“The role of CFOs in organisations has not changed as much as some people like to think it has,” says Chris Povall, Chief Financial Officer at Accéntuate Limited, a listed South African company that specializes in vinyl, laminate and wooden floors, chemicals for the flooring industry and a broad range of cleaning chemicals. Povall is a highly experienced finance leader, having held influential positions at Impala Platinum, Times Media, Chemical Services and Protea Chemicals. “What has changed is the technical and compliance side of the job: rules, regulations, IFRS… there are more and more regulations and standards to comply with. Each day we have to do more with less.”
Several Chief Financial Officers have told CFO South Africa in recent interviews that they feel their role is moving more towards strategic leadership, away from the pure accounting and financial reporting. That is true, but this development is part of a broader shift in how corporate leaders handle their businesses, suggests Povall. “Not only the CFO has become more strategic, the whole management team has moved much more towards risk assessment and strategic thinking in the last twenty years. CFOs sometimes imply that they are the only ones who are affected, but business in general has moved in this direction.”
What has changed significantly for Povall is his own day to day work since he joined Accéntuate last year. “My role here is different. It is a much smaller business than where I have worked before. If I want something done here, I often have to do it myself. Instead of reviewing management accounts, I am largely putting them together.” As is the case for many CFOs working in smaller and medium-sized South African firms, that can be quite a juggling act. “It would be useful to have a little bit more help, especially with the time consuming technical issues. This should become attainable as we grow the business.”
Accéntuate is home to the 60-year old flooring company FloorworX, which currently contributes more than three quarters of the company’s revenue, and the chemical operations of SAFIC. Povall says Accentuate “is actively looking to add to our current business and spread into related areas to broaden our base”. According to the experienced CFO expansion is a must for Accéntuate. “We have to grow - we’re too small to be listed in our present form. It is an ongoing part of my job to look for and assess acquisitions.” Povall says it is difficult to predict when acquisitions will happen. “I have done about 40 acquisitions in my previous roles and it is strange how these things go: you talk and assess, walk away from a few and suddenly you get 3 or 4 at the same time. It’s similar to when you don’t see your mates for months and then suddenly you see them all in the same week.”
The main markets for the locally produced vinyl flooring solutions are government and quasi government institutions. However, there is renewed interest from developers of shopping centres, office complexes, private healthcare and upscale residential developments for modern specialised vinyl flooring solutions. Vinyl floors are the go-to flooring solution for schools and hospitals, but activity in that space at the moment is disappointing, says Povall. “Government spending is not on the level it needs to be. The budgets are not being spent on the right things. Money goes to salaries instead of infrastructure. If a proper school building would be constructed for every school that takes place under a tree or in a mud hut, we could run our factory in East London at 100 percent of capacity. The government has committed to build five hospitals, but only half of one has so far been built. We are concerned about the upcoming elections. The decision making process in government is pretty cumbersome anyway and we fear it could slow down decisions even more.”
The uncertainty hurts Accéntuate, Povall admits. “These are big contracts. A new hospital where we supplied flooring recently has about 1,2 kilometres of passage floors. ” It’s a challenge for a CFO to deal with such sizeable risks. “Our group management and the marketing people communicate a lot with the relevant institutions in the background. The government does not have good management skills and we try to introduce them to these skills. But we have to manage our own business based on what we can reasonably expect and the orders actually received.”
That means Povall needs to be the watch dog amongst his colleagues. “We can’t structure our business on what might be. You can only manage what is in front of you. My role is to ensure we manage realistic expectations. The sales guys need to be positive, but if they say we can double our sales in a year, I have to provide realism. It’s not that I am overly conservative, but I aim to provide a likely view versus a pipedream. The sales people have to have that pipedream, because they are hunting for the big fish.”
FloorworX is the only local manufacturer of vinyl flooring, but that does not mean the company gets all the contracts. “Sometimes you wonder, when a government department gives a contract to a company that imports from China on terms and conditions no better than ours, but historically we are often the preferred supplier.” Povall thinks it’s up to his own company to maximize the benefit from its deep South African roots. “We recently ran a major marketing campaign when FloorworX Celebrated its 60th anniversary. This time around we have been highlighting our South African base, something I am not sure was very well known. We have not always maximized the benefits of being a local manufacturer.”
Povall admits is has become a tricky business to produce vinyl floors in the East London factory. “These days, nobody in the world would build a plant as small as ours. The large Chinese factories produce in a matter of weeks what we can make in a year. With the addition of the shipping costs they can still be competitive.” That means the factory manager is expected to continually put on the squeeze. “We have to maximize efficiencies, reduce costs and keep the volumes up. The more we are manufacturing, the lower the cost per square meter. We vigorously compare our cost base to imported cost. “There is the easy comparison of Rands and cents, but there are also the strategic considerations of being a local manufacturer.”
FloorworX has now started offering iPad apps for architects, interior designers, quantity surveyors and other professionals who need to know about the flooring solutions. “It is a way to get our product ranges and specifications at the fingertips of the people who need them. “It is a modern version of the rep who comes to your house with a bundle of samples” says Povall. It is those same South African professionals that are assisting with the introduction of the FloorworX vinyl, laminate and wooden floors in the rest of Africa. “Our products are often not those traditionally used in other African markets, so we basically have to create a demand. There is more competition, the closer you get to Europe and the East, but we are making inroads with local architects, surveyors and specifiers. We find that when the South African fraternity gets employed elsewhere in Africa they know our products and often specify them. Our reputation for high quality products, outstanding customer service and competitive pricing continues to grow.”
If you also would like to share your ideas with the CFO community, please get in touch with us to arrange an interview with you.Please contact Jurriën Morsch on [email protected].
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