Key highlights
- 2 % annualised increase in Intrinsic Net Asset Value (INAV) to R9,558 billion
- INAV per share of R9.23 (Diluted R9.12)
- Intrinsic Portfolio Value (IPV) of R8,147 billion
- Net Investments of R2,735 billion made in period
- Available cash of R1,576 billion at year end for further investments
- Profit for the period amounts to R674,5 million
Leading black empowerment investment holding company ARC Investments today announced its full year financial results for the period ending 30 June 2018 – reporting a healthy growth in the value of its portfolio as well as its profit. The company listed on 7 September 2017 on the JSE.
Management succeeded in growing the intrinsic value of the company with more than 11% (annualised) to R9,5 billion in the period under review, despite some companies in the portfolio experiencing tough trading conditions primarily due to an economic slowdown partly fuelled by political uncertainty. The company reported a profit of R674,5 million in the period under review.
ARC Investments operates as an empowerment investment holding company as it acquires strategic shareholdings in several high-quality listed and unlisted businesses that are aligned to its strategic objectives. Since 2015 interests in more than 40 companies have been acquired, with a specific building block approach being followed. The building block approach is part of realising a longer-term vision of being a leading black empowered company delivering value to all stakeholders.
The company offers solid Broad-based Black Economic Empowerment credentials to companies seeking a reputable empowerment partner. The company boasts a strong balance sheet and its financial health is considered very attractive. Coupled with the strong leadership and business track record of its key management after having managed major listed and unlisted businesses, it results in an attractive value proposition to prospective business partners. Given these positive characteristics, ARC Investments is able to create value for stakeholders over the longer term as it sees itself as a long-term investor.
All the investments in ARC Investments are made within the ARC Fund and are actively managed by the General Partner, of which Mr Patrice Motsepe is the Chairman of the Board.
Says Motsepe: “We are pleased with the overall performance of the business, even though we are a fairly young business having started in 2015 and listed a year ago in 2017. We have established a black owned and controlled business benefitting a broad base of shareholders as well as the shareholders in our portfolio companies, who reap the benefits of having partnered with a stable broad-based black economic empowerment player. We are delighted with our achievements to date as we endeavour to deliver commercial returns to shareholders while driving inclusivity in our economy.
“The Board is confident in the way management is progressing on implementing its stated strategy and looks forward to deepening our relationships with our various business partners. South Africa offers many challenges and opportunities when it comes to broad wealth creation and wealth redistribution. This is our unique story as a country. Our business activities allow us to address these pertinent issues to the benefit of our immediate shareholders, our broad grouping of stakeholders, and the country as a whole.”
Dr Johan van Zyl, co-Chief Executive Officer of ARC, says: “We have achieved significant scale over a relative short period. We are satisfied with our performance as a business, which is primarily because of our partnerships with our portfolio companies and that the business is well positioned for future growth. We believe that our contribution as an empowerment partner is significant and thus contribute to the success of each of our portfolio companies.
“Over time our performance will be sustained by the growth and improved performance of key individual portfolio companies, aided by synergistic value being unlocked across the portfolio and obviously supported by a much improved economic and political operating environment. We continue to have significant growth ambitions and we believe that it will be both exciting and rewarding for ordinary South Africans to join us as shareholders on this journey.”
The top five investments, measured in terms of its value in the portfolio as at 31 December 2017, are the following.
- Rain
Rain is aiming to become a full-service Mobile Network Operator, focusing on data as a primary offering. Rain is building a dedicated national LTE Advanced network and infrastructure that will eventually offer the best quality possible and internet speed, at affordable rates.
- Size of investment in total portfolio: 26,3%
- The investment value of RAIN as at 30 June: R2,144 billion
- Alexander Forbes
Alexander Forbes is a leading provider of integrated retirement, investment, life and insurance solutions with the objective of creating, growth and protecting the wealth and assets of their clients.
- Size of investment in total portfolio: 8,4%
- The investment value of Alexander Forbes as at 30 June: R692 million
- Afrimat
Afrimat is an open pit mining company and it supplies a broad range of construction materials and industrial minerals to clients.
- Size of investment in total portfolio: 7,9%
- The investment value of Afrimat as at 30 June: R641 million
- BlueSpec
BlueSpec is active in the repair and recovery business of the motor industry. BlueSpec is 51% black-owned and the business has a Level 2 BEE rating, which puts it in a strong position to secure business from short-term insurers.
- Size of investment in total portfolio: 7,2%
- The investment value of BlueSpec as at 30 June: R509 million
- Elandsfontein
Elandsfontein Exploration and Mining is establishing a phosphate mine located on the West Coast. The deposit is the second largest known phosphate deposit in South Africa. Phosphate is a key ingredient in fertiliser manufacturing, which is used in agriculture. The demand for fertiliser is correlated to global population growth and not strongly correlated to other commodity prices.
- Size of investment in total portfolio: 6%
- The investment value of Elandsfontein as at 30 June: R454 million
Says Mr Johan van der Merwe, co-Chief Executive Officer of ARC: “Because of our relative attractive characteristics as an empowerment player, many businesses want to partner with us and we therefore have a healthy pipeline of future investment opportunities. We, however, remain steadfast in our approach to only acquire shareholdings in businesses that are aligned to our strategy. We only invest in specific sectors of the economy where we believe we can add value to the operations of our partners and where we believe we can reward our shareholders with long-term capital growth opportunities.
“Broadly, our focus is on companies in both financial services and non-financial services. We are confident that we have significant investment expertise to unlock value for our stakeholders or partner with sector leading individuals or teams that would assist us in achieving superior performance. Within financial services, we look at businesses in the following sectors: insurance, asset management, banking and specialist financial services. Within non-financial services we look at businesses in the following sectors: telecoms, business process outsourcing, mining, property and agriculture,” says Van der Merwe.
