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Preliminary Audited Group results for the year ended 31 March 2014
INVICTA HOLDINGS LIMITED
Registration number: 1966/002182/06
(Incorporated in the Republic of South Africa)
Share code: IVT
ISIN: ZAE000029773
Preference share code: IVTP
ISIN: ZAE000173399
(“Invicta” or “the Group” or “the Company”)
PRELIMINARY AUDITED GROUP RESULTS FOR THE YEAR ENDED 31 MARCH 2014
REVENUE up by 38%
OPERATING PROFIT up by 18%
NORMALISED EARNINGS PER SHARE up by 7%
NORMALISED HEADLINE EARNINGS PER SHARE up by 15%
FINAL ORDINARY DIVIDEND 184,65 cents per share
CONSOLIDATED SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March
% 2014 2013
change R’000 R’000
Revenue 38 10 464 511 7 557 899
Gross profit 2 899 658 2 158 809
Operating profit 18 1 042 950 883 759
Interest and dividends received 633 556 531 673
Negative goodwill – 52 066
Finance costs (827 966) (651 760)
Share of profits of associates 2 150 3 018
Profit before taxation 4 850 690 818 756
Taxation (140 779) (75 224)
Profit for the year (5) 709 911 743 532
Other comprehensive income
Items that will be reclassified to
profit or loss
Exchange differences on translating
foreign operations 74 615 26 810
Total comprehensive income for the year 784 526 770 342
Profit attributable to:
Owners of the company 580 107 693 152
Non-controlling interest 64 016 28 468
Preference shareholders 65 788 21 912
709 911 743 532
Total comprehensive income attributable to:
Owners of the company 629 158 719 962
Non-controlling interest 89 580 28 468
Preference shareholders 65 788 21 912
784 526 770 342
Earnings per share (cents) (17) 788 955
Diluted earnings per share (cents) (17) 788 948
Normalised earnings per share (cents) 7 788 737
Determination of normalised earnings per share
Profit attributable to Owners of the company 580 107 693 152
Gain on partial derecognition of
financial investments – (158 172)
Normalised profit attributable to Owners
of the company 8 580 107 534 980
Determination of headline earnings
Attributable earnings 580 107 693 152
Adjustments
– Net impairment of property, plant and equipment 66 18
– Goodwill impaired – 2 791
– Negative goodwill – (52 066)
– Profit on disposal of investment (4 032) –
– Net profit on disposal of property, plant
and equipment (16 298) (3 551)
Total adjustments before taxation and
non-controlling interest (20 264) (52 808)
Taxation 2 809 989
Non-controlling interest 96 747
Total adjustments (17 359) (51 072)
Headline earnings 562 748 642 080
Headline earnings per share (cents) (14) 765 885
Diluted headline earnings per share (cents) (13) 765 878
Normalised headline earnings per
share (cents) 15 765 667
Determination of normalised headline
earnings per share
Headline earnings 562 748 642 080
Gain on partial derecognition of
financial investments – (158 172)
Normalised headline earnings 562 748 483 908
Shares in issue
Weighted average (000s) 73 592 72 588
At the end of the year (000s) 75 551 73 409
Number of shares used for diluted earnings
per share (000s) 73 531 73 125
Headline earnings per share (cents) (14) 765 885
Earnings per share (cents) (17) 788 955
Dividends per share* (cents) 7 287 268
– Interim 15 102 89
– Final 3 184,65 179
* In accordance with IAS10, the final dividend of 184,65 cents per share
proposed by the directors has not been reflected in the year-end results.
CONSOLIDATED SUMMARISED STATEMENT OF CASH FLOWS
for the year ended 31 March
2014 2013
R’000 R’000
Cash flows from operating activities
Cash generated from operations 715 160 732 078
Finance costs (827 966) (651 760)
Dividends paid to Group shareholders and
non-controlling interest (281 367) (198 433)
Taxation paid (142 910) (161 137)
Interest and dividends received 633 556 531 673
Net cash inflow from operating activities 96 473 252 421
Cash flows from investing activities
Net cash effects of acquisitions of property, plant
and equipment and intangible assets (216 181) (131 724)
Acquisition of subsidiaries and associates (97 456) (1 496 282)
Acquisition of non-controlling interests in
subsidiaries (1 670) –
Decrease in long-term receivables including
current portion (339 327) (1 060 115)
Net increase in financial investments (11 968) –
Dividend received from associate 1 947 425
Net cash outflow from investing activities (664 655) (2 687 696)
Cash flows from financing activities
Net cash effects of liabilities raised 237 066 1 676 334
Settlement of share appreciation rights and
employees tax on share appreciation
rights exercised (39 299) (148 581)
Ordinary shares and preference shares issued 321 809 232
Net cash inflow from financing activities 198 088 2 336 985
Net decrease in cash and cash equivalents (370 094) (98 290)
Cash and cash equivalents at the beginning of
the year 487 718 586 008
Effect of foreign exchange rate movement on
cash balances 21 872 –
Cash and cash equivalents at the end of the year 139 496 487 718
OTHER INFORMATION
2014 2013
Net interest-bearing debt: equity ratio
(excluding long-term funding debt secured
by investments and loans) (%) 37 39
Depreciation and amortisation (R'000) 135 102 86 814
Net asset value per share (cents) 4 073 3 665
Tangible net asset value per share (cents) 3 025 2 610
Capital expenditure (R'000) 258 661 152 276
Capital commitments (R'000) 51 936 81 770
CONSOLIDATED SUMMARISED STATEMENT OF FINANCIAL POSITION
as at 31 March
2014 2013
R’000 R’000
ASSETS
Non-current assets 6 563 637 6 080 956
Property, plant and equipment 1 170 577 1 010 636
Financial investments and investment in associates 2 032 223 2 018 353
Goodwill and other intangible assets 791 632 773 815
Financial assets, finance leases and long-term
receivables 2 324 107 2 117 013
Deferred taxation 245 098 161 139
Current assets 6 885 035 6 123 855
Held for sale assets – 9 957
Inventories 3 478 732 2 913 052
Trade and other receivables 1 844 072 1 619 567
Current portion of financial investments,
finance leases and long-term receivables 1 014 315 883 599
Taxation prepaid 21 547 18 831
Bank balances and cash 526 369 678 849
Total assets 13 448 672 12 204 811
EQUITY AND LIABILITIES
Capital and reserves 3 559 020 3 095 212
Equity attributable to the equity holders 3 077 073 2 690 077
Non-controlling interest 481 947 405 135
Non-current liabilities 6 120 618 5 679 828
Long-term borrowings, guaranteed repurchase
liabilities and financial liabilities 6 093 891 5 654 572
Deferred taxation 26 727 25 256
Current liabilities 3 769 034 3 429 771
Current portion of long-term borrowings
and guaranteed repurchase liabilities 935 522 1 137 908
Trade, other payables and provisions 2 334 597 2 070 533
Taxation liabilities 112 042 30 199
Bank overdrafts 386 873 191 131
Total equity and liabilities 13 448 672 12 204 811
CONSOLIDATED SUMMARISED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March
2014 2013
R’000 R’000
Share capital
Balance at the beginning of year 3 743 3 706
Shares issued 34 37
Balance at the end of the year 3 777 3 743
Share premium
Balance at the beginning of year 331 515 272 320
Shares issued 79 382 59 195
Balance at the end of the year 410 897 331 515
Treasury shares
Balance at the beginning of year (80 098) (93 931)
Treasury shares utilised to settle share
appreciation rights – 51 958
Treasury shares purchased – (38 125)
Balance at the end of the year (80 098) (80 098)
Preference shares
Balance at the beginning of the year 750 000 –
Preference shares issued – 750 000
Balance at the end of the year 750 000 750 000
Retained earnings
Balance at the beginning of year 2 014 469 1 676 751
Earnings attributable to ordinary shareholders 645 895 693 152
Share appreciation rights exercised (110 085) (150 043)
Change in non-controlling interest – (12 128)
Dividends paid (274 577) (193 263)
Balance at the end of the year 2 275 702 2 014 469
Other reserves
Balance at the beginning of year (329 552) 36 385
Share appreciation rights issued 5 926 4 990
Share appreciation rights exercised (8 630) (17 361)
Fair value of put option on non-controlling interest – (380 376)
Translation of foreign operations 49 051 26 810
Balance at the end of the year (283 205) (329 552)
Attributable to equity shareholders 3 077 073 2 690 077
Non-controlling interest
Balance at the beginning of year 405 135 59 321
Earnings attributable to non-controlling interest 64 016 28 468
Share of foreign currency translation reserve 25 564 –
Non-controlling interest arising on acquisitions
and purchases of non-controlling interests 1 770 327 076
Preference shares issued 321
Dividends paid (14 859) (9 730)
Balance at the end of the year 481 947 405 135
SUMMARISED SEGMENT INFORMATION
for the year ended 31 March
Group,
financing
Engineering Capital Building and other
consumables equipment supplies operations Total
R’000 R’000 R’000 R’000 R’000
2014
Segment
revenue 3 954 572 5 122 299 1 383 421 4 219 10 464 511
Segment
operating
profit 472 773 483 641 66 969 19 567 1 042 950
Segment
assets 2 284 378 3 897 441 693 971 6 572 882 13 448 672
Segment
liabilities 729 493 2 245 847 455 152 6 459 160 9 889 652
2013
Segment
revenue 3 424 847 3 502 965 625 141 4 946 7 557 899
Segment
operating
profit 390 047 339 338 38 610 115 764 883 759
Segment
assets 2 189 286 3 215 154 502 070 6 298 301 12 204 811
Segment
liabilities 867 637 1 874 215 325 923 6 041 824 9 109 599
NOTES TO THE FINANCIAL INFORMATION
BASIS OF PREPARATION
The Group’s audited summary consolidated financial statements (results) are
prepared in accordance with the requirements of the JSE Limited Listings
Requirements for provisional reports, the requirements of the Companies Act
applicable to summary financial statements, the framework, measurement and
recognition requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, the Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council and contains the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation
of the results are in terms of IFRS and are consistent with the accounting
policies applied in the preparation of the Group’s previous consolidated annual
financial statements. All accounting policies effective for the 2014 financial
year onwards were applied and did not have a material impact on the Group
results.
PREPARED BY
These Group audited summary consolidated financial statements and Group
complete financial statements have been prepared under the supervision of Craig
Barnard CA(SA), the Executive Director – Financial and Commercial.
ACQUISITIONS
Various acquisitions of subsidiaries, associates and non-controlling interests
were made during the year ended 31 March 2014, amounting to R99 million.
The most significant acquisition was High Power Equipment Africa (Pty) Ltd.
Events after the reporting period
There were no events to report on or after the reporting period to the date of
this report.
FAIR VALUE DISCLOSURE
The following is an analysis of the financial instruments that are measured
subsequent to initial recognition at fair value. They are grouped into levels 1
to 3 based on the extent to which the fair value is observable.
The levels are classified as follows:
Level 1 – fair value is based on quoted prices in active markets for identical
financial assets or liabilities
Level 2 – fair value is determined using directly observable inputs other than
Level 1 inputs
Level 3 – fair value is determined on inputs not based on observable market
data
Valuation
technique(s)
31 Mar and
2014 key inputs Level 1 Level 2 Level 3
Financial assets at
fair value
Financial assets 155 405 1 – 155 405 –
Trade and
other
receivables 1 844 072 2 – – 1 844 072
Financial
liabilities at
fair value
Financial
liabilities 154 695 1 – 154 695 –
Trade and other
payables 2 070 940 3 – – 2 070 940
Foreign trade
payables 301 860 4 – 301 860 –
Valuation
technique(s)
31 Mar and
2013 key inputs Level 1 Level 2 Level 3
Financial assets
at fair value
Financial assets 156 922 1 – 156 922 –
Financial
liabilities at fair
value
Financial
liabilities 165 030 1 – 165 030 –
Trade and other
payables 615 434 4 – 615 434 –
1. Discounted contractual stream payments using the zero swap curve at the
valuation date.
2. Face value less specific related provision.
3. Determined by the spot rate at year-end.
4. Expected settlement value.
COMMENTS
FINANCIAL OVERVIEW
The Invicta group (“the Group”) has again delivered good results under
challenging circumstances. Labour unrest in South Africa, a marked
deterioration in the Rand and subdued trading conditions in South East Asia
have characterised the year under review.
Tough trading conditions in the industrial consumables market in South Africa
(served by BMG) prevailed during the year. Labour unrest was particularly
debilitating in the mining industry and in the early part of the financial
year, the automotive industry. Labour unrest in the platinum mining sector has
continued into the new financial year, which has contributed to a contraction
in GDP in South Africa in the first quarter of the 2014 calendar year.
The capital equipment markets (served by CEG) experienced mixed conditions –
demand for earthmoving machinery continued to grow throughout the year, while
demand for agricultural machinery declined year-on-year. Trading conditions in
markets in South East Asia, in which Kian Ann Engineering operates, continued
to be subdued. BSG grew much faster than the industry it serves, due mainly to
acquisitions.
Acquisitions made by the Group during the prior financial year bolstered
performance and provided a solid platform for future growth.
Group revenue grew R2,907 billion (38%) to R10,465 billion, of which R610
million (6%) was from acquisitions made this year and R9,854 billion (94%) was
organic. Operating profit, which includes a non-recurring profit on sale of
fixed assets of R14 million, increased by R159 million (18%) to R1,043 billion.
A number of once-off, non-trading transactions occurred during the year under
review and during the prior year, which obscure the trading figures. For this
reason, the normalised earnings have been presented. The normalised EPS
increased by 7% from 737 cents to 788 cents per share, while the normalised
HEPS increased by 15% from 667 cents to 765 cents per share. Working capital
management was good, resulting in cash generated from operations of R715
million.
Management resolved at the beginning of the year under review to restrict
acquisition activity and to bed down the acquisitions of the prior year. The
only significant acquisition during this financial year was that of HPE Africa,
the distributor of Hyundai earthmoving machinery in South Africa.
BEARING MAN GROUP (BMG)
BMG performed extremely well, given the challenging market conditions. Market
demand for BMG’s products and services was negatively impacted by depressed
conditions in mining and manufacturing in South Africa. BMG, however services a
diversified range of industries and customers. This put it in good stead to
achieve a modest growth in volumes sold and to grow its revenue by 15% to
R3,956 billion. Excluding acquisitions made during the course of the prior
period, revenue increased by 10%. No acquisitions were made during the year
under review. Excellent management of costs and gross margins resulted in BMG’s
operating profit increasing by 21% to R473 million. Working capital management
was good.
CAPITAL EQUIPMENT GROUP (CEG)
CEG grew significantly during the year, aided by the acquisitions of Kian Ann
Engineering in Singapore, which was included for 2 months of the prior year and
HPE Africa, which was included from 1 April 2013.
Earthmoving machinery sales in the country grew throughout the year, whilst
agricultural machinery sales, measured by tractor unit sales, declined by 6,3%
during the year under review. ESP, the quality replacement parts business made
a good contribution to CEG.
Trading conditions in the regions of South East Asia serviced by Kian Ann
Engineering continued to be challenging.
CEG’s revenue increased by 46% to R5,122 billion. Only a small percentage of
this growth was organic, with the bulk emanating from the acquisition of HPE
Africa and Kian Ann Engineering. Operating profit increased to R484 million, a
very good result. CEG continued to outperform its benchmarks and to be a major
contributor to the Invicta stable.
BUILDING SUPPLIES GROUP (BSG)
BSG, comprising Tiletoria and MacNeil Distributors (which was acquired on 1
October 2012), was bolstered by two acquisitions during the year. Revenue
increased by R759 million (121%) to R1,383 billion, R1,083 billion (78%) of the
growth being organic and R300 million (22%) from acquisitions made during the
year under review. Although not a major contributor to the profits of the
Invicta Group, BSG is settling down well. It has significant potential and is
expected to make a greater contribution to the Group in future.
PROSPECTS
Trading conditions remain challenging. At the time of drafting this report,
labour unrest in the platinum mines appears to be close to resolution, but
there are threats of strikes in other industries served by the Group. GDP in
South Africa in the first quarter of the 2014 calendar year shrunk by 0,6%.
Numerous public holidays in April and May 2014 compounded the situation, which
has resulted in a slow start to the new financial year.
The maize price, a big driver of sales of agricultural machinery, has dropped
significantly, giving rise to the expectation of a decline in agricultural
machinery demand in South Africa in the coming financial year. Demand for
earthmoving machinery is primarily dependent on mining, construction activity
and infrastructural spend, none of which are flourishing at the moment. Group
management are experienced in managing fluctuating markets and have shown
resilience in the past in dealing with these challenging conditions, which
management believe will inevitably change for the better and business is
expected to improve accordingly.
The global markets serviced by the Group (mainly South East Asia) are erratic
with growth likely to be muted in the coming financial year.
Notwithstanding the above, the Group will continue to do what is has done well
in the past – manage its operations soundly while seeking out acquisitions and
opportunities for growth. Current conditions are expected to give rise to
acquisition opportunities domestically and internationally. Invicta will also
use the opportunity to look inwardly to streamline its businesses, improve
supply chain management and efficiencies.
The Group will focus on diversifying its businesses geographically and has
strategically decided to become a more global business in sectors in which it
has operated historically. Business in Africa is being pursued vigorously.
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the Group’s
complete financial statements for the year ended 31 March 2014. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised financial statements have
been derived from the Group complete financial statements and are consistent in
all material respects, with the Group financial statements. A copy of their
unmodified ISA 700 and ISA 810 audit reports are available for inspection at
the Company’s registered office. Any reference to future financial performance
included in this announcement, has not been reviewed or reported on by the
Company’s auditors.
ORDINARY SHARE CASH DIVIDEND
The Board has declared a final gross dividend of 184,65 cents per share for the
year ended 31 March 2014, in keeping with the dividend policy of 2,75 times
normalised earnings per share. The dividend will be subject to Dividends Tax.
In accordance with paragraphs 11.17(1)(i) and (x) and 11.17(c) of the JSE
Listings Requirements the following additional information is disclosed:
The dividend has been declared out of income reserves;
The local Dividend Tax rate is 15% (fifteen per centum);
Secondary Tax on Companies (STC) credits of R17 705 817,04 (23,44 cents per
share) will be utilised;
The gross local dividend amount is 184,65 cents per ordinary share for
shareholders exempt from the Dividend Tax;
The net local dividend amount is 160,4685 cents per ordinary share for
shareholders liable to pay the Dividend Tax;
Invicta Holdings Limited has 75 551 393 ordinary shares in issue (which
includes 1 452 920 treasury shares); and
Invicta Holdings Limited’s income tax reference number is 9400/012/03/6.
In compliance with the requirements of Strate the following dates are
applicable:
Last date of trade “CUM” dividend Friday, 4 July 2014
First date of trade “EX” dividend Monday, 7 July 2014
Record date Friday, 11 July 2014
Payment date Monday, 14 July 2014
Share certificates may not be dematerialised or rematerialised between Monday,
7 July 2014 and Friday, 11 July 2014, both days inclusive.
By order of the Board
GM Chemaly Cape Town
Company Secretary 12 June 2014
INVICTA HOLDINGS LIMITED
Registered office: Invicta Holdings Limited, 3rd Floor, Pepkor House, 36
Stellenberg Road, Parow Industria, 7493
PO Box 6077, Parow East, 7501
Transfer secretaries: Computershare Investor Services (Pty) Ltd, Ground Floor,
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors: Dr CH Wiese* (Chairman), A Goldstone (Managing), C Barnard,
R Naidoo^, DI Samuels^, LR Sherrell*, AM Sinclair, RA Wally^, CE Walters, Adv
JD Wiese*
* Non-executive ^ Independent non-executive
Company Secretary: GM Chemaly
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
www.invictaholdings.co.za
Date: 17/06/2014 08:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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