Company will sell off sites that don’t fit new partnerships housing model

Countryside has announced it is winding down its direct housebuilding arm to focus on place making and regeneration through its partnerships business.

The Essex-based housebuilder told the stock market it has decided to focus all of its resources on its partnerships business, which works with housing associations, public bodies and institutional private rental operators to deliver mixed-tenure regeneration schemes.

Land and developments that do not fit the partnerships strategy, and are not subject to existing commitments, will be sold off.

This means that the housebuilding business, which in the six months to March generated revenue of £265m, will be wound down.

“No additional capital will be deployed in the building of new developments that do not fit the partnerships model”, the company said.

The firm said a new partnerships region will be set up in the home counties utilising suitable sites from the housebuilding business, which will be led by Philip Chapman, the current chief executive of the firm’s housebuilding business. Any sites not suitable for the partnerships model will either be built out or sold.

Countryside said this move will generate £450m of surplus cash by September 2023, which will be returned to shareholders.

The move follows a campaign by activist shareholder Browning West to sell the housebuilding business. This was followed by David Howell’s decision to stand down as chair alongside the announcement of a strategic review of options for the housebuilding arm. John Martin was appointed chairman in April.

The company has not said specifically why it has moved away from selling the housebuilding business in favour of winding it down instead. 

However, John Martin, chairman of Countryside, said: ”The strategy will significantly accelerate the development of our Partnerships business, which will be even stronger as a result. The value of the additional recurring earnings that this will generate, along with the £450m proceeds from the disposal of surplus assets, clearly significantly exceeds the value of any of the other strategic options available.”

The housebuilding business had a higher profit margin than the partnerships business last year, at 14.8% compared with 11.6% (see table below). However the partnerships arm had a much higher return on capital employed, at 13% compared with 4.9%. Return on capital employed is calculated by dividing pre-tax profit by employed capital and is a measure of how efficiently capital is being used.

How Countryside’s two divisions compare  
  Partnerships Housebuilding
Private completions (#homes) 939 515
Affordable completions (#homes)  1390 301
PRS completions (#homes) 884 24
Total completions (#homes) 3,213 840
Adjusted revenue (£’000) 629.4 359.4
Gross profit (£m) 73 53.3
Gross margin 11.60% 14.80%
Operating profit (£m) 32.8 25
Operating margin 5.2 7.00%
Return on capital employed 13.00% 4.90%
Source: Countryside full year results to 30 September 2020