Ecsponent’s cash flow increases

Ecsponent, a specialist financial-services company funded mostly by high-yielding preference shares, reported a surge in cash flow from operations in the 15 months to March.

Ecsponent, a specialist financialservices company funded mostly by high-yielding preference shares, reported a surge in cash flow from operations in the 15 months to March.

To service the interest payments on its sizeable preference-share issue (with coupon rates as high as 13%), Ecsponent needs to grow profit and commensurate cash flow strongly every year.

Cash flow from operations came in at R177m compared with R20m in the 12 months to December. The extended trading period followed a change in Ecsponent’s financial year end.

Net finance costs of R107m — related mainly to preferenceshare issues — was comfortably covered by cash flow from operations, leaving the net cash inflow from operations at more than R45m.

Ecsponent CEO Terence Gregory said preference shares issued had increased 136%, from R230m in 2015 to R808m in 2017. He said more than R70m was raised in Swaziland through a similar linked-loan units programme.

Gregory said R127m was paid or accrued to preference shareholders as dividends grew during this period and the company remained comfortable with its funding structure.

He said that although funding would continue via preference share issues Ecsponent was in the process of securing debt facilities that would reduce the cost of capital.

Ecsponent’s income statement showed revenue from continuing operations jumping 122% to R322m with operating profit from continuing operations increasing fivefold to R229m. These increases annualised would have been 77% and more than 300% respectively.

Gregory said that Ecsponent’s growth was driven by strong performances from continuing operations — which comprised investment services and business credit. The business-credit operations generated interest income of R232m, which was 271% higher than in the previous financial year.