Hefty director purchases are often used by companies as a beacon of confidence in the business, telling potential investors there is belief somewhere in the company. San Leon Energy boss Oisin Fanning did much more than that this week. Mr Fanning increased his stake in the oil producer from 1.8 per cent to 24 per cent, at a price of £20.6m.
He bought 98m shares at 21p from San Leon’s biggest investor Toscafund Asset Management, which now holds just over 50 per cent of the company. San Leon said “others helped” with the purchase, but no related parties were involved in financing the deal.
The sale took place on May 7, which was also the ex-dividend date for a special payout for shareholders announced in late April. Mr Fanning said the 6p special dividend was coming because “visibility of future cash flow is strong”, including from debtor payments, services contracts and income from the OML 18 oil and gas asset in Nigeria, in which San Leon has a 10.6 per cent stake. Mr Fanning’s share of the special dividend would have been close to £6m.
A new pipeline is being built at OML 18, and the company said this would “immediately” increase revenues by 30-40 per cent.
The debtor payments are linked to OML 18 and San Leon received $40m (£32.5m) in April from Midwestern Leon Oil and Gas, which is also its third-largest shareholder. Another $60m is expected by the end of the year.
This context makes the special dividend more understandable at a time of weak oil and gas prices. San Leon also has no debt and as of last month a cash balance of $74m.
Before the deal, San Leon had fallen to a multi-year low of 11p. The shares kicked up again before the £20.6m purchase, however, and the company is now trading at 25p.
San Leon said Mr Fanning had made the investment because he believes “in the company’s distribution policy”, and with $110-$120m coming into the company in the next 15 months, 50 per cent of this would be paid out to shareholders.
Spirent’s performance so far this year has been supported by a surge of momentum late in 2019. Most of the supplies for the telecoms testing provider’s products and services are dual-sourced, which has provided some shelter from the disruptive effects of the pandemic.
The company has however noted that the launch of its connected devices by its customers, which provides live network testing and digital twins for network and radio systems, may be impacted. But the first quarter saw a 12 per cent increase in revenues, with “robust profit growth” compared with the same point last year. A healthy order book has led its performance, with 5G development continuing well. Indeed, management said in an update in mid-April that it was working closely with Asian service providers who have accelerated their targets for 2020, as demand grows for increased network capacity.
This follows a healthy performance last year, when order intake rose by 13.2 per cent to $532m (£432.8m). This was led by multi-year support contract wins, which has strengthened the Spirent’s revenue visibility. Its networks and security business, its largest division, saw its operating profits climb up by almost a third to $73.9m. Demand has proved robust through the first quarter for its positioning products and ethernet solutions.
Against this backdrop, we are not overly concerned that chief financial officer Paula Bell has sold £126,500 worth of shares. Her partner Dean Ritchie also offloaded £376,285 worth of shares in the company. Since the sales, Spirent’s share price has nudged up by 3.6 per cent.