Insider: directors build stakes in unloved FTSE 350 stocks

Two Autotrader Group directors have spent £50,000 on shares after the board of the car marketplace said that the current price did not reflect its fundamentals or long-term prospects.

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The £25,000 dealings by chair Matt Davies and non-executive director Amanda James were priced at the lowest level since the early days of the pandemic at just above 450p.

The shares have slumped by 50% in the past year, including by 9% on the back of Thursday’s annual results. Operating profit of £392.7 million rose 4% on a year earlier but came in slightly below City expectations after revenue growth slowed at the end of the period.

This reflected difficult trading conditions and retailer feedback to Deal Builder, which provides consumers with additional options such as part exchange on their buying journey.

Autotrader said it had moved quickly to address the issues with Deal Builder and that it had been rewarded with a gradual increase in key performance indicators during April and May.

It forecast operating profit of between £395 million and £415 million for the current financial year, which includes expectations for a second-half weighted revenue performance.

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A dividend of 7.8p is due to be paid on 25 September, representing an increase of 10% on a year earlier and leading to a 9% improvement in the total for the year at 11.6p.

In light of the current share price, management has committed to £500 million of buy backs as well as paying a third of net income in dividends. This will result in more than £1 billion being returned to shareholders in the 2026 and 2027 financial years.

It said: “The board believes the prevailing Autotrader share price does not reflect the company’s fundamentals or long-term prospects.

“Despite a rapidly changing technology environment, our current competitive position has strengthened, we are adapting our car buying experience to evolve with consumer habits, and we remain comfortable our investment in technology is sufficient to take advantage of AI.

“We do recognise that we have had a challenging end to the year which impacts growth in both 2026 and 2027, although we have seen a gradual increase in some of our core metrics as we’ve entered the new financial year.”

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Deutsche Bank cut its price target from 816p to 794p following the results, while UBS reiterated its Sell stance due to ongoing uncertainty around the medium to longer-term growth outlook and minimal near-term catalysts.

Panmure Liberum downgraded to Hold and cut its target price to 420p. It said: “Deal Builder was planned to be a core growth driver, yet it looks unlikely that it will contribute materially in the next few years, and in its absence we are left questioning what Autotrader’s next growth driver will be.

“We think the subsector remains undervalued, but struggle to see why one would buy this stock over Rightmove.”

Dividend yield underpins valuation

A decade low for Big Yellow Group shares has triggered a strong response from one of the self-storage firm’s board members after he disclosed post-results dealings worth £33,000.

The move involving Michael O'Donnell - a non-executive director since 2021 - took place after the real estate investment trust reported a 2% rise in annual earnings and said current conditions presented “considerable challenges” for businesses across the sector.

Big Yellow has sought to position itself in as “good a place as we can” but shares still fell as far as 802p before a recovery to 832p by Friday. O’Donnell’s dealings took place at 827p, having seen shares reverse from 1,724p at the start of 2022 and 1,076p earlier this year.

The FTSE 250-listed shares were last this low in 2017, when the company’s revenues were about half the £209.1 million reported in last week’s annual results.

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Despite economic uncertainty and recent cost headwinds, City firm Berenberg has a price target of 1,159p after highlighting Big Yellow’s robust record across previous cycles.

It noted: “Adjusted EPS (earnings per share) has still compounded by about 10% since 2008. We believe that Big Yellow’s established brand, scale and focus on the London/South-East market positions it for long-term rental and valuation growth.

“The company's execution and balance sheet should allow it to navigate the current environment and capitalise on future opportunities, in our view.”

Big Yellow opened its first store in May 1999, listed on AIM in May 2000 and switched to the main market in 2002. Co-founders Nicholas Vetch and Jim Gibson are still at the helm of the company, which now operates 113 stores.

About 75% of its revenues come from London and neighbouring commuter towns, with the balance in larger regional conurbations. They are almost entirely freehold or long leasehold.

The average store size is approximately 60,000 square feet - the largest being the sites at Staples Corner, Fulham and Bow at over 100,000 square feet. This compares with the average size of UK self-storage centres at approximately 45,000 square feet.

The largest driver of demand remains from domestic customers renting storage space when moving home, while the business continues to see good demand from online retailers and B2B traders looking for flexible mini-warehousing for e-fulfilment.

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Management has been cautious about specific earnings guidance, reflecting ongoing uncertainty regarding the Iran conflict and its impact on UK mortgage rates and housing-driven demand.

The company’s focus is on cost discipline, new store execution and driving an occupancy recovery after recording a 1.7 percentage point decrease to 77% in the year to March. Store operating costs rose by 0.3% in the year, having surged 7% in 2024/25.

Deutsche Bank downgraded its 2027 and 2028 earnings forecasts by 8-9% following the results, leading to a reduction in its price target to 1,100p.

However, it added: “On a relative basis, we consider Big Yellow well positioned owing to its prime London portfolio, superior underlying margins and lower leverage at a time of rising debt costs and intensifying competition.

“While the sector lacks catalysts in a tough trading environment, we think the 5.7% dividend yield underpins the current valuation.”

The group’s dividend policy is a minimum of 80% of its full year adjusted earnings per share. It is due to hand over 23.4p a share on 24 July, representing 2% growth to 47.2p in the year.