Barratt Redrow shares rose on Wednesday after announcing higher completions and unveiling a £400m capital return, but trimmed its outlook for the year ahead as planning delays and a subdued housing market weighed on the enlarged housebuilder.
Britain’s biggest housebuilder, formed from last year’s merger of Barratt and Redrow, said it completed 17,667 homes in the year to 28 June, up 5% and at the top of its guidance range.
Revenue rose 6.6% to £6.06bn. Adjusted pre-tax profit, however, slipped 7% to £572.8m as margins came under pressure, while statutory pre-tax profit jumped 48% to £363.5m as one-off Redrow integration costs fell away.
Barratt Redrow shares were 7% higher at the time of writing on Wednesday, perhaps because last year’s results weren’t that bad, or because investors were happy to look past an uncertain outlook and focus on share buybacks.
“Barratt Redrow’s full-year results revealed the housebuilder remains on solid ground, despite a challenging market,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
The company said the Redrow integration was now complete, with £73m of an expected £100m in annual cost savings delivered so far.
It ended the year with net cash of £772.8m and, reflecting that strength and a share price it said stood at a material discount to net asset value, announced a £400m capital return for the current year, made up almost entirely of share buybacks.
These are arguably good numbers, but the company and analysts pointed to a slowdown in the year ahead as completions guidance was slashed amid housing market challenges.
“Barratt Redrow has reduced its guidance for home completions in the current financial year, citing planning delays,” said Garry White, Chief Investment Commentator at Raymond James.
“In its July trading update, the housebuilder said it expected to complete between 17,700 and 18,200 homes this year, but it now expects to complete between 17,500 and 17,900. Mortgage affordability is also becoming an increasing concern. This week, lenders HSBC, NatWest, Santander, Lloyds and TSB announced mortgage rate increases after oil prices rose above $100 a barrel once again, heightening concerns about inflationary pressures in the year ahead.”
Barratt Redrow renewed a call for the government to do more to support housing demand, particularly for first-time buyers. These are the results under chief executive David Thomas, who retires this month after a decade in charge and is succeeded by Dean Banks.
Despite rising 7% on Wednesday, the Barratt Redrow share price is still down around 20% year-to-date.