Emphasising infrastructure ‘troubles’
THIS IS A company in the wrong place at the wrong time. While Accéntuate is a small cap share listed on the AltX, it’s been around for a while and its underlying business might be quite good in different circumstances. But not now: there’s too much going wrong. Investors should sell and run for cover. First sign of distress is a passed dividend. The reasons are understandable, but the company has now not paid a dividend since the previous interim results to end-December 2009.
Cash holdings are down, its bank overdraft is up and there’s a R33,9m goodwill impairment. Sadly, it gets worse: Accéntuate is in the wrong place because its main businesses are involved in the manufacture and distribution of infrastructural supplies and maintenance products, including flooring, glass, aluminium and chemical cleaning. The wrong time because it describes its interim period to year-end 2010 as the worst within the construction sector in the past 40 years. And it’s positioned at the end of the construction cycle, so there may still be a lot of pain to come.
Then there’s Government, often a big client for construction companies, and especially infrastructure development. Accéntuate says it’s being hurt by Government’s current poor investment in infrastructure. That’s compounded by Government’s “lack of timeous payment for projects completed”.
Prior management also gets some blame for Accéntuate’s woes, which seem to surmount “the troubles” in Northern Ireland. And there’s litigation that’s been launched against the vendors of one of Accéntuate’s businesses, Centurion Glass and Aluminium. It says it’s suing the vendors for a breach of certain warranties when the acquisition took place in 2007. An amount of R10,4m is being sought.
It would be encouraging to argue this is a recovery business, but it’s not. Maybe later. Right now there’s just too much going wrong. At 64c/share its price is already below NAV of 133c/share and tangible NAV of 75c/share. That discount gap could widen further.