Interactive Investor

Insider: director buying at Burberry and a FTSE 100 bank

Company directors are digging deep and increasing stakes in their businesses following significant share price declines. They’ve all been popular in the past, but can they reclaim past glories?

11th December 2023 08:56

Graeme Evans from interactive investor

Support for the struggling FTSE 100 shares of Burberry Group (LSE:BRBY) and Barclays (LSE:BARC)came from the top last week after the disclosure of boardroom purchases totalling £375,000.

Burberry chief executive Jonathan Akeroyd spent £100,000 on Thursday in a move that contributed to shares in the luxury goods group finishing the week on the front foot.

The £275,000 investment by Barclays chair Nigel Higgins took place the same day, about 48 hours after the disclosure of a £500 million sale of shares by major investor Qatar Holding.

Burberry ended the week at 1,518.5p compared with Akeroyd’s 1,489p purchase price, while Barclays rose to 143.3p from the 138.6p when Higgins bought his shares.

However, both stocks are among this year’s worst performing in the FTSE 100 index, with Burberry down by around 27% and Barclays off 13%.

Burberry recently neared its lowest level in three years after the company warned that revenue guidance for 2023/24 is unlikely to be met in the current trading climate.

A backdrop of rising interest rates, elevated inflation and China’s bumpy recovery have weighed on demand across the sector, leading to other disappointing updates by the likes of Richemont and LVMH.

On Thursday, Deutsche Bank took a pessimistic view of prospects in the first half of 2024 as its analysts cut price targets including Burberry from 1,950p to 1,600p.

The tougher conditions have heaped pressure on Akeroyd’s Modern British Luxury strategy revamp, which is in its early stages following September’s launch of the first collection under new creative director Daniel Lee.

Under Akeroyd’s plans to make Burberry a £5 billion brand, he has set out a medium-term ambition for sales of £4 billion and an adjusted operating margin above 20%.

UBS, which has a “sell” recommendation, believes that achieving Burberry’s long-term success may require the company to sacrifice its ambitious short-term margin targets.

The recent half-year results showed revenues rose 4% to £1.4 billion but operating profits fell 15% to £223 million as the margin narrowed to 15.9% from 17.7% the year before.

Cheapest shares

At Barclays, the shares have been described by the banking team at UBS as “the cheapest around” after the lender recently downgraded guidance on its UK net interest margin.

The City firm has a price target of 200p, which compares with the narrow trading range of 140p–165p seen for much of this year.

An upturn may depend on the reception to chief executive C.S. Venkatakrishnan’s review of capital allocation priorities and financial targets alongside February’s annual results.

Analysts expect him to focus on growth opportunities in US credit cards and in wealth management, as well as improved capital efficiency in order to maximise shareholder returns.

Qatar’s wealth fund opted not to wait for the details, however, as the lender’s second largest shareholder chose to offload about half its stake last week. The reduction to 2.78% unwound another chunk of the position taken during the financial crisis in 2008.

Buying opportunity after profit warning

Dented Halfords Group (LSE:HFD) shares have been backed for a recovery after the retail and car servicing company’s top two independent directors bought stakes worth £87,500.

Last week’s investments of £55,800 by chair Keith Williams and one of £31,625 by senior independent director Jill Caseberry took place last week at prices of around 187p.

The shares had been above 225p prior to last month’s interim results, when tougher conditions in cycling and consumer tyre markets prompted Halfords to tighten full-year guidance towards the lower end of its previous range.

Half-year profits rose in line with expectations by 15.8% to £21.3 million and the dividend for payment on 19 January was unchanged at 3p. Despite the setback, the company has been encouraged by market share gains in its four trading segments and by the contribution of needs-driven services as a buffer to the pressure on discretionary spending.

Chief executive Graham Stapleton is particularly encouraged by the significantly improved returns of the Autocentres business, which is now set to see increased investment.

Broker Peel Hunt believes the share price weakness should be used as a buying opportunity after it recently highlighted a target price of 275p. It said: “In our view, management is doing pretty much everything right to control the controllables and the market will turn in time.”

Shares closed last week at 194.4p, compared with the 235p price targets of Investec Securities and Singer Capital. The latter said the results disappointment should be a “bump in the road” as real incomes recover, fuel prices reduce and consumer confidence thaws.

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