Sanne insiders buy on contract wins

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 (SNN). Shortly after a 28 January 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. Hold at 560p.

Last IC View: Hold, 678p, 9 Sep 2020