JSE-listed flooring and chemicals manufacturer and distributor Accentuate on Friday reported a R74.6-million loss for the year ended June 30, down from a R12.2-million profit in the previous year. These results were much in the same vein as those delivered by a raft of other companies active in the local construction sector over the last month or two.

Accentuate’s revenue for the year was R250-million.

The company blamed difficult trading conditions in the construction and construction supply industries for the strong move into the red.

The company also noted that its acquisition of the glass and aluminium fitment business, Centurion Glass and Aluminium (CGA), had not met its strategic objectives and that it was disposing of CGA, which had seen a 40% decline in business over the year.

This had resulted in a R70.8-million impairment, which, after a profit of R8.8-million from continuing operations, culminated in a bottom line loss of R74.6-million for Accentuate.

“We acquired a business in CGA that has not lived up to our expectations and we are consequently disposing of it. The business we bought and the business we got was not the same animal,” said Accentuate CEO Fred Platt. “We cut 30% costs out of CGA, but we can’t see the industry turning in the next two years.”

While negotiations were underway for the sale of CGA, Platt was of the opinion that the warranties furnished in terms of the acquisition were not properly fulfilled by the vendors. The company was now taking legal steps against them, claiming R10.7-million, to enforce their guarantees.

Platt said the decline in construction activity had continued post the 2010 FIFA World Cup, failing to pick up any meaningful momentum in 2011.

Aggravating matters was the fact that the local construction industry had been experiencing “major infrastructure project bottlenecks”, which had resulted in contract award delays, fewer awards, fiercer competition for the limited amount of work available, as well as “huge pressure on margins”.

STAR PERFORMERS

Accentuate’s core businesses, flooring supplier FloorworX and chemicals company Safic turned in strong results, despite difficult market conditions, noted Platt.

FloorworX saw a turnaround in the second half to end the year with earnings up R1-million on the previous financial year. However high energy costs, fluctuating commodity prices and the strong rand remained challenges for the division.

Going forward, Platt said the focus of this business would be on expanding its product range – the company specialised in vinyl flooring, but would soon be introducing a range of carpet tiles – as well as growing its distribution network, especially into Africa.

Safic had also been affected by the slowdown in the economy, but the introduction of a range of new products, including easy dilution concentrates in sachets for the general cleaning industry, the development of adhesives for the tile and carpet industry, as well as a move towards a more annuity income based business model, should result in more sustainable divisional earnings in future.

Platt noted that 28% of Safic’s revenue was already secured on annual contracts.

Looking ahead, he said the cash from the sale of CGA would be used for the expansion of FloorworX and Safic, both through organic growth and strategic acquisitions.

“We have always said we have strong businesses and we’ll keep on using these businesses as leverage. Right now we are in the subfloor business, the floor business and the maintenance products required by these.”

And, while Platt expected the economy to remain under pressure in the current financial year, he believed “pent up demand would no doubt result in the long-anticipated wave of government spending materialising in the not too distant future”.

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