4 February 2015
By Maynard Paton
You may have gathered by now that I do like my companies to have hefty insider ownership.
My theory is simple: I’m convinced directors are more likely to run their businesses successfully — and are therefore more likely to deliver satisfactory returns to outside investors such as you and me — if they boast significant shareholdings themselves.
I’m certainly hoping that’s going to be the case at Andrews Sykes (ASY), where the chairman and his family own 90% — yes 90%! — of the company.
Such shareholder dominance will of course mean this £127m hire business won’t be for everyone. Indeed, the tycoon in charge has adopted a very haphazard dividend policy and does not believe in standard boardroom governance. He is also very old at 94.
Nonetheless, a closer look ASY’s accounts reveals exactly why he wants to own so much of this company. Super margins, immense cash flow and lofty returns on capital in particular mark ASY out as a top-quality operator — and drew me in during May 2013 at an average of 233p.
So far at least, the threat of being ‘done over’ by a boardroom fiefdom has not emerged.
Instead, I have enjoyed a satisfactory return, with the shares rising to 300p — plus a sizeable 29.7p dividend for 2013 representing a lovely 12.7% income on my purchase price.