(Update) Fund manager Neil Woodford has been hit by another share price crash after AA Group (AAAA) fired its executive chairman Bob Mackenzie for gross misconduct and lowered its full-year forecasts.
Shares in the roadside recovery and motor insurer dropped 18% when the news broke yesterday but closed the day 13% down at 210p. The 33p slide in the share price reduced its market capitalisation to £1.3 billion and left it below the 250p price at which it floated in June 2014.
Today the shares regained 4p or 2% to 214p.
This is the third holding of Woodford’s to have suffered a big one-day plunge in the past week. Last week AstraZeneca (AZN) shares crumpled on news of a setback in its Mystic cancer treatment trials, and Provident Financial (PFG) tumbled after full-year results confirmed a profits warning last month by the consumer credit company.
Woodford backed AA at its flotation and owns 12% of the stock through his funds. Although a leading investor in the company, AA’s share price slide has less impact on Woodford and his investors than the other setbacks.
The stock accounted for 0.9% of his flagship Woodford Equity Income fund and was the 32nd biggest position out of 135 holdings at the end of June, according to the company’s website. It represented 1.3% of the Woodford Income Focus fund launched in March, ranking 37 out of 54 stocks.
By contrast, Astra and Provident were the first and fourth biggest holdings in both Woodford funds, with 8.7% and 4.6% respectively of the £10 billion Equity Income fund.
Mackenzie became AA’s executive chairman after leading a management buy-in as part of the flotation after it was previously owned by private equity firms Permira, Charterhouse and CVC.
Analysts had hoped Mackenzie would restructure the business that yesterday admitted to suffering a combination of an erratic work load and a fixed cost base in the first half of the year.
‘Bob Mackenzie has been removed by the board from his role as executive chairman, from his other roles and as a director and as an employee of the company, for gross misconduct, with immediate effect,’ AA said in a statement.
‘This is a personal conduct matter,’ a spokeswoman told Reuters, adding that Mackenzie was not being referred to financial regulators.
Reports suggest that Mackenzie was dismissed after a fracas with a colleague in a hotel bar. The Telegraph reported the 64-year-old's son, Peter, saying his father was suffering 'an extremely distressing mental health issue' and had been admitted to hospital.
Analysts at Liberum said they did not believe his departure was related to any fraud. They maintained their ‘buy’ rating on the stock, saying that even though AA now expected its full-year performance to be broadly in line with its last financial year, its free cash flow was still very strong.
Citywire A-rated Woodford (pictured) is not alone in AA. The top-performing Liontrust Special Situations fund, managed by Citywire AAA-rated Anthony Cross and Julian Fosh, owns 3.4% of the shares, according to Thomson Reuters data.
Figures from fund performance data provider Lipper to the end of July, before AA fell, show Woodford Equity Income has underperformed the stock market and rivals in the short term but in the longer term has done well.
Over three months it has fallen nearly 1% compared to a near 3% gain in the FTSE All-Share index and the 1.5% average gain of funds in its IA UK Equity Income sector.
Over one year the gap is accentuated with the fund up 5.5% but lagging the 15.5% advance in the All-Share and the 13.2% growth in the average UK Equity Income fund.
However, more significant is the performance since its launch on 2 June 2014. Since then it has generated a total return of 34.9%, beating both the 23.3% from the All Share and the 24.2% average gain in UK Equity Income funds.
Woodford Income Focus has got off to a slow start, the data shows, up just 0.4% since its launch on 20 March against a 1.8% rise in the All-Share index and a near 1% gain in the average fund in the IA Specialist sector in which it sits.