Interactive Investor

Insider: these FTSE 100 directors buy £500k of shares on the cheap

29th May 2023 13:54

by Graeme Evans from interactive investor

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This pair of stocks at the bottom end of the FTSE 100 index have received backing from their bosses, and there's buying activity at the end of another tough week for shares in this challenger bank.

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Confidence in better times ahead at British Land Co (LSE:BLND) and RS Group (LSE:RS1) has led to £400,000 of insider share purchases by the chief executives of the two FTSE 100-listed companies.

Simon Carter’s investment of £152,000 was made on Wednesday with British Land shares back near where they were in the aftermath of the mini-budget turmoil last autumn.

The £250,000 RS purchase a day earlier by Simon Pryce took place at between 792p and 803p after shares fell last week on the components supplier’s warning of slower markets.

The CEOs were not alone in showing their boardroom support, with the Segro chief executive and RS non-executive director David Sleath spending £92,000 on Thursday and Loraine Woodhouse buying £20,000 of British Land shares earlier in the week.

The stock market fortunes of the Paddington Central and Meadowhall landlord were dealt a fresh blow last week when inflation figures ramped up UK interest rate expectations.

The impact of earlier rate hikes pushed the yield on British Land’s portfolio up by 71 basis points to 5.8% in the year to the end of March, causing a 12.3% valuation decline despite the benefit of 2.8% rental growth.

The annual results showed net asset value some 10p shy of City hopes at 588p a share, but this was offset by earnings per share of 28.3p coming in ahead of expectations and enabling a 3.3% rise in full-year dividend to 22.64p through the payment of 11.04p on 28 July.

The prospective dividend yield for this year stands at 6%, with Peel Hunt optimistic that British Land is well placed to weather the rise in interest costs through its strong balance sheet and long-dated funding profile.

When Carter presented this month’s results he reminded investors that value in real estate is created over the medium to long term.

He pointed out that British Land focused on supply constrained segments with pricing power, where it can be market leader and leverage competitive strengths to generate attractive returns.

Carter said: “We already lead in campuses, where we continue to see strong demand for best in class space and are increasing our focus on life sciences and innovation sectors.”

Peel Hunt has a target price of 475p and UBS sits at 490p, compared with Friday’s closing price of 345.7p and a position above 500p seen just under a year ago.

RS Group shares, meanwhile, are about 10% lower this year as investors worry about the impact of slower economic growth on the business previously known as Electrocomponents.

In his first set of results since taking the helm 30 days earlier, Pryce said that he was comfortable with the City’s profit forecasts for 2023/24 but that performance was more likely to be weighted towards the second half of the year.

On Friday, analysts at Liberum cut their profits estimate by 3% but said RS was a business “with many levers to pull”. They added: “The balance sheet is strong and the consolidation opportunity large.”

The broker has a price target of 1,460p, adding that a forward price/earnings multiple of 12.8 times looked cheap relative to history and peers. The shares closed on Friday at 803.2p.

RS stocks more than 750,000 industrial and electronic products, sourced from 2,500 suppliers and delivered to 1.1 million customers. It generated revenues of just under £3 billion in the year to 31 March, with earnings per share up 24% to 60.4p and the full-year dividend 16% higher at 20.9p a share based on plans to pay 13.7p on  21 July.

Pryce, who has previously held chief executive roles at Ultra Electronics and BBA Aviation, first joined the board of RS as a non-executive director in 2016. He has regularly bought shares during that time, including a purchase worth £61,000 at 612p in March 2020 and two months ago when he spent £235,800 at a price of 907p.

Buying this mid-cap stock for the very first time

Director dealings in the FTSE 250 index included Friday’s purchase of a £30,000 stake in Virgin Money UK (LSE:VMUK) at the end of another tough week for shares in the challenger bank.

Non-executive director Sara Weller, who also sits on the board of BT Group, made her maiden investment in the company at a price of 151.9p.

The stock has lost almost a fifth of its value this year, driven by turmoil in the wider banking sector, economic uncertainty and a negative reaction to this month’s half-year results.

The interim figures included an impairment provision of £144 million, up from £21 million the year before and 12% higher than the market consensus, as Virgin braced for an increase in arrears numbers as the credit cycle normalises.

On a more positive note, the bank delivered a 3% beat on net interest income at £855 million and announced June’s higher-than-expected dividend payment of 3.3p a share. The shares closed the week at 151.35p, compared to the 220p target of UBS analysts.

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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