- Three directors have purchased nearly £180,000-worth of shares
- This follows Babcock announcing a review of its contract profitability and balance sheet
Defence contractor Babcock (BAB) saw its shares tumble earlier this month after revealing that it had initiated a “detailed review” of its balance sheet and contract profitability. Amid warnings of potential “negative impacts” on its current and future financial years, investors were spooked by the prospect of writedowns to come and the shares sank by more than a fifth.
The group didn’t say what prompted the audit, but it follows the refreshed management team announcing a strategic review in November. Cobham alums David Lockwood and David Mellors were drafted in as chief executive and chief financial officer, respectively, last year to try to restore Babcock’s fortunes. Mr Lockwood has already identified problems with the business’s “federated” model and pointed to a “cultural issue” with its approach to cash.
Babcock’s problems don’t end there. The group’s underlying operating profit plunged by more than a third year on year in the nine months to 31 December, to £202m, as it continues to be squeezed by government insourcing of civil nuclear contracts and existing weakness in civil aviation has been exacerbated by Covid-19. Looking ahead, while the March quarter is typically Babcock’s strongest, it is unlikely to provide much relief this year – the group says that the impact of the pandemic has “worsened in most of our markets”.
As they try to restore investor confidence, Messrs Lockwood and Mellors, alongside chairwoman Ruth Cairnie, have purchased just under £180,000-worth of shares. Babcock’s shares are currently sitting at 217p – above where the trio topped up their holdings – but they have been on a long-term downward spiral and prospects for a recovery are dwindling. Analysts have downgraded their forecasts yet again and as the Covid pressure mounts, broker Liberum believes that a dilutive fundraising has now become more likely. Sell.
Last IC View: Sell, 235p, 01 Oct 2020
Buys | ||||
Company | Director/PDMR | Date | Price (p) | Aggregate value (£) |
Babcock International | Ruth Cairnie (ch) | 20 Jan 21 | 198 | 59,490 |
Babcock International | David Lockwood (ce) | 20 Jan 21 | 199 | 59,580 |
Babcock International | David Mellors (cfo) | 20 Jan 21 | 199 | 59,790 |
Breedon group | James Brotherton (cfo) | 22 Jan 21 | 86.5 | 64,875 |
HomeServe | Ron McMillan | 20 Jan 21 | 1,090 | 29,975 |
IG Group Holdings | June Felix | 22 Jan 21 | 790 | 49,745 |
Lok'nStore | Richard Holmes | 22 Jan 21 | 659 | 49,992 |
Shield Therapeutics | Hans Peter Hasler (ch) | 20 Jan 21 | 59 | 59,000 |
U and I Group | Richard Upton | 10 Jan 00 | 69 | 73,980 |
U and I Group | Richard Upton | 22 Jan 21 | 71.5 | 157,366 |
Sells | ||||
Company | Director/PDMR | Date | Price (p) | Aggregate value (£) |
AJ Bell | Fergus Lyon (PDMR) | 21 Jan 21 | 461 | 2,786,800 |
AJ Bell | Charles Galbraith (PDMR) | 21 Jan 21 | 461 | 1,153,492 |
AVEVA Group | Peter Herweck | 19 Jan 21 | 3,813 | 271,142 |
Ferguson | James Cross (snr vp) * | 19 Jan 21 | 903 | 59,204 |
JD Wetherspoon | Ben Whitley (fd) | 22 Jan 21 | 1,213 | 25,473 |
National Grid | Badar Khan (US Pres.) * | 19 Jan 21 | 4,387 | 131,610 |
Next | Francis Salway | 20 Jan 21 | 8,050 | 363,860 |
Whitbread | Mark Anderson | 21 Jan 21 | 3,169 | 126,770 |
* Via American Depositary Shares |