Listed investment holding company African Rainbow Capital Investments on Thursday (19 March), reported strong growth in it’s digital banking business, TymeBank, and Rain, its 5G data provider, for the period ended December 2019.
“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,” ARC said in a statement.
The company said that its 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.
Rain’s fair value saw an increase of R183 million, while the group launched 5G successfully over the period.
ARC Investments has a shareholding of 20.7% (valued at R2.7 billion) in Rain, which has a business objective of becoming a full-spectrum mobile network operator focused on providing data to consumers and businesses.
The company’s key assets are spectrum licences. It has an allocation in the 1800 Megahertz (MHz) band, as well as an allocation in the sought-after 2600 MHz band.
The company has already established a 4G LTE network with over 3,000 active LTE sites, ARC said.
In September 2019, rain successfully launched South Africa’s first 5G network. It is rolling out the 5G network and at 31 December 2019 already had over 300 live 5G sites, it said.
ARC Investments, through its parent company ARC (the unlisted entity), is the majority shareholder in TymeBank, a fintech bank that already boasts over one million clients after 10 months in operation. ARC has a 66.5% majority shareholding in TymeBank valued at R1.6 billion.
It noted that by 31 December 2019 TymeBank had 1.1 million clients, about 440,000 of whom had active bank accounts. The bank defines an active customer as someone who has a positive account balance and/or initiated at least one transaction in the preceding 30 days.
And by 28 February 2020 TymeBank had 1.4 million clients, about 700,000 of whom had active bank accounts.
The bank has received over R500 million in deposits from its banking clients.
New products, which include a business account for small and medium businesses as well as an unsecured loan product for retail clients, have been successfully launched, ARC said.
In February 2020 the bank announced a partnership with the Zionist Christian Church, which will lead to the bank signing up members of the 12 million strong congregation of the church.
“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 propositions,” ARC said.
ARC FinHoldCo invested R300 million into TymeBank during the six-month period, with R150 million contributed from the ARC Fund.
Overall, ARC Investments said it managed to grow its Intrinsic Portfolio Value by 5.8% to R9,904 billion.
In terms of value per share, the company succeeded in growing its Intrinsic Net Asset Value per share by 3.4% to R9.52 per share as compared to the comparative six-month period ended 31 December 2018.
Dr Johan van Zyl, co-chief executive officer of African Rainbow Capital, said: “As previously communicated to the market, our performance as an investment holding company depends on how well our underlying investee companies perform as we are mostly a significant minority shareholder in their businesses.
“Although we regard our portfolio as satisfactorily diverse which spans several sectors of the economy, pedestrian economic growth adversely impacted many of our investee companies. Our overall performance was also impacted by the poor performance of some of the listed entities in our portfolio.
“Our target is to grow the Intrinsic Net Asset Value of the investments in our portfolio by at least 16% per annum. In the six-month period we achieved a return of only 2.9% and annualised 5.8%. Certainly, we have not achieved our own hurdle rate and therefore cannot be satisfied with our performance.”
Looking ahead, ARC said that a slow-down in the global economy is expected to have an unfavourable impact on the South African economy.
“In terms of our outlook for the remainder of our financial year, we expect our operating environment to remain challenging. We anticipate that our local trading conditions will be unfavourably impacted by a global economic slowdown as well as existing local economic challenges,” van Zyl said.
“Furthermore, we should expect our businesses in general to be impacted by the coronavirus pandemic. Although the impact is expected to be adversarial to business performance, businesses will do the responsible thing and implement a range of measures with employees and other stakeholders to help curb the spread of the virus.”