Wrap Text
Unaudited condensed group results for the six months ended 30 September 2016
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")
UNAUDITED CONDENSED GROUP RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
FINANCIAL HIGHLIGHTS
HEADLINE EARNINGS
PER SHARE
32%
254 CENTS
INTERIM DIVIDEND
DECLARED UP
7%
72 CENTS PER SHARE
REVENUE UP
8%
R5.8 BILLION
OPERATING PROFIT UP
6%
R485 MILLION
CONSOLIDATED CONDENSED
STATEMENT OF COMPREHENSIVE INCOME
Unaudited six Audited
months ended year ended
30 Sep 30 Sep 31 Mar
% 2016 2015 2016
change R'000 R'000 R'000
Revenue 8% 5 750 029 5 324 697 10 635 850
Gross profit 17% 1 727 997 1 473 453 3 049 442
Selling, administration and distribution expenses 22% (1 242 825) (1 016 524) (2 203 177)
Operating profit 6% 485 172 456 929 846 265
Interest and dividends received (10%) 348 643 386 096 831 321
Finance costs (6%) (434 877) (460 773) (1 068 195)
Share of (losses) profits of associates (106%) (196) 3 201 5 607
Profit before taxation 3% 398 742 385 453 614 998
Taxation (4%) (78 878) (82 484) (105 539)
Profit for the period 6% 319 864 302 969 509 459
Other comprehensive income
Items that will be reclassified to profit or loss
Exchange differences on translating foreign operations (112 832) 79 878 164 129
Total comprehensive income for the period (46%) 207 032 382 847 673 588
Profit attributable to:
Owners of the Company 7% 270 543 252 794 418 709
Non-controlling interest (37%) 9 031 14 320 17 043
Preference shareholders 12% 40 290 35 855 73 707
319 864 302 969 509 459
Total comprehensive income attributable to:
Owners of the Company (49%) 169 311 329 303 584 770
Non-controlling interest (115%) (2 569) 17 689 15 111
Preference shareholders 12% 40 290 35 855 73 707
207 032 382 847 673 588
Determination of normalised earnings per share
Profit attributable to owners of the Company 270 543 252 794 418 709
Normalised profit attributable to owners of
the Company 270 543 252 794 418 709
Earnings per share (cents) 7% 253 236 391
Diluted earnings per share (cents) 7% 252 236 391
Normalised earnings per share (cents) 7% 253 236 391
Determination of headline earnings
Attributable earnings 270 543 252 794 418 709
Adjustments
– Gain from bargain purchase (187) – 12 935
– Net impairment of property, plant and equipment 3 491 – (2 663)
– Net profit on disposal of property, plant and equipment (2 354) (55 182) (62 552)
Total adjustments before taxation and non-controlling interest 950 (55 182) (52 280)
Taxation 444 10 204 17 117
Non-controlling interest 25 (1 371) 142
Total adjustments 1 419 (46 349) (35 021)
Headline earnings 32% 271 962 206 445 383 688
Determination of normalised headline earnings
per share
Headline earnings 271 962 206 445 383 688
Relocation cost – 18 000 18 000
Normalised headline earnings 21% 271 962 224 445 401 688
Headline earnings per share (cents) 32% 254 193 359
Diluted headline earnings per share (cents) 31% 253 193 359
Normalised headline earnings per share (cents) 21% 254 210 375
Shares in issue
Weighted average (000s) 106 953 107 042 107 013
At the end of the period (000s) 108 495 108 495 108 495
Number of shares used for diluted earnings per share (000s) 107 365 107 097 107 018
Weighted average used for normalised earnings per share
and headline earnings per share (000s) 106 953 107 042 107 013
Earnings per share (cents) 7% 253 236 391
Headline earnings per share (cents) 32% 254 193 359
Normalised earnings per share (cents) 7% 253 236 391
Normalised headline earnings per share (cents) 21% 254 210 375
Dividends per share* (cents) 72 67 142
Interim 7% 72 67 67
Final – – 75
* In accordance with IAS10, the interim dividend of 72 cents per share proposed by the directors has not been reflected in
the interim results.
CONSOLIDATED CONDENSED
STATEMENT OF CASH FLOWS
Unaudited six Audited
months ended year ended
30 Sep 30 Sep 31 Mar
2016 2015 2016
R'000 R'000 R'000
Cash flows from operating activities
Cash generated before movements in working capital 558 638 552 988 954 462
Working capital changes 172 943 (408 993) (368 863)
Cash generated from operations 731 581 143 995 585 599
Finance costs (434 877) (460 773) (1 068 195)
Dividends paid to Group shareholders and non-controlling interest (133 263) (174 619) (269 262)
Taxation paid (96 643) (79 089) (146 539)
Interest and dividends received 348 643 386 096 831 321
Net cash inflo (outflow) from operating activities 415 441 (184 390) (67 076)
Cash flows from investing activities
Net cash effects of acquisitions of property, plant and equipment and
intangible assets (176 936) (140 964) (180 247)
Net acquisition of subsidiaries and associates (15 135) (3 495) (81 921)
Net change in non-controlling interests in subsidiaries 4 569 (24 559) 18 487
(Increase) decrease in long-term receivables including current portion (325 766) (143 895) 28 659
Net increase in financial investments (94 001) (84 757) –
Dividend received from associates – 630 3 262
Net cash outflow from investing activities (607 269) (397 040) (211 760)
Cash flows from financing activities
Net cash effects of liabilities raised 378 416 115 729 206 826
Share appreciation rights exercised and employees tax paid; treasury
shares acquired – – (8 931)
Ordinary shares issued and related expenses – (1 076) –
Net cash inflow from financing activities 378 416 114 653 197 895
Net increase (decrease) in cash and cash equivalents 186 588 (466 777) (80 941)
Cash and cash equivalents at the beginning of the period 556 134 573 387 573 387
Effect of foreign exchange rate movement on cash balances (12 644) 39 204 63 688
Cash and cash equivalents at the end of the period 730 078 145 814 556 134
OTHER INFORMATION
Unaudited six Audited
months ended year ended
30 Sep 30 Sep 31 Mar
2016 2015 2016
R'000 R'000 R'000
Operating net debt: equity ratio (excluding long-term funding debt
secured by investments and loans) 32% 22% 34%
Depreciation and amortisation (R'000) 72 473 72 578 151 790
Net asset value per share (cents) 3 877 3 590 3 794
Tangible net asset value per share (cents) 3 112 2 833 3 027
Capital expenditure (R'000) 187 360 154 920 319 375
Capital commitments (R'000) 235 797 420 024 182 344
CONSOLIDATED CONDENSED
STATEMENT OF FINANCIAL POSITION
Unaudited six Audited
months ended year ended
30 Sep 30 Sep 31 Mar
2016 2015 2016
R'000 R'000 R'000
ASSETS
Non-current assets 7 803 739 7 049 882 7 399 648
Property, plant and equipment 1 600 804 1 355 480 1 495 251
Financial investments and investment in associates 1 891 606 1 725 840 1 808 135
Goodwill and other intangible assets 828 980 821 394 832 137
Financial assets, finance leases and long-term receivables 3 283 199 2 883 802 3 075 413
Deferred taxation 199 150 263 366 188 712
Current assets 7 832 208 7 437 551 7 495 486
Held for sale assets 15 940 – 12 058
Inventories 4 020 813 3 713 800 4 092 849
Trade and other receivables 2 080 179 2 144 069 1 970 914
Taxation prepaid 33 248 19 572 27 137
Current portion of financial investments, finance leases and long-term
receivables 725 099 1 136 691 610 606
Bank balances and cash 956 929 423 419 781 922
Total assets 15 635 947 14 487 433 14 895 134
EQUITY AND LIABILITIES
Capital and reserves 5 162 873 4 834 219 5 050 090
Equity attributable to the equity holders 4 955 810 4 645 050 4 866 780
Non-controlling interest 207 063 189 169 183 310
Non-current liabilities 6 718 610 5 743 902 6 193 333
Long-term borrowings and financial liabilities 6 686 654 5 619 607 6 164 339
Deferred taxation 31 956 124 295 28 994
Current liabilities 3 754 464 3 909 312 3 651 711
Trade, other payables and provisions 2 643 884 2 231 306 2 406 441
Taxation liabilities 30 656 50 046 32 124
Shareholders for dividends 38 649 23 234 48 082
Current portion of long-term borrowings and guaranteed repurchase
liabilities 814 424 1 327 121 939 276
Bank overdrafts 226 851 277 605 225 788
Total equity and liabilities 15 635 947 14 487 433 14 895 134
CONSOLIDATED CONDENSED
STATEMENT OF CHANGES IN EQUITY
Unaudited six Audited
months ended year ended
30 Sep 30 Sep 31 Mar
2016 2015 2016
R'000 R'000 R'000
Share capital
Balance at the beginning of the period 5 424 5 424 5 424
Balance at the end of the period 5 424 5 424 5 424
Share premium
Balance at the beginning of the period 2 653 151 2 653 151 2 653 151
Share issue expenses – (1 076) –
Balance at the end of the period 2 653 151 2 652 075 2 653 151
Treasury shares
Balance at the beginning of the period (85 011) (80 098) (80 098)
Shares acquired – – (4 913)
Balance at the end of the period (85 011) (80 098) (85 011)
Preference shares
Balance at the beginning of the period 750 000 750 000 750 000
Balance at the end of the period 750 000 750 000 750 000
Retained earnings
Balance at the beginning of the period 1 354 488 1 111 256 1 111 256
Earnings attributable to ordinary shareholders 270 543 252 794 418 709
Reallocation from other reserve 931 3 505 1 367 Change in non-controlling interest/loss of control in subsidiary (5 730) (4 009) 17 086
Ordinary dividends paid (81 411) (119 875) (193 930)
Balance at the end of the period 1 538 821 1 243 671 1 354 488
Other reserves
Balance at the beginning of the period 188 728 20 240 20 240
Share appreciation rights issued 1 606 2 491 7 667
Share appreciation rights exercised – – (4 018)
Other reserves attributable to non-controlling interest 11 600 (3 369) 3 331
Change in ownership of subsidiaries 5 749 (21 757) 1 942
Allocation to retained earnings and non-controlling interest (1 426) (3 505) (4 563)
Translation of foreign operations (112 832) 79 878 164 129
Balance at the end of the period 93 425 73 978 188 728
Attributable to equity shareholders 4 955 810 4 645 050 4 866 780
Non-controlling interest
Balance at the beginning of the period 183 310 175 679 175 679
Earnings attributable to non-controlling interest 9 031 14 320 17 043
Share of other reserves (14 513) 3 369 (3 331)
Non-controlling interest arising on acquisitions and purchases of non-
controlling interests 31 365 (2 181) 324
Dividends paid (2 130) (2 018) (6 405)
Balance at the end of the period 207 063 189 169 183 310
CONDENSED
SEGMENT INFORMATION
Group,
financing
Engineering Capital Building and other
solutions equipment supplies operations Total
R'000 R'000 R'000 R'000 R'000
Unaudited six months ended
30 September 2016
Segment revenue 2 345 633 2 379 634 1 023 017 1 745 5 750 029
% change 13% 4% 9% * 8%
Segment operating profit 240 848 218 865 45 440 (19 981) 485 172
% change 24% 21% 0% * 6%
Operating margin 10.3% 9.2% 4.4% * 8.4%
Segment assets 2 731 802 4 054 591 944 456 7 905 098 15 635 947
Segment liabilities 830 231 1 795 846 576 938 7 270 059 10 473 074
Unaudited six months ended
30 September 2015
Segment revenue 2 084 675 2 284 946 935 933 19 143 5 324 697
Segment operating profit 193 502 181 036 45 620 36 771 456 929
Operating margin 9.3% 7.9% 4.9% * 8.6%
Segment assets 2 382 649 3 753 154 898 772 7 452 858 14 487 433
Segment liabilities 612 537 1 654 164 579 769 6 806 744 9 653 214
Audited year ended
31 March 2016
Segment revenue 4 298 874 4 483 878 1 836 606 16 492 10 635 850
Segment operating profit 406 226 361 989 75 204 2 846 846 265
Operating margin 9.4% 8.1% 4.1% * 8.0%
Segment assets 2 729 534 3 850 263 995 453 7 319 884 14 895 134
Segment liabilities 793 788 1 595 349 603 431 6 852 476 9 845 044
* not meaningful
NOTES TO THE FINANCIAL INFORMATION
Basis of preparation
The Group's condensed consolidated interim financial statements (results) are prepared in accordance with the requirements of the JSE
limited Listings Requirements for interim reports, the requirements of the Companies Act applicable to condensed financial statements, 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 contain 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 2017 financial year onwards were
applied and did not have a material impact on the Group results.
Prepared by
These Group condensed consolidated interim financial statements have been prepared under the supervision of Craig Barnard CA(SA), the
Executive Director - Financial and Commercial.
Acquisitions
Various acquisitions were made during the period ended 30 September 2016, amounting to R19 million.
Events after the reporting date
There were no events to report on 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)
and key
Unaudited six months ended 30 September 2016 inputs Level 1 Level 2 Level 3
Financial assets and liabilities at amortised cost
Trade and other receivables 2 080 179 2 – – 2 080 179
Trade and other payables (851 116) 3 – – (851 116)
Financial assets and liabilities at fair value
Financial assets 86 353 1 – 86 353 –
Financial liabilities (86 353) 1 – (86 353) –
Foreign trade payables (1 357 881) 4 – (1 357 881) –
Foreign exchange contracts (42 365) 4 – (42 365) –
Unaudited six months ended 30 September 2015
Financial assets and liabilities at amortised cost
Trade and other receivables 2 144 069 2 – – 2 144 069
Trade and other payables (779 357) 3 – – (779 357)
Financial liabilities at fair value
Financial assets 119 689 1 – 119 689 –
Financial liabilities (119 689) 1 – (119 689) –
Foreign trade payables (1 154 979) 4 – (1 154 979) –
Foreign exchange contracts 4 016 4 – 4 016 –
Audited year ended 31 March 2016
Financial assets and liabilities at amortised cost
Trade and other receivables 1 970 914 2 – – 1 970 914
Trade and other payables (1 112 494) 3 – – (1 112 494)
Financial liabilities at fair value
Financial assets 103 234 1 – 103 234 –
Financial liabilities (100 252) 1 – (100 252) –
Trade and other payables (1 017 134) 4 – (1 017 134) –
Foreign trade payables (23 113) 4 – (23 113) –
1. Discounted contractual stream payments using the zero swap curve at the valuation date.
2. Face value less specific related provision. The directors consider that the carrying amount approximates their fair value.
3. Expected settlement value. The directors consider that the carrying amount approximates their fair value.
4. Determined by the spot rate at year end.
Commentary
FINANCIAL OVERVIEW
The Group has delivered outstanding results for the six months ended 30 September 2016 under challenging market conditions.
South Africa, which accounts for 78% of Group revenue, experienced poor GDP growth with volatile exchange rates, political uncertainty,
drought, falling demand for earthmoving machinery and subdued demand for commodities. Demand for product in Asia, which accounts
for 8% of revenue, also suffered due to the subdued global demand for commodities. The Group, nevertheless, managed to improve
margins, contain controllable operational costs and produce strong cash flows.
Revenue grew by 8% to R5.75 billion. Acquisitions made in the second half of the last financial year contributed R184 million or 3.5%
of the growth in the period, with 4.5% of the growth being generated organically. Operating profit grew by 6% to R485 million. If the
effect of the once-off profit on the sale of property in the prior period is removed, operating profit grew by 22%. Acquisitions contributed
R19 million or 4% to the growth in operating profit, with the balance of the growth driven by excellent gross margin management and
cost containment in the period.
Cash generated by operations improved substantially to R732 million. Net working capital positively contributed R173 million in the
six months since March 2016 as opposed to a net working capital outflow of R409 million for the comparable prior period. Capital
expenditure of R187 million was incurred in the period. Net operational debt reduced by R78 million in the period, reducing the net
operating debt: equity ratio to 32% from 34% in March 2016.
Earnings attributable to ordinary shareholders increased by 7% to R271 million. Headline earnings increased by a very pleasing 32% to
R272 million. Earnings per share for the period increased 7% to 253 cents whilst headline earnings per share increased 32% to 254 cents.
An interim dividend of 72 cents per share has been declared, maintaining the interim dividend cover ratio of 3.5 times.
CAPITAL EQUIPMENT GROUP
The Capital Equipment Group grew revenue by 4% to R2.38 billion and operating profit by 21% to R219 million. The operating margin
improved to 9.2% from 7.9% in the prior period.
Revenue in the South African operations was flat but the operating profit grew 36% through excellent management of gross margin and
expenses. Working Capital was reduced and cash generated was very strong. Declines in volumes in both the agricultural and construction
markets was offset by excellent performance in the parts business.
Contrasting these sterling results, weak economic conditions in markets in Asia resulted in the Kian Ann Group performance showing
a further decline. Nevertheless, satisfactory cash generation led to a significant reduction in the Singapore Dollar acquisition debt. A
turnaround strategy is underway within the operations to adjust the business to lower levels of activity. Initiatives are also underway to
expand the distribution footprint into new territories.
Construction of a new expanded assembly facility for the South African operations has begun in Camperdown, KwaZulu-Natal.
ENGINEERING SOLUTIONS GROUP (BMG AND ASSOCIATED COMPANIES)
The Engineering Solutions Group produced an excellent result. It grew revenue by 13% to R2.35 billion and operating profit by 24% to
R241 million. The operating margin improved to 10.3% from 9.3% in the prior period. Acquisitions added R175 million (8%) to the sales
growth and R21 million (11%) to the operating profit growth.
Excellent management of gross margins and tight expense control offset weak demand in the period, although volumes improved
marginally in the period compared to the second half of the previous financial year. The consumable segments, especially the automotive
and tools and equipment segments, performed very well, while the engineering-orientated segments (drives, materials handling and fluid
technology) were hampered by an ongoing lack of project activity in the mining and industrial markets. Operating cash flow was very
strong in the period as working capital was reduced.
Excellent progress was made on the BMG World distribution facility in Johannesburg. The project will be delivered on time and within
budget and is expected to settle from the beginning of the new financial year, bringing in significant cost savings and efficiencies for BMG.
The Group sold Wegezi Power Holdings to a black industrialist company, Vele Investments, with effect from 1 April 2016, but will continue
to support the business through the BMG distribution channels.
BUILDING SUPPLIES GROUP
The Building Supplies Group grew revenue by 9% to R1.02 billion in the period. Operating profit was flat at R45 million with the operating
margin declining to 4.4% from 4.9%. Good performances from the tile operations and export operations were offset by a decline in
performance from the wholesale operations. The latter was driven by intense pressure on gross margins. The plastic pipe manufacturing
operation, a key element in the value chain, was turned around in the period and made a contribution to profit.
PROSPECTS
The markets served by the Group are expected to remain challenging and a sustainable upturn is not yet evident in the markets and
economy as a whole. There are positive signs that the world commodity markets have bottomed and that the devastating drought in
South Africa may be abating. However, improved confidence in the resource and construction markets in Africa and Asia is required before
investment and expansion returns to the markets which the Group serves. Management will continue to focus on generating cash in the
businesses whilst preparing for the next phase of growth.
Any forward looking statements have not been reviewed nor reported on by the auditors.
CHANGES TO THE BOARD
Further to the SENS announcement made on 19 August 2016, Charles Walters assumed the role of Executive Chairman of Invicta's
Engineering Solutions Group, effective from 1 November 2016 and continues in his role as Executive Chairman of Kian Ann Engineering.
Arnold Goldstone assumed the role of Executive Chairman of Invicta's Capital Equipment Group and Building Supplies Group, effective
from 1 November 2016. Byron Nichles has resigned as an Executive director of Invicta and Chief Executive Officer of Invicta's Engineering
Solutions Group, effective 31 October 2016 and will remain as a Non-executive director on the board of Invicta effective from
1 November 2016.
Further to the SENS announcement made on 2 September 2016, Ramani Naidoo, Independent Non-executive director of Invicta, has been
appointed as a member of the Audit Committee to replace Lance Sherrell, who resigned as a member of the Audit Committee of Invicta
effective 29 August 2016.
ORDINARY SHARE CASH DIVIDEND
The Board has declared an interim gross dividend of 72 cents per share for the period ended 30 September 2016. Dividends are to be
paid out of distributable reserves. Dividends tax (DT) of 15% will be withheld in terms of the Income Tax Act for those shareholders who
are not exempt from DT. 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 gross local dividend amount is 72 cents per ordinary share for shareholders exempt from the Dividend Tax;
- The net local dividend amount is 61,2000 cents per ordinary share for shareholders liable to pay the Dividend Tax;
- Invicta has 108 494 738 ordinary shares in issue (which includes 1 541 823 treasury shares); and
- Invicta'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 Tuesday, 29 November 2016
First date of trading "EX" dividend Wednesday, 30 November 2016
Record date Friday, 2 December 2016
Payment date Monday, 5 December 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 30 November 2016 and Friday, 2 December 2016,
both days inclusive.
The unaudited Condensed Group results for the 6 months ended 30 September 2016 will be available on the Company's
website after 8:00 on Monday, 14 November 2016 and the presentation to the investor community can be viewed on the
Company website from Moday, 14 November 2016 after 12:00. Copies of the full announcement are available on request from
Grace Chemaly, Company Secretary, gracec@invictaholdings.co.za. The company's website is www.invictaholdings.co.za.
By order of the board
GM Chemaly Cape Town
Company secretary 10 November 2016
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 (Deputy Executive Chairman), CE Walters (Chief Executive Officer),
C Barnard, R Naidoo^, B Nichles*, DI Samuels^, LR Sherrell*, AM Sinclair, RA Wally^, Adv JD Wiese*
* Non-executive ^ Independent non-executive
Company Secretary: GM Chemaly
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
www.invictaholdings.co.za
Date: 14/11/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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