Nictus Holdings’ share price shot up 7.7% to R1.40 on the JSE yesterday after it announced that its profit for the six months to September 30 increased markedly to R13.8 million from R3.7m at the same time a year before.
Basic earnings per share similarly increased sharply to 25.79 cents from 6.93 cents. Headline earnings per share was 26.51 cents versus 6.94 cents in 2023. The share price of R1.40 yesterday represented a 47% increase over the same time a year prior.
Nictus is the holding company of a group of companies that retail motor vehicles, tyres, automotive glass, and furniture, and provide financial and insurance services in Namibia. The group operates in three segments: retail, property, insurance and finance.
No interim dividend was declared. In June, a final cash dividend of 6 cents per ordinary share for the year ended March 31, 2024, was declared.
The significant increase in earnings in the period under review occurred despite revenue falling to R13.81m from R15.01. The results were boosted by a sharp increase in insurance revenue, which rose to R15.4m from R6.59m. Additionally, investment income increased sharply to R35.5m from R21.02m.
The improved profitability in the insurance business was attributed to several factors, including a 216.3% increase in new premiums.
Gerhard Tromp, Nictus managing director, said that a prudent and conservative investment methodology, along with the work of external investment advisors, allowed the segment to successfully navigate a volatile investment environment.
The segment generated competitive investment returns during the reporting period. A larger asset base also contributed to the material increase in investment income.
The FTSE/JSE All Share (ZAR) and FTSE/JSE All Bond (ZAR) indexes returned 18.6% and 18.8%, respectively, over the reporting period.
Meanwhile, the retail industry, particularly for high-value durable goods such as the furniture that the company retails, has been negatively affected by consumers under pressure due to the struggling local economy and increasing levels of unemployment, said Tromp.
“There has been a marked deterioration of basic infrastructure, i.e., roads and water provisioning, specifically in the locations where the segment operates. The compounding effects of these factors have suppressed consumer demand, which negatively impacted the segment's performance,” he said.
Total revenue of Nictus Meubels declined, and the segment’s results were negatively impacted by the one-off derecognition of the segment deferred tax asset amounting to R0.9 million.
“We are fortunate to have a strong capital base to carry the group during times of uncertainty and adverse economic conditions. The group has no external debt financing,” said Tromp about the company’s outlook.
The company directors said that although there was broader optimism about the potential for positive reforms following the formation of a Government of National Unity, confirmation of additional growth-oriented policy changes and the tangible roll-out of structural reforms were yet to be proven.
“The latter is required to meaningfully address the structural decay, persistent low gross domestic product growth, and an ever-increasing unemployment rate,” they said.
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