12 February 2025
If you are covering Barratt Redrow’s latest financial results, please find below a comment from Oli Creasey, property research analyst at Quilter Cheviot:
“The first half-year results for the recently combined group were released this morning and while house sale prices have remained steady, up 0.4% year-on-year, volumes of sales have fallen by around 12% compared to an aggregated figure representing the two separate businesses this time last year. Likewise, profits have reduced, with the company’s operating margin falling to just 7.2% compared to 10.0% last year.
“While the Barratt standalone margin improved 1.4%, the group figure reduced owing to a reduction on the Redrow side, which was partly explained by changes in accounting policies, but also by falling volumes and sale prices in the Redrow business, plus a change in sales mix. Given the relatively recent confirmation of the Barratt Redrow merger, no synergies have been delivered in this half year, but the company expects £10m in the second half of this year, rising to £65m by the end of 2026. Given the adjusted operating profit was £164m this half year, the impact of synergies would be a significant improvement to the operating margin – we estimate this will equate to a 1.5% increase once achieved.
“Management has marginally improved the guidance for full year volumes and for build cost inflation to remain flat. Current trading for Jan/Feb 2025 indicates that sales volumes are similar to the equivalent period last year. The company has maintained its medium-term targets of 22,000 completions (vs 17,000 this year) and a 15% operating margin. Both of which are achievable, but the company will ned to see a positive inflection in both figures before long.”
