Invicta Holdings’ shares take 15% hit before recovery

INDUSTRIAL product and solutions group Invicta Holdings’ share price fell as much as 15 percent yesterday morning after announcing that it is considering non-core asset sales, inventory reductions, debt realignment and a possible equity raise.

The group, which has Christo Wiese as its major shareholder, said a strategic and operational review would depend on “further consideration and relevant market conditions”.

The share price recovered somewhat later yesterday afternoon, and was trading at R13.65, which was nevertheless 4.55 percent lower than the opening price. The share price had reached as much as R18 in January this year. It closed the day at R13.50.

In the six months to September 30 last year, Invicta, which has a small stock market capitalisation of around R1.8 billion, reported sharply higher headline earnings per share at 149 cents, from only 7c in the comparable period a year before, principally due to the non-recurrence of a tax provision. Revenue was flat for the interim period.

Invicta had reached a settlement with the SA Revenue Service in 2018 following a tax dispute related to a previous empowerment structure in the group – it would pay R750 million over four years, and additional taxation was expensed in 2018.

Invicta’s long-term borrowing and liabilities stood at R2.28bn at the end of the interim period, more than its market capitalisation, and up from R1.85bn at the end of the 2018 interim period. The interim dividend was passed due to the tax settlement. Cash generated improved to R518m from R99m.

Invicta’s Engineering Sales Group, which is involved in the sale of bearings, belts, tools, electric motors and hydraulic equipment, has suffered from the weak local economy.

The Capital Equipment Group sells agriculture, construction and earthmoving equipment and forklifts. This division faces tough trading conditions from the downturn in construction.

The Simply Wall St stock analysis website noted at the end of last month that the share is held by some institutions in spite of little analyst coverage and its low market capitalisation.

It said that the group appeared to have become profitable again. However, risk factors were its earnings decline over the past five years, the fact that debt was not covered well by operating cash flow, and the fact that the share price had been “highly volatile” over the past three months.