Wrap Text
Unaudited interim results for the six months ended 31 December 2022
EPE CAPITAL PARTNERS LTD
INCORPORATED IN THE REPUBLIC OF MAURITIUS
REGISTRATION NUMBER: C138883 C1/GBL
ISIN: MU0522S00005
SHARE CODE: EPE
("ETHOS CAPITAL" OR "THE COMPANY" OR "THE GROUP")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022
INTRODUCTION
EPE Capital Partners Ltd is an investment company, registered and incorporated in Mauritius as a public company. It is listed on the Johannesburg Stock
Exchange ("JSE") and offers shareholders long-term capital appreciation by making commitments and investments into Funds or Co-Investments that are managed
by Ethos Private Equity (Pty) Limited ("Ethos"), providing the Company with largely indirect exposure to a diversified portfolio of unlisted private
equity-type investments ("Portfolio Companies"). The Group refers to the consolidated results of the Company and its deemed controlled entity. The Group's
performance is largely measured by the growth in the net asset value ("NAV") and NAV per share ("NAVPS").
The NAV of each Fund is derived from the fair values of the underlying Portfolio Companies which are prepared in accordance with International Private
Equity and Venture Capital Valuation Guidelines, and largely consists of investments being valued on an earnings multiple method. In terms of this method,
an appropriate valuation multiple, as derived from public market companies' multiples and adjusted by the investment manager for certain factors, is applied
to an investment's maintainable earnings (e.g., earnings before interest, taxes, depreciation and amortisation ("EBITDA")) to determine the enterprise value
of the investment that is then adjusted for surplus assets or net debt to derive the equity value of the investment attributable to its shareholders.
THE ADVISOR: ETHOS
Ethos acts as Ethos Capital's Investment Advisor. In addition, Ethos is the Manager of the Funds that Ethos Capital invests in. Ethos is an investment firm
that manages investments in private equity and mezzanine transactions in South Africa and other sub-Saharan African countries. Ethos has a 38-year history
and a strong track record of successful, sustainable investing across economic and political cycles that has delivered 98 realised investments at a 24%
gross IRR and a 2.5x multiple of cost for limited partners in its Large Equity Funds.
On 18 November 2022, Ethos signed a definitive agreement with The Rohatyn Group ("TRG"), one of the largest alternative asset management firms in emerging
markets ("the Transaction"). It will result in TRG taking cession of some of Ethos' management/advisory contracts and acquiring certain Ethos Funds' General
Partner entities owned by Ethos. The current Ethos investment team will remain responsible for driving existing and new Fund strategies and advisory
services in sub-Saharan Africa ("SSA"), where TRG is not currently represented.
TRG has given its commitment to existing Ethos investors that it will continue to operate the relevant Ethos Funds and management/advisory contracts in the
same way as they have been conducted to date. The Ethos Funds' key person clauses remain unaffected, and the Transaction will also not impact the Ethos
Funds' Limited Partners' rights and obligations.
RESULTS ANNOUNCEMENT
Key highlights over the six-month period
- Continued demonstration of exiting investments at a premium to NAV
- Realised proceeds of R214 million during the period, including partial sale of Optasia with its MOIC increasing to 3.0x
- Attributable LTM EBITDA of unlisted portfolio grew by 16%, benefitting from active management in private markets
- NAVPS of R10.80 (at Brait's NAVPS), and R8.51, (at Brait's share price), representing annual increases of 7% and 3% respectively
- Carrying value of invested capital at R2.6 billion with exposure to 21 Portfolio Companies
- Ongoing focus on maximising and realising vaue for investors
Overview
The past six months have seen a continuation of the uncertainty and volatility in world markets, driven by concerns about inflation, higher interest rates,
risks to energy availability, and supply chain constraints. The local markets were impacted by political instability and sustained Eskom load shedding
issues throughout the period. The impact of load shedding was felt by most Portfolio Companies with significant operational disruptions and financial
implications, and it negatively affected consumer confidence.
Despite these challenges, the last 12 months ("LTM") attributable sales and EBITDA of the Portfolio Companies (that are valued on an earnings/revenue-based
valuation methodology) increased on an aggregate basis by 15% and 16% respectively, with the equivalent growth of the top 5 unlisted investments achieving
growth of 23% and 16%. From a valuation perspective though, the LTM maintainable EBITDA increased by 1% over 30 June 2022 with the EV/maintainable EBITDA
multiple increasing to 8.2x (30 June 2022: 7.7x), largely driven by the increase in Optasia's valuation multiple as noted below.
In December 2022, Optasia concluded a transaction whereby a new consortium led by an existing shareholder has acquired a 17.4% stake in Optasia, with an
option to increase the stake to 20%. The acquisition multiple was at a significant premium (22%) to the 30 June 2022 Ethos valuation multiple, resulting in
a significant revaluation at 31 December 2022. Through its commitments to the Ethos Funds, Ethos Capital realised 14% of its participation in Optasia for
R167 million, thereby increasing the Multiple on Invested Capital ("MOIC") on its investment to 3.0x.
In aggregate, Ethos Capital realised gross proceeds of R214 million during the period, including R15 million of dividends from Optasia and R20 million from
the Crossfin Group in relation to the sale of Retail Capital to TymeBank also at a significant premium to pre-sale carrying value. During the six-month
period, Ethos Capital participated in follow-on investments via the Ethos Funds of R61.5 million, investing in Crossfin, Kevro and Echo.
The Ethos Capital NAVPS (including Brait at its NAVPS, that increased marginally over the period) increased by 1.3% from R10.66 to R10.80, largely resulting
from the unlisted portfolio. The portfolio achieved an 8% return (R148 million) over the period, predominantly driven by increases in Optasia following the
partial sale transaction, and strong performances from Synerlytic and Gammatak.
The prices of the listed assets, consisting of ordinary shares in Brait and MTN Zakhele Futhi and the Brait exchangeable bonds, decreased by 5%, 17% and 18%
respectively, resulting in a negative return of R86 million, net of coupon proceeds received on the exchangeable bonds.
Overall, the increases in the investment portfolio contributed to a slight increase in Ethos Capital's NAVPS (including Brait at its share price) from R8.49
to R8.51 over the six months.
As part of its continued assessment to enhance NAVPS and manage the Group’s liquidity, the Board has approved a share buyback program that will be implemented imminently.
FINANCIAL POSITION AND INVESTMENT PORTFOLIO
EXTRACT OF STATEMENT OF FINANCIAL POSITION
Group Company
31 December 2022 30 June 2022 31 December 2022 30 June 2022
R'million R'million R'million R'million
ASSETS
Non-current assets
Unlisted investments at fair value 2,602.1 2,650.6 2,602.1 2,650.6
Current assets 98.2 17.3 97.7 16.8
Trade and other receivables 90.0 14.2 90.0 14.2
Cash and cash equivalents 8.2 3.1 7.7 2.6
TOTAL ASSETS 2,700.3 2,667.9 2,699.8 2,667.4
EQUITY AND LIABILITIES
Total Ordinary shareholders' equity 2,192.4 2,186.9 2,368.3 2,354.7
Non-current liabilities 498.9 460.5 322.5 292.2
Current liabilities 9.0 20.5 9.0 20.5
Total Liabilities 507.9 481.0 331.5 312.7
TOTAL EQUITY AND LIABILITIES 2,700.3 2,667.9 2,699.8 2,667.4
NET ASSET VALUE 2,192.4 2,186.9 2,368.3 2,354.7
Basic Net Asset Value per share (Rand) 8.51 8.49 8.74 8.69
Attributable shares in issue ('000) 257,500 257,500 271,000 271,000
INVESTMENT PORTFOLIO - AT 31 DECEMBER 2022
Valuation % of
Name R'million total assets
Primary/Secondary Investments
Ethos Fund VII 977.5 36.2
Ethos Mid Market Fund I 609.2 22.6
Ethos Ai Fund I 174.9 6.5
Ethos Healthcare Platform 124.0 4.6
Ethos Fund VI 62.7 2.3
Ethos Mezzanine Partners 3 22.8 0.8
Co-Investments
Brait 289.1 10.7
Brait EB 153.6 5.7
Optasia 87.5 3.2
Primedia 77.1 2.9
Kevro 23.7 0.9
2,602.1 96.4
TOP 10 UNDERLYING PORTFOLIO COMPANIES - AT 31 DECEMBER 2022
% of
Name Business description Year* total assets
Optasia FinTech service provider 2018 28.4
Premier (Brait) FMCG manufacturer 2020 10.0
Virgin Active (Brait) Health club operator 2020 7.6
Echo Corporate ISP 2018 6.9
Synerlytic Specialised analytical and testing services 2019 6.9
Vertice MedTech 2018 6.0
Crossfin FinTech group 2021 5.3
Gammatek TMT accessory distribution 2018 5.2
Primedia Media 2017 3.0
TymeBank Banking 2019 2.3
81.6
Brait EB Exchangeable bonds 2021 6.8
Other (11 Portfolio Companies) 8.0
Total underlying investments 96.4
* Initial acquisition date by Ethos Fund
RESPONSIBILITY STATEMENT
This short-form announcement is the responsibility of the Directors of Ethos Capital and is only a summary of the information in the full announcement and
does not contain full or complete details. The announcement is itself not audited but extracted from unaudited results. Any investment decision should be
based on the full announcement which is available from today at:
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/EPEE/EPECAP1222.pdf
and is published on the Company's website at:
https://ethoscapital.mu/investors/reports-results/
Copies of the full announcement may also be requested from the Company Secretary (represented by Mr Kenny Curpen) at no charge at +230 (0) 403 6000, during
office hours, or at ethoscapital@ocorian.com.
PRESENTATION
Ethos Capital will host a webcast presentation at 12h00 pm on Wednesday 15 March 2023 covering the results relating to the six months ended 31 December
2022, and outlook. A copy of the presentation will be available for download on the Company's website at https://ethoscapital.mu/investors/reports-results/
Participants can obtain access via one of the following links:
https://www.diamondpass.net/7593012
CORPORATE INFORMATION
Directors
Yvonne Stillhart (Chairperson)
Derek Prout-Jones
Kevin Allagapen
Michael Pfaff
Yuvraj Juwaheer
Senior Advisors (Officers)
Jean-Pierre van Onselen (CFO)
Peter Hayward-Butt (CEO)
Investment Advisor
Ethos Private Equity (Pty) Limited
35 Fricker Road
Illovo
Johannesburg, 2196
Company Secretary and Registered Office
Ocorian Corporate Services (Mauritius) Limited
6th Floor, Tower A,
1 Cybercity
Ebene
Mauritius
Auditors
Deloitte & Touche
Level 7, Standard Chartered Tower
19 Cybercity
Ebene
Mauritius
Deloitte & Touche
5 Magwa Crescent
Waterfall City
Johannesburg, 2090
Listing
JSE Limited
Abbreviated name: ETHOSCAP
JSE code: EPE
Sector: Financials - Closed End Investments
Transfer Secretary
Computershare Investor Services Proprietary Limited
15 Biermann Avenue
Rosebank, 2196
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place
Cnr Fredman Drive & Rivonia Road
Sandton, 2196
Disclaimer
The financial information on which this announcement is based, has not been audited, reviewed and reported on by the Company's external auditors.
Ebene, Mauritius (with simultaneous circulation in Johannesburg)
15 March 2023
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 15-03-2023 07:30:00
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