Operational efficiency favours Stimulus shareholders

NDAMA NAKASHOLE

Due to its investee companies’ capability to deliver products and services to their customers in the most cost-effective manner possible while still ensuring the high quality of its products, service and support, Stimulus Investments Limited’s portfolio delivered strong dividend payments.

Stimulus Investments Limited’s portfolio delivered dividend payments totalling N$50.88 million, the company announced yesterday during the presentation of its financial results for the year ended 28 February 2018.

The private equity investment company, which focuses on acquiring interests in established, high-cash-yielding businesses, last year paid out share dividends of N$32.29 million.

Stimulus executive director Pieter Laubscher said the company’s results should be seen against the background of the economic downturn, and despite these challenges, “the Stimulus portfolio performed well.”

The strong dividend payments were achieved through continued healthy dividend payments by investee companies as well as the sale of the Joe’s Beerhouse property.

There was no portfolio growth in terms of independent valuations, which the company says is reflective of the tough economic environment and commensurate effect on company earnings.

High dividend payments combined with negligible portfolio growth resulted in the reduction of net asset value per share to N$133.52 (N$141.78 in 2017).

Total return on the Stimulus portfolio stood at 3.44%, which Stimulus chief executive officer Josephat Mwatotele described as “flat growth”. The company’s return on portfolio was 10.90% last year.

The company’s uninvested capital halved to 8% due to additional investments made.

The company says there was a strong focus on operational efficiencies without compromising sustainability of investee companies.

Environment

Namene Kalili, the group economist of FNB Namibia, which has ownership in Stimulus, reiterated the weak economy that the year had to put up with. In his presentation, Kalili said while mining, manufacturing, and utilities were among the few sectors that saw positive growth, many other sectors experienced negative growth during the year.

As much as the economy is growing, the 2018 economic growth is concentrated on specific sectors and Kalili said he does not think it will be felt in the pockets.

“Imagine if you get a 1% increase for your salary, will you be happy?” he said.

Although liquidity improved somewhat, the Namibian economy remains in a vulnerable position, according to him, and the outlook in the short-to-medium term remains challenging.

Beating the tough

Given the difficult economic conditions, growth in the private sector has been constrained and many of Stimulus’s investee companies have not been immune to the downturn and thus the flat portfolio growth.

Significantly, the Stimulus team applied its efforts to provide strategic guidance to ensure that each portfolio company was optimally positioned both strategically and operationally, to handle the challenging economic environment in the best possible manner and make them well placed to deliver accelerated results when the economy improves, the company said yesterday.

“Stimulus has grown from the first Namibian private equity fund to the largest due to the combination of patient capital and an experienced, long-standing management team,” the company said yesterday.

In 2017, Stimulus deployed additional capital of N$60 million within its portfolio as part of its approach to help investee companies grow their businesses, diversify, unlick value and support their long term strategy.

“Stimulus remains committed to achieving the best long term outcomes for its businesses and its investors,” it further said.

Portfolio

Without going into details due to the individuality of the private companies it has shares in, Laubscher said its two portfolio companies, Plastic Packaging Group and Cymot group, in which Stimulus own 44.58% and 31.46% shares respectively, maintained their Angolan operations on a “wait-and-see basis”.

“We are cautiously optimistic about these Angolan operations,” he said, adding that they will head to the Angolan factory of the Plastic Packaging Group soon, which focuses on plastic blow-moulding and extrusion. According to Laubscher, Plastic Packaging has renewed focus on Namibian business and it is on a positive group earnings trend.

Nashua, the office automation supply business, in which Stimulus owns 26% shares, has seen steady growth in the core business.

With a strong focus on operational efficiencies, Namibia Media Holdings, in which Stimulus owns 100% and 80% of the company’s divisions, was also not spared from the decline in advertising as well as tight competition in printing business.

Stimulus also owns 47%, 67.7%, 45% and 20% shares in Neo Paints Holdings, Solar Saver, Walvis Bay Stevedoring and Polyoak Namibia respectively.

Leading

Despite the fact that the fund’s profit for the year declined to N$4.9 million (N$11.8 in 2017), Stimulus says it expects no meaningful improvement in trading conditions in the next 12 months.

“Increased focus on investee companies to streamline operations and operational efficiencies is expected to yield positive results,” said Laubscher.

According to him, the core investment team remains strategically involved since inception and that new appointments will be made as portfolio grows.