It has been a hectic few weeks for Acromas, which is backed by private equity firms Permira, Charterhouse and CVC. Last month, it floated off over-50s travel-to-insurance group Saga (SAGA) - its shares have dropped 8 per cent since. And this week, it pushed through the IPO of roadside assistance specialist, the AA (AA.), at a flotation price of 250p a share.
Unfortunately, the AA's stock market debut has proven to be just as disappointing as Saga's. By the close of the first day's trading, the shares had slumped 7 per cent from the flotation price and they've continued to drift sideways since then. It's perhaps fortunate that - unlike with Saga - there was no retail element to the offer. Instead, the shares were offloaded to institutions through a complex arrangement whereby the stock market was used as a platform to arrange a management buy-in - led by former Green Flag boss Bob Mackenzie - and backed by a pre-agreed group of investors. These included such big names as Aviva, Blackrock and Legal & General.
Certainly, the AA boasts an impressive brand and, with around 12.5m roadside assistance customers, it's also the market leader - in contrast, the RAC has around 8m members. But growth is hardly stellar. In the year to end-January, roadside assistance - responsible for over 70 per cent of group revenues - saw sales rise less than 3 per cent and growth was actually flat in the first three months of the new financial year. While revenue from the next largest segment - insurance - fell 8 per cent last year, principally reflecting lower policy volumes.
Most significantly, the AA has also accumulated a hefty £2.85bn net debt pile, representing over twice the group's market value. That doesn't bode well for dividends and the IPO prospectus emphasised that the AA "does not anticipate paying any material cash dividends in the near future".
