Browning West, LP (“Browning West”), which currently owns 9.4% of the outstanding shares of Countryside Properties PLC (“Countryside” or “the Company”), believes that the Partnerships division (“Partnerships”) is the “crown jewel” of Countryside’s business and that specific steps must be taken to Let Partnerships Prosper.
Browning West believes Partnerships has a wide competitive moat, a unique asset-light business model, high returns on capital, substantial revenue visibility, and significant white space to continue growing at a rate four times that of the average company within the FTSE 250 Index. Given Partnerships’ exceptional qualities, Browning West believes Partnerships is significantly undervalued today.
In order to understand the reasons for this undervaluation, Browning West has done significant primary research and engaged in extensive dialogue with Countryside’s Board of Directors (the “Board”), including conducting twelve phone calls with six different Board members and sending three letters to the Board. Having used these interactions to augment its own research, Browning West has concluded that Countryside currently suffers from three critical deficiencies: (i) deteriorating operating performance versus peers, (ii) a lack of a framework to address its burdensome dual-division structure, and (iii) value-destroying capital allocation policies.
In Browning West’s opinion, there are three underlying board-level issues that are responsible for these critical deficiencies: (i) a weak Chairman, (ii) poor alignment with shareholders, and (iii) gaps in the Board’s skillset.
We have also unfortunately concluded that the Board is unwilling to work with one of its largest shareholders to address these critical deficiencies or consider the meaningful opportunities that have been presented by Browning West to significantly enhance shareholder value.
Countryside’s future success relies on maximising the tremendous potential of Partnerships, and Browning West urges the Board to effect the following changes:
- Immediately Appoint Browning West’s Usman Nabi to the Board: Mr. Nabi should be added to the Board to bring specific financial, M&A, and capital allocation expertise, as well as to co-lead the search for a new Chair of the Board.
- Initiate a Search to Replace Countryside’s Chair: The Board should immediately initiate a search for current Chairman David Howell’s replacement, seeking candidates with the following key attributes: (i) experience as a CEO, (ii) a track record of value creation, and (iii) evidence of success in M&A and capital allocation.
- Task the New Chair with a Mandate to “Let Partnerships Prosper”: The new Chair will work with the reinvigorated Board to urgently address three key issues: (i) reassess the current operating plan to see if there is an opportunity to improve return on capital employed and margins in 2021 and 2022, (ii) initiate a process to thoughtfully execute the separation of Housebuilding to create a stand-alone Partnerships business, and (iii) construct a prudent capital allocation policy that significantly reduces the risk of any future equity offerings and maximises total long-term returns for all shareholders.
Browning West has requested that the Board establish a new committee, co-led by Mr. Nabi and one of the Company’s current non-executive directors, to oversee the search process to identify Mr. Howell’s replacement. Mr. Nabi has a stellar track record in this area. Browning West believes that taking these steps will protect shareholders from downside risk, enhance long-term returns, sharpen management’s focus, and ensure that Countryside can continue to fulfil its important role in the community by addressing the UK’s chronic housing shortage in a sustainable manner.