Barratt Redrow has lifted profit guidance after the housebuilder posted a strong performance for its first six-month trading period as a combined entity.
Britain’s biggest housebuilder, which was formed after Barratt Developments bought Redrow for £2.5billion, told investors full-year adjusted pre-tax profits would be towards the top end of a £506million to £588million guidance range.
Statutory profits surged by 23.1 per cent to £117.2million over the six months to 29 December as overall home completions grew by 10.9 per cent to 6,846.
The group cited a stabilising mortgage market, which helped to drive customer demand, in addition to £100million worth of post-merger cost synergies.
Average selling prices of private properties inched higher to £371,100, helping the firm’s total revenue jump by 23.2 per cent to £2.3billion.
Barratt said trading had remained strong since the period ended, with its net private reservation rate in the five weeks to 2 February flatlining at 0.60 per week.
Expectations: Barratt Redrow anticipates full-year earnings will be towards the top end of forecasts following a strong first-half performance
The company’s forward sales stand at £3.35billion, about £200million up on the same time last year.
‘As the economic, political and lending environments have stabilised, there has been some recovery in customer demand and we have seen solid reservation activity since the start of January, building a strong forward sales position,’ remarked Barratt’s chief executive, David Thomas.
‘As a result, we now expect our full-year adjusted profit before tax will be towards the upper end of market expectations.’
Barratt Redrow shares soared 6.9 per cent to 467.3p on early Wednesday morning, making them the FTSE 100’s top riser.
The upbeat performance also helped to reverse some losses suffered by rival housebuilders yesterday after Bellway flagged mortgage affordability concerns.
Barratt Redrow was formed last year after Barratt Developments finalised its £2.5billion takeover of rival Redrow, the largest UK housebuilding sector merger for 17 years.
Much of the motivation behind the tie-up was to speed up the construction of new properties to help address Britain’s chronic housing shortage.
Barratt hopes to build between 16,800 and 17,200 homes this year, including around 600 joint venture completions, although it cautioned this would depend on the market during the spring selling season.
Mark Crouch, market analyst at eToro, remarked: ‘With UK housebuilders battling numerous challenges in recent months, this morning’s update will come as a relief to investors, as Barratt bucks the trend of disappointing sector earnings.
‘Higher mortgage rates and building costs have weighed heavily on profitability for housebuilders, and while Labour’s planning reforms are expected to help, their impact will take time.
‘Fortunately, Barratt’s strong balance sheet and order book provide ample insulation against any potential market downturns. As it stands however, Barratt is well-positioned to meet the high demand for UK housing, making investors likely to feel more confident following this update.’
The Labour Government has promised to build 1.5 million properties over five years, partly by designating areas as ‘grey belt’ land and giving councils more cash to hire planning officers.
According to the UK Government, just 221,070 net dwellings were added in England in 2023/24, a 6 per cent decrease on the previous year.
Antony Codling, managing director at RBC Capital Markets, said: ‘At first glance, it looks like a winning combination.
‘Against a somewhat challenging market, the coming together of Barratt and Redrow looks set to deliver results significantly ahead of our expectations for FY2025, and that is just the start of a multi-year, multi-brand, multi-faceted story.
‘Integrations are easier said than done, but at this early stage, Barratt’s walk matches its talk. With a medium-term target to deliver 22,000 homes, Barratt is certainly doing its bit to help the Government deliver on its housebuilding targets.’
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