In an exclusive interview group FD Ryan Mangold explains how he steered the company’s finances from distress to double digit growth
By Michelle Perry | CFO UK | Published 14:18, 23 April 14
Ryan Mangold was actively looking to sustain a few “cuts and bruises” when he joined UK housebuilder Taylor Wimpey during one of the deepest recessions on record, and a particularly bruising one for the construction industry.
Mangold, chief financial officer of Taylor Wimpey, certainly endured a roughing-up as he helped the struggling housebuilder sell off assets to repair its broken balance sheet as well as undergoing a number of tough rounds of refinancing.
But for a man who forged his early career working for a coal mine in the badlands of northern Colombia during the late 1990s, the South African native is used to harsh terrain.
In fact Taylor Wimpey’s well-documented difficulties were – perhaps oddly for some – what clinched the deal for Mangold in 2009 when he joined as group controller.
“It wasn’t an easy decision to make”, he says, but the controller-turned-group FD was attracted to Taylor Wimpey “in order to get a couple of years of real challenging experience, as well as it being a sector that I’m hugely passionate about. I love creating something that’s real – that’s a legacy that you can go and see around the country”.
Thanks to his then boss, former CFO Chris Rickard, Mangold was closely involved in the company’s various rounds of refinancing. “Quite often you can work under an FD or leadership team where you don’t get any of the interesting bits. But Chris was great and involved me in the interesting bits,” he says.
By November 2010 with another round of critical refinancing in place the London-based housebuilder announced the departure of Rickard, replacing him with Mangold.
At the time Taylor Wimpey’s chief executive Pete Redfern said: “Ryan is the guy to take us forward as an operational housebuilder”.
Taylor Wimpey is the product of the 2007 merger of George Wimpey and Taylor Woodrow. The deal was set to create the UK’s largest homebuilder worth around £5 billion – large enoughto enter the FTSE 100.
But that was March 2007 and at the time observers were – as we now know – wrongly predicting that despite a minor slowdown in the US housing market, the UK and US markets were stable and there would be steady demand for new houses.
A few months later the global credit crunch hit and the US housing market crashed. By the end of 2008 the company’s market cap had plunged to around £40 million. The following year Taylor Wimpey announced the sector’s biggest ever loss.
“There was a huge amount of distress. They were very uncertain times. Nobody knew by how much prices were going to continue to fall. And through that distress the banks and the creditors all got a bit of a fright. We were quite highly leveraged,” he explains.
Today, Taylor Wimpey’smarket cap stands at around £3.6bn – nowhere near the originally slated £5bn value of 2007 – but clearly illustrating the literal highs and lows of the UK’s third largest housebuilder over the past seven years.
Since Mangold’s promotion to group FD his chief priority has been to repair the balance sheet. He sold off the North American businesses, which were a legacy from the merger, and providing little value, and set about shoring up the finances in order to reinvest in the business.
Today, the work is largely completed in terms of fixing the balance sheet, he says, andthe company had positive net cash at the end of last year. Since 2009 it has been heavily reinvesting in buying up land to provide the much needed houses the UK lacks.
Making cash work
Now Mangold says his attention has turned to improving capital efficiency and delivery against capital. His goal is to deliver an average of 15 percent return on capital employed through the cycle.
“Our net assets grew last year by just over 13 percent so we’re now into the positive territory of that averaging of 10 percent through the cycle, which is good. And our return on capital employed was 10 percent – so on the right side of the average. We think we’re well on track for delivery,” he says.
In February Taylor Wimpey became the third housebuilder during the first quarter of 2014 to report booming business thanks in part to the government’s Help To Buy scheme.
The company announced double digit growth in both profits and revenues with a 39 percent rise in operating profit to £313m on group revenue of £2.29bn, up 13.7 percent. Besides the boost that Help To Buy has handed all housebuilders, the company said growth was also due to it selling more homes at higher prices. It also increased its total order book by almost a third.
Rivals Persimmon and Bovis Homes announced similar growth as housebuilders enjoyed the rewards of greater bank lending and rising house prices.
“Our operating margin for 2013 was 13.6 percent. Half of that is underpinned on newly acquired sites – so we’re leveraging off our core competencies since we entered the land market in 2009. And a lot of it is driven by doing a lot more with the assets we’ve already got,” Mangold explains.
With the government stepping in to boost the sluggish housing market, Taylor Wimpey’s strategy has raced ahead. “What it’s done is accelerate our strategy by about 18 months on the basis that the mortgage market has got back to what we believe is ‘normal’,” he says.
Normal, however, is not how some people view the UK housing market. The most recent monthly house price index from the Office for National Statistics shows prices in London rose by 17.7 percent in the last year to February 2014. A typical home in London now costs £458,000.
But with a predicted 1.1 million shortfall of homes in England alone by 2022 and London making up around a third of that deficit, Mangold says Taylor Wimpey plans to increase its housing presence in London.
“I think that the London market is a very interesting dynamic which creates both significant risks but also opportunities. But our business is sensible in terms of the types of risks and fully understanding them and pricing the land correctly,” he says.
That said, the dangers of a housing bubble worry him.
“House price rises in London are concerning. And it’s concerning more from a social point of view than from demand – given the fact that the UK, and more specifically London, remains a destination for foreign investment – and given the political and legal landscape you’ve got in the UK,” he says.
Still, in terms of the ability of the business to survive a future housing crash, the finance chief is less concerned now than he would have been five years ago. He has overseen the implementation of strict governance and compliance procedures not just in finance but throughout the organisation. A fully integrated common IT platform across the organisation – the first of its kind since the merger – and increased use of business intelligence tools means he and his management team have the most up-to-do information at their fingertips.
“We have well-scripted common processes against that platform, which helps with analytics in terms of driving value and from a governance perspective. You can see the cracks before they come down the line,” he explains.
“Finance has had one of the highest involvements in all of this given the amount of distress the company went through. Finance contributes massively to the analytics of what we have got, and more importantly how we’re going to deliver against what we’ve got and the confidence to deliver.”
What is clear for Mangold is that there is to be no return to “the old days of running too hard and too fast”.
Mangold studied chartered accountancy at Rhodes University in his native South Africa. Although he never had any great desire to become a finance chief, he says each experience has led him to reconsider his ambitions almost yearly.
“I think my ambition has changed every single year as I’ve got more experience and knowledge and understanding of how our value is created.”
He sets great store by networking.Indeed it was through informal conversations that he heard about both the financial project manager’s job with Anglo Coal in Barranquilla, Colombia and the Taylor Wimpey role.
“It was a fantastic opportunity,” he says of the role with Anglo Coal. “Not too many executives wanted to travel there. So we were pretty much left to our own devices, which was just fantastic in terms of growth from my perspective.”
During his time in Colombia, he helped expand the mine from 1.8 million tonnes to 18 million tonnes per year and carried out thedue diligence to buy a neighbouring state-owned mine at auction. On his return to the UK he became group financial controller of Mondi Group where he played a key role in its demerger from Anglo American.
Mangold pinpoints his early career moves, and in particular his overseas experiences, as critical stepping stones for him to capitalise on the opportunities that came later.
“I did a whole bunch of different things during the early part of my career to get all those key attributes and skills that aren’t taught. Through that, opportunity will normally knock if you do a decent job.”
He couldn’t recommend enough the opportunity to work overseas. “There are easier places to go,” he says understatedly. “But I think the more challenging the geography possibly the more likelihood of future success.”
Another interesting aspect of Mangold’s career has been his ability to switch between what seems on the surface vastly differing industry sectors – coal, paper and now houses. He however only sees the similarities.
“From a coal mining perspective, with Taylor Wimpey if you control your land bank and have a good understanding of your assets then you become a master of your destiny. Similar to mining and paper. If you can control your primary ingredient – pulp – you can control your destiny to a certain extent. Housebuilding is no different.”
Despite Mangold’s ability to take calculated risks in his personal career to get where he is today, it’s good to see he still retains some of the more traditional characteristics of a typical CFO – caution. One of his biggest priorities for this year is to make sure “we’ve learnt the hard lessons of 2009/10 and that they are entrenched in the organisation”.
“We don’t want to go back to the peak because that’s what got us into distress last time. The capital allocation was just too free and easy.”
This sentiment will be critical because despite double digit profits and a good outlook for the construction sector as a whole, warnings of an overheated housing market persist, and neither Mangold, nor Taylor Wimpey, wish a return to those times, especially now those cuts and bruises have finally healed.
CV: Ryan Mangold
Nov 2010 – Present Group Finance Director, Taylor Wimpey
April 2009 – Nov 2010 Group controller, Taylor Wimpey
April 2004 – March 2009 Group Controller, Mondi
Oct 2001 – April 2004 Senior financial analyst, Anglo American
June 1999 – Oct 2001 Financial project manager, Anglo Coal