Barratt Redrow Posts First Trading Update as Combined Firm

BARRATT REDROW PLC has posted its first trading update as a combined Group for the three months from 1 July 2024 to 13 October 2024.

The acquisition of Redrow plc completed on 21 August 2024 and the Competition and Markets Authority cleared the deal on 4 October 2024.

£90m Savings

Barratt Redrow is beginning the process of integrating Redrow into its operation and expects at least £90m of ‘cost synergies’ over the next three years.

It expects to save £34m or 38% of the £90m overall target on procurement in the supply chain as existing contracts come to an end and are re-negotiated.

It is in the process of closing five divisional offices and expects to close another four in future, expecting to save £33m or 37% of the £90m target.

Consolidation savings of duplicated head office and support operations are targeted at £23m or 25% of the £90m target, which will include rationalising Board positions, senior management as well as PLC and other third-party related costs.

Increasing Sales

The company is also targeting increased sales by creating additional outlets, being more flexible on its offer across its three brands: Barratt, Redrow and David Wilson, and securing larger sites, as well as increasing sites in Scotland.

The company expects 45 new sales outlet openings until 2028. It expects to see a 60% increase in sales on single brand sites, through its increased ability to create a more flexible offer of house types at more price points and complete sites up to 18 months faster.

Barratt Redrow already sees benefits to the acquisition in its private reservation rate which from 22 August to 13 October was 0.67 – 36.7% ahead of the equivalent prior year period when it was 0.49.  However, Barratt Redrow points out that this relatively short period is a seasonally strong part of the autumn selling season, and that higher mortgage rates dampened reservations the year before.

In its standalone private reservation rate Barratt was up 31.9% to 0.62 from 1 July to 13 October from 0.47, the previous year’s rate.

Barratt Redrow’s combined forward order book at 13 October 2024 totalled 10,619 homes at a value of £3,165m down from the equivalent figure of £3,317.7m in October 2023.

The company reports a combined Group total of 57% forward sold private wholly owned home completions for FY25, of which 64% are either completed or exchanged.

Land Bank

There are 88,880 plots held by Barratt Redrow, equating to 5 years of supply land bank, based on the 2024 completion rate and 74% of these plots carry detailed planning consent.

In addition, Barratt Redrow holds more than 145,000 ‘strategic plots’ as well as Gladman’s promotional land portfolio of more than 105,000 plots.

Outlook

The company says it is beginning to see more stable market conditions with increased mortgage availability and affordability. It adds that it will take some time for customer confidence to fully recover from the macroeconomic headwinds faced over the past two years.

It says the long-term housing market is positive with government reforms of the planning system and affordable housing sector supply helping to unlock permissioned land supply and more homes.

Chief Executive David Thomas said: “Whilst customer demand continues to be sensitive to the wider economy, we are beginning to see more stable market conditions with increased mortgage availability and affordability. It will take some time for customer confidence to fully recover from the macroeconomic headwinds faced over the past two years, but we are encouraged by the solid trading we have experienced over recent weeks.

“This is an exciting new chapter for our business. Barratt Redrow is uniquely well-positioned to meet the need for new homes of all tenures across the country. We have superior scale, with a differentiated multi brand offering that can be deployed across our strong combined land portfolio.

“We begin this journey with a strong balance sheet, a solid forward sales position and the ability to add significant value through cost and revenue synergies. We look forward with confidence to delivering a smooth and efficient integration process, and to capturing the enhanced growth opportunities ahead of us.”

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