The six months to end December 31 was one of the most difficult periods for Accéntuate in its just more than ten years as a JSE-listed company, says CEO Fred Platt.
Speaking at a results briefing in Johannesburg on Monday, he said the flooring and chemicals company experienced particularly poor trading conditions owing to the municipal elections held in the period under review, as a result of delays during the run-up to the elections, as well as in the period afterwards, when no meaningful project decisions were made or implemented by government departments and institutions.
Platt said the impact of the election was particularly dramatic, with the trading lag even longer than in previous elections, especially in metros where a change in the ruling party and administration were made.
This impact, coupled with negative economic growth in the manufacturing, mining and construction sectors, resulted in revenue for the six months to end December 31 dropping to R159-million, compared with R173-million in the same period in 2015. Operating profit declined to R6.1-million, down from R10.8-million.
In light of the economic slowdown, Accéntuate’s businesses focused on maintaining market share, reducing costs and improving management of working capital, said Platt.
FloorworX has further reduced its production schedule in order to reduce inventory build-up. Further initiatives to improve efficiencies and margins while operating at reduced throughput are planned.
FloorworX contributed 79% of group sales.
Revenue of R127.7-million was down 7.2% compared with the previous period. FloorworX ended the period with an operating profit of R5.9-million, compared with R7.5-million in the corresponding period.
Income from government at FloorworX has decreased from around 60% to 40%.
The Safic business was impacted by currency volatility and ongoing volume reductions by a number of key customers.
Safic contributed 21% of group sales.
Revenue for the period declined by 11.1% to R34.9-million. The business posted an operating loss of R899 000, compared with a profit in the previous corresponding period of R997 000.
The Ion Exchange Safic water treatment business, which is a partnership with Ion Exchange India, had secured a number of new customers, said Platt.
Looking ahead, Platt believed the lag in the implementation of government infrastructure projects, particularly in transitioning metros, was over. However, financial pressure within the fiscus remained.
He said Accentuate was taking steps to grow its businesses to critical mass, particularly in the chemicals and water treatment sectors.
While not yet able to elaborate on these steps, he said the main objective was to counter the reduced spend by government on infrastructure and upgrade projects.
“We need to bulk up the chemicals business. The water business needs the correct structure to execute its projects. We are busy with activities that will meaningfully change the organisation going forward.”
Platt said that Accéntuate was pursuing a market capitalisation of R1-billion in order to “be a meaningful company on the JSE”. Current market capitalisation was around R106-million.
Platt added that Louis Schreuder, the former FloorworX FD, was found guilty on all counts of fraud, to the value of R70-million, in the regional court in East London, in November. He received an 18-year prison sentence.
A confiscation order has been granted over certain of Schreuder's assets and the first auction was held in December to liquidate most of these assets.