Companies in the news ... and how they were assessed
AA: roadside wreck?
The AA’S former boss was fired last year following “an alleged punch-up in a hotel bar”, said John Stepek on Moneyweek.com. His replacement, Simon Breakwell, doesn’t seem to be having much luck either. Shares in the breakdown firm plunged 28% last week, after it issued a profit warning and slashed its dividend as part of a turnaround plan. Investors who bought when it listed in 2014 have “now lost nearly two-thirds of the value of their stake” – including “poor old Neil Woodford”, the once-celebrated fund manager, “who is rapidly turning into the ultimate contrarian indicator” due to his recent record of disastrous stock picks. Woodford took advantage of the fall to boost his AA stake to 15%. I wouldn’t advise following suit. Competition in the sector is intensifying even as cars become more reliable. And the legacy of a previous spell under private equity ownership is a “massive” debt. Nonetheless, last week’s “savaging” looks overdone, said Iain Dey in The Sunday Times. “Electric cars, unexpectedly, may offer a brighter future. Apparently, those heavy batteries increase strain on tyres, leading to more call-outs for punctures.” Sadly, no one seems to be buying that line, said Alistair Osborne in The Times. The AA’S shares took a further 12% hammering this week as analysts fretted “about the £2.7bn net debt in the boot”.
Provident Financial: meteoric leap
Fortunately for Neil Woodford, what you lose on the swings you sometimes gain on the roundabouts, said Oliver Gill in City AM. Another of his big bets, the embattled doorstep lender Provident Financial, has staged a remarkable comeback. Shares surged 75% on Tuesday morning, gaining more than £600m in three hours, after fines imposed by two separate regulatory investigations into its business practices turned out to be less severe than expected. As a result, the Bradford-based lender said it only needed to raise £300m in a rights issue, rather than the £500m the market had anticipated. With luck, Provident can now draw a line under a distressing chapter in its history. “Provident’s return to form” gives Woodford and his investors “a timely boost”: his fund had already sustained £1bn in losses in 2018, following £2bn incurred in the latter half of last year. Yet even after this week’s “surge”, Provident’s shares are still trading “well below” their level before last summer’s first profit warning, said Daniel Grote on Citywire. Woodford said that he expected Provident to rebuild its reputation as a “premier” sub-prime lender. There’s still some way to go before his own good name is secure.
Aston Martin: revving up
After a lengthy spell languishing under tarpaulins, James Bond’s favourite British luxury carmaker is once again firing on all cylinders, said Jon Yeomans in The Daily Telegraph. Declaring “job done” on its turnaround, CEO Andy Palmer announced that Aston Martin had “raced back to profit” in 2017, making £87m after eight years of losses. There are now hopes of a flotation. Under Palmer, the “iconic marque” has “refreshed its stable of cars and released the hit DB11”. Three new models are planned for this year, with a sports utility vehicle in the pipeline for 2020. Palmer dismissed suggestions that Brexit might force a move abroad. “The brand is all about handmade British cars,” he said. “I don’t think there is any scope to manufacture outside the UK.”