Directors' Dealings

Director dealings can normally be relied upon to reassure nervous investors about market prospects, but not now.

In fact, as figures compiled by Charles Stanley's Iain Daly show, the prevalence of board selling amongst small- and mid-caps has become more and more pronounced in recent weeks. While in the first four days of May there were 27 buys to ten sells, during the following week buys only outnumbered sells by 50 to 22, while the five days to 23 May showed 41 against 24. And during those three weeks nearly £22 million more was recouped in director transactions than was spent.

The selling activity has dogged companies of all shapes and sizes. While it isn't necessarily cause for alarm (as many of the companies concerned have had extremely good runs and are still performing well) it nevertheless can only act as a palliative for those who believe that the bear market of the last three years is over.

Connaught and Topps attract institutions

At Connaught and Topps Tiles, though, the sales were specifically engineered, in order to free up enough stock so that institutional investors could buy in bulk. Mark Tincknell, the long-standing boss of Aim-listed social housing maintenance group Connaught, cashed in £720,000 by selling 250,000 shares at 287.5p, with his colleague Tony Williams picking up 2,000 of them at the same price. These actions came just the day after Connaught reported impressive interim results on 20 May, showing profits raised 40 per cent. The keen interest in the shares amongst investors can be seen in the fact that they have moved up to 295p since then.

Meanwhile, at fully-listed Topps, no less than five directors sold a total of 1.7 million shares at 350p, three days after the group's results for the ten months to March. Founders Barry Bester, group chairman, and Stuart Williams, his deputy, cashed in the most by selling 758,000 and 538,000 shares, respectively. Both have undertaken not to sell any more of their equal 11 per cent holdings until the company announces results for the year to September. Like Connaught, where Tincknell has made a similar commitment, the shares have held up well, rising to 356.5p.

Smit sells

There was also a substantial piece of selling activity from Smit Berry, the sometime smaller companies analyst and one of the founders of Legendary Investments with Joe Bloggs jeans man Shami Ahmed and Michael Fry. Altogether, Berry offloaded 50 million shares in the Aim-listed investor in Moss Bros, Bioprogress and Ofex-listed Legends Surf Shops amongst other things.

Berry sold out at a heavily discounted 0.5p, apparently to fund an acquisition. Penny shares dealing house City Equities successfully passed the 27 million shares that it bought on to private clients. However, despite all of this selling, Legendary's shares actually moved up slightly to 0.81p, giving it a market value of £4.3 million.

AIM's black sheep attract buys

Of course, it hasn't been all one-way traffic, especially on Aim, several of whose lesser lights have attracted director-buying lately. Not least Public Network, the fledgling internet kiosk operator whose time on the junior market could variously be described as chaotic, confusing and unproductive. The shares were suspended from 2 January through to 10 April when the company finally managed to sort out a highly- complex refinancing package.

This involved the conversion of debt into equity, including preference shares that have given holders the right to the first 30p from any final return on the shares. Given that, after a one-for-20 consolidation, they are trading at 20p, that doesn't look like a great deal for holders of ordinary shares. So, in this respect, the purchases of Messrs Grace, Martin and Nowacki, at 12p an 17p, might just be a reason for some confidence in prospects. However, ex Ofex broker GHW Group has been busy selling off its holding and still holds 17 per cent of the ordinaries.

Artisan (UK), another, rather older, Aim-listed disappointment, was also in the buying frame, with Aspen Finance, new boss Michael Stevens' vehicle, snapping up a further three million shares at 2.25p. The housebuilder has been through some difficult times, with massive write-offs, severely declining operating figures and the exit of entrepreneurial chairman Stephen Dean. Dean's departure 'incurred substantial management time', Stevens has said. It also cost Artisan £690,000 in severence payments.

Investors will be hoping that the new board will manage to get the company, still based at 'Dean House' in Huntingdon, back on track. The market has certainly responded favourably to Stevens' purchase, with the shares having climbed back

up to 3p.