1. COVER STORY
Billionaire investor Christo Wiese is about to launch his
next big play: a major push into the burgeoning market for
industrial goods in emerging markets, via his 37.2% stake in
InvictaHoldings,adistributorofengineeringconsumables,
forklifts, agricultural and construction machinery.
8 FINWEEK 18 OCTOBER 2012
Invicta’s fairly low profile belies its R5.91bn
market value, making it almost 60% bigger
than rival Hudaco Industries. It’s also the
fourth leg in Wiese’s billion-dollar corpo-
rate empire.
Wiese’s interests in clothing and food
retail, through his 52% holding in Pepkor
and an 18% controlling stake in Shoprite
Holdings, are probably his best-known
investments. Then there’s the nearly 40%
he holds in Brait SA, the country’s larg-
est private equity firm, which gives him a
toehold in financial services. With Invicta,
Wiese now has the ideal platform upon
which to grow his industrial ambitions.
“Industrial consumables give our family
a fourth pillar to complement our food and
clothing retail and investment holdings,”
Wiese said in a statement to Finweek. “We
believe Invicta is particularly well poised to
grow in emerging markets.”
Already plans are afoot to grow the
company’s geographic footprint. As you
read this, Invicta is putting the finish-
ing touches to a plan to raise as much as
R2.3bn through a combination of debt and
equity over the next 12 months to pursue
an aggressive global expansion strat-
egy, which chief executive officer Arnold
Goldstone says will be a “material game
changer” for the company.
“We’re very ambitious and that’s going
to require us to beef up our balance sheet
considerably to facilitate a few acquisitions
we’re planning to make over the next year,”
Goldstone told Finweek in an interview in
Cape Town. “It’s a strategy that’ll defin-
balance sheet with only about R370m of
bonds in issue, which Goldstone says was
done mainly to give the company a pres-
ence in the debt capital markets. Goldstone
says that under Invicta’s existing debt pro-
gramme, bond issuance could rise to as
much as R1bn, which suggests that any
additional debt requirement would likely
be met with syndicated loans or other
credit facilities.
“Raising finance has never been an issue
for us,” says Goldstone. “Finding the right
acquisitions has been the issue.”
The fact that Invicta is on the verge of
announcing its first offshore acquisition
also marks a turning point in manage-
ment’s strategic thinking.
“Up until a few years ago we were ada-
mant that we didn’t want to grow outside
of SA but right now we’re looking for geo-
graphic diversity,” says Goldstone. “We
need to diversify outside of SA to reduce
the geographic and political risk that
comes with being overly-reliant on a sin-
gle market. It’s also difficult to expand in
industrial consumables and capital equip-
ment in a relatively small market without
running into competition issues.”
itely involve a combination of gearing
and equity because if we only go the debt
route, our debt-to-equity ratios won’t be as
healthy as we’d like.”
Goldstone says about R1.3bn of the
capital-raising exercise will be done
through debt while a further R600m to
R1bn will be raised by issuing perpetual
preference shares over the course of the
next year. The bulk of these proceeds will
be used to help fund a single “large off-
shore purchase” as well as “a few smaller
ones in the domestic market”, he says.
“Depending on our funding needs, we
may downscale the overall capital raising
number by about R400m,” says Goldstone.
“But we certainly have the capacity to raise
as much as R2.3bn if it’s required.”
As it stands, Invicta has little debt on its
COVER STORY
FINWEEK 18 OCTOBER 2012 9
InvictaChristo Wiese’s next big play
By Garth Theunissen
74.1 million shares in issue
1.6 million thereof held in treasury Source: Invicta
Shareholding September 2012
Directors
62%
Public &
Financial
institutions
32%
Staff &
treasury
6%
CH Wiese*
(Chairman)
Sherrell family
(LR Sherrell)*
A Goldstone (CEO)
D Samuels*
*non-executive
37.2%
13.1%
6.0%
5.5%

2. COVER STORY COVER STORY
10 FINWEEK 18 OCTOBER 2012 FINWEEK 18 OCTOBER 2012 11
sions: engineering and industrial products;
capital equipment and spares; and a small
building materials unit.
Arguably the most important cog in the
Invicta machine is Bearing Man Group
(BMG), Africa’s biggest distributor of
industrial and engineering products. Like
its competitor, Hudaco, it’s also a value-
added service provider, which makes it a
handy earner of annuity income for the
parent company. Its product lines include
belts, valves, filters, power transmissions
and of course bearings.
If that sounds boring, consider for
a moment that bearings factories were
among the first sites to be bombed by the
allies during World War II. It’s a piece of
trivia that underscores the crucial role that
bearings play in any modern-day industrial
economy.
Invicta’s Capital Equipment Group
(CEG) is another crucial part of its busi-
ness since it gives the company access to
the agricultural, mining and construc-
tion sectors. Through CEG’s North-
mec, New Holland SA and Landbou
Parts units, it services a domestic
farming sector that’s becoming
Goldstone says Invicta isn’t looking to
buy anything in the rest of Africa right
now and will instead focus its product
offerings on specific mining and agricul-
tural projects on the continent. Much of
this will be done by simply following exist-
ing clients that are themselves expanding
into the rest of Africa.
While the issuance of perpetual prefer-
ence shares will certainly enable investors
to share some of Invicta’s growth, they
probably would have preferred an ordinary
share offering. What little Invicta stock is
available tends to be rather tightly held,
with 62% in the hands of directors and
a further 6% held by staff or in treasury
stock. That leaves institutional and pri-
vate investors scrapping over the remain-
ing 32%.
It’s also not hard to see why the share is
so thinly traded. Over the past five years
the company has seen revenue surge almost
68% to R5.6bn in March 2012, while prof-
its have jumped 71% over the same period
71-year-old billionaire as something of an
“Oom Schalk Lourens figure”, alluding to
the homespun wisdom of the character in
Herman Charles Bosman’s short stories.
It’s probably an apt description of Wiese
who, despite is reported $3.1bn net-worth,
is after all the son of an Upington farmer
and filling station owner.
“He embodies those old-school farm-
ing values and is a wonderful source of
human wisdom, which is precisely what
makes him such a wonderful chairman to
have,” says Goldstone. “Having said that,
he’s still surprisingly growth orientated and
what really defines him is that he just loves
business.”
This family-orientated structure can
also be seen in Invicta’s shareholding.
Apart from Wiese’s stake, Goldstone
himself owns 6% of the company with
independent non-executive director,
David Samuels, holding a further 5.5%.
The Sherrell family, whose interests are
represented by former Western Province
and Springbok flyhalf Lance Sherrell, who
is a non-executive director, owns a further
13.1%.
The structure of the group they preside
over can essentially be split into three divi-
Arnold
Goldstone
increasingly mechanised and one that
Goldstone describes as “highly efficient”
despite newspaper headlines frequently
bemoaning its apparent demise.
To illustrate this, Goldstone tells of the
R153m tractor order placed by a single
farming family in the Mpumalanga town
of Middelburg.
“A big section of our business forms part
of the very fabric of SA’s food chain,” he
says.
Still, Invicta has steadily decreased its
reliance on agriculture over the years. This
has been achieved mainly by beefing up its
presence in the distribution of construction
equipment and industrial machinery via
the Doosan SA and TCM Forklift brands.
Through Cartcom it even has a presence in
golf cart rentals.
It’s this sort of diversity that has helped
the Capital Equipment division grow reve-
nue by almost 36% to R2.55bn.in the most
recent fiscal year.
Yet being a big player in a small pond
has its limitations. Goldstone says the total
Directors
62%
INVICTA
HOLDINGS LTD
Humulani
Investments
Humulani
Empowerment Trust
20%
5%
100%
100%
Staff & treasury
6%
Institutional & Private
Investors
32%
75%
BEE
25%
Theramanzi
Investments
Humulani
Employee
Investment
Trust
60%
Tiletoria
100%
Humulani
Marketing
BMG
Northmec
CSE
New Holland SA
Cartcom
Landbou Parts
Goldquest International Hydraulics
Disc Equipment (Doosan SA)
Criterion Equipment
Equipment Spare Parts (ESP)
Invicta Properties
to R514.63m. Capital growth on the share
price has been equally stellar. Since 2002
the stock has gone from R3.10 to R81.5 at
the time of writing, a more than 26-fold
increase. Over that same period, dividends
have increased more than tenfold, going
from 24c/share in 2002 to R2.54 in March
this year.
“Invicta has been a consistent performer
that’s increasingly highly regarded by the
investor community,” says Leith Wimble,
an equity analyst at BoE Private Clients in
Cape Town. “It’s a stock that has tended to
fly under the radar a bit but at the moment
it’s definitely on the buying list of most
investors. It’s one of the biggest positions
in our small to mid-cap fund.”
That’s no faint praise for a company
founded on a philosophy of underpromis-
ing and overdelivering. Invicta is also a
tightly run ship with Goldstone saying he
doesn’t believe in corporate headquarters,
edifices he describes as “consumers of prof-
its”.
Yet the conservative façade belies a
healthy competitive streak.
“We might be conservative in our values
but we’re very ambitious in our dreams,”
says Goldstone, a mechanical engineer and
chartered accountant by trade. “We want
to achieve big growth and realise that it’s
going to come from looking abroad.”
Nevertheless, Goldstone says he still
runs the company along the same prin-
ciples he abided by when he was appointed
Invicta’s financial director almost 23 years
ago with just 40 employees. The company’s
headcount today is over 3 500.
“In those days there was very much a
family atmosphere at Invicta and I would
often open the shop door myself,” Gold-
stone adds. “In many ways we still see our-
selves as a family.”
It’s an ethos that extends right up to the
top of Invicta’s corporate hierarchy, which
Wiese presides over in his capacity as non-
executive chairman. Goldstone, who has
known Wiese for 18 years, describes the
Sales 10-year history
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
2002 0703 0804 0905 10 201206 11
Revenue (R000's)
15% per annum
Source: Invicta

3. COVER STORY
12 FINWEEK 18 OCTOBER 2012
COVER STORY
FINWEEK 18 OCTOBER 2012 13
Leith Wimble, an equity analyst
at BoE Private Clients in Cape
Town, says that although Invicta
stock does tend to be tightly held,
there’s enough scrip available
for private investors to get their
hands on the company.
“For institutional investors
wanting to take a large position
it might be a bit more diffi-
cult to get large amounts
of Invicta stock,” says
Wimble. “But for private
or retail investors there’s
enough stock out there
to fill your up your boots.”
Wimble says BoE is an
accumulator of In-
victa but cau-
tions that re-
tail investors
must bear in
mind that the
company's
exposure to
the agricul-
tural sector
means rev-
enues can
swing wildly
in response
to moves in the
maize price.
"If the maize
price slumps it
can definitely af-
fect tractor sales,"
says Wimble. "It's
1. BoE Small and Mid-Cap Fund 5,919.200 4.32
2. Nedgroup Investments Entrepreneur Fund 30,214.800 4.18
3. Old Mutual Small Companies Fund 30,956.933 3.88
4. Momentum Small Mid-Cap Fund 37,559.586 3.05
Unit Trust portfolios
Holdings Value (R'000s) % of Fund
Source: Moneyweb
market for excavators in South Africa is
round 1 000 units a year, making the coun-
try a miniscule player when one consid-
ers the more than 70 000 excavators that
are sold in China each year. The desire to
expand abroad thus makes perfect business
sense.
The one area of the domestic market
where Invicta is focusing is its compara-
tively minor presence in building materials
via its 60% stake in Tiletoria, a supplier of
ceramic and porcelain tiles, taps and sani-
taryware. Since acquiring the business four
years ago, Invicta has trebled sales to more
than R300m, something Goldstone says
was a “nice experiment” to test manage-
ment’s ability to grow the business. While
Tiletoria currently contributes just 5%
What he does say about potential
purchases is that Invicta favours “broken
down” businesses – companies that have
lost their way and are close to insolvency.
It’s the best way of getting an attractive
bolt-on acquisition at an attractive price,
says Goldstone. However, he emphasises
that Invicta only covets companies with
some form of competitive advantage such
as sole distribution rights for an industrial
product that will augment its portfolio.
“We look to buy businesses with good
brands in them,” he says. “Price-earnings
multiples of between five and seven are
generally what we tend to look at although
the numbers tend to be a little higher for
companies abroad.”
In terms of what parts of the globe
Invicta is looking at, Goldstone will only
say that the group will remain focused on
emerging markets with Asia and Eastern
Europe the preferred destinations. Man-
agement is also currently mulling over
whether or not to enter Brazil, though
Goldstone says he remains “unsure” due to
the country’s reputation for red tape and
the fact that it’s not typically welcoming of
foreign business interests. There’s also the
language barrier to be considered.
Overall, Goldstone comes across as one
of the more relaxed CEOs in the local cor-
porate landscape. He says a big reason for
this is that he has good people around
him.
“We’ve got brilliant staff,” he says.
“That’s a major strength of the Invicta
group.”
While salaries are the company’s big-
gest expense, at about 70% of total costs,
Goldstone says he’s happy to incur that in
order to maintain the company’s low staff
turnover rate. Besides, he says salaries at
Invicta tend to be tied to performance,
which is a clever way of bulletproofing
the balance sheet during harder times.
At 51, Goldstone is still rather active
and although he has had to give up
squash due to injuries, he regularly par-
takes in cycling, wakeboarding, golf and
even snowboarding when he gets the
chance. He’s also recently tried his hand
at surfing with Muizenberg being his
favourite haunt.
“A business tends to thrive when its
people lead balanced lives,” says Gold-
stone. “It’s something I try to instil in all
the people at Invicta.”
While he certainly comes across as
young at heart, he acknowledges that
every CEO has a “lifespan” and that
overstaying one’s welcome can be bad for
the business.
“There’s a definite succession plan,” he
says. “It’s one of things you simply have
to have in place. After all, anything could
happen to me.”
It’s a statement that underscores Gold-
stone’s inherent pragmatism. But share-
holders can still take comfort from the
fact that he remains very committed to
the business. He still commutes to Johan-
nesburg weekly and confesses that he
loves being “close to the action”.
Goldstone has three children who also
help keep him young: two sons from his
first marriage aged 16 and 19 as well as a
10-month-old daughter with his second
wife.
“I’m in the fortunate position of being
able to say I’m a very happily married
man,” he says.
Shareholders too can take heart from
that. As with any worker, a happy CEO
is far more likely to be a good one. n
Getting your hands on
Invicta shares
Invicta share price follows the money
EPS/DPS (cents) Share price (cents)
0
500
100
1 500
200
2 500
300
3 500
400
4 500
500
5 500
600
700
6 500
7 500
2002 0703 0804 0905 10 201206 11
Source: Invicta
Earnings per share (cents) Dividends per share (cents) Share price at year-end (cents)
Sales by region
Gauteng
35%
Africa
9%
Limpopo
5%
North West
6%
Free
State
2%
Northern
Cape
5%
Western
Cape
6%
Eastern
Cape
6%
Mpumalanga
12%
KZN
14%
Source: Invicta
still a great long-term prospect,
as long as you're aware of that."
Another way of accessing In-
victa might be to simply buy into
the various unit trusts that allo-
cate a sizeable portion of their
overall assets to the industrial
distributor’s stock. The biggest
of those is BoE’s small- and mid-
cap fund, with about 4.32%
of total assets allocated
to Invicta. Nedgroup In-
vestments’ Entrepreneur
Fund is another good op-
tion with almost 4.2% of
assets in the form of In-
victa scrip. While the per-
centage of the fund that’s
allocated to Invicta
is slightly smaller
than BoE’s, it ac-
tually has a larger
number of Invicta
shares by virtue of
the fact that it’s a
larger fund. (See
table.) Other op-
tions for unit-
trust investors
include the Old
Mutual Small
Companies
Fund or the
Momentum
Small to Mid-
Cap Fund. n
to group revenue, that’s about to change
as Invicta is currently in the process of
acquiring a 60% stake in another
building materials business.
“We’ll pay around R45m for
the business which will take the
building materials revenue
to more than R1bn
when combined
with Tiletoria,”
says Goldstone,
without nam-
ing the acqui-
sition target.
New Holland tractor
Leith
Wimble