Navigating tough times: Huge Group's strategy for sustainable growth

South African investment holding company Huge Group is positioning itself for long-term growth, despite the challenging economic and political landscape, it said in its annual report released on Friday.

With assets under management of R1.463 billion for 2024, the company is actively refining its investment strategy, focusing on ecosystems and technology enablement.

Its investment portfolio companies comprise: 

- Huge TNS is a network enabler offering a comprehensive suite of data, voice, and network services, along with ICT hardware solutions for corporate businesses, small and medium enterprises (SMME) and small home offices.

- Huge Connect recently embarked on a process of pivoting the business to incorporate a much broader, full-service IoT proposition for enterprise and SMME clients.

- Huge Distribution is a customer-centered, channel-only telecoms and renewable energy solutions distributor serving the South African and African market. It is positioning itself as a leading importer and distributor of alternative energy products and solutions, including solar panels, inverters, and lithium batteries

- Huge NXTGN. The latest addition to Huge Group’s portfolio introduced a highly sophisticated enterprise network enablement capability into the portfolio and served as the inflection point for the evolution of its strategy in addressing the rapidly evolving needs of enterprise and SMME clients. AND provides agile cloud-native, turnkey enterprise enablement capabilities.

James Herbst, the CEO, said, "As a South African investment company, we operate in a challenging environment. SA’s small-cap sector has suffered from prolonged neglect. High interest rates, global and local political uncertainty, and a profoundly limited institutional appetite have all weighed on market sentiment. It is in this light that the outcomes HugeGroup has achieved are remarkable."

He said like many of  its peers, Huge Group’s market price also trades at a substantial discount to its NAV (net asset value) – a reflection of the current investment environment, small cap sentiment, technical share imbalances (where the supply of small-cap shares exceeds the demand for them), rather than a reflection of the fundamental value of its investment portfolio.

"The valuation gap which is currently extant, which is represented by the discount at which our shares trade to their net asset value, will begin to narrow as investors and analysts begin to understand our investment approach," he said.

Veran Kathan, the chairman of Huge Group, said the South African operating environment had been much tougher for businesses this year.

The Government of National Unity had faced challenges, global and local services inflation had been much stickier than expected (resulting in interest rates falling far slower than expected), and global geopolitical tensions had continued to rise.

After Huge reviewed its investment philosophy, approach, models, and style "we realised how well Huge Group and its PICs (portfolio investement companies) are already positioned to innovate, and we realised that we have the ecosystem and technology to connect consumer brands to consumers in a cost-effective way, where convenience is a theme, where all the parties have a great experience, and where value is shared – and so Huge NXTGN was born. In pursuit of this innovation, we deployed considerable capital to Huge NXTGN," he said.

On governance, in August 2024, Maria Heraty resigned as Huge Group’s chief financial officer and Tamryn van Tonder, Huge Group’s chief commercial officer, stepped in to fulfill her role

Van Tonder said, as regards investment performance, given general market sentiment and volatility this year, Huge have opted for a more conservative approach tovaluing the investments within its investment portfolio, despite falling interest rates, which ordinarily have a positive impact on valuations.

She said the investment performance was also negatively impacted by delays in the deployment of loan capital to its existing PICs.

Looking forward, Huge remains resolute in its  commitment to continue investing in "our ecosystems, while remaining equally focused on active cash management, the optimising of our investment portfolio’s cost base, as well as initiatives focused on unlocking synergies and efficiencies across our investment portfolio," she said.

BUSINESS REPORT