Directors’ Deals: Peltz cuts Unilever stake

Consumer goods group Unilever has underwhelmed in recent years, and despite a better 2022 its share price is well below its 2019 peak.

Even last year did not get off to a good start. A failed £50bn bid last year for GSK’s consumer health business, later spun out to become London-listed Haleon, was scorned by investors as strategically dubious. Fundsmith chief executive Terry Smith referred to this as a “near-death experience” for the manager’s stake. And rising interest rates have dented Unilever’s attractiveness as a bond proxy stock.

But progress was made as the year unfolded. Underlying sales growth of 9 per cent was better than expected by City analysts. And pre-tax profits rose by a fifth to €10.3bn (£9bn), the best posting since 2018.

Still, the results highlighted the impact of rising prices on consumer demand. Unilever raised prices by 13 per cent in the final quarter and by 11 per cent over the full year. It was no surprise that volumes contracted by 2 per cent on an annual basis, and by 4 per cent in the final three months of the year, as cash-strapped consumers looked elsewhere.

Activist investor Nelson Peltz, chief executive and founding partner of hedge fund Trian Fund Management, began building a stake in Unilever in January last year and was granted a board seat in May. Since then, the company’s chief executive Alan Jope has announced plans to retire. His replacement, Hein Schumacher, will take over in July. He will certainly have a lot on his plate but the fact that he previously worked with Peltz at Heinz should help.

The share price has also ticked up by around 8 per cent since Peltz first invested and he recently banked some gains, selling around 1.67mn shares, or around £71mn worth, on February 15. However, Peltz’s fund still holds more than 10mn shares, according to FactSet.

Bango boss bags bucks

Last year was a success story for mobile payment platform Bango. The company offers a mobile payment platform allowing users to charge purchases made in app stores straight to their mobile phone account. The technology is gaining traction in the marketplace. During the year it added 44 new merchant customers, including McAfee, HBO, Paramount, NFL and Duolingo. There was also a leading undisclosed multinational technology group that analysts speculate could be Apple.

Revenue was up 59 per cent to $32.9mn (£27.2mn), but if these new customers do indeed include Apple, this figure could expand rapidly. The total spend of users of Bango’s technology last year was $5.6bn. Apple’s app store generated revenue of over $80bn, so even if Bango took just a small sliver of these purchases it would make a huge difference to its top line.

The gross profit margin slipped slightly to 80 per cent because of the acquisition of Docomo digital, a less profitable company. However, Bango has managed to deliver $11mn of its $21mn of planned cost synergies from this deal. By 2024, gross margins are expected to return to 90 per cent and the Docomo deal is forecast to add incremental cash profit (Ebitda) of $10mn next year.

The market has taken notice of this good news, with Bango’s share price rising by 34 per cent in the past 12 months. Executive chair Raymond Anderson believes this is a good time to cash in some shares. Last week, he sold 600,000, worth £1.39mn.

The sales were sold “to meet institutional demand”, the company said. Following the disposal, Anderson still holds around 5.8mn shares, or a stake of about 7.6 per cent.

It may prove to be prudent if consumers struggling with the cost of living cut back on app store purchases.

However, there’s no sign of this yet. In the three months to December, Apple’s service revenue grew 6 per cent, despite overall revenue declining by 5 per cent. This suggests the ease and relative cheapness of app store purchases keeps them under the radar when consumers are looking for ways to balance the budget.