Invicta shows it is master of its fate

Invicta, a diversified industrial group, says it delivered “exceptional results” for the year to March 2017 amid exchange rate volatility, the severe drought and continuing political turmoil.

Despite recession in the third and fourth quarters of the company’s financial year, it grew revenue 8.4% to R11.5bn, as attributable profit soared 25.7% to R533m. Headline earnings per share shot up 37.3% to 500c. Operating profit before foreign exchange movements jumped 35.9% to R1.16bn, from R853m in financial 2016.

Mpho Mokotso, an analyst at Avior Capital Markets, said on Monday that the group’s earnings came from tight cost controls and management of the gross profit margin, while its Singapore-listed Kian Ann engineering subsidiary did better.

She said Invicta’s rest of Africa businesses were contributing an estimated 5% to 10% of group profit. The engineering solutions operations opened new branches in Tanzania, the Democratic Republic of Congo and Ghana. This added to the businesses in Zambia, Mozambique, Swaziland, Namibia and Botswana.

Mokotso also said Invicta had sold its building supplies segment to Steinhoff for R732m because it was not core to operations. Competition Commission approval was expected within the next few months.

The group was now focusing on engineering consumables and capital equipment, which included earthmoving and agricultural machinery.

Neil Brown, co-head of Electus Fund Managers, said most of the South African industries that Invicta supplied remained under pressure.

“Invicta’s revenues have been flat for the past four years, where there has been very little growth in the mining, manufacturing, construction and agriculture industries.”

But he also said that Invicta had spent the past financial year improving its management and financial metrics without concluding any large acquisitions.

He said the building supplies group produced only 10% of Invicta’s operating profits and Invicta had no competitive edge in this division. It would rather buy add-on businesses that could be integrated in the engineering consumables and capital equipment divisions.

Invicta CEO Arnold Goldstone said the recession in the third and fourth quarters had tested management. “I am very pleased with the resilience Invicta demonstrated and, despite all these hindrances, delivered more than pleasing results,” he said.