Electra Private Equity has responded to shareholder Edward Bramson’s attack on its performance, insisting his criticisms are “unverifiable and unsubstantiated” and reveal “a lack of understanding” of its business.
The London-listed investment trust hit back today after Bramson, who has amassed a 20 percent shareholding via hedge fund Sherborne Investors, criticised Electra in a letter to shareholders last week. He said the trust had underperformed and relied too heavily on financial engineering, and reiterated his call for a strategic review.
Bramson also claimed that Electra’s value could be increased by more than £1 billion. However, Electra scoffed at this suggestion today, arguing that Bramson provided insufficient evidence of how that could be achieved, and that he didn't have enough information to make such a judgement anyway.
“Sherborne’s claims appear to be based upon analysis of a 'representative' sample of Electra’s portfolio companies; in reality, they are based on public information covering less than 30 percent of the current investment portfolio,” Electra said in the statement.
Electra also denied that it relied too much on financial engineering. “Over 50 percent of Electra’s realised investment returns have come through profits growth and, since 30 September 2010, Electra portfolio companies have grown profits at a weighted average compound rate of 9.2 percent,” it said.
The trust rejected the suggestion that its performance is in decline, insisting that it had consistently outperformed the FTSE 250 Index over the last 10 years, including in each of the last three years. Compared to unlisted private equity peers, the returns generated by Electra Partners are in the top third across 2006, 2009 and 2012 vintages, with the 2006 vintage in the top decile, it added.
Moreover, Electra said, in the 10 years to 31 March 2014 Electra has delivered a 14 percent annualised return on equity, at the upper end of its target range of between 10 percent and 15 percent.
In a response to Sherborne’s complaint about increasing investment fees – which according to the activist shareholder have absorbed more than 42 percent of the total return on Electra’s investments, reducing shareholders’ NAV by approximately £275 million over the period – Electra said it reviews its fee structure annually and “believes the fees charged by the manager are broadly in line with market standard”.
Electra Private Equity, whose investment manager is Electra Partners, led by chief investment partner Alex Fortescue, repeated its previous warning about Sherborne’s request to lead a strategic review, saying that this would “have a deeply destabilising effect and risks disrupting the continuation of this highly successful track record and destroying significant shareholder value”.
It urged its shareholders again to vote against all Sherborne’s proposals during the general meeting on 6 October, which include the removal of Geoffrey Cullinan as a director and two board seats for Ian Brindle and Edward Bramson.
At 11.25 BST, Electra shares were up 22p to 2,683p, a 0.83 percent increase, giving the trust a market capitalisation of £950.06 million.