Investors not convinced by Electra’s new strategy since booting its manager
Listed private equity firm Electra Private Equity said today that it had generated a strong return for shareholders and slashed management fees, in its first year-end results since showing its investment manager the door.
Under the leadership of activist investor Edward Bramson earlier this year, Electra tore up its agreement with longstanding investment manager Electra Partners – now operating alone as Epiris – which was responsible for making deals with the firm's cash.
During the "year of change", Electra – which is one of the oldest private equity firms in the UK – said it had made a 21 per cent return for shareholders. But this compared to a 35 per cent total return last year, when Electra was still working with its investment manager.
"I am pleased to report on a year that has seen the company take great strides in defining and implementing its future strategy whilst continuing to deliver excellent financial returns for our shareholders," said chairman Neil Johnson.
Bramson, who had been leading the company as interim chief executive, said he would step back into a non-executive role. The chief executive functions will now be split between Johnson and the chief finance officer, Gavin Manson.
The firm announced earlier this year that it would be making no new investments for the foreseeable future, blaming unfavourable market conditions. In today's update, it appeared to be sticking by this plan, adding that asset prices were too high and there was too much private equity money around the globe competing for deals.
Instead, Electra said it would focus on the few companies which it does still own. Before Epiris's contract with Electra actually ended, the manager rapidly sold a number of companies in order to gain its share of profits from the sales – but left Electra with TGI Fridays, Photobox, Hotter Shoes and property company Knight Square.
Electra today called these "strategic corporate assets", saying it had employed an in-house team to manage their development and would be recruiting more private equity professionals to build the team over the next year.
Analysts at Numis, however, contradicted Electra's positive spin. They said the firm's portfolio was actually "a rump of investments that Epiris did not sell before its management contract ended", and that both gift personalisation business Photobox and Hotter Shoes had suffered writedowns in the year.
Using the money from sales which Epiris did achieve before its contract ended, Electra returned £1.5bn to shareholders over the year in the form of special dividends and share buybacks. It today said that it would not pay an ordinary dividend due to the "exceptional level of special dividends".
But despite these payouts, investors seemed unconvinced about Electra's future. Shares were down 2.71 per cent at the close.