Shares digital

Following lacklustre results and the collapse of takeover discussions, four directors of Close Brothers (CBG) – led by chairman Rod Kent and managing director Stephen Hodges, have bought more shares in the company. Although the results were distorted by exceptional items, underlying earnings were down by 4.6%. Corporate finance profits were lower and funds under management fell by 2% to £8.9 billion.

Shareholders are likely to rue the collapse of the offers, which started with the Cenkos/Landsbanki joint offer of 950p. The talks collapsed because ‘no bidder was able to deliver a firm fully funded offer’ that the board could place before shareholders. The company used the hiatus to review its own strategy, eschewing a break up of the group or demerger or sale of one or more divisions. Instead the board has decided to adopt a more rigorous approach to managing capital. There will also be a greater emphasis upon controlling costs and incentivising staff.

The company is well capitalised but it decided not to increase gearing by paying a special dividend. Although directors are clearly optimistic about the medium term potential sentiment will be dominated in the short term by the deteriorating economic situation and volatile equity markets. At 592p the shares are selling on a PE of about eight, falling to around 7.4 next year.

Shares says: Sector is likely to remain under a cloud for the foreseeable future thanks to a squeeze on financial markets, but the directors' faith is reassuring.