23
October 2024
Barratt Redrow
plc
AGM Trading and Integration
Update
Barratt Redrow plc (the 'Group') is
pleased to announce its first trading update as a combined Group
for the period from 1 July 2024 to 13 October 2024 (the
'period').
David Thomas, Chief Executive
commented:
"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."
Highlights:
|
·
|
Acquisition of Redrow plc completed
on 21 August 2024, with final Competition and Markets Authority
('CMA') clearance received on 4 October 2024.
|
|
·
|
Integration under way to
deliver:
|
|
|
○ At least £90m of cost
synergies
|
|
|
○ Revenue synergies from 45
incremental sales outlet openings through until FY28.
|
|
·
|
Optimisation of the divisional office
network under way, with collective consultation on five potential
divisional closures announced on 21 October 2024.
|
|
·
|
Barratt Redrow private reservation
rate from 22 August to 13 October of 0.67, 36.7% ahead of the
pro-forma equivalent in FY24 of 0.49.
|
|
·
|
Barratt standalone private
reservation rate from 1 July to 13 October up 31.9% to 0.62 (FY24:
0.47).
|
|
·
|
Reflecting unchanged guidance on the
standalone Barratt operations and the inclusion of Redrow's order
book and performance from 22 August 2024, total home completions
for Barratt Redrow are expected to be between 16,600 and 17,200 for
FY25.
|
|
·
|
Matthew Pratt, Geeta Nanda and Nicky
Dulieu welcomed to the Barratt Redrow plc Board.
|
Overview
Reflecting legal completion of the
acquisition of Redrow plc on 21 August 2024, this update includes
trading data for Barratt Redrow plc ("Barratt Redrow") from 22
August 2024 to 13 October 2024 and the standalone performance of
Barratt Developments PLC ("Barratt") and Redrow plc ("Redrow") for
the period from 1 July to 13 October 2024. All comparatives are
based on the equivalent trading period1 ('FY24') unless
otherwise stated.
Rationale for the
acquisition
The
acquisition will:
|
·
|
Help us to address the country's
housing shortage by creating an exceptional homebuilder in terms of
development pace, build quality, customer service and
sustainability.
|
|
·
|
Deliver revenue synergies by
accelerating homebuilding through our scale, geographic coverage
and three national high quality, distinct and complementary brands,
and in doing so improve asset turn.
|
|
·
|
Deliver significant cost synergies
rapidly and efficiently.
|
|
·
|
Allow the enlarged Group to maintain
a robust balance sheet, better protected to operate through the
cycle, providing a strong platform from which to deliver improved
shareholder returns.
|
|
·
|
Deliver significant benefits for our
wider stakeholders including our highly skilled and dedicated
employees, our sub-contractors, our suppliers and most importantly
our customers who will have access to more homes across a broader
product range and at more price points.
|
Revenue synergies and growth
The acquisition of Redrow gives us
clear opportunities to deliver more homes with greater customer
choice over the years ahead. With our ambition to return to 22,000
total home completions in the medium term, increasing revenue is a
key operational driver for the Group. The acquisition creates clear
opportunities through:
|
·
|
The geographic expansion of the
Redrow brand and house type range into new regions to meet local
market demand by leveraging the existing Barratt divisional
network; and
|
|
·
|
The deployment of the Redrow brand
onto suitable Barratt development sites as well as the Barratt
Homes and David Wilson Homes brands onto Redrow sites creating
opportunities for dual or triple branded sites.
|
Expansion through dual and triple
branding gives us the opportunity to create c. 45 incremental sales
outlets by FY28, with around 30 delivered by FY27.
|
Barratt Redrow plc
|
FY27
|
FY28
|
|
Cumulative incremental sales outlet
openings
|
30
|
45
|
With our portfolio of three
differentiated brands outside London, Barratt Redrow will be well
placed to acquire larger development sites and develop them more
quickly through the creation of incremental sales
outlets.
Together, these opportunities give
us the ability to optimise housing mix, price points and customer
choice, as well as controlling the delivery of community
facilities, sustainability and biodiversity requirements of these
larger developments.
Cost synergies
Following the receipt of CMA
clearance on 4 October 2024, (and the lifting of restrictions on
our ability to undertake any integration activity), we have begun
the integration of the two businesses at pace. As a result of
our planning to date, we are confident that we can deliver cost
synergies of at least £90m, as reported in February
2024. Cost synergies will be delivered
from three principal sources:
|
1.
|
Procurement related savings targeted
at £34m or 38% of the £90m target. Synergies will be centred on
optimising procurement for Redrow's business whilst working with
our supply chain partners to unlock additional procurement
savings.
|
|
2.
|
Optimisation of our divisional office
structure targeted at £33m or 37% of the £90m target which is
anticipated to result in the closure of nine divisional offices
across the country with our activities re-aligned across 32
divisions (see below).
|
|
3.
|
Consolidation of duplicated central
and support functions targeted at £23m or 25% of the £90m target
which will include the rationalisation of Board positions senior
management as well as PLC and other third-party related
costs.
|
We have identified run rate
synergies post CMA clearance, from 4 October 2024, of at least £45m
at the end of the first year, with at least £81m secured by the end
of the second year and with the balance in the third year through
to 3 October 2027.
The timing of synergies recognised
in the Barratt Redrow plc income statement will reflect:
|
·
|
Existing supplier contract
arrangements and the migration to negotiated new terms agreed with
suppliers over the coming quarters; and
|
|
·
|
Employee consultation requirements as
we rationalise the divisional office network.
|
In the following table we detail the
run rate of cost synergies which we estimate will be secured to our
financial year ends, as well as the estimated cost synergies which
will be reported through our income statement by financial year
from FY25 through FY28.
|
Barratt Redrow plc - Cost synergies £m
|
FY25
|
FY26
|
FY27
|
FY28
|
|
Run rate of synergies at financial
year end
|
c. 26
|
c. 66
|
c. 86
|
c. 90
|
|
Incremental synergies secured in
P&L in year
|
c. 10
|
c. 40
|
c. 30
|
c. 10
|
|
Cumulative synergies secured in P&L
|
c.
10
|
c.
50
|
c.
80
|
c.
90
|
Consultation on divisional closures
As part of our integration planning
over the summer, we conducted a detailed review of our geographic
coverage and office structure to optimise the divisional network of
the combined Group. On 21 October, we announced a collective
consultation on the proposed closure of five divisional offices. If
confirmed, these closures will generate annualised run rate cost
savings of c. £19m with c. £9m accruing in FY25. Subject to
employee collective consultation at the relevant time, we continue
to anticipate that the integration programme will deliver an
overall reduction of nine divisions.
We have made good progress on plans
to deliver other head office and divisional cost synergies, some of
which are dependent on systems changes expected in the second half
of FY25. We will provide a further update on progress with
synergies in our half year results in February 2025.
Trading
performance
Barratt standalone trading performance
On a standalone basis in the period
from 1 July 2024 to 13 October 2024 Barratt net private
reservations2 per week were 189 (FY24: 172) and net
private reservations per active outlet per week were 0.62 (FY24:
0.47). During the period, sales to the private rental sector and
other multi-unit sales contributed 0.05 (FY24: 0.04) to the
reservation rate. During the period, and in line with our
expectations, Barratt operated from an average 305 sales outlets
(FY24: 369).
Reflecting the Barratt standalone
order book at the start of FY25, the reservation rate over the
period and completions to date, our total forward sales (including
JVs) at 13 October 2024 totalled 8,172 homes (15 October 2023:
9,284 homes) at a value of £2,264.5m (15 October 2023: £2,385.1).
(Appendix I).
Standalone Barratt operations at 13
October 2024 were 55%3 forward sold with respect to
private wholly owned home completions for FY25 (FY24:
57%4), of which 65% are either completed or exchanged
(FY24: 67%).
Barratt Redrow plc combined trading performance (Post
acquisition from 22 August 2024)
The combined trading performance
includes both Barratt and Redrow activities from 22 August 2024
through to 13 October 2024. Prior year comparatives are on a pro
forma basis representing the aggregation of trading performance for
Barratt Developments PLC and Redrow plc for the period stated. It
should be noted that this relatively short period is a seasonally
strong part of the Autumn selling season, where elevated mortgage
rates dampened reservation activity in the prior year comparative
period.
On a combined basis in the period
Barratt Redrow net private reservations per average week were 280
(FY24: 237) and net private reservations per active outlet per
average week were 0.67 (FY24: 0.49). During the period, sales to
the private rental sector and other multi-unit sales contributed
0.08 (FY24: 0.05) to the reservation rate and during the period
Barratt Redrow operated from an average 419 sales outlets (FY24:
488).
Reflecting the Barratt standalone
order book at the start of FY25, along with reservations and
completions in the period; and the inclusion of Redrow's order book
as well as reservations and completions from 22 August 2024, the
combined forward order book (including JVs) at 13 October 2024
totalled 10,619 homes (15 October 2023: 12,201 homes) at a value of
£3,165.0m (15 October 2023: £3,317.7m). (Appendix II).
Incorporating the combined Group
total home completion guidance for FY25, Barratt Redrow at 13
October 2024 was 57%5 forward sold with respect to
private wholly owned home completions for FY25, of which 64% are
either completed or exchanged.
Redrow standalone trading performance
In the period from 1 July 2024 to 13
October 2024 Redrow standalone net private reservations per week
were 58 (FY24: 46) and net private reservations per active outlet
per week were 0.49 (FY24: 0.36). During the period sales to the
private rental sector and other multi-unit sales contributed 0.02
(FY24: 0.01) to the reservation rate. Full details on Redrow's
standalone performance are included in Appendix III.
Land
Our combined total owned and
controlled land bank, on a pro-forma basis, at 30 June 2024, stood
at 88,880 plots and equated to 5.0 years of supply based on FY24
completions. This included 79,645 owned plots equating to 4.5 years
supply with a further 9,415 plots contracted or controlled,
equating to 0.5 years. Through the combination we together hold
what we believe is a high quality, geographically diversified and
commercially positioned land bank with 74% of the owned land bank
plots carrying detailed planning consent.
In addition, through our combined
strategic land positions, on a pro-forma basis at 30 June 2024,
Barratt Redrow held more than 145,000 strategic plots further
complemented by Gladman's promotional land portfolio of more than
105,000 plots.
Following the acceleration in our
land approvals in the final quarter of FY24, our disciplined and
selective approach to land has continued in FY25 with land approval
activity now at a more normalised level.
Board changes
On 4 October, we were delighted to
welcome, as planned, three members of the Redrow plc Board to the
Barratt Redrow plc Board. Matthew Pratt was appointed to the
position of Chief Executive Officer, Redrow and Group Executive
Director, and Geeta Nanda and Nicky Dulieu were both appointed as
Non-Executive Directors of Barratt Redrow plc.
Outlook
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.
Long-term housing market
fundamentals continue to reflect a significant imbalance between
housing supply and demand. The new Government has demonstrated that
it is committed to improving the planning system and addressing
funding challenges in the affordable housing sector. Whilst these
supply-side reforms will also take some time to be fully
implemented, we are confident that they will help to unlock
permissioned land supply and the delivery of more high-quality,
sustainable homes across the country.
Our guidance on the standalone
Barratt operations remains unchanged. With the inclusion of
Redrow's order book and performance from 22 August 2024, we now
expect to deliver total home completions of between 16,600 and
17,200 in FY25, including c. 600 home completions from JVs
(Appendix IV). As new sales outlets come into operation through the
balance of FY25 and throughout FY26, we expect that Barratt Redrow
will operate with average sales outlets in FY26 ahead of proforma
FY24 levels.
Our focus in the near term is on
achieving a smooth integration of the Redrow business and meeting
our synergy targets, whilst delivering against our key operational
drivers of increasing revenue, controlling costs, maintaining land
investment discipline and leading the industry on customer service,
build quality and sustainability.
With the creation of Barratt Redrow,
we are uniquely well-positioned to meet the need for new homes of
all tenures. We have superior scale, with a differentiated multi
brand offering that can be deployed across our strong combined land
bank portfolio throughout the country. Barratt Redrow
has a strong balance sheet, a solid forward sales
position and significant opportunities to create value through cost
and revenue synergies. We therefore look forward with confidence to
delivering a smooth and efficient integration process, and to
capturing the enhanced growth opportunities
ahead of us.
Annual General Meeting
The Group will be holding its AGM at
noon today at the offices of Linklaters LLP, One Silk Street,
London, EC2Y 8HQ. There will also be a live webcast of the AGM and
the ability to submit questions during the meeting. Full details on
how to access the webcast can be found in the Notice of
AGM.
Year end and reporting dates
The Group will move to a 52-week
reporting cycle following the acquisition of Redrow plc. Results
for the 26 weeks to 29 December 2024 will be released on 12
February 2025 and for the 52 weeks to 29 June 2025 will be released
on 17 September 2025.
Webcast and conference call for analysts and
investors
David Thomas, Chief Executive,
Steven Boyes, Chief Operating Officer and Deputy Chief Executive,
Matthew Pratt, CEO Redrow and Group Executive Director and Mike
Scott, Chief Financial Officer, will be hosting a conference call
at 08:00am today, Wednesday 23 October 2024, to discuss this
Trading Update. To join the call, please register your details
using the registration options details below:
To
listen only and watch the webcast and hear the Q&A session,
please use the webcast link:
https://broadcaster-audience.mediaplatform.com/event/670e77a8bdb9fa32700d86e9
To
listen, watch as well as ask questions in the Q&A session,
please register on the following Zoom link:
https://brunswickgroup.zoom.us/webinar/register/WN_gD1CybeCTqmdoYO4ZyQXYA
The
Group's next scheduled release of financial information will be the
announcement of our half year results on Wednesday 12 February
2025.
This trading update contains certain forward-looking
statements about the future outlook for the Group. Although the
Directors believe that these statements are based upon reasonable
assumptions, any such statements should be treated with caution as
future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
Notes:
|
(1)
|
The equivalent trading period,
'FY24', covered the period from 1 July 2023 to 15 October
2023.
|
|
(2)
|
Unless otherwise stated, all numbers
quoted exclude Joint Ventures (JVs) throughout this
statement.
|
|
(3)
|
Barratt standalone forward sold
position with respect to FY25 private home completions
is based on the mid-point of Barratt Developments
standalone wholly owned completions guidance at 12,650 (13,250
total completions less 600 JVs) and assumes
high teens affordable home completion mix in FY25.
|
|
(4)
|
Our forward sold position with
respect to prior years is based on actual wholly owned private home
completions reported for the year.
|
|
(5)
|
Barratt Redrow forward sold position
with respect to FY25 private home completions is based on the
mid-point of Barratt Redrow's wholly owned completions guidance
at 16,300 (16,900 total completions less
600 JVs) and assumes high teens affordable
home completion mix in FY25.
|
For
further information, please contact:
Barratt Redrow plc:
|
Analyst / investor enquiries
|
|
|
Mike Scott, Chief Financial
Officer
|
07881 327 748
|
|
|
|
|
John Messenger, Group Investor
Relations Director
|
07867 201 763
|
|
|
|
|
Media enquiries
|
|
|
Tim
Collins, Group Corporate
Affairs Director
|
020 7299
4874
|
|
|
|
|
Brunswick
|
|
|
Jonathan Glass / Rosie Oddy/ Peter
Hesse
|
020 7404
5959
|
Barratt Redrow plc LEI: 2138006R85VEOF5YNK29
Appendix I: Barratt
standalone performance
|
|
FY25
|
FY24
|
|
|
Barratt standalone
|
1 July - 13
October
|
1 July - 15
October
|
Change
|
|
a.
Net Private Reservation Rate
|
0.62
|
0.47
|
31.9%
|
|
- of which PRS and Other
MUS
|
0.05
|
0.04
|
n/m
|
|
-
excluding PRS and Other MUS
|
0.57
|
0.43
|
32.6%
|
|
|
|
|
|
|
Average active sales outlets
|
305
|
369
|
(17.3%)
|
|
Barratt
standalone
|
13 October
2024
|
15 October
2023
|
Variance
(%)
|
|
b.
Forward sales
|
£m
|
Homes
|
£m
|
Homes
|
£m
|
Homes
|
|
Private
|
1,528.7
|
4,250
|
1,503.0
|
4,306
|
1.7%
|
(1.3%)
|
|
Affordable
|
582.2
|
3,532
|
719.5
|
4,486
|
(19.1%)
|
(21.3%)
|
|
Wholly Owned
|
2,110.9
|
7,782
|
2,222.5
|
8,792
|
(5.0%)
|
(11.5%)
|
|
JV
|
153.6
|
390
|
162.6
|
492
|
(5.5%)
|
(20.7%)
|
|
Total
|
2,264.5
|
8,172
|
2,385.1
|
9,284
|
(5.1%)
|
(12.0%)
|
|
Barratt standalone
|
Current
Year
|
Prior Year
|
Variance
(%)
|
|
c.
Forward sales roll
|
Private
|
Total
|
Private
|
Total
|
Private
|
Total
|
|
June
|
3,386
|
7,239
|
3,884
|
8,995
|
(12.8%)
|
(19.5%)
|
|
Reservations
|
2,835
|
3,249
|
2,574
|
2,869
|
10.1%
|
13.2%
|
|
Completions
|
(1,971)
|
(2,316)
|
(2,152)
|
(2,580)
|
(8.4%)
|
(10.2%)
|
|
October6
|
4,250
|
8,172
|
4,306
|
9,284
|
(1.3%)
|
(12.0%)
|
Note 6: At 13 October 2024 and 15
October 2023 respectively.
Appendix II: Barratt Redrow
plc consolidated performance
|
|
FY25
|
FY24
|
|
|
Barratt Redrow plc:
|
22 August - 13
October
|
24 August - 15
October
|
Change
|
|
a.
Net Private Reservation Rate
|
0.67
|
0.49
|
36.7%
|
|
- of which PRS and Other
MUS
|
0.08
|
0.05
|
n/m
|
|
-
excluding PRS and Other MUS
|
0.59
|
0.44
|
34.1%
|
|
|
|
|
|
|
Average active sales outlets
|
419
|
488
|
(14.1%)
|
|
Barratt Redrow plc:
|
13 October
2024
|
15 October 2023 pro
forma
|
Variance
(%)
|
|
b.
Forward sales
|
£m
|
Homes
|
£m
|
Homes
|
£m
|
Homes
|
|
Private
|
2,253.5
|
5,718
|
2,150.3
|
5,641
|
4.8%
|
1.4%
|
|
Affordable
|
757.9
|
4,511
|
1,004.8
|
6,068
|
(24.6%)
|
(25.7%)
|
|
Wholly Owned
|
3,011.4
|
10,229
|
3,155.1
|
11,709
|
(4.6%)
|
(12.6%)
|
|
JV
|
153.6
|
390
|
162.6
|
492
|
(5.5%)
|
(20.7%)
|
|
Total
|
3,165.0
|
10,619
|
3,317.7
|
12,201
|
(4.6%)
|
(13.0%)
|
|
Barratt Redrow plc:
|
Barratt
|
Redrow
|
Barratt
Redrow
|
|
c.
Forward sales roll
|
Private
|
Total
|
Private
|
Total
|
Private
|
Total
|
|
30 June
|
3,386
|
7,239
|
1,119
|
2,187
|
|
|
|
Reservations
|
1,152
|
1,260
|
435
|
436
|
|
|
|
Completions
|
(568)
|
(668)
|
(196)
|
(261)
|
|
|
|
21
August
|
3,970
|
7,831
|
1,358
|
2,362
|
5,328
|
10,193
|
|
Reservations
|
1,683
|
1,989
|
440
|
467
|
2,123
|
2,456
|
|
Completions
|
(1,403)
|
(1,648)
|
(330)
|
(382)
|
(1,733)
|
(2,030)
|
|
13
October
|
4,250
|
8,172
|
1,468
|
2,447
|
5,718
|
10,619
|
Appendix III: Redrow plc
standalone performance
|
|
FY25
|
FY24
|
|
|
Redrow plc:
|
1 July - 13
October
|
1 July - 15
October
|
Change
|
|
a.
Net Private Reservation Rate
|
0.49
|
0.36
|
36.1%
|
|
- of which PRS and Other
MUS
|
0.02
|
0.01
|
n/m
|
|
-
excluding PRS and Other MUS
|
0.47
|
0.35
|
34.3%
|
|
|
|
|
|
|
Average active sales outlets
|
118
|
128
|
(7.8%)
|
|
Redrow plc:
|
13 October
2024
|
15 October
2023
|
Variance
(%)
|
|
b.
Forward sales
|
£m
|
Homes
|
£m
|
Homes
|
£m
|
Homes
|
|
Private
|
724.8
|
1,468
|
647.3
|
1,335
|
12.0%
|
10.0%
|
|
Affordable
|
175.7
|
979
|
285.3
|
1,582
|
(38.4%)
|
(38.1%)
|
|
Total
|
900.5
|
2,447
|
932.6
|
2,917
|
(3.4%)
|
(16.1%)
|
|
Redrow plc:
|
Current
Year
|
Prior Year
|
Variance
(%)
|
|
c.
Forward sales roll
|
Private
|
Total
|
Private
|
Total
|
Private
|
Total
|
|
June
|
1,119
|
2,187
|
1,266
|
2,699
|
(11.6%)
|
(19.0%)
|
|
Reservations
|
875
|
903
|
690
|
1,036
|
26.8%
|
(12.8%)
|
|
Completions
|
(526)
|
(643)
|
(621)
|
(818)
|
(15.3%)
|
(21.4%)
|
|
October6
|
1,468
|
2,447
|
1,335
|
2,917
|
10.0%
|
(16.1%)
|
Note 6: At 13 October 2024 and 15
October 2023 respectively.
Appendix IV: Barratt Redrow
plc: FY25 completion guidance
|
Barratt Redrow plc: Total home completion
guidance
|
Lower
|
Mid-point
|
Upper
|
|
Barratt standalone wholly owned home
completion guidance
|
12,400
|
12,650
|
12,900
|
|
Barratt standalone JVs home
completion guidance
|
600
|
600
|
600
|
|
Barratt standalone total home completion
guidance
|
13,000
|
13,250
|
13,500
|
|
|
|
|
|
|
Redrow standalone FY25 completion
guidance
|
3,861
|
3,911
|
3,961
|
|
Redrow home completions delivered to
21 August 2024
|
(261)
|
(261)
|
(261)
|
|
Redrow standalone total home completion guidance from 22
August 2024
|
3,600
|
3,650
|
3,700
|
|
|
|
|
|
|
Barratt Redrow total home completions
guidance
|
16,600
|
16,900
|
17,200
|
|
Wholly owned Barratt Redrow completion
guidance
|
16,000
|
16,300
|
16,600
|