Interactive Investor

Insider: over £550,000 spent on shares in former bid target

Shares in this company are trading at almost half the price of a takeover approach last year, and the chief executive is backing his growth strategy with his own money.

8th April 2024 08:41

by Graeme Evans from interactive investor

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Two big purchases by the chief executive of John Wood Group (LSE:WG.) have backed his growth strategy after a year in which shares have stayed well below a private equity suitor’s bid price.

Ken Gilmartin, who is overseeing a three-year plan at the energy and materials-focused consulting and projects firm, made the first investment of £358,000 on Wednesday at a share price of 128.7p. A second worth £200,000 took place on Thursday at 132.8p.

Non-executive director David Lockwood, the chief executive of Babcock International Group (LSE:BAB), also spent £33,250 on Wood’s FTSE 250-listed shares at a price of 133p just before Easter.

Their dealings compared with the 240p–a-share fifth and final approach of asset manager Apollo before its 15 May announcement that it would not make a formal offer.

The shares were 175p in January after recovering from the 135p seen on Apollo’s withdrawal, only to retreat again in a decline not helped by a mixed reception to last month’s annual results.

Gilmartin reported revenues growth across all business units and upped earnings guidance for the current year towards the top end of the mid-to-high single digit target.

He also highlighted a significantly improved cash generation performance, but shares fell back on the disclosure of $50 million (£39.6 million) of simplification costs, which will delay positive cash flow until 2025. Dividend payments and share buybacks remain on hold.

More than half of Wood’s 2023 revenues came from the oil and gas sector, where it stands to benefit from demands for solutions addressing energy security or energy transition.

Significant contract wins last year included a new global framework agreement with Shell, engineering design work for Woodside’s Trion project in the Gulf of Mexico and a strategic partnership with Harbour Energy.

It is also in a number of small markets with substantial growth potential, such as hydrogen and carbon capture. Wood is now a services-led business with the majority of its contracts cost reimbursable and the remaining 20% mostly fixed price services.

Gilmartin said Wood had made significant progress in the first year of his growth strategy, with the order book of $6.3 billion (£5 billion) up 7% and the company’s six focus markets offering an addressable market of about $240 billion (£190 billion) in 2026.

He said: “We continue to see clear business momentum, with a higher order book, double-digit growth in our pipeline and positive pricing trends in both pipeline and order book.”

Peel Hunt believes the current valuation presents a “compelling opportunity” to buy Wood shares at a multiple significantly below the company’s closest peer, Worley.

The broker, which has a price target of 200p, added: “We see many reasons to be positive. Industry demand continues to rise, pricing is firming, and Wood is a critical supplier with improving margins.”

The Aberdeen-based company bought Amec Foster Wheeler in 2017 and is a former member of the FTSE 100 index. It employs about 35,000 people across 60 countries.

Money man sitting on paper profit

The finance boss of Luceco (LSE:LUCE), the LED lighting, wiring accessories and portable power firm, has spent £91,000 in support of the FTSE All-Share stock’s improving share price.

Will Hoy’s dealings took place at around 142p, which compares with 121p prior to last month’s well-received annual results. The stock closed last week at 153.6p - a paper profit of over £7,000 - but analysts at Deutsche Numis see further upside to 165p with Liberum at 170p.

The latter notes that Luceco’s forward earnings multiple is 24% below its average level for the last five years. It added: “Luceco continues to be a strong leader in its industry and the scale of its own facilities in China is very hard to replicate.”

Annual earnings of £24 million were at the top of the company’s guidance range, while stronger cash generation has reduced leverage and left the company well placed for further M&A.

It recently completed the earnings-enhancing purchase of cable solutions provider D-Line for an initial £8.6 million and has also advanced a number of product developments.

They include its second series of electric vehicle chargers sold under the Sync EV brand. Charger sales last year totalled just under £8 million, growth of 44% the company views as “highly encouraging” given a slight slowdown in the EV vehicle market in the second half of the year.

Hoy, who joined the company in April 2023, said in the results: “We remain excited about the opportunities that this new sector will provide as the vehicle market moves towards electrification by 2035 within the UK - our current key marketplace.”

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