Invicta, which focuses on the industrial and auto-agricultural sectors, plans to reduce its debt load in the second half after suffering foreign exchange losses in the first half due to a stronger rand.
The JSE-listed firm, chaired by Christo Wiese, said it remained on the hunt for cash-generating businesses to acquire and was committed to an offshore expansion strategy.
CEO Steven Joffe said he was confident that the group could generate sufficient cash and conclude the disposals of noncore properties to return its debt levels to about R500m from the R1.2bn it reported on in last week’s interims.
Debt for the six months to September rose R523m after the R703m repurchase of 6.9-million preference shares.
According to Joffe, Invicta has been moving forward with the sale of its Kian Ann warehouse in Singapore, with most of the regulatory licences obtained. The sale will be finalised in January.
“We just sold a very big warehouse in Singapore for 63-million Singapore dollars (R850m). From that, we’re going to declare a dividend of 40-million Singapore dollars, with our share being 20-million of that — which will be used to reduce debt,” Joffe told Business Day.
“That, together with our normal cash flow over the six months should bring us down to about R500m of debt, which is about where we were at the beginning of the year.”
Invicta made acquisitions totalling R158m and distributed R161m in dividends to shareholders, but the group’s results were also affected by forex losses that ultimately caused a 14% drop in headline earnings per share.
“The rand’s resilience is due to domestic fiscal improvement and global risk sentiment, especially as markets digest president-elect Donald Trump’s trade policies,” TreasuryOne currency strategist Andre Cilliers said.
However, for the month of November, the rand lost 2.5% to the dollar, cutting its gain for the year to date to 1.3%.
Joffe said the R3.3bn JSE-listed organisation remained dedicated to an offshore expansion plan and actively seeking businesses to acquire, even in the face of currency volatility.
“We won’t hedge against dollars ... but we will continue to hedge against rand devaluation,” he said. “Already the rand has started to come back, so it’s never a one-way bet.”
Invicta recently restructured the US and UK-based KMP operations into the Kian Ann joint venture — in which it has a 48% stake — as part of a bid to further consolidate and leverage its earth-moving businesses.
The group also bought 100% of National Bearing Company in the UK. “We know the bearing business quite well and it’s done remarkably well since we bought it,” said the CEO.
Joffe previously said with the government of national unity in place, Invicta would also look favourably at investment opportunities in SA which it did not see previously.
He said Invicta was looking into several organic and acquisition options that satisfied the group’s investment requirements, expressing confidence that shareholders would support the impending actions, particularly after debt reduction.
“We are actively looking for businesses to buy in our Kian Ann joint venture. And, we’ve just opened up a new warehouse in our auto business in Spain. We’re looking to grow our business into West Africa with a headquarters in Ivory Coast,” Joffe said. “I think our shareholders will support it and once we’ve got the debt down we’ve got quite a lot of capacity to regear.”
Closing 5.30% higher at R34.39 on Friday, Invicta’s share price has gained 30% in the past six months.
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