Barratt Redrow has recently unveiled its performance for the first half of fiscal year 2026, showcasing resilience in a challenging UK housing market. Despite prevailing low consumer confidence and a subdued market, the company reported an increase in home completions and made substantial progress in integrating Redrow. While adjusted profit before tax experienced a dip, revenue saw an upward trend, and the company remains steadfast in its full-year projections, focusing on strategic land management and future expansion.
Barratt Redrow Navigates Market Headwinds with Strategic Integration and Growth Initiatives
In a recent announcement on February 11, 2026, Barratt Redrow (LON:BTRW) revealed its operational and financial achievements for the first half of fiscal year 2026. The company successfully delivered 7,444 homes, marking a 4.7% increase compared to the previous year's aggregated performance. This growth occurred despite a challenging UK housing market, characterized by low consumer confidence and uncertainty leading up to the November budget.
Chief Operating Officer Mike Roberts highlighted that while the increase in completions was partly due to timing, the company's full-year guidance remains unchanged. Roberts also detailed shifts in reservation patterns: Private Rental Sector (PRS) reservations decreased to 4% from 9% a year prior, as the market tightened and Barratt Redrow maintained pricing discipline. Conversely, part-exchange options surged, accounting for 23% of private reservations, up from 14%. This indicates a growing customer preference for less stressful transactions amidst concerns about conveyancing chains, a trend further supported by the expansion of Barratt's part-exchange capabilities into the Redrow brand. Roberts assured that part-exchange stock levels were carefully managed, with 180 units unsold at the half-year mark, and underlying private reservation rates held steady at 0.55 reservations per week.
Investor Relations Director John Messenger elaborated on the financial aspects, reporting an adjusted profit before tax (pre-PPA) of £200 million, a 13.6% decrease year-over-year. This decline was attributed to higher net finance costs and reduced joint venture profits. Despite this, revenue climbed 10.5% to £2.6 billion, driven by increased completions and a higher average selling price. However, the adjusted gross margin contracted by 200 basis points to 15%. Messenger pinpointed three primary factors for the margin compression: flat underlying pricing despite volume growth, increased use of non-cash incentives (such as extras and upgrades) to secure reservations, and approximately 1% build cost inflation. Adjusted earnings per share stood at £0.10, with an interim dividend of £0.05 per share proposed.
Chief Executive David Thomas provided an update on the Redrow integration, confirming it is nearing completion, with full integration expected by April. He reiterated the target of £100 million in annual cost synergies, with over £30 million already realized in the first half and a further £50 million anticipated in FY26. Thomas also outlined plans for revenue synergies, targeting 45 incremental sales outlets, with 16 approvals already secured for planning applications. These new synergy sites are expected to commence sales at the beginning of FY27. The company's owned and controlled land bank duration was 5.6 years at December, reflecting a strategic approach to land acquisition and capital efficiency. Messenger detailed the embedded gross margin in the land bank at 18.9%, a slight decrease of 30 basis points due to flat pricing, build cost inflation, and incremental incentives.
Financially, the group recorded a net cash outflow of nearly £600 million in the first half, primarily due to seasonal construction work and part-exchange investments. However, management projects a cash inflow of approximately £300 million in the second half, with year-end net cash anticipated to be between £400 million and £500 million. Regarding building safety, Messenger confirmed no changes to the group's provision position, with legacy property provisions remaining at over £1 billion after spending £77.8 million on works. The company reiterated its FY26 guidance for 17,200 to 17,800 total completions, stable underlying pricing, and around 2% build cost inflation.
The recent earnings call from Barratt Redrow paints a picture of a company adeptly navigating a fluctuating economic landscape. Their strategic focus on integrating Redrow and optimizing operational efficiencies, even amidst a challenging housing market, demonstrates a forward-thinking approach. The commitment to delivering high-quality, energy-efficient homes underscores their brand values and positions them well for sustained success. As they move towards completing the Redrow integration and launching new synergy outlets, Barratt Redrow appears poised to reinforce its market leadership and enhance shareholder value, making it a compelling entity to observe in the coming financial cycles.
