- Completions below target
- Sales outlook lowered
- Share buyback no panacea
As Shares suggested last week (10 July), today’s full-year trading update from leading developer Barratt Redrow (BTRW) would likely set the tone for the rest of the sector.
As well as missing its target for completions for the year to June 2025, the firm’s outlook failed to inspire, and even though it committed to buy back another £100 million of shares, it wasn’t enough to stop the stock price tumbling 40p or 10% to 376p, their lowest level since late 2023.
Shares in Berkeley Group (BKG), Persimmon (PSN) and Taylor Wimpey (TW.) were also dragged lower by selling pressure.
SALES STILL SLUGGISH
Total home completions for the year to June were 16,565 including 538 from joint ventures, around 8% lower than the previous year and below the firm’s target of 16,800 to 17,200 due to fewer international and investor completions than expected in its London business, particularly in the most recent quarter.
Net weekly private reservations per active sales outlet, a widely-watched indicator of underlying demand for new houses, was 0.64 against 0.58 the previous year, including 0.08 from the private rental sector and other multi-unit sales.
Pre-tax profit excluding Redrow purchase price allocation adjustments is expected to be in line with market forecasts of £583 million, however, thanks to some improvement in margins and initial merger cost savings.
Synergies of £69 million have already been identified, against a target of £100 million, with £15 million included in the 2025 results and £45 million expected to come in this year’s results.
Adjustments are expected to be around £229 million, including legacy property charges of £98 million, acquisition-related reorganisation and restructuring costs of £52 million and CMA (Competition and Markets Authority) commitments of £29 million.
For the year to next June, ‘reflecting current market conditions and a revised expectation of broadly flat average sales outlets,’ the firm lowered its forecast for total completions to between 17,200 and 17,800, including 600 from joint ventures.
‘Homebuyer confidence remains fragile and mortgage rates remain high compared to recent years, but there remains a long-term under-supply of new homes and we have seen some increases in mortgage market competition and availability,’ the company added.
