Wrap Text
Investment update
African Rainbow Capital Investments Limited
(Incorporated in the Republic of Mauritius)
(Registration number C148430)
JSE and A2X 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 on 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 2024 financial year, being the 3 months to 31 March 2024.
This announcement also includes commentary on significant developments to the end of April 2024.
MACRO ENVIRONMENT
Significant challenges, including elevated interest rates, high unemployment and pressure on
disposable incomes, persisted during the period under review. Notwithstanding these unfavourable
conditions, several portfolio companies have demonstrated resilience, and we remain committed to
identifying promising investment opportunities. Disruptions to the electricity supply abated towards
the end of the period under review, with continued improvement in the period afterwards.
DIVERSIFIED INVESTMENTS PORTFOLIO
rain
RainOne continues to experience steady month-on-month growth, with positive market reception for
the recently launched 101 device. A notable trend is the successful migration of customers from legacy
plans to newer offerings, reflected in improved collections and retention rates. Prioritising customer
engagement and service has yielded positive customer sentiment.
During the period under review, rain has successfully achieved its monthly financial targets.
Kropz Plc (Kropz)
Kropz Elandsfontein faced challenges in increasing production in the first quarter of 2024, but
management has identified key issues related to ore variability, production bottlenecks, liberation,
and flotation. Dedicated teams are actively working to address these challenges and achieve
profitability.
Despite these hurdles, Kropz successfully sold 80,771 tonnes of phosphate concentrate during the
quarter. Production trials and development of the Nanophos product have also begun, with several
small sales completed. The installation of an additional centrifuge is complete and undergoing testing,
with the aim of stabilising and boosting production levels from the third quarter onwards.
The ARC Fund continues to support the project and Elandsfontein's operational ramp-up, providing an
additional R113 million in capital during the quarter.
Bluespec
The Bluespec Group is performing as expected and is on track to meet its growth targets across key
areas. The group continues to innovate in the insurance space with new products and services,
resulting in an expanded insurer customer base. This sector is a crucial distribution channel and
stakeholder for Bluespec. The group is well-positioned for further growth with sustained growth in
assessment volumes, an expanding operational footprint, a strong balance sheet, and sustainable
dividend levels.
Additionally, Bluespec's subsidiary Weelee recently opened its first wholesale mega vehicle
warehouse, which is expected to drive retail growth. Despite a highly competitive market and
pressured customer base, Weelee is exceeding expectations in most areas.
Ooba
Despite a challenging economic climate with high inflation and interest rates, ooba has maintained its
market share and performance. In response to market demands, management has introduced innovative customer
and banking solutions and continues to explore growth opportunities in related areas through its national
footprint and strategic partnerships. These initiatives are showing promising early results.
Ooba's financial performance is on track. Key value drivers for its origination and aggregation business,
including the number of applications, application conversion rate, and average bond size, are being
closely monitored. The management team remains focused on improving productivity and optimising
these key metrics.
Agri portfolio
ARC is making good progress in consolidating its agri-sector investments. This focused approach is
expected to create sustainable long-term growth and contribute to broader food security goals.
The assets within the agri pillar continue to demonstrate strong financial performance, dividend yields,
and growth potential.
This consolidated approach will result in a vertically and horizontally integrated group, offering a
unique value proposition to stakeholders across the fresh produce and broader agricultural sector,
including distribution channels.
Upstream Group of companies
The Upstream Group's financial performance met expectations, despite a tightening credit
environment and ongoing pressure on consumers. The group's diversified client base across retail
credit lenders and financial institutions helps mitigate concentration risk. Notably, more consumers
are entering the debt review process earlier than in previous years, increasing demand for Upstream's
services.
Upstream's technology-focused platforms for debt review, rehabilitation, and recovery services
uniquely position it in the market. The group plays a vital role in the broader debt review ecosystem,
serving both creditors and consumers.
We remain optimistic about future growth prospects. Together with Upstream's management and
shareholders, we will continue exploring synergies across the ARC network to ensure sustainable
growth and align Upstream's offerings with ARC's investment portfolio.
FINANCIAL SERVICES PORTFOLIO
TymeBank
The Tyme Group has a customer base of 12.4 million across South Africa and the Philippines, with 9.2
million TymeBank customers and 3.2 million GoTymeBank customers. The group onboards approximately
450,000 new customers monthly, with 250,000 for GoTymeBank and 200,000 for TymeBank.
The Group's annualised gross revenue run rate is $175 million, while the annualised net operating
income is tracking at $110 million. The combined deposit base is $600 million, with a $165 million
lending portfolio. TymeBank is expected to achieve sustained profitability by June 2024, after breaking
even in December 2023, positioning it for further growth and increased profitability due to its strong
operating leverage. GoTyme Bank is projected to reach breakeven in Q4 2025. Retention rates and
transactional activity continue to strengthen in both markets.
GoTyme Bank recently acquired 100% of Savii, a salary-based lender in the Philippines, enabling it to
offer a wider range of lending and financial products to customers while accelerating profitability.
Additionally, GoTyme Bank shareholders increased their stake in the bank, resulting in Tyme Group's
economic interest exceeding 50%. These developments, coupled with strong growth, bode well for
GoTyme Bank's future.
TymeBank is expanding its SME lending proposition through its merchant cash advance product despite
economic challenges. It is also expanding into unsecured consumer lending by leveraging its growing
deposit base.
The Series C capital raise was finalised in January 2024, and Tyme has initiated its Series D capital raise
to enable GoTyme Bank to achieve profitability and grow TymeBank's lending portfolio.
Crossfin
Over the last quarter, Crossfin's entities have continued to operate in a tough trading environment,
largely driven by the continued strain experienced by consumers in a relatively high interest rate cycle,
as well as the ongoing unpredictability of load-shedding for merchants. Nevertheless, the Crossfin
portfolio has performed in line with expectations, delivering strong year-on-year financial
performance.
In May 2024, Lesaka Technologies acquired Adumo (a Crossfin portfolio company) for R1.6 billion (in
cash and shares). ARC has opted to receive Lesaka shares. The deal is expected to be finalised in Q3
2024, subject to customary approvals.
Capital Legacy
Capital Legacy, a leading estate administrator in South Africa, distinguishes itself through its unique
estate administration insurance product. Despite challenging economic conditions, the company has
maintained impressive growth. Capital Legacy is actively expanding its resources to maximize the
partnership with Sanlam, following Sanlam's 26% investment and Capital Legacy's acquisition of the
entire Sanlam Trust business.
GoSolr
Solar installations remained consistent compared to the previous quarter, primarily due to the
minimal load shedding experienced during the reporting period. With no power outages in over 40
days, demand for solar solutions was lower than anticipated. However, the company's steady
performance can be attributed to increased leads and sales, reflecting the effectiveness of
management's marketing and sales strategies, as well as a shift in focus beyond just load-shedding
solutions.
Disclaimer
The financial information on which this announcement is based has not been reviewed or reported on
by the Company's external auditors.
Ebene, Mauritius (with simultaneous circulation in Johannesburg)
07 June 2024
For further information please contact:
Company Secretary
Intercontinental Trust Limited
Tel: +230 430 0800
JSE Sponsor
Deloitte & Touche Sponsor Services Proprietary Limited
Date: 07-06-2024 07:05:00
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