UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER

Transcription

1 UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

2 FINANCIAL HIGHLIGHTS REVENUE 2.7% TO R4.86 BILLION PROFIT FROM CONTINUING OPERATIONS 6.4% TO R314 MILLION PROFIT BEFORE TAXATION 8.7% TO R399 MILLION EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0% FLAT AT 242 CENTS CONSISTENT DIVIDEND COVER Revenue (R billion) Segment operating profit before foreign exchange movements (R million) Earnings per share (cents) SEPT 2015 SEPT 2016 SEPT 2017 SEP 2015 SEP 2016 SEP 2017 SEP 2015 SEP 2016* SEP 2017 ESG CEG Profit before taxation (R million) Operating net debt: equity (%) Ordinary dividends paid (cents) SEP 2015 SEP 2016* SEP 2017 SEP 2015 SEP 2016 SEP 2017 SEP 2015 SEP 2016 SEP 2017 The results as disclosed above represent the continuing operations. * Restated

3 COMMENTS OVERVIEW OF THE PERIOD The Invicta Group has managed to hold its own in a very challenging environment. In South Africa, low economic growth, low business confidence, political uncertainty and a troubled mining sector (following the announcement by government of a controversial mining charter) weighed heavily on the Group, which derives about 80% of its revenue from within South Africa. Contrasting this, global trading conditions have improved and this growth looks set to continue, which should help to carry the Group until conditions in South Africa normalise. The sale of the Building Supplies Group ( BSG ) became unconditional on 30 September 2017, and shareholders are referred to a separate SENS announcement in this regard dated 10 October GROUP PERFORMANCE CONTINUING OPERATIONS The continuing operations comprise: ESG ( Engineering Solutions Group ) African distributor of engineering products, technical services and solutions including bearings, tools, electric motors and hydraulics. CEG ( Capital Equipment Group ) agricultural machinery, construction machinery, forklifts and related parts in southern Africa and earthmoving machinery parts in South East Asia via Kian Ann Engineering, which is based in Singapore. Revenue from continuing operations increased by 3% from R4.73 billion to R4.86 billion. Gross margins declined due to increased pricing pressures from competitors, whilst operating profit increased by 1% from R429 million to R432 million, assisted by improved foreign exchange movement. Profit on the sale of investments of R24 million helped to augment profit from continuing operations, which after tax increased by 6% from R295 million to R314 million. Earnings per share from continuing operations were flat at 242 cents per share, whilst headline earnings per share decreased by 7% from 243 cents to 225 cents per share, which reflects the true economic reality of what is happening in South Africa. The ordinary dividend for the six months is 69 cents per share, down 4% on the comparative period, maintaining a dividend cover of 3.5 times. Cash generated by all operations of R111 million was reduced by the strategic increase of working capital and the receivable on the disposal of BSG, which was largely received in October DISCONTINUED OPERATIONS Last year the decision was taken to dispose of BSG (consisting of the MacNeil and Tiletoria group of companies), in order to focus the Group on its core competency of industrial consumable products, capital equipment and parts. BSG is therefore shown as a Discontinued Operation in the Condensed Consolidated Statement of Profit or Loss and other Comprehensive Income in the prior year and comparative period, and as Assets Held for Sale in the Condensed Consolidated Statement of Financial Position in the prior year. The transaction became unconditional on 30 September 2017, as announced in a SENS announcement on 10 October 2017, and proceeds arising from the sale commenced flowing into the group after this date. Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

4 COMMENTS (CONTINUED) ESG The Engineering Solutions Group felt the headwinds of the slowdown in industrial and mining South Africa. Revenue declined by 3% to R2.27 billion for the period under review. As conditions became more difficult and industry sales slowed down, competitors reduced prices in order to liquidate stock, which resulted in gross margins declining. Project work in the mining sector dried up virtually completely and only essential maintenance purchases were made by customers. The threat of labour unrest in the industry in July further added to the uncertainty in the market. Action taken by ESG management to mitigate the decline in activity in the market, including the cancellation of a number of outsourced contracts, automation of processes and consolidation of branches/distribution hubs, helped to limit the decline in operating profit to 16%, from R241 million to R202 million. The benefits of these measures will only fully take effect in the second half of the financial year. A highlight of the period was the very successful opening in September 2017 of the BMG World facility in Johannesburg, which has been refurbished over the past few years. The 10 hectare site is a world class logistics facility and is now fully operational. The benefits of the facility will be felt in the future, and it positions the BMG Group perfectly to take advantage of any upturn in the economy. New branches in Tanzania, DRC and Ghana complement the African operations already in place in Zambia, Mozambique, Swaziland, Namibia and Botswana. CEG The Capital Equipment Group continues to focus on increasing the number of units in the market to secure original manufactured and aftermarket parts. CEG had a relatively strong performance for the 6 months in very competitive and challenging market conditions. The agricultural sector in South Africa emerged from the worst drought in over 100 years in late calendar 2016, although the Western Cape is still suffering from a severe drought. Construction machinery sales in the country during the period were still subdued, although certain segments within the market have improved, although marginally. As announced previously, with effect from 1 May 2017 the group relinquished the right to import and distribute the New Holland brand agricultural products into southern Africa to CNH, the manufacturer of the product. As expected, the impact on the Invicta Group results so far has not been material. The remaining distribution rights for other CNH branded products (CASEIH & CASE Construction) are not affected by this agreement. CEG continues to support the New Holland agricultural products in the aftermarket. Contrasting the conditions in South Africa, South East Asia and the world as a whole have picked up, which has benefitted Kian Ann. Its volumes have steadily increased and profits have improved strongly compared with the prior period. CEG increased its revenue by 7% from R2.38 billion to R2.56 billion. Gross margin pressure within South Africa contributed to the South African business producing lower operating profit than the prior period, whilst Kian Ann improved its operating profit resulting in CEG s operating profit remaining virtually flat at R218 million compared to the prior period. Good operational cash generation also resulted in healthy interest income further assisting in the overall performance of CEG. 2 Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

5 STRATEGIC FOCUS The Group s strategic focus is to generate cash in its existing businesses and to invest this in sound acquisitions that diversify the Group s revenue streams both within its product groups and geographically. PROSPECTS The Group remains resolute in its efforts to produce results above market benchmarks and its competitors. Trading conditions in the period under review were much more challenging in South Africa than management had anticipated, largely due to factors beyond the control of the Group. The businesses that make up the Invicta Group have strong fundamentals and enjoy significant competitive advantage. Management will continue to consolidate the strengths of the current businesses that make Invicta one of the leading suppliers of industrial consumable products, capital equipment and parts in southern Africa and South East Asia. Any forward looking statement in this announcement has not been reviewed nor reported on by the Company's Auditors. CHANGES TO THE BOARD AND BOARD COMMITTEES Grace Miriam Chemaly resigned as Group company secretary and legal advisor effective 27 September The Group is in the process of finding a replacement. APPRECIATION The board is once again highly appreciative to the executive managers, managers and staff for the excellent commitment and performance in what can only be described as difficult and uncertain political and economic times in South Africa. The board is confident that, with the strengths the Group possesses and the strategic decisions that the board will take, the Group will continue to deliver sustainable value to all stakeholders. Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

6 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar % change R 000 R 000 R 000 Continuing operations Revenue Gross profit Operating profit before foreign exchange movements (4) Net foreign exchange cost (14 880) (40 748) Operating profit Interest and dividends received from financial investments Interest paid ( ) ( ) ( ) Profit on disposal of investment Share of profits/(losses) of associates (196) Profit before taxation from continuing operations Taxation (85 280) (72 334) ( ) Profit for the period from continuing operations Discontinued operations Profit for the period from discontinued operations (87) Profit for the period Other comprehensive income Items that will be reclassified subsequently to profit or loss: Exchange differences on translating capitalised loans (10 788) Exchange differences on translating foreign operations ( ) (82 482) Total comprehensive income for the period Profit attributable to: Owners of the Company Non-controlling interest (3 882) (3 932) Preference shareholders Total comprehensive income attributable to: Owners of the Company Non-controlling interest (15 482) (10 902) Preference shareholders Earnings per share from continuing operations (cents) Earnings per share (cents) (4) Diluted earnings per share (cents) (4) Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

7 Determination of headline earnings Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar % change R 000 R 000 R 000 Attributable earnings Adjustments Headline earnings per share adjustments on discontinued operations (2) (578) Gain from bargain purchase price recognised (187) (235) (Profit)/Loss on property, plant and equipment (2 163) (Profit)/Loss on disposal of investments (24 439) Profit on disposal of other assets (278) (231) Net profit on disposal of property, plant and equipment (2 354) (11 355) (Reversal)/Impairment of loans (297) Total adjustments before taxation and non-controlling interest (27 177) 948 (507) Taxation Non-controlling interest Total adjustments (17 926) Headline earnings Determination of headline earnings Headline earnings per share from continuing operations (cents) (7) Headline earnings and diluted headline earnings per share (cents) (11) Shares in issue Weighted average ('000) At the end of the period ('000) Number of shares used for diluted earnings per share ('000) Headline earnings per share (cents) (11) Earnings per share (cents) (4) Dividends per share* (cents) Interim (4) Final 95 * In accordance with IAS 10, the interim dividend of 69 cents per share proposed by the directors has not been reflected in the final results. Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

8 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar R 000 R 000 R 000 ASSETS Non-current assets Property, plant and equipment Financial investments and investment in associates Goodwill and other intangible assets Financial assets, finance leases and long-term receivables Deferred taxation Current assets Inventories Trade and other receivables Taxation prepaid Current portion of financial investments, finance leases and long-term receivables Bank and cash balances Assets classified as held for sale Total assets EQUITY AND LIABILITIES Capital and reserves Equity attributable to the equity holders Non-controlling interest Non-current liabilities Long-term borrowings and financial liabilities Deferred taxation Current liabilities Trade, other payables and provisions Share appreciation rights liability Taxation liabilities Shareholders for dividends Current portion of long-term borrowings Bank overdrafts Liabilities associated with assets held for sale Total liabilities Total equity and liabilities Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

9 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar R 000 R 000 R 000 SHARE CAPITAL, SHARE PREMIUM AND PREFERENCE SHARE CAPITAL Share capital Share premium Treasury shares Balance at beginning of the period (68 057) (85 011) (85 011) Treasury shares Movement for the period Treasury shares Balance at end of the period (68 057) (85 011) (68 057) Preference shares RETAINED EARNINGS Balance at the beginning of the period Total comprehensive income Other reserve movements (42 259) Non-controlling interest arising on acquisitions and purchases of non-controlling interests (5 730) Ordinary and preference dividends paid ( ) (81 411) ( ) Balance at the end of the period OTHER RESERVES Balance at the beginning of the period Share appreciation rights exercised Share appreciation rights issued 677 Non-controlling interest arising on acquisitions and purchases of non-controlling interests (41 944) Other reserve movements (11 510) Translation of foreign operations ( ) (75 512) Balance at the end of the period Attributable to equity shareholders NON-CONTROLLING INTEREST Balance at the beginning of the period Total comprehensive income Transfer from non-distributable and other reserve movements (14 513) (3 146) Non-controlling interest arising on acquisitions and purchases of non-controlling interests (1 092) (37 719) Disposal of subsidiary (81 932) Ordinary dividends paid (439) (2 130) (9 047) Balance at the end of the period Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

10 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar R 000 R 000 R 000 Cash flows from operating activities Cash generated from operations Finance costs ( ) ( ) ( ) Dividends paid to Group shareholders and noncontrolling interest ( ) ( ) ( ) Taxation paid (57 187) (96 643) ( ) Interest and dividends received Net cash (outflow)/inflow from operating activities ( ) Cash flows from investing activities Proceeds on sale of property, plant and equipment and other intangible assets Additions to property, plant and equipment ( ) ( ) ( ) Additions to intangible assets (6 879) (2 871) (16 820) Acquisition of subsidiaries and associates (10 566) ( ) Dividend received from associates Proceeds on sale of Wegezi Decrease in net bank overdraft on disposal of subsidiary Net increase in long-term receivables and finance lease receivables ( ) ( ) ( ) Net increase in financial investments ( ) (94 001) ( ) Net increase in current portion of financial investments and long-term and finance lease receivables ( ) ( ) ( ) Net cash outflow from investing activities ( ) ( ) ( ) Cash flows from financing activities Increase in long-term borrowings Increase/(decrease) in current portion of long-term borrowings and financial liabilities ( ) (62 946) (Acquisition) of non-controlling interest (1 275) (46 317) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the period Effect of foreign exchange rate movement on cash balance (12 644) (25 358) Cash and cash equivalents at the end of the period Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

11 OTHER INFORMATION Unaudited six months ended Restated Audited year end 30 Sep 30 Sep 31 Mar Net interest-bearing debt: equity ratio (excluding longterm debt secured by investments and loans) (%) 29% 34% 28% Depreciation and amortisation (R 000) Net asset value per share (cents) Tangible net asset value per share (cents) Capital expenditure (R 000) Capital commitment (R 000) SEGMENT INFORMATION Group, Engineering solutions Capital equipment financing and other operations Total continuing operations Discontinued operations Total operations R 000 R 000 R 000 R 000 R 000 R 000 Unaudited six months ended 30 September 2017 Segment revenue Segment operating profit before foreign exchange movements Segment assets Segment liabilities Unaudited six months ended 30 September 2016 *Restated Segment revenue Segment operating profit/(loss) before foreign exchange movements (16 290) Segment assets Segment liabilities Audited year ended 31 March 2017 Segment revenue Segment operating profit before foreign exchange movements Segment assets Segment liabilities Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

12 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 2018 financial year onwards were applied and did not have a material impact on the Group results. The comparative periods results have been restated for the change in accounting policy disclosed at 31 March 2017 whereby the Group's share based payments which were classified as equity settled were changed to cash settled. PREPARED BY These unaudited condensed consolidated results have been prepared under the supervision of Craig Barnard CA(SA), the Executive Director Financial and Commercial. SIGNIFICANT EVENTS AND TRANSACTIONS The significant events and transactions which require disclosure per IAS 34 have been considered and are disclosed in the notes and other information in the unaudited condensed consolidated results. ACQUISITIONS OF SUBSIDIARIES AND ASSOCIATES No acquisitions were made during the period ended 30 September EVENTS AFTER THE REPORTING DATE There were no events after the reporting date which require disclosure. 10 Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

13 RESTATEMENT NOTE This restatement has been accounted for due to the proactive monitoring process of the Johannesburg Stock Exchange. In the comparative period, the Company accounted for the employee share incentive scheme as equity settled rather than cash-settled. The correction of the above results in adjustments as follows: As previously reported Restatement adjustments As restated R'000 R'000 R'000 September 2016 Statement of financial position Equity attributable to the equity holders ( ) ( ) Deferred tax asset (2 294) Share appreciation rights liability (6 111) (6 111) Statement of comprehensive income Operating profit before foreign exchange movements Taxation (78 878) (662) (79 540) Net effect on profit for the period Other note disclosure Basic earnings and normalised earnings per share (cents) Diluted earnings per share (cents) Headline earnings per share (cents) Diluted headline earnings per share (cents) Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

14 TRADE AND OTHER RECEIVABLES Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar R 000 R 000 R 000 Trade receivables Other receivables Trade and other receivables from operations Receivable on disposal of subsidiary Balance at end of the period DISPOSAL OF SUBSIDIARY Unaudited six months ended Audited Restated year ended 30 Sep 30 Sep 31 Mar R 000 R 000 R 000 Fair value of net assets disposed of Assets Liabilities ( ) Non-controlling interest (81 932) Fair value of net assets disposed Bank and cash Fair value of net assets disposed of excluding bank and cash Profit on disposal of subsidiary Receivable on disposal of subsidiary ( ) Decrease in net bank overdraft due to disposal of subsidiary Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

15 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. Unuadited six months ended 30 September 2017 Valuation technique(s) and key inputs Level 1 Level 2 Level 3 Financial assets at fair value FirstRand Bank bonds Forward exchange contract asset Financial liabilities at fair value Foreign trade payables Foreign exchange contract liability 1 Unaudited six months ended 30 September 2016 Valuation technique(s) and key inputs Level 1 Level 2 Level 3 Financial assets at fair value FirstRand Bank bonds Forward exchange contract asset 1 Financial liabilities at fair value Foreign trade payables Foreign exchange contract liability Audited year ended 31 March 2017 Valuation technique(s) and key inputs Level 1 Level 2 Level 3 Financial assets at fair value FirstRand Bank bonds Forward exchange contract asset Financial liabilities at fair value Foreign trade payables Foreign exchange contract liability Discounted contractual stream payments using the zero swap curve at the valuation date. 2. Face value less specific related provision. 3. Expected settlement value. 4. Determined by the spot rate at the end of the period. There have been no transfers between the levels during the financial period disclosed. Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

16 PREFERENCE SHARE CASH DIVIDEND Notice is hereby given that the board have declared a gross cash dividend on 6 November 2017 of cents (31 October 2016: cents) per preference share for the period from 13 June 2017 to 6 November Dividends are to be paid out of distributable reserves. Dividends tax (DT) of 20% will be withheld in terms of the Income Tax Act for those shareholders who are not exempt from the DT. Accordingly, shareholders who are not exempt from DT will receive a net dividend of cents per preference share. Invicta Holdings Limited has preference shares in issue. Invicta Holdings Limited's income tax reference number is 9400/012/03/6. The salient dates for the preference share dividend will be as follows: Last day of trade to receive a dividend Tuesday, 28 November 2017 Shares commence trading ex dividend Wednesday, 29 November 2017 Record date Friday, 1 December 2017 Payment date Monday, 4 December 2017 Share certificates may not be dematerialised or rematerialised between Wednesday, 29 November 2017 and Friday, 1 December 2017, both days inclusive. ORDINARY SHARE CASH DIVIDEND The board has declared a final gross cash dividend of cents per ordinary share for the period ended 30 September Dividends are to be paid out of distributable reserves. Dividend tax (DT) of 20% 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 11.17(c) of the JSE Listings Requirements, the following additional information is disclosed: The gross local dividend amount is cents per ordinary share for shareholders exempt from the Dividend Tax; The net local dividend amount is cents per ordinary share for shareholders liable to pay the Dividend Tax; Invicta Holdings Limited has ordinary shares in issue (which includes treasury shares); and Invicta Holdings Limited's income tax reference number is 9400/012/03/06. In compliance with the requirements of Strate the following dates are applicable: Last day of trade to receive a dividend Tuesday, 12 December 2017 Shares commence trading ex dividend Wednesday, 13 December 2017 Record date Friday, 15 December 2017 Payment date Monday, 18 December 2017 Share certificates may not be dematerialised or rematerialised between Wednesday, 13 December 2017 and Friday, 15 December 2017, both days inclusive. By order of the board Cape Town 23 November Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

17 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 Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, PO Box 61051, Marshalltown, 2107 Directors: Dr CH Wiese* (Chairman), A Goldstone (Chief Executive Officer), C Barnard, R Naidoo^, B Nichles*, GM Pelser, DI Samuels^, LR Sherrell*, AM Sinclair, RA Wally^, Adv JD Wiese* * Non-executive ^ Independent non-executive Sponsor: Deloitte & Touche Sponsor Services Proprietary Limited Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September

18 NOTES 16 Invicta Holdings Limited Unaudited Condensed Consolidated Results for the six months ended 30 September 2017

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