Accentuate CEO Fred Platt
Accéntuate has wrapped up the fraud case that saw R70-million disappear at the JSE-listed flooring, water and chemicals specialist.
CEO Fred Platt said on Wednesday that the guilty party – a director at its East London operation – had been charged and found guilty of fraud and theft. Sentencing was imminent. In addition, a number of assets had been confiscated and handed over to Accéntuate.
These assets include paintings, jewellery, Persian carpets and property.
“We think we may be able to recover a substantial amount, but not all of it,” said Platt in Johannesburg as he announced the company’s results for the year ended June 30.
He noted that the fraud occurred in systematic fashion over a ten-year period, ever since Accéntuate took over the East London operation.
Platt described the fraudster as a professional criminal “who built the hole when the accounting system was put up. He stole at a consistent pace so no-one would notice.”
The fraud at FloorworX Africa, a 100% subsidiary of Accéntuate, had a big impact on accounting practices at the company.
Platt said that although management believed the amount misappropriated had already been expensed through the income statement, a subsequent investigation showed that R17.6-million had been incorrectly reflected in the balance sheet to account for the misappropriated funds.
“To ensure that shareholders are provided with the correct comparative information and to ensure compliance with the highest reporting and accounting standards, the board deemed it appropriate to restate the previous financial results to reflect these transactions in the periods in which they occurred.”
The matter was reported to the Independent Regulatory Board for Auditors.
“A number of steps have been taken to fully understand the extent of the fraud, evaluate the control environment to detect any further weaknesses and to take the necessary remedial action to avoid a recurrence, as well as ensure a strong and reliable reporting foundation for the anticipated growth across the organisation,” said Platt.
Profit Up
Accéntuate inched up revenue by 1.3% for the year ended June 30, to R322.7-million. Operating profit grew from R3-million in the 2015 financial year, to R13.4-million.
Looking at the broader operating environment, Platt said the downturn in the local economy continued in the year under review, with economic growth slowing to “virtually zero” during the second half of the financial year.
“[This] was compounded by the slowdown in the allocation of government contracts in the run-up to the municipal elections held in August.
“The weakness in the private and public construction environment, as well as in the industrial and mining sectors, impacted on group turnover due to the significance of these sectors in its operations.
“The effect of the significant currency volatility made it difficult to manage input costs and pricing.”
Platt said he did not expect the local economy to improve significantly in the short term.
The FloorworX business operations contributed 79% of the group sales.
The Environmental Solutions business, which includes Safic, contributed 21% of group sales.
The Ion Exchange Safic Water Treatment business, of which Accéntuate owns 40%, is a partnership between Accéntuate and Ion Exchange India.
Platt said this business had seen a “pleasing improvement in new business”, particularly in the second half of the financial year.
“Management remains firm in its view that this business has the potential to become a major contributor to the growth and profitability of Accéntuate in the future.”
Looking ahead, Platt said growth for the flooring division depended on export initiatives, including to North America and Australia, as well as government’s infrastructure roll-out.
Greater marketing focus, increased contract-based business and process chemical supply, and the return of traditional markets to some form of normality, may see Safic improve its performance.
In order to gain critical mass, further acquisitions are being assessed.
Platt viewed ‘critical mass’ as a company earning R1-billion in revenue.