Barratt Redrow has initiated a share buyback program totaling up to £386 million, complemented by a £14 million ordinary dividend, as part of a new £400 million capital return. This move aligns with the company's commitment to distribute 50% of its adjusted net income to shareholders and comes after a period of significant investor pressure. The decision follows the company's "solid performance" in the financial year ending June 28, where profits met market expectations.
Barratt Redrow's adjusted pre-tax profit for the year reached £559.5 million, an increase from £488.3 million in the previous year, aligning with the consensus forecast. CEO David Thomas acknowledged a challenging market environment marked by macroeconomic and geopolitical uncertainty, industry headwinds, and subdued customer demand. However, he stated that the company's strong performance and robust balance sheet make expanding the share buyback program the most effective way to create long-term shareholder value.
Total home completions for the year were strong at 17,667, exceeding the guidance range of 17,200 to 17,800. The company also projects further growth for the current financial year, targeting 17,700 to 18,200 completions. Barratt Redrow ended the financial year with a strong net cash position of £772 million, consistent with the prior year. For the fiscal year 2027, the company anticipates minimal house price inflation but a 3-4% increase in total build cost inflation under current market conditions.
This capital return strategy has been heavily influenced by major shareholder Phoenix Asset Management Partners, which had advocated for an "aggressive" share buyback program. Phoenix, the company's third-largest investor, had argued that an increased buyback was crucial to address the undervaluation of the company's shares. This investor activism, including a detailed report from Phoenix's CIO Gary Channon, underscored the belief that Barratt Redrow's board needed a new approach to capital allocation to turn the depressed valuation into lasting value for long-term shareholders.
The pressure from shareholders suggested that if the board did not act, further escalation, including potential changes to the board, could occur. This new £400 million program effectively responds to these demands, demonstrating a strategic pivot by Barratt Redrow to utilize its strong financial position to enhance shareholder value through share repurchases, rather than solely focusing on land acquisition in a difficult market.
