Accentuate CEO Fred Platt
Photo by: Duane Daws
Deteriorating economic cycles in the manufacturing and construction industries saw the Accéntuate group on Monday report an 8.4% drop in revenue for the year ended June 30 compared with the previous financial year, to R308-million.
Profit for the year was 42% lower, at R5.1-million.
The Accéntuate group serves the South African construction, chemicals, infrastructure development and water treatment markets.
“Following exciting developments at the time of completing the previous financial year, including the FloorworX 60th anniversary promotions and the acquisitions of Suntups and Degrachem, it would have been virtually impossible to have foreseen how difficult the coming financial year would be for the Accéntuate group,” said the JSE-listed company in a statement.
“The economic cycles for the manufacturing and construction industries continued to deteriorate beyond initial expectations.”
Other factors also contributed to make the year “incredibly challenging”. These included prolonged industrial action in a number of sectors supplied by the group, “severe upward price pressure” on many raw materials and fuel prices, as well as depressed government infrastructure spend.
The FloorworX division contributed 76% of group revenue.
The lackluster trading conditions experienced by this division continued throughout the year. The market also saw price and margin pressures, and increased competition.
FloorworX increased revenue by 6.7%. However, substantial increases in operating costs saw operating profit drop to R6.6-million, compared with R12.3-million in the previous year.
“Profitability was severely impacted by the weakening of the rand and higher oil prices, which resulted in large increases in the price of diesel and, consequently, dramatically higher delivery costs,” reported Accéntuate.
“There were also significant increases in other administered prices, such as electricity and water. The nature of the markets in which the business operates sees prices generally fixed a considerable time before delivery takes place, which makes it difficult to recover these increases in the short term.”
Accéntuate said it was cautiously optimistic that government would increase its healthcare and education spend, which should have a positive impact on the business going forward.
The environmental solutions division comprises the Safic business operations and contributed 24% of group revenue during the year under review.
Safic faced a continued slowdown in its major markets – the manufacturing and mining sectors – compounded by industrial action, the volatility and relative weakness of the rand, and the impact of administered cost increases.
“The division has taken strong action in further reducing costs, and continues to increase penetration in the commercial cleaning market,” noted the group.
“The growth experienced in the commercial sector has, to a large extent, off-set the impact of reduced trading in the mining and manufacturing areas.”
Safic saw a 13.4% increase in revenue over the corresponding year.
Accéntuate said it was confident that the coming financial year would see Safic make a meaningful contribution to the profitability of the group.
“The business is concentrating on greater specialisation, the positioning of the Cleanfix and SRI ranges of cleaning products, additional metal treatment opportunities, the distribution of the Ion Exchange range of water treatment products, together with further exploitation of the synergies with FloorworX in the areas of adhesives and enhanced maintenance products.”
Accéntuate’s water treatment division comprises the Ion Exchange Safic water treatment business, which is a partnership between Accentuate, Safic and Ion Exchange India.
The division has secured a number of projects, including the supply of a drinking-water plant and water-recycling plant, while also gaining a number of clients in the food and beverage sector.
Accéntuate said it remained positive about its business model, despite facing a number of “serious macroeconomic challenges”.
“Management remains confident that these are largely temporary in nature, and that the group will in the near future be achieving and exceeding the levels of profitability previously achieved.”