Interactive Investor

Insider: Chiefs trade this £24bn beast

30th September 2016 16:51

Lee Wild from interactive investor

Compass points north

Compass Group has been a fantastic investment. Bought for less than 200p in 2005, the catering company is now an industry colossus and its shares trade at around £15. They're up about 50% in the past 12 months alone, making shareholders a fortune.

That includes directors, although even this month, with the price at around 1,490p, non-executives Stefan Bomhard and Ireena Vittal were loading up with 6,100 and 1,863 shares respectively. Total spend was almost £120,000.

And why not? Compass has been one of the major beneficiaries of the post-referendum rally, up 15% since 23 June, and third-quarter results a month later revealed organic revenue growth of 5.2%, and 5.6% for the nine months to 30 June. The weak pound should also boost profits by £60 million.

Analysts at Barclays recently had lunch with Dominic Blakemore, Compass's former CFO and current head of Europe. They paid a visit to the San Francisco operations, too.

"Overall we continue to like Compass," the broker said. "We see the group as a compounder with a 12.5% [total shareholder return] and >20% [return on capital employed] which justifies the current 21x cal 17e price/earnings (PE) multiple."

But Gary Green has built up a sizeable stake since he joined the company in 1986, and has decided to bank some profits.

Green, who now runs the North American operation, has just sold 100,000 shares at 1,498p per share, trousering almost £1.5 million. But there's no reason to be alarmed; Green still owns 265,819 shares worth almost £4 million.

Put money into OneSavings Bank

It was plain sailing for two years when OneSavings Bank floated in 2014. The shares were eventually worth two-and-a-half times its IPO price of 170p, peaking at 412p last November.

Inevitably, shareholders banked profits, but a bounceback during the spring ended abruptly when Britain's decision to leave the EU triggered a collapse in the UK banking sector. With low interest rates contributing to wafer thin margins, a "hard" Brexit could seriously undermine the industry here and guarantee record low interest rates for years to come.

OSB shares have clawed back half their post-referendum losses, but non-exec Andrew Doman believes they're still cheap.

In his maiden share purchase, Doman, previously at management consultants McKinsey, has spent over £262,000 on shares at 260-261p.

First half results, published a month ago, were good. Underlying pre-tax profit, which strips out the £34.7 million OneSavings made on the sale of its Rochester vehicle in May, surged by 36% to £64.6 million, about £4 million more than expected. That's thanks to a much smaller-than-anticipated impairment charges and lower regulatory provisions.

A 27% surge in underlying earnings per share to 19.7p was 10% higher than estimates, and underlying return on equity (ROE) of 29% also beat forecasts.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advise