Interactive Investor

Insider: directors get buying at BT, Rolls-Royce and BAT

Three of the most-popular stocks in the FTSE 100 have seen stakebuilding by board members over the past week. City writer Graeme Evans names the chiefs digging deep.

26th February 2024 09:29

by Graeme Evans from interactive investor

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A £428,000 swoop for BT Group (LSE:BT.A) shares and support for an even higher Rolls-Royce Holdings (LSE:RR.) valuation were among last week’s FTSE 100 boardroom purchases.

A non-executive director of British American Tobacco (LSE:BATS) also spent £99,000 in a week when the high-yielding group’s shares remained near to a decade low.

The BT purchase by Allison Kirkby was her first since becoming chief executive earlier this month, although she has made previous investments as a non-executive director.

Kirkby dealt Tuesday’s 400,000 shares at a price of 107p, which compares with 207p when she added BT stock shortly after joining the board in 2019. The widely held stock had been at 160p as recently as April.

As chief executive, the former boss of Denmark telecoms company TDC and Sweden’s Tele2 is required to build up a BT shareholding equivalent to 500% of her £1.1 million salary within five years.

She has taken over from Philip Jansen, whose first insider purchase as BT chief executive took place in the summer of 2019 at 202p.

That proved to be near the high point for his tenure after Covid led to a pause in dividend payments and rising interest rates fuelled the City’s anxiety over the significant investment cost of rolling out full-fibre broadband.

BT’s most recent trading update on the day Kirkby started in the role revealed a 3% rise in underlying earnings alongside unchanged full-year guidance.

Shares dipped as low as 102p a fortnight ago as investors await annual results on 16 May for guidance on Kirkby’s strategy.

In contrast to the recent struggles of BT, the shares of Rolls-Royce have continued to fly after results on Thursday revealed better-than-expected cash flow and earnings for 2023. It also forecast large engine flying hours for this year at 100-110% of 2019’s level.

Buyers included non-executive director Dame Angela Strank after she spent £20,000 on shares at a price of 351.7p. That’s 180% above the price she paid this time last year, when shares were 126p in the early days of the tenure of chief executive Tufan Erginbilgic.

Dame Angela, who previously worked alongside Erginbilgic at BP, has reaped the benefit of the company’s upturn in fortunes after making four other purchases in the past year.

On Friday, Bank of America highlighted a further re-rating opportunity after raising its price target to 520p and lifting its target multiple to 17 times free cash flow from 15 times previously.

It expects Rolls to be at its required investment grade profile during this year, which opens the door for the return of dividend payments by 2025.

The bank said: “We think that there is growing conviction in management's mid-term targets, with strong margin execution in both Defence & Power Systems in the second half of 2023 as well as solid margins with better quality in civil aerospace.”

British American Tobacco posted results two weeks ago, when it committed to a progressive dividend policy and signalled a plan to improve balance sheet flexibility by selling some of its century-old shareholding in Indian conglomerate ITC.

Shares in the Dunhill, Lucky Strike and Vuse business initially bounced but are now back where they were before the figures, having fallen 30% in 2023.

The company, which trades with a dividend yield close to 10%, has been impacted by economic pressure in the US, the rise of illicit single-use vapour products and regulatory uncertainty.

Analysts at Jefferies recently described BAT sentiment as the worst in 14 years of coverage, although the US bank said last week it is optimistic that this can change for the better amid hopes for a recovery in US industry volumes in the year ahead.

Jefferies has a price target of 3,200p, which compares with 2,380p when non-executive director Karen Guerra bought her 4,150 shares last week. She has been on the BAT board since 2020 and has held a variety of executive roles, including managing director of Colgate Palmolive UK.

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.

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