Key Highlights
- Intrinsic Portfolio Value of R9,904 billion reported (30 June 2019: R9,359 billion)
- INAV per share of R9.52 (30 June 2019: R9.34 per share)
- Net investments of R339 million made in the period under review
- Available cash of R437 million (30 June 2019: R725 million)
Sandton. Leading empowerment investment holding company African Rainbow Capital Investments (ARC Investments) today announced interim financial results for the period to 31 December 2019.
ARC Investments (the listed entity) is majority owned (51,1%) by African Rainbow Capital (ARC, the unlisted entity), which in turn is 100% owned by Ubuntu-Botho Investments (UBI), a broad-based empowerment investment company that has as its key asset a 13% interest in the financial services group Sanlam.
UBI, which is Sanlam’s largest shareholder, currently has a broad base of individual black shareholders as well as several groups as shareholders, which makes it one of the true broad-based empowerment success stories in South Africa over the past two decades.
ARC Investments has successfully positioned itself as an empowerment investment holding company offering Broad-based Black Economic Empowerment credentials to companies seeking a reputable empowerment partner.
The company today announced interim financial results for the six-month period to 31 December 2019. In the context of a largely subdued economic environment, ARC Investments managed to grow its Intrinsic Portfolio Value by 5,8% to R9,904 billion.
In terms of value per share, the company succeeded in growing its Intrinsic Net Asset Value per share by 3,4% to R9.52 per share as compared to the comparative six-month period ended 31 December 2018.
Dr Johan van Zyl, co-Chief Executive Officer of African Rainbow Capital, commented:
“As previously communicated to the market, our performance as an investment holding company depends on how well our underlying investee companies perform as we are mostly a significant minority shareholder in their businesses.
“Although we regard our portfolio as satisfactorily diverse which spans several sectors of the economy, pedestrian economic growth adversely impacted many of our investee companies. Our overall performance was also impacted by the poor performance of some of the listed entities in our portfolio.
“Our target is to grow the Intrinsic Net Asset Value of the investments in our portfolio by at least 16% per annum. In the six-month period we achieved a return of only 2.9% and annualised 5.8%. Certainly, we have not achieved our own hurdle rate and therefore cannot be satisfied with our performance.”
Despite the tough trading conditions, ARC Investments continued to implement its strategy and assist its investee companies to meet their business objectives. Some examples follow below.
- ARC Investments, through its parent company ARC (the unlisted entity), is the majority shareholder in TymeBank, a fintech bank that already boasts over 1 million clients after 10 months in operation. ARC has a 66,5% majority shareholding in TymeBank valued at R1,6 billion.
- By 31 December 2019 TymeBank had 1,1 million clients, about 440 000 of whom had active bank accounts. The bank defines an active customer as someone who has a positive account balance and/or initiated at least one transaction in the preceding 30 days.
- By 28 February 2020 TymeBank had 1,4 million clients, about 700 000 of whom had active bank accounts.
- The bank has received over R500 million in deposits from its banking clients.
- New products, which include a business account for small and medium businesses as well as an unsecured loan product for retail clients, have been successfully launched.
- In February 2020 the bank announced a partnership with the Zionist Christian Church, which will lead to the bank signing up members of the 12 million strong congregation of the church.
- ARC Investments has a shareholding of 20,7% (valued at R2,7 billion) in the new mobile network data provider rain.
- rain has the business objective of becoming a full-spectrum mobile network operator focused on providing data to consumers and businesses.
- The company’s key assets are spectrum licences. It has an allocation in the 1800 Megahertz (MHz) band, as well as an allocation in the sought-after 2600 MHz band.
- The company has already established a 4G LTE network with over 3 000 active LTE sites.
- In September 2019, rain successfully launched South Africa’s first 5G network. It is rolling out the 5G network and at 31 December 2019 already had over 300 live 5G sites.
- ARC Investments views its in investment in Alexander Forbes as strategically important and in January announced its plans to increase its shareholding in the business.
- For most South Africans the only real wealth they are likely to build over their lifetime of hard work is their pension fund.
- Alexander Forbes is a leading provider of integrated retirement, investment, life and insurance solutions with the objective of creating, growing and protecting the wealth and assets of its clients.
- Recent changes in the regulation pertaining to clients saving in their fund and not having to exit their pension fund upon retirement, as announced by the National Treasury, are viewed as a positive development for Alexander Forbes going forward. The regulation is aimed at saving clients on costs and thus adding further value to their pension fund.
- ARC Investments has already informed the market that its parent company ARC (the unlisted entity) has announced its plans to potentially become a 35.5% shareholder in Alexander Forbes, subject to the necessary regulatory approval.
Says Mr Johan van der Merwe, co-Chief Executive Officer of ARC:
“Given the tough trading conditions that have impacted our performance, management will continue with initiatives to unlock value for stakeholders. Key to us is a range of synergy projects under way among our investee companies. We are also continuing with initiatives outside South Africa where we have successfully set up a range of investment funds with international investors to drive infrastructure development in select countries on the continent.
“In terms of our outlook for the remainder of our financial year, we expect our operating environment to remain challenging. We anticipate that our local trading conditions will be unfavourably impacted by a global economic slowdown as well as existing local economic challenges.
“Furthermore, we should expect our businesses in general to be impacted by the coronavirus pandemic. Although the impact is expected to be adversarial to business performance, businesses will do the responsible thing and implement a range of measures with employees and other stakeholders to help curb the spread of the virus.”
