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Directors’ Deals: Aston Martin chair increases stake

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Shareholders in Aston Martin Lagonda have seen the value of their equity depreciate even more quickly than owners of the prestige car maker’s vehicles. Anyone who invested in its IPO five years ago (at 19,000p a share) will have suffered a total return of minus 94 per cent, according to FactSet. A DB Vantage bought in the same year would have been a much better store of value — and you’d have had the pleasure of driving it in the meantime.

Aston Martin has continually lost money and frequently had to issue new shares to keep the show on the road. Lawrence Stroll, who became chairman after his Yew Tree Consortium rescued the company in January 2020, has since overseen five equity raises through a combination of placings and rights issues that have brought in over £1.5bn of fresh funding. 

Among those stumping up the cash are several new “strategic” investors, including Saudi Arabia’s Public Investment Fund, Mercedes Benz and Chinese carmaker Geely

Last week, consortium members increased their stake by around 3.3 per cent to 26.2 per cent. Stroll bought almost £20mn worth of shares and said in an accompanying statement that the investment demonstrated its “belief in the future of Aston Martin” and the shareholder value it will deliver.

There are definitely signs of progress. AML’s first-half pre-tax loss halved to £142mn on the same period in 2022 as revenue increased by 25 per cent. Yet even after raising £650mn at the back end of last year, net debt still stood at nearly £850mn at the end of June and the company was continuing to bleed cash. The turnaround still has some way to go.

Breedon chair’s business builds stake

Aggregates group Breedon continues to outperform building materials peers. The acquisitive company’s model of owning a greater share of the value chain than peers is paying dividends, with half-year results showing that despite an overall decline in volumes, pricing power allowed it to increase like-for-like revenue by 7 per cent. Like-for-like operating profit was up by 4 per cent.

The fact that it only generates 20 per cent of its revenue from housebuilding has helped. So, too, has its exposure to a still-thriving infrastructure sector — it is the source of half of the group’s sales. 

Breedon moved from the Alternative Investment Market to the main market in May this year and joined the FTSE 250 in September.  It has typically earned double-digit operating margins and good levels of cash generation have allowed it to quickly repay acquisition-related debt. 

Adjusting for a five-for-one consolidation undertaken at the time of its move to the main market, Breedon’s shares are up by more than a quarter over the past 12 months. Still, at just 10-times FactSet consensus forecast earnings, they are priced well below their five-year average of 14-times. Chair Amit Bhatia clearly thinks they are undervalued. A company linked to him, Abicad Holding, bought over £45mn worth of shares in early October (some of which feeds into this week’s disclosures, with the remainder falling into next week’s). A statement from Abicad on October 3 said that it planned to increase its stake “over time” but that it was holding the shares for investment purposes and does not intend to make an offer for Breedon. Abicad further upped its stake by around 4 percentage points over the next couple of days to 18 per cent. It has been a significant shareholder since 2015 after an associated company sold the Hope Construction Materials business to Breedon for £336mn.

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