Investment holding and management company Invicta Holdings, consisting of the Engineering Solutions Group (ESG), the Capital Equipment Group (CEG) and the Kian Ann Group (KAG), based in Singapore, reported good results for the year ended March 31, during a period of considerable changes.

“The year has been characterised by major but very positive changes for the group, which included the sale of the CEG’s agricultural and earthmoving businesses and the in-principle agreement reached to restructure KAG.

The severe lockdown conditions of April and May 2020 led to a rightsizing of the South African businesses, and the support functions became skilled at working remotely,” CEO Steven Joffe says.

He notes that this, together with a strong focus on working capital management, resulted in good cash generation and a significant reduction of debt, reducing the group’s net debt to equity ratio, excluding right-of-use liabilities, from 44% in the previous year to 16% in the year under review.

Revenue for the continuing operations of the group decreased by 9% to R6.3-billion.

Gross margin at ‘normal’ levels of 32% reflect a year-on-year increase of 2%, following the additional stock provisions taken in the prior year in response to revised sell-through rates.

The group recorded a profit of R76.8-million on the disposal of the agricultural businesses and a profit of R21.8-million on the disposal of branches to independent empowerment entities that service mines.

The results are presented after a goodwill impairment of R21.4-million and retrenchment costs of R28.9-million.

Operating profit improved by 283% to R585.2-million from a loss of R319.2-million in the prior year; however, the prior year was impacted by R1.1-billion in impairments in the context of the Covid-19 pandemic, of which goodwill was R639-million, property was R196-million and deferred tax assets were R71-million.

Discontinued operations comprise the results of the KAG and nine months of trading of the CEG’s agricultural and earthmoving businesses.

The total profit for nine months from the discontinued agricultural and earthmoving business was R91.6-million, reflecting a 13.8% increase from the full year of trading in the prior year.

KAG recorded a loss for the year of R12.3-million after taking a fair value impairment loss of R76.9-million, triggered by the loss of control following the categorisation of the business as held-for-sale.

This valuation is based on the valuation of the business in its current structure and does not recognise the post-transaction position.

The group recorded an increase of 156% in total profit for the year to R376.1-million from a prior year loss of R673.3-million after the impairments.

This is reflected in the basic earnings a share of 285c and headline earnings a share of 316c, increases of 140% and 445% respectively.

Revenue for the ESG was down 12.7% on the prior year. As noted last year, ESG businesses in Africa and Europe are growing faster than in South Africa.

Revenue for the CEG was down 10.6% on the prior year.

Revenue for KAG, in Singapore dollars, was down 8.1% year-on-year. The business activities in this region were impacted by the ongoing pandemic. However, the demand for parts in North America, where KAG has a parts distribution business, is expected to remain stable.

“The board has approved a final dividend of 60c a share following the good cash flow generation that reduced our debt levels significantly. This is based on the normal dividend policy of 2.75 times dividend cover based on normalised earnings, excluding results from discontinued operations, profit and loss from disposals and impairments,” says Joffe.

POST PERIOD

Subsequent to year-end, the group entered into a series of inter-linked transactions as a result of which its 100% interest in KAG will reduce to 48.81%. The effective loss of control triggers a deemed disposal.

At year-end the decision was taken to proceed with the transactions; however, agreements still needed to be finalised, conditions met and statutory processes followed, with the expected effective date to be within next financial year.

The proceeds on the disposal of the four businesses within CEG, namely Northmec, CSE, NHSA and Landboupart, to CNH Industrial, effective January 1, comprised of the net asset value of R176.6-million and goodwill of $6-million.

At year-end, the group had only received R74-million towards the net asset value and $1-million towards goodwill. Subsequent to year-end, the group received the balance due on the net asset value.

Regarding the disposal of the Samrand property, the group received further nonrefundable deposits of R3.5-million in respect of the disposal of the Samrand property, subsequent to year-end.

Joffe notes that management will focus primarily on implementing the proposed restructure of KAG, anticipated to be completed by September, and pursuing growth opportunities.

“Additionally, the group will remain guided by the principles of targeting lower debt levels, driving operational performance on return on equity and assets, and the simplification of both the group structure and our reporting,” Joffe says.