Direct Line (DLG) – Changing Strategy
DLG just had a capital markets day where they set out their new strategy “to do fewer things better”:
- Sustainable growth in motor and putting Direct Line onto price comparison websites.
- Rebalancing portfolio to grow home, commercial, and rescue.
- £100m of cost savings.
This is defensive, and is more about survival than growth. They will face tough competition on the comparison sites. The investment case was that the fears were overdone, but this business is shrinking, and I am less enthused from here. We had the bid approach from Ageas, which validated my thesis, but the board rejected it. I held out for good things to keep happening, but I no longer believe there is much to look forward to.
Direct Line
I have decided to exit the position at 191p. The purchase price was 166p on 22 February 2024. With 4p of dividends, the IRR is 80%.
Please let me know your thoughts by emailing me at charlie.morris@bytetree.com or tweeting me @AtlasPulse.
Many thanks,
Charlie Morris
Editor, Venture
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