ARC Investments
Interim financial results for the six months ended 31 December 2024
DISCOUNT TO NAV REDUCES ON THE BACK OF PLEASING ADVANCES AT KEY INVESTMENTS
HIGHLIGHTS
- Intrinsic net asset value (INAV) up 4.1% at R19 385 million
- INAV per share increased by 3.2% to R12.78
- Cash in the ARC Fund increased to R575 million (30 June 2024: R163 million)
- Debt in the Fund reduced by 5% to R1 639 million (30 June 2024: R1 725 million)
Sandton. 18 March 2025. – Leading South African empowerment investment holding company African Rainbow Capital Investments Limited (ARC Investments) announced steady portfolio growth for the six months to 31 December 2024. The Intrinsic net asset value (INAV) per share increased by 3.2% to R12.78, a function of acquisitions of R698 million, disposals of R1 260 million and a net portfolio gain of R840 million.
Johan van der Merwe, co-CEO of African Rainbow Capital Proprietary Limited (ARC): “ The diverse nature of the ARC Fund portfolio has continued to show resilience against a challenging
macroeconomic environment. The difficult environment has also created opportunities that we believe our investment portfolio is ideally positioned to benefit from.”
ARC Investments invests mainly 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 the tough economic environment.
ARC Fund invested a further R698 million to support its existing portfolio, predominantly in financial services. These transactions included additional investments in Rain, Tyme, ARCH and Kropz. The ARC Fund’s net fair value gains benefited from an increase of R351 million in the financial services portfolio, driven by gains in Tyme, Alexforbes and Sanlam Third Party Asset Management. From the Diversified Investment portfolio, fair value gains of R489 million were mainly driven by the growth in the value of Rain, ARC Investments, Blue Spec, Acorn Agri and Linebooker.
TymeBank grew its customer base to more than 10 million with an increasing transaction rate and deposits rising to R6.9 billion. Net operating income doubled year-on-year, with costs increasing by only 10%, highlighting the advantages of technology. Tyme Global launched GOtyme Bank in the Philippines in November 2022, which reached the milestone of 5 million customers by December 2024.
Rain’s investment gains were primarily a result of the company achieving its forecast and progressing on its growth trajectory, coupled with a positive take-up of its rainOne product. Linebooker reached break-even in August 2023 and continues growing its customer base and profitability. These gains were largely offset by the delays, pressures on the phosphate price and operational challenges faced by Kropz during the same period, which resulted in a slight decrease in fair value.
The ARC Fund’s investment portfolio includes a combination of mature, high-growth and early-stage investments. Said van der Merwe: “We have made excellent progress in the development of early-stage investments in recent years, to the extent that two-thirds of the portfolio now consists of mature and high-growth investments. We have also successfully streamlined the portfolio, with the top 10 investments now comprising 85% of the ARC Fund’s value”.
Johan van Zyl, co-CEO of ARC: “We are particularly pleased with our efforts to narrow the discount at which the ARC Investments share trades to underlying NAV.”
The growing maturity of the portfolio improves the predictability of earnings, while the predominance of high-growth investments ensures prospects into the future. The unlisted portion of the ARC Fund, which is only accessible through ARC Investments, now comprises 86% of the portfolio. Portfolio valuations have been validated through several disposals at prices above the last reported fair values, increasing the conviction in the valuations. We have established a good track record of realising synergies and accelerating growth through partner collaboration. The ARC Fund’s dividend income has also been accelerating, with c.R100 million received in this period, relative to R53 million in the comparable period. ARC Financial Services Investments received dividends amounting to c.R500 million, mainly from Alexforbes.
Van Zyl continues: “These actions have reduced the discount from c.50% in June 2024 to c.30% in December 2024. We will continue collaborating with our partners to realise synergies among portfolio companies. We have created an ecosystem of businesses leveraging off each other. We are creating significant value by tapping the large client pools within the ecosystem to launch new products and services, thereby creating win-win opportunities for all.”
ARC Investments and Sanlam further strengthened their symbiotic relationship during the period. Sanlam acquired a 25% stake in ARC Financial Services Holding (FSH) (including the interest in Tyme Group) in two transactions valued at R3.91 billion. This transaction allows ARC Investments to continue to benefit from the high-growth investments in ARC FSH while sustainably reducing the demands on its capital to fund ARC FSH’s growth.
The ARC Fund’s cash and funding position has improved notably with the benefit of the cash received as part of the Sanlam transactions and significant capital drawdowns by the early-stage entities, mainly having ceased. ARC Investments remains receptive to attractive investment opportunities and, with its growing resources, becomes increasingly well-equipped to capitalise on them.
Van Zyl says they see welcome signs of recovery in the business environment, with favourable green shoots indicating a modestly improved economic landscape ahead. ARC Investments’ investee
companies are strategically positioned to capitalise on these developments and are well-placed for growth.
As mentioned in ARC Investments’ Integrated Annual Report of 30 June 2024, a strategic priority would be the assessment of a delisting of ARC Investments going forward. In spite of the substantial narrowing of the discount at which ARC Investments’ shares were trading at on the JSE and A2X at end December 2024, it was concluded that the listed structure has largely fulfilled its initial purpose and has now become an impediment to the future growth prospects of the company.
Therefore, ARC, together with an SPV created specifically for this purpose, made a joint binding conditional cash offer to acquire all of the issued ordinary shares of ARC Investments not already
owned by them or their related parties, subject to regulatory and other required approvals, with the objective of delisting the business from the JSE and A2X and also re-domiciling it from Mauritius to South Africa. The offer is made for a cash consideration of R9.75 per share, which represents a substantial premium over the 30-day VWAP market price of the ARC Investments’ shares, also taking into account the narrowing of the discount to NAV during the period under review.
Shareholders are specifically informed that the offer and its implementation are dependent on several regulatory approvals and other conditions precedent. These are set out in the SENS and A2X
announcement made earlier today, and, together with the planned timetable, will also be set out in a Combined Offer Circular, to be published and circulated to shareholders in due course.
ENDS
For media enquiries, please contact:
Garry Ramaru on 066 477 4112 or garry.ramaru@africanrainbowcapital.co.za
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 51 mainly South African
investments, valued at R20.5 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.
