Mike Ashley launches yet another share buyback as firms return record amounts of cash to shareholders
Plans: House of Fraser is Mike Ashley-owned
Mike Ashley has launched yet another share buyback as firms return record amounts of cash to shareholders.
Ashley’s retail group Frasers plans to repurchase up to £70m of its stock.
The company, which owns brands including Sports Direct, Jack Wills and House of Fraser, has already handed back around £300m to investors since May.
And figures show the biggest companies listed in London have already committed to spending almost £33billion this year through buybacks.
Shell, Rio Tinto and British American Tobacco are among the 29 FTSE 100-listed firms with bumper buyback plans.
Shell’s is largest, worth around £6.3billion, while Aviva expects to spend £3.8m and consumer goods giant Unilever £2.5billion.
AJ Bell analysts believe the surge is on course to break 2018’s record of £34.9billion.
Russ Mould, investment director at AJ Bell, said: ‘It seems likely that 2022 could surpass that year’s record quite easily.’
A company buys back shares to return money to investors, as an alternative to paying dividends. As firms recover from the pandemic, many have set smaller, more achievable dividend strategies and have used buybacks to top up the amount they hand back.
This keeps investors happy and can be more tax-efficient for them. But it can benefit a company as it bolsters the share price and, if earnings are calculated on a share-by-share basis, make these higher.
Sceptics say it can amount to manipulating the stock price.
Anybody who keeps their shares rather than selling ends up owning a slightly bigger part of the company. On the huge programmes planned for his year, Mould said it was always worth considering whether it is ‘financial engineering’.
He added: ‘It may at least help to ease such concerns that the largest buyback schemes are being run in sectors that have been out of favour for a very long time, and could therefore be potentially cheap – financials (both banks and insurance) and oils, although consumer staples are not far behind.’
Frasers Group recently upped its stake in Hugo Boss and now owns 4.5 per cent. It is understood to be looking at buying shirt-maker TM Lewin.