TIDMMAJE
RNS Number : 7253A
Majedie Investments PLC
26 May 2023
Majedie Investments PLC
Half-Year Financial Report
31 March 2023
Majedie Investments plc ("Majedie" or the "Company") is pleased
to present its Half-Year Financial Report for the six months ended
31 March 2023.
The Half-Year Financial Report can be found on the Company's
website at https://www.majedieinvestments.com/reporting or by
contacting the Company Secretary on telephone number 07936 332
503.
Financial Highlights
Half Year
ended
31 March 2023
Total shareholder return (including dividends): 32.6%
Net asset value (NAV) total return (debt at
par including dividends): 13.9%
NAV total return (debt at fair value including
dividends): 13.8%
NAV per share (debt at par value): 245.0p
NAV per share (debt at fair value): 244.2p
Revenue Return per share: 0.7p
Quarterly Dividend: 1.8p
Total assets*: GBP150.6m
* Total assets are defined as total assets
less current liabilities.
Chief Executive's Report
In the six months ended 31 March 2023 the NAV at par and the NAV
at fair value (net asset value with debt at par and fair value)
rose by 13.9% and 13.8% respectively on a total return basis. Total
shareholder return (including dividends) increased by 32.6%.
The Company announced a change to its Investment Management
Arrangements in November 2022 and held a General Meeting on 25
January 2023 at which shareholders approved the appointment of
Marylebone Partners LLP (Marylebone) and a change in its Investment
Policy. Subsequent to the meeting, Marylebone took over the
management of the Company's portfolio and by 31 March it had been
largely transitioned to the new investment policy.
Since the announcement of the appointment of Marylebone, it is
encouraging that the discount to NAV of the Company has narrowed,
especially as many peers' discounts have widened. The Board also
notes the higher turnover in the Company's shares and that several
new investors have joined the share register.
Results and Dividends
The Company had a capital gain for the six months to 31 March
2023 of GBP15.8m. Total income from investments fell to GBP1.2m
compared to GBP2.0m in the six months to 31 March 2022 largely due
to the absence of a dividend from Majedie Asset Management
following its sale to Liontrust PLC (Liontrust) on 30 March
2022.
Total administrative expenses and management fees were GBP1.2m
compared to GBP0.8m for the six months to 31 March 2022. The
increase is due to fees incurred in the change in Investment
Management Arrangements, in particular fees payable to JP Morgan
Cazenove, as corporate broker, and Dickson Minto LLP, as legal
advisor. Marylebone has agreed to waive half of the investment
management fees payable by the Company for a period of twelve
months from their appointment as investment manager, this will be
amortised over two and a half years as shown in note 3 in the full
Half-Year Financial Report. The Company also paid performance fees
to Liontrust of GBP0.7m which relate to its holding, now sold, in
the Tortoise Fund.
Following the approval of the changes to the investment
objective and policy the Company will pay quarterly dividends which
are expected to comprise approximately 0.75% of the relevant
quarter end NAV, leading to an aggregate annual dividend target of
approximately 3%. Accordingly, in relation to the quarter ended 31
March 2023 a quarterly dividend of 1.8p was declared on 5 May 2023
which will be paid on 2 June 2023 to shareholders on the register
on 19 May 2023.
As a consequence of the new arrangements the Company will no
longer be self-managed and Marylebone will become the AIFM in due
course. The Company will no longer have an office or any
employees.
Performance
The overall performance for the Company was strong as equity
markets recovered during the period. The large allocation that the
Company had in the UK equity market was beneficial as was the
continued strong performance of the Tortoise Fund. The UK Equity
Segregated Portfolio was sold on 25 January 2023 and the Global
Equity Fund, International Equity Fund and the Tortoise Fund were
all sold on 22 February 2023 to enable the Company's assets to
remain invested during the transition.
The share price of Liontrust increased by 43% in the six months
to 31 March 2023, though the price remains 50% below the level
received as consideration by the Company as part of the sale of
Majedie Asset Management (MAM). The performance targets (to be met
by MAM by 31 March 2023) which would have triggered a deferred
benefit from Liontrust to the Company were not achieved, therefore
the deferred payment benefit has lapsed. The Company had attributed
no value to this contingent payment in its NAV. The Company has
continued to reduce its holding in Liontrust, selling 216,000
shares for a consideration of GBP2.3m over the six months to 31
March 2023.
Performance of Liontrust Funds until their sale
30 September to sale date Since MI invested
% % % % % %
Fund Benchmark Relative Fund Benchmark Relative
return return performance return return performance
---------------------- -------- ----------- ------------- -------- ----------- -------------
UK Equity Segregated
Fund to 25 January
2023 15.4 13.9 1.5 38.9 60.9 (22.0)
Global Equity
Fund to 22 February
2023 7.8 6.5 1.3 156.9 144.9 12.0
International
Equity Fund to
22 February 2023 10.0 10.4 (0.4) 27.6 16.1 11.5
Tortoise Fund
to
22 February 2023 18.0 - - 48.7 - -
MAM/Liontrust
6 months
to 31 March 2023 42.8 - - (49.6) - -
NAV Bridge 30 September 2022 to 25 January 2023 (date of Fund
Manager change)
NAV 30.09.22 GBP116.9m
------------------------------- ----------
UK Equity Segregated Portfolio GBP9.3m
Tortoise Fund GBP4.6m
Global Equity Fund GBP3.4m
International Equity Fund GBP1.6m
Liontrust GBP0.5m
Cash (GBP2.2m)
Debenture (GBP0.8m)
Other Net Assets (GBP1.2m)
------------------------------- ----------
NAV 25.01.23 GBP132.9m
Transition to the New Investment Policy
Under the recently adopted Investment Objective and Policy, the
Company will target annualised total returns (net of fees and
expenses, in GBP) of at least 4% above the UK Consumer Price Index,
measured over rolling five year periods. Marylebone, the Company's
investment manager will invest in three differentiated investment
strategies, in order to achieve the Board's key objectives of
improving performance, reducing the Company's discount to NAV and
developing the Company's culture;
1. Special Investments
2. External Managers
3. Direct Investments
Following approval of the new objective and policy the portfolio
has been transitioned so that all Liontrust Funds were sold.
Marylebone have re-invested the proceeds in both External Managers
and Direct Investments and made initial investments into Special
Investments. It is anticipated that this will be fully transitioned
by the end of the calendar year as suitable investments are
sourced.
The investments that feature in the new 'Liquid Endowment'
Strategy offer not only a clearly differentiated portfolio, but
also (and importantly) a portfolio that is marked to market
regularly. This is possible either because the underlying assets
are both liquid and traded on recognised markets, or the idea
sponsor has a policy which usually entails asking an independent
third party to price the investment on a regular basis. The only
asset in the portfolio as at the date of this interim report that
requires a Director's valuation is the 7.5% holding in the
Marylebone Partnership LLP. This is currently valued at GBP5,000
(see Note 12 in the full Half-Year Financial Report). One Special
Investment is Tier 3 (see Note 9 in the full Half-Year Financial
Report) and is currently valued at GBP2.2m.
Under the new investment policy, the portfolio has a more
significant exposure to non-sterling
assets, predominantly USD, which exposes the shareholders to
currency risk and therefore the manager has a currency hedge in
place, as permitted under the Company's investment policy. The
portfolio is hedged monthly using forward contracts and covers the
currency exposure within External Managers and Direct Investments.
Special Investments are not hedged because they are less
liquid.
The Current Portfolio
Allocation of Total Assets at 31 March 2023
Value % of Total
GBP000s Assets
----------------------------------- --------- -----------
External Managers 72,339 48.0%
Direct Investments 29,932 19.9%
Special Investments 9,510 6.3%
Liontrust 3,297 2.2%
Net Cash/Other Assets/Realisation
Fund* 35,532 23.6%
--------- -----------
Total Assets 150,610 100.0
--------- -----------
* GBP12.2m had been allocated to External Managers and settled
on 1 April 2023.
Special Investments
The portfolio holds 6.3% of total assets in Special Investments
that are sourced through Marylebone's proprietary network. These
comprise two 'stressed' credit opportunities and two activist
co-investments in public equities (one in a niche Software business
and the other in a Consumer Discretionary business) and a commodity
investment. The final Special Investment is completely uncorrelated
to markets and pursues a strategy similar to factoring, overseen by
a manager in the US with whom Marylebone has a fifteen-year
relationship.
External Managers
At 31 March 2023 the portfolio held 48.0% in fourteen External
Managers with a further GBP12.2m allocated to External Managers
awaiting settlement. Marylebone regards all of these managers as
pre-eminent in their respective specialist areas. By 'role in
portfolio' profile, equity centric funds comprise 53% of the total
External Manager allocation and is invested with specialists in mid
cap software, turnarounds, value-based activist situations,
biotech, Scandinavian, other European and Chinese equities.
To complement these equity funds, Marylebone has allocated to
four credit funds with a focus on 'performing yet stressed'
opportunities in the US, Europe and emerging markets, this
comprises 32% of External Managers.
Marylebone's chosen managers have targeted situations that are
short duration, where risk is mitigated by positioning at the top
of the company's capital structure. Having navigated at least four
previous cycles, the Marylebone team consider stressed/distressed
credit an area of true differentiation for the Company's
portfolio.
The final allocation to External Managers, which comprises 15%,
is to managers that offer exposure to commodities, (in particular
uranium and copper) as well as to the broader theme of energy
transition from fossil fuels to clean energy.
Direct Investments
Direct Investments in public equities comprises 19.9% of total
assets. After the dislocations of the previous eighteen months
Marylebone has built a focussed portfolio of equities that have not
only met their quality criteria, but have also satisfied their
strict research and selection process. This part of the Company's
portfolio has divergent return drivers and is not determined by
style or specific macroeconomic outcomes. As a general observation,
Marylebone believes that earnings estimates for developed markets
do not appear to fully reflect the possibility of an economic
slowdown and the portfolio therefore, has modest exposure to
sectors such as Property, Energy and Financials where expectations
are high and is overweight. Industrials and IT where expectations
are more realistic.
Largest ten holdings in each Strategy
Special % External Managers % Direct Investments %
Investments
-------------------- ---- ------------------------------ ---- ------------------- ----
Perseverance DXF Value
Project Bungalow 2.0 Fund 4.3 Alight Inc 1.8
Project Uranium 1.5 Silver Point Capital Offshore 4.3 KBR Inc 1.7
Pernod Ricard
Project Retain 1.4 Eicos Fund SA 4.1 SA 1.7
Project Saint 1.2 KL Event Driven UCITS Fund 4.0 Laboratory Corp 1.6
Keel Capital SA SICAV-SIF
Project Challenger 1.0 Longhorn 3.8 Weir Group 1.6
Project Care 0.7 Millstreet Credit Offshore 3.7 Wabtec Corp 1.5
Praesidium Strategic Software Howmet Aerospace
Opportunities 3.7 Inc 1.4
Energy Dynamics 3.4 Sage Group PLC 1.3
UnitedHealth Group
Paradigm BioCapital Partners 3.3 Inc 1.2
CastleKnight Offshore 3.2 Adobe Inc 1.1
-------------------- ---- ------------------------------ ---- ------------------- ----
The 7.5% stake in Marylebone Partners LLP is currently valued at
cost as in note 12 in the full Half-Year Financial Report.
At the end of the period the Company held larger than normal
levels of net cash and other
assets, a significant proportion of which was subsequently
deployed in early April into External Managers and Special
Investments.
Following the change in investment policy and the transition to
the 'Liquid Endowment' strategy the Company will no longer publish
daily NAVs. Instead, an estimate of the month end will be published
around the tenth day of the month. A mid-month NAV will be
published around the twenty fifth day of each month accompanied by
the final NAV for the prior month. Importantly the prices are
almost all generated from observed marked to market prices with the
exception of the 7.5% stake in Marylebone Partners LLP and Project
Retain. The proportion of the portfolio that is marked to markets
accounts for over 98% of the assets.
Outlook
The consequences of Central Bank tightening in 2022 are becoming
apparent especially in the US Regional Bank sector evidenced by the
collapse of Silicon Valley Bank and the subsequent failure of
Signature and First Republic. The ensuing crisis of confidence
across the sector led to the acquisition of Credit Suisse by UBS.
Whilst prices have largely recovered after the initial shock as the
largest banks are well capitalised, markets remain nervous. One of
the consequences could be Central Banks adopting a less hawkish
stance on further tightening as the availability of credit has
become scarcer. Inflation remains stubborn, but adjustment to
commodity price increases and fuel prices caused by the invasion of
Ukraine by Russia over a year ago, tight money supply and
improvements in the global supply chain as China opens up should
lead to lower inflation in the second half of the year.
Geo-political risks remain at heightened levels and increase
uncertainty. Against such a background the Company's portfolio
which now combines idiosyncratic equity return with targeted
positioning in External Managers together with specialist credit
and real assets should provide downside protection as well as
benefiting from increased sources of returns.
Sir William Barlow Bt.
Chief Executive
For and on behalf of the Board
25 May 2023
Further Information
A copy of the Half-Year Financial Report will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism , in
accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules.
ENQUIRIES
If you have any enquiries regarding this announcement, please
contact Mr William Barlow on 020 7382 8185.
END
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.
LEI: 2138007QEY9DYONC2723
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