Babcock directors buy on dip

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Shares in Babcock International have suffered lately. A mid-July trading statement warned of continued delays to defence spending, exacerbated by the restructuring of the government’s Defence Equipment & Support (DE&S) organisation. A subsequent spending review has prompted analysts to lower full-year forecast revenue growth at Babcock from 4 per cent to 2 per cent.

The group’s shares have been on shaky ground since last year, when concerns over the wider outsourcing sector and weak cash flows dented confidence. Clearly, investors are still nervous. This announcement caused another drop in the share price, erasing almost all of the re-rating seen since the start of the year.

The company directors, however, don’t seem as worried. Shortly after the statement’s release, four non-executives increased their stakes. Restrictions on share dealings were in place before the announcement, which could explain the purchases’ quick succession.

Dart Group has been quick to snap up some of the excess capacity left over in the European air travel market by the now-collapsed Monarch airlines. It increased seat capacity by 45 per cent to 11.3m during the year to March. So far the load factor, or the proportion of seats filled, has managed to keep up, increasing from 91.5 per cent in full-year 2017 to 92.2 per cent. But the European market is a tricky one, and “very competitive pricing” meant average airline ticket yields fell 15 per cent to £73.65.

Still, the market was encouraged by the full-year results, sending the shares up to near record highs of around 1,030p. Executive chairman Philip Meeson sold 500,000 ordinary shares at 912p apiece. Dart said the £4.56m transaction was completed to meet “personal financial commitments”, while Mr Meeson still owns just over 55.7m shares, around 37.5 per cent of issued share capital.