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ARC portfolio companies demonstrate resilience in challenging conditions

An image showing Kropz's Elandsfontein mine

The ARC Fund continues to support the Elandsfontein mine’s operational ramp-up

7th June 2024

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed African Rainbow Capital (ARC) Investments says that, despite an unfavourable macroeconomic environment for the quarter ended March 31, several portfolio companies have demonstrated resilience, and it remains committed to identifying promising investment opportunities

In an update on strategic matters and a performance overview of the significant investments in the ARC Fund for the period, including major developments to the end of April, the company says that significant challenges, including elevated interest rates, high unemployment levels and pressure on disposable incomes, persisted.

However, disruptions to the electricity supply abated towards the end of the period, with continued improvement in the period afterwards, ARC points out.

RAIN

Telecommunications company rain’s rainOne offering continues to experience steady month-on-month growth, with positive market reception for the recently launched 101 device, ARC avers.

ARC highlights a notable trend as the successful migration of customers from legacy plans to newer offerings, reflected in improved collections and retention rates.

rain successfully achieved its monthly financial targets during the year.

KROPZ

Phosphate producer Kropz successfully sold 80 771 t of phosphate concentrate during the quarter, despite facing challenges in increasing production.

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 the Elandsfontein mine’s operational ramp-up, providing an additional R113-million in capital during the quarter.

BLUESPEC

ARC says 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, it adds.

This sector is said to be a crucial distribution channel and stakeholder for Bluespec.

ARC avers that 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.

Also, Bluespec’s subsidiary Weelee recently opened its first wholesale vehicle megawarehouse, which is expected to drive retail growth.

OOBA

Despite a challenging economic climate, ooba has maintained its market share and performance.

In response to market demands, management has introduced customer and banking solutions and continues to explore growth opportunities in related areas through its national footprint and strategic partnerships, with these initiatives showing promising early results, ARC highlights.

ooba’s financial performance is on track.

Key value drivers for its origination and aggregation business are being closely monitored.

The management team remains focused on improving productivity and optimising these key metrics.

AGRI PORTFOLIO

ARC says it 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, ARC highlights.

It avers that 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

Debt recovery provider The Upstream Group’s financial performance met expectations, despite a tightening credit environment and ongoing pressure on consumers.

More consumers are entering the debt review process earlier than in previous years, increasing demand for Upstream’s services, ARC says.

It remains optimistic about future growth prospects.

Together with Upstream’s management and shareholders, ARC will continue exploring synergies across the ARC network to ensure sustainable growth and align Upstream’s offerings with its investment portfolio.

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, after breaking even in December 2023, positioning it for further growth and increased profitability owing to its strong operating leverage, ARC says.

GoTyme Bank is projected to reach breakeven in the fourth quarter of 2025.

Retention rates and transactional activity continue to strengthen in both markets, ARC highlights.

GoTyme Bank recently acquired 100% of Philippines salary-based lender Savii.

Also, GoTyme Bank shareholders increased their stake in the bank, resulting in Tyme Group’s economic interest exceeding 50%.

TymeBank is expanding its small and medium-sized enterprises 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, and Tyme has initiated its Series D capital raise to enable GoTyme Bank to achieve profitability and grow TymeBank’s lending portfolio.

CROSSFIN

The Crossfin portfolio has performed in line with expectations, delivering strong year-on-year financial performance, ARC says.

In May, 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 the third quarter, subject to customary approvals.

CAPITAL LEGACY

Despite challenging economic conditions, financial services provider Capital Legacy has maintained good growth, ARC highlights.

Capital Legacy is actively expanding its resources to maximise 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 with the previous quarter, primarily owing to the minimal loadshedding 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 loadshedding solutions, ARC posits. 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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