The Fund Monitor

There’s been a flurry of news from Chrysalis, culminating in the launch of its share buyback programme. Elsewhere, abrdn Property Income sells its portfolio, while Invesco Global Equity Income and Schroder Japan vie for the biggest dividend increase.

By Frank Buhagiar

Chrysalis Commences Buyback Programme

Chrysalis (CHRY) had a busy week. First up, the growth capital investor signalled it was planning to trigger its capital allocation policy (CAP) to bring forward the point at which it can return capital to shareholders. The company announced it had secured a £70 million debt facility with Barclays Bank. The plan, to draw down the full £70 million commitment to cover the first pillar of the CAP – a £50m “buffer” to cover working capital and any follow-on investments.

Just a few days later and the company announced the commencement of the second pillar of the CAP – buybacks. “The Company is now in a position to enact the second pillar of the CAP, initially via the launch of a share buyback programme of up to £40 million, representing approximately 8% of the Company’s current market capitalisation.” This followed another press release that revealed Visa had agreed to acquire portfolio holding Featurespace. The total consideration was not disclosed, but Chrysalis said it expects to receive around £89 million cash in total. That would represent a 20% premium to the company’s latest £74.2 million carrying value for its Featurespace investment. It would also mean, CHRY stands to make around three times the total £29.5 million it invested in Featurespace.

Winterflood: “We remain mildly puzzled at the urgency of conducting debt-financed share buybacks, but this transaction certainly changes the perspective. If the purpose of the debt facility was bridge financing, the financial risk profile is substantially lowered. The Featurespace transaction is a textbook exit, providing helpful validation of Chrysalis due diligence, valuation and portfolio quality, which had been under natural scrutiny following the challenges at wefox. While investors will continue to eye widely anticipated IPOs for Klarna and Starling, this deal will aid confidence in the remainder of the portfolio, and could pave the way for new investments in an attractively priced venture field once buybacks are completed.”

abrdn Property Income to Sell Portfolio

abrdn Property Income (API) put out a press release confirming “that it has entered into an agreement with certain funds and accounts managed by GoldenTree Asset Management LP for the sale of the entire share capital of abrdn Property Holdings Limited (APH), a wholly-owned subsidiary of API” for £351m. As part of the deal, API’s debt facility will be transferred in full to GoldenTree. APH holds API’s entire investment property portfolio, meaning the fund will be left with Far Ralia, 1,471 hectares of open moorland in the Scottish Highlands. Could think of worse things to be left holding.

JPMorgan notes “API said in the annual report that it was soft marketing Far Ralia – it was valued between £8-£10m at 31/12/24 and they went so far to say that the capital value uplift on a sale could make this investment one of its better investments.” Meanwhile, “In our view an immediate asset sale makes good sense, though it has inevitably involved taking a haircut to the 30/6/24 valuation, in this case of 8% (we have previously assumed 10% in our modelling).”

Dividend Watch

Invesco Global Equity Income (IGET) set to hike dividend by 70%. The multi-share class fund that recently consolidated the UK Equity, Balanced Risk Allocation and the Managed Liquidity shares into the Global Equity Income share-class unveiled a new dividend policy alongside its full-year results. This will see the fund pay an annual dividend of at least 4% in equal amounts each quarter. The dividend is calculated on the unaudited year-end NAV. Based on the first interim dividend of 3.13p, the projected annualised total dividend of 12.52p per share represents an eye-catching +70% increase over the annual dividend that was paid to shareholders of any share class for the year ending 31 May 2024.

Schroder Japan (SJG) goes one better with 100% dividend increase. This follows the announcement in the latest full-year results that the fund is adopting an enhanced dividend policy to pay out 4% of the average NAV in each financial year. As for how enhanced, well the Board declared a final dividend for the year of 10.81p per share, an increase of 100.19% over previous year’s payout.