Insider: bosses buy shares in this trio after results

Directors have been quick to load up on shares during results season, but a broader sell-off late in the week means these stocks are even cheaper now. City writer Graeme Evans reports.

5th August 2024 08:39

Graeme Evans from interactive investor

Results-day reverses for Melrose Industries (LSE:MRO) and molten metal flow engineering firm Vesuvius (LSE:VSVS) have served up £50,000 buying opportunities for two of their directors.

Melrose finance boss Matthew Gregory built up his stake in the GKN Aerospace business after shares fell 12.5% to their lowest level since November.

The trigger for the sell-off was weaker 2025 revenue guidance due to industry-wide supply chain challenges, an issue also highlighted by Rolls-Royce Holdings (LSE:RR.) in its results the same day.

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Investors dumped FTSE 100-listed Melrose even though its half-year adjusted operating profit beat the company’s expectations at £247 million.

The supplier of aerospace components and systems to the civil and defence markets also reiterated profits guidance for this year and next, supported by an upgraded forecast for a margin above 18% in 2025.

The results were the first since the exit of co-founder Simon Peckham, who oversaw a 3,396% total shareholder return in the 19 years following his first “Buy, Improve, Sell” deal in 2005. He now leads Rosebank Industries, which aims to replicate the success of Melrose.

Gregory joined the board in March as part of the switch to a new executive team, having joined GKN Aerospace as chief financial officer in September 2022.

His £50,000 purchase of Melrose shares took place on Friday at a price of 510p, which compares with 596p for his previous investment made in March. However, the stock closed the week at 480.1p after losing another 7% in the wider sell-off that followed poor US job figures.

The insider buying of Vesuvius shares was by finance director Mark Collis, who made his £50,000 investment shortly after the FTSE 250-listed company’s half-year results.

Like Melrose, the figures were robust after underlying earnings of £97.2 million beat the £95 million forecast of broker Peel Hunt. However, with the recovery in its end markets taking longer than expected the company scaled back guidance for the full year.

Shares fell 12% on Thursday and closed the week at 422p, with Collis making his purchase at a price near to 431p.

Vesuvius is a world leader in the supply of refractory products to steel producers and other high-temperature industries. Its other division, which operates under the Foseco brand, provides products and process technology to foundries that improve their castings.

Steel coped better with the weak market conditions after posting organic revenues growth of 0.5% and a one percentage point margin improvement to 11.5%. Foundry revenues fell 8%, with the margin down 220 basis points to 8.2%.

Despite the delayed recovery, chief executive Patrick André reiterated the 2026 objectives set out in a capital markets day last November. He backed up his confidence by increasing the interim dividend for payment on 13 September by 4.4% to 7.1p.

He added: “Irrespective of the timing of market recovery, we continue to anticipate progress in our results supported by the growing benefits of our cost reduction programme, our continued investment in innovation and our capacity investments in India.”

Peel Hunt cut its price target from 700p to 625p after lowering its earnings per share estimate for 2024 by 10% to 43p. The shares trade with a forward yield of 5.2%.

The broker said on Thursday: “The steel performance is good, but the foundry headwinds move the recovery into 2025. The medium-term targets remain unchanged, so today is frustrating but it is a delay rather than structural.”

Robert Walters (LSE:RWA) shares also got boardroom support in the aftermath of interim results when chair Leslie Van de Walle made an investment of £95,000 on Friday.

The global recruitment firm’s half-year figures on Thursday provided more detail after the warning two weeks earlier that the rebalancing of the jobs market from the post-pandemic peak is taking longer than expected.

It reported a 16% drop in revenues to £459.3 million for a loss of £2.3 million, down from last year’s profit of £8.1 million and lower than Panmure Liberum’s break-even forecast.

However, the broker said it viewed an unchanged dividend of 6.5p for payment on 27 September as an important sign of confidence in future prospects.

Panmure Liberum believes the shares remain cheap relative to larger peers on a 2025 forecast basis and that high operational gearing should deliver material upside as markets stabilise.

It left its target price unchanged at 430p, which compares with the purchase price by former Rexam boss Van de Walle at 378.5p and Friday's closing level of 372p.

The broker added: “Markets may not be helpful for some time, but the self-help opportunity is material and work on this continues at pace.”

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