Falling multiples in comparable companies caused Electra Private Equity to write down all but one of its unlisted investments for the year ended 30 September.
The London-listed mid-market firm said the value of its portfolio was reduced by 26 percent, or £134 million (€160 million; $198 million), giving it a total value of £505 million. That was comprised of £403 million in direct investments and £102 million in fund interests.
The firm’s net asset value fell 10 percent over the year to £18.01 per share; coupled with a 25 pence per share dividend paid in March, it resulted in a negative return of 8.3 percent, Electra said. Its 2007 return was nearly 26 percent.
“Electra’s performance in terms of net asset value movement must be viewed against the background of the falling stock markets and others negative factors,” the firm said. “In the year under review, the FTSE All-Share Index fell by more than 25 percent and significant problems emerged in the financial system which affected many banks and other institutions.”
On Tuesday, Electra’s shares were trading at £9.90, a discount to NAV of nearly 52 percent.
That discount is in line with other European-listed funds, according to a research note issued last week by JPMorgan Cazenove, which upgraded its recommendation on Electra from in-line to outperform.
Analyst Chris Brown noted “the share price in our view is discounting an overly pessimistic outcome. Electra is also able to invest across the capital structure, which is vital in the current environment. It also has plenty of buyback ammunition”.
Electra bid on 19 transactions over the year, after having considered 186 deals, but noted its “cautious stance meant that it was frequently outbid by competitors”. As a result, its new investments totalled £114 million, versus £322 million the prior year.