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Odey's Hanbury hails 'hero to zero' Mike Ashley

Odey's Hanbury hails 'hero to zero' Mike Ashley

Odey’s James Hanbury has said the company continues to stand behind controversial Sports Direct boss Mike Ashley (pictured) describing him as ‘one of the most talented entrepreneurs and retailers in the UK’.

Formerly feted by the media and political establishment over his stewardship of the discount retailer and its policy of broadly distributing bonus rewards across its permanent staff, Ashley’s reputation has been tarnished by more recent revelations about employment conditions in its warehouses.

Seemingly needless battles with MPs over his attendance at a parliamentary select committee and skirmishes with investors over corporate governance have also drawn blistering public criticism.

Hanbury, manager of the CF Odey Absolute Return and Odey Allegra Developed Markets funds, cited the stock as an example of how the Odey investment busines is prepared to back value, however.

The company is the third largest holder of Sports Direct stock, owning 5.1% of equity or 28 million shares worth £112 million at a recent price of 402p, according to Reuters data, with Hanbury’s Absolute Return fund the largest single holder of the stock, owning 5.9 million shares  

The house has been an active buyer this summer, as its shares have come back from a low of 257p last year. The valuation remains a shadow of the 916p it reached in early 2014, however.

‘The politicians and press took Mike Ashley from hero to zero but here is a man who is one of the most talented entrepreneurs and retailers in the UK today,’ Hanbury said. ‘He made a bad hedging decision around Brexit but he took the hit not his investors.

‘He is selling brands everyone said were dead at 30% below anywhere else; he is the owner-manager and puts everything into making the business work.

‘The market’s view, that Sports Direct’s underlying free cash flow (FCF) as a percentage of market capitalisation was 7.9%, was not our view; after the release of some assets we valued the FCF as a percentage of market cap at nearer to 17%.

‘I like being where the perceived risk is high but the actual risk is significantly lower.’

A period of unexciting performance has turned trickier for Hanbury’s Absolute Return fund since Brexit,  with the portfolio up 4.9% over the last three years versus a Citywire Alternative Ucits Long/Short Equity peer return of 11.8%.

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James Hanbury
James Hanbury
60/72 in Alternative UCITS - Long/Short Equity (Performance over 3 years) Average Total Return: -6.4%
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