Interactive Investor

Insider: boss and his successor think these shares are cheap

13th September 2021 09:10

Graeme Evans from interactive investor

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Both the existing chief and incoming CEO picked up stock in this well-known business. Two other companies also just received backing from their chairman.

Pub industry veteran Ralph Findlay and his successor as chief executive of Marston's (LSE:MARS) have spent a combined £35,000 on the company's shares prior to next month's leadership change.

Findlay's 20-year career at the helm of the pub and accommodation business ends on 2 October, when finance chief and long-time colleague Andrew Andrea takes on the top job.

Despite his imminent departure, the outgoing boss has chosen to top up his holding with shares currently about 20% below where they started the summer. Findlay's backing for Andrea and the company's ongoing recovery from Covid-19 disruption amounts to an investment of £19,200 and comes four years after his last open market purchase of shares.

Marston's also disclosed on Thursday that Andrea bought shares last week worth £16,000, his first purchase since 2018. The new boss has 23 years' experience within the pub and brewing industry and has served on the company's board since 2009.

He takes over with Marston's now a focused pub operator, having poured its brewing operations into the creation of the Carlsberg Marston’s Brewing Company. The joint venture deal completed last October provided a significant boost to the Marston's balance sheet and gave it a 40% interest in a larger, more attractive brewing business.

The remaining Marston's pubs operation amounts to 1,500 managed, franchised and leased sites, with overall trade between May and the end of July better than expected after like-for-like sales comfortably topped 90% of 2019 levels.

What’s holding back Marston’s shares?

The shares, however, have failed to show momentum amid the wider industry's concerns about pricing and employment pressures and the uncertain outlook for trading this winter.

From 100p in mid-May, the FTSE All-Share stock closed last Friday at just above 80p following a period of sideways movement since the company's most recent trading update in late July. The shares had been 130p prior to the pandemic and below 30p in March 2020.

Analysts at Liberum last week named Marston's alongside Marks & Spencer, Dignity, Card Factory and Topps Tiles as the top five stocks with exposure to the retail sales recovery. However, the broker continues to have a “hold” recommendation on the pub company.

The predominately freehold estate served as an advantage during the lockdown, while Marston's is much less exposed than its peers to city centres, where the long-term impact of Covid-19 may be more pronounced. About 90% of sites benefit from having outside space.

Findlay said recently that the tone of Government messaging will be an important influence on consumer confidence. He also said a review of the business rates system is “long overdue” and that the current VAT reduction should be permanent due to the hospitality industry already being one of the most heavily taxed sectors.

He added: “This would assist an industry that has been hit hard and aid hospitality’s employment and development of young workers which will be a key part of the UK’s economic recovery.”

Chairman makes double purchase

Purchases totalling more than £150,000 were made by Ian Bull last week in share dealings to mark his appointment as the non-executive chairman of car dealership Lookers (LSE:LOOK) and the latest strong results from homewares retailer Dunelm Group (LSE:DNLM).

Bull, who has experience of consumer-facing businesses during spells as the chief financial officer at Parkdean Resorts and Ladbrokes, is currently senior independent director at Domino's Pizza and a non-executive director at Dunelm.

He will add to his portfolio of boardroom commitments on 1 October when he replaces Phil White as chairman of Lookers. The appointment was announced on the day Lookers reported record profits of £50.3 million and said unprecedented used vehicle margins had resulted in trading ahead of expectations in July and August.

The shares surged on results day to 70p, the point at which Bull made his maiden purchase of stock with a transaction worth £105,000. Lookers closed the week at 68p.

On the same day, Bull spent £56,000 on 4,000 Dunelm shares at a price of 1,422p after the retailer reported a 45% jump in pre-tax profits to £158 million and said its 2022 performance was modestly ahead of the top end of City forecasts.

A dividend yield of about 8%, which includes the special award of 65p a share, contributed to momentum as Dunelm shares eventually closed the week at 1,515p.

Peel Hunt has a price target of 1,750p amid upside pressure on its trading assumptions for the year, which it says reflects the company being “relentlessly focused” on the core customer offer.

The broker added: “Digital developments continue to accelerate and we remain confident the group will continue to take market share over the coming years.”

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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Related Categories

    UK shares
    Consumer goods and services
    Income Investor

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