Interactive Investor

Insider: board spends £460k on this FTSE 250 recovery play

10th April 2023 15:19

Graeme Evans from interactive investor

There are signs this company is bouncing back, and one analyst thinks they’re worth 50% more. Will these directors enjoy a windfall? Our City expert also reports more heavy buying of a mid-cap property stock and on AIM.

The incoming boss of Hilton Food Group (LSE:HFG) and three other directors have spent over £460,000 backing the FTSE 250-listed protein producer to deliver an upturn in fortunes.

The purchases by newly-appointed chief executive Steve Murrells, chairman Robert Watson, finance boss Matt Osborne and non-executive director Patricia Dimond were made after annual results highlighted the significant impact of supply chain and inflation pressures, particularly in UK seafood.

Adjusted profits fell 17% last year to £55.5 million and earnings per share dipped 26.4% to 45.1p, but the group maintained its record of growing volumes every year since joining the stock market in 2007.

Hilton, which appears in this year's Wild's Winter Portfoliobegan life in 1994 supplying pre-packed beef and lamb to Tesco and now boasts advanced food processing, packing and logistics facilities across 19 markets in Europe, Asia Pacific and North America. Two-thirds of its sales volumes are outside the UK.

The shares closed last week at 678p, having fallen by about 45% to 529p during September after interim results included a 13% dividend cut in the face of severe inflationary headwinds. In December, the share were briefly below 500p for the first time since June 2016.

The company, which has maintained a progressive dividend policy since its flotation, reversed the cut last week by announcing plans to pay shareholders 22.6p a share on 30 June.

Broker Peel Hunt said this demonstrated confidence in the business and its cash flows as Hilton looks to rebuild after a difficult 2022.

The City firm added: “Market conditions will continue to be challenging given pressure on consumer budgets, but Hilton is getting on top of recent issues and profit should rebuild.”

It noted that service levels have continued to be “best in class” and that Hilton is working with customers to recover inflation, reduce costs, improve efficiencies and optimise ranges in order to rebuild profitability in UK seafood.

The broker has a price target of 1,030p, believing the attractions of the business model and the long-term growth potential are intact.

From July the business will be run by former Co-op boss Murrells after he was named successor to Philip Heffer, who is stepping down after serving 30 years on the board and the past five years as group chief executive.

Murrells knows Hilton well, having first worked with the business in the 1990s and early 2000s when he was the meat category director at Tesco. He said last week: “The way that Philip and the team have grown the business since then has been incredible, with fifteen years of sensational growth.”

He immediately backed up his appointment by spending £200,000 on the company’s shares at a price of 688p on Thursday. Dimond, who joined the board last April, committed £50,000 on the same day at a price of 659p while Osborne invested £10,000 at 678p on Thursday.

We also found out just before the Easter holiday that Watson, CEO at Hilton from 2002 then executive chairman from 2018 until the start of 2021, had spent over £203,000 on 30,000 shares at 678p each. Watson has timed his trades well in the past. In April 2022, he sold Hilton shares worth £2.4 million at around 1,200p. He'd also disposed of 50,000 at 950p in 2019. According to data firm SharePad, Watson now owns just over 2m shares, or 2.3% of the company.

Another mid-cap buyer

Elsewhere in the FTSE 250 index, the finance boss of Primary Health Properties (LSE:PHP) bought shares on Thursday, with the GP surgeries landlord trading close to its 52-week low of 95p.

Richard Howell made his £40,000 purchase at just below 101p, which compares with 117p as recently as early February. Higher gilt yields have diminished the stock market appeal of real estate investment trusts, leaving Primary’s fully-covered forward dividend yield above 6%.

The company has grown its dividend for 27 years in a row, underpinned by predictable cash flows from a rent roll 90% funded by the UK and Irish governments. Peel Hunt, which has a price target of 130p, said recently: “A 6.6% yield, with long and strong income, remains very attractive.” Shares closed the week at 104.6p.

At Balfour Beatty, chief executive Leo Quinn raised £275,000 on Tuesday by selling shares with the infrastructure company trading near to a multi-year high.

The disposal was made at 373p after a 45% rise in Balfour’s valuation since last summer. Last month, Quinn unveiled strong annual results that included a 17% rise in full-year dividend to 10.5p a share and a third consecutive annual £150 million buyback.

Is this a smart move?

On AIM, the £1 billion-valued Smart Metering Systems (LSE:SMS) has received strong boardroom backing in response to a recent fall in its share price.

The Glasgow-based company installed 480,000 smart meters last year and is also rolling out battery energy storage systems that can boost the transition to clean energy.

Recent results showed a 25% rise in revenues to £135.5 million and underlying profits up by a third to £24.5 million, with the dividend for the year 10% higher at 30.25p a share.

Despite chief executive Tim Mortlock’s optimism for 2023, shares are down by around 17% in the past two months. Last week, he spent £120,000 on shares at a price of 744.7p before two non-executive directors followed his lead this week.

Chair Miriam Greenwood spent £20,500 at a price of 751p last Thursday and Jamie Richards made an investment worth £25,000 at 744.6p on Monday 3 April. The stock closed last week at 769p but analysts at Liberum have a price target of 1,185p.

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