ARC Investments’ Strong FY 2023 Financial Performance

  • ARC Investments reports a 15.8% increase in intrinsic net asset value (INAV) for FY 2023, reaching R15,328 million.
  • The company showcases resilience in a challenging economic environment with notable advances in portfolio companies like Rain and TymeBank.
  • Strategic initiatives, including fee reductions and portfolio streamlining, lead to substantial savings for shareholders, reinforcing long-term growth prospects.

African Rainbow Capital Investments Limited (ARC Investments) has announced its full-year financial results for the twelve-month period ending on June 30, 2023, showcasing remarkable resilience in the face of a challenging economic environment.

  • Financial Performance

In a tough macroeconomic landscape that exerted pressure on the economy and consumers, ARC Investments displayed impressive financial performance. The intrinsic net asset value (INAV) increased by a significant 15.8%, reaching R15,328 million, up from R13,242 million in the previous year. This notable growth reflects the strength of the company’s diverse portfolio.

Moreover, INAV per share witnessed a substantial increase of 13.4%, reaching R11.41 per share. Despite a 25% decrease in cash within the ARC Fund, which amounted to R500 million, and a 51% increase in debt, which reached R1,473 million, ARC Investments managed to navigate the challenges effectively.

Portfolio Highlights

ARC Investments’ portfolio includes a range of companies across various sectors. Notable advancements were reported in several of its large early-stage portfolio companies:

  • Rain: The company successfully launched its rainOne mobile service, expanding its reach and offerings.
  • Kropz Plc: Kropz’s Elandsfontein operation sold an impressive 120,000 tonnes of phosphate in the six months leading up to June 2023, marking significant progress.
  • TymeBank and Tyme Global: The successful capital raise of USD125 million boosted these entities, enhancing their financial stability and capabilities.
  • Sanlam 3rd party Asset Management: The conclusion of the Absa Asset Manager transaction demonstrated ARC Investments’ strategic positioning.
  • Capital Legacy: This entity received an investment from Sanlam and acquired the Sanlam Trust accounts, strengthening its presence in the financial sector.
  • RSA: Reporting strong profits exceeding the combined results of the past two years, RSA has added to the overall positive performance.

Strategic Initiatives

ARC Investments has implemented several initiatives to bolster its portfolio’s performance:

  • Streamlining the portfolio to focus on future-focused areas.
  • Validating portfolio valuations through several disposals at full value.
  • Reducing management and performance fees by more than 50%.
  • Growing the unlisted portion of the fund, accessible only through ARC Investments, to 89% of the portfolio.

The company’s revised strategy involves disposing of smaller and non-core assets while increasing its exposure to future-focused growth areas in Financial Services, Telecommunication, Agriculture, and “Diversified financials.”

Performance Fees and Savings for Shareholders

The newly approved performance participation fee structure allows shareholders to share in 16% of the growth in ARCI NAV above the 10% hurdle. For the year ending June 30, 2023, a provisional performance amount of R122 million was recognized, a substantial saving for investors compared to the previous year’s R273 million.

Future Outlook

ARC Investments remains committed to its strategic direction, with a focus on delivering value to its shareholders. The company continues to explore opportunities in various sectors to strengthen its portfolio and ensure long-term growth.

Conclusion

ARC Investments’ resilience and strategic manoeuvring have resulted in strong financial performance despite challenging economic conditions. The company’s diverse portfolio, focus on future-focused sectors, and cost-saving initiatives have positioned it for continued success in the years ahead. Shareholders can look forward to sustained growth and value creation.

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