Insider: directors spend £1.4m on two FTSE 100 stocks

Both these companies have struggled recently, but heavy buying by board members suggests they think the shares are good value. City writer Graeme Evans runs through the latest deals.

10th June 2024 08:12

by Graeme Evans from interactive investor

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Confidence in the struggling shares of Reckitt Benckiser Group (LSE:RKT) and Entain (LSE:ENT) was shown last week when directors of the two FTSE 100 companies made a series of insider purchases.

Two of the deals worth almost £70,000 involved Entain chair Barry Gibson, even though his five-year stint on the board of the Ladbrokes and BetMGM business is due to end by September.

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Interim chief executive Stella David, who will step into Gibson’s role once a full-time boss has been appointed, also disclosed a £1 million investment in Entain shares made through her husband. Senior independent director Pierre Bouchut spent £69,500.

The trio’s purchases took place at prices between 685p and 694p and followed a 40%-plus reverse for shares in the past year, the third worst in the FTSE 100 over that period.

The stock closed the week at 716.4p but that’s still weaker than before the findings of a strategic review concluded that Entain has the right assets, brands and geographic footprint. The study was launched in January with the focus on maximising shareholder value.

Gibson, whose overall interest in Entain shares is worth more than £1.4 million, said last month that the company still had work to do to improve its operational performance but that the board is pleased with progress so far in 2024.

He added: “The group has the core strengths, brands and products to be competitive across its markets and continues to be a global leader in betting and gaming.”

A day after the disclosure of this week’s boardroom purchases, it emerged that New York-based activist investor Eminence Capital had increased its stake to 5.8%.

Eminence founder and chief executive Ricky Sandler was appointed to the board of Entain in January, having first taken a stake in the gambling group in 2020.

He was critical of last year’s “perplexing” decision to part fund a central European acquisition through a placing of Entain shares and has said he believes the company needs to consider the divestiture of some or all of its stake in the US-based BetMGM joint venture.

Broker Peel Hunt highlighted a 1,100p target price after Entain’s in-line trading update in April, adding that “a quick fix from structural change is preferable to waiting for the long haul”.

Backing recovery at this underperformer

Reckitt shares are down more than 25% at 4,506p in the past year, placing the Nurofen-to-Dettol consumer healthcare products firm among the 10 worst performers in the FTSE 100. In contrast, Unilever (LSE:ULVR) shares are up 12% and Haleon (LSE:HLN) slightly higher over the same period.

The reverse follows February’s worse-than-expected fourth-quarter results and the loss of a court case filed against its Mead Johnson infant formula business in the United States.

Its plight is thought to have attracted the interest of Eminence, which according to the Financial Times has built a stake of 0.5% in the £31 billion company.

Reckitt shares have steadied in recent weeks after a new management team led by chief executive Kris Licht beat forecasts with first-quarter like-for-like sales growth of 1.5%.

The improvement follows the return to a more balanced contribution from price, mix and volume, as well as strong demand for power brands Lysol, Dettol, Durex and Finish.

UBS noted it was the first time in over a year that Reckitt’s shares had risen on results day: “Whilst it is still early days, we thought that Q1 showcased a broad-based enhancement in Reckitt's execution, with a majority of power brands achieving strong mid-single digit sales growth.”

The broker, which kept its target price of 7,170p, has forecast second-half weighted like-for-likes sales growth of 3.2% and 30 basis points of operating margin improvement for 2024.

As well as the appointment of Licht, the company has a new board chair after Jeremy Darroch took over from Chris Sinclair in the wake of last month’s annual meeting.

The former Sky chief executive, who has stepped up from the role of senior independent director, spent £64,000 on Reckitt shares at a price of 4,509p on Wednesday last week.

He was joined by six other members of the board, including Vodafone chief executive Margherita Della Valle and former National Grid finance boss Andrew Bonfield, as they disclosed purchases worth about £215,000 in total. The biggest was the £77,500 spent by Elane Stock.

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