Countryside’s third largest shareholder is calling for a new chairman to restructure the business.
Browning West claims current chair David Howell “has a track record of value destruction”, threatening the business with “an affinity for big share issuances”.
The investor, which owns 9.4% of Countryside, says poor capital allocation has “severely damaged” Countryside’s valuation.
The comments were made in a letter to the Countryside board, following months of debate over a company split.
Browning West wants to separate the Housebuilding and Partnerships divisions into two businesses, with Housebuilding sold, leaving the “crown jewel” of Partnerships “to prosper”.
It has demanded the business find a new chairman with “evidence of success in M&A and capital allocation”.
Browning West has also called for its founder, managing director and chief investment officer Usman Nabi to be appointed to the board.
Nabi wants to co-lead the search in collaboration with another non-executive director selected by the board. Browning West added that his presence on the board would be a big uplift from the current board ownership stake of just 0.06%, which it claims is the lowest level of ownership of any listed UK housebuilder.
Once a new board is in place, the investor says Countryside must “urgently” work to reassess the current operating plan to improve return on capital employed and margins over the next two years.
It should initiate a process to separate Housebuilding and Partnerships and build a capital allocation policy that reduced the risk of future equity offerings.
The investor revolt follows a £250m equity raise in July, which Countryside said it would use to repay debt and fund partnership ventures.
For the year ended September 30, the housebuilder reported profits down by 77%. In the first half of the year it had ROCE at 25.8%, down from 32.9% a year earlier. Its operating margin fell 550 bps to 10.4%.
An announcement from Countryside said in response: “We maintain an ongoing dialogue with our shareholders and listen carefully to the views they express.
“As scheduled, we will publish our full-year results for year ending 30 September 2020 tomorrow when we will provide a comprehensive update to all shareholders.”
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