BTRW: To buyback or not to buyback

Research evidence excerpt

BTRW: To buyback or not to buyback

Barratt Redrow PLC

What Berkeley did—and why it matters

Berkeley Group did something genuinely radical during the Global Financial Crisis. At the time it

had a Scheme of Arrangement and had to get shareholder approval to not pay the final tranche

of its capital return. Initially shareholders baulked at the idea. But they came round. And we

suspect they are glad they did, because in our view the land Berkeley Group purchased around

and following the turning point of the GFC underpinned its returns for the next ten years.

Berkeley didn’t buy back shares. It didn’t pay out the cash. It held onto it—and then deployed

it into a land market where distressed vendors and motivated sellers were offering consented

sites at margins well above normalised levels. The returns on that land were extraordinary, not

because Berkeley was cleverer than its peers, but because it had the cash and the conviction to

buy when others could not or would not.

That is what playing the longer game looks like. Not financial engineering. Not mechanical NAV

accretion that only crystallises if the discount closes. Actual value creation through buying assets

at genuinely distressed prices and developing them into homes over the following decade. We

believe that Barratt should seek to follow the Berkeley playbook.

Is Phoenix asking the right question?

Pheonix's Gary Channon is a serious investor. As co-founder and CIO of Phoenix Asset

Management Partners, and Barratt Redrow’s third-largest shareholder he has earned the right

to be heard. His 430-page report demanding up to £1bn of annual buybacks is thorough, the

maths is correct, and the frustration is entirely understandable. When your shares have more