Barratt Redrows’ half-year revenue rose from £1.9bn to £2.2bn, growth includes a contribution from recently acquired Redrow. The group delivered 6,846 homes, down from a combined 7,777 last year.
On a combined basis, underlying profit before tax fell from £248.8mn to £217.5mn
Net private weekly reservation rates rose 33% to 0.60 and forward sales totalled £3.4bn as of 2 February.
Net cash fell 48% to £458.9mn, driven by dividend payments and investment in land.
An interim dividend of 5.5p was announced, alongside a £100mn per year buyback, with the first £50mn planned for the second half.
Total completions for the full year are expected to be between 16,800–17,200.
The shares rose 8.3% in early trading.
Our view
Barratt Redrow’s new combined scale is already showing some benefits. The enlarged balance sheet is being flexed to support a new, and ongoing, buyback programme (no guarantees) and underlying performance looks to be progressing well.
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 well 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 two or three 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 new 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.
This optimism comes with warnings. The housing market remains relatively subdued, and there are no guarantees that rate cuts will stimulate buyer demand. Elevated levels of incentives, used to boost sales, have also weighed on profitability in recent times.
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.
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
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