final RESULTS PRESENTATION · Invicta Holdings Limited | Final results presentation for the year...

FINAL RESULTS PRESENTATIONfor the year ended 31 March 2019

Presented by Arnold Goldstone (Chief Executive Officer)

2Invicta Holdings Limited | Final results presentation for the year ended 31 March 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. SARS settlement

• SENS announcement 27 September 2018

• R750m full and final settlement – due and payable over four years:

› R300m in October 2018

› R100m x 3 payments October 2019, October 2020 and October 2021

(total R300m)

› R150m in October 2022 (final)

› Fully provided for at 31 March 2019 - R550m in prior years, R200m in FY 2019

• Have paid R450m to date (R150m more than planned)


First things first (continued)

2. Effect of IFRS changes

• IFRS 9

› FY 2018: Decrease in opening retained earnings of R5.6m

› FY 2019: not material

• IFRS 15: No significant impact

• IFRS 16: Coming in next year. Effect on the FY 2019 figures (which will be

comparatives next year) disclosed in AFS notes.



3. Cash flow and dividends

• Cash generation has been in line with prior year, but tax settlement this year has

resulted in higher gearing

• Board prefers to conserve cash (improve gearing; market conditions tough; may be

acquisition opportunities)

• Hence no final 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



4. Early retirement of CEO

• April 2019 the company announced retirement of the Group CEO (Arnold Goldstone)

on 31 December 2019 due to relocation.

• Appointment of replacement is imminent

• Management strengthened by:

› Appointment of CFO (Nazlee Rajmohamed) on 1 July 2018

› New CEO was appointed to BMG (major part of ESG) to free Gavin Pelser to focus

on his role of ESG CEO

› CEG CEO (Tony Sinclair) employment confirmed post his retirement in July 2019



5. Revision of write off period of agency (franchise) rights (Other Intangible Assets)

• New auditors (EY) appointed in January 2019

• As a consequence of a first-year audit, the application of all accounting policies and

estimations were rigorously checked as part of the year-end process

• The amortization period of Other Intangible Assets has been reassessed

• Resulted in restatement of Retained Earnings at 31 March 2018 of R216m and Assets

and Liabilities of R216m


The year in perspective


Revenue

↑ 5%to R10.4 billion

Operating profit

↓ 18%to R690 million

Headline earnings per share

↑ 93%to 112 cents

Results at a glance Tough markets, satisfactory results excluding anomalies


Profit before tax

↓ 15%to R614 million

NAV per share

↑ 7%to 4085 cents

to 3420 cents

TNAV per share

↑ 9%

Results at a glance (continued)


Results at a glance (continued)

3 New acquisitions

R331m

Share price 21 June 2019

R24.6540 % discount to NAV28 % discount to TNAV


The period in perspective

Exchange rate volatility USD to ZAR chartOpening: 11.85610Closing: 14.3421717% weaker in 12 months, with volatility


The period in perspective (continued)

Source: SASFIN



Source: Stats SA (data as at June 2019)



Source: Financial Mail May 2019


Divisional review


Divisional structure

• Northmec

• New Holland*

• CSE

• Doosan

• HPE

• ESP

• Landboupart

• Criterion

• Shamrock

• Kian Ann Group

Capital Equipment Group

CEG

• BMG

o Hansen

o OST

o Fenner

o Rustenburg Engineering

o Joerg Foundry

o Belt Brokers

• Man-Dirk

o SA Tool

o Sibuyile

o Toolquip & Allied

o F&H Machine Tools

• Autobax

• 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 Group

ESG

* Spare parts


Revenue contribution by operating segment (R’m) (excluding Head Office)

4 209 4 299 4 665 4 559 5 238

4 607 4 4844 955 5 074

4 831

0

2 000

4 000

6 000

8 000

10 000

12 000

MAR 2015 MAR 2016 MAR 2017 MAR 2018 MAR 2019

R'million Chart Title

10,069

52%48%

ESG CEG

8,816 8,7839,620 9,633


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

(53%)

48% 52%

ESG CEG

499406 486 479

342

457

362

426 452

374

0

200

400

600

800

1000

1200


R'million Chart Title

956

768

912 931

716


Revenue contribution by region(excluding Head Office)

18%

5%

76%

Asia

Other

South Africa


Revenue contribution by sector(excluding Head Office)

(63%)

(5%)

(16%)

(11%)

(14%)

(29%)

23%

17%

16%

12%

4%

Agriculture & Forestry

Mining

Construction

Manufacturing & Industry

Automotive


DIVISIONAL REVIEW


Review of 2019

• Markets are challenging with major pressure on equipment margins• Good cash generation• Working capital under control

• Agriculture• Customer liquidity issues• Value of land (expropriation of land) making it difficult for farmers to gear against

farms• Low maize prices• High value of used equipment in the market

• Construction• Major construction companies not buying; many in business rescue• Large number of small companies emerging• Bank financing for the sector remains difficult

• Forklifts (logistics)• Market stable

• Aftermarket spare parts• Holding up

Revenue 5%

Operating profit before foreign exchange movements 17%


Review of 2019 (continued)

Divisional Performance:

• Agriculture• Market share for CaseIH Tractors and Combine Harvesters increased• Retained large portion of the New Holland spare parts business• New equipment business restricted by value of trade ins

• Construction• Retained and grown market share in some sectors with volumes up on last year• All construction equipment companies profitable and exceeding last years performance

• Forklifts (Logistics)• Forklift import units down for the whole market by 5% (no sales stats available for market)• Profitable and additional investments of R45m to increase long and short term rental fleet

• Aftermarket spare parts• S.A. Construction machinery parts business maintained margins and in line with last year• South East Asia performed within expectations under improved market conditions• S.A. Agriculture aftermarket spare parts performed well under the circumstances


Chief Executive OfficerTony Sinclair

Northmec NHSA Landboupart Doosan HPE Africa CSE Criterion Shamrock ESP Kian Ann

Management structure

MDRoss

Collard

MDBrenton

Kemp

MDAndrew Grobler

MDAlex

Ackron

MDJohan

van der Merwe

MDMarius Schutte

DH David Visser

MD Darrel Holton

DH Danie

van Aswegen

MDLoy

Soo Chew


Final results summary 31 March 2019

Revenue (R’m)

Operating profit margin (%)Net operating assets (R’m)

Operating profit before interest on financing transactions and foreignexchange movements (R’m)

First Half Second Half

2 380 2 556 2 517

2 575 2 518 2 314

0

1 000

2 000

3 000

4 000

5 000

6 000

MAR 2017 MAR 2018 MAR 2019

4 955 5 074 4 831

219 218 187

251 234

186

0

100

200

300

400

500

600

MAR 2017 MAR 2018 MAR 2019

470 452

373

2306 2338

2769

1 800

2 050

2 300

2 550

2 800

3 050

3 300

MAR 2017 MAR 2018* MAR 2019

9.2% 8.5% 7.4%

9.7% 9.3%8.0%

MAR 2017 MAR 2018 MAR 2019

9.5%8.9%

7.7%


Agriculture 30.9%

Construction 20.1%

Logistics5.3%

Parts 43.7%

Revenue contribution by market sector


Parts 75.3%

Equipment 21.7%

Rent 3.0%

Gross profit value contribution

by income stream


• Agriculture equipment volumes

o Tractors 18%

o Combines 7%

o Sprayers 8%

• Construction equipment volumes

o TLB’s 17%

o Skidsteers 36%

o Excavators 8%

o Loaders 5%

Equipment volumes

(South Africa)


1500

1700

1900

2100

2300

2500

2700

2900

3100

3300

3500

01

-Jan

-18

12

-Jan

-18

23

-Jan

-18

03

-Fe

b-1

8

14

-Fe

b-1

8

25

-Fe

b-1

8

08

-Mar

-18

19

-Mar

-18

30

-Mar

-18

10

-Ap

r-1

8

21

-Ap

r-1

8

02

-May

-18

13

-May

-18

24

-May

-18

04

-Ju

n-1

8

15

-Ju

n-1

8

26

-Ju

n-1

8

07

-Ju

l-1

8

18

-Ju

l-1

8

29

-Ju

l-1

8

09

-Au

g-1

8

20

-Au

g-1

8

31

-Au

g-1

8

11

-Se

p-1

8

22

-Se

p-1

8

03

-Oct

-18

14

-Oct

-18

25

-Oct

-18

05

-No

v-1

8

16

-No

v-1

8

27

-No

v-1

8

08

-Dec

-18

19

-Dec

-18

30

-Dec

-18

10

-Jan

-19

21

-Jan

-19

01

-Fe

b-1

9

12

-Fe

b-1

9

23

-Fe

b-1

9

06

-Mar

-19

17

-Mar

-19

28

-Mar

-19

08

-Ap

r-1

9

19

-Ap

r-1

9

30

-Ap

r-1

9

11

-May

-19

22

-May

-19

02

-Ju

n-1

9

ZAR

per

to

n

Maize - Safex Prices 2018/19

Yellow Maize White Maize

Yellow/white maize prices/ZAR


3400

3600

3800

4000

4200

4400

4600

4800

01-Jan-18 01-Dec-18

ZAR

per

to

n

Wheat - Safex Prices 2018/19

Wheat

Wheat prices/ZAR


Outlook

Take advantage of the opportunities in each market sector by:

• Securing aftermarket business

• Selling volumes of machines to secure annuity business (spare parts)

• Improve efficiencies within the group – stock turns, expense control etc.

• Implement new ERP system


DIVISIONAL REVIEW


Review of 2019

Revenue 15%

Operating profit before foreign exchange movements 29%

Divisional Performance:

• BMG• Below expectations due to H2 decline & demand and margin pressures

• Autobax• Met expectations

• ManDirk Group• Disappointing performance with challenges post acquisition of Tool Quip & Allied and F&H with continued

decline in the sectors and pressures on margins

• Hyflo• Continued lack of projects resulting in integration into BMG

• African Operations• Mozambique

• Exceeded expectations and opened a new branch in Pemba• Solid performance across all other countries in Africa

• Working Capital• Stock cover improved• Debtors under pressure – market pressure forcing extended payment terms• Debtors > R250 000.00 insured


Management structure


Highlights 2018/2019


Noteworthy milestones 2018/2019

• Belt Brokers (Acquired 1 September 2018 ) – Performed well

• Joerg Foundry & Rustenburg Engineering- Securing strategic supply of cast iron products

• Drive Shaft Parts Group (Acquired 1 December 2018)- South Africa- UK- Poland- Ukraine- SpainFirst expansion into Europe

• Integration of Hyflo into BMG

• ManDirk Group restructure & S4S initiative


Final results summary31 March 2019

Revenue (R’m)

Operating profit margin (%)Net operating assets (R’m)

Operating profit before interest on financing transactions and foreign exchange movements (R’m)

2 346 2 270 2 564

2 319 2 289

2 675

0

1 000

2 000

3 000

4 000

5 000

6 000

MAR 2017 MAR 2018 MAR 2019

4 665 4 559

5 239

241 202 208

239277

134

0

100

200

300

400

500

600

MAR 2017 MAR 2018 MAR 2019

480 479

342

10.3% 8.9% 8.1%

10.3% 12.1%

5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

MAR 2017 MAR 2018 MAR 2019

10.3% 10.5%

6.5%

2 039

2 181 2 255

1 900

1 950

2 000

2 050

2 100

2 150

2 200

2 250

2 300

MAR 2017 MAR 2018 MAR 2019

First Half Second Half


Revenue analysis 31 March 2019

• Strategy of market differentiation by:o complementing product distribution with

technical expertise

• African revenue growing as a % of ESG revenues

(65%)

(88%)

63%

37%

Consumables Engineering

87%

12%1%

South Africa Africa Other


Sales by industry sector31 March 2019


Group financial overview


Revenue (R’m)

5 2704 389 4 727 5 041 5 284

5 190

4 410

4 905 4 953

5 166

0

2 000

4 000

6 000

8 000

10 000

12 000


First half Second half

9 632 9 994*

10 450

8 799

10 460

* Re-presented


Operating profit

Operating profit before interest on financing transactions and foreign exchange movements (R’m)

**Excluding once-off items

Operating margin (%)

377440 426 403

372

611

479

296

34

0

200

400

600

800

1 000

1 200

MAR 2016 MAR 2017 MAR 2018 MAR 2019

First half Second half Once off

783

1 051

905*

699

9.4% 8.6% 8.5% 7.6%

8.4%

12.5%

9.7%

5.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

MAR 2016 MAR 2017 MAR 2018 MAR 2019

First half Second half

8.5%**

10.9%

9.1%

6.7%

* Re-presented


EBITDA (%)

EBITDA (R’m)

11.0%10.0%

13.0%

10.1%

8.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2015 2016 2017 2018 2019

1 144

1 103

1 483

870

1 019


Attributable earnings (R’m)

510

393 383

84135

42

-2 -3

21

11

70

74 82

84

83

69

31

150

400

200

-100

0

100

200

300

400

500

600

700

800


Ordinary s/h Minority s/h Pref s/h Once off Specific taxation expense

429

589612

496

691


Earnings per share (cents):what it would have been if there was no specific tax provision

293

207253 242

195

361

160

246210

88

29

0

100

200

300

400

500

600

700

800

900

1000


First half Second half Once-off

742

78m weightedaverage nr of ordinaryshare

107m weighted average nr of ordinary shares

396

499

452

313

Rights issue

EPS after specific taxation expense, as published

359

78

118

126


Dividend per share (cents)

8467 72 69

50

112

7595

50

0

50

100

150

200

250


Interim Final

196

142

167

119

50

Feb 2015: Special dividend of 2024cps was paid

18%

No final dividend


Prospects and strategy


Prospects

• Trading conditions have settled (no load-shedding, elections over), but they still

remain challenging

• Expect coming year to more positive than FY2019 (less distractions), but anticipate a

slow return to growth

• 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 RONA >20% for each of the underlying businesses

• Target real, sustainable growth


Q & A

Thank 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

Properties

Invicta

Treasury

Invicta

Finance

Invicta Offshore

Holdings

ESG CEGInvicta African

Holdings

Invicta Asian

Holdings

BMG

Hansen

OST

Fenner

Rustenburg Engineering

Joerg Foundry

Belt Brokers

Man-Dirk

SA Tool

Sibuyile

Toolquip & Allied

F&H Machine Tools

Autobax

Hyflo

Northmec

New Holland*

CSE

Doosan

HPE

ESP

Landboupart

Criterion

Shamrock

Kian Ann &

subsidiaries in

South East

Asia

Mozambique

Zambia

Tanzania

DRC

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 services

o 102 branches

o Bearings, Seals, PT, Tools, Fasteners

o Drives, Motors, Belting, Field Services

o Filtration, Hydraulics, Lubrication, Pneumatics

• Hansen

• Rustenburg Engineering & Joerg Foundry

• Belt Brokers

• Man-Dirk Group (incl SA Tool)

o Tools & equipment, PPE, lifting and welding

o 18 branches & subsidiaries

o Newly acquired Toolquip & Allied and F&H

• Autobax

o Automotive

o 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 DIRECTORS

Dr Christo Wiese (Non-Executive Chairman)

ENTITY

Invicta Holdings



CHIEF FINANCIAL OFFICERCHIEF EXECUTIVE OFFICER

NAZLEE RAJMOHAMED

TONY SINCLAIR GEOFF BALSHAW

GAVIN PELSER BENNIE GROENEWALD


Shareholding as at 31 March 2019

Public 49%

Wiese family38%

Sherrell family7%

Goldstone family3%

Samuels family2%

Exec directors 1%

Directors’ Total % 51%

Public % 49%

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