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Marwyn Value Investors Limited - Audited Annual Results 2018



·    For the year ended 31 December 2018, the Net Asset Value ("NAV") per ordinary share decreased by 10.5%, representing a 8.6% total return loss including distributions to shareholders, compared with a decrease in value of the FTSE All-Share of 9.5% over the same period. The NAV per realisation share decreased by 10.3% over the year.


·     Despite significant activity within our portfolio investments as noted below, the decrease in NAV per ordinary share and realisation share over the period is primarily attributable to decreases in the share prices of Zegona Communications plc ("Zegona") and Wilmcote Holdings plc ("Wilmcote"), along with a write down of the Le Chameau Group plc ("LCG") investment and the liquidation of Gloo Networks plc ("Gloo").


·      The Company's strategy has delivered a 177.2% NAV total return to ordinary shareholders from inception in March 2006 to 31 December 20181, compared with a total return of 95.9% for the FTSE All-Share Index over the same period. The NAV total return attributable to realisation shareholders since inception on 30 November 2016 to 31 December 2018 is a 7.4% loss.



Distributions to shareholders


·    Quarterly interim dividends of 2.064p per ordinary share were paid in January, April and July 2018 resulting in £4.4 million being distributed to ordinary shareholders.


·   The Ordinary Share Distribution Policy was amended on 5 September 2018, permitting distributions to ordinary shareholders to be made through the repurchase of ordinary shares, dividends or a combination of both. The Company's buy-back scheme commenced in October 2018, with £1.46 million distributed to ordinary shareholders in Q4 2018. A total of 1,186,468 ordinary shares were re-purchased at an average price of 123.12 pence per share and were subsequently converted into exchange shares with the corresponding limited partnership interests cancelled.


·     In January 2019, Marwyn Value Investors LP ("MVI LP") made a partial offer to institutional shareholders for ordinary shares in the Company (the "Partial Offer"), conducted by way of a reverse bookbuild. Pursuant to this offer, the Master Fund acquired 4,030,625 ordinary shares at a price of 130p per share for a total consideration of £5.2 million.


·      To the date of this report, a total of £52.4 million has been returned to ordinary shareholders since the implementation of the Ordinary Share Distribution Policy in November 2013 (including the partial offer in January 2019 and shares purchased under the buy-back scheme during 2018 and in 2019 to date).


·      In September 2018, following the receipt of the initial funds as part of the liquidation of Gloo, a total of £442,978 was returned to realisation shareholders by way of a partial redemption of realisation shares.


Portfolio Companies


·      BCA Marketplace plc ("BCA") recorded strong results in both its annual accounts for the year ended 1 April 2018 and its interim results for the six months ended 30 September 2018, with an increase in vehicle volumes across all divisions including UK and international remarketing, showing continued success in leveraging its infrastructure and range of services to provide solutions to automotive customers across the vehicle life cycle. During the year, BCA received two proposals from Apax Partners LLP for an all cash offer for BCA, the first of which was priced at 200p per share. Both offers were unanimously rejected by the board of BCA, concluding that the offers significantly undervalued the business and its highly attractive long term prospects.


·      In October 2018, Zegona announced its intention to acquire additional shares of Euskaltel, resulting in an equity placing in January 2019, raising gross proceeds of approximately £100.5 million. These funds are to be used for market purchases of Euskaltel shares, with the intention to increase Zegona's influence to constructively work with the board and management team of Euskaltel to improve the performance of the business. Euskaltel's results for the year ended 31 December 2018 reported a 11.2% increase in revenue with net profit up 26.6% on the prior year.


·      Wilmcote, established in 2017 alongside Adrian Whitfield (formerly CEO of Synthomer plc, a FTSE 250 company) with target acquisitions focused on the downstream and specialty chemicals sector, has explored a number of opportunities in line with its investment strategy. Most notably in 2018 was its bid for Arysta LifeScience from Platform Specialty Products Corporation. Whilst this did not complete, Wilmcote continues to explore attractive opportunities and remains excited about the prospect of being able to execute the company's investment strategy. Wilmcote strengthened its board with the appointment of John McAdam in October 2018 as an independent non-executive director.


·     Safe Harbour Holdings plc ("Safe Harbour"), a portfolio company established alongside CEO Rodrigo Mascarenhas (formerly of Bunzl plc, a FTSE 100 company), completed its IPO in March 2018 raising a further £22.7 million of equity funding with backing from a number of high profile institutional investors. Safe Harbour is now in the process of evaluating various platform acquisition opportunities in the B2B Distribution and/or Business Services sectors in line with its stated investment strategy. Safe Harbour has strengthened its board with the appointment of Chris Cole as an independent non-executive director in November 2018 and announced in March 2019 that James Brotherton will be joining as CFO.


·   LCG continued its operational and marketing development in 2018, launching European e-commerce websites, partnering with Amazon in the UK and US and investing in new digital marketing initiatives to drive brand awareness, resulting in 6% revenue growth, of which 15% is now being generated online. Investment has also been made in the Le Chameau product offering, with the leather boot range being extended to include the new Le Chameau Lite and Jameson products, the addition of children's rubber boots and the development of its new technical apparel and accessory product categories which are set to launch in 2019. The investment in marketing and product development, coupled with challenging trading conditions, especially within its retail channels has required further investment to be made into Le Chameau. Lower than expected revenue growth and profitability in 2018 has resulted in the fund making a significant write down to the carrying value of our investment during the year.


Le Chameau has a clear vision to be a leading brand within the premium country lifestyle segment. As such, Financo, a boutique investment bank specialising in the merchandising and retail sector, has been engaged to review the strategic options for the business. No transaction has been agreed and there is no certainty that any transaction will proceed; we will communicate progress with shareholders at the appropriate time.


·   Following a strategic review of the pipeline of potential acquisitions that demonstrated the requisite financial characteristics, the Gloo board believed that the likely timeframe to a successful completion would prove unpalatable to the broader shareholder base and consequently Gloo was put into voluntary liquidation, approved by its shareholders on 4 June 2018. The first distribution to shareholders of 47p per share was made in August 2018, representing 39.2% of gross capital invested at cost.  A final distribution is expected before 30 June 2019.


Chairman, Robert Ware, commented: "We continue to believe in the value creation opportunities present in our existing portfolio companies, and were particularly pleased to see the impressive results announced by BCA. The Zegona team raised additional gross proceeds of £100.5 million to increase their stake in Euskaltel in order to increase its influence on the performance of the business, while Le Chameau invested heavily in refining the brand in the year, better understanding customers and marketing strategies, and creating a holistic proposition reflective of their premium heritage products. Wilmcote and Safe Harbour, already led by sector-leading management teams, have strengthened their boards this year through the appointment of high calibre non-executive directors and continue to actively pursue their platform acquisitions. We look forward to a productive year ahead with our portfolio companies."