Stellar Capital Partners Limited Results: Year ended 30 November 2016
Forward-looking statements and disclaimer This presentation contains certain forward-looking statements. These forward-looking statements are based on current information and expectations, and involve a number or risks and uncertainties. Although Stellar Capital believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to changes in economic and market conditions, changes in regulatory environment, fluctuations in security prices and exchange rates, and business and operational risk management. Stellar Capital is under no obligation to update these statements once it has been posted or released. The information contained herein is provided for general information purposes only. This information does not constitute a solicitation, recommendation, guidance or proposal, and the service provided is not intended nor does it constitute financial, tax, legal, investment or other advice. Whilst reasonable steps are taken to ensure the accuracy and integrity of information contained herein, Stellar Capital accepts no liability or responsibility whatsoever if any information is, for whatever reason, incorrect. Stellar Capital further accepts no responsibility for any loss or damage that may arise from reliance on information contained herein. 2
About us • Stellar Capital Partners Limited (“ Stellar Capital ”, “the Company ”, “us” , “we” ) is a JSE Main Board listed investment holding company (JSE ticker: SCP ) • Stellar Capital’s R2.5bn asset base comprises 6 financial services investments, 3 industrial investments and 2 disruptive technology investments • At establishment, in order to build scale and introduce Dr Christo Wiese as an anchor shareholder, we acquired various non- core assets from the Wiese family in exchange for new Stellar Capital shares • Stellar Capital has now successfully exited these initial non-core investments, raised new capital and repositioned the portfolio with a strong focus on cash generative, annuity-based business within the financial services portfolio and Amecor (Industrials). The remaining industrial investments, Torre Industries and Tellumat, provide considerable upside potential to the portfolio as the economy recovers • The transition of the portfolio from the legacy asset base to the current portfolio of financial services and industrial assets, provides Stellar Capital with a more focussed investment strategy • The Company’s focus remains to build out each investment in the portfolio through a combination of organic and inorganic initiatives. We want to develop each asset such that it: • has scale in terms of its profitability and business activities; and • is a quality asset in terms of its management team, its ability to generate cash and its growth prospects 3
Significant milestones 2013 2014 2015 NAV: R0,22bn NAV: R0,19bn NAV: R1,88bn A process was initiated to liquidate the remaining non-core assets, build the Stellar Capital was core assets and focus the portfolio on annuity officially established in income businesses, with January 2015 with a a dual focus on the portfolio investment SCP team identified an industrial and financial value of R532m opportunity to convert services sectors the cash-shell into an In November 2015, R1bn investment holding SCP team conducted an was raised by way of a extensive investigation company by rights issue and into the performance and consolidating a number convertible preference of sub-scale and illiquid viability of struggling ICT share issue assets held by Christo group, ConvergeNet Wiese and other vendors Holdings Limited, and commenced a process to dispose of all operating subsidiaries and close the head office 4
Significant milestones (cont.) 2016 NAV: R1,77bn Completed the acquisition of Amecor Announced the acquisition of a strategic investment Launched a in Prescient mandatory offer for Holdings Torre Industries at a Partnered with NAV accretive Masimong valuation and Technologies and Establishment of acquired outright completed a 51.1% Stellar Credit, fund control of this key BEE transaction for manager of Stellar asset Tellumat Specialised Lending and the Inyosi Supplier Development and Enterprise Development Funds 5
Investment strategy • Stellar Capital’s investment strategy is to: • develop a scalable portfolio of strategic or controlling interests in high quality companies operating in the financial services and industrial sectors; • apply a hands-on investment approach, in order to assist management teams and to provide strategic input, without assuming direct operational responsibility; and • apply a flexible investment approach relating to the timing and duration of investments • Stellar Capital’s investment focus is to: • hold a combination of strategic and controlling equity investments for capital growth as its primary objective; and • earn high levels of current income from dividends and a credit investment portfolio as a secondary objective • Stellar Capital’s geographic exposure comprises: • Stellar Capital has initially invested in South African based investments with focused international operations, but over time intends to invest in foreign based investments which may or may not have established operations within South Africa 6
Investment strategy (cont.) • Quantitative and qualitative targets : • We seek a minimum 15% p.a return on NAV over any rolling three year period. The re-weighting of the portfolio into financial services and annuity-based industrial assets during 2016 and 2017 should enable consistent attainment of this target going forward • We run the portfolio with a lean recurring cost base in relation to NAV, which even at the current relatively small size, has been achieved since establishment at less than 1% of NAV • We will have an active dividend policy that supports both the business strategy and optimal shareholder returns 7
Investment portfolio – Financial Services Financial Services Investment Specialty Finance Management 100% 100% 50% Up to 49,9% 100% 60% Investment: R89,4 Investment: Investment: R5,7 Investment: Up Investment: Investment: R7,9 million at 30 R29,6 million at million at 30 to R713 million R457,8 million at million at 30 November 2016 30 November November 2016 (pending) 30 November November 2016 2016 (equity) (equity) 2016 Valuation underpinned Local AUM of Third party by liquid NAV Efficiency Loan book at R77 billion, AUA Return: R80,2 AUM: R300 measures R38,5 million of R83 billion, million interest million in SSL Stable investment yielding results, yielding 22% per offshore AUA of and dividends and R160 million team and significantly capital structure annum €673 million (annualised post in Inyosi improved investment under review tax yield of 16%) performance Strategy to grow Strongly cash Strategy to build Significant IT to R100 million+ generative with Reduced to to R1 billion+ Platform for spend to book over next 18 annuity income R300m post third party AUM alternative investment enhance months profile reporting date over 24 months products capabilities 8
Investment portfolio – Industrials and Disruptive Opportunities Industrials Disruptive 100% 2% 55,62% 48,9% 2% Investment: R709,4 Investment: R359,7 Investment: R239,2 million at 30 million at 30 million at 30 November November 2016 November 2016 2016 (equity and pref) Highly accretive Normalised EBITDA Experienced significant disposal of Kanu exceeded budget by execution delays in Equipment 19% (H1 FY2017) FY16 exacerbated by halt of government set- Trading improving, Strong cash flow top box migration albeit off a low generation, ungeared resulting in EBITDA base. Outcome of capital structure R17,1 million (R2015: strategic review R34.9 million) pending Significant annuity revenue base, low Strong EBITDA working capital contribution by Air requirement Traffic Management 9
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