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.

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