NORSAD FINANCE Investing in sustainable enterprise growth Investing
NORSAD FINANCE Investing in sustainable enterprise growth Investing in Sustainable Enterprise Growth 1 www. norsadfinance. com PAGE
ABOUT We are a regional private credit firm offering medium to long-term risk capital to mid-market growth companies across Southern Africa. We provide tailor-made debt solutions to profitable businesses and commercially viable projects that deliver substantial impact VISION To be acknowledged as a preferred impact investor providing flexible and customised financing solutions MISSION To be the premier provider of customised longer-term risk capital to Southern African companies and financial services providers that are financially, socially and environmentally sustainable Investing in Sustainable Enterprise Growth PAGE 2
OUR STORY o Our Background o Our Shareholders o Geographic Footprint www. norsadfinance. com
OUR BACKGROUND We have a rich history spanning 30 years of investing within Southern Africa • With a history spanning almost 30 years, Norsad was first established in 1990, operating as a multilateral Agency based in Lusaka, Zambia and a DKK 200 million (USD 33. 5 m) Fund based in Denmark • In 2011, Norsad Finance was incorporated in Botswana and is International Financial Services Centre (IFSC) accredited • We have invested over USD 350+ million in more than 150+ companies • Norsad Finance has offices in Botswana and South Africa Investing in Sustainable Enterprise Growth PAGE 4
OUR SHAREHOLDERS We have Nordic and Southern African institutional shareholders FINNFUND FINLAND TIB TANZANIA SWEDFUND SWEDEN EDF MALAWI NORFUND NORWAY DBZ ZAMBIA IGEPE MOZAMBIQUE IFU DENMARK IDBZ ZIMBABWE BDA ANGOLA DBN NAMIBIA CEDA BOTSWANA Investing in Sustainable Enterprise Growth enidc ENIDC e. SWATINI LPB LESOTHO SIC MAURITIUS PAGE 5
GEOGRAPHIC FOOTPRINT Our principal market is the 16 -member Southern African Development Community (SADC) region SADC Member states: Angola, Botswana, Comoros, DRC, e. Swatini, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania, Zambia and Zimbabwe We can also provide financing beyond our principal markets to SADC domiciled companies expanding outside the region within sub Saharan Africa. SADC Regional Economic Community • • 16 Countries Combined population of 300 million people Combined GDP of USD 700 billion (30% of Africa’s GDP) Combined land area of ~10 million sq. km (30% of Africa) • • • Investing in Sustainable Enterprise Growth Average urbanisation of 30% Countries are members of other Regional Economic Communities such as EAC, SACU and the Common Monetary Area (CMA) Commodity and Agriculture driven economies PAGE 6
WHY US o Who We Are o Our Unique Value Proposition o Impact Investment www. norsadfinance. com
WHO WE ARE We are a regional bespoke stretch debt and mezzanine finance solutions firm with an established track record, strong capital base and reputable shareholders Pioneers with a solid track record • • Only regional pure-play customized debt & mezzanine player within the SADC region 30 -year track record having invested ~ USD 350 m in 150+ companies Regional experienced team with diverse background and expertise Established regional partnership network Tailor-made financial solutions and complementary finance • • Bespoke solutions to match the cashflow generation capabilities of the client/project Partnership capital complementary to senior debt and equity Solutions for companies that have reached an inflexion point in their growth cycle Debt layered with mezzanine instruments Reputable shareholders, Strong capital base and impact focused • • Permanent Capital Vehicle (PCV) Nordic (Norfund, Swedfund, IFU & Finnfund) and SADC DFI shareholders On balance sheet investment activities using predominantly equity capital Investments which create impact in the communities they operate Investing in Sustainable Enterprise Growth PAGE 8
OUR UNIQUE VALUE PROPOSITION We are truly African Affinity Easy to work with and keep our promises. We are professional, pragmatic and we listen Partnership We have an established regional partnership network through our in country local shareholders as well as banking, advisory and private equity firms, which allows us to access opportunities and understand local nuances Responsiveness Accessible, agile and responsive. We have a quick turnaround and simplified decision-making structure that supports the urgency of investment needs Flexibility Customised financing structures. We have a stable and significant source of capital that allows us to offer flexible and efficiently structured alternative financing solutions. We are differentiated as a premier alternative debt provider Local knowledge Good in country knowledge with 30 years of experience funding businesses in the region. Led and staffed by African professionals of diverse nationalities and backgrounds Sustainability We work together with our clients in creating companies which are socially, environmentally and financially sustainable with strong governance Investing in Sustainable Enterprise Growth PAGE 9
IMPACT INVESTMENT As an impact investor, our focus is on providing credit facilities towards financially, socially and environmentally sustainable companies that foster development outcomes Creating impact Norsad Finance invests in profitable businesses and commercially viable projects, recognising that growth needs to be sustainable, impact job numbers, enable diversification of the economy and promote the development of transformational infrastructure Affiliation and Associations Norsad Finance adheres to the World Bank/IFC Performance Standards and International Labour Organization (ILO) core conventions. We are also signatories of Principles of Responsible Investments (PRI) and members of Global Impact Investing Network (GIIN) ESG We believe that subscribing to best Environmental Social and Governance (ESG) practices creates sustainable brands, increases productivity and enables companies to unlock further funding. We assist investee companies to formulate and implement adequate internal social and environmental policies Embedded SDGs We expect sustainability objectives and activities to become fully anchored in our investee companies’ business strategies and to be adapted and integrated into their procedures and operations Our investments are aligned to the Sustainable Development Goals (SDG) and priorities within our region Social Impact Norsad actively measures the social impact of its investments 1 TOTAL EMPLOYED 14, 118 WOMEN EMPLOYED - 37% YOUTH EMPLOYED - 12% 93% of companies in our investment portfolio have a social and environmental management system (SEMS) Norsad Finance Social and Environmental Impact report 2018 1 Investing in Sustainable Enterprise Growth PAGE 10
WHAT WE DO o Solution Offering o Instruments o Our Sectors o Criteria www. norsadfinance. com
SOLUTION OFFERING Our solutions are complementary to other sources of funding and are layered between senior debt and pure equity of a company’s the capital structure Capital Stack Norsad Solutions Our range of investment products include senior debt, stretched senior, uni-tranche, second lien, subordinated debt, tier II for Banks and mezzanine debt financing. NORSAD Sub-structure Mezzanine High Yield Stretch Debt Bespoke Senior RISK AND RETURN Equity (Private equity) Senior (Banks) • Private credit solutions we offer constitute an innovative funding component (complementary to bank financing or an alternative sustainable financing solution) that can be better structured to the needs of growing mid-sized companies • We partner with banks, other financial institutions and investors by providing complementary financing that allows them to stay within their core lending mandates and investment policy while unlocking potential future lending capacity for their clients Investing in Sustainable Enterprise Growth PAGE 12
INVESTMENT INSTRUMENTS We customise our solutions to match the cashflow generation capacity of the client Deal ticket size: USD 5 million – USD 10 million • Currency: USD & ZAR • Tenor: 3 – 7 years (Average of 5 years) Structure Return • Amortizing term debt • Cash interest (LIBOR/JIBAR linked) • Grace period • • Bullet payments Deferred interest (Payment-In-Kind, Redemption Premium) • Upside/ Yield pick-up (profit participation, warrants) • Investing in Sustainable Enterprise Growth Shaped balloon structures Security • First/Second mortgage, Floating and Fixed Charges, Share pledges, Cession or Assignment, Guarantees • Alignment with the promoters PAGE 13
OUR SECTORS We are sector agnostic thereby allowing us to invest in diverse sectors. Our preferred sectors are those which can achieve impact in line with the Sustainable Development Goals (SDGs) Renewable Energy Financial Institutions (Banking and Non. Banking) Hospitality (Hotels and Leisure, Consumer Discretionary) Manufacturing Food Products Integrated Agriculture Retail and Services Education and Healthcare Our impact approach will give preference to companies which have the following characteristics: • • • Employment effects and gender diversity Import substitution Export related • • • Food security Global climate change mitigation Financial inclusion We exclude sectors prohibited in the IFC Exclusion list as well as extractive mining and primary agriculture Investing in Sustainable Enterprise Growth PAGE 14
CRITERIA (WHAT WE LOOK FOR) We are constantly looking for investment opportunities and follow a rigorous credit-centric and disciplined investment process in identifying target partners Companies we invest in are predominantly Southern Africa (SADC) domiciled or headquartered and typically exhibit: • Predictable stable or growing cashflows • EBITDA in excess of USD 2 million (emphasis on USD 2 million to USD 10 million) • EBITDA margins in excess of 10% • Revenues in excess of USD 5 million (emphasis on USD 5 million to USD 50 million) • Dedicated and experienced management team • Accountability and transparency – audited financial statements • Skin in the game (shareholder alignment) • Commitment to good corporate governance practices • Commitment to high social and environmental sustainability standards We exclude the following investments: • Direct mining • Loss making/turnarounds • Start-ups • Business activities per the Norsad Exclusion List Investing in Sustainable Enterprise Growth PAGE 15
HOW WE DO IT o Investment Process www. norsadfinance. com
INVESTMENT PROCESS Our disciplined investment process is streamlined to two decision making committees with a combined experience in multiple financial instruments, sectors and geographies Deal Identification Weekly Meeting Screening Indicative. Term sheet 4 – 5 Days Monthly Final Termsheet Pre-Screening Transaction team and other professionals consider merits of the potential transaction Screening Committee (First Credit) The investment is appraised by a 6 -member committee (weekly) to test for investment and credit eligibility Due Diligence Hypothesis testing of: commercial, financial & tax, operational, technical and legal Final Approval Board Meeting (Final Credit) A 7 -member board consisting of members with deep investment, credit, risk and legal backgrounds meets monthly or on notice to consider the investment Legal Drafting Investing in Sustainable Enterprise Growth Conditions Precedent Disbursement Post Investment Management Exit PAGE 17
OUR PORTFOLIO o Investment Track Record o Investment Portfolio www. norsadfinance. com
INVESTMENT TRACK RECORD Our portfolio showcases our work in alignment with our impact agenda across the region • We have invested over USD 350 million into 150+ companies in 12 countries in the Southern Africa region. Our current investment portfolio consisting of 25 companies is diversified by country and sector • We are focused on providing solutions that enable our clients to grow sustainable companies through alignment with the investee companies and working in partnership to strengthen corporate governance • We believe financial accessibility and inclusion is key to unlocking entrepreneurial growth on the African continent and we target investments into in financial institutions capable of providing credit to the bottom of the pyramid and the missing middle • Our direct investments are informed by the environmental, social and developmental needs of the region and alignment to the Sustainable Development Goals (SDGs) Selection of portfolio companies Investing in Sustainable Enterprise Growth Country – Mauritius Sector – NBFI Year – 2018 Country – Zambia Sector – Hospitality Year – 2015 Country – Angola Sector – Banking Year – 2017 Country – Zambia Sector – Food Products Year – 2018 Country – Zimbabwe Sector – Energy (Hydro) Year – 2016 Country – Botswana Sector – Banking Year – 2013 Country – Malawi Sector – Hospitality Year – 2017 Country – e. Swatini Sector – NBFI Year – 2018 Country – Angola/Namibia Sector – Food products Year – 2017 PAGE 19
INVESTMENT PORTFOLIO Our portfolio is diversified by country, sector, currency and instrument Portfolio - by Country Portfolio - by Sector (GICS Level 3) Outstanding Portfolio % Zimbabwe Portfolio - by Currency Outstanding Portfolio % Banks Angola Capital Markets Food Products ZAR Independent Power & Renewable Electricity Producers Botswana Zambia Consumer Finance USD • Hotels, Restaurants & Leisure Malawi e. Swatini Mauritius Namibia Mozambique Diversified Financial Services • • Construction & Engineering • Banking and Non-Banking FIs constitute ~ 50% of the investment portfolio, in-line with theme of financial inclusion Key themes remain food products, renewable energy and hospitality Our lending predominantly remains USD in line with our balance sheet funding structure Our key instrument remains stretch debt *As at September 2019, Excluding Commitments Investing in Sustainable Enterprise Growth PAGE 20
OUR TEAM www. norsadfinance. com
OUR TEAM Diversified and experienced team consisting of 6 nationalities and is multilingual Credit and Portfolio Management Team Executive Team Kenny Nwosu Nathaniel Nyika Jonathan Davies Chief Executive Officer Chief Investment Officer Chief Financial Officer Khumoetsile Sekucha Tshepho Mpolokeng Keoleboge Malela Portfolio & Risk Director Portfolio Manager Mabedi Resedie ESG Officer Senior Portfolio Analyst Investment Team Zubair Suliman Investment Director Corporate and Office Management Team Gorata Ogotseng Senior Executive Assistant Investing in Sustainable Enterprise Growth Oteng Sebonego Investment Director Brian Moipone Treasury Manager Alice Zulu Investment Principal Mercy Ramateke Justin Nthala Investment Principal Senior Financial Accountant Matthew Pratt Investment Associate Gosegomang Modise Head Audit & Compliance Masilo Serumola Senior Investment Analyst Charity Malatsi Office Administrator Keboetswe Letsholo Senior Investment Analyst Lantlha Mokhai Receptionist & Business Support Wedu Mbayi Investment Analyst Thabo Toko Driver & Office Assistant PAGE 22
TALK TO US Botswana Office First Floor, Plot 54366 Peelo Place, Western Commercial Road, CBD Gaborone, Botswana T • + 267 (0) 316 0860 | F • + 267 (0) 316 0782 South Africa Office No. 4, Upper Ground Floor, Katherine & West, 114 West Street, Sandton, Johannesburg, South Africa T • +27 (0) 11 326 6644 E • norsad@norsadfinance. com | Team emails • name. surname@norsadfinance. com Investing in Sustainable Enterprise Growth W • www. norsadfinance. com norsad-finance-limited 23 www. norsadfinance. com PAGE
DISCLAIMER The information contained in this presentation is of a confidential nature and is intended for the addressee only. No warranty is made as to the accuracy or validity of the information and any conclusions or assumptions are merely the opinion of Norsad and are intended solely for information purposes. Any party whomsoever that relies on any information contained in this presentation does so at such party's own risk and under no circumstances will Norsad be liable for any liability of whatsoever nature that arises out of such reliance. Investing in Sustainable Enterprise Growth PAGE 24
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