A big-picture focus
Invicta Holdings, one of SA’s fastest-growing industrial businesses over the past decade and a half, will find it a grind to re-engage its growth engines over the short term.
Fundamentals, especially in SA and elsewhere in Africa, are still looking brittle for the industrial supplier. It has a wide range of operations, from engineering consumable parts and technical products to the industrial and mining sector, agricultural equipment and parts, construction equipment and parts as well as tiles, sanitaryware and building supplies.
Invicta’s offshore presence, mainly through Singapore-based engineering supplies group Kian Ann, probably won’t compensate for local trading woes.
Of course, trading cycles do turn and those investors willing to bank on a long(er)term recovery in the local economy might regard Invicta as a stock to accumulate at current levels. The share price at the time of writing — if normalised earnings are estimated at 700c/share — suggests Invicta offers good value for patient, stoic investors.
The share is trading at less than half the R123.12 high seen in late 2013 — though investors do need to factor into the equation a large R20.24/share special dividend paid in February 2015. 12,000 10,000 8,000 6,000 4,000 2,000 0
But there will need to be evidence of growth traction before sentiment sparks again.
The performance priorities outlined by CEO Charles Walters for the 2017 financial year include growing revenue and earnings by 12% and, at the same time, controlling overhead costs and working capital levels. Reassuringly in these tremulous times for industrial suppliers, the operating cash conversion rate has been set at 75%.
Invicta also needs to complete, on time and within budget, an expansion project at core subsidiary Bearing Man Group (BMG).
This is aimed at fattening the operating margin at BMG, which is the biggest single contributor to the revenue line, to above 10%.
Walters also highlighted the continued expansion of an African branch footprint and the further expansion of the South-east Asian branch footprint.
While it’s understandable that management are emphasising inward-looking efforts on margin protection, cost efficiencies and working capital optimisation, the sense remains that Invicta still has a bigger picture firmly in its sights. review, chairman Christo Wiese stresses the group’s strategic