AA share price crashes: Can new boss Simon Breakwell get road recovery giant the AA back on track after a series of setbacks?
Shortly after the AA’s float back in 2014, boss Chris Jansen handed the reins over to Bob Mackenzie, a man he had referred to only weeks earlier as an “elder statesman”.
Mackenzie was credited at the time with driving through the AA’s innovative management-buyout-cum-stock-market listing, a manoeuvre backed by big-name investors including Neil Woodford and Blackrock.
Many in the City bought into the AA’s investment story, sending shares up to more than £4 a pop in their first year of trading, from a listing price of 250p.
Mackenzie refused to commit to a dividend policy at the time, saying the AA would use its healthy cash flow to reduce a £3bn debt pile. All very sensible, one may have presumed.
Read more: AA shares crash as investors break down in response to turnaround plan
Fast-forward to today and the whole AA experience looks like one big car crash. Last summer, after Mackenzie abruptly left the firm following a now-infamous fracas at a posh Surrey hotel, shares plummeted by around a third.
And yesterday, when dividends were cut and 2019 earnings downgraded, shares lost another 28 per cent.
Meanwhile, the AA’s debt pile has been stuck in first gear. A company now worth around £500m still owes bondholders around £2.8bn – so much for paying it down.
The incident with Mackenzie last summer, in which he is reported to have clashed with insurance chief Michael Lloyd, concerned plans for a tie-up with FTSE 250 motor insurer Hastings.
Read more: AA demands sacked chair Bob Mackenzie pay back £1.2m bonus
Yesterday, new boss Simon Breakwell seemed to back Lloyd’s point of view, saying it is time for the AA to “accelerate” further into the insurance market, while innovating and growing the firm’s roadside operations.
Breakwell exudes confidence. However, he must know that the motor insurance game is a tough nut to crack. Concerns persist around whiplash reforms, discount rate changes and potential increases in insurance premium tax – and this is before you consider the wafer-thin margins.
The AA still enjoys an exceptionally strong brand – despite last year’s executive punch-up. Few British firms could make a serious claim to be the country’s “fourth emergency service”.
But while the strength of this brand gives the new boss an opportunity to sharply reverse his company’s fortunes, an army of short-sellers believe the AA’s nightmare journey has further to run.