• Market Watch

Stimulus pleased with portfolio performance

- 2022-06-01 00:00:00

Jo-Maré Duddy
Despite the devastating impact of the Delta Covid-19 variant in the winter of 2021 as well as another Covid-19 wave in the peak trading period during December 2021, the eight companies in the portfolio of Stimulus Investments Ltd continued to strengthen their balance sheets and produce encouraging trading results, locally-listed SIL said yesterday.
Stimulus Investments Ltd (SIL), one of the country’s largest private equity funds, released its financial results for the year ended 28 February 2022 on the Namibian Stock Exchange (NSX) on Monday.
Ashburton Investments, wholly-owned by FirstRand Namibia, has a stake of 25% in SIL. SIL’s investments make up about 26% of Namibia’s unlisted investments market.
Namibia Media Holdings (NMH) – owner of Namibian Sun, Republikein and Allgemeine Zeitung among others – is one of the companies in the portfolio of Stimulus Investments Ltd (SIL).
SIL has an 80% shareholding in Namibia’s largest diversified media group.
The other companies in the portfolio are: Plastic Packaging Group (45.3% interest), Solar Saver Group (67.6%), Neo Paints Group (47%), Cymot (31.8%), Nashua Namibia (26%), Polyoak Namibia (20%) and Walvis Bay Stevedoring (45%).
Troubled waters
The companies in its portfolio navigated the troubled waters of the Delta and Omicron waves, as well as Russia’s invasion of the Ukraine towards the end of SIL’s financial year, “very well”, Stimulus said.
“We are encouraged by the manner in which the various management teams have applied skill and initiative to adapt and to walk the proverbial extra mile in order to maintain and gain market share and to grow in such a challenging market,” the company said.
It continued: “The Stimulus portfolio companies in general are in a much stronger position than before and are also well positioned to benefit from any increase in economic activity.”
In terms of increased profitability, revenue growth within these companies is still somewhat offset by the increased logistical cost and supply side constraints experienced globally, Stimulus said, adding: “As an example, the cost of sea freight increased by approximately 230% over the past year.
These constraints increase the cost of raw material and stock and necessitate the keeping of significantly higher inventories which ties up capital for longer periods.”
This situation will however hopefully normalise over the next year or two which would allow companies to re-capture some of this lost margin and release excess capital in the form of dividends, Stimulus said.
Dividends
The Stimulus portfolio delivered dividend payments totalling N$9.6 million for the year under review, a decrease of 36.4% from the N$15.1 million in its 2021 financial year.
“This was as a result of low dividend receipts from investee companies, which continued to retain capital to reduce gearing and invest in inventory and raw material. Stimulus did not deploy any additional capital within its portfolio during the year under review,”
According to SIL executive team member, Pieter Laubscher, the Stimulus team continues to apply its efforts to provide strategic guidance and to ensure that each portfolio company is optimally positioned, both strategically and operationally.
“All the investee companies are leaders in their respective industries and are well positioned to operate effectively in the current environment and to benefit from any economic pick-up.
“We are encouraged by the prospects regarding Namibia’s positioning around green hydrogen as well as the offshore oil reserves and believe this should feed positively into the general economy in the years to come,” Laubscher said.
Stimulus is now entering its exit phase, given the October 2026 redemption date of its preference shares, he said.
“The board will start carefully considering certain exit opportunities in the year to come, keeping in mind that the portfolio could materially benefit from an economic pick-up over the next two or three years,” Laubscher added.
Figures
Total assets under management was N$648.8 million as at 28 February 2022 and the investee companies employed 1 639 permanent employees and 424 temporary employees. Assets under management increased marginally by 0.5% for the year under review, compared to the -1.7% of 2021.
The market value of SIL’s preference shares represents an internal rate of return since inception of 6.7% for the preference shareholders as at the end of February. The value ascribable to each preference share, cum dividend, is N$139.40 (2021: N$138.84).
Stimulus said preference share dividends remained fairly low at N$2.00 per preference share (2021: N$2.07), which represent a dividend yield of 1.5% (2021: 1.6%).
“The low level of dividends resulted from investee companies retaining cash to further reduce gearing on their balance sheets as well as the need to carry increased inventory levels due to the global supply chain shortages and logistical constraints,” it said.
Approximately 5.24% (2021: 5.23%) of Stimulus’ investment portfolio is made up of cash reserves available for application within the portfolio should circumstances so require, the company said. Stimulus is otherwise fully invested.