Wrap Text
Investment update
African Rainbow Capital Investments Limited
(Incorporated in the Republic of Mauritius)
(Registration number C148430)
JSE share code: AIL
ISIN: MU0553S00000
("ARC Investments" or "the Company")
INVESTMENT UPDATE
ARC Investments is a Limited Partner in an en commandite partnership, the ARC Fund Partnership SA
("ARC Fund"). This announcement provides shareholders with a high-level update of the Company’s
progress on strategic matters and a performance overview of the significant investments in the ARC
Fund for the third quarter of the 2022 calendar year.
This announcement also includes commentary on significant developments to the end of November
2022.
DIVERSIFIED INVESTMENTS PORTFOLIO
rain
The business continues to perform well as demand for both 4G and 5G services remains strong.
The company’s acquisition of additional spectrum is expected to positively impact the valuation of the
ARC Fund’s investment in rain. The company’s plans for utilisation of the spectrum and its impact on
rain’s cash-flow forecast are still being finalised.
Kropz Plc (Kropz)
Kropz Plc is an independent phosphate producer listed on the London Alternative Investment Market
Exchange (AIM). Kropz Plc holds an investment in Kropz Elandsfontein, a developed phosphate deposit
and processing plant on the West Coast of South Africa, as well as in Cominco, one of the largest
undeveloped phosphate deposits in the world, situated in the Republic of the Congo.
Although the commissioning of the Elandsfontein phosphate plant has suffered several setbacks,
significant progress has been made on both the mining and processing fronts. Elandsfontein
completed an updated drilling program to gain a better understanding of the hard bank material
present throughout the ore deposit. Work is still being finalised on an updated long-term mining plan.
Up to 30 November 2022, Elandsfontein has produced circa 30,000 tonnes of phosphate in
anticipation of achieving its first bulk sale.
In November 2022, the ARC Fund increased the convertible loan facility by R550 million, of which
R247.5 million has already been drawn. The capital was largely used to fund the ongoing operational
cash shortfall at Elandsfontein resulting from delays in the processing ramp-up. A large portion of the
remaining balance will be used to fund operations at Elandsfontein. Some some capital will be used
towards development work at Cominco. The ARC Fund continues to engage with the Congolese
government on the strategic plan for the asset.
Afrimat
Afrimat Limited ("Afrimat") is listed on the JSE and information regarding its activities and financial
performance is publicly available. In November 2022, the ARC Fund disposed of its remaining
investment in Afrimat (7.2%) for an amount of R486.7 million. This disposal generated an internal rate 1
of return (IRR) of 16.0%. Overall, the ARC Fund achieved an IRR of 21.72% on the Afrimat investment.
This consists of profits on disposals of R713.8 million and dividends received of R125.0 million.
ARC Services
The ARC Fund is in the process of disposing of the majority of its assets in the ARC Services group of
companies with proceeds in line with the carrying value as at 30 June 2022 of R291 million. The
remaining assets do not form a significant part of the group and are being managed for future growth.
Bluespec
The company is performing in line with expectations and meeting its profit targets. Weelee, the online
vehicle bidding platform, is increasing its market volumes and footprint with growth levels in line with
business case projections. The Bluespec group continues to maintain its B-BBEE Level 1 rating, which
is testament to a strong transformation focus by management.
Capital Appreciation
On 30 November 2022, the ARC Fund disposed of its 3.2% shareholding in Capital Appreciation for an
amount of R67.8 million, realising a profit of R27.3 million. This represents an IRR of 12%.
Humanstate
The ARC Fund has concluded the disposal of its investment in Humanstate and Payprop SA, for a total
consideration of R496 million. The ARC Fund achieved an overall IRR on disposal of 20%, excluding any
potential earn-out structures. R52 million of the consideration is deferred and will be received over a
period of 30 months. In preparation of the sale, the ARC Fund restructured the Gemcap business and
consolidated its investments in Humanstate.
Fledge Capital
The company is currently in an acquisition phase and is considering a series of new opportunities in
the market, following its disposal of its remaining investment in We Buy Cars earlier in the year.
Linebooker
The company continues to enjoy good month-on-month volume growth as more clients make use of
the online booking platform. Linebooker management is currently exploring geographical
diversification beyond South Africa to benefit from growth in other select markets.
FINANCIAL SERVICES PORTFOLIO
Alexforbes
Alexforbes is a JSE-listed entity and announced its interim financial results for the six months to 30
September 2022 on 5 December 2022. Shareholders are referred to the detailed Stock Exchange News
Service ("SENS") announcement, also published on the company’s website.
TymeBank
TymeBank continues to sustain its onboarding of new customers. In October the company reported
that approximately 228 000 new customers were onboarded for the month, which represents a record
level in the number of new customers onboarded in a single month. This compares to the average rate
of 130 000 to 140 000 customers onboarded per month in the first half of 2022. The company also
experienced a marked increase in the average customer activity levels.
TymeBank maintained the momentum of onboarding new customers in November. In total, the bank
onboarded 200 100 new customers. Customer activity levels were also maintained.
In the period under review, TymeBank announced that it has acquired Retail Capital, which is a leading
fintech funder of small and medium enterprises. The transaction will support TymeBank’s offering to
its business banking clients. It will also see Retail Capital’s lending expertise being combined with
TymeBank’s deposit base and operations to serve a broader customer base. In the last 10 years, Retail
Capital has provided funding of more than R5.5 billion to more than 43 000 business owners in South
Africa, making it the largest SME funder of its kind in the sector.
TymeBank’s international partner, Tyme Global, reported that it has successfully launched its digital
bank GOtyme in the Philippines with its partners the Gokongwei family. The launch is the next step in
Tyme Global’s international growth strategy to have a presence in select markets with the potential
for high customer growth.
Rand Mutual Holdings
African Rainbow Capital Financial Services Investments ("ARC FSI") has concluded an agreement with
Rand Mutual Holdings to dispose of its shareholding of 30% for a consideration that, taken together
with cumulative dividends received, represents an IRR of 16.8%.
Crossfin
Crossfin invests in high growth and cash generative technology and fintech type businesses.
Merchant trading conditions were challenging in the period under review due to load shedding and
reduced consumer spending. Notwithstanding these challenges, the business managed to increase
the number of merchants utilising its services.
On a relative basis, Crossfin achieved strong year-on-year revenue and EBITDA growth. The business
also achieved its key strategic objectives, one of which is an expansion of the Crossfin portfolio.
Sanlam 3rd Party Asset Management
Sanlam and Absa announced on 1 December 2022 that all suspensive conditions have been
successfully met, allowing for the implementation of the transaction that combines their investment
management businesses in South Africa.
In terms of the transaction, Absa will exchange its investment management business, Absa
Investments, for an interest in Sanlam Investment Holdings Proprietary Limited (SIH). Absa
Investments comprises Absa Asset Management, Absa Alternative Asset Management, Absa Fund
Managers and Absa Multi-Management.
With the transaction now concluded, SIH’s offering to the market is expected to be significantly
strengthened through enhanced scale, broadened distribution reach and an increased range of
investment solutions. This is likely to increase SIH’s position as one of South Africa’s largest black-
owned asset managers.
Afrocentric
The ARC Fund’s general partner has noted the corporate action that was announced by both
Afrocentric and Sanlam. Shareholders are referred to the detailed SENS announcements that were
issued on 11 October 2022.
Other
The process of reviewing the annual management and performance fees of the ARC Fund has been
completed by the fund’s General Partner. Shareholders voted in favour of the reduced management
and performance fees at a General Meeting held in November 2022. A detailed announcement in this
respect has already been made to shareholders.
Disclaimer
The financial information on which this announcement is based has not been reviewed or reported on
by the Company’s external auditors. The Company will be reporting in more detail on its performance
after the finalisation of its financial results for the six months ending 31 December 2022, which are
expected to be released on SENS on or about 16 March 2023.
Ebène, Mauritius (with simultaneous circulation in Johannesburg)
9 December 2022
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
For further information on African Rainbow Capital Investments, please visit our website at
www.arci.mu
Date: 09-12-2022 10:00:00
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