Interactive Investor

Insider: bosses at this small-cap pair spend over £300k  

In a week when trading activity was light on the ground, Graeme Evans has picked out director deals at a couple of smaller companies that have had an eventful week.  

22nd April 2024 08:48

by Graeme Evans from interactive investor

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Two directors of Robert Walters (LSE:RWA) have spent £65,000 on the company’s shares at the end of a rough week across the London-listed recruitment sector.

New finance boss David Bower made his first investment on Thursday in a move costing £38,000 before a purchase worth £27,265 by chair Leslie Van de Walle the following day. They did so at 380p and 389.5p respectively.

Robert Walters told investors on Tuesday that client and candidate confidence remained at low levels and that this was likely to be a headwind to fee income growth in the near-term.

First-quarter income of £81.3 million was down 21% against tough comparatives the year before, with the company’s divisions of Asia Pacific, Europe, UK and Rest of the World posting declines of between 16% and 24%.

Chief executive Toby Fowlston said the company was focused on tight cost discipline and ensuring it is “optimally placed” for when trading conditions improve.

Page Group and Hays delivered similar messages to investors in a week when all three stocks lost ground. FTSE All-Share business Robert Walters closed on Friday at 389p, which compares with 472p towards the end of 2023.

City firm Liberum disclosed a price target of 490p after last month’s annual results presentation, when the new management team at Robert Walters highlighted a strategy focused on building scale in existing markets rather than geographic expansion.

The broker said: “Robert Walters is starting from a much lower margin base than peers, so the scope for earnings upside as the strategy is executed alongside (eventually) a market recovery makes for an interesting investment case.”

In the annual results, the company pointed out that no single country accounted for more than a sixth of group net fee income and that 84% came from outside of the UK.

Earnings per share fell by 64% to 20.1p but the benefits of an international diversified model, good cash generation and balance sheet strength enabled it to peg the dividend at 23.5p.

Ambitious lads

LBG Media Ordinary Shares (LSE:LBG) boss Solly Solomou has bought £250,000 of the company’s shares after he said the digital entertainment business had a “clear line of sight” to £200 million of revenues.

Solomou, who co-founded the venture in 2012 while still at university, increased his stake to 41.6% after shares bounced 10% on the day of the LADbible firm’s annual results.

Revenues of £67.5 million rose 7.5% in testing conditions, and with a slightly improved margin of 26%, the AIM-listed company grew underlying earnings by 10.8% to £17.4 million.

Its outlook has been boosted by the recent addition of US digital media firm Betches, which Solomou said had turbocharged LBG’s position in the world’s largest advertising market.

LBG’s global audience is up by 24% year-on-year to 452 million, including 141 million in the US. Video views of 128 billion rose 31% year-on-year.

Direct revenues increased by 5.5% to £29.3 million, reflecting content marketing to corporates and other clients and deeper blue-chip advertiser relationships. Indirect revenues grew by 10.4% to £37.1 million supported by increased video views and audience growth.

Solomou said: “Our positive revenue momentum and platform for growth in the US leaves the group at a significant juncture in its evolution and provides a clear line of sight to achieving £200 million of revenue.”

The shares closed last week at 72p but house broker Peel Hunt has reiterated a “Buy” recommendation and price target of 135p following the results.

The City firm said: “Looking ahead, market expectations for advertising growth on key social media platforms are in the mid-teens to low 20s range for 2024.

“This compares with our core LBG revenue growth forecast of 5% for 2024. Thus, we believe the risk is towards the upside as the year progresses.”

LBG trades on a valuation of five times 2024 underlying earnings, falling to 4.2 times in 2025.

Zeus Capital said: “We see this as a compelling entry point for a profitable and highly cash generative business well-positioned in fast growing digital media niches with the potential to outperform expectations should we see a recovery in demand for advertising in the short to mid-term.”

Solomou bought his shares on Thursday at 72.75p, while chief financial officer Richard Jarvis also made an investment worth £10,000. The Manchester-based company floated on AIM in December 2021 at a price of 175p, only to fall to 54p by the following October.

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