US hedge fund Elliott Advisors, one of the top five shareholders in Taylor Wimpey, says that Taylor Wimpey has underperformed under Pete Redfern and warns that “shareholders are unlikely to support a CEO candidate that represents an extension of the status quo at Taylor Wimpey.
Elliott has written to the board of the house-builder “to share perspectives” and “foster a dialogue”.
Peter Redfern handed in his notice as Taylor Wimpey chief executive last week after more than 14 years in the job with no successor in place. Elliott suggests that his departure was not entirely voluntary.
“With the recent resignation of the CEO following reports of Elliott’s involvement, the company has taken an important first step toward the change that Taylor Wimpey needs to restore this lost confidence,” its letter says.
It tells the board: “The company continues to fall short of achieving the opportunity inherent in the business. In particular, a series of operational and strategic missteps has resulted in persistent share-price underperformance, leaving shareholders frustrated and lacking confidence in the company.”
Elliott says that Taylor Wimpey had a bad covid compared to its competitors. “Under current management’s direction, the company suffered the worst declines in volumes in 2020 across the entire sector, with a 39% decline compared to Barratt and Bellway at 28-29% and Persimmon at only 14%. As the construction sector resumed activity following lockdowns, other homebuilders showed that it was not necessary to sacrifice financial performance to the extent that Taylor Wimpey did.”
It also criticises the land buying strategy and the focus on large sites “causing Taylor Wimpey to sacrifice margins for volume in 2019, significantly downgrading margin guidance and disappointing investors during a period where its closest sector peers experienced positive margin development”.
Elliott says that the next chief executive should be an experienced operator with an established track record in the UK from outside the company.
“We believe that a meaningful change in leadership, with top-tier external talent, is essential to rebuild investor confidence. It is clear that the status quo invariably leads to inadequate results and persistently impaired shareholder value,” it says.
A Taylor Wimpey spokesperson responded: “Taylor Wimpey delivered record interim profits and increased guidance for the full year in August. This follows a successful and well-timed £500m equity raise in 2020 which enabled the company to invest in a total of £1.7bn of new land at a time when there was a lack of competition in the land market and prices were considerably lower than they are today. The company is set for another year of growth in 2022 and given the equity raise will deliver accelerated growth from 2023.”
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