On the road to success
The company has earned its stripes as a listed small cap
Ecsponent is one of the JSE’S quiet achievers and while the company has maintained a low profile, its results are anything but subdued. Over the past six years — albeit from a low base — it has achieved triple digit growth each year.
Moreover, Ecsponent is also a good example of a sustainable, listed small cap.
In 2010 the Ecsponent board was replaced, and the current management team, with CEO Terence Gregory, took the helm. At the time Ecsponent’s balance sheet had a value of around R8m, but today its total assets exceed R1bn.
Ecsponent group marketing and communications manager Christine Marincowitz says the company is one of the JSE’S best-kept secrets.
“People should be paying attention to us because great things are happening. With the active support of our shareholders, the team has refined the business model, focusing on known profit generators. In 2010 we had two subsidiaries. We now have over 20 and we are growing all the time,” she says.
Marincowitz says one of the key decisions made by Gregory and the board was to exit the retail credit market before market conditions changed and investors in the sector experienced losses.
“Today our credit activities are focused solely on the business market,” Marincowitz says.
Ecsponent has been careful to balance its portfolio of investments and the underlying returns.
In this way it has the cash flow to fund its shorter-term investments, though its long-term investments tend to be sustainable businesses with extended investment horizons. Ecsponent is a financial services company and it provides niche financial products to very specific markets in SA and other African countries.
The company’s operations are conducted via three business units, namely investment services, business credit and equity holdings.
Gregory says: “At the core of investment services is an established broker network that provides a range of investment products. This distribution channel also raises capital from the public through our Jse-approved listed preference share programme.”
The business credit unit provides secured medium-term loans to small and medium-sized companies.
“Ecsponent has a focused approach in the SME credit market. We have a limited number of clients with whom we have longterm relationships. This reduces the risk as we know each of our clients and remain aware of developments in their businesses. In addition, Ecsponent never takes an unsecured position,” Gregory says.
He says the business credit arm also offers a holistic service to larger corporations supporting their emerging vendors as a part of their enterprise and supplier development programmes.
“Ecsponent’s team is keen to partner with corporations that want to achieve true vendor upliftment. Part of our value proposition is that we offer a complete solution that results in emerging vendors being integrated into the company’s mainstream supply chain as fully fledged suppliers.
“While our corporate clients focus on their core business activities, we will take care of developing sound and effective supply chain partners.”
He says emerging vendors often lack the track record needed to secure finance to compete for purchase orders or tenders, and skills are regularly a stumbling block. Ecsponent provides finance, support, and on-the-job training to the selected vendors.
Besides providing much-needed funding through the Ecsponent Development Fund, the company also has ecsponent procurement services, which mentors vendors, enabling them to understand and implement best practices.
“We provide corporate clients with evidence of their supply chain development successes through an ongoing scorecard that tracks the vendors’ development. Ecsponent warrants on time and on delivery of the companies’ goods as specified by their purchase orders.
“The new BEE codes have made it even more critical for companies to develop emerging suppliers and improve their procurement spend with this sector,” Gregory says.
He says Ecsponent’s equity holdings’ operations are based on the philosophy of investing in companies with high barriers to entry, high technology or intellectual property and that are scalable to provide significant returns.
“Our investments are varied – from fintech to biotechnology and media intelligence — and are growing steadily. We invest in companies with sustainable growth models and the potential to generate attractive returns. The experience and support of our shareholders, combined with the focused management team, unlock value for all the stakeholders,” Gregory says.
What it means: A multipronged business unit that enables the company to deliver on its core mandate