If Accéntuate wanted to justify the costs of being a listed company, it would have to grow, said CEO Fred Platt on Thursday.
Announcing the company’s results for the six-month period ended December 31, he said the flooring infrastructure and chemicals group would look to increase in size through carefully selected acquistions, as well as organic growth.
However, Platt said growing from the current yearly revenue base of between R250-million and R300-million to R1-billion, meant there was “be a limitation, realistically, as to how far organic growth can take the company”.
Accéntuate returned to profitability in the six months ended December, following significant losses for the year ended June 2011.
The group reported net profit of R5.2-million for the period, compared with a loss of R30.3-million for the previous comparable six months.
Turnover was up 12.2% to R143-million and headline earnings a share up 99% to 6.86c a share.
Around 65% of group turnover came from government sources, with Limpopo, currently under national government administration, a problem client in terms of slow payment, or contracts being placed on hold.
Accentuate’s six-month performance was boosted by an “exceptional result” from the flooring division, FloorworX, said Platt, even if this business operated in what he described as a “generally depressed” market.
FloorworX’s revenue for the period was up around 10% to R106-million. FloorworX’s margin was up too – from 5% to 8%.
The division now contributed around 74% of group revenue.
Platt said Accentuate’s turnaround was also assisted by stemming the cash hemorrhage from loss-making subsidiary Centurion Glass and Aluminium (CGA), which was disposed of in September last year for R9.5-million.
Accentuate acquired CGA, which manufactures and installs purpose-made aluminium windows for the construction industry, in 2007, but the business failed to live up to its earnings expectations.
Accentuate had subsequently instituted legal proceedings against the vendors of the business for breach of their warranties.
The group's Environmental Solutions division also turned in an improved performance for the six months ended December 31.
Revenue from this division was up 21.5% over the previous comparable period, to R36-million.
Platt said the improvement was owing to increased annuity income for the division, an uptick in project work and an improved ability to cross-sell additional projects into FloorworX.
“We are confident that with the disposal of CGA and a renewed focus of our core competencies, Accentuate can now put the difficulties experienced behind it and focus on an exciting new purpose and direction for the company."
Platt emphasised that any growth or acquisition would be limited to the company’s core competencies.
He also noted that the company continued to operate in a lacklustre macroeconomic environment.
The construction sector remained depressed with no meaningful upturn in private project-driven construction activity and only sporadic public sector infrastructure spending.
Platt said while he was encouraged by government’s renewed commitment to infrastructure spending, as noted in President Jacob Zuma’s State of the Nation address, the lack of capacity at provincial and local government level was still impeding infrastructure delivery.
However, he said FloorworX had noticed a recent acceleration in infrastructure spending on classrooms, as well as hospitals, clinics and residences for the Department of Health, which augured well for the future.
“Even a limited increase in spending in these areas has a significant impact on the performance of FloorworX and Accentuate.”
While the second half of the financial year was likely to remain challenging, Platt said he was confident that the dominant position held by the group in the markets it operated in would ensure that it would “continue to deliver acceptable results for the full 2012 financial year”.