Company insiders such as corporate executives and directors tend to have the most up-to-date information on their companies’ prospects. They are often finely tuned to the macro and micro economic factors that will influence their business. If they’re buying stock, it’s generally a positive development.
Here, we are going to highlight a large insider purchase at N Brown Group PLC (BWNG:LN). N Brown Group is a digital fashion retailer in the UK that offers a range of clothing, footwear, and homeware products for men, women, and children. It’s listed on the London Stock Exchange’s AIM market and currently has a market capitalization of £327 million.
N Brown Group PLC: Insider Buying
Regulatory filings show that on 11 February, a Non-Executive Director of N Brown Group, Joshua Alliance, purchased 7.849 million BWNG shares at a price of £0.65 per share and on 12 February purchased 3.365 million shares at a price of £0.647 per share. These purchases – which cost the insider approximately £10.06 million – boosted Alliance’s holding by nearly 112%.
This is a large purchase in monetary terms that has increased the Non-Executive Director’s stake by a significant amount in percentage terms. It would suggest that he is very confident in the future prospects of the company.
It’s worth noting that Mr Alliance has been with N Brown for seven years meaning he is likely to know the company well. It’s also worth noting that he is the son of the major shareholder, Lord David Alliance. This gives greater significance to Alliance’s recent share purchase.
N Brown Group’s revenues were severely impacted by Covid-19, with product revenue falling 28.8% in the first quarter. The shares were heavily hit in early 2020 but they have slowly rebounded as investors focus on recovery.
A recent Q3 trading update was encouraging. The company advised that product revenue had continued to recover from the sudden and sharp decline experienced in the first quarter of FY'21 caused by the impact of Covid-19. It also said that it experienced particularly strong demand for computing (+115%), gaming (+50%), and white goods (+48%). Home & Gift sales comprised 42% of product revenue, compared to 32% in the same period last year. Overall, trading was in line with expectations and the company now expects to deliver FY21 adjusted EBITDA of between £84 million and £86 million.
A recent fundraising of £100 million has eliminated unsecured debt from the business which is reassuring. Commenting on the successful capital raise, N Brown Group said that it will help the company continue the acceleration phase of its strategy and create a sustainable business delivering profitable growth in the long-term.
Reflecting upon this latest news, we see the insider buying here as a bullish signal. It suggests that the Non-Executive Director believes the business is being turned around.