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There was a flurry of selling activity by directors in the run-up to chancellor Rachel Reeves’ first Budget.
Expectations of an increase in capital gains tax and the potential scrapping of inheritance tax relief on Aim shares motivated many directors to crystallise some of their paper gains, with around £655mn of shares sold in the three months to Friday October 25, the Investors’ Chronicle’s directors’ deals data shows. This compares with less than £28mn of sales in the same three-month period last year.
The figure is also around £190mn higher than in the previous quarter, which witnessed some chunky disposals, including the sale of a £260mn stake in Associated British Foods by members of the Weston family and the £68mn divestment of a stake in shared offices group IWG by founder Mark Dixon.
The rush to realise gains in companies that many of those selling have either founded or spent years growing is understandable, but not all are cashing in for their own benefit. Last week, AO World founder and chief executive John Roberts donated 1.6mn of his own shares to a charitable trust — a gift worth £1.7mn at AO’s closing price of 106.4p on the day of the announcement.
Roberts can afford to be generous — he is worth £125mn, according to the Sunday Times Rich List. He and his wife Sally also cashed in £8mn of shares in August. He has, however, been a supporter of youth charities for years, particularly the OnSide project, which has built more than 20 Youth Zones in economically disadvantaged towns and cities.
He has donated around £10mn worth of shares since AO floated a decade ago to a trust that supports OnSide and other good causes.
Roberts is now the second-biggest shareholder in AO World, with a 16.6 per cent stake. Mike Ashley’s retail group Frasers owns 24 per cent.
Midwich boss buys the dip
Between January and October, shares in Midwich were having a tough time. Things got significantly worse on October 21, however, when the audiovisual equipment supplier downgraded its full-year forecasts. Its share price dropped by almost a fifth in response.
The update didn’t make for easy reading. Revenue is expected to be marginally ahead of last year, but adjusted operating profit is set to be “significantly below” the £59.6mn achieved in 2023. This is largely because market conditions have not improved as anticipated. Germany in particular has seen a further deterioration, and there remains “subdued demand” for mainstream products in the education and corporate markets.
Midwich’s managing director Stephen Fenby appears to have spotted a value opportunity, however. On the day of the trading update, he bought 150,000 shares for 273.3p each — or a total of £410,000.
Fenby joined Midwich as finance director in 2004 and became managing director in 2010. Together with people closely associated with him, he now owns 16.85 per cent of the group’s share capital.
There do appear to be reasons for optimism. Demand in the UK, Midwich’s main market, has “stabilised”, according to the company. Midwich is also selling a greater quantity of technical video, audio and lighting products than before, which is boosting its gross margins. Meanwhile, its forward price/earnings ratio sits at just 9.6 times, compared with a five-year average of 16 times.
There is still a great deal of uncertainty, however — not least because it has been on an acquisition spree in recent weeks, buying three small specialist UK companies for a total of £12mn. This is expected to push its end of year leverage to 2.2 times. This is well within Midwich’s debt covenants, but looks fairly high given the difficult market conditions.
