Half-year Report

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*:	£150.6m
* 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 £15.8m. Total income from investments fell to £1.2m compared to £2.0m 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 £1.2m compared to £0.8m 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 £0.7m 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 £2.3m over the six months to 31 March 2023.

Performance of Liontrust Funds until their sale

	30 September to sale date			Since MI invested
	% Fund return	% Benchmark return	% Relative performance	% Fund return	% Benchmark return	% Relative 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	£116.9m
UK Equity Segregated Portfolio	£9.3m
Tortoise Fund	£4.6m
Global Equity Fund	£3.4m
International Equity Fund	£1.6m
Liontrust	£0.5m
Cash	(£2.2m)
Debenture	(£0.8m)
Other Net Assets	(£1.2m)
NAV 25.01.23	£132.9m

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 £5,000 (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 £2.2m.

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 £000s	% of Total 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

* £12.2m 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 £12.2m 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                                 Investments	%	External Managers	%	Direct Investments	%
Project Bungalow	2.0	Perseverance DXF Value Fund	4.3	Alight Inc	1.8
Project Uranium	1.5	Silver Point Capital Offshore	4.3	KBR Inc	1.7
Project Retain	1.4	Eicos Fund SA	4.1	Pernod Ricard SA	1.7
Project Saint	1.2	KL Event Driven UCITS Fund	4.0	Laboratory Corp	1.6
Project Challenger	1.0	Keel Capital SA SICAV-SIF Longhorn	3.8	Weir Group	1.6
Project Care	0.7	Millstreet Credit Offshore	3.7	Wabtec Corp	1.5
		Praesidium Strategic Software Opportunities	3.7	Howmet Aerospace Inc	1.4
		Energy Dynamics	3.4	Sage Group PLC	1.3
		Paradigm BioCapital Partners	3.3	UnitedHealth Group 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

 

END