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Results of Annual General Meeting and Chairman’s comments
RECM and Calibre Limited
(Incorporated in the Republic of South Africa)
Registration number 2009/012403/06
Preference Share Code: RACP
ISIN: ZAE000145041
("RAC" or "the Company")
RESULTS OF ANNUAL GENERAL MEETING AND CHAIRMAN’S COMMENTS
Annual General Meeting
The Annual General Meeting (“AGM”) of RAC ordinary shareholders was held on Thursday, 20 August
2015. The RAC ordinary shares are not listed on the JSE.
The following ordinary resolutions, as set out in the notice of AGM to ordinary shareholders posted 1 June
2015, were approved by 100% of the shares voted in person or by proxy, which represented 5 000 000
ordinary shares (100% of issued share capital):
- Approval of annual financial statements
- Reappointment of auditors
- Election of Ms Z Matlala as a director
- Election of Mr T Rossini as a director
- Election of Mr JG Swiegers as a director
- Election of Mr JG Swiegers as an Audit and Risk Committee member
- Election of Ms Z Matlala as an Audit and Risk Committee member
- Election of Mr T Rossini as an Audit and Risk Committee member
Director’s meeting with preference shareholders
At the Director’s meeting with preference shareholders, which was held directly after the AGM, the
following prepared comments were shared with attendees.
PORTFOLIO CHANGES SINCE YEAR END
Just before and after year end RAC acquired 109mn shares in Sentula, a listed holding company with
subsidiaries principally involved in the mining industry. These shares were subsequently exchanged for a
90% interest in an investment partnership. The principle of the partnership is Jacques Badenhorst, who
has joined the board of Sentula. The partnership has since acquired further shares, and currently owns
115mn shares, being just less than 20% of Sentula.
RAC also acquired a 17% shareholding in College SA for a nominal amount. College SA is primarily
involved in distance learning. Although the investment (and business) is quite small, we think it has a
strong management team, is scalable, and will require more capital over time to grow.
We have made further (small) gains in whittling down the tail of our listed investments, and have added a
small amount to our investment in KWV. We have received the first cash amounts from the realization of
our American Homes investment.
After all the above transactions RAC now has cash of R87mn, up from R71mn at year end (being March
2015). Our R150mn facility with ABSA is almost finalized.
LATEST NET ASSET VALUE (“NAV”) PER SHARE (ORDINARY AND PREFERENCE)
As at 31 July 2015, the NAV per share came to R18.49, marginally down from R18.54 at year end. The
NAV per share has not been audited or reviewed. It should be noted that our unlisted investments (65%
of the NAV) have not been revalued. We will do so at the time of the interim results.
Our valuation methodology is consciously conservative. Many of our businesses are growing rapidly, and
therefore do not produce cash yet. Others have strong inherent optionality, which is path dependent. In
both cases, it is hard to put a single number on the value with a high degree of confidence. The best
defense against a volatile and unknown future is to own assets with a significant margin of safety built into
their valuation.
We will provide our shareholders with more information as our businesses mature, and become more
competitively entrenched. At that time, shareholders will better be able to make their own valuation
judgments.
We continue to believe the accounting NAV significantly understates our intrinsic value, we just don’t
know by exactly how much.
BUSINESS UPDATES ON OUR SIGNIFICANT INVESTMENTS
Transhex/West Coast Resources (c. 20% of NAV)
As Transhex is listed, we are precluded from making any comment. West Coast Resources will start
mining operations towards the end of the year, as per the original mine plan. In the interim, results from
treating recovery tailings dumps are significantly worse than expected.
Goldrush (c. 30% of NAV)
Goldrush continues to grow strongly, on the back of rolling out further LPM machines under existing
licenses and the Bingo operation maturing, combined with further roll out of Bingo sites. Since year-end
Goldrush has been awarded further LPM route licenses as well as further sports betting licenses. As one
of the established operators in this industry, Goldrush continues its growth through acquisition of new
licenses, building out new operations and growing profitability at existing operations.
Retail (c. 18% of NAV)
As stated in our annual financials, RAC owns a stake in Dischem, via an entity called Fledge Holdings.
Dischem continues to expand and grow. Our other retail operation, Safari and Outdoor is also trading
well.
GENERAL OBSERVATIONS
Our bigger transactions have, on average, done better than our smaller ones.
Our private transactions have, on average, done better than our listed ones.
We believe this is evidence of:
Good acquisition prices. We are generally not part of an auction when acquiring the stake.
An ability to establish a good relationship with management. This results in us working together
for the benefit of the company and produces good results. Incentive structures are also sensible.
Less noise surrounding business decisions. Markets’ immediate reaction to news flow, as
expressed in share price volatility, is of no consequence in guiding management endeavors.
These conclusions will tend to guide our future actions.
CASH REQUIREMENTS
Although we have around R90mn available on the balance sheet, as well as the above-mentioned facility
from ABSA, we are discussing a number of interesting transactions which might potentially utilize this
cash.
We intend using debt for any further future acquisitions, unless we can present a transaction to our
shareholders, which is so good that they would be willing to allow us to use our undervalued paper to
fund it.
Our investment strategy remains to buy good businesses, with good management at good prices. If you
are involved in any business that meets these criteria and that needs either capital or a responsible owner
with a true long term orientation, please give us a call. We don’t make many promises, but we promise
not to waste your time.
Any forward looking statements contained in this announcement have not been reviewed nor reported on
by the Company’s auditors.
In the interest of sharing the information equally with all shareholders, this announcement is also
published on SENS and on the RAC website www.racltd.co.za.
20 August 2014
Cape Town
Sponsor
Questco Proprietary Limited
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