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ACCENTUATE LIMITED - Updated announcement relating to subordinated convertible loan agreements

16 April 2019 - 09:53 AM
ACE
Updated announcement relating to subordinated convertible loan agreements

ACCENTUATE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2004/029691/06)
JSE Share code: ACE ISIN: ZAE000115986
(Accentuate or the Company)

UPDATED ANNOUNCEMENT RELATING TO SUBORDINATED CONVERTIBLE LOAN AGREEMENTS

1.      INTRODUCTION

Accentuate is a group of companies involved in the water treatment, chemical blending, industrial and
commercial cleaning and metal treatment sectors, as well as the flooring market.
In terms of section 5.53(b) of the JSE Listings Requirements, shareholders are advised that Accentuate, has
entered into convertible loan agreements with Mr. Frederick Cornelius Platt (Chief Executive Officer), Pruta
Securities (Jersey) Limited (Pruta), Jacana Assets Limited (Jacana) and TBI Strategic Partners Proprietary
Limited (TBI) (collectively the Lenders).

2.      RELATED PARTIES

Mr. Fred Platt, Chief Executive Officer of Accentuate holds a beneficial interest of 5.19% in Accentuate ordinary
shares and is a related party and has loaned R1 000 000 to the Company.
TBI is a material shareholder with a 28.92% holding of Accentuate ordinary shares and is a related party and
has loaned R1 000 000 to the Company.
Pruta holds 8.61% Accentuate ordinary shares and is not a related party and has loaned R1 500 000 to the
Company.
Jacana holds 9.72% Accentuate ordinary shares and is not a related party and has loaned R1 500 000 to the
Company.

The related parties will be taken into account in determining a quorum at the general meeting but their votes
will not be taken into account in determining the results of the voting at the general meeting.

3.      RATIONALE FOR THE TRANSACTION

Accentuate requires loan funding from the Lenders, who have agreed to provide the required loan funding, in
order to meet and, or exceed their covenants in terms of a bank facility agreement.

4.      SUBORDINATED CONVERTIBLE LOAN AGREEMENTS

Accentuate has entered into subordinated convertible loan agreements (the loans) with the Lenders in terms
of which, the Lenders have advanced the loans to the Company, and subject to approval of the shareholders in
general meeting, the Lenders will have an option to convert such loans into a maximum of 16 666 667 ordinary
shares in their sole discretion prior to repayment of the loans, equating to a share price of 30 cents per
ordinary share. The Lenders also have an option, upon a corporate event (as defined), to convert their loans
into ordinary shares at the corporate event price per share less a 15% discount thereon. The loans are to be
repaid by the Company on or before the expiry of a 24-month period.

5.      SECURITY AGREEMENTS

The Accentuate Board has entered into an agreement of pledge and cession of the shares held in Floorworx
Africa Proprietary Limited (Floorworx) and Safic Proprietary Limited (Safic) and authorised the Company as
the sole shareholder of Floorworx and Safic) to provide cross suretyship for the obligations of the Company
and to enter into the following security agreements in favour of each of the Lenders 

                 5.1      Cession of residual book debts of Floorworx and Safic;
                 5.2      A notarial covering bond of stock Floorworx.
        (the security agreements)
6.       COLLATERAL SECURITY SHARING AGREEMENT

The Board has authorised each of Floorworx and Safic to conclude a collateral security sharing agreement with
the Lenders providing for the sharing of the benefits under the security agreements between the Lenders.


7.       CONDITIONS PRECEDENT

The Loan Agreements create an obligation to repay the loan funding to the Lenders, subject to the right of the
Lenders to convert their pro-rata portion of the loan funding into ordinary shares in the share capital of the
Company, provided this conversion right is approved by Shareholders in general meeting.

8.       IRREVOCABLE UNDERTAKINGS

The Company has received irrevocable undertakings from the Lenders excluding the related parties to vote in
favour of the share conversion rights associated with the loans and have advanced to the Company the
funding required, to meet the covenants in terms of the bank facility agreement.

9.       EFFECTIVE DATE

The effective date for the transaction is 29 March 2019.

10.      PRO FORMA FINANCIAL INFORMATION

The pro forma financial information is presented in accordance with the provisions of the JSE Listings
Requirements and the Guide on Pro forma Financial Information issued by the South African Institute of
Chartered Accountants. The pro forma financial effects have been prepared by the management of Accentuate
and are the responsibility of the Board. The pro forma financial effects have been presented for illustrative
purposes only and, because of their nature, may not give a fair reflection of Accentuates financial position,
changes in equity or results of operations post implementation of the transaction. The accounting policies of
Accentuate for the six months ended 31 December 2018 have been used in the preparation of the pro forma
financial effects and are consistent with IFRS. It has been assumed for purposes of the pro forma financial
effects that the transaction took place with effect from 1 July 2018 for the statement of comprehensive
income and 31 December 2018 for the statement of financial position.

 Scenario 1: No conversion
 Unaudited interim results for the 6 months 31 December                                       Pro forma         After
                                                                       Before (cents) (1)                                % change
 2018                                                                                         (cents)
 Net asset value per share                                                          0,68                         0,67      -0,14%
 Net tangible asset value per share                                                 0,60                         0,60      -0,16%
 Earnings per share                                                               -12,05                      -12,15        0,82%
 Headline earnings per share                                                       -7,75                        -7,85       1,27%
 Diluted earnings per share                                                       -11.80                      -10,31        0,82%
 Diluted headline earnings per share                                               -7.58                        -6,66       1,27%


 Weighted average number of Accentuate shares in issue                     133 827 505                  133 827 505         0,00%
 Weighted average diluted number of Accentuate shares in
                                                                            136 724 476                 157 713 643        15,35%
 issue
 Number of shares in issue                                                 139 366 188                  139 366 188         0,00%

Notes and assumptions:

          1.   The Accentuate financial information reflected in the Before column has been extracted from the published interim
               results of the Company for the six months ended 31 December 2018.
          2.   The earnings per share and headline earnings per share Pro forma after are based on the assumption that the
               transaction is effective from 1 July 2018 for the statement of comprehensive income purposes. The net asset value and
                tangible net asset value per share Pro forma after are based on the assumption that the transaction is effective 31
                December 2018 for the statement of financial position.
          3.    None of the loans will be converted to shares and the loans are classified as equity.
          4.    Interest on the loans will not be deductible and withholding tax @ 15% will apply on interest payable on foreign
                shareholder loans.

  Scenario 2: Full conversion
  Unaudited interim results for the 6 months 31                                            Pro forma         After
                                                                    Before (cents) (1)                               % change
  December 2018                                                                            (cents)

  Net asset value per share                                                        0,68                                     5,17%
                                                                                                             0,71
  Net tangible asset value per share                                               0,60                                     5,84%
                                                                                                             0,63
  Earnings per share                                                             -12,05                    -11,88           -1,39%
  Headline earnings per share                                                      -7,75                     -7,58          -2,16%
  Diluted earnings per share                                                     -11.80                    -10,08           -1,39%
  Diluted headline earnings per share                                              -7.58                     -6,43          -2,16%


  Weighted average number of Accentuate shares in issue                    133 827 505               133 827 505            0,00%
  Weighted average diluted number of Accentuate shares
                                                                            136 724 76               157 713 643           15,35%
  in issue
  Number of shares in issue                                                139 366 188               139 366 188            0,00%

Notes and assumptions:

          1.    The Accentuate financial information reflected in the Before column has been extracted from the published interim
                results of the Company for the six months ended 31 December 2018.
          2.    The earnings per share and headline earnings per share Pro forma after are based on the assumption that the
                transaction is effective from 1 July 2018 for the statement of comprehensive income purposes. The net asset value and
                tangible net asset value per share Pro forma after are based on the assumption that the transaction is effective 31
                December 2018 for the statement of financial position.
          3.    All loans will be converted to shares and the loans are classified as equity.
          4.    Interest on the loans will not be deductible and withholding tax @ 15% will apply on interest payable on foreign
                shareholder loans.

11.       FAIRNESS OPINION

The Board of directors must obtain a fairness opinion prepared in accordance with Schedule 5 of the JSE Listings
Requirements to determine that the transaction is fair to the Accentuate shareholders excluding the related
parties and that the Board of directors has been advised by an independent expert acceptable to the JSE.

12.      CIRCULAR TO SHAREHOLDERS

A circular containing full details of the transaction as well as a notice to convene a general meeting of
Shareholders in order to consider and, if deemed fit, to pass with or without modification, the resolutions
necessary to approve and implement the transaction, will be made available to Shareholders in due course.


Johannesburg
16 April 2019
Designated Adviser: Bridge Capital Advisors Proprietary Limited

Date: 16/04/2019 09:53:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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