Invicta delivers strong interim performance

Investment holding and management company Invicta Holdings achieved a robust performance for the six months ended September 30, with revenue having increased by 12% to R4.3-billion.

The increase of R461-million was made up of R178-million from the South African operations, while the rest of Africa contributed R89-million and Europe and America contributied the balance of R194-million.

“Management has kept a tight grip on operations and the disposal of some noncore properties generated cash, which was used to buy back both ordinary and preference shares.

“This, together with solid operational performance, resulted in an improvement in net profit of 8% to R356-million, with earnings a share improving by 12% to 304c,” CEO Steven Joffe highlights. 

He adds that the group kept headline earnings a share in line with the prior period, despite a higher net finance cost owing to higher interest and a preference dividend of R25-million.

The focus will continue to be on debt reduction, as higher interest rates have meant an increase in net finance costs of R23-million, which were mainly offset by the R18-million improved contribution in equity-accounted earnings from Kian Ann.

Invicta highlights that it produced strong results against the background of volatile currencies and an uncertain global macroeconomic and political environment.

The weakening of the rand from R19.81 to R23.48 against the pound and R16.31 to R18.66 against the dollar boosted revenue on translation of the group’s foreign operations.

The gross profit margin of 32.6% held steady from 32.5% in the comparative period, with gross profit increasing by 12%, from R1.2-billion to R1.4-billion.

“Sustainable selling, administration and distribution costs, adjusted for one-off items, increased by 7% when compared to the prior period, which we believe is a commendable outcome,” Joffe avers.

Equity-accounted earnings from investments in joint ventures increased by R20.6-million, or 23%, from R90-million to R110-million, of which Kian Ann contributed 21%, through the sale of a property, which resulted in an R33-million gain on the sale.

KMP Far East contributed the remaining increase in equity-accounted earnings of joint ventures. Net profit for the period thus increased by 8% from R330-million to R356-million.

Invicta repurchased about 1% of its ordinary shares and 3% of its preference shares in issue during the period, to the value of R49-million, resulting in earnings a share increasing by 32c from 272c to 304c apiece.

Headline earnings a share increased slightly from 268c to 269c apiece.

Cash generated from operations before working capital changes increased by 9% from R469-million to R513-million, with working capital absorbing R190-million, resulting in cash generated from operations increasing from R290-million to R322-million.

The board intends paying dividends on a yearly basis by applying a cover ratio of between 2.75 and 3.25 times on sustainable earnings.

Effective July 3, Invicta acquired a 100% shareholding in Imexpart, which is based in the UK, for £4.7-million (about R113-million).

Imex distributes a wide variety of truck and bus parts for DAF, Mercedes, Volvo, MAN, Iveco, Renault, Scania and Cummins engines and carries a full range of replacement parts, including amongst others bumpers and step panels, for trucks.

The acquisition provides an opportunity to distribute RPA-Auto Agri products through Imex, which has been incorporated into the RPA segment since the acquisition date.

OUTLOOK

Joffe reiterates that the group strategy to build both a geographically (with 50% of the group earnings outside South Africa) and sectorally diverse business by 2026, will be tempered by the careful evaluation of growth and acquisition opportunities.

“Prevailing market conditions, notably the current high interest rates and tough trading conditions experienced worldwide, as well as rand volatility and loadshedding locally, remain a challenge.

“We are confident that Invicta is well positioned in this context, given our relatively low level of debt, to continue to provide sustainable returns to shareholders. Our current initiatives include conversion to solar power at selected sites in South Africa, and a limited share buy-back programme funded from capital receipts,” he explains.