interim results presentation · 2019-11-27 · | interim results presentation for the six months...

INTERIM RESULTS PRESENTATIONFor the 6 months ended 30 September 2019

Presented by Arnold Goldstone (Chief Executive Officer)

2Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019

Agenda

The period in perspective02Divisional review03

Group financial overview04Prospects and strategy05Appendix06

Capital Equipment Group (CEG)

Engineering Solutions Group (ESG)

First things first01


First things first


First things first

1. Debt

• Our debt levels are too high.

• Although net interest bearing debt as reported has improved from 46 % (Sep 18) to 44% (Mar 19) to 42% (Sep 19), we need to do better.

• Target range: 15% -40%

• Focus on reduction of working capital, sale of excess and non-core assets and looking at capital structure.


First things first (continued)

2. Inventory levels

• Targets not achieved yet due to:

• Deterioration in key markets in South East Asia and South Africa (= lower sales, slower burn rate)

• Investment in new market sectors (e.g. R100m in food and beverage)

• General global slow down has resulted in suppliers bringing orders forward (equalling more inventory)

• Centralisation of inventory in the ESG warehouse will be completed 30 Nov 2019 (2 months behind schedule). Relocating R400m of inventory

• Good news: Action taken to reduce inventory starting to bear fruit. Inventory at Oct 19 was back to Mar 2019 levels, with targeted reductions of a further R250m by year-end.



3. Update on SARS settlement

• SENS announcement 27 September 2018

• R750m full and final settlement agreement:

› 1 October 2018: R300m

› 1 October 2019, 2020, 2021: R100m x 3 = R300m

› 1 October 2022 (final): R150m

› Fully provided for at 31 March 2019

• Have paid R550m to date (R150m more than settlement plan)

• Next payments:

› 1 Oct 2020: R100m

› 1 Oct 2021: R100m



4. Effect of IFRS changes

• IFRS 9 and 15: No significant impact

• IFRS 16: The effect of the adoption IFRS 16 as at 1 April 2019 (increase/(decrease)) is as follows: 1 April 2019 R'000 Assets Right of use assets 458,711 Deferred tax asset 16,304 Total assets 475,015 Liabilities Right of use lease liability 554,254 Interest-bearing loan and borrowings * (7,971) Trade and other payables * (4,853) Total liabilities 541,430 Total adjustment on equity Retained earnings (66,180) Non-controlling interest (235) (66,415) * Lease smoothing liabilities



5. Cash flow and dividends• Cash generation has been materially better than the comparative period, but tax

settlement this year has resulted in higher gearing

• Board prefers to conserve cash (reduce gearing; withstand tough trading conditions)

• Hence no interim dividend declared

• Will resume normal dividend policy as cash flow allows

• Normal dividend policy is:

› 3.50 x dividend cover at interims; and

› 2.75 x dividend cover at year end



6. New CEO

• Steven Joffe appointed from 01 January 2020


The period in perspective


Revenue

↔ 0%to R5.3 billion

Operating profit

↓ 6%to R382 million

Results at a glance tough markets, satisfactory results, better cashflow

Headline earnings per share

↑ 1046%to 149 cents


Profit before tax↓ 16%to R314 million

NAV per share

↑ 6%to 4210 cents

to 3550 cents

TNAV per share

↑ 8%

Results at a glance (continued)


Results at a glance (continued)

No new acquisitions

Share price 22 November 2019

R20.6051 % discount to NAV42 % discount to TNAV

Cash generated by operations

↑ 423%to R518 million


The period in perspectiveExchange rate volatility USD to ZAR chartOpening 1 Apr 2019: 14.3422Closing 30 Sep 2019: 15.13696% weaker in 6 months, with volatility

14.3422 15.1369


Divisional review


Divisional structure

• Northmec• New Holland*• CSE• Doosan• HPE• ESP• Landboupart• Criterion• Shamrock• Kian Ann Group

Capital Equipment GroupCEG

• BMG o Hanseno OSTo Fennero Rustenburg Engineering and

foundry o Belt Brokers

• Industri Tools and Equipment • Autobax

o Driveshaft Parts• Hyflo

Importer & distributor of agricultural equipment, construction equipment, forklifts and aftermarket

replacement spare parts

Leading distributor of engineering consumables services and provider of engineering solutions

Engineering Solutions GroupESG

* Spare parts


Revenue Contribution by Operating Segments (R’m) (excluding Head Office)


Operating profit contribution by operating segment before forex costs (R’m)(excluding Head Office)

(53%)


Revenue contribution by region(excluding Head Office)


Revenue contribution by sector(excluding Head Office)

DIVISIONAL REVIEWCapital Equipment Group


Review of September 2019

Agriculture

Revenue 8%

Operating profit before foreign exchange movements 21%

Construction

Forklifts (logistics) Aftermarket spare parts

• Customer liquidity issues• Expropriation of land creating uncertainty• Drought resulting in low yields and below average

maize prices• High value of used equipment in the market

• Markets are challenging with opportunities in a crowded market• Good cash generation.• Working capital under control.• Expenses reduced and under control• Good absorption rate

• Major construction companies not buying; many in business rescue

• Large number of small companies emerging• Bank financing for the sector remains difficult

• Market stable • Doing well with exception of Asia


Review of September 2019 (continued)

Divisional Performance

• Maintaining volumes in tractor, combine harvesters and implement sectors of the markets

• Retained large portion of the New Holland spare parts business.• New equipment business restricted by value of trade-ins.

• Maintaining good momentum in all sectors of the market• All construction equipment companies profitable and exceeding

last years performance.

• Forklift import units down for the whole market by 23% (no sales stats available for market).

• Profitable

• S.A. Construction machinery parts business maintained margins and in line with last year.

• South East Asia performed below expectations and under pressure due to declining demand

• S.A. Agriculture aftermarket spare parts are performing well.

Agriculture

Aftermarket Spare Parts

Forklifts (Logistics)

Construction


Chief Executive OfficerTony Sinclair

Management structure

MDGraham

Forte

MDBrenton

Kemp

MDAndrew Grobler

MDRoss

Collard

MDJohan

van der Merwe

MDMarius Schutte

DH David Visser

MD Darrel Holton

DH Danie

van Aswegen

MDLoy

Soo Chew


Interim results summary 30 September 2019

First Half Second Half


Revenue – First/Second half

7601107

890 8781119

1683

2583 2404 2285 2380 2556 25172320864

1148

860 999

1429

1820

2539

22032199

25752518

2314

0

1000

2000

3000

4000

5000

6000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

H1 H2


Revenue contribution by market sector


Gross profit value contribution by income stream


Combine volume market –annual

70

135

209191

291

228

165

124 125

97

175 178

278

165 168179

341

275

188

260

343352

339

211

185

196198

145

0

50

100

150

200

250

300

350

400

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


Tractor volume market -annual

2207

3122

46794308

60495721

4015

2624

2668

2847

4428

4330

5280

4677

5727

6451

7549

5550

5155

7379

7899

7517

7466

6606

5855

6362

6715

5800

1500

2500

3500

4500

5500

6500

7500

8500

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

units

Years


Agriculture equipment volumes

Tractors 22%

Combines 16%

Sprayers 7%

Equipment volumes (South Africa)

Construction equipment volumes

TLB’s 13%

Skid Steers 20%

Excavators 11%

Loaders 0%


Yellow/white maize prices/ZAR

11,0000

11,5000

12,0000

12,5000

13,0000

13,5000

14,0000

14,5000

15,0000

15,5000

16,0000

2 300

2 400

2 500

2 600

2 700

2 800

2 900

3 000

3 100

3 200

3 300

01-Jan-19 01-Nov-19

ZAR

USD

ZAR

per t

on

Maize ZAR 2019

Yellow Maize White Maize ZAR/USD


Wheat prices

4 200

4 300

4 400

4 500

4 600

4 700

4 800

4 900

01-Ja

n-19

08-Ja

n-19

15-Ja

n-19

22-Ja

n-19

29-Ja

n-19

05-F

eb-1

9

12-F

eb-1

9

19-F

eb-1

9

26-F

eb-1

9

05-M

ar-1

9

12-M

ar-1

9

19-M

ar-1

9

26-M

ar-1

9

02-A

pr-1

9

09-A

pr-1

9

16-A

pr-1

9

23-A

pr-1

9

30-A

pr-1

9

07-M

ay-1

9

14-M

ay-1

9

21-M

ay-1

9

28-M

ay-1

9

04-Ju

n-19

11-Ju

n-19

18-Ju

n-19

25-Ju

n-19

02-Ju

l-19

09-Ju

l-19

16-Ju

l-19

23-Ju

l-19

30-Ju

l-19

06-A

ug-1

9

13-A

ug-1

9

20-A

ug-1

9

27-A

ug-1

9

03-S

ep-1

9

10-S

ep-1

9

17-S

ep-1

9

24-S

ep-1

9

01-O

ct-1

9

08-O

ct-1

9

15-O

ct-1

9

22-O

ct-1

9

29-O

ct-1

9

ZAR

per t

on

Wheat - Safex Prices 2019

Wheat


Outlook

• Securing aftermarket business

• Securing annuity business (spare parts)

• Improve efficiencies within the group – stock turns,

expense control etc.

• Implement new ERP system

Take advantage of the opportunities in each market sector by:

Engineering Solutions Group

DIVISIONAL REVIEW SEPTEMBER 2019

36Invicta Holdings Limited | Interim results presentation for the six month ended September 2019

Revenue 6.83%

Operating profit before foreign exchange movements 8.44%


ESG• ESG has performed better than prior year. Operating in very volatile markets and industries.

BMG• Has exceeded expectations largely due to a change of market focus, namely: Food & Beverage, water

purification and renewable energy.

Autobax• Met expectations & has had a smooth onboarding of the Drive Shaft business.

INDUSTRI Tools & Equipment• Successful launch of INDUSTRI Tools & Equipment into the market and the consolidation of all our tool

business into one brand.

Hyflo• Continues to operate in the project side of the business, however, the majority of its trade business has

been integrated into the BMG business.

Review of September 2019


Review of September 2019 (cont.)


African operations – BMG Subsidiary Branch Network outside of South Africa• Mozambique – continues to exceed expectations• Continued solid performances from the rest of the African countries

Working Capital• Stock cover is too high and is being addressed. Stringent plans are in place to reduce this to an acceptable level by the

end of March 2020• Debtors continue to be under pressure• Large focus on extending supplier payment terms • Debtors > R250 000.00 insured


Management structure


Half-year Highlights 30 September 2019

People Engagement - Be PART - BMG Heroes

• A peer nomination system that rewards peers for excellence – those that go above and beyond and are the

“change agents” within the business

• Objective – To drive the right behavior (not a buddy system)

• EXCO steerco selects Heroes and publicly recognizes them and incentivizes them for excellence

• Anyone can nominate anyone

What BMG Heroes led our people to do; • Live the brand – Be PART

• Show up at work with a smile every day, ready to conquer the world

• BE Accountable (Do YOUR Part)

• Dress well and take pride in themselves

• Give their ALL in everything they do

• Go the extra mile for our customers (internal & external)

• Learn from mistakes


Half-year Highlights 30 September 2019 (cont.)

• INDUSTRI was formed to supply and support all industrial sectors in Southern Africa • Consolidation of all tool businesses – Man-Dirk, Tool Quip & Allied, SA Tool, Sibuyile Industrial Supplies, Gem Tool

and F & H Machine Tools • INDUSTRI – Fast, Reliable, Effective suppliers of tools and equipment, cutting tools, welding products, lifting

equipment, PPE products, locks and machine tools.• Greater buying power means reduced cost; coupled with fast, effective supply means increased value for our

customers.

• Another S4S Implementation - One System, under One Leadership Team = Simplify for Success

Complete Re-brand - INDUSTRI Launch


• Drought & economic climate meant ESG had to diversify & explore new markets “Drink from new watering holes”

• H1 Focus – Food & Beverage Industry o National Expo Roadshow with credible industry speaker keynotes o Showcase full industry-specific offering o Cross-sell to existing clients o Introduce and sell to new clients o Provide expertise and consult services

• Add Value – Don’t just sell product, sell solutions

• H2 Focus – Water & Waste Water

Explore New Markets – Food & Beverage

Half-year Highlights 30 September 2019 (cont.)


Interim results summary30 September 2019


Revenue contribution by Region


Revenue contribution by revenue stream


Revenue contribution by Sector


Group financial overview


Revenue (R’m)

* Re-presented


Operating profit

**Excluding once-off items* Re-presented


Attributable earnings (R’m)


Earnings per share (cents)


Dividend per share (cents)


Cash flow statement (R’m)

53Invicta Holdings Limited | Interim results presentation for the six months ended September 2019

Prospects and strategy


Prospects

• Trading conditions have settled (less load-shedding, May 2019 elections over), but

they still remain challenging

• Anticipate a slow return to growth in South Africa. Business confidence in Q3 was

lowest in 20 years, which impacts on sentiment in the country. GDP for CY2019 was

revised down from 1.5% to 0.5% in the Oct 2019 Medium Term Budget Speech

• Rest of world slowing down, expect lead times for products to decline and reduction

in demand for Kian Ann product

• E commerce development


Strategy

Invicta’s strategy is unchanged.

• Generate healthy cash from existing businesses

• Build on the strength of the current businesses

• Focus on customer service, value-added distribution and supply chain efficiencies

• Diversify the Group’s revenue stream geographically

• Acquire businesses that are a strategic fit for the Group

• Target real, sustainable growth

• Short term strategy: reduce debt, address capital base


Q & AThank you for your attendance and participation

The accounting treatments this year are complex. We are happy to discuss any queries which you may have

www.invictaholdings.co.za

For any further Investor Relations questions please contact:

Arnold Goldstone (CEO) [email protected]

Nazlee Rajmohamed (CFO) [email protected]

Marlize Keyter (Keyter Rech Investor Solutions) [email protected]

087 351 3810

http://www.invictaholdings.co.za/

mailto:[email protected]




Appendix


Group structure

BBEE & Staff Trusts

Invicta Holdings

SA Non - SA

Invicta SAInvicta

PropertiesInvicta

TreasuryInvicta

FinanceInvicta Offshore

Holdings

ESG CEG Invicta African Holdings

Invicta Asian Holdings

BMGHansen

OSTFenner

Rustenburg EngineeringJoerg FoundryBelt Brokers

Man-DirkSA ToolSibuyile

Toolquip & AlliedF&H Machine Tools

AutobaxHyflo

NorthmecNew Holland*

CSEDoosan

HPEESP

LandboupartCriterionShamrock

Kian Ann & subsidiaries in

South East Asia

MozambiqueZambia

TanzaniaDRC

Ghana

25% 75% 100% 100% 100% 100%

100% 100% 100% 100%

*Equipment sales discontinued. Aftermarket support continues (spare parts)


Capital Equipment (SA))

• Northmec (Agricultural Machinery)• New Holland* (Agricultural Machinery)• CSE (Earthmoving Machinery)• Doosan (Earthmoving Machinery)• HPE (Hyundai Earthmoving)• ESP (Spare Parts)• Landboupart (Spare Parts)• Criterion (Forklifts)• Shamrock (Forklifts)• 138 dedicated outlets

*Equipment sales discontinued. Aftermarket support continues (spare parts)


Capital Equipment (Kian Ann Group)

Kian Ann Engineering• One of the world's largest independent distributors

of heavy machinery and diesel engine parts• HQ in Singapore• Subsidiaries in Singapore, Indonesia, China, Canada,

United Kingdom, USA and Myanmar• Joint venture in India• Associate in China

Kian Chue Hwa Industries • One of Asia’s largest independent distributors of

commercial and industrial vehicle parts• HQ in Singapore• Subsidiaries in Indonesia, Thailand and Malaysia


Engineering Solutions• BMG (Bearing Man Group)

o Engineering components & technical serviceso 102 brancheso Bearings, Seals, PT, Tools, Fastenerso Drives, Motors, Belting, Field Serviceso Filtration, Hydraulics, Lubrication, Pneumatics

• Hansen• Rustenburg Engineering & Joerg Foundry• Belt Brokers• Man-Dirk Group (incl SA Tool)

o Tools & equipment, PPE, lifting and weldingo 18 branches & subsidiarieso Newly acquired Toolquip & Allied and F&H

• Autobaxo Automotiveo 3 branch network

• OST

• Hyflo



Group profit drivers

• Mining and industrial activity (ESG and CEG)

• Agricultural activity (Northmec and aftermarket spare parts)

• Construction and earthmoving activity (CSE, Doosan SA & HPE)

• Warehousing (Criterion Equipment and Shamrock)

• Global replacement spares market (Kian Ann)


ARNOLD GOLDSTONE

Executive management team

BOARD OF DIRECTORSDr Christo Wiese (Non-Executive Chairman)

ENTITY

Invicta Holdings

Capital Equipment Group


CHIEF FINANCIAL OFFICERCHIEF EXECUTIVE OFFICER

NAZLEE RAJMOHAMED

TONY SINCLAIR GEOFF BALSHAW

GAVIN PELSER BENNIE GROENEWALD


Shareholding as at 30 September 2019

Public 49%

Wiese family39%

Sherrell family7%

Goldstone family2%

Samuels family2%

Exec directors 1%

Directors’ Total % 51%

Public % 49%

interim results presentation · 2019-11-27 · | interim results presentation for the six months...

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