The potentially damaging tax liability facing Invicta Holdings will not derail the industrial supplies conglomerate’s international expansion plans.
Invicta’s offshore thrust has been on the cards for at least three years.
In an investor presentation covering the year to end-March on Monday, CEO Arnold Goldstone said Invicta’s listing on an offshore bourse was on track for conclusion by the end of the new financial year.
"To remind stakeholders, the rationale for this is to enable Invicta to eventually list on an international stock exchange in addition to its current listing on the JSE."
Goldstone maintained the offshore listing would provide improved access to international funding for debt and equity as Invicta looked to expand its international footprint in a "measured and focused approach". Goldstone stressed that a listing would only happen when the right offshore acquisition opportunity presented itself.
To remind stakeholders, the rationale for this is to enable Invicta to eventually list on an international stock exchange in addition to its current listing on the JSE
Invicta’s only offshore operation is 100%-owned Kian Ann, a capital equipment distributor based in Singapore.
In the period under review 79% of revenue was generated in SA with 11% from Asia and the balance from Africa and other markets.
Overall there was a cautious tone to the results with Invicta conservatively tweaking its dividend cover. At the weekend Invicta disclosed it had raised an additional R400m provision for potential tax consequences stemming from the funding of legacy transactions.
The year to end-March financials showed Invicta proposing a 50c/share dividend instead of applying the normal dividend policy of a cover ratio of 3.5 times earnings at the interim stage adjusted to 2.75 times at financial year-end.
Headline earnings before the specific tax provision came in at 464c/share — down 23% on the previous year. This meant the proposed dividend plus the interim payout of 68.64c was covered almost four times by headline earnings.
Headline earnings after accounting for the additional tax provision came in at just 90c/share — down 80% on the previous year.
Referring to the potential tax liability, Goldstone said the board believed the transactions were tax-compliant.
He acknowledged that ongoing uncertainty over the quantum of the tax liability was affecting Invicta, specifically hampering its ability to use equity to fund expansion.
The market on Monday again heavily marked down Invicta’s shares, which at one stage touched a 12-month low of R35.
Goldstone believed the total tax provision of R550m was a pragmatic solution that provided certainty, and was preferable to protracted and costly litigation. "The company therefore continues to negotiate with SARS with a view to reaching agreement regarding the tax consequences of these transactions."
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