Unaudited Interim Financial Results for the period ended 31 December 2019
African Rainbow Capital Investments Limited
Incorporated in the Republic of Mauritius
Company number: C148430 JSE share code: AIL
ISIN code: MU0553S00000 LEI: 378900F086B090C6FB94
Unaudited Interim Financial Results for the period ended 31 December 2019
INAV Per Share Increase of 3.4% to R9.52 (31 December 2018: R9.21)
IFRS NAV Per Share Increase of 4.2% to R9.67 (31 December 2018: R9.28)
Intrinsic Portfolio Value R9 904 million (30 June 2019: R9 359 million)
Cash in the ARC Fund at year-end R437 million (30 June 2019: R725 million)
rain Fair value increase of R183 million and rain launched 5G successfully
TymeBank 1.1 million customers, of which 440 000 are active
African Rainbow Capital Investments Limited (ARC Investments) is a public company which is
incorporated in the Republic of Mauritius and holds a Category One Global Business Licence under the
Mauritian Financial Services Act 2007 and is regulated by the Mauritian Financial Services Commission.
The six month period under review has been characterised by challenging economic conditions which
adversely impacted most of the companies in our portfolio. Our investee companies have traded in an
environment with low consumer demand, and decreased business and investor confidence.
The Company’s investment in the ARC Fund’s intrinsic value increased by 1.9% (3.9% annualised)
over the six-month period from R9 740 million at 30 June 2019 to R9 931 million at 31 December 2019,
mainly as a result of the increased value in Rain. The Intrinsic Net Asset Value (INAV) of the Company
increased from R9.34 per share at 30 June 2019 to R9.52 per share at 31 December 2019 which also
amounts to an increase of 1.9% (3.9% annualised). Whilst growth remains below the medium to long-
term expectation of 16% per annum, it remains encouraging that portfolio growth was achieved
considering the current economic environment. The IFRS Net Asset Value (NAV) per share increased
from R9.45 at 30 June 2019 to R9.67 per share at 31 December 2019. The 10% hurdle for the
Performance Participation has not been met for the six-month period ended 31 December 2019.
The ARC Fund’s Intrinsic Portfolio Value (IPV) at 31 December 2019 was R9 904 million (30 June 2019:
R9 359 million). Net acquisitions and disposals during the period under review amounted to R339 million
(30 June 2019: R1 130 million), including no deferred consideration arrangements (30 June 2019: R148
million). At year end, cash resources available in the ARC Fund for further investments amounted to
R437 million (30 June 2019: R725 million).
Investment in ARC Fund Net Asset Value Net Increase in Net Asset Value Growth in Net
R million 30 June 2019 Net Investment Net Asset Value 31 Dec 2019 Asset Value
Intrinsic Portfolio Value 9 359 339 206 9 904 5.8%
Cash in the ARC Fund 725 (330) 42 437 (39.7%)
Other net assets in the ARC Fund (344) – (66) (410) 19.2%
Intrinsic Investment in the ARC 9 740 9 182 9 931 1.9%
Fund at FVTPL*
* FVTPL: Fair Value Through Profit or Loss
ACQUISITIONS & DISPOSALS DURING THE PERIOD
The developments during the six-months under review resulted in acquisitions of R399 million and
disposals of R60 million. The most significant included:
African Rainbow Capital Financial Services Holdings Proprietary Limited (ARC FinHoldCo) acquired a
controlling interest in TymeBank during November 2018. The ARC Fund contributed R150 million for
its 49.9% share of ARC FinHoldCo shareholding of 66.5% in TymeBank during the six months under
review. This forms part of scheduled capital injections into the bank. The ARC Fund’s effective interest
in TymeBank is 33.3%.
ARC FinHoldCo acquired a 25% shareholding in specialist financial services firm Capital Legacy during
the period for a consideration of R159 million. Capital Legacy is a significant provider of services in
respect of wills and estate administration. Operating since 2012, the company has identified improved,
efficient and cost-effective solutions for the preparation of wills, estate planning and execution.
ARC subscribed for additional shares worth US$3.25 million (R45 million) as part of a short-term
working capital injection in Kropz Plc, a holding company listed on the Alternative Investment Market of
the London Stock Exchange.
During the six-month period ARC FinHoldCo disposed of its shares in Santam Limited for a total
consideration of R120 million, realising a profit R21 million net of capital gains tax.
PERFORMANCE REVIEW FOR THE PERIOD
The ARC Fund increased by R545 million from R9 359 million to R9 904 million, being the net impact
of acquisitions including deferred consideration and interest capitalised (R399 million), net disposal in
the period (R60 million), fair value write-ups including foreign net exchange gains and profit or loss on
disposal of investments of R373 million and fair value write-downs of R169 million.
Key Comments: Diversified Investments Portfolio (72.0% of Fund Value, 30 June 2019: 72.5%)
Rain (27.4% of Fund Value, 30 June 2019: 26.8%)
Rain is aiming to become a full-service mobile network operator, focusing on data as a primary offering.
The major assets constitute spectrum licences.
Rain’s income sources consist of roaming income, 4G data sales, 5G subscriptions and reseller income.
The Rain Network is expanding according to plan to achieve nationwide connectivity. During October
2019, Rain launched the country’s first 5G network for fixed wireless internet connectivity.
Kropz Group (5.4% of Fund Value, 30 June 2019: 5.2%)
The Kropz Group is a nutrient producer with an advanced stage phosphate mining project on the West
Coast of South Africa, a phosphate project in the Republic of Congo and an exploration asset in Ghana.
The ARC Fund holds 49.3% of the issued shares in Kropz Plc. Commissioning of the mine has been
delayed, owing to additional laboratory and pilot plant testing. The ore body at Elandsfontein was found
to be more complex than initially anticipated.
Based on the additional test work that has been conducted over the past 14 months there is a high level
of confidence that the proposed modifications to the processing plant will produce the required final
saleable concentrate at the desired yields.
Given the uncertainty regarding the current depressed phosphate market price and the timing of a
potential recovery, coupled with the additional funding requirements, a prudent approach for valuation
purposes was adopted. The ARC Fund’s investment in the Kropz Group has been left unchanged since
30 June 2019. The increase in carrying value from R485 million at 30 June 2019 to R530 million at 31
December 2019 relates to a R45 million working capital injection made during the period under review.
Bluespec (3.2% of Fund Value, 30 June 2019: 2.9%)
The ARC Fund holds a 24.8% interest in Bluespec, which is a holding company comprised of several
specialist businesses which collectively aim to transform the motor repair and recovery industry.
Bluespec has been able to turn the business around after facing difficult trading conditions in 2018 and
the early part of 2019 when it effected internal changes and restructuring of certain operations.
The business has responded well by spreading its geographical presence and introducing innovative
routes to market, increasing market share, focusing on core business units, reducing costs and
Key Comments: Financial Services Portfolio (28.0% of Fund Value, 30 June 2019: 27.5%)
Alexander Forbes (8.3% of Fund Value, 30 June 2019: 8.7%)
The effective combined shareholding in Alexander Forbes Group Limited on conversion is currently
approximately 22.0% (after considering the dilution impact of the flip up on current shareholding in the
listed entity). The ARC Fund (through its 49.9% in ARC FinHoldCo) therefore has an effective
shareholding of 11.0%.
The ARC Fund investment in Alexander Forbes Group Holdings decreased from R495 million at 30
June 2019 to R486 million at 31 December 2019, as a result of a downward adjustment of the
investment fair value of R9 million (30 June 2019: R29 write down) due to a reduction in the listed share
The ARC Fund investment in Alexander Forbes Limited, however, increased in value from R315 million
at 30 June 2019 to R340 million at 31 December 2019, as a result of a partial unwind of the marketability
Rand Mutual Holdings (RMH) (2.9% of Fund Value, 30 June 2019: 3.1%)
RMH is a subsidiary of Rand Mutual Assurance (RMA) whose core business is the receipt, adjudication
and administration of workers’ compensation claims, including the payment of medical costs, once-off
disability payments and the ongoing payment of pensions in the case of severe disability and death.
RMH is well positioned to use its competitive advantage in the COID sector via its technology and
administration platforms to potentially administer other classes/sectors for the Compensation Fund. It
can also partner with other insurance companies/governments in the rest of Africa. We believe the
inherent business can be grown and there is significant value that can be unlocked for all shareholders.
TymeBank (8.3% of Fund Value, 30 June 2019: 7.2%)
TymeBank is a digital bank that leverages the use of digital biometric technology to make banking
simple and affordable and is focused on banking the unbanked in South Africa. ARC FinHoldCo
invested R300 million during the six-month period, with R150 million contributed from the ARC Fund.
At 31 December 2019, the bank had cumulatively signed-up 1.1 million customers of whom 440 000
were actively using their accounts. The bank is signing up between 3 500 and 4 000 customers per
day, with about 40% of bank accounts being active. The bank is well positioned within the SA banking
sector to implement its unique low-cost banking fee model as well as customer experience value
A slow-down in the global economy is expected to have an unfavourable impact on the South African
economy. Coupled with the current economic dynamic in South Africa, it is expected that the challenging
operating environment will persist over the short to medium term. Given the ARC Fund’s diverse
investment portfolio, it is expected that the Fund will deliver a satisfactory performance.
GOVERNANCE & LEADERSHIP
ARC Investments is managed and controlled in Mauritius by an experienced, multinational and majority
independent Board of Directors (the Board) that has final oversight and responsibility in respect of ARC
Investments’ business, strategy and key policies. This includes the investment in the ARC Fund. There
are no executive directors on the Board of ARC Investments.
Mark Cyril Olivier Clive Msipha Karen Bodenstein
Chairman of the Board Chairman of the Audit and Risk Committee Chief Financial Officer
ABOUT THIS ANNOUNCEMENT
This short form announcement is the responsibility of the directors and the information contained herein
is only a summary of the information in the full Unaudited Interim Financial Results announcement and
does not contain full or complete details.
Any investment decision by investors and/or shareholders and/or bondholders should be based on
consideration of the full announcement that was released on
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/AILE/IResults20.pdf and on the ARC
Investments’ website http://www.arci.mu/2020_unaudited_interim_results.pdf. on 19 March 2020. This
short-form announcement does not contain any additional information not appearing in the full
Unaudited Interim Financial Results released on SENS.
The full announcement is available for inspection at the registered office (1) and designated office (2)
of ARC Investments and the offices of the Sponsor (3) at no charge during normal business hours.
Copies of the full announcement may be requested by email from email@example.com.
Ebène, Mauritius (with simultaneous circulation in Johannesburg)
19 March 2020
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
(1) The registered office: Level 3, Alexander House, 35 Cybercity, Ebène, 72201, Mauritius (2)
Designated Office: 6th Floor, Phase 3, 11 Alice Lane, Sandhurst, Gauteng (3) The offices of the
sponsor: Rand Merchant Bank, a division of FirstRand Bank Limited, 1 Merchant Place Cnr Fredman
Drive and Rivonia Road, Sandton, Johannesburg, 2196
Date: 19-03-2020 08:00:00
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