Barratt Redrow shares fell sharply yesterday, closing down 9.4% at 377.30p, after a trading update confirmed that full-year profits would fall short of expectations. The shortfall follows a challenging year for home completions and the impact of a substantial new safety-related charge.
The company — formed in late 2024 through Barratt’s £2.5bn all-share acquisition of Redrow — described its performance as “solid”. Markets clearly disagreed.
Annual completions fell to 16,565 homes — below forecasts and down from the 17,972 homes delivered by Barratt and Redrow combined the previous year.
Pre-tax profits are now expected to be around 10% below expectations, at approximately £712m, partly due to a one-off £98 million charge related to new building safety costs.
Chief executive David Thomas attributed the shortfall to weaker international and investor activity in London. On a more upbeat note, he said the integration of Redrow is progressing ahead of schedule and is expected to deliver cost savings. He also highlighted a “solid” forward sales position.
Barratt Redrow’s order book remains healthy and continues to grow, supported by a strong landbank ready to be activated once the housing market begins to recover. With markets currently pricing in at least two interest rate cuts over the course of 2025, there is hope that mortgage affordability and availability will improve – setting the stage for renewed buyer demand. Barratt Redrow appears well positioned to benefit from any such upturn.
Financially, the all-share structure of the Redrow acquisition has allowed the group to retain a sizeable net cash position, providing flexibility to navigate near-term market challenges. The increased scale of the business is also helping to contain build cost inflation, which is expected to remain between 1–2% this year.
Commenting on Barratt Redrow’s trading update, Anthony Codling, managing director of equity research at RBC Capital Markets, said: “Barratt is ready for growth, but the planning system is not, and Barratt’s share price took a big hit today. The new rules have been published, but local authorities are not yet playing by them, and until they do, there are downside risks to our estimates.
“This is an industry-wide issue, not just a Barratt one. If the government wants housing supply to increase, it needs to enforce the new rules – not just write them. We believe that enforcement will come in the autumn. Therefore, we believe that the weakness in the share price today presents a buying opportunity.”
Julie Palmer, partner at Begbies Traynor, commented: “Barratt’s performance reflects the resilience of a sector leader, boosted further by its acquisition of Redrow which has added greater scale and the potential for meaningful synergies as the integration progresses.
“However, a 7.8% drop in total home completions highlights how the long-anticipated rebound in housebuilding has yet to take hold and drive growth in the sector. Indeed, the drag from weak consumer confidence, elevated mortgage rates, and a lack of meaningful government intervention continues to limit what otherwise capable operators can deliver.
“Barratt clearly has strong fundamentals in place, but like the rest of the sector, it is constrained by forces beyond its control. Still, where many smaller players are struggling to stay afloat, Barratt’s scale and strength leave it well placed to ride out the current situation and lead the recovery when conditions improve.”
