Vistry’s combined CEO and chair roles ‘not an issue – if he delivers’

Vistry’s decision to combine the roles of chair and chief executive might cause concern among some shareholders but the company will be judged on its financial performance, analysts have said.

The homebuilder announced in January that CEO Greg Fitzgerald would become executive chairman and assume both roles after its AGM in May. The firm said this would be to “ensure continuity and maintain momentum” of company strategy, delivering on targets announced in 2023.

Last week Vistry appointed outgoing Met Office chair Rob Woodward as senior independent director to provide extra oversight on governance matters and carry out high-level engagement with investors after Fitzgerald’s new role is established.

Luca Enriques, professor of corporate law at the University of Oxford, said combining the roles is against the Financial Reporting Council’s (FRC’s) corporate governance code for public companies.

“You have to either comply with the rule of separation or else explain why you think that in your case the alternative arrangement is a better fit,” he said.

This is because the chair leads board discussions and oversees the flow of information from management to the board so that it is aware of all of the information the chair deems appropriate.

The FRC corporate governance code applies to London Stock Exchange-listed companies such as Vistry. The code, revised in January this year, states: “A chief executive should not become chair of the same company.

“If, exceptionally, this is proposed by the board, major shareholders should be consulted ahead of [the] appointment. The board should set out its reasons to all shareholders at the time of the appointment and also publish these on the company website.”

Enriques said: “The arrangement that [Vistry] has announced is typical of US companies. In the US, the most common arrangement is for the CEO to also combine the role of chair, and to have a senior independent director on the board who is supposed to be the leader of the independent directors.”

He added that following the financial crisis of 2008, a debate began in the US about whether companies were better off splitting the roles out, as per the UK model.

Investec equity analyst Aynsley Lammin said: “I guess it’s probably a concern for some UK shareholders, but my view is Greg is a very able operator and a key individual within that business so I suspect the US investors, and there’s quite a lot of US investors on the shareholder register, are less concerned by it and potential issues around corporate governance.”

Last year the housebuilder announced it was leaving private homebuilding in favour of a partnerships model with housing associations and local authorities. The news came a year after the firm acquired Countryside Partnerships.

The model has been a central part of Vistry’s growth plans since its formation through the merger of Bovis and Galliford Try’s housing companies in 2019.

“If he delivers strategically and financially on the Countryside deal, then probably all will be forgiven and it won’t be a big issue,” Lammin said.

Applied Value analyst Steven Rawlinson said the announcement of additional oversight would help attract third-party investors, and noted the main investors want him in the job.

He added: “There doesn’t seem to be a lack of demand for the shares, they’re up 30 per cent this year, and all of this was known for most of this year. If people don’t like it, they could just sell, but they seem to like it.

“It’s the best-performing housebuilder in the year to date by some distance. The housebuilding sector hasn’t moved but Vistry is up 30 per cent.”

Shares in the group rose from 967.50p in January to 1,257p in mid-April. The share price stood at 1,150p on Friday afternoon (12 April).

Lammin added that with the absence of the government’s Help to Buy scheme, which ended in 2022, and affordability issues constraining sales rates, other homebuilders need to think about how to increase their own sales.

“One way of doing that is to widen the customer base out to more mixed tenure, partnership [build-to-rent and] housing associations, which I think you will see more of in future.

“If Labour wins the general election, I suspect that there will be more focus on affordable housing and that whole partnership side, and that will play into that potential housing policy as well.

“I think you’ll see housebuilders do more mixed tenure, more partnerships, but not to the scale and the focus that Vistry is doing.”

Mark Reynolds, former chief executive of Mace, took on the additional role of chair of the contractor in 2021, becoming executive chair following the departure of Stephen Pycroft.

As a private company, Mace is not bound by the FRC’s corporate governance code.

At the time, the firm stated that it operated with four distinct business entities within its group structure, which each had a separate chief executive and board, enabling challenge and “rigorous governance”.

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