Interactive Investor

Insider: Lord connected to millions spent on shares in this AIM company

23rd January 2023 07:56

by Graeme Evans from interactive investor

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This small company with a long history has fallen on hard times, but a life peer is betting that a series of structural changes and rebuilding process will reward loyal shareholders.

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Shares in home shopping group Brown (N) Group (LSE:BWNG) worth £2.5 million have been bought in a series of deals connected to long-serving director and former chairman Lord David Alliance.

The 90-year-old has been part of the N Brown story for more than half a century, having served as executive chairman from November 1968 to 2012. The life peer also helped to build Coats Viyella into one of the world's best known textile companies.

He continues to serve as a non-executive director, with the Alliance family owning approximately 57% of the JD Williams, Simply Be and Jacamo fashion business prior to these latest insider purchases.

The stock market disclosure of dealings by a person closely associated with a director involved six separate purchases by Lady Homa Alliance over several days.

They were made in the wake of the Manchester-based company’s Christmas trading update on 12 January, culminating in Wednesday's biggest purchase worth £1.35 million and a further £90,000 on Thursday.

The final two deals were at a price just under 30p, whereas the first purchase a week earlier was at 25.9p. The AIM-listed shares had been near 20p in October, with the recovery since then boosted by this month’s settlement of a legal dispute with Allianz Insurance.

The matter, which related to redress paid to customers by JD Williams and the insurer in connection to payment protection insurance, cost N Brown £49.5 million to settle. This was greater than its balance sheet provision of £25.5 million but analysts at house broker Shore Capital welcomed the removal of a cloud hanging over the group.

It added: “This brings to an end a long chapter of legacy costs that the business has had to face for some years, well before the present senior management team’s tenure.”

Three days later, the company left profit guidance unchanged after product sales in the “golden quarter” to 31 December fell 9.2% on a year earlier to £166.4 million.

With customers continuing to face a squeeze on their discretionary spending, the company also gave a cautious assessment on the financial year due to begin in the spring.

Chief executive Steve Johnson, who has run the business since October 2018, added: “We remain confident in the resilience of our business and in the strategic investments which we are making for the long term.”

Shore Capital said the 2024 guidance left the company in an extended multi-year transition mode that has yet to bear fruit in terms of either profitability or investor returns.

The broker sees the next 12 to 18 months as critical for N Brown to demonstrate that its many structural changes, which will continue for the next couple of years, can deliver in terms of a return to revenue growth and higher margins.

It added: “Management expects to return to growth in 2025, and with net cash it undoubtedly provides support in the rebuilding process, though in the near-term we expect investors will wish to see how trading momentum evolves.”

N Brown dates back to 1859 when it was founded by Manchester entrepreneur James David Williams, who pioneered catalogue mail-order shopping. In 1963, Alliance Brothers acquired the group and it became part of Lord Alliance's property company N Brown in 1970.

Shares were 350p in 2017 but fell as far as 10p at the onset of the Covid pandemic. A capital raise at a price of 57p followed in November 2020, a move that saw shares switch from London's main market onto AIM.

The £100 million fundraising allowed the business to repay all unsecured debt and focus on investing in its digital capabilities at a time of rapid expansion for online retail.

More buying on the FTSE 250 index

Recent boardroom arrivals at FTSE 250-listed Hikma Pharmaceuticals (LSE:HIK) and Tritax EuroBox Euro Ord (LSE:BOXE) last week took the chance to build stakes in their respective companies.

Non-executive director Deneen Vojta, who joined Hikma’s board in November when shares were 1,291p, spent £17,000 on her stake at a price of 1,702p on Tuesday. The generic, specialty and branded pharmaceutical products business last updated the market two months ago, when it reiterated guidance for all three of its businesses.

At Tritax EuroBox, non-executive director Sarah Whitney spent £21,000 on Thursday in her second purchase of shares in the logistics company since her appointment in February.

Her latest dealings took place at 64p, which compares with 89p for her investment in July. The shares were above 100p in May, but economic headwinds have impacted sentiment towards the company whose key locations are in Western Europe's major supply chain corridors.

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