A number of earnings upgrades by analysts have helped push shares in software specialist Softcat to a near all-time high. That fact that should perhaps allay any investor concerns around a trio of share sales from directors totalling £11.2m.
Chairman Martin Hellawell and chief financial officer Graham Charlton sold shares worth £6.8m and £900,000, respectively. Hellawell’s ownership — including shares held by his wife and their family and charitable trusts — stands at 2.1 per cent, while Charlton retains a stake of 0.04 per cent. Softcat declined to comment on the reasons for the sales.
The group, which provides IT infrastructure technology and services, has benefited from a surge in demand from public sector clients, which include the NHS. That has offset weaker private sector interest, particularly in areas most affected by pandemic trading restrictions.
However, it still managed an overall increase of 8 per cent in revenue and 10 per cent rise in earnings per share during the 12 months to the end of July last year, which resulted in a boost to the annual dividend by just over a tenth.
The consensus earnings per share forecasts for this financial year and 2022 have both been upgraded by 9 per cent since the end of December, after management revealed that the group was trading “significantly ahead” of where it needed to be at the early part of the year. It also said corporate demand had continued to improve but that the picture was still mixed. The group is due to announce half-year results on March 24.
At 1,545p, the shares trade at a toppy price/forward earnings multiple of 37, above its own five-year average and a premium to the industry average. However, it could be argued that the group’s ability to maintain solid earnings growth post-pandemic, together with impressive rates of cash conversion and return-on-equity could justify that premium.
In an age where nil-cost share awards and incentive plans are the de facto method for executives to stake their claim in a listed company, it is always good to see company directors put their money where their collective mouths are.
Good news, then, for shareholders of Sanne. Shortly after a January 28 trading update from the FTSE 250 group received a lukewarm market reaction, two board members stepped in to acquire a combined £150,000-worth of shares.
As a provider of corporate and administrative services to asset managers, private equity firms and hedge funds, Sanne has been insulated from much of the last year’s business woe.
Consensus earnings of 25.1p per share for 2020 — which the group expects to meet — have been trimmed 14 per cent from their pre-pandemic high, but cash conversion and margins have remained robust. Management felt confident enough to finish the year by signing off on the acquisition of Scandinavian private equity fund administrator PEA for at least €27m (£23.9m).
Now Sanne has revealed it won new business worth £22.5m a year to the top line in the three months to December. That was a strong enough sign for chairman Rupert Robson, who acquired 21,057 shares in two separate transactions at a weighted strike price of 569.9p following the announcement. He was joined by chief financial officer James Ireland, who bought 5,300 shares at 565p.
In doing so, they join a bullish chorus of analysts who see fair value in the shares at 711p, according to the consensus target price. The pair can also be confident of buying in at a reasonable valuation, with the shares trading on just under 20 times consensus forecast earnings, compared with a five-year average of 24.
That is a narrower premium to the broader FTSE All-Share index over the same period, although we await next month’s results for clarity on rising leverage before turning bullish ourselves.