Interactive Investor

Insider: trio splash £140,000 on shares

The tough run for this housebuilder’s shares is continuing, giving three new directors the chance to buy shares at close to half the price of 18 months ago.

23rd October 2023 09:50

Graeme Evans from interactive investor

Three new directors of Barratt Developments (LSE:BDEV) have tied £140,000 of their own money to the housebuilder after buying shares for the first time last week.

They include former Morgan Stanley and Merrill Lynch investment banker Caroline Silver, who spent £40,000 a day after chairing her first Barratt AGM in the City of London.

Silver made her investment on Thursday at 397p, a price 5% lower than Barratt’s starting point for the week and down from 462.8p when she took on the role on 1 June.

Despite the reassurance of the company in its AGM trading update, valuations across the housebuilding sector were dealt another blow last week when an unchanged UK inflation reading of 6.7% fuelled fears of a further hike in mortgage costs.

As well as the ongoing loan challenges faced by potential homebuyers, Barratt is dealing with the absence of Help to Buy reservation activity, which accounted for 12% of private reservations in the previous financial year.

David Thomas, who has been in charge since 2015, told shareholders Barratt was in resilient shape and had the benefit of a strong balance sheet.

For now, the UK’s largest housebuilder is focused on driving revenues through targeted incentives, while tightly controlling costs and taking a selective approach to land buying.

Barratt shares closed the week at 392.3p, near its low point for this year and not far from the 323p seen in the aftermath of the mini-Budget turmoil in September 2022. The stock had been as high as 769p in April 2021.

Analysts at Liberum have a target price of 500p, while UBS believe there’s the potential to reach 475p, having reiterated a “buy” recommendation in the wake of Wednesday’s update.

Barratt continues to expect volumes of between 13,250 and 14,250 for the 2024 financial year, the midpoint in line with the present sales rate of 0.46 but down on 0.55 seen in 2022-23.

UBS said: “Barratt's focus is to maintain network coverage in order to be positioned for a recovery, although we think prolonged weakness in sales rates may necessitate additional cost reductions.”

As well as the new chair, Barratt shareholders attending the company’s AGM were introduced to non-executive directors Jasi Halai and Nigel Webb for the first time.

All three appointments were overwhelmingly backed, as were the resolutions on the company’s annual remuneration report and new three-year remuneration policy.

Following the meeting, Halai bought Barratt shares for the first time since joining the board in January after she declared an investment worth £50,000 at 395.3p. Nigel Webb, who joined Barratt earlier this month, spent the same amount at 396.1p.

A fourth non-executive director, Marks & Spencer boss Katie Bickerstaffe, also topped up her holding on Wednesday when she spent £4,000 at a price of 403.8p.

A very strong foundation for profitable growth

Per Widerström, the new boss of 888 Holdings (LSE:888), marked his first week in charge of the William Hill owner by staking £950,000 on the company’s shares.

His purchase on Friday came two days after 888 revealed a 10% drop in third-quarter revenues to £405 million, a decline driven by a run of customer-friendly results and the ongoing impact of safer gambling changes.

Shares fell 4% on the day of the update, even though 888 stuck by current quarter expectations for revenues to be down mid-single digits.

In his first briefing to investors, Widerström said that 888 had a “very strong foundation” for profitable growth but that there were also several areas for improvement.

The FTSE 250-listed company has faced a series of challenges since the £1.95 billion acquisition of William Hill’s non-US operations in 2021.

The deal created a business with 11,000 staff but higher interest rates have lifted the debt burden and impacted 888’s ability to reinvest excess cash flow into accelerating growth.

January’s disclosure of Middle East compliance issues and the exit of long-time chief executive Itai Pazner were then followed by a fine of £19 million from the Gambling Commission in relation to historic player safety failings prior to the acquisition.

The recruitment of Widerström has enabled chair Jon Mendelsohn to resume non-executive duties, having run the business on an interim basis since January.

He marked the switch on Thursday by spending £40,000 on 888 shares at a price of 79.5p. The following day, Widerström bought his shares at an average price of 84.3p.

During his time running central European gaming business Fortuna Entertainment, Widerström oversaw growth in underlying earnings from 2014’s 25 million euros to 150 million euros by 2020. Earlier in his career, he was chief operating officer of PartyGaming.

Shares in 888 closed the week at 85.3p but analysts at Peel Hunt have a target of 175p as they remain optimistic in the promised benefits of the William Hill merger.

The broker said: “We forecast growth next year, partly because we expect the pressure from responsible gaming changes to unwind, and partly because we expect revenue synergy benefits of the merger to flow through.”

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