Wrap Text
Interim financial results for the six-months to 31 December 2023
AFRICAN RAINBOW CAPITAL INVESTMENTS LIMITED
Incorporated in the Republic of Mauritius
Company number: C148430
JSE share code: AIL A2X share code: AILJ
ISIN code: MU0553S00000 LEI: 378900F086B090C6FB94
("ARC Investments" or "the Company")
INTERIM FINANCIAL RESULTS
for the six-months to 31 December 2023
OVERVIEW
ARC Investments has a diverse portfolio of listed (illiquid) and unlisted assets.
Multiple unfavourable factors had an impact on the investment portfolio in the six
months under review. These included a contracting economy, strained trading
conditions, interrupted electricity supply, backlogs at the ports, coupled with
increasing interest rates, high inflation and volatile exchange rates. All these
factors put pressure on consumers and hampered some of our entities' growth.
The diverse investment portfolio has, however, shown remarkable resilience against
the persisting challenging macroeconomic environment.
HIGHLIGHTS
Financial performance:
Intrinsic net asset value (INAV) increased by 4.6% to R16 028 million.
INAV per share increased by 12.9% from R9.88 at 31 December 2022
to R11.15 at 31 December 2023.
INAV per share decreased by 2.3% from R11.41 at 30 June 2023 to R11.15 at 31 December
2023
Successful capital raise of R750 million through a rights issue.
Debt in the Fund increased by 21% to R1 775 million.
Significant advances in several early-stage assets leading to a maturing portfolio
Linebooker and Tymebank reached a break-even point in the period.
Considerable synergies realisation through collaboration within the financial
services ecosystem
The integration of the Sanlam 3rd Party AM and Absa AM resulted in substantial scale
benefits and cost savings.
Sanlam and Alexforbes transactions - substantial reduction of cost per member,
improved client experience and release of capital.
Sanlam and Capital Legacy transactions leveraging off the strong balance sheet and
distribution capacity.
Successful integration of Retail Capital into TymeBank.
Retail Capital launched with GOtyme in the Philippines.
Portfolio pivot towards high-growth technological innovation
Investments in future focus areas contributing more than half of the portfolio.
TymeBank – 37% year-on-year growth to 8.5 million customers and increased activity
per customer.
Tyme Global – Grew customer base to 2 million within one year of launching GOtyme in
the Philippines.
Major additional investments:
Additional investment in Rain and Tyme Group of R81 million and
R76 million respectively.
Additional capital advanced to Kropz Plc amounting to R379 million.
PERFORMANCE HIGHLIGHTS
The Company's intrinsic investment value in the ARC Fund increased by 4.57% from R15
328 million at 30 June 2023 to R16 028 million at 31 December 2023. The R700 million
increase in INAV comprises R784 million of net fair value gains, disposals of R47
million, acquisitions of R632 million, a cash balance decrease of R267 million, a
debt increase of R302 million and a R100 million increase in net other liabilities.
During the period under review, the Company's effective share of the invested assets
(or the IPV) increased by 8.37%, from R16 363 million at 30 June 2023 to R17 732
million at 31 December 2023. The IFRS Net Asset Value (NAV) per share decreased by
1.8% from R11.44 at 30 June 2023 to R11.23 at 31 December 2023 as a result of the
increase in the number of shares. The increase in shares was driven by the rights
issue and the performance hurdle being met in the prior year. During December 2023,
ARCI raised R750 million through the right issue, which resulted in an additional 150
million shares being issued to the shareholders who followed their rights.
Performance analysis for the six months ended 31 December 2023
Net
Net Net
Asset
Increase Asset
Percentage Value Net
Investment in ARC Fund in Net Value
change 30 Investment
Asset 31 Dec
June
23 Value 23
Intrinsic portfolio value 8.37 16 363 585 784 17 732
Cash in the ARC Fund 500 -300 33 233
Debt in the ARC Fund -1 473 -209 -93 -1 775
Other net assets/(liabilities)
in the ARC Fund -62 –76 -24 -162
UBI GP fee payable -61 – 11 -50
Other liabilities in the ARC
Fund -1 –76 –35 -112
Intrinsic Investment in the
ARC Fund at FVTPL* 4.57 15 328 – 700 16 028
*FVTPL: Fair Value Through Profit or Loss
NOTABLE PROGRESS IN REPOSITIONING THE PORTFOLIO
The most significant highlight of the reporting period is the strong progress that
has been made at several of the Fund's unlisted portfolio investments, with both
TymeBank and Linebooker reaching the important milestone of breakeven in the past six
months and Philippines-based GOtyme reaching a record 2 million customers within 13
months.
ARC Fund made no major acquisitions or disposals in this period, opting rather to
reinvest in its existing portfolio, mainly in telecoms, future-focused diversified
financial services and agriculture. In terms of its strategy, ARC Fund has, in recent
times, disposed of non-core assets in its diversified portfolio, reduced its exposure
to listed shares, and bulked up the Financial Services and Fintech portfolio. As a
result of these transactions, Financial Services exposure has increased from 27% to
34% of the portfolio in the past year. An outlier to this strategy was an additional
investment in Kropz during the period, which was utilised to repay debt to external
parties while the mine continues to ramp up operations.
The unlisted portion of the fund which is only accessible through ARC Investments,
has grown to 90% of the portfolio, and the portfolio has successfully been
streamlined, with the top 12 investments now comprising 89% of the portfolio value,
up from 84% in December 2022.
Management fees
The management fee for the six months ended 31 December 2023 was R50 million, as
compared to R37 million on 31 December 2022.
The performance participation hurdle has not been met in the current reporting
period. Consequently, no performance participation provision amount has been
recognised in terms of IFRS 2.
DIVERSIFIED PORTFOLIO SUPPORTED RESILIENT PERFORMANCE
ARC Fund's key underlying investments generated strong performance and progress
towards profitability was accelerated at several of the ARC Fund's pre-break-even
portfolio companies.
Rain – 27.2% of Fund Value - Rain established itself as a strong brand with a growing
market share in low-cost data and mobile services in South Africa. The Company's
effective interest in Rain has increased by R303 million (additions of R81 million
and net revaluations of R222 million) to R4 819 million in the period under review.
The increase in valuation can be attributed to the business progressing past the
significant net cash outflow point and the subsequent launch of rainOne.
The performance of rainOne in the current period has been pleasing and customer
growth is encouraging. Rain is expecting to achieve an EBITDA of > R2 000 million for
the year ending February 2024 after taking into account IFRS 16 adjustments, as is
industry practice.
Tyme Group – 20.3% of Fund Value
TymeBank remains a leading digital bank with more than 8.5 million customers and
growing activity per customer. The operational leverage as the Bank grows is clear,
despite doubling Net Operating Income (NOI), the cost base has remained relatively
stable year on year. Tyme has by far the largest cash-in and cash-out network in the
country. The Bank has grown credit advances to c.R1.8 billion and attracted fixed
deposits of R4.8 billion in 2023. Tymebank achieved breakeven in December 2023, and
sustained profitability should be achieved in the next few months. The valuation of
TymeBank was adjusted to reflect the Series C capital raise concluded in December
2023 and the fact that the Bank has achieved breakeven.
Tyme Global is the holding company through which the multi-country banks will be
launched. The first such bank is TymeBank followed by GoTyme in the Philippines which
launched in November 2022 and achieved the 2 million customer milestone in December
2023. It launched the Retail Capital Merchant Cash Advance product in November 2023
and is also pursuing the acquisition of a Philippines-based payroll lender to
leverage its low-cost and growing deposit base. GoTyme Bank is expected to reach
profitability in quarter four, 2025. The third country, Vietnam, is currently in the
contracting stages with country partners.
Kropz Group – 11.3% of Fund Value - The ARC Fund invested an additional R379 million
into Kropz Group during the period. The capital was largely used to fund an
operational cash shortfall at Elandsfontein resulting from a delay in the ramp-up.
The value of Elandsfontein and Cominco at 31 December 2023 was determined using a
discounted cash flow model and amounted to R2 003 million. The ramp-up of mining and
processing operations at Elandsfontein has progressed slower than anticipated.
Elandsfontein mine only made 103,500 tonnes of sales over the 6-month period ending
31 December 2023, missing production targets. Performance remains inconsistent.
Elandsfontein is in the process of installing additional modifications to increase
throughput and hopefully achieve breakeven during 2024. The ARC Fund impaired the
investment by R295 million in the period. A potential smaller project is being
investigated to prove the concept and mitigate country risk. ARC and Kropz are
currently in the market looking for potential partners for the Cominco project.
Alexforbes – 6.6% of Fund Value - ARC FSI owns 42.3% of the listed company Alexander
Forbes Group Holdings Limited, currently valued at R3 618 million. ARC will continue
to play an appropriate role in the investment in terms of strategy, acquisitions and
people. The share price performed well during the period under review, which resulted
in a net fair value gain of R26 million being recognised.
INCREASED CASH AND FUNDING
Cash in the ARC Fund decreased by 53% to R233 million (30 June 2023: R500 million),
while cash in ARCI increased to R768 million, from the proceeds of the rights issue.
The cash was transferred by ARCI to the ARC Fund after the reporting period,
providing valuable liquidity. Debt in the Fund increased to R1 775 million (30 June
2023: R1 473 million). The Company's effective share in dividend income for the
period under review decreased to R53 million (December 2022: R79 million) as the
businesses preserve cash for investment in the short term.
EVENTS AFTER REPORTING PERIOD
Kropz Group
During January 2024, the ARC Fund advanced an additional R52.5 million loan from an
existing loan facility to help fund operations at Elandsfontein.
ARCH Emerging Markets
During February 2024, the ARC Fund advanced a loan amount of USD5.1 million
(approximately R96 million) to ARCH Emerging Markets.
GOVERNANCE
ARC Investments is managed and controlled in Mauritius by an experienced, multi-
national Board of Directors (the Board), of which the majority are independent.
The Board has final oversight and responsibility in respect of ARC Investments'
business, strategy and key policies, including the investment in the ARC Fund.
There are no executive directors on the Board of ARC Investments. ARC Investments is
the only Limited Partner in the ARC Fund. It plays no role in the management or
investment decisions of the ARC Fund.
ABOUT THIS ANNOUNCEMENT
This short-form announcement is the responsibility of the directors and the
information contained herein is only a summary of the information in the full
Financial Results announcement and does not contain full or complete details.
Any investment decision by investors and/or shareholders should be based on
consideration of the full announcement that was released on
https://senspdf.jse.co.za/documents/2024/JSE/ISSE/AILE/IResults24.pdf and the ARC
Investments' website https://arci.mu/investor-relations/#sens on 14 March 2024.
This short-form announcement does not contain any additional information not
appearing in the full Financial Results released on SENS. The full announcement is
available for inspection at the registered office1 and designated office2 of ARC
Investments and the offices of the Sponsor3 at no charge during normal business
hours. Copies of the full announcement may be requested by email from
investors@arci.mu.
14 March 2024
Ebène, Mauritius (with simultaneous circulation in Johannesburg)
Mark Cyril Olivier
Chairman of the Board
Clive Msipha
Chairman of the Audit and Risk Committee
Karen Bodenstein
Chief Financial Officer
SPONSOR
Deloitte & Touche Sponsor Services Proprietary Limited
1 The registered office: Level 3, Alexander House, 35 Cybercity, Ebène, 72201,
Mauritius
2 Designated Office: 6th Floor, Phase 3, 11 Alice Lane, Sandhurst, Gauteng
3 The offices of the sponsor: Deloitte & Touche Sponsor Services Proprietary Limited,
5 Magwa Crescent, Waterfall Crescent, Waterfall, 2090
Date: 14-03-2024 07:30:00
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