Building Blog

Bonus watch: Bellway bosses bag £632,500

November 26th, 2008

By Tom Bill

Watson: was 2008 performance worth a £275,000 bonus?

There’s still no sign housebuilding bosses are attracted by the warm glow and good PR they’d get by waiving their bonuses in these difficult times.

Latest in line is Bellway. Admittedly the company is not in the same state of crisis as some of its peers but a £275,000 bonus for chief exec John Watson is a hefty whack. The company has made about 400 redundancies so far this year.

The figure was 55% of his entitlement and came on top of his salary of £500,000. Judging by a company statement, it seems the bonus was even toned down due to what it called “genuinely exceptional circumstances” in 2008.

It shows the Bellway bosses clearly thought twice about how it would look and counters the old argument about directors being tied in to bonuses that have been previously set.

Finance director Alistair Leitch got a bonus of £178,750 on top of a £325,000 salary and other director bonuses took the overall total to £632,500.

Bellway is one of the truly bullshit-free companies out there but the question remains:

Who will be the first construction boss to hear the little voice in his head that says a big bonus is morally questionable during these tough times and listen to it?

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Taylor Wimpey debt talks: mind your language

November 26th, 2008

By Tom Bill

Some of the descriptions of the fraught Taylor Wimpey rescue talks have been pretty euphemistic considering the company’s survival is at stake.

The housebuilder kicked things off a fortnight ago when it described the pace of talks with its lenders as “a tad disappointing”. Which was very restrained.

It continued a few days later with a description of Taylor Wimpey’s mood by someone close to the crisis talks about the delay. “They’re pretty grumpy,” he said. Ah, bless.

Then news emerged this week that not all the banks were singing from the same hymn sheet about the terms of the rescue deal. When asked what was going on, one source said: “It’s just some silliness among the banks.” Silliness?

This morning there was more understatement after it appeared that some of the banks had been talking to the press - shock horror – in order to force Taylor Wimpey into coming round to their way of thinking and giving them a slice of equity in return for a rescue deal.

Talks have been pretty colourful and heated between the company and its banks and even among the different banking factions in recent days. “Vigorous and intense” was the palatable version of events offered by one source.

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Barratt slashes house prices by 43% – good or bad news?

November 19th, 2008

By Tom Bill

Barratt’s attractiveness to investors is a moot point.

Some in the City believe the housebuilder is over the worst and say its shares are worth a punt at 60p-ish. They point to the rescue deal it struck with its banks in the summer.

Others are more reticent. Included in that camp is Alastair Stewart at Dresdner Kleinwort who issued a note called “It’s Grim Up North” in September. He described how Barratt’s Yorkshire East division was offering discounts of 43% on bulk deals so poor was the housing market.

The story was picked up by most national newspapers, including The Sun, and for a few week’s Barratt’s name couldn’t be written anywhere without the 43% figure being bandied around.

Cut to this week and the company announced surprisingly good visitor levels to its sales sites for the last three months – particularly since September.

Word has it the negative publicity may have actually attracted punters to its sites in search of a bargain.

Every cloud …

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Barratt chairman puts his money where his mouth is

November 18th, 2008

By Tom Bill

Clare: when will he put his money where his mouth is?

At Barratt’s trading update this morning one analyst questioned whether FD Mark Pain or chief exec Mark Clare would be buying shares in the company any time soon.

“It’s a good mark of confidence from the directors in the company’s fortunes,” he pointed out.

Pain was cagey and joked that his wife would have to stop single-handedly trying to reverse the slowdown in UK consumer spending first.

Clare talked about continuing investment opportunities, managing to answer the question but not really answer the question in the way he is particularly adept at.

And both were quick to knock back suggestions that they’d be at an unfair advantage if they did decide to buy company shares because they knew the exact terms of the company’s new banking covenants.

“Watch your screens,” concluded Pain.

A few hours later and the City was rewarded – chairman Bob Lawson piled in with £100,000 worth of shares.

Which just leaves one obvious question: Why havent the two Marks followed suit yet?

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MJ Gleeson boss bags £70k bonus

November 14th, 2008

By Tom Bill

When MJ Gleeson chief exec Paul Wallwork announced a pre-tax loss of £21m last month, he warned of more job cuts to follow the 335 already made this year.

His £70k bonus - announced this week - must have been pretty hard to swallow for those already shown the door.

The company is at pains to point out that the figure – on top of his basic salary of £293,000 – is what he’s entitled to for hitting performance targets and was 24% of his possible haul. It was the result of “organisational objectives other than the achievement of pre-tax profits,” it said.

It was a similar tale with Redrow recently.

It fails to acknowledge the issue of perception. The current financial carnage has seen the debate widen beyond a facile row about fat cat bosses.

Wallwork comes across as a likeable and down-to-earth character; not a fat cat. This is just 70 grand’s worth of bad PR.

Even the uber-capitalists at Goldman Sachs seem to have got the message.

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It's been emotional

November 13th, 2008

By Tom Bill

It can’t be easy being the boss of a housebuilder at the moment. The incessant flow of bad news must take its toll.

But while some are proving they have the hides of elephants, others appear to be wilting under the pressure.

If rumours in the square mile are to be believed, that is.

The story goes that one chief exec, who shall remain nameless for legal reasons, recently met with a group of hedge fund managers. Not a nice prospect at the best of times, of course.

Alarmingly, when they queried his sales figures, the meeting had to be called to an abrupt end because he burst into tears.

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Rok: are you still a believer?

November 5th, 2008

By Tom Bill

Snook: had some bad news for the flock

When Rok’s messianic chief executive Garvis Snook told the Stock Market this morning that the credit crunch would knock £12m off its bottom line, some were quick to mutter “I told you so” under their breath.

The company’s business model has always divided opinion; does a network of sub-contracted tradesmen under one skillfully branded umbrella add up to a sound business?

The believers point to its top-line – who’s to argue with a billion-pound business?

The non-believers say the model will come undone and were no doubt feeling a bit smug this morning. 

Some in the City have admitted to”seeing the light” in recent years and Snook himself is PR-savvy enough to admit that he is a bit like Marmite.

The man himself says Rok is simply suffering ahead of the curve due to the small-scale nature of its projects. “You can turn the tap off on these deals more quickly,” he says.

He adds: “Basically the lights were turned out right across the UK in October. It happened the same week that the government announced it would recapitalise the banks.”

He’s a little hazy on the connection between the two but said the economy “stopped functioning in the way it had done.” It’s potentially nasty news for contractors further back in the curve.

And what of the 50% plunge in Rok’s share price today? (See right)

He gives a good answer but is not entirely convincing when he says: “I turned my computer screen off.”

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Interim Management Statements: Why bother?

November 4th, 2008

By Tom Bill

Balfour Beatty’s market update this morning made fairly unexciting reading.

Apart from the news that a couple of PFI schemes have been pushed back due to the current market malaise, the 354 words didn’t add much to its interim results eight weeks ago.

Same story for Carillion a fortnight ago – whose brief update, six weeks after its own interims, had very little to add.

Both companies fulfilled their legal obligations to update investors but not in any meaningful way.

It caused one analyst to ask: “How do you keep telling the market there have been no material changes? The companies are clearly not that comfortable with it. It makes their life more difficult and my life more difficult.”

The US Stock Market is more focussed on quarterly updates and, according to one observer is “a lot more short termist” as a result.

He said: “You have to be able to see the wood for the trees and not get too caught up in the latest news every three months.”

Then again, as housebuilders have shown this year, a few weeks can make a big difference.

They must long for the days of banal market updates.

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