Invicta Holdings hoping to break even
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CAPE TOWN - Invicta Holdings, which yesterday reported a R673.3 million loss for the year to March 31 compared with a R126m profit previously, hopes to break even in the first half of 2021.
The share price shot up 18.9 percent to R9.75 yesterday morning, but was still trading well below the more than R23 per share at the start of the year.
Many of its industrial product and capital equipment sales operations were significantly impacted by the lockdown, with operations running on skeleton staff.
Despite the annual loss, the board said there was sufficient funds to pay debts over the next 12 months, and measures to defer or cut costs remained in place.
Revenue since the March 31 year-end was still tracking below volumes of the prior year, but cost containment measures had meant that the initial level 5 losses were recovered, making a 2021 interim break-even possible.
Some R37.5m would be spent on retrenchments. Agreements had been reached with bankers to establish new covenants for the next six months.
Invicta’s audit committee, under chairman David Sammuels, identified five major risks that illustrate the uncertain environment that industrial companies in South Africa trade under.
The first risk was the decline in manufacturing, capital expenditure and foreign direct investment, which were “lead indicators of the potential de-industrialisation of South Africa,” resulting in flat or declining group revenue and profitability.
The group’s risk response was to seek geographical diversification to growing industrial regions, and to diversify away from South African markets and products.
The second risk was the business model, which needed to adapt to new market realities based on declining demand, “making current business processes redundant or inefficient.”
The appropriate risk response was to develop digital platforms throughout the various businesses, and to restructure the operational framework.
The third risk was the Covid-19 pandemic, and that a “permanent setback to South African and world growth has become a distinct possibility.”
The response was to adapt management focus to ensure cash preservation, and expenditure reductions, in line with new levels of business activity.
The fourth risk was “a high risk of labour and political instability following growing economic hardships, which could disrupt economic and business activities.”
The risk response was to diversify geographically to more stable regions.
South Africa’s electricity supply was the fifth risk, with the appropriate response to invest in a power supply independent of the national grid.
In the past year, revenue fell marginally to R10.04 billion from R10.45bn previously. The bank and cash balance was healthy at R1.13bn at year end, up from R935.7m previously.