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One of the most common investor complaints is that management often has little real stake in a business, with the awarding of share options and long-term incentive plans largely guaranteed whatever the performance.
Therefore, it is interesting to see an incoming senior manager spend an entire year’s salary in buying shares on the open market, which is exactly what the London Stock Exchange’s new chief financial officer Michel-Alain Proch has done.
Proch spent £843,000 buying up a total of 9,314 shares in two separate tranches on joining LSEG. His salary was advertised as £850,000, so the buy represents a pretty noteworthy vote of confidence in what the exchange and data company is currently doing.
In many ways, sinking such a large lump in LSEG looks like decent timing as its share price has improved since the last full-year results — it is fair to say that these did not set the world alight even though LSEG looks set to fulfil its targets for the year ahead. However, the company is still only halfway through its £1bn share buyback programme for the year.
A Deloitte accountant by training, Proch is a corporate veteran of US and French boardrooms and joined the LSE in January after a spell at French PR giant Publicis.
Investors will get a chance to see Proch in action when the London Stock Exchange reports its interim results in early August.
Breedon chair buys back in
Five weeks after spending £5.8mn on shares in building materials company Breedon, the company’s chair Amit Bhatia has returned for more. Or, more accurately, a company closely associated with him, Abicad Holding, has been hoovering up more shares. This time, it has spent £4.2mn, bringing the total since the start of April to just shy of £10mn.
During that period, Abicad has increased its holding by 2.6mn shares which, when added to the 61.7mn held at the end of last year, brings its holding above 18.7 per cent. It has been a shareholder since 2016, when Breedon bought Abicad’s Hope Construction Materials business for £336mn through a mix of cash and shares.
It has been upping its holding over the past year — initially through a reverse bookbuild that increased its stake from 10 per cent to 15 per cent, followed by further large purchases in October and November. Abicad clarified at the time that the shares were being bought as an investment and it was “not intending to make an offer for Breedon”.
It’s an investment that has fared well, with the shares bouncing by around 26 per cent from their mid-October lull.
And although the first quarter of this year proved something of a washout, with bad weather blamed for a 9 per cent like-for-like decline in sales, the completion of a landmark $300mn (£238mn) deal in March to buy BMC Enterprises has given Breedon a long-anticipated foothold into a US market that is ripe for consolidation. Deutsche Bank analyst Christen Hjorth recently argued that Breedon has a management team with a history of “underpromising and overdelivering”, and a record of successfully integrating deals.
With that in mind, Breedon’s current share price of 11.5-times forecast earnings, below its five-year average of 14-times, clearly continues to appeal.