Industrial conglomerate Invicta Holdings — which has beleaguered investment tycoon Christo Wiese as a 38% shareholder — is determined to distance itself from the Steinhoff International debacle.
Wiese was a large shareholder in Steinhoff at the time of the retail giant’s calamitous share price collapse following the admission of accounting irregularities.
Last Friday Invicta hiked its provision for a tax liability by R400m to R550m. This is linked to complicated financial structures that were created at the time of an empowerment deal 10 years ago.
The development smacked down Invicta’s share price to a new 12-month low on Monday.
It also appeared to reinforce contentions that Invicta and Steinhoff were startlingly similar. Market watchers cited the existence of complicated financial structures and a low tax rate at both companies, as well as a knack for acquiring companies at low earnings multiples and quickly turning these into big profit spinners.
Aside from Wiese being a common shareholder, there is a more tangible connection in that Invicta last year sold its building supplies division to Steinhoff subsidiary SteinBuild.
At an investment presentation this week, Invicta CEO Arnold Goldstone openly addressed the effect of Steinhoff’s collapse on the company.
He noted that in the wake of the collapse of its share price in December, Invicta had undertaken a full review and considered all possible contagion risks.
He stressed there were no direct links to Steinhoff, and no direct fallout at Invicta. "It’s business as usual."
Vunani Securities analyst Anthony Clark welcomed Invicta’s pragmatic and transparent approach to clearing up negative market perceptions around the company.
"The key word is pragmatism. [Goldstone] banged on about that over and over. Invicta seems absolutely intent on cleaning up its image. They want to be seen as a clean business ... all the old structures are unwinding."
It is clear that the sooner Invicta can settle its outstanding tax liability with the SA Revenue Service (Sars) the better.
Certain segments of the market have speculated that Sars could demand settlement in excess of Invicta’s provision — which might also explain the brittle share price.
Invicta has also admitted that the ongoing uncertainty around the tax matter is affecting its ability to use equity to fund expansion — which includes a long-awaited further push offshore.
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