Industrial holding and management company Invicta wants to grow internationally as it benefits from the weaker rand and reduce the effect of a muted SA market.
The company, chaired by billionaire Christo Wiese, is seeing a resurgence in mining in the Democratic Republic of Congo (DRC) while it continues to operate in Mozambique, but CEO Steven Joffe told Business Day that Africa is doing well, particularly on the east coast.
“There are growing inquiries into that market, although we don’t have a physical presence there. That is something we are actively investigating at the moment,” he said after the release of its results for the year to end-March.
Foreign companies flourishing are helping Invicta, which distributes earthmoving, industrial, automotive and agricultural products and provides technical support, as it reported a foreign exchange gain of R439m in part because of the weaker rand.
This lifted its net asset value (NAV) per share — total assets minus total liabilities — more than one-fifth year on year to R46.34, helped by Singapore-based replacement parts supplier and manufacturer Kian Ann in which Invicta has a 48.8% stake.
Joffe said Invicta takes “no joy” from a depreciating rand, but said that despite generating more than three-quarters of its revenue in SA, about 60% of net profit was generated outside the country.
“I would like to see more of the other businesses [apart from Kian Ann] having offshore exposure as well,” he said.
Invicta is on the lookout for possible acquisitions, but could not find any to which Joffe felt the company could add value.
Instead, it opted to reward shareholders by buying back about 5% of its shares for R131m as the share continues to trade at a discount, and hiked its dividend 11.1% to 100c.
Smalltalkdaily analyst Anthony Clark said buying back shares is the best use of Invicta’s money right now, because offshore transactions are “prohibitively expensive”.
Invicta also benefited from the lifting of all Covid-19 restrictions over the past year in the various countries it operates, and moving its Ukrainian warehouse from Chernihiv to Lviv.
“With the lifting of Covid-19 restrictions, we focused on visiting our clients and suppliers and attending trade shows,” the company said.
This boosted overall revenue 8.1% to R7.8bn, while gross profit margin improved by 1.8 percentage points to 32.5%.
Headline earnings per share, a common profit measure in SA that excludes certain items, jumped 47.9% to 488c and by 42.3% for continuing operations.
Profit was down more than a third to R587.2m because of discontinued operations, but improved 12.8% for continuing operations.
Companies worldwide are having to contend with high inflation, interest rate hikes and the fallout from the war in Ukraine, while local companies face the added pressure of power cuts and water supply disruptions.
For Invicta, this meant price hikes from suppliers, currency volatility and supply chain challenges, such as shipping and logistics disruptions.
The replacement parts services and solutions for industrials (RPI), Invicta’s largest segment by revenue, reported a 7.6% rise in revenue to R4.8bn, and 29% growth in operating profit to R317m.
Mining remained the largest industry RPI served as it sells products such as engineering tools and equipment to gold, coal, platinum, chrome, copper, manganese and diamonds mines.
Invicta said it will focus on cutting its net debt amid global uncertainty caused in part by the war in Ukraine, which has triggered higher inflation and led to rising interest rates.
“Having a relatively debt-free business gives you time to respond to difficult situations and at the same time provides the capacity for us to implement our acquisition strategy, should the opportunities arise,” Joffe said.
Update: June 26 2023
This story has been updated with new information.
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