief financial officer, Maarten Coetzee CA(SA).

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.


Appreciation
The board would like to take this opportunity to thank the various management teams for their loyalty and 
dedication during this difficult period. The board would further like to thank all the customers, partners, 
advisers, suppliers and most importantly, the shareholders for their ongoing support and faith.

12 October 2018


Unaudited summarised consolidated statement of comprehensive income
for the year ended 30 June 2018
                                                                  Unaudited                  Restated    
                                                               30 June 2018              30 June 2017     
                                                                      R'000                     R'000    
Revenue                                                             294 893                   295 061    
Cost of sales                                                      (176 012)                 (176 327)    
Gross profit                                                        118 881                   118 734    
Other income                                                          1 795                    12 384    
Operating expenses                                                 (144 126)                 (131 134)    
Operating (loss)/profit before finance costs                        (23 450)                      (16)   
Investment income                                                       486                       145    
Finance costs                                                        (3 520)                   (2 420)    
(Loss)/profit before tax                                            (26 484)                   (2 291)    
Taxation                                                              4 300                     1 139    
(Loss)/profit for the period                                        (22 184)                   (1 152)    
                                                                                                         
Earnings per share                                                                                       
(Loss)/earnings per share (cents)                                    (16,53)                    (0,88)   
Diluted (loss)/earnings per share (cents)                            (16,35)                    (0,86)   
Net asset value per share (cents)                                     79,17                     97,34    
                                                                                                         
Headline earnings per share                                                                              
Headline (loss)/earnings per share (cents)                           (15,85)                    (1,37)     
Diluted headline (loss)/earnings per share (cents)                   (16,01)                    (0,83)                                                                                                        
Number of shares in issue                                                                                
Weighted average number of shares                               134 221 594               130 405 641    
Diluted weighted average number of shares                       137 118 565               133 302 612    
Total shares in issue                                           139 366 188               134 048 757    
                                                                                                         
Reconciliation between earnings and headline earnings:                                                   
Loss attributable to ordinary shareholders                          (22 184)                   (1 152) 
Loss on disposal of property, plant and equipment                         9                        45
Equity-settled share based payment expenses                             906                      (681)
Headline earnings attributable to ordinary shareholders             (21 269)                   (1 788)    


Unaudited summarised consolidated statement 
of financial position
as at 30 June 2018
                                                                  Unaudited                  Restated    
                                                               30 June 2018              30 June 2017     
                                                                      R'000                     R'000    
Assets                                                                                                   
Non-current assets                                                   80 014                    58 885    
Property, plant and equipment                                        61 427                    54 339    
Goodwill                                                              9 751                         -    
Intangible asset                                                      7 141                     1 500       
Deferred taxation                                                     1 695                     3 046    
Current assets                                                      144 025                   131 372    
Inventories                                                          80 234                    80 157    
Trade and other receivables                                          47 003                    47 266    
Other financial assets                                                8 231                     1 726     
Current tax receivable                                                2 027                     2 022    
Cash and cash equivalents                                             6 530                       201    
                                                                                                         
Total assets                                                        220 039                   190 257    
Equity and liabilities                                                                                   
Equity attributable to owners of the parent                         110 341                   130 487    
Stated capital                                                      150 557                   147 613    
Accumulated loss                                                    (67 589)                  (45 755)    
Revaluation reserve                                                  27 264                    27 614    
Share-based payment reserve                                             109                     1 015    
Total equity                                                        110 341                   130 487    
Non-current liabilities                                               3 645                     6 613    
Deferred taxation                                                     3 645                     6 613    
Current liabilities                                                 110 053                    53 157       
Trade and other payables                                             72 732                    41 635    
Borrowings                                                           15 197                         -    
Finance lease obligation                                                360                       706    
Operating lease liability                                             1 271                     1 530    
Current tax payable                                                   2 703                       500    
Bank overdraft                                                       17 790                     8 786    
Total liabilities                                                   113 698                    59 770
Total equity and liabilities                                        224 039                   190 257    


Unaudited summarised consolidated statement 
of changes in equity
                                                                  Unaudited                  Restated  
                                                               30 June 2018              30 June 2017     
                                                                      R'000                     R'000    
Capital and reserves - opening balance                              130 487                   116 506    
Correction of error in equity                                             -                      (721)    
Total comprehensive income for the year                             (22 184)                   (1 152)    
Shares acquired by subsidiary                                          (247)                        -    
Shared issued to acquire subsidiary                                   3 190                         -    
Shares issued for cash                                                    -                     7 500    
Asset revaluation surplus                                                 -                     7 673    
Share-based payment expense                                            (906)                      681    
Restated balance at 30 June 2017                                    110 341                   130 487    


Unaudited summarised consolidated statement 
of cash flows
                                                                  Unaudited                 Unaudited     
                                                               30 June 2018              30 June 2017     
                                                                      R'000                     R'000    
Cash flows from operating activities                                  6 043                    12 477    
Cash flows from investing activities                                (23 815)                   (1 089)    
Net cash used in financing activities                                15 098                     8 206    
Net increase in cash and cash equivalents                            (2 674)                   19 594    
Cash and cash equivalents at beginning of period                     (8 586)                  (28 179)    
Cash and cash equivalents at end of period                          (11 260)                   (8 585)    


Segmental report
                                                                   Environmental                 Corporate and
                                          Flooring                   Solutions                    Eliminations           Consolidated
                                       2018         2017          2018       2017           2018        2017           2018        2017    
                                      R'000        R'000         R'000      R'000          R'000       R'000          R'000       R'000    
   Comprehensive income                                                                                                                    
   Total sales                      229 010      232 999        71 006     67 489         12 273       9 086        312 288     309 574    
   Less: Inter-segmental sales            -            -       (5 123)    (5 428)       (12 273)     (9 086)       (17 396)    (14 514)    
   Revenue                          229 010      232 999        65 883     62 061              -           -        294 893     295 060    
   Gross profit                      92 856       91 034        41 364     39 746       (15 339)    (12 049)        118 881     118 731    
   Operating profit                (19 233)          540       (5 117)    (2 379)           900       1 824        (23 450)        (16)   
   Finance income and costs           (397)      (1 270)       (1 397)    (1 097)        (1 240)          90        (3 034)     (2 276)    
   Profit/(loss) before tax        (19 630)        (730)       (6 513)    (3 475)          (340)       1 914       (26 484)     (2 291)    
   Other information                                                                                                                       
   Capital expenditure                1 991        1 133           281        130            417         333          2 689       1 596    
   Depreciation and amortisation      4 824        3 325           874      1 123            257         164          5 955       4 612    
   Segment assets                   183 598      162 007        26 067     24 132         14 374       3 312        224 038     190 257    
   Segment liabilities               63 851       31 376        25 235     17 166         24 612      11 934        113 337      60 476    


Corporate 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

Registered address
Accéntuate 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
@AccéntuateLtd

Facebook
www.facebook.com/AccéntuateLtd

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 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: 12/10/2018 05:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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