The AIM chiefs buying shares in their own companies

by Andrew Hore from interactive investor |

Our award-winning AIM writer names directors with new skin in the game, often a good sign for investors.

Despite the volatility of global stock markets due to the uncertainty surrounding Covid-19, some AIM company directors have been putting their hand in their pocket and buying shares in their own companies. 

Some of these directors have already made a significant profit on their investments. Of course, it does not always mean that the company will perform well, but it does make the them worth looking into. 

Paper profits

Electrical accessories supplier Volex (LSE:VLX) is an example of a company where directors were buying in late March and early April. 

Chief operating officer John Molloy invested £188,000 at 104p a share and £138,000 at 109p a share. Finance director Daren Morris invested £33,600 at slightly higher share prices. 

A subsequent trading statement has helped to push the share price back up to 135p. Trading to the beginning of April was in line with expectations, although it will be affected by Covid-19, but the exposure to medical devices and datacentres will limit this. Net cash is $31.7 million, and this allows Volex to promise a 2p a share dividend. 

Some have made contributions to new fundraisings. For example, Joules (LSE:JOUL) founder Tom Joule invested £1 million in the placing that raised £15 million at 80p a share in order to shore up the balance sheet of the fashion brand. 

Alastair Bathgate is stepping down as chief executive of the robotic software provider Blue Prism (LSE:PRSM), although he is investing £200,000 in the latest placing. Blue Prism is raising a further £100 million at £11 a share 15 months after raising £100 million at the same share price. Dr Jason Kingdom will become chairman and chief executive. He is investing £1 million in the placing.

This article, though, focuses on some of the share purchases in the market rather than newly issued shares or options and management incentives.

Some directors, particularly non-executives, are taking part of their pay in the form of company shares, but they are not included.

The dates in the table below are the date of the announcement rather than the purchases. Sometimes, more than one purchase is included in an announcement. 

AIM director share buying in April*
Company Code Announced Director Role Number of shares Price (p) Value (£)
               
Smart Metering Systems (LSE:SMS) SMS 24/04/2020 Alan Foy Chief executive 83,333 604.8 503,997
Telit Communications (LSE:TCM) TCM 27/04/2020 Harald Rosch Non-exec 185,000 122.1 225,885
Brave Bison (LSE:BBSN) BBSN 17/04/2020 Oli Green / Tangent Marketing   Services Interim chairman 31,610,503 0.7 221,270
Diversified Gas & Oil (LSE:DGOC) DGOC 23/04/2020 David Turner Non-exec 170,000 88.8 150,960
Volex (LSE:VLX) VLX 01/04/2020 John Molloy Chief operating officer 126,921 109 138,344
ULS Technology (LSE:ULS) ULS 07/04/2020 Oliver Scott/Kestrel Non-exec 295,032 36.03 106,310
Brickability (LSE:BRCK) BRCK 27/04/2020 Andrew Wilson PDMR 217,361 46 99,986
Pebble (LSE:PEBB) PEBB 17/04/2020 Charles Fandos PDMR 100,000 97.8 97,800
ULS Technology (LSE:ULS) ULS 09/04/2020 Oliver Scott/Kestrel Non-exec 208,223 37.47 78,028
Pebble (LSE:PEBB) PEBB 09/04/2020 Chris Lee Chief Executive 100,000 77.5 77,500
Pebble (LSE:PEBB) PEBB 09/04/2020 Richard Law Chairman 100,000 77.5 77,500
Fevertree Drinks (LSE:FEVR) FEVR 23/04/2020 Jeff Popkin Non-exec 5,000 $18.86 $94,300
Circassia Pharma (LSE:CIR) CIR 14/04/2020 Jonathan Emms Executive 300,000 23.2 69,600
Ten Lifestyle (LSE:TENG) TENG 06/04/2020 Andrew Long Executive 111,815 56 62,616
1Spatial (LSE:SPA) SPA 01/04/2020 Andrew Roberts Chairman 276,190 21.7 60,000
Conygar Investment Company (LSE:CIC) CIC 30/04/2020 Robert Ware Chief executive 55,000 108 59,400
Central Asia Metals (LSE:CAML) CAML 06/04/2020 Nigel Robinson Chief executive 36,800 136.55 50,250
*£50,000   or more              

Smart Metering Systems (LSE:SMS) boss Alan Foy has bought a further £504,000 worth of shares in April. That followed a total investment of £2.95 million in March. Most of these shares was acquired at more than the current share price of 598p.

Foy has a 5.23% stake. SMS has completed the sale of meter assets to Equitix Investment Management for £282 million net of expenses. This puts the company in a net cash position. SMS will pay 25p a share in dividends for 2020. The prospective yield is 4.1%. The company can promise this because, following the disposal, index-linked annualised recurring revenues are £75.8 million.

However, the installation of new smart meters has been temporarily stopped. SMS is diversifying its asset base through a collaboration with Columbia Threadneedle Sustainable Infrastructure Fund to develop carbon reduction asset opportunities.

Respiratory disease treatments developer Circassia Pharma's (LSE:CIR) executive directors invested more than £165,000 at share prices around 23p, following the deal to transfer to AstraZeneca US commercial rights to Tudorza and Duaklir.

The deal still requires approval by the US authorities. The $149.9 million loan from AstraZeneca (and accrued interest) will be offset against the consideration for the transfer. AstraZeneca still owns 18.9% of Circassia.

The focus of Circassia will be the Niox respiratory diagnostic platform. The share price is back to 28p, which is near to the level at the end of February.

It pays to get in early

Promotional goods supplier Pebble Group joined AIM just before the General Election last year. The two main subsidiaries are Brand Addiction, which provides promotional products to multinational companies, and Facilisgroup, a Software-as-a-Service business that provides services such as order management and customer relationship management.

Manchester-based Pebble Group (LSE:PEBB) raised around £23 million pounds in a placing at 105p a share, while selling shareholders raised £56 million at the same price.

In early April, chief executive Chris Lee and chairman Richard Law each bought 100,000 shares at 77.5p each. Non-executive Yvonne Monaghan bought 20,000 shares at the same price. This was around the all-time low for the share price.

The 50,000 shares bought by the finance director Claire Thomson nearly one week later cost 90p each. In total, the board has invested £215,500.

Charles Fandos, who is part of the management team but is not on the board, acquired 100,000 shares at 97.8p each, which is a much higher price than the others.

That reflects the fact that they were acquired at a later date. The share purchases came at the time that BlackRock cut its stake from 13.4% to 11.7%. They also followed a trading statement and the publication of 2019 figures. January and February trading was strong but corporate business slumped in April.

Facilisgroup has more predictable revenues and it is trading in line with expectations. Group costs have been cut by £500,000 a month. There was £9.9 million in the bank on 7 April although that includes money drawn down from a loan facility.

The share price moved back above the placing price, but it has fallen back to 104p.

Group buying

Directors in payments technology developer PCI-PAL (LSE:PCIP) have invested more than £70,000 in shares, although chairman Simon Wilson has also sold shares worth £5,600.

All the purchases have been at a higher price than the 30p a share placing price when £5 million was raised at the end of March. This cash means that PCI-Pal will have two years to build up revenues and start to generate cash.

Some of the cash will go on sales and marketing. Total annual contract value is £5.9 million. The share price has recovered to 50.5p, which is the highest level it has been for more than two years.

Northbridge Industrial Services (LSE:NBI) is another example of a board that has been investing, not just one individual.

The amounts invested in the loadbanks and oil and gas tools supplier company are much smaller, though. Non-executive Ash Mehta invested the most with £17,524 pounds spent on shares. In total, the board has invested more than £62,000. Chief executive Eric Hook has made five purchases at prices ranging from 74.2p a share to 95.76p a share.

His total investment is £23,491. The low oil price is not good for Northbridge and it could disrupt the recovery of the oil and gas tools business. The group is a strong cash generator and investment in additional rental equipment can be delayed.

Net debt was £6.4 million at the end of 2019. There is no concern about the financial position. First-quarter trading showed a continuing recovery. Rental demand remains strong, but travel restrictions are hampering the business.

The Northbridge share price has fallen to 72.5p from the 122.5p at which it was included in the 2020 AIM recommendations.

Non-executive director David Turner has invested £151,000 at 88.8p a share in US-focused oil and gas producer Diversified Gas & Oil (LSE:DGOC), which is set to move to a premium listing. The move is expected to happen on 18 May, with the AIM quotation being cancelled on the same day.

Management hopes the switch will improve liquidity and increase the profile of the business. The strong cash flow and ability to pay dividends, even with a low oil price. The yield is currently in excess of 11% and even if the cash flow declines and the dividend is cut the yield is likely to be attractive.

Business travel and video games

The business of Ten Lifestyle Group (LSE:TENG) is based on business travel and this has not been a good time for the company, which provides a concierge service for clients, including booking restaurants and obtaining tickets for events.

Chief executive Alex Cheatle and executive Andrew Long have invested £40,000 and £62,616 respectively. The shares were bought at 56p and they have recovered to 82.25p.

Ten Lifestyle is reducing costs, including getting employees to give up part of their salary in return for share options exercisable at 70p each. Net cash was £9.6 million at the end of February.

There was a £3 million outflow from operating activities last year with a further £5.4 million of capital investment. Video games firm Team17’s newly appointed finance director Mark Crawford bought nearly £30,000 worth of shares at 560p each. Team17 is growing rapidly and has a pipeline of games launches this year.

A subsequent placing raised £39.4 million for Lloyds Development Capital (LDC), the private equity division of Lloyds Banking Group which owns a stake in Team17, at 575p.

The current share price is 568p. Directors have been buying shares in Telit Communications (LSE:TCM) since the 2019 figures were published in the middle of April.

The most notable purchase is by non-executive director Harald Rosch, which has spent nearly £226,000 on shares in the Internet of Things company.

The share price of 118p is below the average buying price. Last May, Rosch bought an initial 250,000 shares at 184.6p each. He became a director in October 2018.

Telit had net cash of $48.2 million at the end of 2019. Given the patchy track record, investors may still be cautious of Telit.

Business is holding up at the core document storage operations of Restore thanks to its strong recurring revenues, although it is taking steps to conserve cash.

However, the scanning operations will be hit by the lack of exam work and office relocation work is reduced. Restore is no longer going to pay the 4.8p a share dividend it announced. That will help to reduce borrowings. Charles Bligh has invested nearly £25,000 at 375p a share and finance director Neil Ritchie has invested nearly £20,000 at 370p a share.

This is another share price which, at 387.5p, has not seen a significant uplift after this week’s dealings. This is a solid business, but the share price has fallen by one-quarter this year. That leaves room for potential recovery.

Andrew Hore is a freelance contributor and not a direct employee of interactive investor.

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, and 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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