Directors’ Deals: On the Beach founder buys in

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The market gave a big thumbs up to former chief executive Simon Cooper’s recent vote of confidence in On the Beach. The online holiday retailer’s founder bought £2.5mn-worth of shares in the company on August 11, which drove the share price up by more than 10 per cent once the disclosure was made on the following trading day.

The move by Cooper, who now sits on the board as a non-executive director but still owns 7.5 per cent of issued share capital, will surely have pleased new boss Shaun Morton. 

The share price bounce provided some relief to investors, given the weak performance this year. The shares have fallen by more than a third this year as investors priced in concerns around consumer demand and trading uncertainty. 

For the half-year to March 31, revenue rose by 38 per cent to £73.2mn and the pre-tax loss narrowed by £1mn to £6mn. Given that the company tends to make most of its profit in the second half of the year there is scope for cautious optimism here as it continues its push into the “premium” end of the market. While value holiday performance hasn’t yet recovered to pre-pandemic levels, the total transaction value of premium holidays booked in the latest half was 17 per cent ahead.

Recent updates support the idea that the outlook for travel demand is resilient despite headwinds around consumer spending. Airline shares such as easyJet and British Airways owner International Consolidated Airlines reported strong growth in passenger numbers. 

Broker Shore Capital argued that if On the Beach can “replicate its short-haul value share of around 20 per cent by leveraging its established brand awareness, existing customer base and investments across the larger addressable market, we see scope for it to more than double its revenue base”. 

The company’s shares trade hands at seven times forward earnings, according to consensus analyst data on FactSet. This represents a steep discount to the five-year average of 21 times. 

Hiscox chair takes plunge on results day

Lloyds syndicate insurer Hiscox is benefiting from a grisly but favourable commercial environment. The pandemic, war, and environmental disasters have meant higher insurance rates. This was apparent in the company’s half-year results to June 30. Rates were up by 9 per cent in London, with property lines posting the strongest uplift — household market premiums rose by 27 per cent.

Chief executive Aki Hussain pointed to “disciplined underwriting and favourable market conditions” as the reasons behind the company’s performance. Pre-tax profit surged to $265mn (£209mn) from the $25mn recorded in the same period last year, with underwriting profits increasing by 60 per cent to $221mn. Higher bond yields also helped Hiscox’s investment return, which came in at $122mn for the half compared to a $214mn loss in 2022. 

Chair Jonathan Bloomer bought £210,000-worth of shares on results day as the share price slipped. Despite the progress in profitability, market sentiment was hit by a weaker outlook for the company’s retail businesses. Management guided for full-year headline retail growth to be in line with the half-year performance (mid-single digits), a downgrade from previous expectations, which sent the shares tumbling by 6 per cent. 

RBC Capital Markets analyst Derald Goh said that an “expected return on equity of around 19 per cent at current valuation levels leaves us neutral”. The investment bank calculates that Hiscox shares trade at 1.75 times book value and offer a 3 per cent yield. This isn’t unattractive, but there are valuation discounts and better yields available elsewhere in the insurance space.