CAPE TOWN - Listed investment holding and management company Invicta Group yesterday reported a massive 81percent decline in headline earnings a share to 90cents for the year-end to March after a specific tax provision of R400million.
The group yesterday said that before the tax provision, its Heps slid 23 percent to 464c during the period. It said its board had noted stakeholder and market commentary over the potential tax consequences of certain transactions which it entered into several years ago.
“Based upon advice received, the board is of the view that the transactions are tax compliant,” Invicta said. “However, the board is also of the view that the ongoing uncertainty is affecting the group and hampering its ability to use equity to fund expansion, and therefore that a pragmatic solution, which provides certainty, is preferable to potentially protracted and costly litigation.”
The company said it was negotiating with the SA Revenue Service to reach an agreement on the tax consequences of the transactions.
“Taking all the above considerations into account, the board has concluded that R400m is the best estimate of an additional provision.”
It said that if an agreement was not reached with Sars, on the basis that it elected to issue revised assessments, the group would defend its position fully.
Portfolio manager at Mergence Investment Managers, Peter Takaendesa, said operational results were weaker than market expectations.He said uncertainty on the tax dispute with Sars had increased, as evidenced by the company making such a significant provision.
“The mid-term outlook remains challenging also, as the sectors of the economy they are exposed to remain weak and the normalisation of tax payments from this year will be key headwinds to earnings growth,” Takaendesa added.
The group said that in South Africa its performance was also affected by low economic growth, political uncertainty and low business confidence during the period, which accounts for 77percent of its revenue.
It said international operations showed improved growth, while revenue from continuing operations, when compared with last year, was flat at R9.6billion, the company reported a 3.1percent decline in gross profit to R2.98bn.
“Although costs were strictly controlled and increased by only 0.8percent, the resultant operating profit before foreign exchange movements showed a decline of 10.6percent from R1.05bn to R940million. Net foreign exchange costs increased by R30m from R41m to R71m,” the group said.
Invicta shares declined 8.36percent on the JSE yesterday to close at R36.70.