Housebuilder Barratt Redrow has unveiled plans to boost shareholder returns by £400 million over the year ahead, responding to pressure from activist investor Phoenix Asset Management Partners. The group will buy back approximately £386 million of shares over the year to July 2 next year, with an additional £14 million paid through dividends.
Activist Investor Pressure
Phoenix Asset Management Partners, Barratt's third largest investor with a stake of around 5%, had called for share buybacks of up to £1 billion a year and warned it would escalate its campaign if no action was taken. Phoenix argued that Barratt's shares are undervalued, with a widening gap between the share price and asset value.
Outgoing chief executive David Thomas stated that deploying capital through an expanded share buyback programme is currently the most effective way to create long-term shareholder value. He hinted at further measures: "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."
Market Reaction and Performance
Barratt's shares rose 4% in morning trading on Wednesday, though they remain down nearly a third over the past year. Phoenix welcomed the buyback announcement, seeing potential for further improvement. Gary Channon, founder and chief investment officer of Phoenix, said: "The board’s decision to return capital through buybacks, while the shares trade so far below their worth, is a step forward for shareholders. Every share bought back creates lasting value for those who remain."
Financial Outlook and Challenges
Barratt, which became the sector's largest player after its £2.5 billion acquisition of Redrow in 2024, remains on track to meet market expectations for underlying pre-tax profits of £559.5 million for the year to June 28, up from £488.3 million in 2024-25. Home completions are expected at the higher end of guidance, at 17,662, with completions in 2026-27 forecast between 17,700 and 18,200.
However, the group cautioned that house price inflation will be minimal over 2026-27 and build costs could rise by 3% to 4%, accelerating from 1% in the first half to 3% in the final six months. Recent volatility in global energy prices and supply chain disruption may further increase build cost inflation, though the extent remains uncertain. Barratt aims to offset rising costs through cost cutting and supply chain management.
Leadership Transition
David Thomas will retire in September, handing over to incoming chief executive Dean Banks. Thomas will remain available as an adviser until March 3 next year.
