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Electra underperforms as it shrinks

07
2017
December

Electra underperforms as it shrinks – Electra Private Equity reports that, for the year ended 30 September 2017, its NAV total return was 9%, well behind that of the Mid 250 Index at 14%. Including their third special dividend announced 23 October 2017, they have returned GBP1.8bn to shareholders since 1 October 2016. The shareholder return was 21% as the discount narrowed (although this has widened since the end of the period and is now 13.7%).

Edward Bramson will become a non-executive director from March next year. Neil Johnson is to take on a role of executive chairman (good corporate governance practice is to separate the roles of chairman and chief executive). The strategic review also confirmed the board’s view that a listed closed-ended fund structure is not optimal for private equity investment (not a view that is held widely). The company is considering the migration from a closed-ended investment trust to a corporate structure in due course. The intention is to change its name to remove the words “Private Equity” to “better reflect its revised strategic focus”.

The central headcount has gone from two to ten as responsibility for the management of the portfolio has shifted in-house. In addition, there are nine directors. The market cap is now £368m. The changes make it hard to calculate a meaningful ongoing expenses ratio and, if Electra repositions itself as a company going forward, it won’t have to report this figure in future reports.

There is not much mention in the statement about the underlying investments in the portfolio. “market conditions are not conducive to significant numbers of attractive new investment opportunities” i.e. they think markets look expensive. They go on to say that “As such, investment activity in the short term is likely to be focused on the existing portfolio, as reflected by a GBP35m additional investment made in TGI Fridays” is about as far as it goes. Hopefully there will be more in the annual report.

ELTA : Electra underperforms as it shrinks

 

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