Insider: director’s £2m purchase is massive show of confidence

This well-known company received a boost from the latest mini-budget U-turn, and the CEO has dug deep again. A finance chief at a FTSE 250 firm has also spent big money backing their business.

Boss Julian Dunkerton’s £2 million swoop for more Superdry (LSE:SDRY) shares has highlighted his turnaround optimism following the fashion retailer’s recent return to profit.

Co-founder Dunkerton topped up his stake on Thursday at a price of 111p, which compares with 300p last November and the 500p in 2010’s £400 million stock market listing.

The shares closed last week at 121.6p after Friday’s disclosure of Dunkerton’s latest investment boosted confidence and retailers generally benefited from the mini-budget U-turn. That means the extra 1.8 million shares he bought were showing a profit of over £190,000.

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At 4.8 times forecast 2023 earnings, house broker Liberum reckons the retailer’s valuation is “extremely cheap”. It went on to praise the foundations put in place since Dunkerton returned to the helm in April 2019 with a renewed focus on design and quality.

Liberum has a price target of 500p, having seen annual adjusted profits of £21.9 million come in £10 million higher than its forecast and up from the loss of £12.6 million a year earlier.

The improvement in the year to 30 April was driven by 9.6% revenues growth to £609.6 million and a 350-basis points improvement in gross margin, partly offset by increased costs as one-off government rates and furlough support fell away.

The company now has 220 stores and around 475 franchisees and licensees, with operations in over 50 countries and more than 4,000 staff.

In the new financial year, sales for the 22 weeks to 1 October rose 7% year-on-year thanks to store growth of 14.3% as the shift to online during Covid continues to reverse.

Dunkerton, however, remains cautious about near-term prospects as the chain grapples with high levels of inflation and the accompanying impact on consumer spending patterns.

The cost pressures mean margins are down 230 basis points on the previous year and the company expects to deliver a reduced profit of between £10 million and £20 million.

A £70 million asset backed lending facility is also due to expire in January and will need to be refinanced, leading to a going concern note in the recent results from the company’s auditor. However, the company said discussions with prospective lenders have been encouraging and that it remains confident of a positive outcome.

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Overall, Dunkerton is pleased with progress and expects revenues to continue their recovery throughout 2023, albeit still short of pre-pandemic levels.

He added: “Superdry is a premium, affordable, brand, which should mean we are well-positioned as customers think more carefully about their purchases.

“That said, given the current challenging conditions, we continue to run the business prudently while remaining focused on delivering our strategic goals.”

Joint house broker Peel Hunt is supportive, with a price target of 375p after highlighting a current trading position that it says defies much of the sector gloom.

It added: “With better product, improved availability and recovering trade in Europe, Superdry’s recovery is more tangible and profitable on a valuation that appears to have given up.”

Dunkerton previously bought shares in May, when he spent £1.15 million at a price of 142p.

Light at end of tunnel for Darktrace?

Darktrace (LSE:DARK) finance boss Cathy Graham has followed the cyber security firm’s encouraging first quarter trading update by spending £95,000 on its FTSE 250-listed shares.

Her move on Thursday was at a price of 288p and came a day after Darktrace revealed that it had grown its customer base by 320 to 7,757.

This resulted in constant currency annual recurring revenues (ARR) of $511.5 million (£456.3 million) at the end of September, reflecting year-on-year growth of 40.5%. The progress was offset by a warning over the potential impact of a weaker pound on future reporting periods.

Shares recovered during Thursday’s stock market rebound and finished the week at 303.4p, with analysts at Jefferies highlighting a price target of 530p. Darktrace’s flotation in April 2021 saw shares initially priced at 250p for a valuation of £1.7 billion, before they hit a peak of just above 1,000p in September.

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Graham, who joined the Cambridge-based company in February 2020 and is on a basic salary of £393,750, told investors she expects sales momentum to be further supported by the phased roll-out of Darktrace’s new Prevent product family.

These interconnected artificial intelligence products were made available in the middle of the first quarter. Graham said: “We believe that Prevent product sales should start making positive contributions to our ARR growth and net retention measures in the second half of FY2023."

Graham has a minimum shareholding requirement of 200% of her base salary, but in the company’s recent annual report this was disclosed to be 241% at the end of June.