London-listed investment trust Electra Private Equity made a total return of 15 percent in the six months to 31 March 2016, outperforming the FTSE All-Share by almost four times.
The trust’s performance in the period was boosted by portfolio company profit growth and cash generation, it said.
The trust reported a total net asset value (NAV) per share of £44.05 ($63.84; €55.54) and announced an interim dividend of 44 pence per share, an increase of 16 percent on the corresponding period last year and in line with Electra’s policy of returning to shareholders a targeted 3 percent of NAV per annum, said Kate Barker, the trust’s interim chairman.
“What’s very pleasing is that it’s a set of results that is driven by performance across all aspects, both good performance within the companies, some very good realisations, and also in the period there have been some very interesting new investments,” Barker told Private Equity International.
The latest results come in the midst of a review of Electra’s investment strategy, policy and structure which was launched in January at the behest of Sherborne Investors, the trust’s largest shareholder with just less than 30 percent of shares.
Sherborne had been critical of the board in a number of areas, including the performance of the trust’s underlying portfolio companies and the relationship between the board and Electra Partners, which manages its portfolio. Following a shareholder vote in November Sherborne representatives Edward Bramson and Ian Brindle were appointed to the board.
In its statement, Electra reiterated that its strategy and investment policy has remained “substantially unchanged for almost 10 years”, and the board considers “now is the right time to conduct a review, given that a portion of shareholder wish such a review to take place”. The review is expected to be completed during the autumn.
“Performance over the last 10 years has been very good, and it’s absolutely the case that any changes have to meet the test that they are clearly better for shareholders than the arrangements we have today,” Barker told PEI.
“We are looking for possibly one more [non-executive director] to add to the board to ensure that we continue to have a very good balance of independent directors following the board changes that came about last November.”
In April, Electra appointed Neil Johnson as non-executive chairman and director. He will take over from interim chairwoman Barker on 12 May. Former chairman Roger Yates resigned on 5 November following the shareholder vote to approve the appointment of Bramson and Brindle as board directors.
In January, Electra Partners appointed Alex Fortescue to take over as managing partner from Hugh Mumford, who retired after 34 years at the firm. Mumford, who remains chairman of the Electra Partners Investment Committee, said the move was part of a succession plan that had been in the works since 2010, as reported by PEI.
Electra posted an investment return of £299 million for the period, 75 percent of which came from realised exits, profits growth and cashflow growth. Of that return, around half came from three Electra portfolio companies – Parkdean Resorts, The Original Bowling Company, and Elian – each of which has recently completed “transformational M&A”, said Fortescue.
“We expect to see more of the same. We’ve got a very active programme of further potential bolt-ons to portfolio companies. We see by and large good mileage in terms of further growth from our companies,” Fortescue said.
The trust made realisations of £384 million, including full exits of fine art materials supplier Daler-Rowney and Zensar Technologies.
Electra also committed to invest £203 million during the period, comprising two platform deals – PhotoBox and Grainger Retirement Solutions – as well as several debt investments. As at 31 March 2016 Electra held six debt investments with an aggregate value of £59 million.
Electra Partners chief investment partner Bill Priestley told PEI that the UK mid-market remains “quite tough”, but that the firm had managed to find some interesting opportunities and is “in advanced stages on two or three new transactions, which we very much hope to close in the next six months”.
Electra is also not anticipating much of an impact from the referendum on the UK’s membership of the European Union.
“By and large it’s not going to have a profound effect on the deals we’ve got in the pipeline,” Fortescue said.
“We don’t think it will have a big impact on the existing portfolio, and it’s not determining the timing of new investments on our side.”
At 12:15 BST Electra shares were trading up 5.67 percent at £38.04, giving the investment trust a market capitalisation of £1.53 billion.