Directors’ Deals: Genuit chief executive begins to fill share pipeline

It’s understandable that investors have been so down on building products companies in recent months. Genuit Group’s shares have almost halved since hitting an all-time high of 806p at the end of August last year. 

The company, still best known by the name of its most popular product Polypipe, despite a rebrand last year, deals largely in the manufacture of plastic pipes. 

This means it faces something of a double whammy in terms of hydrocarbon price increases, given that it uses crude as a feedstock as well as being hit by higher energy prices in its manufacturing processes.

Indeed, its share price seems almost inversely correlated to the price of a barrel of Brent, which has jumped by about 48 per cent since Genuit’s share price peak.

The company acknowledged the presence of cost headwinds when reporting its results in March but said it is offsetting input inflation with “necessary market leading price increases”. 

Its statutory operating margin grew to 11.3 per cent, compared with 7.6 per cent a year earlier.

Its end markets also remain fairly robust. Although the Construction Products Association downgraded its growth forecast for this year to 2.8 per cent from a previous estimate of 4.3 per cent given an expected slowdown in the home improvement market, infrastructure spending is set to grow by 8.8 per cent this year and 4.6 per cent next.

Genuit’s chief executive Joe Vorih, who was appointed in February after previously running the HBK testing business owned by Spectris, is backing himself to continue expanding the business, buying £88,000-worth of shares on April 28. Although this represents a fraction of his £560,000 basic salary, which remuneration committee guidelines suggest should be matched by share ownership worth 200 per cent of this, he seems to be buying in at an attractive price point. 

The company’s shares are trading at 12.6-times FactSet consensus forecast earnings, below their five-year average of 16.4-times.

Consultants cash in on demand for shares

Quips about management consulting have been around for as long as the industry itself, and some studies into their use have found that clients have often been unable to demonstrate the advice they were given had delivered expected returns.

This hasn’t stopped both public and private sector bodies from continuing to spend lavish sums on these modern-day gurus in the hope that they’ll find a cure for their organisational ills, though. 

The industry’s trade body, the Management Consultancies Association, said in January that its members reported a 16 per cent increase in business last year and expected a further 13 per cent uplift in 2022.

Little wonder, then, that Elixirr International has done so well since it first ventured on to the Alternative Investment Market less than two years ago. The company raised £25mn floating at 217p per share, which gave it a market capitalisation of £98.1mn. 

Shareholders who bought in at that time have done well. The firm, which describes itself as a “challenger consultancy” to industry giants like McKinsey, Bain, and Boston Consulting Group, doubled pre-tax profit last year to £5.8mn on the back of a 67 per cent increase in revenue to £50.6mn. It expects a near 50 per cent uplift in revenue this year to about £70mn-£75mn, some of which is being fuelled by acquisitions. In March, the company said it would spend up to $40mn (£30.4mn) on US-based technology services company Iolap.

Since flotation, its share price has more than trebled in value, lifting its market cap to almost £350mn. 

Company bosses haven’t done so badly, either. At the end of last month, Elixirr said it had completed a secondary placing where 1.2 per cent of its shares were sold by insiders to “satisfy strong institutional demand” for its shares. At 725p, this meant that six selling shareholders made almost £1.85mn between them, with chief executive Stephen Newton pocketing about £800,000 of this. 

This was the fourth time since the company’s flotation that directors have sold shares through secondary placings. The fact that each one has taken place at a significantly higher price shows demand is there, though, and the shares now trade above the latest placing price, only just below the all-time high of 780p they hit last month.