Insider: trio of FTSE 100 execs in £600,000 spending spree

7th March 2022 07:09

by Graeme Evans from interactive investor

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There are plenty of shares falling rapidly, but not all company bosses have been brave enough to buy them. Will the big bets placed by these high-profile directors pay off?

Results-day maulings for shares in ITV (LSE:ITV), Admiral Group (LSE:ADM) and GKN owner Melrose Industries (LSE:MRO) have been followed by a £600,000 spending spree as directors topped up their holdings.

ITV chairman Peter Bazalgette and chief executive Dame Carolyn McCall both spent £100,000 and finance director Chris Kennedy invested £50,000, as the trio responded to the FTSE 100 stock plunging to its lowest level since November 2020.

There was also buying worth £233,000 at Melrose as the chairman and three other board members took advantage of an 8% fall in value for the manufacturing conglomerate.

And the day after Admiral shares fell 14%, the car insurer reported purchases of £100,000 by the wife of finance boss Geraint Jones and £25,000 by chair Annette Court.

The disclosures failed to stem the losses at ITV and Melrose, with events in Ukraine contributing to the stocks being 33% and 16% lower across the week. A late sell-off left Admiral 1% lower by Friday’s close, down 16% since Monday.

The slide for ITV came after 2021 results included details of a plan to launch streaming platform ITVX into an already crowded digital market. Dame Carolyn said ITV was doing so from a position of “financial and creative strength” and that the move would support a doubling of digital revenues to £750 million by 2026.

In the annual results, ITV reported a slightly better-than-expected 40% jump in earnings per share to 15.3p after a record year for total advertising revenues.

UBS has a “buy” recommendation and 155p target price, adding that shares “look very cheap” if ITV delivers on its plans. However, the bank notes a lack of short-term catalysts and warns that TV advertising markets may be impacted by the Ukraine conflict, increasing pressure on revenues to keep pace with ITVX investment of about £280 million.

A 6% dividend yield provides near-term support and the bank sees ITV continuing to grow its current 5p a share pay-out despite the increased investment costs.

Analysts at Barclays are more sceptical after reducing their target price from 160p to 95p, adding that it was “hard to be enthusiastic in the short term”.

While investing in the on-demand platform might dramatically increase ITV’s chances of “making it”, Barclays said it would be at a cost of declining earnings this year and next.

Dame Carolyn bought her shares on Thursday at 82.26p after Bazalgette had earlier done so at 90p. Finance director Kennedy picked up his shares at 73.81p on Friday.

The boardroom buying at Melrose came on the day that the aerospace and automotive specialist disappointed investors by not adding to the £729 million it returned in September following recent disposals.

Melrose said its “very conservative position” reflected uncertainty around events in Ukraine and that it hoped to resume payments at the earliest opportunity. The company increased its dividend by a third to 1p a share, reflecting a year in which all its businesses returned to growth and the company significantly reduced its debt pile.

Chairman Justin Dowley said Melrose had transformed the GKN businesses and was positioned to “create, and realise” significant value for shareholders. He backed up his comments with the acquisition of £100,000 shares at a price of 132.26p.

Non-executive directors Liz Hewitt, David Lis and Victoria Jarman also bought at prices between 133.25p and 136.51p, but the stock closed the week at 121.3p for its lowest level since August 2020.

The Admiral boardroom purchases were made a day after shares slumped 14% on the back of the company’s guidance that profits will be lower in 2022.

The insurer has reaped the benefits of two years when lower claims frequency rates boosted its performance in UK motor insurance, contributing to strong upward momentum for its shares up until August.

The strong 2021 performance means shareholders will receive a 37% higher final dividend at 118p a share on 6 June, taking total returns to 577% over the past decade.

Peel Hunt believes the stock remains richly valued on 19 times forecast earnings and has a price target of 2,720p, which compares with the 2,505p seen at the end of last week. Deutsche Bank added: “A normalisation of earnings in 2022 implies consensus downgrades.”

The purchase of shares by board chair Court was made on Friday at 2,571p, while the dealings connected to finance boss Jones took place at 2,573p.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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