Battle royale plays out behind the scenes at Pinewood studios

Pinewood faces activist interest Pinewood, the British film studio that is home to the James Bond franchise, is facing a villainous spectre from its past in the form of activist fund Crystal Amber.

The fund first attacked the studio in 2010 when it called for the removal of chairman Michael Grade. That failed, and the activist eventually sold its 28.3 per cent stake to Peel Holdings, the Manchester-based conglomerate which is now Pinewood's largest shareholder.

This month, Crystal Amber saw a chance to buy back into the company as part of a £30m share placing by Pinewood which was aimed at helping fund its expansion plans. The fund snapped up a holding of just over 4 per cent in the studios.

Crystal Amber's decision to invest again - at 375p per share, having sold at 200p in 2011 - highlights the transformation that has taken place at the studio in the intervening years. One thing that has not changed, however, is that Lord Grade is still chairman.

Richard Bernstein, who runs the fund, plays down the idea that he will renew a war against Lord Grade, a former chairman of the BBC. "Our interest in Pinewood is about shareholder value," he says. "We are not here to have a spat in public or in private with Michael Grade."

Even so, Mr Bernstein says that the "corporate governance issues" that it flagged in 2011 have not been addressed. He argues that Pinewood, which has hosted the latest Star Wars and Avengers productions, should be far more profitable.

According to his calculations, the studio's return on capital employed - a measure of profitability - is lower than 5 per cent, which he describes as "bafflingly low".

Pinewood has enjoyed strong revenue growth in recent years as Hollywood film producers have flocked to the UK to take advantage of its facilities, the favourable dollar/sterling exchange rate and the film production tax relief provided by the government.

But its profits have not increased as smoothly as its sales. In 2014, Pinewood posted operating profit of £4.9m on revenues of £64.1m. Four years earlier, in 2010, its operating profit was £9.1m on revenues of £43.4m.

"We see enormous value in the business and tremendous scope to improve profitability," Mr Bernstein says, while declining to explain in detail how exactly this could be achieved.

Pinewood declined to comment on Mr Bernstein's views.

But the Aim-listed company has taken several significant steps to accelerate its growth in the years since Crystal Amber appeared on its share register.

The most significant was in June 2014, when, after a seven-year battle with the local council, Pinewood finally won planning permission for a £200m expansion on greenbelt land next to its main site in Buckinghamshire. This was vital for the company as it was starting to hit capacity constraints and faced the prospect of having to turn away business.

The second big development came in December, when Pinewood took full control of Shepperton, its second-biggest studio site. The company paid £36.8m to Aviva Investors, the asset manager, which owned a 50 per cent interest in Shepperton through a joint venture set up to develop the site in 2006.

Sahill Shan, analyst at N+1 Singer, Pinewood's house broker - who is the only sellside analyst to publish research on the thinly-traded stock - says the expansion of Pinewood's main site is a "game changer". As a result, he forecasts that the company will be able to almost double its adjusted earnings per share from 11.5p in 2014 to 19.6p in 2018.

"We see it as well positioned to drive the next leg of growth," he said. As the leading international independent studio, Pinewood could "capitalise on the structural trend towards big-budget movies and high-end TV dramas".

Crystal Amber clearly agrees. But for every buyer there is a seller. Peel Holdings, Pinewood's biggest shareholder, reduced its stake in the company from 58 per cent to 39 per cent in the placing on Thursday.

Now, as in 2011, Crystal Amber and Peel Holdings appear to have divergent views about Pinewood's future.

Low-profile fund aims to crystallise value

Crystal Amber is an Aim-listed "special situations" activist fund, which targets small and mid-cap companies in the UK and Ireland.

Founded by Richard Bernstein, the fund has about £150m of assets under management and is up 49.5 per cent since listing in 2008. Its name is a mash-up of Amber Analysis, a research house founded by Mr Bernstein in 1994, and the concept of "crystallising value".

Though the fund itself has a relatively low profile, its has some well-known shareholders, including Neil Woodford, who bought a 10.1 per cent stake in January. Other big investors include Baring Asset Management, Aviva Investors and Rathbone Investment Management.

Crystal Amber's recent targets have included chocolate retailer Thorntons and Irish airline Aer Lingus, which is its biggest holding.

However, despite a good share price run for the Irish flag carrier on the back of a takeover bid by International Consolidated Airlines, the fund's net asset value performance underperformed its benchmarks during the first half.

Crystal Amber says that while most of its activism takes place in private, "we are willing to make our concerns public when appropriate".

In 2010, the fund protected PayPoint, a payment provider in its portfolio, by publicly lobbying against a request by Camelot, which runs the National Lottery, to expand its commercial offering.

Crystal Amber says it likes to invest in "off balance sheet assets" that are often overlooked by investors, such as Aer Lingus's 23 pairs of Heathrow landing slots.

Mr Bernstein is also chief executive of Eurovestech, a European-focused fund that invests in technology companies.

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