Interactive Investor

Insider: chiefs buy at FTSE 100 housebuilder and unloved AIM pair

In a quiet week for boardroom share purchases, City writer Graeme Evans picks out interesting activity at these small-caps, plus a confident trade in the building sector.

15th January 2024 08:37

Graeme Evans from interactive investor

The heavily-sold shares of Marks Electrical Group Ordinary Shares (LSE:MRK) have received £30,000 of boardroom backing after the online household goods retailer issued a profit warning last week.

Revenues for the October to December quarter rose 17.8% to £35.1 million, but with consumers still highly price-conscious the margin performance did not increase as expected.

Shares tumbled 26% to 68p as AIM’s smaller rival to AO World (LSE:AO.) and Currys (LSE:CURY) downgraded earnings guidance for the year to March to between £5 million and £6 million. This compared with the previous year’s £7.5 million when the margin was 7.7%.

Leicester-based Marks continues to expect revenue growth but is cautious on the speed of recovery in consumer buying patterns, which will impact trends in gross product margin.

Chief executive Mark Smithson, who founded the business in 1987, said his experience over four decades in the industry was that margin fluctuations are inevitable.

He added: “I remain confident about our long-term growth prospects and continue to be impressed by our ability to deliver market share gains profitably, against a fiercely competitive backdrop.”

The continued determination of Smithson to make Marks the UK's leading premium electrical retailer was backed up later on Wednesday when chief financial officer Josh Egan and chair of the board Marnie Millard bought shares.

Egan spent £20,700 while Millard, who is a former chief executive of Vimto soft drinks business Nichols, declared an investment worth £10,000.

They did so at 67p and 69p respectively, compared with 110p when the company floated with a stock market valuation of £115 million in November 2021. Shares closed the week at 69.5p.

In other boardroom dealings on AIM, Penarth-based EKF Diagnostics Holdings (LSE:EKF) revealed on Thursday that funds connected to non-executive director Christopher Mills bought a further £30,000 of the company’s shares at a price of 30p. The stock peaked at 80p towards the end of 2021 after its core business benefited from deals to supply Covid-19 test kits.

The shares started 2023 at about 50p but they’ve since come under pressure as the company said the ramping up of revenues from new capacity had been delayed into this year.

EKF, whose life sciences division makes enzymes and custom products for use in diagnostic, food and industrial applications, expects the newly-opened facility in Indiana to address a significant gap in the US market for scalable mid-volume manufacturing.

The EKF portfolio also includes small blood analysers and consumables used in testing patients for conditions including diabetes and anaemia.

Mills, who founded Harwood Capital Management in 2011, now holds a 29.2% direct and indirect interest over EKF. He is also a non-executive director and major shareholder of Renalytix, an artificial intelligence led diagnostics business spun out of EKF in 2018.

Stake building

In a quiet week for insider boardroom purchases in the FTSE 350 index, blue-chip Berkeley Group Holdings (The) (LSE:BKG) revealed on Thursday that non-executive director Sarah Sands had spent £15,000 on an increased stake in the housebuilder.

The move by the former editor of BBC’s Today programme, who joined the Berkeley board in April 2021, took place at a price of 4,869p. That compares with 3,997p when she made a previous purchase in July.

The recent decline in mortgage rates and improved demand outlook has reignited buying across the housebuilding sector, with Berkeley shares up 23% since the end of October.

Last month’s half-year results showed the resilience of the London and South East builder, with an unchanged operating margin of 19.5% and 4.6% increase in pre-tax profits.

During the first half it bought back 1.7 million shares at an average 3,901p and also paid a 59p a share dividend as part of its annual return of £283 million by September this year.

Chief executive Rob Perrins used the results to extend the group’s guidance through to 2026, targeting the delivery of at least £1.5 billion of pre-tax profit and the maintenance of net cash above £400 million for the current and next two financial periods.

Following the results Peel Hunt downgraded Berkeley from “Add” to “Hold”, noting that a valuation of 13 times forward earnings made it the highest-rated housebuilder.

However, the broker added: “We continue to believe Berkeley is a very well-run business that focuses on medium-to-longer term value generation and shareholder returns.”

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.