Fairfax Africa Holdings Corporation Annual Meeting: April 25, 2018

Transcription

1 Fairfax Africa Holdings Corporation Annual Meeting: April 25, 2018 Note: All financial disclosure in this presentation is, unless otherwise noted, in US$

2 Forward Looking Statements This Presentation has been prepared for informational purposes only from information supplied by Fairfax Africa Holdings Corporation ( Fairfax Africa or the Company ) and from third-party sources indicated herein. Such third-party information has not been independently verified. The Company makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information. Any graphs, tables or other data demonstrating the historical performance of Fairfax Africa or its affiliates contained in the presentation are intended only to illustrate past performance and are not necessarily indicative of the future performance of Fairfax Africa or its affiliates. Any statements made by us or on our behalf may constitute forward-looking statements or forward-looking information and are made pursuant to the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 and comparable provisions of Canadian securities laws. The words believe, anticipate, project, expect, plan, intend, predict, estimate, will likely result, will seek to or will continue and similar expressions identify forward-looking statements. These forward-looking statements relate to, among other things, our plans and objectives for future operations and underwriting profits. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We are under no obligation to update or alter such forward-looking statements as a result of new information, future events or otherwise, except as may be required by applicable laws. Forward-looking statements are based on the opinions and estimates of the Company as of the date of this Presentation, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to the following factors: taxation of the Company and its subsidiaries; substantial loss of capital; long-term nature of investment; limited number of investments; geographic concentration of investments; potential lack of diversification; financial market fluctuations; pace of completing investments; control or significant influence position risk; minority investments; ranking of Company investments and structural subordination; follow-on investments; prepayments of debt investments; risks upon dispositions of investments; bridge financings; reliance on key personnel; effect of fees; performance fee could induce Fairfax to make speculative investments; operating and financial risks of investments; allocation of personnel; potential conflicts of interest; employee misconduct at the portfolio advisor could harm the Company; valuation methodologies involve subjective judgments; lawsuits; foreign currency fluctuation; derivative risks; unknown merits and risks of future investments; resources could be wasted in researching investment opportunities that are not ultimately completed; investments may be made in foreign private businesses where information is unreliable or unavailable; illiquidity of investments; competitive market for investment opportunities; use of leverage; investing in leveraged businesses; regulation; investment and repatriation restrictions; aggregation restrictions; restrictions relating to debt securities; pricing guidelines; emerging markets; corporate disclosure, governance and regulatory requirements; legal and regulatory risks; volatility of the African securities markets; political, economic, social and other factors; governance issues risk; African tax law; changes in law; exposure to permanent establishment, etc.; enforcement of rights; smaller company risk; due diligence and conduct of potential investment entities; Asian economic risk; reliance on trading partners risk; natural disaster risks; government debt risk; and economic risk. Additional risks and uncertainties are described in the Company s Annual Information Form which is available on SEDAR at and on the Company s website at These factors and assumptions are not intended to represent a complete list of the factors and assumptions that could affect the Company. These factors and assumptions, however, should be considered carefully. The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the reported amounts of revenues and expenses and the calculation of the Net Asset Value of the Company during the reporting periods. Financial information provided throughout this presentation is prepared in accordance with IFRS. 2

3 Fairfax Africa Board of Directors Prem Watsa Chairman Christopher Hodgson Lead Director Richard Okello Independent Paul Rivett Vice Chairman Quinn McLean Ndidi Okonkwo Nwuneli Independent Michael Wilkerson Chief Executive Officer Hisham Ezz Al-Arab Independent Louis von Zeuner Independent 3

4 Pactorum Neil Holzapfel Partner Trent Hudson Partner Bongani Chabala Senior Analyst Investing Experience 15 years 13 years 4 years 4

5 What is Fairfax Africa? An investment holding company focused on making outstanding longterm returns through value investments in African businesses Focus on conservative, long term value-oriented investing across Africa Unique opportunity to co-invest with Fairfax Financial Holdings (FFH) in Africa Alignment of interest FFH s long-term investment of over $300 million in FAH Full flexibility and benefit of a permanent capital company with TSX listing for liquidity 5

6 Africa: Compelling Investment Destination Rapid growth Attractive demographic and urbanization trends Emergence Scarcity of capital Supply/demand imbalance across sectors 6

7 Fairfax Africa Holdings Corporation (FAH) (US$ millions, except per share data) Dec. 31, 2017 Book Value per Share $10.21 Earnings per Share $0.54 Closing Share Price $14.16 Revenue $31.9 Net Earnings $23.5 Investments $339.1 Total Assets $669.1 Common shareholders equity $516.7 Shares outstanding (millions)

8 Contribution by Investment Platform Invested Capital at Cost (1) Invested Capital by Currency Permitted Investments & Cash 53.7% 23.6% Financial Services ZAR 19% 18.2% Food & Agriculture USD 81% 0.6% Other 3.0% Education 0.7% Infrastructure (1) Invested capital through March 2018 as percentage of Total Assets at December 31,

9 Summary of Investments (US$ millions) 2017: Amount Invested AFGRI $75 Atlas Mara 158 Nova Pioneer 20 Infrastructure Investments 4 Total Dec. 31, Pro-Forma 2018 to Date: Philafrica Foods 28 AFGRI Rights Issue 19 Total March 31, 2018 $304 Available for April 2018 $188 9

10 AFGRI

11 AFGRI Leadership AFGRI Philafrica Chris Venter Chief Executive Officer Roland DeCorvet Chief Executive Officer Rivasha Maharaj Chief Financial Officer Edouard N GO Chief Financial Officer 11

12 AFGRI Business Overview Africa s leading agricultural services and food processing company core focus on grain commodities One of Africa s largest grain management companies Storage capacity of more than 5 million tonnes Based in South Africa, operations in 17 African countries Leading non-bank financial services provider to agricultural sector Africa s leading farming equipment dealer through John Deere brand Philafrica: pan-african foods processing business with new management 12

13 AFGRI Investment Rationale Vast market potential Africa has 60% of the world s remaining arable land Opportunities for import substitution Established infrastructure Impressive network of 69 silos and multiple bunkers and warehouses in South Africa Presence in 17 African countries and Australia Strong management team Barriers to entry One of Africa s few large companies with core grain management focus 100-year history and recognizable brand Attractive valuation 13

14 AFGRI Transaction Initial Investment Initial investment of $75 million in February 2017 for 42.2% of the company Valuation represented 8.4x EBITDA (comparables: 10x+) 1.17x Book Value Subsequent Subscribed for ZAR218 million ($19 million) in Rights Offering, increasing equity ownership to 43.8% Plan for partial spin-out of Philafrica Foods in 2018 ($28 million) Value at Dec. 31, 2017: $88.3 million 14

15 AFGRI Financial Summary (ZAR millions) Income Statement Fiscal Years Ending 31 March, CAGR E (15-18E) Unaudited Revenue R8,701 R10,219 R11,254 R12, % EBITDA Net Earnings (97) Balance Sheet Total Assets R8,583 R8,261 R8,678 R11, % Shareholders Equity 1,270 1,156 1,017 3, % 15

16 Atlas Mara

17 Atlas Mara Leadership Board Management Bob Diamond Chairman John Staley Chief Executive Officer Amadou Raimi Chairman Audit & Risk Committee Beatrice Hamza Bassey General Counsel Richie Boucher Chairman Remuneration Committee Mike Christelis Group MD, Markets & Treasury Eduardo C. Mondlane, Jr. Chairman Nomination Committee Kenroy Dowers Chief Financial Officer 17

18 Atlas Mara Business Overview Sub-Saharan African financial services group founded and listed on the London Stock Exchange in 2013 Provides commercial banking, markets and treasury, and FinTech solutions for corporate and retail clients Broad footprint: Operates and controls banks in six countries (Botswana, Mozambique, Rwanda, Tanzania, Zambia and Zimbabwe), plus 48% noncontrol position in Nigeria, Africa s largest banking market outside South Africa 18

19 Atlas Mara Investment Rationale Deep value opportunity Diversified footprint in attractive banking markets Long-term vision of creating pan-african financial services platform High growth potential in African financial services sector broadly Entry point into attractive high-growth Nigerian market 19

20 Atlas Mara Transaction Acquired 42.4% of the company for net cash consideration of $155.8 million in August 2017 Enabled Atlas Mara to increase stake in UBN from 31% to 48% for $130 million through discounted rights offering and private market purchase UBN share price increased 90% from rights offering price to December 31, % stake now valued at $242 million (1) Acquired an additional 0.9% in December 2017, bringing total net cash investment to US$158.2 million and ownership to 43.3% Initial investment made at attractive valuation representing 0.33x book value and a 77.5% discount to Atlas Mara s IPO price (1) As at April 20,

21 Atlas Mara Countries Union Bank of Nigeria: Nigeria 2,753 Employees 679 ATMs 314 Physical Locations BancABC: Botswana, Mozambique, Rwanda, Tanzania, Zimbabwe 1,744 Employees 259 ATMs 135 Physical Locations Banque Populaire du Rwanda: Rwanda 996 Employees 106 ATMs 192 Physical Locations 21

22 Atlas Mara Financial Summary (US$ millions, except per share data) Fiscal Years Ending 31 Dec., CAGR (15-17) Income Statement Revenue $205.1 $241.7 $ % Net Earnings % EPS % Balance Sheet Total Assets $2,452.1 $2,757.1 $3, % Total Equity % BVPS

23 Nova Pioneer

24 Nova Pioneer Leadership Chinezi Chijioke Chief Executive Officer Chris Khaemba Director Damany Gibbs Chief Financial Officer Dai Ellis Director Oliver Sabot Managing Director Ali Sweet Chief Talent Officer 24

25 Nova Pioneer Business Overview Nova Pioneer is a pan-african, for-profit education platform for Africa s middle class Offers preschool through secondary education with campuses in Kenya and South Africa and c. 2,200 total students Rapidly growing company with world-class management team 25

26 Nova Pioneer Investment Rationale Vast demographic opportunity Strong competitive position in high-growth industry Inelastic demand for African private education; high quality product offering Strong management team of proven industry operators Platform scaling opportunity with potential for follow-on investments as company successfully scales 26

27 Nova Pioneer Transaction $20 million in secured debentures with interest rate of 20% 2 million warrants; assuming exercise of 100% would result in 9.2% equity ownership 27

28 Nova Pioneer Financial Summary (US$ millions) Fiscal Years Ending 31 Dec., YoY Income Statement Revenue $2.0 $ % Net Loss (4.6) (3.1) - - Balance Sheet Total Assets % Shareholders Deficit - - (1.5)

29 Philafrica

30 Philafrica Overview Created out of AFGRI s legacy foods business as a separate scalable platform to capitalize on opportunity in the Foods sector across Africa Owns and operates maize mills, wheat mills, an oilseed plant, and animal feed manufacturing plants in South Africa; integrated poultry operations in Mozambique, and a pan-african cassava processing business In contract to acquire two businesses: snacking company and bakery in South Africa Vision is to transform the lives of millions of Africans through food processing in Africa 30

31 Philafrica Business Segments (ZAR millions) FY17 Revenue Description Animal Feeds R2,810 Converts raw materials into balanced feed for animal production Milling R1,062 Industrial milling of yellow corn and wheat flour Oils R1,142 Oilseed crushing, extraction and refining plant for human and animal consumption Total R5,013 31

32 Philafrica Investment Rationale High-growth company with deep pipeline of attractively valued food opportunities in key African markets Strong, experienced leadership under Roland Decorvet Seasoned industry veteran Former CEO of Nestlé China, Nestlé Pakistan and Nestlé Switzerland Nimble, vertically-integrated business model enables efficiencies and drives growth 32

33 Philafrica Recent Developments Pakworks: Snacking business; PepsiCo s largest co-manufacturer in Africa Signed agreement to acquire 60% at 5.0x EBITDA; awaiting regulatory approval Offers Philafrica crucial strategic relationship for the expansion of its foods business in Africa Sunshine Bakery: Cash-flowing bakery business in South Africa Signed agreement to acquire 51% at 7.2x EBITDA Strong margins, inelastic demand, and recognized brand in South Africa Recently completed acquisitions in poultry (Mozambique) and cassava processing (Ghana and Mozambique) 33

34 Philafrica Transaction Bridge loan extended on interim basis in advance of expected equity issue by Philafrica ZAR330mm (c. $28mm) convertible bridge facility entered into on February 28, 2018 Expected rights offering to existing AFGRI shareholders later in 2018 Priced to 10% discount to value 34

35 Looking Forward

36 Positive Momentum Leadership Transitions Rand Strengthening Angola ZAR/USD 12 South Africa 13 Zimbabwe Jan. Mar. June Sept. Dec

37 Attractive Valuation Dynamics 27.9x Median Transaction P/E Multiple 22.7x 19.1x 15.6x North America & Europe Latin America SE Asia Africa Source: S&P Capital IQ. 2,369 disclosed transaction values above $100 million between 2014 and

38 Focus Sectors & Investment Themes Food & Agriculture Sectors Financial Services Materials & Infrastructure Energy Import substitution plays Themes Supply-demand gaps (e.g. infrastructure, energy, services) Technology leap-frog (e.g. telecoms, mobile banking) Emerging middle class consumer 38

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