Barratt Redrow has unveiled plans to boost shareholder returns by £400 million over the year ahead as it comes under pressure from activist investor Phoenix Asset Management Partners. The group said it would buy back around £386 million of shares over the year to July 2 next year, with a further £14 million set to be paid through dividends.
Activist Investor Pressure
Barratt Redrow has faced calls from Phoenix Asset Management Partners, which is Barratt’s third largest investor with a stake of around 5%, to launch share buybacks of up to £1 billion a year. Phoenix warned it would “escalate” its campaign if no action was taken by Barratt. The investor has argued that Barratt’s shares are undervalued and that there is a widening gap between its share price and the value of its assets.
CEO Statement
David Thomas, Barratt’s outgoing chief executive, said on unveiling the investor returns plans that “deploying capital through an expanded share buyback programme is currently the most effective way to create long-term shareholder value.” He suggested there may be more plans to appease investors on the horizon. “We are focused on further enhancing our cost base efficiency and we have additional opportunities to optimise our capital employed to enhance returns for shareholders,” he said.
Market Reaction
The housebuilder’s shares lifted 4% in morning trading on Wednesday, but it follows recent hefty falls, with the stock down nearly a third in the past year. Barratt, which became the biggest player in the sector after its £2.5 billion deal to buy Redrow in 2024, has cautioned over rising build costs and the potential for interest rates to stay higher for longer due to the Iran war, which has dampened buyer demand across the sector.
Financial Outlook
In its update on Wednesday, the group said it remains on track to meet market expectations for underlying pre-tax profits of £559.5 million for the year to June 28, which would be an increase on the £488.3 million reported in 2024-25. The firm expects home completions at the higher end of guidance, at 17,662. It is guiding for completions in 2026-27 of between 17,700 and 18,200. However, it cautioned that house price inflation is set to be “minimal” over 2026-27 and that build costs could rise by 3% to 4% after ramping up in recent months.
Build Cost Inflation
Barratt said build costs picked up pace from 1% in its first half to the end of December, to 3% in the final six months. The firm said: “Recent volatility in global energy prices and supply chain disruption may increase build cost inflation in 2026-27. However, the extent of any impact remains uncertain and will depend on movements in energy prices, broader market conditions and the pace at which supply chains normalise.” The group hopes to offset rising build inflation through cost cutting and supply chain management.
Leadership Transition
Barratt announced in March that Mr Thomas will be retiring in September, when he will hand over the reins to incoming chief executive Dean Banks. Mr Thomas will remain available as an adviser until March 3 next year.
