Interactive Investor

Insider: massive buying at AIM newbie and two FTSE 100 firms

13th December 2021 08:38

Graeme Evans from interactive investor

This small-cap has had a nightmare since floating on AIM in June, but the CEO has just bet big on a turnaround. Graeme Evans has more on this and buying at a pair of popular blue-chips.

The leaking valuation of record AIM listing Victorian Plumbing Group (LSE:VIC) was plugged on Friday after founder Mark Radcliffe spent £2.9 million on shares at the same time as other directors.

Radcliffe, who pocketed £212 million in June's listing when shares were placed at 262p, made his purchase at 96.6p after a 40% slump in the wake of Thursday's full-year results.

The chief executive holds a 46.6% stake in the Skelmersdale-based online bathroom retailer, which he set up from a shed in his parents' garden two decades ago.

The company was valued at £850 million in the junior market's biggest ever flotation and accelerated to as high as 341.8p in the first week of trading. But the company is now worth £325 million after Thursday's results accelerated the decline seen in the past two months.

Radcliffe continues to believe in the medium to long-term growth prospects but admitted on Thursday that short-term conditions are hard to predict, with consumers now spending more on leisure and less on big ticket material homeware purchases.

Demand and revenues in the first two months of the new financial year are broadly the same as last year, but supply chain pressures mean that profit margins have been squeezed.

A pledge to take a more aggressive approach on marketing and pricing also contributed to broker Numis cutting its earnings forecasts for 2022 by 42% to £24 million, a figure compared with the 53% rise to £40.1 million seen in Thursday's results.

Numis has cut its price target from 280p but now has a “buy” recommendation at 130p.

It said: “Given tough comparatives and revitalised competition, we don’t see visibility on a return to teens (earnings) growth emerging imminently, nevertheless we still see Victorian Plumbing as the long-term winner in the bathroom market.”

The company handled 906,000 orders in the year to 30 September, while revenues rose 29% to £268.8 million based on an average order value of £297. Its total market was said to be worth about £1.4 billion in 2020, with Victorian Plumbing growing its share to over 14% last year at more than twice the level of its nearest online specialist competitor.

Against this background, the company's placing of shares with institutional investors was significantly over-subscribed in June's listing, a process that raised £258.9 million for selling shareholders including Radcliffe's mother Carole.

The return of more normal market conditions during the summer months, and following the easing of Covid-19 restrictions, led to a sharp sell-off for the shares in October. 

They closed the week at 99.6p after a rise of 9% on Friday, when Radcliffe and his brother Neil disclosed their sizeable share purchases.

Neil, who is product director and owns more than 9% of the company, bought shares worth £497,000 at a price of 94p. On Thursday afternoon, it emerged that chairman Philip Bowcock and senior independent director Damian Sanders had bought shares worth £48,760 and £25,000 respectively at prices of 92p and 96.4p.

Blue-chip 'buy' orders

Among director purchases in the FTSE 100 index, the new chief financial officer of Barratt Developments (LSE:BDEV) has wasted no time in building his stake in the housebuilder.

Mike Scott, who started his new role last Monday after seven years at Countryside Properties (LSE:CSP), bought shares worth £50,000 at a price of 742p.

His purchase on Thursday followed another positive week for the sector after London-focused rival Berkeley Group reported a better-than-expected update. House prices also continue to rise and there are signs that interest rates will remain at their record low for a little longer.

Shares rose as much as 8% in the aftermath of the Omicron sell-off, closing the week at 733.4p.

At DS Smith (LSE:SMDS), non-executive director Alina Kessel spent almost £20,000 on shares at the end of a positive week for the packaging business.

Kessel, who is a global client leader at WPP (LSE:WPP) and has been on the DS Smith board since May 2020, bought her shares at 386.94p. That compares with the low for this year of 355.6p recorded at the start of December, but well down on the 458.7p seen as recently as September.

On Thursday, the company reported an 80% jump in half-year profits to £175 million and said favourable trends and pricing momentum meant it expected to deliver a significant improvement in profitability during the second half of the year.

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