Interactive Investor

Insider: Sabre boss makes incisive share purchase

1st September 2020 11:19

Graeme Evans from interactive investor


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Chairman Andy Pomfret buys £100,000 of shares days before joining motor insurer, while ShoeZone brothers extend holdings.

A £100,000 purchase of shares in high-yielding Sabre Insurance (LSE:SBRE) has been made by its new chairman just days before taking the helm at the motor insurer.

Non-executive director Andy Pomfret assumes the role today from Patrick Snowball, who oversaw the company's £575 million stock market flotation in December 2017.

The FTSE 250 index shares have attracted interest in recent weeks after Sabre restored dividend payments, including the special award deferred at the height of the Covid-19 pandemic.

The resumption announced in July's interim results means Sabre is now trading with a dividend yield of 7.5% for 2020 trading, moderating to 5.7% and 6.3% in the following two years.

Shares briefly surged above 300p in the wake of the results, only to drift back to 261.75p by last week. That is near to the 2017 flotation price and also the point at which Pomfret bought his 37,800 shares a few days before taking the helm.

The dividend decision was made with Sabre in a much better position than in May, when chief executive Geoff Carter admitted the company found itself “in the eye of the storm” after new business volumes fell and there was little certainty on the outlook for claims costs.

Sabre's trading improved in June and July, helped by pent-up demand for new cars and rising industry prices that made the company appear much more competitive. During the lockdown it lost market share due to pricing discipline, meaning premium volumes fell 14%.

The focus on margins over volumes helped its solvency coverage ratio to 178% at the end of the first half. Even after accounting for the 9.5p a share or £23.7 million paid to shareholders on Friday that is well above the target range of between 140% and 160%.

Analysts at Berenberg said the dividend went some way to rebuilding faith in the insurance sector's ability to make payments to shareholders, particularly at a time of heightened regulatory oversight.

They added last month:

“These results highlight the stability of Sabre's earnings and dividend security. In addition, it gives us confidence that the motor insurance market continues to price rationally and reacts quickly to claims trends.”

Trevor Moss, an analyst at Agency Partners, praised the company for avoiding trouble at a time when claims inflation is likely to remain in the high single digits.

He added that he would not be surprised to see a further special dividend at the year end: “Sabre shareholders know why they own the share and the dividend yield is sufficient reward.”

Moss had a price target of 253p after last month's results, whereas Berenberg was at 284p and Numis Securities 310p.

Sabre started life as an underwriting agency for Crusader Insurance and Royal Insurance UK in 1982. The former Aviva subsidiary now operates through a network of over 1,000 insurance brokers, as well as through the direct channels Go Girl and Insure 2 Drive.

Pomfret has extensive experience working in the financial services sector, having been chief executive of Rathbone Brothers between 2004 and 2014. He is also on the board of Sanne Group, the FTSE 250 index listed provider of alternative asset business services, and is a director at Aberdeen New Thai Investment Trust and chairman of Miton UK MicroCap Trust.

At Shoe Zone (LSE:SHOE), the brothers at the helm of the retailer have extended their holdings after an asset swap involving a pension fund linked to departing non-executive Jeremy Sharman.

Chairman Charles Smith, who joined Shoe Zone in 1998, has increased his stake to 22.4%, while chief executive Anthony Smith now has 28.1%. He joined the company five years before his brother and became its chief executive in 1997.

The company's AIM-listed shares closed on Friday at 52p, which compares with the 61p agreed for the asset swap earlier in August. 

Sharman is leaving ShoeZone after serving nine years on the board, with his role being taken by the TheWorks supply chain director Victoria Norrish. The Sharman Family Pension fund sold its entire holding of 234,375 shares in the swap.

Shoe Zone, which has 490 outlets, last updated the market on its performance in June. The early part of the lockdown contributed to a £4 million drop in half-year revenues to £69 million in the six months to 4 April, with sales previously 2.6% higher in the five months to February. The group recorded a bottom-line loss of £2.7 million.

At the beginning of 2020 the company updated its strategy to focus on expanding its portfolio of ‘big box’ stores, as well as digital growth and the renewal of town centre outlets.

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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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