The FTSE 100 is riding high, but that hasn’t stopped directors at Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US), Meggitt (LSE: MGGT) and Debenhams (LSE: DEB) buying shares in their own companies.
At what price did these directors nail their colours to the company mast, and how much did they invest? Read on!
Debenhams
The high street is gearing up for the busy Christmas trading period. Department store Debenhams will be hoping for a good one after a year that saw a weather-related profit warning during March and a 3% drop in profit before tax (PBT) for the company’s financial year ended 31 August.
The PBT fall meant chief executive Michael Sharp missed out on a potential bonus worth 100% of his £615,000 a year base salary. He also elected not to accept a bonus of 2% of salary for meeting performance targets on like-for-like sales and gross margin “in light of the overall profit performance”.
What Sharp did do, though, was open his wallet to the tune of £97,700 to buy 100,000 shares in the company. With the shares currently trading at 100.5p you’d have to pay a tad more than the chief exec’s buy price of 97.7p, but you’d still be getting Debenhams on a value rating of 10 times forecast earnings for the year to August 2014.
Meggitt
The shares of specialist defence manufacturer Meggitt closed at an all-time high of 572.5p on 31 October. The next day, the company shocked the market with a below-expectations trading update and the additional sickener of a recently identified “raw material supply issue” for which the company was putting aside £20m to resolve. The shares dived 11% to 509p.
Six days later Meggitt’s chief financial officer, Doug Webb, who was appointed during June, more than doubled his shareholding in the company. Webb invested £76,000, buying 15,000 shares at 505.4p a pop.
A £20m hit doesn’t seem exactly devastating to a company that delivered a PBT of getting on for £300m last year. If you think the market’s overreacted and want to follow the chief financial officer’s lead, you can buy Meggitt’s shares today at 512p.
Centrica
Things haven’t been going too smoothly for British Gas owner Centrica of late. Last month we had Ed Milliband threatening to put a freeze on energy prices if Labour wins the General Election in 2015. This week, Centrica reported that “market conditions remain challenging”, and that the group expects to deliver 2013 earnings per share at a similar level to last year.
After a 17 October announcement by Centrica that it would be increasing its gas and electricity prices by an average 9.2%, but ahead of this week’s announcement of management’s lacklustre earnings expectations for the current year, non-executive director and chairman-elect Rick Haythornthwaite made his maiden purchase of company shares.
Haythornthwaite pulled £44,573 out of his pocket to buy 12,500 shares at 356.6p. Analyst dividend forecasts suggest the shareholding will earn him an income of £2,200 over the next 12 months, giving a yield of something over 4.9%. If you follow Haythornthwaite into Centrica today, your forecast yield would nudge above 5% because the shares are now trading lower at 345.3p.
