The Stimulus Investments portfolio delivered dividend payments to its preference shareholders totalling N$84.5 million (2022: N$9.6 million) for the year under review, which increased by 777% from 2022. This, in combination with the latest portfolio valuations, represent a total return to preference shareholders of 13.6% (2022: 1.9%) for the year. The substantial increase in dividends is largely due to the proceeds from the investment disposals of N$75.2 million.
Stimulus Investments Limited (SIL), a private equity investment company, has grown from being the first Namibian private equity fund to one of the largest due to the combination of patient capital and an experienced, long-standing management team. SIL’s total assets under management amounted to N$651.1 million on 28 February 2023 and the investee companies employ 1 264 permanent employees and 766 temporary employees.
This year (2023) marked SIL’s first major divestments in the form of the disposal of its 26% interest in Nashua Namibia as well as the disposal of 17.6% of its interest in Khomas Solar Saver, whereafter Stimulus and Sedgeley Solar Management now each owns 50% of Khomas Solar Saver.
These two divestments were, in the aggregate, done at a premium of 47% to the independent valuations of these entities as contained in the 2022 Annual Financial Statements.
Meanwhile, Stimulus’ dividend income from investee companies reduced by 11.2% to N$17.4 million (2022: N$19.6 million) mainly due to the retention of capital within two key portfolio companies for expansionary purposes. The reduction in dividend income from investments is offset by an increase in the fair value of the investment portfolio.
Executive team member, Pieter Laubscher explained: “We are pleased to note the portfolio companies are starting to benefit from their operational efficiencies in combination with the pick-up we experienced in certain industries. We remain positive regarding the Namibian economy’s prospects in the medium term, also taking into account Namibia’s positioning around green hydrogen as well as the offshore oil reserves, which are starting to look like a very real prospect. Last year we mentioned that the Stimulus Board would carefully start evaluating certain exit opportunities. In this regard we are pleased to report the two divestments made. We also believe that the terms at which these disposals were made underpin and inform the value of the remaining portfolio”.
According to an SIL statement, the 2023 financial year in many respects represented a return to some form of normality in the business environment. This follows an extremely volatile business environment over the last few years, which included a Namibian recession, the significant disruption caused to the Namibian economy due to Covid-19 and its variants, as well as the Russian invasion of Ukraine.
SIL continued that the exception to this was the spill-over effects of the Ukrainian war, which resulted in world-wide inflation relating to especially food, energy and transport, combined with weak emerging market currencies. These inflationary effects, SIL noted, required businesses to act much more dynamically in terms of their pricing, as raw material prices and inventory prices were much more volatile.
“We are pleased to report that, in general, the portfolio companies experienced a meaningful pick-up in business activity which filtered through to revenue and profit growth. Forecasting predictability has also improved. The construction sector however remained in recession which currently limits revenue growth in Neo Paints, which supplies this industry. Media also remains a challenging industry with companies in this sector, such as NMH, being forced to rapidly adapt to an ever-changing technological environment”, SIL stated.