Stimulus takes a knock in dividends but compensates with annual return
Pioneer private equity investor, Stimulus Investments Limited, described the 2023 financial year as a gradual return to normal business conditions following three very volatile years during and after Covid.
Despite disruptive headwinds, Stimulus still managed to generate an annual return of 13.6% for its preferential shareholders.
Executive team member, Pieter Laubscher explained: “We are pleased to note that the portfolio companies are starting to benefit from their operational efficiencies in combination with the pick-up that 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.”
“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.”
Approximately 5.3% (2022: 5.2%) of Stimulus’ investment portfolio is made up of cash reserves available for application in the portfolio should circumstances so require. Stimulus is otherwise fully invested.
The 2023 financial year marked Stimulus Investments Limited’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. Stimulus and Khomas Solar now each holds 50%.
Stimulus’ dividend income from investee companies reduced by 11.2% to N$17.4 million (2022: N$19.6 million) mainly due to retention of capital in 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.
The Stimulus 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 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. “Stimulus remains committed to achieving the best long-term outcomes for its stakeholders. The Stimulus portfolio companies are all leaders in their respective industries and are well-positioned to benefit from any improvement in economic activity and climate,” the private equity investor stated.
