Relations with directors: Rolls-Royce, Admiral, Dunelm

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Directors’ trades are essentially insider trading for shares between directors and the companies they work for. These transactions are always made public and are often considered a good indicator of a company’s future prospects. However, they don’t get as much attention as other company news due to their complex nature. Nonetheless, I break down this week’s biggest director deals with three FTSE companies here.

Rolls Royce

Rolls Royce (LSE: RR) is a British multinational aerospace and defense holding company. It is one of the world’s largest aircraft engine manufacturers and operates in four different segments. These include civil aerospace, electrical systems, defense and new markets.

After a series of disappointing results in the first half, Rolls-Royce shares fell again. But this week, a number of admin dealings were done. Most notably, there was a huge stock purchase of Chairman Anita Frew. The purchase of such a senior director should improve the sentiment surrounding the title.

  • Name: Anita Frew
  • Directorship: President
  • Nature of the transaction: Purchase of shares
  • Transaction date: August 5, 2022
  • Amount purchased: 50,000 @ £0.83
  • Total value: £41,300

  • Name: Lee Hsien Yang
  • Director position: non-executive director
  • Nature of the operation: Share purchase plan
  • Transaction date: August 8, 2022
  • Amount purchased: 1,161 at £0.84
  • Total value: £980.23

  • Name: Wendy March
  • Director position: non-executive director
  • Nature of the operation: Share purchase plan
  • Transaction date: August 8, 2022
  • Amount purchased: 2,156 @ £0.84
  • Total value: £1,820.31

  • Name: Sarah Armstrong
  • Administrator position: Chief People Officer
  • Nature of the operation: Share purchase plan
  • Transaction date: August 9, 2022
  • Amount purchased: 175 @ £0.86
  • Total value: £149.84

  • Name: Rob Watson
  • Directorship: Chairman (Rolls-Royce Electrical)
  • Nature of the operation: Share purchase plan
  • Transaction date: August 9, 2022
  • Amount purchased: 175 @ £0.86
  • Total value: £149.84

Admiral

Admiral (LSE: ADM) is a British insurance company. It specializes in car insurance products, but also offers a range of other offerings. These include home insurance, travel insurance, pet insurance and van insurance.

The FTSE100 The company released its first-half results earlier this week. Although earnings fell by almost half, the stock still climbed 15% this week. This was probably due to the announced special dividend of 15.8 pence. This would bring its total dividend to 60.0p per share. Investor sentiment was also boosted when the chairwoman bought shares worth more than £25,000.

  • Name: Annette Court
  • Directorship: President
  • Nature of the operation: Share purchase plan
  • Transaction date: August 11, 2022
  • Amount purchased: 1,181 @ £22.44
  • Total value: £26,501.64

dunelm

dunelm (LSE: DNLM) is one of Britain’s largest home furnishing retailers with a steadily growing market share. It operates over 170 stores across the UK and offers over 50,000 products in a wide range of categories.

The FTSE250 The company released its fourth quarter business update not too long ago, and the interim numbers resonated well with investors. Nevertheless, its revenue has not yet been released and investors are wondering if their expectations will be met. Therefore, recent purchases by its CFO and another manager could be an indicator of an earnings beat. The company is expected to release its official FY22 results in less than a month.

  • Name: Vijay Talwar
  • Director position: non-executive director
  • Nature of the transaction: Purchase of shares
  • Transaction date: August 4, 2022
  • Amount purchased: 9,670 @ £8.50
  • Total value: £82,156.32

  • Name: Karen Witts
  • Board position: Chief Financial Officer
  • Nature of the transaction: Purchase of shares
  • Transaction date: August 5, 2022
  • Amount purchased: £1,174 at £8.45
  • Total value: £9,922.18

Kinds of actions

For context, there are a few types of shares that can be purchased by directors. Some directors choose to buy shares on the open market. That said, directors also have the option of purchasing shares through a stock incentive plan (SIP).

A SIP is an employee plan allowing companies in the UK to flexibly allocate shares to employees. Publicly listed companies normally exercise this option as it is tax-efficient for both the employer and its employees.

Relations with directors: stock incentive plan (SIP)
Types of shares in a SIP

Across this week’s director trading, a number of directors opted to purchase shares through their company’s stock purchase plans. This allows employees to purchase shares by direct debit from their salary. And that was the case for a number of Rolls-Royce directors, as well as the Admiral’s chairwoman.

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