23 October 2024
If you are covering Barratt Redrow’s latest results, please see the following comment from Oli Creasey, property research analyst at Quilter Cheviot:
"Barratt has completed its acquisition of Redrow, and the CMA clearance has been provided. The company is now starting the process of integration, which is expected to take several years. £90m of cost synergies have been identified, and while the first £45m of these are expected to be realised in the next 12 months, the remainder will take three years to achieve (with the majority in year 2).
"The combined company also believes that it can expand the use of the Redrow brand and build types into geographical areas historically targeted by Barratt, and also bring David Wilson (part of Barratt) onto former Redrow sites. The expectation is that this will increase the number of sales outlets by an additional 45, potentially worth 1,500-2,000 additional sales per annum. However, the full number of new sites is not expected to come online until mid-2028.
"The combined company has guided total completions to be between 16,600-17,200 for FY 2024/25, which is slightly ahead of the consensus analyst estimate but slightly behind prior guidance, with the reduction appearing to come from the Redrow side. In FY 23/24, the sales rate per site increased by 37% (albeit from a very low base and still below the long-term average), but the number of sites reduced by 14% to 419. Barratt Redrow will need to bring additional sites online if it is to hit the medium-term target of 22,000 sales per annum, a target which we think could take several years to achieve (probably 2028 again).
"The acquisition of Redrow represents an opportunity for the combined business to become more efficient. However, it is quite a long road to achieving all identified synergies, and it seems likely that it will take several years for the company, and the industry in general, to return to the sort of sales volumes and profits seen in the years before interest rate rises impacted the sector."
