Invicta Holdings Limited (IVT) Earnings Call Transcript & Summary

[indiscernible] [Operator Instructions] It is now my pleasure to hand you over to the Invicta management team.

Welcome to you all, and thank you for joining us. I am Steven Joffe, the Chief Executive Officer of Invicta and I'm joined by Chief Financial Officer, Nazlee Rajmohamed. Craig Barnard is also available as part of our panel to answer any questions you may have. During this presentation, in respect of any commentary or views we may portray and to the extent we analyze information or make forward-looking statements, please have regards to our disclaimer. Today's presentation will cover our group results for the year ended 31 March 2026. We will also attempt to cover key developments for the year under review as well as looking forward to our prospects and strategies. Invicta distributes world-leading capital and earthmoving equipment, industrial, automotive and agricultural parts, often exclusively, which we try to ensure are always available and that are overlaid with a technical and service solution. Thus, we differentiate ourselves by adding value through our distribution chain, product availability and by providing technical support. Technical support helps prevent this intermediation and is a key part of our strategy to add value to our customers. In vector is proud to report a pleasing set of results for the 2026 financial year despite challenging trading conditions across our businesses and markets. The financial year was defined by external pressure and internal resolve. Sustained rains trend affected the translation of our foreign operations, while U.S. tariffs on Chinese manufactured goods and supply chain disruptions triggered by the Middle East conflict created headwinds across nearly every market in which we operate. During the year, management moved swiftly to control operating costs across the group, carefully prioritizing essential costs while deferring noncritical projects. As a result, we succeeded in preserving margins across the businesses. We tightened working capital management to improve liquidity and targeted measures, including more disciplined purchasing of inventory to ensure the foreign exchange risk was appropriately managed. These initiatives, combined with prudent capital expenditure discipline, enabled us to preserve cash and maintain financial flexibility throughout the year. In the prior year, we completed the disposal of the primary distribution warehouse within the [indiscernible] and Singapore operations and use part of the proceeds to redeem all the remaining outstanding preference shares. These actions have contributed positively to the current year's performance. Our disciplined operational model and strategic initiatives has supported our businesses stability throughout a tough trading year. We remain confident in the resilience of our businesses. management priorities continue to be rigorous strategy execution, improved operational efficiency and positioning the group for sustainable growth. We believe that our offshore investment strategy in targeted markets will, over time, generate the returns we aim to deliver for shareholders. We experienced fluctuating demand, margin pressure and heightened cost volatility across our markets. Persistent macroeconomic headwinds, shifting consumer patterns and large currency and tariff movements, constrained trading performance. Throughout the year, our U.S. business has navigated highly volatile tariffs with rates fluctuating as high as 145%. By year-end, the IEEPA tariffs had been eliminated through a U.S. high court ruling. However, other additional tariffs were subsequently levied. Following the year-end, we were able to recover some of the IEEPA tariffs. Furthermore, our businesses continue to experience supply chain challenges, which have been exacerbated by the blockade of the Strait of Hormutz. Container prices out of China have remained volatile in 2026, with prices oscillating between $2,500 to $7,000 for a 40-foot container. The spike in prices came in June when there was a temporary U.S.-China tariff reduction. Importers rush to move goods to the United States within the 90-day grace period to avoid potential price hikes amid the risks associated with the Middle East conflict. Throughout the period, we experienced extreme volatility in currencies. We opened the period with a rand-dollar rate of ZAR 18.31 with the rate peaking at ZAR 19.77 and closing at ZAR 17.21 on the 31st of March. With the strengthening of the rand, we translate our foreign operations at lower rates, thereby dampening the overall contribution to the group results. This number is meaningful in understanding the overall performance for the year as roughly half the group's earnings come from our offshore operations. In certain sectors such as agri and mining, local markets have shown increased activity that has remained sustained at these levels. However, South Africa's industrial sector remains a challenging environment in which to operate with regulatory framework that has little to stimulate growth. Notable achievement for the year notwithstanding the challenging environment include growing sustainable headline earnings per share by 7% to ZAR 5.94. We have returned in excess of ZAR 280 million to shareholders throughout the year through dividends and share buybacks in the market. We also successfully concluded the acquisition of Spaldings operation in the U.K. on the first of September, which I will speak more later in the presentation. Group financial overview. Sustainable operating profit of ZAR 690 million was 8% down on the comparative period. This is reflective of the tough conditions in the market in which we operate as well as the cost base details, which we will unpack later on in this presentation. In determining sustainable operating profits, we have made the following adjustments. In both the current and prior year, we reversed profits made on the disposal of noncore properties as well as impairments on those properties when they were reclassified as held for sale. We also reversed profits made on the disposal of subsidiaries, associates and agency rights. We unwind a modification loss in the prior year which is the time value of money, accounting adjustment on amounts owed to the group by the KMP operation. We added back amortization of the PPA asset on MWB and Spaldings as well as a one-off cost related to the acquisition of the Spaldings operation. Equity accounted earnings from the Kian Ann investment decreased year-on-year by 65% to ZAR 128 million. The prior year includes ZAR 199 million once-off profit related to the sale of the main distribution facility in Singapore. The operations of Kian Ann were impacted by U.S. tariffs, which have created's uncertainty in the market. Customers in America have had reservation in purchasing amid the uncertainty in the tariff positions. Additionally, the translated foreign currency results have been dampened with the strengthening of the rand over the period. In determining our share a sustainable net contribution from the Kian Ann Group, we added back the amortization of the purchase price aduccation assets amounting to ZAR 17 million and a one-off cost related to the acquisition of the [indiscernible] operation as well as losses incurred before the full commencement of the KMP Power operations in China. Sustainable headline earnings decreased by 2%. In determining our sustainable headline earnings, we unwind a time value of money adjustment on an amount owing from KMP to the group. We added back amortization of PPA assets and added back one-off costs relating to the acquisition of the Spaldings operation and the impact of the foreign next-stage translations as well as pre-commencement losses of KMP power. Please have a look at our key indicators. Where appropriate, they've been adjusted for one-off items to try and present a position showing sustainable earnings. Operating profit was 8% lower than the prior period. Headline earnings per share grew by 7% to ZAR 5.94. Our total net asset value per share of ZAR 63.70 was 7% higher than at 31 March 2025. No adjustment has been made to the net asset value calculation. I will now hand over to Nazlee.

Revenue for the year, including the addition of Spaldings was 4% higher than the prior comparative period. The gross profit percentage has been maintained at 33%. Maintaining this margin in the current environment is a great achievement by the management teams. Operating expenses, as reported, grew by 10% compared with the comparative period. There are several factors that contributed to this increase. Firstly, the comparative expense line was reduced by ZAR 42 million of gains on disposals of properties and subsidiaries compared with only ZAR 20 million in the current reporting period. In both the current and prior year, there were impairments and profits on the derecognition of right-of-use assets and liabilities. The current period includes one-off costs relating to the acquisition of the Spaldings operations, whose 7 months of operating expenses were also included in the current year for the first time. Therefore, in normalizing all these items, we experienced a 1% increase in our overhead base, which highlights the hard work the management teams have done in containing cost increases over the year. Operating profit before foreign exchange movements for the year was 10% lower than the comparative period. As previously mentioned, this included the once-off costs related to this Holdings acquisition, as well as the planned operating loss of the moldings operation for the period where the peak profit season will only occur between July and September. The estimated credit losses recognized of ZAR 48 million reflects the impact of applying consistent provision policies over a period where trade debtors are paying more slowly and reflects the difficulties experienced by associates who service small localities with 1 or 2 key customers. The road to market via these associates is under strategic review. This decrease in the operating profit highlights the tough trading conditions the group faces across all markets as well as the once-off items Steven has already mentioned. We thank our management teams for maintaining relative stability in our operations. Comparing the opening and closing rate over the year, the rand strengthened Against the U.S. dollar, the value of the rand appreciated 6% from ZAR 18.31 on the first of April to ZAR 17.21 on the 31st of March. However, throughout the year, we saw significant volatility in the currency with the rand depreciating as low as ZAR 19.77 to the dollar. The impact on our group was a net ForEx loss of ZAR 23 million, which is a 44% deterioration on the ZAR 16 million in the prior period. As a matter of policy, in South Africa, we hedge all confirmed foreign purchase orders. Net finance costs decreased by 4%. During the period, the South African Reserve Bank decreased the prime interest rate by 50 basis points through a stepped approach to 10.5%. We welcome these adjustments from the SAAB. With recent local inflationary pressures, we anticipate that there may be further increases to the rate in the medium term, following the recent 25 basis point increase in May 2026. On a net basis, having redeemed the preference shares in the prior year, ordinary shareholders are better off by not having to pay dividends to preference shareholders compared to the preference dividend of ZAR 24 million paid last year. Property, plant and equipment decreased by ZAR 40 million. Included in this number is the additional ZAR 62 million related to the Spaldings property located in Lincoln in the U.K. as well as ZAR 17 million of equipment in the business. However, the net decrease is attributable to the reclassification of the Macneil Plastics operation to being held for sale and ultimately disposed of after year-end, which Steven will address later on in the presentation. We commend the management teams for their disciplined approach to capital expansion over the period. Investment in joint ventures is our 48.8% investment in Kian Ann. The decrease over the reported period is made up of ZAR 128 million of equity accounted earnings less dividends declared of ZAR 171 million and our share in the other comprehensive losses and foreign currency translations from the Kian Ann operations. Goodwill increased by ZAR 70 million. This is the goodwill recognized on the Spaldings acquisition as well as a foreign exchange adjustment from the strengthening of the rand. Finance lease receivables, including the current portion, increased from ZAR 384 million to ZAR 583 million. This is finance extended to customers across our capital equipment businesses. This finance is both short and long term in nature. Following the year-end, we discounted these additional deals with the bank. We remain focused on working capital management. Inventories net of provisions remained flat for the period. Considering the addition of the inventory from the Spaldings business, management have worked hard on reducing the inventory held and ensure that they are covering foreign exchange risks in their purchases. Contributing to the flat inventory balance is also the reclassification of Macneil Plastics operations to held for sale. Gross inventories decreased by ZAR 59 million in our Industrial Solutions businesses. The management team have done a great job in purchasing correctly and selling older inventory over the period. The net increase in the capital equipment and parts operation was as a result of the Spaldings acquisition in September. Our management teams continue to focus on the number of months of inventory held. We continue to manage as best as we can the volatility in currencies, logistic costs and inflationary pressures in our basket of products. Our continued focus on ordering the correct inventory and selling aged inventory has helped to keep this number in check. Trade and other receivables increased by ZAR 59 million. We continue to see across our businesses that debtor insurance levels and criteria are tightening. We continue to focus on granting appropriate credit and ensuring the collectibility of our receivables. Please note our cash on hand of ZAR 757 million. Our borrowings and finance lease liabilities amounted to ZAR 1.95 billion, of which ZAR 1.49 billion is noncurrent and ZAR 460 million is current. Finance lease liabilities make up ZAR 405 million of the total borrowings. Trade and other payables decreased by ZAR 259 million. The majority of this decrease is the reclassification of Macneil Plastics to held for sale at year-end. With our cash on hand of ZAR 757 million and no overdraft, we have net cash on hand of ZAR 757 million. Our net interest-bearing debt is thus ZAR 1.19 billion. The equivalent number in March 2025 was ZAR 706 million. With the corporate actions and increase in asset financing in the capital equipment businesses undertaken throughout the year, the ZAR 483 million increase in net debt was anticipated. Please note that the ZAR 1.19 billion excludes the IFRS 16 liabilities of ZAR 236 million. Including IFRS 16, net interest-bearing debt for the year increased by ZAR 467 million. Our net interest-bearing debt to equity sits at a healthy 26%. Please see a summary of our banking covenants, all of which have been met. We were pleased to have generated ZAR 464 million in cash from operations for the year. This is after the ZAR 200 million investment in leases as mentioned previously as well as the settlement of an additional ZAR 190 million of long-term creditors, which became due in our capital equipment businesses. The finance leases were entered into late in the period and were only back-to-back post year-end with the banks, which has bolstered cash flow in the new year. We also continued the expansion of the group through the acquisition of the Spaldings Group of companies. We received ZAR 48 million of dividends from Kian Ann. In the prior year, we had received our share of the proceeds from the disposal of the Kian Ann warehouse in Singapore. Please note the ZAR 177 million distributed to shareholders as we repurchased 5.3 million ordinary shares throughout the year. We have, therefore, in aggregate of buybacks and dividends, returned in excess of ZAR 280 million to shareholders in the year. We are pleased with the net closing cash balance of ZAR 757 million, which is after all of the activities detailed above. I now hand back to Steven Joffe.

Thank you, Nazlee. Operational review. In the prior year, we presented the Invicta results across 5 segments in our biannual presentation. Following engagement with investors and as part of our process to assist users, we have moved to simplify our presentation by reducing the number of operations. Reducing the number of operations presented will ensure the underlying performance is easier for stakeholders to understand, particularly as the 5 segments had overlapping or less clearly defined differences. This consolidation aligns more closely with how management view the risk pertaining to the businesses without overwhelming users with excessive detail. Going forward, the businesses will be presented in 2 operations. The operations are; Industrial Solutions and Parts, Capital Equipment and Parts. The Industrial Solutions and Parts operation will, in aggregate, comprise what used to be presented in the RPI and RPA segments. The Capital Equipment and Parts operation will, in aggregate, present what used to be in the CE and RPE segments as well as that of Kian Ann in Singapore. I will encourage shareholders to read our 2026 integrated annual report. Page 5 and 6 of the Directors report, in particular, give a detailed overview of each segment and its activities, providing deeper background on the extent of our global offering. Industrial Solutions and Parts. These operations include our BMG businesses, our UPG automotive businesses amongst others. Revenue for the period was down 2% on the prior year. This is as a result of tough market conditions that the business had to deal with, especially in the local market, sustainable operating profits in these operations decreased by 10%. Net operating assets increased to ZAR 2.5 billion. The return on net operating assets weakened from 19% in to 17%. Please see how we determine sustainable operating profits for the purpose of determining our returns. Mining, retail and automotive remain the top sectors for us across our industrial businesses. The team have worked hard to maintain sales amidst the deindustrialization in South Africa. Roughly 2/3 of our sales come from consumable parts and our industrial businesses primarily operate in South Africa with offshore markets becoming more important over time as we focus on the internationalization of these operations. The industrial sector of the Africa continues to face pressure from all sides, and we anticipate the dampening of demand for product as a knock-on effect from the strike in steel industry as well as the implementation of the recent tariffs. This, in turn, impacts margins as the market competes for business. However, our engineering service businesses continue to do well. We have seen positive movements in the automotive business in South Africa, and we're optimistic about the growth of our in-house agricultural brands locally. With a sustained tension in Eastern Europe, we are continually seeking to expand our auto agri businesses westward into other European geographies. Capital Equipment and Parts. These operations consist of our capital equipment businesses, the Kian Ann operation in Singapore as well as the newly acquired Spaldings operation in the U.K. amongst others. Revenue for these operations was 19% higher than the prior year. This increase is attributable to both the addition of the piling operation in the current year for the first time as well as improved performance across the capital equipment businesses as we saw increased volume in the construction and mining sectors. Sustainable operating profit decreased slightly by 3% to ZAR 398 million. This decrease is largely driven by seasonal trend in the profitability of the Spaldings operation, which will only peak in the U.K. summer from July to September. Net operating assets increased by ZAR 146 million, primarily driven by the inclusion of the posing assets. Following this inclusion, the return on net operating assets slipped from 15.7% to 14.5% with only 7 months of trading from Spaldings consolidated with the full balance sheet. Please see how we determine sustainable operating profits for the purpose of determining our returns. Agriculture, construction, mining and earthmoving are the largest industries we service in our capital equipment and pass businesses. With the addition of the moldings business in the year, we have done well in ensuring that roughly half of our business comes from offshore operations in the segment. Similarly, parts provided the majority of the revenue with the balance from consumable and equipment sales. This graph does not account for sales in the Kian Ann business, which is equity accounted, bringing in only our share of profit from the joint venture. In South Africa, we are starting to see growth in the construction and mining markets, with volume starting to increase. This improvement in the mining sector is positive. However, the recovery is limited to hard rock resources such as copper, gold and platinum. We are keeping a close eye on the global position as fuel prices will continue to influence customers' habits going forward. On the first of May 2025, Kian Ann acquired 100% of Safe Harbor. Safe Harbor is a premium aftermarket part supplier primarily of [indiscernible] for a wide variety of capital equipment and operates from the single premises in Texas in the United States. We are also pleased to advise that on the first of September 2025, Invicta purchased the Spaldings operation. Spaldings is a prominent distributor of agriculture and ground care components in the United Kingdom, known for his extensive phase of high-quality replacement parts and machinery. We paid GBP 10.5 million for the Spaldings business, and we anticipate that the sustainable aggregate net profit for the first full year of operation should be in the region of between GBP 1.4 million and GBP 1.6 million. We anticipate that the profit will be earned in the U.K. summer. Throughout the year, we were further able to repurchase a significant tranche of roughly 5.3 million ordinary shares, thereby returning a further ZAR 177 million to shareholders. All these shares were canceled during the year. Post year end, on the 15th of April 2026, the group completed the disposal of its 60% share in the Macneil Plastics business and its associated property. The decision was made after evaluation of operations sustained inability to meet performance benchmarks and its overall impact on the group's profitability. We are confident that divestiture will strengthen the group's financial position going forward as it allows us to redeploy capital towards higher-returning opportunities aligned with our core strategic priorities. On the 27th of April, 2026, the group bought out the minority shareholder in the Mozambique operation of the BMG Group. The Mozambique operations are now fully owned subsidiary, and we look forward to the growth we expect from these operations. Prospects and strategy. Pleasingly, the group has achieved a long-stated objective of generating approximately 50% of our income from operations outside South Africa ahead of schedule. This geographical diversification materially reduces our dependence on any single market and positions the group for the next phase of growth. Going forward, we have a relatively debt-free balance sheet and the freedom to scale our platform and add meaningful acquisitions. Our management teams continue to manage our business well to ensure they receive the desired returns. Our objective for the coming year include managing working capital and optimizing operations, including the evaluation and implementation of AI managed processes, generating cash, managing supply chain and logistical challenges, looking for appropriate sizable acquisitions and new product lines for our existing businesses. With the fluctuation of tariffs globally and a host of foreign conflicts, future economic outlook remains difficult to gauge. We are working hard to remain well informed on development and hope to move as quickly as possible to assess and deal with them promptly, ensuring the businesses remain stable. Many of the sectors we service are trading in line with these results, and we can continue to service our clients without stockouts and delay. With so much uncertainty in the world, we will continue to focus on cash generation. With the overall group being relatively debt-free, we have the necessary time to respond to difficult situations with a capacity for us to implement our acquisition strategy. We are evaluating several opportunities on the acquisition front. And if we can identify suitable targets that align with our strategy, we'll certainly continue to acquire businesses. We are pleased to declare a dividend of ZAR 1.25 per share for the year, which is an 8.7% increase over last year. As a result of our relative financial strength, we'll endeavor to return to sales approximately 30% of our earnings annually paid either through buybacks in the market or dividends. We are extremely grateful to have delivered this performance for our shareholders and other stakeholders in the midst of tough trading conditions. Thank you to our loyal suppliers, customers and advisers for your continued partnership with the group. Our experienced, diligent and dedicated team from the factory floor to the boardroom, we thank you for your efforts throughout the year. Lastly, we wish to thank our Chairman and the nonexecutives for their continued guidance and advice.

Thank you, Steven and Nazlee. [Operator Instructions] So far we have two. The first question is from [indiscernible]. Why such an increase in the ECL followed by why did your operating costs rise by 10%.

Good morning, everyone, and thank you for joining us for the presentation this morning. So Nazlee did do a bit of a deeper dive on the costs. And we show that taking out primarily the Spaldings costs, actual costs for the year increased by 1%. And if you took Spaldings out of the turnover, it was probably flat, so you're probably looking at a situation where we had turnover flat and 1% increase in costs on a like-for-like basis. With regard to the e-sales for the year, the biggest write-down this year [indiscernible] do with our associates. So about 5 years ago, as a result of a requirement from local mining houses to procure locally, we sold several BMG branches to primarily black entrepreneurs. And those entrepreneurs had an exclusive domain to look after the clients in that particular area. And many of those branches have thrived, but some have battled and some [indiscernible] money, and we've made a provision for that repayment of loan that's owing in that regard. We currently, as Nazlee has mentioned, are just evaluating the best way to service clients in those areas. Just bear in mind that Invicta Group as a whole is a Level 2 BE participated as things stand at the moment, and we were just rated this week. I hope that answered you in everything.

Second one is from [indiscernible]. What would turn around the industrialization of South Africa?

That's a challenging one [indiscernible]. Like I'm just like a simple guy from Pretoria, and I'll just say, like, what could make me on to invest money here and build a product here for export. I understand when someone gets a subsidy to make a product here like a car industry, and I understand when you're making something for local consumption, sometimes it's best to make in South Africa. But what would make me choose South Africa as a point to -- as a country to make my product. In regards to all -- just the logical things you want to know to buy freehold land and not have anyone challenge or land ownership. You want to have like labor. You want to have ports that work and road systems that work. You want to have supply chains that work. You want to have electricity that's reliable. And it's all just the basic things that I think we just need to do and need to do better. But things like steel policy -- by putting a levy on steel, I think you make the upstream just far more difficult to get your head around. And again, I say to myself, why would I choose to make something with a levy imposed on a steel product here when I could make it somewhere else. So it's just every little thing. Just put yourself in the position of saying, why would I choose to make something in South Africa where there's so many other jurisdictions where I could do it. I hope that answered your question.

Thanks, Steven. A question in from [indiscernible]. Congratulations on a solid set of results, particularly given the challenging operating environment. Could you quantify the revenue contribution from Spaldings following its acquisitions. Specifically, how much of the group's reported revenue for the period was attributable to Spaldings.

Thank you for that question. I don't have the exact amount in my mind. It's about like 4% of our turnover. Nazlee, if you don't mind, would you just give us the exact amount. I would estimate about ZAR 160-odd million. But let's see.

Yes, Steven, it's -- it's in our note 38. It gives you post-acquisition revenue since acquisition included in the consolidated results, ZAR 345 million.

Another in from [indiscernible]. Are you confident that Spaldings as well earn about GBP 1.4 million profit also in this coming year?

Yes. So just on the Spaldings. The costs of getting the deal and closing the deal and all that and the loss in the first year was about ZAR 30 million. But it's trading in line with its budget. And as we mentioned, it will make its profit or expected to make its profit in the U.K. summer. So we hope we own this business on the 17th of July. Otherwise, we'll miss the U.K. summer. [indiscernible], you're not laughing at my joke. I thought that was quite funny. So it will make its money in the U.K. summer. So hopefully, from now until about September, we'll make the money there. And as I said, it is trading in line with budgets.

Thanks, Steven. And then from Keith McLaughlan. Given you've reached a target exposure to non-South African business is 50%, where do you apply growth capital going forward, local versus offshore?

We've been quite focused on building the offshore component. Our objective was to reach 50%. We've done that now. And now we are looking at several new acquisition opportunities, actually quite a few in South Africa as well. We are on a growth -- forward growth orientated base is seeing some interesting opportunities here. And for the first time, we are really thinking about deploying a significant amount of capital in South Africa.

[indiscernible] from African. Steven, Nazlee and team, crazy past 15 months. So weak on the numbers and especially cash flow, please on Path comments on being largely debt free. And then there's another part to this, how much was received from Macneil's and why not keep buying shares on a 6 PE if shareholders want to then buy out their shares. And could you gear up for acquisitions and still buy shares, correct? I hope I got that right?

That's a lot of questions. So Okay. So cash now over 16 months or something. It's a little bit hard for me to answer like without not in front of me. But we spent a lot of money buying back shares and redeeming the preferences, and then we bought quite a few businesses over that period of time. When I say relatively debt-free, the way I think about it, and it's quite an anomaly in our books. We've been building our capital equipment leasing books. And I think they're in the order of around ZAR 600 million at the moment. Now -- we are funding other people in industrial and capital equipment in that amount. And theoretically, that amount could be funded by a third-party bank. So if you assume even like a 70%, 75% debt-to-equity book that we will establish, you would think that about ZAR 450 million of capital should -- or debt should fund that book outside of ours and only ZAR 150 million of capital at the moment, it's all on our balance sheet. So that explains that ZAR 600 million. And then we have a property portfolio in our group of about ZAR 600 million or ZAR 700 million. And I would think you'd need about 30% debt on that property to make it viable from a return on equity point of view. So when I take all those factors into account, there's actually very little real trading debt in the business. And relatively, I think we are relatively debt-free. Macneil Plastics. We haven't disclosed that number yet. It was done in line with our loan accounts, the money that was received. We paid a small commission to management post that just for getting the deal over the line. With regard to buying back shares, it's something that the Board are cognizant of all the time and every acquisition we make is compared to rather buying back shares. And since then, we would probably look to use debt to make the acquisitions. So that is our strategy as things stand.

Thanks, Steven Joffe. From [indiscernible], good day with the drive in the defense industry spending around the world. Can we expect to see an indirect tailwind if that happens?

We don't do much direct sales to anyone in the defense industry. But what is interesting, and we picked it up visiting America quite recently is with all the build of these AI centers, there are a lot of excavators. And actually our parts, which is the replacement parts for the excavators are in big demand. So there are some -- like interesting opportunities for us. The American economy is still growing quite well in our space, and I think there's some nice opportunity there.

Thanks, Steven. And and then from [indiscernible]. Please give some more color in terms of what you're looking for in acquisitions from here. hurdle sectors? And how much you think about the total balance sheet capacity for M&A from here?

So we've done a lot of the cleanup work over the last few years and I think we're now getting ready for like a bigger acquisition. And I think the time has come. I think hopefully, we're going to see like a cessation of hostilities in the Iran. And with that, hopefully, we'll see like a decrease in the interest rates, which should bode well for both economic growth and for making acquisitions using funding. So our balance sheet will allow us to make relatively large acquisitions, but it's still difficult to quantify until you've gone through the bank process. You don't know exactly how much the banks are prepared to advance. We are really looking to grow all our businesses, so both capital equipment and industrial, and we'd look to make acquisitions in both of those sectors.

Thanks, Steven. And some [indiscernible], sorry, [indiscernible] just said I missed time, they're not so weak and well done on the numbers. Then the perpetuals question, Steven, is why remain listed? And what portion of the shares on our outside of management and insiders?

I think about 35% as we stand today is owned by third parties. And listen, at the moment, we're very happy being listed. We like the discipline. But nothing is forever. And we'll have to see, I guess, in time if you don't have any valuation, you'd have to evaluate that. But at the moment, we're quite happy to be listed.

Thanks, Steven. I have no further questions that I can see. Steven, do you have any other concluding remarks before I close.

No, just thank you for joining us. It wasn't an easy year. I mean I just want to make one other point which I'm preparing for our Board meeting, became apparent to me. A lot of people -- we talk about the tariffs in America, and that's the biggest sing party that happened in our world last year. With the imposition of the tariff we're obviously all aware that a lot of the Chinese customers and factories couldn't get their product into United States. But what happened afterwards is those Chinese factory owners really worked hard in getting their product into other markets. So you had a lot of competition from Chinese factories where really the absolute objective is to just keep volume going and not so worried about the price really in many, many markets, and specifically in Europe. So that competition was manifested in these results as well. And we'll probably continue in that way. So it was a very like interesting year like from the tariff point of view. And then the other big thing that Doug really became apparent is the massive weak dollar. So we've been building our offshore business for the past 5 years. We referenced more than 50% of our properties now derived outside South Africa and many will not like many of those businesses trade in dollars. And when you have the dollar devaluating to such an extent that also impacted our results. But with all that, we still think our strategy is correct, and we will probably continue with that. So those are my comments here. So thank you for joining us, and we'll carry on working hard to deliver better results.

Steven, I see -- no, we've just got a thank you very much. And so then on behalf of Invicta, I'd like to thank you for your participation, and goodbye.

Thank you, everyone. Bye-bye.