Quarterly Update

QUARTERLY UPDATE

Ethos Capital offers shareholders long-term capital appreciation by directly and indirectly investing in a diversified portfolio of mainly unlisted private equity type investments that are managed by Ethos Private Equity (Pty) Limited (“Ethos”).  Set out below is an updated net asset value (“NAV”) statement for the quarter ended 31 March 2017, as well as an update on the investment portfolio and the progress of its various strategic initiatives.

Investment Portfolio and NAV

(1)   R550 million commitment (will increase to R900 million at final close) into Ethos Mid Market Fund I (B) Partnership (“Ethos MMF 1”)

(2)   R134 million commitment into Ethos Fund VI (Jersey), L.P. (“Ethos Fund VI”)

Ethos Capital’s underlying NAV increased to R10.11 per share as at 31 March 2017.  This was driven by the return on Temporary Investments and an increase in the valuations of the underlying portfolio companies which maintained positive growth in aggregate sales and EBITDA over the reporting period despite difficult macroeconomic conditions.

As at 31 March 2017, the average EBITDA valuation multiple that was used to determine the enterprise value of each portfolio company was 6.9x and the average Debt to EBITDA ratio was 2.8x.  

Investment activity in the quarter 

During the three months to 31 March 2017, Ethos Capital invested R14.5 million and R1.3 million into Ethos MMF 1 and Ethos Fund VI, respectively.  These proceeds were invested into the Twinsaver Group to fund its acquisition of Validus Medical and the expansion of its production facilities. 

Recent Investment activity 

Post the quarter-end, Ethos Fund VI completed the acquisition of Little Green Beverages Proprietary Limited, a bottler and distributor of non-alcohol beverages in South Africa; Ethos Capital’s share of the investment was R5.5 million. 

Both Ethos MMF1 and Ethos Fund VI have a number of new and follow-on transactions in the pipeline.  The Ethos MMF 1 Investment Committee has given final approval for two new investments which would result in a total direct and indirect investment by Ethos Capital of approximately R325 million.  These transactions are close to completion; however, there can be no certainty that these transactions will be completed. 

Furthermore, at the Ethos Capital board meeting in March, the board approved potential direct investments alongside these Funds of an additional R400 million.

Commitments 

At 31 March 2017, Ethos Capital has total commitments of R684 million (38% of NAV) and net invested capital (including unfunded guarantees) of R382 million (21% of NAV).  

Ethos MMF 1 Fund continues to successfully attract investors in its fund raising programme.  Ethos Capital’s commitment to the Fund will increase from R550 million to R900 million on final close, which is anticipated to be within the next few months.  

Ethos Mezzanine Partners Fund 3 was formally launched on 15 November 2016; fund raising is progressing well and the first close is expected soon.  The Ethos Capital commitment to this Fund is intended to be R320 million.