Invicta inches ahead in tough market conditions
Market watchers say the company’s slender increase in turnover is a reasonable performance
It was a hard grind for Invicta Holdings, the industrial conglomerate that is controlled by investment tycoon Christo Wiese, in the six months to the end of September.
On Monday, the company, which recently sold off its building supplies hub, reported a slender increase in turnover to R4.8bn, which market watchers said was a reasonable performance under deteriorating trading conditions in the local industrial and mining sectors.
The operating margin slipped slightly to 8.8% (previously 9%) with operating profits from continuing operations increasing 6% to R314m. The performance will be viewed against Invicta’s stated target of achieving R20bn in revenue and R1bn for operating profit by 2020.
Headline earnings, which strips out once-off profits, came in 7% lower at R243m or 225c per share.
In commentary accompanying the results, CEO Arnold Goldstone said the Engineering Solutions Group (ESG) — which distributes engineering products such as bearings, tools, electric motors and hydraulics — felt the headwinds of the slowdown in SA’s industrial and mining sectors. Revenue dropped 3% to R2.3bn, with Goldstone reporting squeezed gross margins as competitors reduced prices to liquidate stock as trading conditions became more difficult and sales slowed.
He said project work in the mining sector "dried up virtually completely" with only essential maintenance purchases made by customers.
The operating profit of ESG dropped 16% to R202m.
Invicta’s Capital Equipment Group (CEG), which specialises in agricultural machinery, construction machinery, forklifts and earthmoving machinery parts — enjoyed a strong six months’ trading as the agricultural sector emerged from a prolonged drought.
But Goldstone reported that construction machinery sales were still subdued, saying that some segments within this market had improved marginally.
There was good news from southeast Asia where earth-moving parts subsidiary Kian Ann experienced a steady increase in volumes and profits.
Overall CEG increased revenue 7% to R2.6bn with operating profit static at R218m.