Executive Review
of Performance
for the year ended 31 March 2025
The Year Under Review
Invicta is pleased to report a strong set of results for FY2025, reflecting the resilient and consistent performance of our core operations. Throughout the year, we remained focused on streamlining our business, enhancing efficiency and executing key strategic initiatives.
Notable achievements during the period include:
» The successful redemption of all outstanding preference shares and the acquisition of a parcel of our ordinary shares, both aimed at improving shareholder returns.
» The disposal of the main distribution warehouse at our Kian Ann operations in Singapore is seen as an important step in the process of optimising capital allocation. This transaction has freed up substantial capital while making Kian Ann more efficient by relocating it to a bonded distribution facility in China.
» Through our Kian Ann joint venture, we have further solidified our position in the US market by establishing a further start-up business called KSP, operating out of its own warehouse in Alexandria, Louisiana, which is intended to complement the product line of our KTSU America undercarriage business.
» The disposal of the KMP operations to Kian Ann has further aligned our interests with those of our partner in the Kian Ann joint venture, as we believe that the customer bases for engine parts and undercarriage components are largely similar.
» Lastly, the acquisition of the Nationwide Bearing Company (“NWB”) has further enhanced our offshore revenue streams. For a more detailed breakdown of the Group’s financial performance, refer to Reflections from our CFO on page 33.
Despite ongoing global economic uncertainty, the strength of our operational model and focused strategic initiatives enabled us to maintain both stability and growth. We remain confident in the long-term value of our business and are committed to delivering sustainable returns to shareholders by executing our strategy, driving operational efficiencies and maintaining discipline in capital allocation.
Throughout the period, we navigated several external challenges, including currency volatility, global supply chain disruptions, shipping delays and port congestion. Notably, South Africa experienced over 300 consecutive days without load shedding from 26 March 2024 through late January 2025, which had a positive effect on both business performance and confidence.
This continuous power supply was a welcome change, allowing our customers to operate without disruption.
While external pressures persist, our Group has proven resilient, and we have continued to manage and adapt effectively. We are proud of our dedicated management teams across all operations, who have responded swiftly and creatively – not only mitigating
risks but, in many cases, identifying opportunities to grow, optimise, or diversify the business. For further detail, refer to Our Operating Environment on page 17.
Our relatively strong balance sheet and shareholder support has also afforded us the ability to navigate these challenges with confidence. It has allowed us to continue invest in businesses and grow our current operations
CAPITAL MANAGEMENT AND CASH FLOW
Net debt increased by R204 million during the year, primarily due to the R173 million net investment in finance leases in our Capital Equipment business segment. Cash generation remained strong, with R725 million generated from operations. The net investment in working capital for the year totalled R215 million, with most of this investment directed towards finance leases for customers in the Capital Equipment segment.
Our management teams remained focused on tightly managing working capital levels to ensure our investment in inventory is relatively flat, notwithstanding our current operating environment and inflationary effects on product pricing.
Over the year, we returned R166 million in dividends to ordinary and preference shareholders and undertook a strategic buyback of the entire outstanding balance of 6.9 million preference shares, at a cost of R703 million. This redemption marks a significant milestone for the Group and reflects our ongoing efforts to enhance long-term value for ordinary shareholders.
We also acquired 4.9 million ordinary shares at a cost of R157 million. The benefit to shareholders will be seen in the year ahead and should positively impact earnings per share.
The Group continues to benefit from significant available banking facilities, providing ample capacity to fund operations and support strategic growth initiatives.
Our internal measure of net debt has always included the listed preference shares, and the redemption of these has already delivered a net gain to ordinary shareholders during the interim
period. The benefit is expected to increase annually going forward, creating a more robust and simplified capital structure aligned with our long-term strategy. Our net debt position is appropriate, and we are now in a position to evaluate growth opportunities in the market.
Reporting Segments
Consistent with the prior year, the Group reports its operations across five business segments. While the KAG forms part of the broader Replacement Parts, Services and Solutions: Earthmoving Equipment (“RPE”) segment, we continue to report on KAG separately due to its relative size and contribution.
The five reporting segments are:
» Replacement Parts for Earthmoving Equipment (“RPE”)
» Kian Ann Group (“KAG”)
» Replacement Parts for Industrial Equipment (“RPI”)
» Replacement Parts for Auto and Agri (“RPA”)
» Capital Equipment and Related Services (“CE”)
Financials per segment
This segment includes, inter alia, the operations of Equipment Spare Parts Africa (Pty) Ltd (“ESP”) and NWB. During the year, we restructured the KMP operations into the Kian Ann joint venture to better align our interests with those of our partner and leverage our combined capabilities for future growth. We also acquired NWB during the year, and it has delivered a solid performance in its first year with the Group.
Results summary for the year (prior year excludes KMP, as KMP is reported as a discontinued operation)
» Revenue increased by 23% (R460 million to R567 million).
» Operating profit before interest on financing transactions and foreign exchange increased by 39% (R95 million to R132 million).
KAG is equity-accounted as a joint venture. During the year, we disposed of our main Kian Ann warehouse in Singapore for S$63 million. From these proceeds, we received a dividend of S$20 million, which was applied towards reducing the Group’s South African debt facilities – contributing to the improvement of our overall debt position.
Following the disposal, Kian Ann relocated its primary distribution operations to Shanghai, from where it will continue servicing customers. The transition to Shanghai is expected to improve operational efficiency and profitability. The head office presence will remain in Singapore, housing the executive and sales teams.
The other KAG entities delivered satisfactory results despite heightened geopolitical tensions between China and the West.
Results summary for the year
» Revenue increased by 16% (S$248 million to S$288 million).
» Operating profit before interest on financing transactions and foreign exchange increased by 107% (S$29 million to S$60 million). The current year operating profit includes the SG$33 million profit on the Singapore property disposal, as well as a S$4 million accounting profit from the derecognition of the IFRS 16 assets and liabilities related to the distribution centre. In the prior year, the operating profit included the S$5 million profit on the disposal of a property in Shanghai.
RPI focuses on the import and local manufacture of industrial consumable products, services and solutions across all industries in Southern Africa. Our offering is built around world-class products and services aimed at improving customer efficiency and ensuring global competitiveness.
In the lead-up to the South African elections, customer hesitation impacted order volumes. However, once the Government of National Unity was announced and market confidence improved, we saw a noticeable uptick in activity, resulting in a strong performance in the second half of the year. The mining sector remained subdued due to low global resource prices and persistent local logistical challenges, including rail disruptions and port inefficiencies.
The business continued to prioritise inventory optimisation – maintaining appropriate fill rates and implementing strategies to move aged stock. The management team in RPI did well in controlling costs throughout the year, thus the business was able to generate improved returns.
Results summary for the year
» Revenue increased by 3% (R4.9 billion to R5.0 billion).
» Operating profit before interest on financing transactions and foreign exchange increased by 18% (R352 million to R416 million).
RPA operates in South Africa and select European markets, supplying automotive and agricultural replacement parts. The segment imports and distributes aftermarket automotive parts, OEM kits, driveshaft components and other agricultural spares.
Most of the pressure in this segment comes from the South African markets where consumers are under financial pressure, which drives buying practices supporting Chinese-produced products.
Results summary for the year
» Revenue increased by 10% (R738 million to R813 million), primarily due to the full-year contribution from Imexpart.
» Operating profit before interest on financing transactions and foreign exchange decreased by 1% (R94 million to R93 million).
CE supplies capital equipment and related spare parts and services to the earthmoving, construction, mining and logistics sectors.
Customer demand slowed in the lead-up to the national elections, leading to oversupply in the market. This in turn triggered margin compression across the sector. Following the formation of the GNU, demand normalised, and we believe oversupply conditions are now largely behind us.
Mining and materials handling remained under pressure due to continued port and transport challenges. The construction sector saw limited activity amid ongoing infrastructure delays. We hope that renewed political stability will unlock infrastructure spending and provide an uplift to this segment.
Competitors distributing Japanese brands benefited from the Rand/Yen currency tailwinds, requiring us to reduce gross margins to remain competitive. In the year, we have done well and have offered customers a competitive package with our in-house financing options.
Spare parts remain a critical revenue and profit driver for the segment, especially in the aftermarket.
Results summary for the year
» Revenue increased by 11% (R1.2 billion to R1.3 billion).
» Operating profit before interest on financing transactions and foreign exchange was flat at R110 million.
Repurchase of Shares
During the financial year, the Group repurchased and cancelled 4,921,642 ordinary shares (FY2024: 3 002 164) on the open market for R157 million. Post year-end, an additional 3,130,629 shares were acquired for R97 million.
A central pillar of our strategy is to reduce leverage. In line with this, we have successfully redeemed all outstanding preference shares without issuing new ordinary shares and without a significant increase in debt, but rather using cash from the disposal of underperforming assets as well as and operational profits. The removal of the preference shares enhances earnings available to ordinary shareholders, as previously declared dividends to preference shareholders were deducted before calculating distributions to ordinary shareholders.
These repurchases have been earnings accretive and will continue to benefit shareholders going forward.
Dividend
We are pleased to declare a dividend of 115 cents per share, up 10 cents from the prior year’s 105 cents – reflecting our strong operational performance and prudent capital allocation.
FY 2025 Strategy Review
The group strives to be a world-leading industrial products supplier in Southern Africa and selected international markets – often exclusively – offering readily available products supported by technical and solution-based services.
We create value through our robust distribution chain, extensive inventory holdings, reliable product availability and strong technical support. This technical support offering is a key differentiator, helping to prevent disintermediation and reinforcing our commitment to customer value.
Our overarching aim is to grow a diversified, sustainable replacement parts group that delivers above-market returns to stakeholders. To achieve this, we regularly review and restructure our businesses to meet return expectations. We also aim to achieve both geographic and sectoral diversification.
To realise our Group strategy, we are focused on the following key strategic objectives:
- Business optimisation: Continuously review and restructure our operations to ensure they deliver the desired financial returns.
- Geographic diversification: Expand into international markets aligned with our investment criteria, with the goal of generating 50% of Group net income from outside South Africa in the next year.
- Sectoral diversification: Grow into aligned sectors that leverage the Group’s core competencies and capabilities over the same timeframe.
Assessment of our Performance in FY 2025
The Group delivered a solid performance despite persistent global economic challenges. Below is a self-assessment of our performance against the key objectives we set for FY2025:
FY 2025 Objective
Managing working capital and optimising operations
Generating cash
Managing supply chain challenges
Looking for appropriate acquisitions
Self Assessment
1.5 – Between achieved and partially achieved
1.0. – Achieved
1.5 – Between achieved and partially achieved
1.5 – Between achieved and partially achieved
Looking ahead, the Group remains focused on driving performance and resilience across all core areas. Our key objectives for FY2026 are:
- Maintaining earnings growth
- Managing working capital and optimising operations
- Generating cash
- Managing and limiting geopolitical impacts on the business
- Identifying and pursuing appropriate acquisition opportunities
- Optimising capital allocation and the return thereon
Appreciation
We are proud of our strong performance and extend our sincere thanks to our loyal suppliers, customers and all stakeholders for their continued partnership and support.
To our exceptional team – across factory floors, offices and boardrooms – thank you for your dedication, expertise and resilience throughout the year. Your efforts are the cornerstone of our success.
We also express our deep appreciation to our Chairman and the Non-executive Directors for their participation and involvement at various levels. Their engagement and strategic input have played an instrumental role in helping the Group realise improved outcomes.