- Housebuilder’s swoop for Redrow closed in autumn 2024
- Newly created entity has more than 1.5 years of sales in inventory
- Barratt Redrow also has a land bank that covers more than six years’ sales, based on completions in 2025
- Management forecasts a modest increase in completions for new financial year but warns of Budget uncertainty
“Barratt Redrow expects to complete on somewhere between 17,200 and 17,800 homes in the 12 months to June 2026, a modest increase on the 16,565 achieved in its financial year just ended. But that is below the prior cyclical peaks of 2008 and 2019 and its medium-term goal of 22,000,” says AJ Bell investment director Russ Mould.
“Lower interest rates from the Bank of England, and thus mortgage rates, would help, as would improved consumer sentiment, and the housebuilder’s huge land bank means it is ready capitalise on any upturn in the housing cycle. However, boss David Thomas does caution the risk of holding off in the short term as they wait to see what changes, if any, November’s Budget brings when it comes to taxation.
“Barratt’s guidance for around 17,500 completions in the coming year includes Redrow, whose last published annual figure for sales exceeded 5,000 units. Their combined maximum completions came to 24,299 in 2018 and even Barratt Redrow’s medium-term goal of 22,000 undershoots that.
“This may not help the government in its drive to get 1.5 million homes built nationwide by the end of this five-year Parliament. Barratt Redrow might argue this reflects a drag from regulation and red tape, even ahead of 2026’s long-delayed implementation of the 2022 Building Safety Act. Although would-be buyers may continue to bewail housing affordability, given that Barratt Redrow’s average selling price of £343,800 represents nine times the average UK salary, according to the Office for National Statistics’ data for July that shows total pay including bonuses is some £727 per week.
Source: Company accounts, management guidance for 2026E. *Barratt Developments only to 2024. Barratt Redrow for 2025. Financial year to June.
“The 2024 deal does, however, take Barratt Redrow’s combined land bank to over 100,000 plots, so the builder is well placed for when the next housing upturn comes, as surely it shall, either because interest rates fall, wages rise or house prices stagnate (or even fall) and permit salaries to catch up, either because housing demand stalls or the supply of dwellings grows.
Source: Company accounts. *Barratt Developments only to 2024. Barratt Redrow for 2025. Financial year to June.
“Barratt Redrow also has considerable inventory on hand. Total stock is £8.4 billion. This naturally reflects the combination of Barratt and Redrow, but it represents 636 in inventory days, or 1.7 years’ sales – the highest figure at Barratt since 2020 when Covid-19 was doing its worst. The only other year with a higher inventory days figure in the last 20 years was 2011, when the housing market was still recovering from the impact of 2007 to 2009’s Great Financial Crisis.
Source: Company accounts. *Barratt Developments only to 2024. Barratt Redrow for 2025. Financial year to June.
“This inventory is tying up a lot of cash. If, as and when demand and completions pick up, reducing that inventory will release cash and enable Barratt Redrow to boost cash flow, invest in its business and then – once management feels its competitive position is secure and its product and service offering is up to the required standard – return cash to shareholders via dividends or even share buybacks.
“Barratt Redrow increased its dividend in the year to July 2025, albeit after a big cut the year before. It also completed one £50 million share buyback and launched another worth £100 million.
Source: Company accounts. *Barratt Developments and Redrow separate entities through to 2024. Barratt Redrow for 2025. Financial year to June.
“The peak combined cash returns from Barratt Developments and Redrow came to £769 million when they were separate entities. Unlikely as a repeat of that largesse seems right now, that figure represents 15% of Barratt Redrow’s current £5.2 billion stock market capitalisation, so the potential of the housebuilders to be cash machines for investors once more remains, especially as many of the quoted companies in the sector are running lofty inventory levels.
Source: Company accounts. Berkeley April year end. Barratt Redrow and MJ Gleeson June year end. Bellway July year end. Crest Nicholson October year end. Persimmon, Taylor Wimpey and Vistry December year end.
“According to analysts’ consensus forecasts the average dividend yield across the sector is 4.7% in 2025, with some buybacks on top. Earnings may be cyclically depressed, but the quoted builders ended their last financial years sat on £1.8 billion in net cash, to provide support for the existing payments, and higher sales, increased profits and lower inventory could yet create scope for higher shareholder distributions.”
Source: Company accounts, Marketscreener, analysts’ consensus forecasts, LSEG Refinitiv data
