15th Mar 2016 12:48
LONDON (Alliance News) - Crystal Amber Fund Ltd, the activist investor listed on AIM in London, on Tuesday raised concerns with the "pace and scope" of cost cuts at Grainger PLC, the UK's largest listed residential property owner and manager, and questioned the company's plan to invest in the private rental sector.
In January, Grainger revealed plans to invest GBP850.0 million in the private rented sector by 2020, cut overheads and sell non-core assets, following a review of its strategy. That followed the sale of its equity release division earlier that month to private equity investors Patron Capital Partners and constituent Electra Private Equity PLC, which agreed to pay GBP175.0 million in cash and take on GBP150.0 million in debt under the terms of the deal.
Crystal Amber, which owns 3.4% of Grainger and has been calling for changes since building its stake in 2015, on Tuesday said Grainger has not gone far enough. Grainger declined to comment to Alliance News.
"We note that last year Grainger, with a GBP900 million market capitalisation, incurred administrative costs of GBP42 million. Mountview Estates, a company in the same sector with a market capitalisation of GBP450 million, incurred administrative costs of GBP5 million. Neither is the fund convinced of the merits of investing GBP850 million into the private rental sector rather than reducing debt, particularly at the time of global financial uncertainty for asset classes," Crystal Amber said on Tuesday.
"We continue to believe that further significant value can be realised through either a spin-off of the regulated tenancies division or a sale of Grainger," the activist investor added.
Shares in Grainger were down 0.3% at 220.35 pence on Tuesday, shortly after midday in London, while shares in Crystal Amber were down 0.3% at 149.60p.
Crystal Amber's commentary came as the fund reported that its net asset value per share fell 7.3% in the first half of its financial year, to 155.9 pence per share on December 31. Including the dividend paid in August 2015, the NAV total return per share over the six-month period was negative 5.9%. Over the course of the 2015 calendar year, Crystal Amber's NAV rose 2.1%, generating a total return per share of 3.7%.
The fund paid dividends of 2.5p per share in August 2015 and February 2016.
Net realised gains over the six months to the end of December amounted to GBP3.1 million, Crystal Amber said.
Crystal Amber said its net asset value was boosted by its holding in Dart Group PLC, STV Group PLC and Leaf Clean Energy Co.
The fund continued buying back its own shares on the market in an effort to manage the price of its shares in relation to NAV. Over the first half of its financial year, Crystal Amber's shares traded at an average 0.7% premium to NAV. After the end of December, the 6.1 million shares held in treasury were sold at a price equal to NAV.
"Though market conditions have been and remain challenging, the fund will continue to focus on predominantly asset backed special situations and our activist approach which has proved its effectiveness. The fund continues to maintain a cautious stance, undertaking portfolio hedging as insurance against a significant fall in markets," Chairman William Collins said in a statement.
By Samuel Agini; [email protected]; @samuelagini
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Related Shares:
Crystal AmberGrainger plc