Electra: ‘Sherborne episode cost £3m’

The London-listed investment trust said operating expenses tripled as a result of its tussle with the activist shareholder

Electra Private Equity has spent a total of £3 million (€3.8 million, $4.7 million) in its battle with activist shareholder Edward Bramson, it said in its full year results on Thursday.

Operating expenses for the year to 30 September 2013 reached £6 million, up from £2 million for the previous year, the London-listed trust said.

Following an extraordinary general meeting in October, at which Bramson’s hedge fund Sherborne Investors attempted to win support for two board seats and a strategic review, Electra launched a review into its fee arrangement, its capital structure and its distribution policy. Speaking after the release of the firm’s full year results today, chairman Roger Yates said the firm should be in a position to update the market on the review “in the next few weeks”.

Electra reported another record year of investment, deploying £410 million in the year ending 30 September 2014, up from its previous record of £337 million in 2013. Investments during the period include Hotter Shoes, in which the firm invested £85 million of equity, The Original Bowling Company, which it acquired for £91 million, and Innovia Group, in which it invested €40 million as a cornerstone investor.

Realisations totalled £352 million, down from last year’s figure of £459 million. However, total return was up at £246 million, compared to last year’s £222 million. The firm’s diluted net asset value per share was up 15 percent to 3,174 pence, and its diluted return per share was 419 pence, up from 298 pence.

“Our long-term target is to produce a 10 to 15 percent return on equity every year,” Alex Cooper-Evans, partner at Electra Partners, told PEI. “Over the last 10 years we’ve delivered 14 percent, so right at the upper end of that target range.”

Cooper-Evans said performance of newer assets, including AXIO Data Group and Park Resorts, contributed substantially to this year’s returns. AXIO posted a gain of £57 million, the largest in the portfolio, while Park Resorts recorded a gain of £51 million.

Electra Partners chief investment partner Alex Fortescue said that in an environment of fairly high pricing, the firm has been focusing on a few key areas. “We think at the moment that relatively low growth, but stable cash-generative businesses are comparatively undervalued, and so we have been focusing particularly on those,” he said, citing The Original Bowling Company as an example of such a business.

Electra has also invested in several higher growth businesses, such as Hotter Shoes and Elian, the fiduciary services arm of the Ogier Group, which it acquired in June for £180 million. “Our average entry price has been 7.5x EBITDA in a market where the average entry price has been 10.6x,” Fortescue said. “I don’t think we are seeing that we have loaded up with a series of very expensive assets at very high prices. We’ve been able, using that strategy, to keep average prices down.”

Fortescue said Electra has a “busy pipeline”, and is expecting “another year of significant investment”.

Electra shares rose 3.92 percent today on the results to 2,680 pence per share, giving the firm a market capitalisation of £951.62 million.