ETHOS CAPITAL INVESTOR PRESENTATION...2020/02/01 · –Ethos Capital investment into Brait of...

ETHOS CAPITAL INVESTOR PRESENTATION28 SEPTEMBER 2020

CO

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Executive summary

Liquidity analysis

Portfolio overview

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Outlook

© Ethos | 3

Financial year ended 30 June 2020 headlines at a glance

EXECUTIVE SUMMARY

NAV per share:

R9.12on an aggregate basis

with Brait assets at NAV

NAV per share:

R6.65on an accounting basis with the Brait

investment at the Brait share price

Brait investment and R750m Ethos Capital

Rights Issue completed in

February

Carrying value of invested Capital

as at June 2020:

R1.9bn99% of total assets invested

Total capital invested

R1.3bnduring FY2020

Brait disposals:

Disposal of DGB &

Iceland Foods

for a total of R2.9bn

Estimated annualised

savings to Brait’s cash costs of

R493mthrough actions taken since

1 March 2020

Ethos Capital currently* trades at a

discount to the R9.12 NAVPS of

c.62%

Unlisted portfolio valued at

7.0x LTM EBITDA

* As at 25 September 2020

© Ethos | 4

PERFORMANCE REVIEW

PORTFOLIO PERFORMANCE

ETHOS CAPITAL LIQUIDITY

– 20% reduction in Net Asset Value Per Share (“NAVPS”) for the year to 30 June 2020 from R11.34 to R9.12 as a result of:

• R750m capital raise in February 2020

• EV / EBITDA multiple reduction across most Portfolio Companies

• Lower maintainable EBITDA of many of the Portfolio Companies

– NAVPS assuming Brait is valued at its 30 June 2020 share price decreased to R6.65

– Attributable maintainable EBITDA* decreased by 8% with the average EV / EBITDA multiple decreasing to 7.0x

– Ethos Capital is fully invested with Invested Capital of R1,892m

– Current RMB base facility of R500m of which R40m was utilised as at 30 June 2020

– Current undrawn net commitments total c.R380m across the various Ethos Funds

– Sufficient liquidity to fund Ethos Capital commitments

COVID IMPACT

– Significant impact on most of the Portfolio Companies (18 of 24 Portfolio Companies were closed during lockdown)

– Impact on maintainable EBITDA, multiples and also sustainable net debt

– Measures put in place by management teams were all successful and there were no corporate “casualties”

* Adjusted for acquisitions/realisations and fx

© Ethos | 5

PERFORMANCE REVIEW

BRAIT PORTFOLIO

INVESTMENTS AND DISPOSALS

– Significant amount of time spent with Portfolio Company boards and management teams focusing on:

• Short term strategies to survive the impact of COVID

• Understanding and aligning behind Brait’s new strategy with new / refreshed strategies to optimise value in the 3 to 5-

year time horizon

• New management incentive schemes and succession plans in place at Virgin Active and Premier

– Strategic reset and growth plan implemented at Premier

– Virgin Active refinancing, liquidity plan and launch of global digital offerings

– New Look capital restructuring and CVA announced and largely completed

– Consol debt restructuring completed

– R2.3bn invested in FY20 by Ethos Funds, largely into Brait, Gondwana and Vertice - Ethos Capital share R1.3bn

– Ethos Capital investment into Brait of R1,034m completed in February 2020

– Sale of Eaton Towers completed in January 2020 by Ethos Fund VI (2.5x TMB, 22% IRR in ZAR)

– DGB sale completed in April 2020 – Brait proceeds of c.R470m in line with current Net Asset Value (“NAV”)

– Sale of Iceland Foods in May 2020 – Brait proceeds of GBP115m in three tranches at an 84% premium to NAV, second

and third tranches totaling GBP48.5m received as part of early settlement agreement on 15 September

© Ethos | 6

PERFORMANCE REVIEW

BRAIT DEBT

BRAIT OPERATIONS

– Refinancing and significant reduction in Brait net debt:

• BML debt reduced from R4.6bn (March 2020) to R2.7bn post receipt of Iceland proceeds and GBP7m New Look investment

• Interest saving of R310m on an annualised basis

– Increased headroom on covenants for both the Brait debt facility and the 2024 Convertible Bonds

– Repayment of 2020 convertible bonds:

• Savings of c.R66m through early settlement offers and tender process

– Brait / Ethos team integration complete

– Significant reduction of R493m of cash costs on an annualised basis

• Operating cost reduction of R183m

• Reduced interest costs of R310m

– Redomiciliation process from Malta largely complete; process to be completed by March 2021

STRATEGIC OUTLOOK

– Current focus of Ethos Funds on portfolio optimisation and exits

– Ethos Capital Board is focused on maximising value and return of capital to shareholders

– No new Fund commitments until Funds’ realisation strategies and shareholder distributions have been demonstrated

© Ethos | 7

Overview of Ethos key unlisted portfolio companies

PORTFOLIO COMPANY PERFORMANCE OVERVIEW

– Strong operational performance has continued despite COVID

– >40% growth in LTM EBITDA in ZAR to June 2020 broadly across territories and customers

– Growth opportunities in new customer deployments, new products and MFS deployments

– Robust operational performance with significant increase in the company’s sales pipeline

– Management focused on integrating the Gondwana acquisition to drive pan SSA growth to key customers

– Strategy remains to look for in-fill acquisitions of complementary businesses

– Very significant (86%) growth in maintainable EBITDA driven by both organic growth and in-fill acquisitions

– Business impacted by the slowdown in elective procedures due to COVID which is likely to reverse

– Impacted by the lockdown but business was operational in Level 3 and performing in line with budget

– Integration of acquisition (AFS) has boosted profitability, management assessing other bolt-on acquisitions

– 1H 20 adversely impacted by supply chain issues, IT platform integration and consolidation of distribution centres

– Demand remains robust and 1H issues have been resolved

– Significant decrease in advertising spend in Q2 20 impacted both the broadcasting and outdoor businesses

– Advertising spend has seen an encouraging post lockdown increase although remains well below previous years

© Ethos | 8

Brait portfolio company overview


– Clubs opened in Italy, Thailand, Singapore, Australia and the UK (7 remain closed in London)

– Early indications are positive with usage levels above and freeze / terminations in-line with management’s forecasts

– South Africa opened on 24 August, lower terminations than forecast and usage at 37% by week 3

– However, likely to take at least 18 months (based on management’s forecasts) to revert to 2019 levels

– Strong operational and financial performance has continued with Q1 revenue and EBITDA increasing 12% and 20%

respectively

– Management highly focused on enhancing operational efficiency and dealing with Coronavirus mitigants to the business

– Strategy remains to look for in-fill acquisitions of complementary products to leverage the Premier platform

– Sold to Iceland management for a total consideration of GBP115.0m; a premium to the March 2020 carrying value of

GBP62.5m

• Early settlement of deferred payments of GBP48.5m received on 15 September

– Operational turnaround plan was on track, however significantly impacted by Coronavirus with store closures

– Capital restructuring and CVA process to reduce costs largely complete

– Strong 2019 performance halted by Coronavirus and impacted by the renewed alcohol ban in South Africa; operations

have reopened and will take time to ramp up to full capacity

© Ethos | 9

Brait cash cost savings, debt and covenants

BRAIT LIQUIDITY & CASH COST ANALYSIS

6,348

2,925 2,851 2,851

6,402

4,6023,597

2,680

Sep 19 (prerestructure)

31 March 2020 30 June 2020 30 June 2020(Adjusted)

Total Group debt (R million)

2020 Convertible Bond 2024 Convertible Bond Drawn BML RCF

CASH COST SAVINGS DEBT & COVENANTS

12,750

6,4485,531

7,527

Jun-20 Adjusted reflects the illustrative drawn balance

outstanding on the drawn RCF, post receipt of the remaining

Iceland deferred sales proceeds of GBP48.5m and NL

investment

30%

26%5%

29%

8%3%

R493m cash cost

reduction (1)

INTEREST RATES

Refinancing of BML

facility (annual interest

saving – including Base

Rate reduction) (2)

ADVISOR FEE

Reduction in the BML

Advisory Fee (3)

Voluntary reduction in Q1

Advisory Fee

OPERATING COSTS

– Re-domiciliation from

Malta to Mauritius

– Reduction cost of the Brait

Board

– Voluntary reduction in Q1

directors’ remuneration

DISPOSALS

Asset disposal

process, resulting in

annual interest rate

savings

CB REPURCHASE

Liquidity management:

Repurchase of a portion

of 2020 Convertible

Bonds at a discount

PREMIER LOAN REPAYMENT

Liquidity management:

R150m of shareholder loan proceeds

from Premier (interest saving)

(1) Represents an illustrative estimate of “annualised” cost savings; (2) Includes the benefit of a 300bps reduction in SA Base Rates; (3) Reduction of Advisory fee from R215 million to R100 million p.a.

CO

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Executive summary

Liquidity analysis

Portfolio overview

Outlook4

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© Ethos | 11

Changes in NAV since June 2019

ETHOS CAPITAL NAV ANALYSIS

AuditedImpact of the Rights Issue

and Brait investmentIllustrative Proforma Audited

30 June Equity

raise

Brait

investment

30 June 30 June

2019 2019 2020

Investments 1,427 74.1% - 1,034 2,461 92.4% 2,529 99.4%

Brait (at cost / NAV) - - 1,034 1,034 38.8% 1,068 42.0%

Channel Vas 408 21.2% 408 15.3% 549 21.6%

Echo 28 1.5% 28 1.1% 178 7.0%

Vertice 61 3.2% 61 2.3% 153 6.0%

Kevro 202 10.5% 202 7.6% 115 4.5%

Synerlytic 105 5.4% 105 3.9% 114 4.5%

Other investments 623 32.3% 623 23.4% 352 13.8%

Cash and cash equivalents 485 25.0% 735 (1,034) 186 7.0% 8 0.4%

Accounts receivable 17 0.9% 17 0.6% 5 0.2%

Total assets 1,929 100.0% 735 - 2,664 100.0% 2,542 100.0%

Borrowings (Drawn RCF) - - (40)

Borrowings (Black Hawk Debt) (135) (135) (145)

Non-current liabilities (135) (135) (185)

Accounts payable & provisions (8) (8) (8)

Current liabilities (8) (8) (8)

Total Liabilities (143) - - (143) (193)

NAV to ordinary shareholders 1,786 735 2,521 2,349

# of shares ('mil) excl treasury 157.5 100.0 257.5 257.5

NAV PER SHARE 11.34 7.35 9.79 9.12

© Ethos | 12

31 December 2019 vs 30 June 2020

PORTFOLIO OVERVIEW

COVID-19 PANDEMIC

Carrying value of

Capital

Invested

R1.9bn

EV / EBITDA

(unlisted)

7.0x

EV / EBITDA (Brait portfolio based on its

share price)

6.7x*

Ethos Capital

NAVPS @ Brait

NAV (R8.27)

R9.12

Ethos Capital

NAVPS @ Brait

share price

R6.65

Capital

Invested

R2.7bn

# of Portfolio

Companies

24

EV / EBITDA

(unlisted)

7.4x

Ethos Capital

all-in Brait

entry price

R7.99

Ethos Capital

NAVPS

R9.89

At 30 June 2020

* Ethos Capital’s unlisted

portfolio is valued at 4.6x

based at EC’s share price

Pro forma at 31 December 2019 – adjusted for Rights Issue and Brait investment

© Ethos | 13

3%

1% 1% 1%2% 2% 2%

4% 5%

6% 6%

8% 8%

9%

13%

29%

Other * MTN Chibuku Autozone New Look Twinsaver TymeBank Gammatek Primedia Synerlytic Kevro Vertice Premier Echotel Virgin ChannelVas

90% of total assets

The largest 10 assets constitute 90% of total assets

TOTAL ASSET CONTRIBUTION

53%40%

7%

South Africa

Rest of sub-Saharan Africa

International

© Ethos | 14

The majority of companies (by value) grew both revenue and EBITDA


250 246 292

5886 42

3

< -15% -15% to < 0% 0% to < 15% 15% and greater

Value - R'm Number

223

43

562 5484

3

7 1

< -15% -15% to < 0% 0% to < 15% 15% and greater

Value - R'm Number

LTM SALES GROWTH BY UNLISTED COMPANY

LTM EBITDA GROWTH BY UNLISTED COMPANY

(111.9)

(80.6)

(41.0)

(40.9)

(28.5)

(25.0)

(21.7)

(19.5)

10.5

16.9

27.7

146.8

Brait

Kevro

Primedia

Twinsaver

Other

Autozone

Gammatek

Eazi

MTN

Synerlytic

Echo

Vertice

ChannelVas

(603.0)

INVESTMENT RETURN

%

Change

35%

22%

11%

10%

(48%)

(64%)

(26%)

(55%)

(26%)

(56%)

(49%)

(49%)

(58%)

© Ethos | 15

Decrease in NAVPS and NAV since 30 June 2019

NAV MOVEMENT ANALYSIS

– Capital raising: NAVPS declined by R1.55 due as a result of the rights issue with R750m raised through the issuance of 100m shares

– EBITDA: the maintainable EBITDA of the unlisted portfolio companies (adjusted for acquisitions and fx) fell by 8% which resulted in a R0.41 per share decline in value

– EV/EBITDA multiple: the average EV/EBITDA of the unlisted portfolio reduced from 7.5x in June 2019 to 7.0x in June 2020, accounting for a R0.44 per share decline

– Net debt: whilst actual net debt was relatively flat, adjustments to account for accrued expenses during lockdown and working capital reduced values by R0.15 per share

– FX impact: the weaker US$/ZAR (R14.1 in June 2019 to R17.4 in June 2020) positively impacted Channel VAS’s EBITDA resulting in a R0.40 increase in NAVPS

– Listed valuations – this comprises Brait and MTN Zakhele Futhi listed shares both of which declined significantly (Brait 58% and MTN 48%) during the course of the year

NAVPS (Rand): BY VALUATION DRIVER NAV (R’millon): BY VALUATION DRIVER

The Ethos Capital NAV decreased from R1.8bn in June 2019 (pre-Rights Issue) to R1.7bn in June 2020, driven by the following factors:

11.34

6.65

0.08

0.40

(1.55)

(0.41)(0.44) (0.15)

(2.49)

(0.13)

June 19NAVPS

RightsIssue

Realisedgains

EBITDA Multiple Debt FXimpact

Listedand

other*

Netexpenses

June 20NAVPS

1,786 1,712

735

22 102

(106)(114)

(38)(640)

(35)

June 19NAV

RightsIssue

Realisedgains

EBITDA Multiple Debt FXimpact

Listedand

other*

Netexpenses

June 20NAV

* Brait, MTN, Chibuku and TymeBank

© Ethos | 16

Ethos Capital share price implies the following EV / LTM multiples

PORTFOLIO COMPANY IMPLIED VALUATIONS

4.2x

3.3x3.5x

5.4x 5.3x5.5x

5.2x5.4x

5.1x

2.8x

4.8x5.2x

1.5x

4.0x

5.4x

5.8x 9.0x 5.5x 10.5x 9.5x 9.0x 7.3x 11.4x 9.1x 11.7x 14.4x 11.1x 3.7x 9.8x 11.5x

4.6x

ChannelVas

Echotel Vertice Kevro Synerlytic Primedia Gammatek Twinsaver Autozone SterKinekor

Eazi Bevco Neopak Waco RTT

Fund VI / VII Ai Fund Mid Market Fund Implied

- - - - EV / EBIAT

average

EV/EBITDA

7.9x average

© Ethos | 17

The combined NAV of the top 2 assets exceeds EC’s market capitalisation

NAV COMPOSITION BY PORTFOLIO COMPANY

(1) Brait listed share price as at 30 June 2020 (R3.34), (2) Brait NAV as at 31 March 2020 of R8.27,

(3) Ethos Capital share price as at 25 September 2020 , (4) Consisting of Other investments of R196m less net liabilities of R180m

548

431

178

153

115

114 84

73 16

636

Channel Vas Brait listed value(1)

Echotel Vertice Kevro Synerlytic Primedia Gammatek Other Brait NAVincrease (2)

NAV (Brait at 30 June share price)

Attributable NAV (Brait at 30 June NAV)

47%

62%

Current marketcapitalisation (3)

(4)

© Ethos | 18

CHANNEL VAS UPDATE

Channel VAS is a leading provider of Airtime Credit Services (“ACS”) to prepaid mobile subscribers and has expanded into Micro Finance Services (“MFS”) leveraging

its existing credit scoring capability and access to data

29% 548m 1.52x 20%

% of Total Assets Value (Rm) TMB Ethos stake

LTM

PERFORMANCE

– Strong growth continued across all territories and most customers

• LTM revenue growth of 48% in ZAR

• ACS advances increased by 19% year on year in USD

• LTM EBITDA growth of 40% in ZAR

– Revenue growth a result of 12 new deployments and increased penetration of existing

deployments

IMPACT OF

COVID-19

– Business largely unaffected by COVID although impact on Nigerian economy has an indirect impact

on profitability (due to FX conversion)

– COVID had an impact on new deployments and marketing efforts

– Constant adjustment of credit scorecards to take account of the impact on consumer spend

– Innovative approach to mitigating potential currency risks in certain countries

OPERATIONAL

OUTLOOK

– Business continues to experience strong demand for its products

– Focused on further operational efficiencies and new product / customer deployments

– Early indications of positive progress in MFS

VALUATION

– LTM EBITDA increased 40% in ZAR, however adjustment made for potential future depreciation in

Naira / US$ resulted in maintainable EBITDA YoY growth of only 20%

– No change to EV / EBITDA multiple (same as Ethos entry multiple)

– No debt in the business, R22m of dividends received by Ethos during the year

20%15%

48%40%

Revenue EBITDA

YoY growth

US$ ZAR

423

548

2019 2020

Valuation change *

* 2019 adjusted for current year investment; dividends of R22m received during the year

© Ethos | 19

VIRGIN ACTIVE UPDATE

Virgin Active is one of the leading international health club operators and strives to provide customers with a combination of outstanding exercise experiences and a world

class digital offering

13% 243m n/a 10%


ITALY

– Current usage levels for clubs at 61% usage, higher at clubs opened first, lower in inner city gyms

– Active members are 14% below prior year with total membership numbers 10% lower as a result of

increase in members on freeze

AUSTRALIA

– Current like-for-like usages levels are at 87%; suburban clubs close to 100% usage, with inner city

clubs at c.50% as businesses work through their return to office strategies

– Active membership are 16% below prior year levels with total membership numbers 8% down

THAILAND &

SINGAPORE

– Opened all 8 clubs in Thailand and all 6 clubs in Singapore, current usage levels:

• Thailand clubs at 73% usage with 5% of membership on freeze

• Singapore clubs at 89% usage with 21% of members on freeze

– Overall active membership numbers for Thailand and Singapore are 13% and 29% down on prior

year with total membership numbers 12% and 18% down

UNITED

KINGDOM

– Opened 36 clubs (6 remain closed) - current usage levels are at 53% of the prior year

– Active membership numbers are 36% down on prior year due to higher members on freeze with total

memberships down 26% due to increase in terminations

SOUTH AFRICA

– Opened all clubs on 24 August, two clubs in Namibia and one in Botswana re-opened in June

– Still early days but usage has steadily increased to 37% of prior year levels with active membership

base 30% down however, total membership base down only 6%

– Contract structure of SA membership base remains a positive for Virgin Active

140

108

2019 2020

EBITDA change (GBPm)

897

422

2019 2020

Valuation (GBPm)

© Ethos | 20

ECHO UPDATE

Echo is a corporate Internet Service Provider, providing Information and Communications Technology (”ICT”) services through an aggregation of

third-party networks

9% 178m 1.12x 62%


LTM

PERFORMANCE

– Company continues to grow strongly with new client wins and additional contracts with existing

customers resulting in third party revenue growth of 20% in the SA business

– Investment in sales force paid off with the weighted sales pipeline increasing 37% YoY

– Focus remains on converting the pipeline to revenue and scaling the business to benefit from

operational leverage

IMPACT OF

COVID-19

– Echo has a broad range of customers across a number of industries

– To date the impact on the debtor book has been limited

– Integration of the Gondwana business has been impacted to some extent by the travel ban

STRATEGIC

OUTLOOK

– Demand for the company’s products and its focus on customer service has remained strong

– The Gondwana acquisition provides the business with a competitive pan SSA offering that

enables it to compete for business with larger regional customers

– Management continue to consider potential in-fill acquisitions in certain geographies

– Focus on driving operational leverage in the business as it continues scale up

VALUATION

– L-f-L third party Revenue growth of 20% YoY and a strong forward sales pipeline for the current year

– No long-term debt in the business

– R133m of capital injected to fund the Gondwana acquisition which completed in October 2019

– Core Echo valuation increased by 15%

20%

22%

Revenue Gross Profit

YoY growth

161

178

2019 2020

Valuation change *

* 2019 adjusted for current year investment

© Ethos | 21

PREMIER UPDATE

Premier is a leading South African FMCG manufacturer offering branded and private label solutions. The business has strong heritage brands in bread, maize meal, wheat

flour, feminine hygiene and sugar confectionary

8% 157m n/a 13%


OPERATIONAL

PERFORMANCE

– 12% revenue growth continued in Q1 FY21 (over prior year) driven by Milling (growth of 20%),

Baking (12%) and Grocery and International (3%)

– EBITDA growth of c.20% for Q1 FY21 (over prior year) driven by Milling, Baking and Grocery and

International

– Strong performance has continued into Q2 FY21

MARKET SHARE

– Bread market share of 23.5% (31 Mar 2020: 22.8%) across five brands

– Maize market share of 15.5% (31 Mar 2020: 16.2%) across its four regional brands

– Wheat share market share of 30.0% (31 Mar 2020: 26.1%)

– Sugar-based confectionery market share of 8.2% (31 Mar 2020: 7.7%)

– SA feminine hygiene products market share of 15.8% (31 Mar 2020: 17.4%)

OPERATIONAL

AND STRATEGIC

– Increased unemployment, consumer spend pressure and rising raw material costs require continued

focus on operating cost containment

– Covid-19 related costs of R43m mainly for transport, screening and additional labour costs

– Benefited from reduced fuel costs for distribution and production

– Management considering strategic in-fill acquisitions of complementary products

CASH

GENERATION

AND DEBT

– Strong cashflow generation, net third party debt of R2.2bn at the end of Q1 FY21

– Investment in working capital due to increased inventories and wheat price increases

– Beneficiary of lower base rates

12%

20%

Revenue EBITDA

Q1 21 growth

65

145

@ share price @ NAV

Valuation range

© Ethos | 22

VERTICE UPDATE

Vertice sells medical technology and supplies across a wide range of applications predominantly to support

emergency and critical procedures

8% 153m 1.25x 88%


LTM

PERFORMANCE

– Strong organic and acquisition-led growth over the past 12 months:

• Revenue up 73%

• EBITDA up 86%

– 3 bolt-on acquisitions of complementary products leveraging the same customer base and operating

platform

– Significant progress made on supplier, customer and product diversification

IMPACT OF

COVID-19

– COVID resulted in a slight slowdown in the revenue growth rate as elective procedures were delayed

– Likely to pick up again as COVID hospitalisations decrease

OPERATIONAL

OUTLOOK

– New product development and increasing use of data is enhancing the value-add aspect of the

business

– Additional bolt-on acquisitions to further extend the value-add / IT services component of the

business should result in further revenue growth

– Focus on adding complementary product offerings / services to the existing platform

VALUATION

– Maintainable EBITDA more than doubled - reduced slightly to account for COVID

– EV / EBITDA multiple largely flat despite larger, more diversified business

– Net incremental capital of R65m injected to fund acquisitions

126

153

2019 2020

Valuation change *

73%

86%

Revenue EBITDA

YoY growth

* 2019 adjusted for current year investments

© Ethos | 23

KEVRO UPDATE

Kevro is the largest supplier of corporate-branded clothing and promotional

products in South Africa

6% 115m 0.57x 29%


LTM

PERFORMANCE

– Significant underperformance in the past six months largely as a result of the company’s IT

integration project and distribution centre consolidation

• IT system issues have been resolved and the operational platform is now fully functional

• Distribution centres consolidated into one site resulting in significant operational and cost

efficiencies

– New management team has managed the change management process well

– Demand side remains strong with a significant reduction in the number of independents

IMPACT OF

COVID-19

– Impact of initial lockdown on supply chain particularly from China

– Supply side issues resolved and impact is now indirectly through impact on customer spend

OPERATIONAL

OUTLOOK

– Significant cost reduction program (c.14% of total cost base) will drive operational efficiencies

– New IT system and distribution centre efficiencies should improve operating performance and

customer service

– Management succession (replacement for interim CEO) has commenced

VALUATION

– Reduction in maintainable EBITDA (11% reduction)

– EV / EBITDA multiple decreased to reflect post COVID reality

– Increase in net debt as a result of COVID lockdown and operational issues

227

115

2019 2020

Valuation change *

* 2019 adjusted for current year acquisition

© Ethos | 24

SYNERLYTIC UPDATE

The Synerlytic group operates in subsets of the Testing, Inspection and Certification market and is one of the leading condition monitoring and fluid analysis specialists in

Africa (through WearCheck) and supplier of certified reference materials to mining laboratories across the world (through AMIS)

6% 114m 1.26x 89%


-3%

5%

Revenue EBITDA

YoY growth

104

114

2019 2020

Valuation change *

* 2019 adjusted for current year realisation

LTM

PERFORMANCE

– Solid operational performance with organic and acquisition-led growth in revenue

• Strong performance from AFS (recent acquisition) in WearCheck resulted in strong cross

selling and revenue growth

• Solid growth in the AMIS business

• Strategic changes in Set Point Labs business also showing early positive signs

– Recent SANAS accreditation likely to unlock new contract opportunities

– Strong cost focus resulted in 5% growth in maintainable EBITDA

IMPACT OF COVID-

19

– The business was impacted by COVID with many of its clients closed during the lockdown

– Business performance has picked up sharply since the lockdown restrictions eased

– Unlikely to be a material long term impact on the business (impact larger on smaller

competitors)

OPERATIONAL

OUTLOOK

– Operational changes and cost reductions will benefit the business as volumes normalize

to pre COVID levels

– Further in-fill acquisitions being assessed to leverage the platform

VALUATION

– Maintainable LTM EBITDA increased by 5% accounting for the impact of COVID

– EV / EBITDA multiple increased slightly

– Slight increase in net debt as a result of COVID

© Ethos | 25

PRIMEDIA UPDATE

Primedia is one of the leading South African broadcasting and outdoor advertising businesses

5% 84m 0.56x 24%


LTM

PERFORMANCE

– Operational performance significantly impacted by low GDP growth environment and the impact of

COVID on advertising spend

• Radio advertising spend fell 15% in LTM

• Outdoor advertising spend fell 22% in LTM

– Advertising spend has started to improve significantly post lockdown but still well below prior

years

IMPACT OF

COVID-19

– Very significant impact on general advertising spend across all media

– Radio adspend decreased 15% YTD (40% decrease in Q2 20) with Outdoor adspend falling 22%

YTD (c.50% in Q2 20)

– Will take some time for adspend to return to pre COVID levels

OPERATIONAL

OUTLOOK

– Significant focus on renewed line-ups in the talk radio stations to drive market share and audience

ratings

– Cost cutting across all divisions to drive operational efficiencies given top line pressure

– Changes to executive management at head office and divisional level

– Business remained cashflow generative throughout the lockdown period

VALUATION

– Maintainable EBITDA decreased by 21%

– EV / EBITDA multiple reduced by 15%

– Slight reduction in group net debt over past 12 months

-15%-22%

-40%

-50%

Radio Outdoor

Advertising spend change

YTD Q220

165

84

2019 2020

Valuation change

© Ethos | 26

Overview of other Ethos unlisted portfolio companies


– Leading distributor of mobile accessories and low technology products

– COVID impacted sales but new products and sales channels have underpinned recent performance

– Digital banking platform exclusively leveraging the Pick n Pay and Boxer store footprint

– Strong LTM growth in KPIs (>2m customers (+300%), 530k active accounts (+400%), strong transactional volume

growth, significant cost rationalisation), raising capital to fund growth aspirations

– Market leading provider of industrial equipment for working at height

– Impacted by COVID, significant cost saving initiatives, management changes and recent pick up in activity

– One of the largest emerging market MNOs (Ethos Capital’s investment through BEE vehicle MTN Zakhele Futhi)

– Decent growth in underlying EBITDA and focus on reducing group debt, share price has re-rated from lows

– Second largest manufacturer of tissue paper in South Africa in addition to other HPC products

– Strong demand drove significant growth in revenue and profit in the past twelve months

– Leading supplier of automotive parts to the retail and wholesale market in South Africa

– Turnaround strategy implemented 12 months ago yielding positive results despite difficult trading environment

4%

2%

1%

1%

2%

1%

% of

Total Assets

CO

NT

EN

TS

Executive summary

Liquidity analysis

Portfolio overview

Outlook4

1

3

2

© Ethos | 28

Sufficient liquidity to fund outstanding fund commitments

LIQUIDITY PROFILE

* Available liquidity = Cash plus Debt Facility less Net Investment outflows / Realisation inflows

3,245 3,108

(112)

137

2,728

460

32

Totalcommitments

Fee provision Netcommitments

Investedcapital

Base facility Treasuryshares

Commitmentgap

FY21 FY22 FY23 FY24

Realisations

Existing outflows

Available liquidity

CO

NT

EN

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Executive summary

Liquidity analysis

Portfolio overview

Outlook

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OUTLOOK FOR ETHOS CAPITAL

Significant uncertainty remains regarding the impact and longevity of COVID, particularly the effects of a second lockdown invarious jurisdictions

Underlying performance of most Portfolio Companies have rebounded strongly since the reopening of the South African economy which should reflect in positive underlying valuations

Ethos Capital has sufficient liquidity to meet its commitments however, continues to assess ways to unlock / realisevalue from its portfolio

The performance of Ethos Capital’s larger assets (by value contribution) were largely unaffected by the impact of COVID and continue to perform strongly

The board continues to focus on NAVPS accretive strategies and believes that share buybacks are an important part of that (liquidity permitting)

No new Fund commitments until Funds’ realisation strategies and shareholder distributions are demonstrated

DISCLAIMER

THE INFORMATION CONTAINED HEREIN IS PROVIDED FOR INFORMATIONAL AND DISCUSSION PURPOSES ONLY AND IS NOT, AND MAY NOT BE RELIED ON IN ANY MANNER AS, LEGAL, TAX OR INVESTMENT ADVICE OR AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY A LIMITED PARTNERSHIP INTEREST IN ANY ETHOS

FUNDS. A PRIVATE OFFERING OF INTERESTS IN THE FUNDS WILL ONLY BE MADE PURSUANT TO A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THE “OFFERING MEMORANDUM”), THE FUND’S LIMITED PARTNERSHIP AGREEMENT AND SUBSCRIPTION AGREEMENTS, WHICH WILL BE FURNISHED TO QUALIFIED INVESTORS ON A

CONFIDENTIAL BASIS AT THEIR REQUEST FOR THEIR CONSIDERATION IN CONNECTION WITH SUCH OFFERING AND WILL BE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN SUCH DOCUMENTS. THE INFORMATION CONTAINED HEREIN WILL BE QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OFFERING MEMORANDUM,

WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE INVESTMENT OBJECTIVE, TERMS AND CONDITIONS OF AN INVESTMENT IN THE FUNDS AND ALSO CONTAINS TAX INFORMATION AND RISK DISCLOSURES THAT ARE IMPORTANT TO ANY INVESTMENT DECISION REGARDING THE FUNDS. INTERESTS IN THE FUND WILL ONLY BE

OFFERED TO INVESTORS WHO (A) ARE “ACCREDITED INVESTORS” AS DEFINED IN REGULATION D UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, “QUALIFIED PURCHASERS” UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND “QUALIFIED CLIENTS” UNDER THE U.S. INVESTMENT ADVISERS ACT OF

1940,AS AMENDED; (B) WITHIN THE EUROPEAN ECONOMIC AREA WOULD FALL WITHIN THE CATEGORY OF "PROFESSIONAL CLIENT” AS THAT TERM IS DEFINED IN THE MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE 2014/65/EU; AND (C) WITHIN THE UNITED KINGDOM WOULD FALL WITHIN THE CATEGORY OF A “PROFESSIONAL CLIENT”

AS THAT TERM IS DEFINED IN THE MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE 2014/65/EU.

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THIS DOCUMENT DOES NOT CONSTITUTE AN INVITATION OR INDUCEMENT OF ANY SORT TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN INVITATION OR INDUCEMENT IS NOT PERMITTED OR WHERE WE ARE NOT QUALIFIED TO MAKE SUCH INVITATION OR

INDUCEMENT. THIS DOCUMENT IS INTENDED TO BE COMMUNICATED ONLY TO SUCH PERSONS AS WE ARE LEGALLY ABLE TO SEND IT AND WHO ARE LEGALLY ABLE TO RECEIVE IT IN THEIR JURISDICTION OF RESIDENCE.

NO PERSON HAS BEEN AUTHORISED TO MAKE ANY STATEMENT CONCERNING THE FUNDS OTHER THAN AS SET FORTH IN THE OFFERING MEMORANDUM AND ANY SUCH STATEMENTS, IF MADE, MAY NOT BE RELIED UPON. THE INFORMATION CONTAINED HEREIN MUST BE KEPT STRICTLY CONFIDENTIAL AND MAY NOT BE REPRODUCED

OR REDISTRIBUTED IN ANY FORMAT WITHOUT THE APPROVAL OF THE FUNDS. NOTWITHSTANDING THE FOREGOING, EACH INVESTOR AND PROSPECTIVE INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT THEREOF) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE TAX

TREATMENT AND TAX STRUCTURE OF THE FUNDS AND ITS INVESTMENTS AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO SUCH INVESTOR OR PROSPECTIVE INVESTOR RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE, PROVIDED, HOWEVER, THAT SUCH

DISCLOSURE SHALL NOT INCLUDE THE NAME (OR OTHER IDENTIFYING INFORMATION NOT RELEVANT TO THE TAX STRUCTURE OR TAX TREATMENT) OF ANY PERSON AND SHALL NOT INCLUDE INFORMATION FOR WHICH NON DISCLOSURE IS REASONABLY NECESSARY IN ORDER TO COMPLY WITH APPLICABLE SECURITIES LAWS.

AN INVESTMENT IN THE FUNDS WILL INVOLVE SIGNIFICANT RISKS, INCLUDING THE LOSS OF THE ENTIRE INVESTMENT, DUE TO, THE NATURE OF ITS INVESTMENTS. THE FUNDS WILL BE ILLIQUID, AS THERE IS NO SECONDARY MARKET FOR INTERESTS IN THE FUNDS AND NONE IS EXPECTED TO DEVELOP. RESTRICTIONS APPLY TO

TRANSFERS AND WITHDRAWALS OF INTERESTS IN THE FUNDS, AND THE INVESTMENT PERFORMANCE OF THE FUNDS MAY BE VOLATILE. THE FEES AND EXPENSES CHARGED IN CONNECTION WITH AN INVESTMENT IN THE FUNDS MAY BE HIGHER THAN THE FEES AND EXPENSES OF OTHER INVESTMENT ALTERNATIVES AND MAY OFFSET

PROFITS. BEFORE DECIDING TO INVEST IN THE FUNDS, PROSPECTIVE INVESTORS SHOULD READ THE OFFERING MEMORANDUM AND PAY PARTICULAR ATTENTION TO THE INVESTMENT CONSIDERATIONS CONTAINED IN THE OFFERING MEMORANDUM. INVESTORS SHOULD HAVE THE FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT

THE RISK CHARACTERISTICS OF THE FUNDS’ INVESTMENTS.

IN CONSIDERING ANY PERFORMANCE DATA CONTAINED HEREIN, YOU SHOULD BEAR IN MIND THAT PAST OR TARGETED PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL ACHIEVE COMPARABLE RESULTS OR THAT TARGET RETURNS WILL BE MET. IN ADDITION, THERE

CAN BE NO ASSURANCE THAT UNREALISED INVESTMENTS WILL BE REALISED AT THE VALUATIONS SHOWN AS ACTUAL. REALISED RETURNS WILL DEPEND ON, AMONG OTHER FACTORS, FUTURE OPERATING RESULTS, THE VALUE OF THE ASSETS AND MARKET CONDITIONS AT THE TIME OF DISPOSITION, ANY RELATED TRANSACTION

COSTS, AND THE TIMING AND MANNER OF SALE, ALL OF WHICH MAY DIFFER FROM THE ASSUMPTIONS ON WHICH THE VALUATIONS CONTAINED HEREIN ARE BASED. THE INTERNAL RATE OF RETURNS (THE “IRRS”) ARE PRESENTED ON A “GROSS” BASIS DO NOT REFLECT ANY MANAGEMENT FEES, CARRIED INTEREST, TAXES AND

ALLOCABLE EXPENSES BORNE BY INVESTORS, WHICH IN THE AGGREGATE MAY BE SUBSTANTIAL. ALL IRRS PRESENTED ARE ANNUALISED AND CALCULATED ON THE BASIS OF MONTHLY INVESTMENT INFLOWS AND OUTFLOWS. NOTHING CONTAINED HEREIN SHOULD BE DEEMED TO BE A PREDICTION OR PROJECTION OF FUTURE

PERFORMANCE OF THE FUNDS.

PROSPECTIVE INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND EVALUATION OF THE INFORMATION CONTAINED HEREIN. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISER AND TAX ADVISER AS TO LEGAL, BUSINESS, TAX AND RELATED MATTERS CONCERNING THE INFORMATION

CONTAINED HEREIN.

EXCEPT WHERE OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED HEREIN IS BASED ON MATTERS AS THEY EXIST AS OF THE DATE OF PREPARATION OF THIS DOCUMENT AND NOT AS OF ANY FUTURE DATE. THE INFORMATION PROVIDED HEREIN WILL NOT BE UPDATED OR OTHERWISE REVISED TO REFLECT INFORMATION

THAT SUBSEQUENTLY BECOMES AVAILABLE, OR CIRCUMSTANCES EXISTING OR CHANGES OCCURRING AFTER THE DATE HEREOF.

CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT CONSTITUTES “FORWARD-LOOKING STATEMENTS, ”WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD- LOOKING TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “EXPECT,” “ANTICIPATE,” “TARGET,” “PROJECT,” “ESTIMATE,” “INTEND,” “CONTINUE” OR “BELIEVE,” OR THE

NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. DUE TO VARIOUS RISKS AND UNCERTAINTIES, ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. DUE TO VARIOUS RISKS AND UNCERTAINTIES,

INCLUDING THOSE SET FORTH UNDER “RISK FACTORS” AND“ POTENTIAL CONFLICTS OF INTEREST” IN THE OFFERING MEMORANDUM, ACTUAL EVENTS OR RESULTS OR THE ACTUAL PERFORMANCE OF THE FUND MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS.

ETHOS, THE FUND AND ITS GENERAL PARTNER AND THEIR RESPECTIVE AFFILIATES BELIEVE THAT SUCH STATEMENTS AND INFORMATION ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS AND INFORMATION ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS

CAN AND WILL DIFFER FROM THOSE PROJECTED. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS AND INFORMATION.

A PRIVATE OFFERING OF INTERESTS IN THE FUNDS WILL ONLY BE MADE PURSUANT TO A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND THE FUNDS’ SUBSCRIPTION DOCUMENTS, WHICH WILL BE FURNISHED TO QUALIFIED INVESTORS ON A CONFIDENTIAL BASIS AT THEIR REQUEST FOR THEIR CONSIDERATION IN

CONNECTION WITH SUCH OFFERING. THE INTERESTS IN ANY FUTURE FUND OR INVESTMENT VEHICLE SPONSORED BY ETHOS WILL NOT BE APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY OF ANY U.S. STATE, BY THE U.S. SECURTIES AND EXCHANGE COMMISSION, OR ANY SIMILAR AUTHORITY IN ANOTHER

JURISDICTION, AND ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENCE.

CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT IS BASED ON OR DERIVED FROM INFORMATION PROVIDED BY INDEPENDENT THIRD-PARTY SOURCES. ETHOS BELIEVES THAT SUCH INFORMATION IS ACCURATE AND THAT THE SOURCES FROM WHICH IT HAS BEEN OBTAINED ARE RELIABLE. ETHOS CANNOT GUARANTEE THE

ACCURACY OF SUCH INFORMATION, HOWEVER, AND HAS NOT INDEPENDENTLY VERIFIED THE ASSUMPTIONS ON WHICH SUCH INFORMATION IS BASED.

THIS DOCUMENT IS BEING PROVIDED ON A CONFIDENTIAL BASIS. ACCORDINGLY, IT MAY NOT BE REPRODUCED IN WHOLE OR IN PART, AND MAY NOT BE DELIVERED TO ANY PERSON WITHOUT ETHOS’ PRIOR WRITTEN CONSENT.

ETHOS CAPITAL INVESTOR PRESENTATION...2020/02/01 · –Ethos Capital investment into Brait of...

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