Marwyn Value Investors Ltd (LON:MVI) has announced the publication of its interim results for the six months ended 30 June 2021.
The Interim Results are available on the ‘Financial Reports’ section of the Company’s website, http://www.marwynvalue.com/company-information/financial-reports .
SUMMARY PERFORMANCE
Ordinary Shares
| NAV Total Return1 | FTSE All-Share | |
| Six months (to 30 June 2021) | 15.9% | 11.1% |
| Since inception (1 March 2006 to 30 June 2021) | 172.7% | 133.8% |
Realisation Shares
| Shareholder Total Return2 | FTSE All-Share | |
| Six months (to 30 June 2021) | 27.7% | 11.1% |
| Since inception (30 November 2016 to 30 June 2021) | (4.8)% | 27.7% |
KEY HIGHLIGHTS OF THE SIX MONTHS TO 30 JUNE 2021
Ordinary Shares
Net assets of £102.8 million, an increase of £11.7 million since 31 December 2020
· NAV per share of 184.1p as at 30 June 2021.
· Total NAV return of 15.9% since 31 December 2020 (and 20.5% since 30 June 2020).
· Share price up 13.5p since 31 December 2020 to £1.21 as at 30 June 2021, an increase of 12.6%. The share price discount to NAV remains at 34% at both 30 June 2021 and 31 December 2020.
Continued significant distributions
· Quarterly dividends of 2.265p per share paid in February, May and August 2021 with a further quarterly dividend of 2.265p expected to be paid in November 2021. Total dividend expected to be paid in 2021 of 9.06p per share represents a yield of 7.4% (based on share price of 122p as at 28 September 2021).
Strong cash position
· Look-through cash balance of £7.6m at 30 June 2021. This is expected to strengthen considerably following Zegona’s tender offer which is expected to result in a minimum cash inflow of £45.4m in October 2021.
Realisation Shares
Net assets of £8.3 million, an increase of £1.8 million since 31 December 2020
· NAV per share of 225.5p as at 30 June 2021.
· Total shareholder return of 27.7% since 31 December 2020 (and 30.1% since 30 June 2020).
Further distributions in H2 2021
· Cash proceeds attributable to the realisation shares from the Zegona tender offer of a minimum of £6.7m expected to be distributed shortly after receipt in October 2021.
Portfolio Highlights
· Zegona has completed the sale of its underlying asset, Euskaltel, for €428 million. Zegona is returning the majority of the cash generated to shareholders via a tender offer in October 2021, generating a 1.4x return for the Marwyn Funds over the life of our investment.
· Le Chameau continues to grow sales, particularly online and has successfully implemented extensive cost-out and integration changes, significantly improving the business’ ability to achieve profitability and positive cash generation.
· AdvancedAdvT, following the appointment of Vin Murria, has successfully raised £130 million of equity from high-calibre institutional investors as target acquisitions are analysed in the software sector.
· Our other acquisition vehicles are exploring a strong pipeline of potential Management Partners and acquisition opportunities.
· Cash is expected to be received into the Master Fund relating to a historic investment in Praesepe plc which operates in the gaming industry although quantum and timing of this is currently unknown.
OUTLOOK
· Following the sale of BCA in late 2019 and the expected upcoming return of capital by Zegona, a new portfolio of management-led acquisition companies is being constructed to drive future investment returns, alongside the remaining investment in Le Chameau.
· AdvancedAdvT, led by Vin Murria, continues to proactively engage with both previously known and many new exceptional businesses, resulting in a robust and growing pipeline of businesses that closely match its target characteristics.
· Discussions are ongoing with a number of other high-calibre, experienced, public company executives across a number of sectors to lead the other companies.
· Combination of management talent, capital to support their ambitions and the improved acquisition structure of the new vehicles allied to the strongest pipeline of target opportunities we have seen in years, gives real optimism for the future and the returns expected to be generated for the Company’s shareholders.
· Acceleration of Le Chameau’s digitalisation and direct to consumer presence should continue to improve the company’s growth trajectory and return it to sustained profitability.
Capitalised terms used in the announcement and not otherwise defined have the same meaning as detailed in the Company’s unaudited interim results for the six months ended 30 June 2021.
1 For the ordinary shares, inception to date movement is based on the combined weighted average NAV of Marwyn Value Investors I, II and B shares prior to their amalgamation, using the conversion ratio published on 17 April 2008.
Total return assumes the reinvestment of dividends paid to shareholders into the Company at NAV and is calculated on a cum-income basis
2 For the realisation shares, shareholder total return is calculated as the movement in total shareholder value, including all distributions made to realisation shareholders over the relevant period.
Robert Ware, Chairman of Marwyn Value Investors Limited, commented:
“We are pleased with the progress that’s been made in the period, particularly with the confirmation of the Zegona Communications capital return which positions the fund well to support the pool of exciting executive talent, currently working with the manager, and which we hope to announce joining our recently launched vehicles in due course.”
REPORT OF THE CHAIRMAN
I present to shareholders the unaudited interim results of Marwyn Value Investors Limited for the six months ended 30 June 2021.
Investment Performance:
The Board and I are pleased with the investment performance for the year to date, driven by positive performance from existing investments and leaving the portfolio well-positioned and capitalised for the next phase of investment over the coming months.
Listed acquisition companies have been at the core of the Manager’s strategy for more than 15 years. Whilst the recent rise in the use of such vehicles will benefit this strategy through the consequential increased investor and executive interest the Board does note the caution expressed by the Manager with respect to the US SPAC boom and the risk of material misalignment that appears to be inherent in the conventional SPAC model. Notwithstanding this, the growth in the overall market has substantially broadened the appeal of the Manager’s model and the new acquisition companies that the Manager has created will, we believe, be seen as the ‘gold standard’ for how the next generation of listed acquisition companies should be structured.
Governance & Oversight of the Manager
We have a very active relationship with the Manager which provides us with a detailed understanding of its perspectives on the portfolio and the wider market. I believe that the Board and the Manager both benefit from that ongoing interaction and consultation. My fellow non-executives and I bring a valuable combination of listed fund and corporate experience at both operational and board level that makes us well-equipped to oversee the Manager’s activities on behalf of shareholders. My role is complemented by my Non-Executive Chairmanship of the Marwyn Group and the oversight that that role gives me of the broader Marwyn operations.
Shareholder Composition and Communication
It has long been our ambition to broaden the Company’s underlying shareholder base to both enhance the liquidity of the Company’s shares and increase the number of Marwyn investors who invest both in the Company and the underlying listed acquisition companies. I am delighted to welcome more than 10 institutional investors to the register and look forward to meeting with any of those I have yet to meet over the coming months. Similarly, whilst we will seek to proactively contact investors throughout the year, I would encourage shareholders to contact me directly at any time.
Shareholder Returns and Distributions
The Company aims to deliver shareholders long term growth in its NAV, supplemented by a quarterly dividend programme and a profit distribution policy on portfolio investments as and when they are realised.
The Manager generates its investment returns by growing the value of the companies they create. The success of the Manager’s previous vehicles, including Advanced Computer Software, BCA Marketplace, Breedon Aggregates, Entertainment One amongst many others is a testament to its ability to drive value, but also demonstrates the time that it takes to build such high-quality companies, with an expected hold-period for Portfolio Companies of 5 to 7 years post platform acquisition. This approach allows the Manager to support the medium- to long- term ambitions of the Management Partners, as demonstrated by Le Chameau’s recent restructuring and resulting turnaround. We believe that the combination of the investment strategy and current income profile of the Company is very attractive to shareholders, but we also recognise that the persistent discount to NAV is frustrating.
At the start of this year, the independent directors met, or offered to meet, with all of the Company’s larger shareholders to reconsider the effectiveness of the Company’s discount management. As a result of the feedback received, we suspended the share buy-back programme that had been in place since 2018, reverting to the payment of quarterly dividends. Under our policy, distributions are maintained or grown on a per-share basis and currently represent an annual dividend of 9.06 pence per share, paid in equal quarterly instalments. Based on a share price of £1.22 as at 28 September 2021, this represents a yield of 7.4%.
Whilst narrowing the discount to NAV has always been and remains our ambition, in 2013 the Company adopted, with shareholder approval, the realisation share conversion programme. This innovative feature allows electing shareholders, every 5 years, to exchange some or all of their shares for a new class of share allowing for the receipt of investment proceeds as and when the Manager realises portfolio investments. Accordingly, in November 2021, ordinary shareholders will be given the option to convert their shares into a new series of realisation shares. Members of the Board and the Manager will not be converting any of their shareholdings to the realisation class. Full details will be released through the publication of an offering circular and a prospectus relating to the admission of the new series of realisation shares to trading on the Specialist Fund Segment in due course.
Robert Ware
Chairman, Marwyn Value Investors
29 September 2021
