Barratt Redrow investors were enthused by the newly merged group’s start to life as a single entity, with shares rising 3% after the the group released a trading statement and update on the integration.
The key takeaway for investors will be the £90m in synergies the group hopes to achieve through the merger of Barrat Developments and Redrow and the upbeat predictions of 16,600 and 17,200 completions in 2025FY.
The group noted stabilising market conditions, which will please long-suffering investors who have had to contend with slowing sales rates amid rising interest rates.
The group said they were ‘encouraged by the solid trading we have experienced over recent weeks’.
In addition, the new Labour government has pledged to build 1.5 million homes over the parliament adding a fresh tailwind to housebuilders.
“In the first update since the dotted line was signed on Barratt’s acquisition of Redrow, the enlarged group signalled that it’s got big plans ahead. Together, Barratt Redrow expects to deliver between 16,600 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. These will be spread across different geographies and with three differentiated brands under its umbrella, it’s able to meet the needs of different types of buyers at various price points,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“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 interest rate cuts at every Bank of England meeting out to March 2025, which should ease mortgage availability and affordability pressures, and Barratt Redrow looks well placed to be buoyed by the rising tide.
“The enlarged group hopes to deliver at least £90mn of cost savings by trimming the fat on overlapping processes. 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 along the way.”