interim results presentation · 2019-11-27 · | interim results presentation for the six months...
TRANSCRIPT
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
3Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
First things first
4Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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.
5Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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.
6Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
First things first (continued)
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
7Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
First things first (continued)
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
8Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
First things first (continued)
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
9Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
First things first (continued)
6. New CEO
• Steven Joffe appointed from 01 January 2020
10Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
The period in perspective
11Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
12Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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)
13Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
14Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
15Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Divisional review
16Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
17Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Revenue Contribution by Operating Segments (R’m) (excluding Head Office)
18Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Operating profit contribution by operating segment before forex costs (R’m)(excluding Head Office)
(53%)
19Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Revenue contribution by region(excluding Head Office)
20Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Revenue contribution by sector(excluding Head Office)
DIVISIONAL REVIEWCapital Equipment Group
22Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
23Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
24Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
25Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Interim results summary 30 September 2019
First Half Second Half
26Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
27Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Revenue contribution by market sector
28Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Gross profit value contribution by income stream
29Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
30Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 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
31Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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%
32Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
33Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
34Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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%
Divisional Performance
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
37Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Review of September 2019 (cont.)
Divisional Performance
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
38Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Management structure
39Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
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
40Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
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
41Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
• 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.)
42Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Interim results summary30 September 2019
43Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Revenue contribution by Region
44Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Revenue contribution by revenue stream
45Invicta Holdings Limited | Interim results presentation for the six month ended September 2019
Revenue contribution by Sector
46Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Group financial overview
47Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Revenue (R’m)
* Re-presented
48Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Operating profit
**Excluding once-off items* Re-presented
49Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Attributable earnings (R’m)
50Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Earnings per share (cents)
51Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Dividend per share (cents)
52Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Cash flow statement (R’m)
53Invicta Holdings Limited | Interim results presentation for the six months ended September 2019
Prospects and strategy
54Invicta Holdings Limited | Interim results presentation for the six months ended September 2019
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
55Invicta Holdings Limited | Interim results presentation for the six months ended September 2019
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
56Invicta Holdings Limited | Interim results presentation for the six months ended September 2019
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
57Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Appendix
58Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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)
59Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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)
60Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
61Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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
Engineering Solutions Group
62Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
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)
63Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
ARNOLD GOLDSTONE
Executive management team
BOARD OF DIRECTORSDr Christo Wiese (Non-Executive Chairman)
ENTITY
Invicta Holdings
Capital Equipment Group
Engineering Solutions Group
CHIEF FINANCIAL OFFICERCHIEF EXECUTIVE OFFICER
NAZLEE RAJMOHAMED
TONY SINCLAIR GEOFF BALSHAW
GAVIN PELSER BENNIE GROENEWALD
64Invicta Holdings Limited | Interim results presentation for the six months ended 30 September 2019
Shareholding as at 30 September 2019
Public 49%
Wiese family39%
Sherrell family7%
Goldstone family2%
Samuels family2%
Exec directors 1%
Directors’ Total % 51%
Public % 49%