Invicta grew in spite of tough markets and the outlook is optimistic – CEO

Steven Joffe CEO of Invicta Holdings at the offices of BMG World at Droste Park in Johannesburg. Picture: Freddy Mavunda © Financial Mail

Steven Joffe CEO of Invicta Holdings at the offices of BMG World at Droste Park in Johannesburg. Picture: Freddy Mavunda © Financial Mail

Published Jun 25, 2024


South Africa can, for the first time in a while, look forward to some positive economic prospects, including less load shedding, the possibility of interest rate cuts, and better government policies with the formation of the Government of National Unity, Invicta CEO Steven Joffe said yesterday.

Interviewed at the release of the heavy equipment and diesel parts distribution group’s results for the year to March 31, he said the war in Ukraine and the Middle East, and the impact on commodity and food prices would probably continue to be felt globally. But all indications were that the next interest rate movement would be downward, which would positively impact the economy and business in general.

“In South Africa we are encouraged by the suspension of load shedding and by the election results. We are hopeful the GNU will implement policies that will allow industry to grow,” he said.

Right-sizing of South East Asia distribution, and growing the agriculture equipment and related parts operations in the UK were other areas of focus. The group was also working on obtaining bonded status for its warehouses in the US, which would support strong growth in the region.

Joffe said considering the challenges they faced in just about every market that the group operated in over the past financial year, they were very pleased with the 5% rise in sustainable earnings to 488 cents a share, and the dividend rise by the same percentage, to R1.05. He said the results showed how resilient their consumable parts businesses were in tough trading conditions.

Cash generated from operations, a focus of the past year, increased by 28% to R818 million. Revenue increased by 7% to R8.3 billion. Operating profit was up by 8%.

Some of the challenges in South Africa over the past year included load shedding, increasingly frequent water supply disruptions, and severe flooding in the Western Cape in September 2023.

“We also faced upward pressure in supplier pricing, currency volatility, and supply chain challenges, including shipping and logistics disruptions. Consumers in the group’s markets are holding off on spending,” he said.

Five properties non-core to group operations were sold during the year, and about 2% of the ordinary shares and 4% of the preference shares were repurchased for R88m, and further buybacks were not ruled out.

The 7% rise in group revenue was 4.2% higher than last year after normalising the results for the automotive aftermarket Imexpart Limited (Imex) acquisition in the UK. The aim was for Imex to distribute agriculture parts as well as automotive components, said Joffe.

The gross profit percentage was 33%. Joffe said their management had worked hard to protect their margins. If the costs from the Imex acquisition – 100% stake for R109m effective July 1, 2023 – and if the impairment of the gasifier project was excluded, the overhead base increased by 6.7%.

Joffe said that given the rising cost of logistics and the depreciation of the rand, their management of group costs had been “an outstanding achievement”.

Kian Ann Group revenue was 15% lower than last year, primarily driven by tempered demand for undercarriage components in the US market. Operating profits decreased to $26m.

“Considering the tough operating environment, all businesses performed in line with the operational environment,” said Joffe.

He said that the tough trading conditions across South East Asia were expected to persist in the new financial year.

Joffe said that the cost of the preference shares significantly impacted returns to ordinary shareholders with the rate linked to prime, and the group believed that removing the preference shares from the capital structure was the next unlock for shareholder returns.

On April 1, Invicta acquired Nationwide Bearing Company, a UK-based supplier of consumable parts to the earth-moving and agricultural machinery aftermarkets.

“Management continues to evaluate potential acquisition opportunities and we are well placed to take advantage of opportunities as they arise,” the group’s director said in the results.