Tesco boss Dave Lewis who took up the reins on 1 September 2014 has finally answered those critics who had been increasingly raising their eyebrows about his lack of share purchases; and, indeed, about the general dearth of buying by Tesco executives.
It seems that Tescos board had banned itself from sharedealing, as it considered itself to have too much privileged inside information on the progress of asset sales. The situation changed on Wednesday, when the company released its half-year results, and announced that further asset sales were off the agenda.
The following day, the directors bought shares en masse, as summarised in the table below.
|Director||No. of shares||Price per share||Total investment|
|Dave Lewis (chief exec)||99,950||200.1p||200,000|
|Deanna Oppenheimer (non-exec)||51,000||200.4p||102,204|
|Alan Stewart (finance director)||50,000||202.4p||101,200|
|John Allan (chairman)||50,891||196.5p||100,000|
|Richard Cousins (non-exec)||17,357||199.0p||34,540|
|Mikael Olsson (non-exec)||5,000||200.1p||10,005|
So, the board has been happy to nail its colours to the mast at around the 200p mark, on a current-year forecast P/E of 26. The P/E does, though, fall to 19 next year, withanalysts expecting a return to earnings growth under Mr Lewiss continuing initiatives.
Tescos total indebtedness (net debt + operating lease commitments + pension deficit) at the half-year end of 21.9bn was little changed from 12 months ago. And falls to 17.7bn when you include the proceeds of the sale of the groups Korea business, which came after the period end.
Tescos debt particularly the non-cancellable operating lease commitments, which had been rather tucked away in the accounts of previous management was something Id been warning investors about for a number of years. Its good to see progress on this front, with Tesco even managing to regain sole ownership of 21 superstores, and hopefully the company will make further inroads into reducing lease commitments and exposure to inflation-indexed rent reviews.
As to salesand profits, theres still a long way to go. I was happy to suggest Tesco as a buy at around the lows of 165p at the end of last month. However, aftera rise of over 20% to 200p, I see the valuationas being up with eventsfor the time being. The directors would appear to disagree with me!
Weve had no trading news from British Gas owner Centrica since half-year results in July. The company has been through a strategic review under chief executive Iain Conn, who was appointed at the start of this year. The strategynow is to refocus on customer-facing businesses, to reduceand limit scale in oil and gas E&P andcentral power generation, and to exitremaining wind joint ventures.
Centricas shares have drifted lower since the results, and, on the same day Tescos directors were busy opening their wallets, Mr Conn was too. He bought 100,000 Centrica shares, and was joined by non-executive director Steve Pusey who picked up 20,000. Both directors paid 235.35p a share, for a combined outlay of 282,420.
A 12-month forward P/E of around 13 and a dividend yield just north of 5%, make Centrica an attractive proposition, in my view, and I can see why Messrs Conn and Pusey would want to buy.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.