Invicta grows earnings after toughest year ever


Invicta grows earnings after toughest year ever

Published Date: 2019-06-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Invicta grows earnings after toughest year ever

The engineering and capital equipment group says just about every sector it operates in has been under severe pressure.

Invicta says the past year has been one of the toughest on record for the group, with just about every sector it serves in South Africa under severe economic pressure. With 76% of its revenue generated locally, that's had a knock-on effect on margins.

The engineering and capital equipment group still managed to grow revenue by 5% to R10.45 billion in the year to end-March, boosted by acquisitions which contributed R254 million. It said challenging trading conditions resulted in a decline in gross margins, while costs rose due to rationalisation expenses associated with the acquired businesses and the once-off costs of right-sizing some existing underperforming businesses. That resulted in an 18% slide in operating profit to R690 million.

Earnings were also affected by a R750 million settlement with the SA Revenue Service, R200 million of which was provided for in the year under review. The other R550 million was accounted for in prior years. The settlement related to a number of historical transaction that it was advised were tax compliant but it decided to settle due to the lingering uncertainty, which had weighed on its share price.

Its Engineering Solutions division grew revenue by 15% to R5.24 billion, helped by the inclusion of Forge Industrial Group. Its Capital Equipment Group reported a 5% drop in revenue to R4.83 billion largely due to lower demand.

Group net profit rose 61% to R135 million as it benefitted from a significant decline in finance costs and a lower annual tax bill. Headline earnings per share increased by 88% to 109c. It's not paying a final dividend due to the tax settlement and the resultant higher gearing in the group. It said its normal dividend policy would be resumed once cash flows and debt allowed.

The group said it would focus on bedding down acquisitions and prioritising cash generation and return on equity in the year ahead.

Its shares fell 5.5% to R23.30 yesterday.

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