Interactive Investor

Insider: captain of AIM’s biggest business starts buying again

17th July 2023 08:34

by Graeme Evans from interactive investor

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After selling shares in his company last winter, this boss just placed a six-figure buy order that’s got the market excited.

airline happy captain 600

Long-serving Jet2 Ordinary Shares (LSE:JET2) boss Philip Meeson has reacted to market jitters over his imminent departure by spending £170,000 upping his stake in AIM’s biggest company.

The executive chair’s commitment to the business, which he bought as a small cargo airline in 1983 and turned into the UK's largest package holiday operator, eased some of the City’s concerns about the future of his 18.3% stake worth about £470 million.

The ex-RAF pilot bought the shares on Thursday at a price of 1,124p, compared with 1,263p before annual results on 6 July, and the disclosure that Meeson is to become non-executive chair and step down from the board once a successor is appointed.

Meeson had been a seller of Jet2 shares as recently as late November as he looked to diversify his investment portfolio, adding at the time that no further sales were planned.

The shares closed last week at 1,197p, but with a large number of “buy” recommendations in the City suggesting that the market reaction to Meeson’s departure has been overdone.

Peel Hunt, which is among the most bullish after increasing its target price by 300p to 2,200p, said the company’s successful strategy will not change based on “excellent service levels and performance for all stakeholders”.

Analyst Alexander Patterson added: “His departure has been carefully planned for and the group has a sizable and highly experienced management team that has gradually taken on his executive responsibilities.”

Meeson’s role over the past two years has largely focused on the group’s longer-term prospects, after an order was placed for 98 fuel-efficient Airbus A321/A320neo aircraft with options to increase to 146 by 2035. The first of these aircraft was delivered in March.

With day-to-day responsibilities now in the hands of a management team led by chief executive Steve Heapy, the company’s results showed annual profits of £390.8 million in line with April’s guidance and 48% higher than their pre-Covid level.

Revenues reached £5 billion as Jet2.com, which is now the UK's third largest airline, flew a total of 16.22 million single sector passengers in the year to 31 March. The average price of a Jet2holidays package holiday increased by 10% to £761.

Cash balances ended the year at £2.6 billion, or 4% higher at £1.1 billion when excluding advance customer deposits. It announced a final dividend of 8p a share for payment on 25 October, taking the total to 11p at a 1% yield.

One of the other factors driving the retreat for shares concerned the company’s outlook statement after it described current pricing for its package holidays and flight-only products as “robust”. This compared with the use of “strong” in April’s trading update.

It added that the average load factor was slightly below 2022’s level, but that the mix of higher margin package holiday customers stood five percentage points higher amid signs that families are continuing to prioritise their summer getaway.

Jet2 said: “We continue to believe that the end-to-end package holiday is a resilient and popular product, particularly during difficult economic times.”

Should macroeconomics conditions and the pricing environment stay stable, analysts at Jefferies think there’s the potential for a 10% upside on its current profit estimates.

The City bank has a target of 1,800p after noting that Jet2 trades on 7.7 times 2024 forecast earnings, a 37% discount to pre-Covid levels.

Numis Securities upgraded its profit forecast by 5% following the results and said the recent weakness looked to be a buying opportunity based on a price target of 2,040p.

An undervalued FTSE 100 share

A former boss of the brands Speedo, Canterbury and Berghaus has made his second purchase of JD Sports Fashion (LSE:JD.) shares since joining its board in May 2021.

Andy Long’s move worth £28,000 was made on Tuesday at 144.1p, which compares with the low of 138p seen a few days earlier. The investment has already generated a paper profit based on Friday’s close of 151.95p.

JD shares have picked up since it announced a deal to buy the remaining stake of Iberian Sports, a move that improves access to some appealing European growth markets.

Peel Hunt reiterated its price target of 250p, adding: “We continue to believe that the global growth story here is materially undervalued.” UBS values the shares at 210p.

Long is an executive director at JD’s majority shareholder Pentland Group, having previously run the privately-owned group’s portfolio of sports and fashion brands that is also home to Mitre and Red or Dead.

Prior to joining Pentland, he held senior finance roles at Boots and Procter & Gamble and has been a board member at Sport England since 2016.

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