Stimulus cautions investors amid Covid

Due to the fixed investment horizon, strong balance sheet and adequate cash reserves, the conclusion was that Stimulus can continue as a going concern for the foreseeable future

By Hilary Mare

STIMULUS Investments Limited chief executive officer, Josephat Mwatotele has cautioned investors within the Stimulus portfolio saying that the effects of the Covid-19 pandemic are unprecedented and significant risks exist in a prolonged global pandemic.

Mwatotele who last week was presenting the equity firm’s annual financial statement for the year ended February 28 2021 further highlighted that the Stimulus portfolio has suffered depressed activity due to this situation which has seen the Namibian recession deepening.

However, Mwatotele allayed that the firm’s directors have made a thorough analysis of the going concern principle including stress test scenarios of the duration and outcome of the pandemic and lockdown.

“Due to the fixed investment horizon, strong balance sheet and adequate cash reserves, the conclusion was that Stimulus can continue as a going concern for the foreseeable future,” he said adding that the existing portfolio is underpinned by quality investments.

“The unprecedented economic environment experienced during the past year provided an opportunity for most of our portfolio companies to focus on, and take advantage of internal restructuring initiatives. There has been a continued focus on ensuring that each portfolio company is optimally positioned, both strategically and operationally, to handle this challenging environment in the best possible manner and to reach its potential value once the pandemic is under control and normal economic activity returns,” further explained Mwatotele.

Stimulus holds eight investments, being the Plastic Packaging Group, Namibia Media Holdings, Nashua Namibia, CYMOT, Polyoak Packaging, Neo Paints, Khomas Solar Saver and Walvis Bay Stevedoring.  Total assets under management are N$646 million as at February 28 and the investee companies employ 1 766 permanent employees.

The Stimulus portfolio delivered dividend payments totalling N$15.1 million (2020: N$16.3 million) for the year under review, which decreased by 7.6 percent from 2020.  This was as a result of reduced dividend receipts from investee companies, which continued to retain capital to reduce gearing and to hedge against operating uncertainty. Stimulus deployed additional capital of N$17 million (2020: N$7.5 million) within its portfolio as part of its approach to assist an investee company to grow its business and support its long-term strategy.

Mwatotele went on to say: “Our top priorities for the future remain the health and safety of our investee companies’ employees, protecting their livelihoods, safeguarding liquidity and strategically positioning our investee companies for the new reality.  We remain positive about the ability for these companies to flourish in a dynamic and changing environment given that they are well capitalised, streamlined in terms of operations and well managed by competent and experienced management teams.”

During the year under review Stimulus’ preference share dividends decreased year on year by 36 percent to N$2.07 per preference share (2020: N$3.24), which represent a dividend yield of 1.6percent (2020: 2.5 percent).  The reduction in dividends resulted from investee companies retaining cash to further reduce gearing on their balance sheets;

Furthermore, approximately 5.2 percent (2020: 7.6 percent) of Stimulus’ portfolio is made up of cash reserves available for future investments, which makes Stimulus fully invested.