Invicta overcomes 'most challenging market conditions ever' to raise profit by 21%
The investment holding and management company, with products and services in the engineering and the capital equipment sectors, lifted profit for the year by 21percent to R229million after enduring what Goldstone described as the most challenging market conditions they had ever experienced.
“Almost every sector served by the group in South Africa - which makes up around 76percent of revenue - has been under severe economic pressure, with load-shedding and the political uncertainty ahead of the election the two main negative factors that affected us,” he said.
The result was a decline in demand “across our range”, he said. A number of acquisitions in the year contributed R254m to revenue, which was up 5percent to R10.45billion over the year. Further acquisitions were not ruled out in the new financial year, he added.
The challenging trading conditions resulted in a decline in gross margin, while overheads increased due to take-on and rationalisation costs of acquisitions, and once-off costs related to right-sizing some existing under-performing businesses, including the loss of some 200 jobs in distribution.
As a result, operating profit declined from R839m to R690m.
Profit for the year grew by 21percent to R229m, with basic earnings per share up 62percent and headline earnings per share up 93percent, after lower interest paid and a slightly lower tax bill.
A tax dispute with SA Revenue Service (Sars) was settled for R750m and was provided for in the accounts - R550m was provided in prior years and R200 million this year. Approximately R450m had been paid to Sars to date and the balance was payable over the next four years.
In light of the tax settlement and the resultant higher gearing, the final dividend was passed. The net interest-bearing debt:equity ratio increased to 44percent, compared with 28percent at the previous year end.
Tangible net asset value increased to R34.20 versus R31.46 per share at the end of 2018.
The share price fell 2.64percent to R24.00 yesterday morning, which is about a 30percent discount to tangible net asset value. By late afternoon the share was at R23.98.
Engineering Solutions Group’s (ESG’s) revenue grew 15percent to R5.24bn, R254m of which came from acquisitions.
Significant sectors serviced by ESG - mining, manufacturing, agriculture, general industry and construction - all experienced headwinds.
The acquisition of The Forge Industrial Group, which operates mainly in the tool and belting sectors, and of the Driveshafts Parts business, operating in South Africa and Poland, were concluded.
An investment of R331m was made in these businesses. The tool business was amalgamated with ESG’s Man-Dirk business, but major restructuring was required to turn the business around.
“The tool business is expected to be profitable in the first quarter of the new financial year.
“The other core businesses in ESG business have grown and the first phase of the consolidation and rationalisation of logistics operations at BMG World are finally being completed,” said Goldstone.
Goldstone said while trading conditions had settled since the elections, they still remained challenging. Management anticipated a slow return to growth in the economy.
“We will focus on bedding down acquisitions and prioritising cash generation and return on equity,” said Goldstone.