Barratt Redrow’s average weekly sales rates moved around 2% higher to 0.62 in the 13 weeks to 30 March.
The order book fell 2% to £3.1bn, with 93% of sales this financial year already locked in. Build cost inflation is expected to remain “broadly flat” this year.
The integration of Barratt and Redrow is “nearing completion”. Good progress is being made on driving cost efficiencies in the enlarged group, with the company on track to deliver £100mn of savings.
Full-year guidance has been reiterated, with between 16,800-17,200 new homes expected to be completed. The net cash position is set to finish in the £500-600mn range.
Around £17mn of shares were purchased in the period, with the remainder of the £50mn share buyback programme set to be completed by 29 June 2025.
The shares were broadly flat in early trading.
Our view
Despite some mixed industry data, Barratt Redrow’s shown that everything’s ticking along nicely so far in 2025. Revenue and cost benefits are continuing to build as the integration of Barratt and Redrow is nearing completion
Together, Barratt Redrow expects to deliver between 16,800 and 17,200 new homes this year, with plans to build that figure up to 22,000 over the medium term, making it a serious force in the market.
Not only has the acquisition increased Barratt’s geographical reach, but it’s also increased the different types of customers it appeals to. The Redrow brand focuses on larger, higher-quality homes for more affluent buyers. The higher average selling prices of these homes should be a major positive for margins moving forward.
Sales rates are slightly ahead of the prior year, and there’s a strong landbank ready to be unleashed when the housing market recovers. Markets are pricing in a further three or four interest rate cuts over 2025, which should ease mortgage availability and affordability pressures for buyers. Barratt Redrow looks well placed to be buoyed by the rising tide.
Integration efforts are in full swing, and Barratt hopes it can deliver £100mn of cost savings by trimming the fat on overlapping operations. If operations can be streamlined and new homes delivered as expected, there’s plenty of opportunity for profits to rebound over the medium term. But as with any merger, there will be challenges.
With a change in government in power, there has been a fresh dose of hope that the issues plaguing the housebuilding industry can be fixed. Reform of the current planning rules is key to an uplift in activity, and Barratt appears optimistic that it’s on the way.
On the balance sheet side, structuring the deal as a share offer means there’s still a sizable net cash position. That gives flexibility to cope with a challenging market in the near term. While many peers are seeing moderate levels of build cost inflation, Barratt’s increased scale means it’s been able to keep build costs broadly flat this year.
Barratt Redrow now has a strong landbank to unleash when the market picks back up. It’ll likely be a year or so before major benefits start to feed through to profits and there are no guarantees. In the meantime, Barratt's valuation isn’t overly demanding, a reflection of the tricky market conditions.
Environmental, social and governance (ESG) risk
Most housebuilders are relatively low risk in terms of ESG, particularly for those in Europe. However, there are some environmental risks to consider, from direct emissions to the impact of their buildings on the local ecology. The quality and safety of their buildings is also a key risk.
According to Sustainalytics, Barratt Redrow’s management of ESG risk is strong.
Commitments are in place to deliver net zero houses by 2030 through a combination of energy-efficient equipment, the use of renewables and the establishment of alternative heating technologies. While Barratt reports that all its revenues come from sustainable products, the total portion of recycled materials used in its operations is undisclosed.
Barratt Redrow key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is not advice or a recommendation to buy, sell or hold any investment.No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.Non - independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place(including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.Please see our full non - independent research disclosure for more information.