REG - Barratt Redrow PLC - AGM Trading and Integration Update
23/10/2024 07:00
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RNS Number : 2027J Barratt Redrow PLC 23 October 2024
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 period(1) ('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 reservations(2) 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
(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
(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%)
October(6) 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%)
October(6) 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
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