Annual financial results announcement for the year ended 30 June 2024
NOTABLE STRATEGIC PROGRESS CULMINATES IN PLEASING GROWTH
HIGHLIGHTS
- Intrinsic net asset value (INAV) up 21.5% to R18 616 million, essentially comprising an increase in equity through a rights issue of R750 million and a net portfolio gain of R2 671 million.
- Intrinsic net asset value (INAV) per share up 8.5% to R12.38 in a sluggish economy
- Portfolio additions of R1 384 million
- Disposal of assets of R229 million
Sandton. – Leading South African empowerment investment holding company ARC Investments announced robust portfolio growth for the 2024 financial year. The Intrinsic net asset value (INAV) per share increased by 8.5% to R12.38, benefiting from new investment and net fair value gains.
ARC Investments invests in disruptive businesses that leverage technology to drive prices down and in economic clusters with large client pools, providing affordable services to promote inclusion and competitiveness. This focus has supported most of the ARC Fund’s key underlying investments in generating strong performances in a challenging economic environment.
Both TymeBank and Linebooker approached the important milestone of breakeven in the past year, and generated fair value gains of R1 181 million and R79 million, respectively. Seven-year-old Rain generated an EBITDA of R2.5 billion and was ranked as SA’s most liked network provider in the DataEQ/PwC Telecommunications Industry Index 2023, resulting in a fair value gain of R598 million. TymeBank’s customer base increased to 9.5 million, while Philippines-based GOtyme attracted a record 3.6 million customers within 18 months since its launch. Tyme Group’s recent pilot in Vietnam is also performing well, and they have announced plans to enter Indonesia before the end of 2024.
Linebooker has become one of the largest transport businesses in the country, with an ecosystem of over 25 000 trucks, despite not owning a single truck. The company recently signed two significant international clients, which will likely double the value of the business in the next year. ARC Investments also celebrated standout achievements by Alexforbes, Capital Legacy and its agricultural portfolio, which exhibited high growth and high profitability.
The ARC Fund made no sizeable acquisitions or disposals during this period, opting to reinvest in its existing portfolio, with a net investment of R1.2 billion in its key investments in telecoms, diversified financial services, agriculture, and mining. In terms of its strategy, ARC Fund continued to dispose of assets in its diversified portfolio, reduced its exposure to listed shares, and increased its holdings in the Financial Services and Fintech portfolio from 31% to 33% of the portfolio in the past year. The ARC Fund has systematically been increasing its exposure to more futuristic businesses in Fintech, sustainable resources, renewable energy and new metals. High-growth, technological innovation and future-focused investments now contribute more than half of the portfolio.
The ARC Fund also made an additional investment in phosphate developer Kropz Plc during the period to repay debt to external parties while the mine continued to ramp up operations.
The ARC Fund’s investment portfolio includes a combination of mature, high-growth and early-stage investments. Says Johan van der Merwe, co-CEO of African Rainbow Capital: “We have successfully streamlined our portfolio, with the top 12 investments now comprising 90% of the Fund’s value. Over 87% of the portfolio is contributed by mature and high-growth investments, which will continue to improve earnings visibility. Less than 13% of the portfolio remains in the early-stage category where they may require larger capital outlays.”
The financial services ecosystem developed between investee companies has generated considerable synergies that are being realised through collaboration. These synergies include scale benefits, cost savings, reductions in cost per member, improved client experience, enhanced distribution capacity and larger client pools. Recently, the ecosystem has benefited Sanlam, Alexforbes, Retail Capital, TymeBank, Capital Legacy, Crossfin and Ooba.
Says Johan van Zyl, co-CEO of African Rainbow Capital:
“We are particularly pleased with how our vision of developing the synergy and networking potential among portfolio companies is coming to fruition. For the first time, we see an ecosystem of businesses leveraging off each other and creating significant value by tapping the large client pools within the ecosystem to launch new products and services. We have similar aspirations for an agri ecosystem, as we see this type of value creation, together with our early-stage businesses now entering profitability, to be major drivers of value in the portfolio over the short to medium term.”
ARC Investments announced a transaction with Sanlam in recent weeks. The two parties are looking to restructure the capital structure of the Financial Services portfolio, with Sanlam acquiring a 25% stake in ARC FSH (including the interest in Tyme Group). In addition to further cementing the symbiotic relationship between the Company and Sanlam, this transaction will allow us to continue to benefit from the high-growth investments in ARC FSH while sustainably reducing the demands on our capital to fund their growth.
The Fund’s cash and funding position has improved notably compared to 2023, now that the significant capital drawdowns by the early-stage entities have mostly ceased. The R1.3 billion cash ARC Investments receives from the Sanlam/ARC FSH transaction will pay off some debt, fulfil obligations, and improve available cash resources. ARC Investments remains receptive to promising investment opportunities and, with its growing resources, becomes increasingly well-equipped to capitalise on them.
Van Zyl said they see welcome signs of recovery in the business environment, with favourable green shoots indicating a more robust economic landscape ahead. ARC Investments’ investee companies are strategically positioned to capitalise on these improvements and are confident in their potential for growth.
ENDS
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Garry Ramaru on 066 477 4112 or garry.ramaru@
To the editor
ABOUT ARC INVESTMENTS
ARC Investments Limited is a Black-controlled investment holding company that acquires minority interests in quality unlisted and listed businesses at a discount by leveraging its compelling empowerment credentials. The Company manages a portfolio of 49 mainly South African investments, valued at R20.2 billion, offering shareholders the opportunity to indirectly invest in a diversified portfolio of listed and unlisted investments in high-growth companies and sectors of the economy.
