African Rainbow Capital grows intrinsic net asset value by 8.5%

African Rainbow Capital (ARC) Investments has reported an 8.5% rise in intrinsic net asset value (INAV) per share for the year to end-June.

ARC, which is backed by Patrice Motsepe, invests in start-up businesses that aim to disrupt the status quo in areas such as financial services and telecoms. Its diverse portfolio of listed and unlisted assets is valued at R20.2bn.

The group said INAV per share rose 8.5% to R12.38, while INAV increased by 21.5% to R18.6bn, which comprised an increase in equity through a rights issue of R750m and a net gain of R2.67bn.

The group said there were significant advances in several early-stage assets leading to a maturing portfolio. More than 80% of the portfolio is now contributed by mature and high-growth investments.

“One of the most pleasing aspects of this year’s results has been the strong progress made at several of the fund’s early-stage assets, with both Tyme Bank and Linebooker achieving break even, Rain generating R2.5bn ebitda [earnings before interest, tax, depreciation and amortisation], and Philippines-based GOtyme reaching a record 3.6-million customers within 18 months,” the group said.

TymeBank achieved break-even in the month of December 2023, and sustained profitability is expected in the coming months and it generated fair value gains of R1.18bn.

Linebooker achieved break-even and generated fair value gains of R79m and Rain met its economic and customer service related targets, generating R2.5bn in ebitda, resulting in fair value gain of R598m.

ARC Investments said the integration of Sanlam Third Party Asset Management and Absa Asset Management resulted in substantial scale benefits and cost savings. Sanlam and Alexforbes collaborations led to a substantial reduction of cost per member and improved client experience and capital management.

Sanlam and Capital Legacy transactions drove value by leveraging off a strong balance sheet and an enhanced distribution capacity, it said.

It also reported the successful integration of Retail Capital into TymeBank, while Retail Capital launched with GOtyme in the Philippines.

During the period, ARC Investments made additional investments in Rain and Tyme Group of R126m and R169m, respectively. It also made an additional investment in ARCH Emerging Markets of R161m, an investment of R143m in ARCI shares, benefiting from the considerable discount compared with net asset value.

ARC Investments said the prevailing high interest rates, high unemployment, falling levels of consumer spending and volatile foreign exchange environment created challenging trading conditions for some of its portfolio companies. The diverse investment portfolio of ARC Investments had, however, shown remarkable resilience against the challenging macroeconomic environment, it said.

More than 80% of the portfolio now comprised mature and high-growth investments, which would continue to improve earnings visibility in the future, ARC said.

The ARC Fund invested a further R1.38bn in its current portfolio and disposed of R229m of investments during the year. As a result of these transactions, financial services exposure had increased to 33% of the portfolio, and the unlisted portion of the fund, which was accessible only through ARC Investments, had grown to 88% of the portfolio, it said.

mackenziej@arena.africa