JSE- and A2X-listed industrial investment group Invicta Holdings has reported a rise in headline earnings and stronger cash reserves for the six months ended September 30, delivering a 15% increase in headline earnings per share (HEPS) to R2.65 and a 19% increase in sustainable HEPS to R2.85.

The company reported cash on hand of R931-million, with net asset value per share up 3% to R60.90. Meanwhile, revenue rose by 6% and the gross profit margin held steady at 32%.

Invicta said its performance reflected the continued benefits of its offshore diversification strategy and internal streamlining measures.

“We are pleased with our cash generation during the period. The business continues to demonstrate strength in its geographical diversification strategy and strategic initiatives, that have supported resilient operations and delivered value despite challenging trading conditions,” Invicta CEO Steven Joffe said on November 24.

He added that the company had focused on simplifying operations, consolidating recent investments and managing the effects of currency movements and import tariffs.

Joffe noted that last year’s sale of the main Singapore distribution warehouse and the redemption of all outstanding preference shares had contributed to the group’s position.

“It is these initiatives that have started to yield results in the current year,” he said.

Further, he noted that interest rate cuts in several major economies, including two in South Africa, had created mixed conditions during the period.

“In South Africa, we saw two interest rate cuts during the period and we hope that the cuts will continue as current interest rate levels remain high amidst a low-growth industrial environment,” Joffe said.

Currency volatility remained a key issue, with the rand:dollar exchange rate ranging from R18.31 to R19.77 before closing at R17.26.

Invicta reported that activity levels in the local market improved despite declines in the mining and manufacturing sectors. The company said South Africa’s industrial environment remained difficult, with regulatory constraints limiting growth. Supply chains were also disrupted by port delays, and container shipping costs from China fluctuated between $2 500 and $4 200.

In Invicta’s industrial solutions and parts division, the company said demand remained under pressure, with businesses in the industrial sector reducing spending. However, it reported improvements in South Africa’s automotive sector and said it expected growth in its agricultural house brands.

The company said it was also expanding its auto-agri operations into additional European markets owing to continued tensions in Eastern Europe.

Replacement parts for industrial equipment revenue dipped slightly from R2.46-billion to R2.45-billion. Operating profit before finance and foreign exchange fell 9% from R196-million to R178-million, mainly owing to a 6% rise in operating costs. Profit before tax decreased from R115-million to R111-million.

Meanwhile, replacement parts for automotive and agriculture revenue increased from R424-million to R428-million, with a 7% rise in local sales offsetting a 2% decline in offshore revenue. Offshore operations contributed 62% of this segment’s revenue. Operating profit before finance and foreign exchange remained unchanged at R46-million, with profit before tax stable at R41-million.

Invicta said trading conditions in Poland and the UK had been difficult, but plans to improve synergies across the group were under way.

The capital equipment and parts division reported stronger growth.

“Sentiment in the mining sector is positive. However, it comes off a low base, with the sector still having a long way to go to return to continuous production levels. We are positive that we have come to a more stabilised position in terms of tariffs globally and, we hope that this will provide the impetus for a global sales improvement,” Joffe said.

Capital equipment and related services revenue rose from R612-million to R764-million, an increase of 25%, supported by a recovery in South Africa’s mining sector. Operating profit before finance and foreign exchange increased from R42-million to R57-million, and profit before tax grew from R39-million to R57-million.

Replacement parts and earthmoving equipment revenue increased from R293-million to R366-million, also up 25%, benefiting from the acquisition of Spaldings, which contributed 20% of revenue. Operating profit before finance and foreign exchange increased from R71-million to R75-million, with Spaldings accounting for 5% of the increase.

The Kian Ann Group contributed R69-million to Invicta’s group earnings, down from R79-million in the previous period. Invicta said the result was affected by US tariffs, the relocation of warehouse operations from Singapore to China and the stronger Singapore dollar relative to the dollar.

Joffe said the international outlook remained uncertain.

“Given the current uncertainty in the world, we will continue to prioritise cash generation. Having a relatively debt-free business gives us the necessary time to respond to difficult situations and, at the same time, provides the capacity for us to implement our acquisition strategy,” he said, adding that the company intended to return about 30% of earnings to shareholders each year through dividends or share buybacks.