Britain's biggest housebuilder rewarded shareholders with a hefty capital return even as it warned planning delays and mortgage pressures would slow completions this year.
Barratt Redrow (LSE: BTRW) shares climbed 7% on Wednesday after the housebuilder reported a rise in annual completions and confirmed a £400m capital return, even as it trimmed guidance for the current financial year. The group, formed from last year's merger of Barratt and Redrow, completed 17,667 homes in the 12 months to 28 June, up 5% and at the top end of its guidance range, while revenue rose 6.6% to £6.06bn.
Investors focused on the balance sheet and buyback rather than the softer profit line. Adjusted pre-tax profit fell 7% to £572.8m as margins tightened, though statutory pre-tax profit jumped 48% to £363.5m once one-off Redrow integration costs dropped out of the numbers. With net cash of £772.8m and the shares trading, in the company's own view, at a material discount to net asset value, Barratt Redrow said it would return £400m to shareholders this year, almost entirely through buybacks.
The integration of Redrow is now complete, with £73m of an expected £100m in annual cost savings already delivered. Analysts framed the results as broadly reassuring: Aarin Chiekrie of Hargreaves Lansdown said the figures showed the enlarged housebuilder 'remains on solid ground, despite a challenging market'.
The outlook was less rosy. Guidance for completions in the current year has been cut from a range of 17,700–18,200 to 17,500–17,900, with planning delays cited as the main culprit, according to Garry White of Raymond James. He also flagged fresh mortgage rate rises from HSBC, NatWest, Santander, Lloyds and TSB this week, linked to oil prices climbing back above $100 a barrel and renewed inflation worries, as a further headwind for buyer affordability.
Barratt Redrow repeated its call for government support for housing demand, particularly for first-time buyers, and the results mark the last set under outgoing chief executive David Thomas, who retires this month after a decade in the role and hands over to Dean Banks. Despite Wednesday's bounce, the shares remain around 20% lower year-to-date, underlining how much ground has to be recovered even after a well-received update.
This report is based on Barratt Redrow’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Design Hills on Unsplash.
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