Earnings call transcript: Barratt Redrow Q3 2026 sees strong reservation growth

Barratt Redrow PLC reported a robust performance in the third quarter of 2026, marked by a significant increase in reservation rates and a strengthened forward order book. Despite geopolitical uncertainties, the company maintained its guidance and achieved significant cost synergies through the integration of Redrow. The stock price rose by 2.02% following the announcement to $3.57, though shares remain just 4% above their 52-week low of $3.38, reflecting investor confidence in the company’s strategic direction and operational execution amid broader market headwinds.

Key Takeaways

• Reservation rates increased by 6.3% year-over-year.
• Forward order book improved by 11%, supporting housing volume guidance.
• Successful integration of Redrow with GBP 100 million in confirmed cost synergies.
• Stock price increased by 2.02%, indicating positive market sentiment.
• Land approvals guidance revised downward, reflecting a strategic shift.

Company Performance

Barratt Redrow demonstrated resilience in Q3 2026, with improved reservation activity and strategic execution despite geopolitical challenges. The company’s focus on operational efficiency and disciplined land acquisition has positioned it well for future growth. Trading at a PEG ratio of just 0.38, the stock appears attractively valued relative to its earnings growth potential. According to InvestingPro analysis, the company is currently undervalued, with shares trading below Fair Value estimates—placing it among opportunities on the Most Undervalued stocks list. An InvestingPro tip highlights that the company holds more cash than debt on its balance sheet, reinforcing its financial stability. Compared to previous quarters, the integration of Redrow has enhanced operational capabilities and cost efficiencies.

Financial Highlights

• Housing volume guidance: 17,200-17,800 homes for FY 2026.
• Build cost inflation: approximately 2% for FY 2026.
• Net cash position guidance raised to GBP 550-650 million.
• Land spend guidance reduced to GBP 700-800 million.

Outlook & Guidance

Barratt Redrow’s outlook remains positive, with strategic initiatives like the Synergy sales outlet expansion program set to enhance customer experience and operational efficiency. With a P/E ratio of 17.75 and trading at a low earnings multiple relative to growth prospects, the stock presents a compelling value proposition for investors. For deeper insights into Barratt Redrow’s valuation and growth potential, InvestingPro offers access to 8 additional exclusive tips, comprehensive financial health scores, and detailed Pro Research Reports covering over 1,400 top stocks. The company revised its land approval guidance downward but maintained confidence in its financial position and cost management strategies.

Executive Commentary

Executives highlighted the successful integration of Redrow, with cost synergies on track and an incremental GBP 50 million profit contribution expected in FY 2026. The focus on disciplined land acquisition and operational efficiency underpins the company’s strategic positioning in the market.

Risks and Challenges

• Geopolitical uncertainties may impact interest rates and market conditions.
• The London and South East markets face affordability challenges, affecting transaction levels.
• The strategic shift in land acquisition may limit short-term growth opportunities.
• Build cost inflation remains a concern, though current pressures are manageable.

Q&A

During the earnings call, analysts inquired about the impact of geopolitical events on market conditions and the company’s strategic response to potential interest rate changes. Management emphasized their proactive approach to managing these challenges and maintaining operational resilience.

Full transcript - Barratt Redrow PLC (BTRW) Q3 2026:

George, Conference Coordinator, Conference Services: Hello, and welcome to the Barratt Redrow plc Third Quarter Trading Update. My name is George. I’ll be your coordinator for today’s event. Please note, this conference is being recorded, and for the duration of the call, your line will be in listen-only mode. However, you have the option to ask questions towards the end of the presentation, and this can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you’ll be connected to an operator. I’d like to hand the call over to your host today, Mr. David Thomas, CEO, to begin today’s conference. Please go ahead, sir.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thank you, George. Good morning, everyone, and thank you for joining us on this Third Quarter Trading Update call. Mike Roberts and John Messenger are here with me this morning. After some opening comments, we will open up for questions as normal. I would like to, as usual, start by thanking all of our employees, our subcontractors, and our suppliers for their continued commitment and sheer hard work, which underpins the resilient performance that we’re going to take you through today. While the geopolitical environment has become increasingly uncertain, trading on the ground has held up well. Our overall reservation rate was 6.3% higher than last year, with an increase in the underlying private reservation rate of 3%, supported by a higher contribution from PRS and multi-unit sales. Sales incentives continued to support reservation activity and were at levels in line with the Half Year.

Our forward order book is 11% higher, so we are on track to deliver housing volumes in line with guidance of between 17,200 and 17,800 homes. Mike will give you a bit more flavor on that in a moment. Average sales outlet numbers at 408 were essentially flat on the first half, as expected. We were pleased to launch our first two Synergy sales outlets at Curborough Fields in Lichfield ahead of schedule, and we expect to open a further six Synergy outlets by the end of June. 22 Synergy outlets are scheduled to open in FY 2027 and 15 in FY 2028. Including organic sales outlet growth, this brings average sales outlets for FY 2027 to between 425 and 435 as we highlighted at the interims. I will now pass over to Mike.

Mike Roberts, Chief Operating Officer / Finance Executive, Barratt Redrow plc: Thanks, David, and good morning, everyone. Our sales and build positions are in line with where we’d expect them to be at this stage of the year. As of today, we only have a handful of sales required and all of our year-end private units are now roofed. Our build teams are now focusing on delivering the reserve homes, so we’re well set to ensure all units are completed in line with our customer handover requirements and quality controls. Given our advanced build position and the limited inflationary pressure on the current year build activity, we are maintaining our FY 2026 build cost inflation. You’ll recall that at the interims we said that we expected total build cost inflation would be around 2% for the year. That comprised 1% for the first half and an estimated 3% for the second half.

We do recognize that this will be more challenging going forward, but given the strength of the supply chain and the size of our business, we do feel we’re well-placed to manage these negotiations as they arise. On that, we’ll provide a further update on this in July. With that, I’ll pass back to David.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thanks very much, Mike. Turning to the Redrow integration progress, this is substantially complete, with the final parts of IT integration completing this month. All of the GBP 100 million cost synergies have now been confirmed, and we are on track to achieve an incremental GBP 50 million to our profit and loss account this financial year. There will be a further GBP 30 million from July 2026 to get the full GBP 100 million of synergies to the income statement through to the end of December. Turning to land, we are now updating our guidance on land. We have maintained our disciplined approach with 2,465 plots approved for purchase in the period, bringing year-to-date approvals to just over 4,000 plots. This is lower than last year, partly because we are seeing fewer attractive opportunities in the market.

Also, as we outlined in February 2025, we are moving towards a model of three and a half years owned and one year of controlled land, which remains our longer term goal. Also in the current environment, as you will understand, we are being even more selective. As a result, we are now guiding to total land approvals of between 7,000 and 9,000 plots for FY 2026. We expect a reduction in land spend to between GBP 700 million and GBP 800 million from the GBP 800 million-GBP 900 million previously guided. We would expect that the adjustment in approvals, if ongoing, will have a more significant effect on cash flows for land in FY 2027. Our financial position remains strong.

We are raising our guidance for the year-end net cash position to between GBP 550 million and GBP 650 million, up from the GBP 400 million-GBP 500 million that we guided in February. This increase reflects both more cash spend on land as well as the timing of legacy building mediation payments, which are now expected to fall into next year. Coming to the outlook, with a strong order book and good spring trading, our guidance on completions remains unchanged. However, events in the Middle East will create headwinds for our industry, with the potential for a more prolonged higher interest rate environment as well as cost pressures. Our Group is in a good place. We have three complementary brands, an excellent reputation for quality and service, and a strong land bank.

We are highly disciplined in our capital allocation, our land investment, and our cost control, and we are well placed to deliver attractive returns to shareholders. With that, we’re now very happy to move to questions.

George, Conference Coordinator, Conference Services: Thank you very much, Mr. Thomas. Ladies and gentlemen, as a reminder, if you have any questions, please press star one on your telephone. Just make sure your line is not muted. Our very first question this morning is coming from Aynsley Lammin from Investec. Please go ahead. Your line is open. Thank you.

Aynsley Lammin, Analyst, Investec: Thanks very much. Good morning, everybody. Just two questions from me, please. First of all, obviously, reservations held up. Just interested to hear whether you pushed incentives more, anything around that area that kind of supported the reservations. I guess just on more recent trading, what’s the feel and signs on things like inquiries, cancellation rates, footfall? Are you already seeing the kind of higher mortgage rates in the market and maybe a bit of a dent to confidence impact in anything there? The second question on build cost inflation. Just interested if energy costs remain where they were and you start to get that coming through. When does that actually impact? How much of a lag is there given you presumably got some contracts that you’ve kind of fixed at the beginning of this year? I’m just interested how you see that coming through. Thanks.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Aynsley, hi, good morning. If I pick up both of those, I think in terms of reservations, we’ve just not seen any change in terms of our reservation trends. As you know, we gave a current trading position when we did the half-year results in February, and we provided, I think, around five weeks of current trading at that point in time. If anything, we’ve just seen a slight strengthening of that position. It’s not been noticeably better or worse at the beginning or the end of that period. I think in terms of customer sentiment beyond the reservations, which clearly are encouraging, I would say there’s more questions being asked about mortgages and mortgage rates. As has been well documented, there has been a lot of changes in mortgage products and mortgage rates, but it’s clearly not to date impacting customer sentiment, inquiries, or reservation levels.

I think in terms of build cost inflation, I know everyone’s very eager, as we are, to understand what the potential impact in relation to build cost inflation. I think we have got to set it in context that these events in the Middle East have only been going on for a relatively short period of time. There are three main areas that we would be affected on in terms of cost. First of all, just transportation to site. Secondly, that we are a high user of diesel, both ourselves and our supply chain on site. Thirdly, there are energy costs within the supply chain, particularly for production of certain materials. We’re confident, as Mike touched on, in terms of our build cost estimates to June 2026, in line with our previous guidance. We will talk to our supply chain on a case-by-case basis.

We should be able to provide a little more color in July. Clearly in July, it will not be a certain position in terms of build cost inflation for the year to June 2027. We’ll just have to continue to see how things evolve, both in terms of particularly the oil prices and the overall geopolitical position.

Aynsley Lammin, Analyst, Investec: Just maybe one follow-up. Have you seen any of the manufacturers yet, whether it’s bricks or plasterboard, concrete, anything actually ask for higher prices, or is it just more delivery charges at this point?

David Thomas, Chief Executive Officer, Barratt Redrow plc: I would say it’s more about delivery charges at this point, but the reality is, clearly the supply chain, the different suppliers are impacted in different ways. We had our annual supply chain conference last week, so we would have probably representatives from around about 180 of our supply chain. There’s no question that they are seeing cost pressures, but I think we’ve got to see how prolonged those cost pressures become.

Aynsley Lammin, Analyst, Investec: Thank you very much.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thanks, Aynsley.

George, Conference Coordinator, Conference Services: Thank you, sir. Sorry to interrupt you, sir. Next question is here from Charlie Campbell of Stifel. Please go ahead. Your line is open, Charlie.

Charlie Campbell, Analyst, Stifel: Yeah, good morning. I think Aynsley’s nicked all the obvious ones, but just to sort of push a bit more on pricing and a couple of questions on that, really. Just wondering if your sales guys on the ground are reporting people driving a harder bargain? As a kind of corollary to that, I’m intrigued that you’ve sort of seen a strengthening, if anything, of the build-to-rent and the other bulk, and you would have thought those would be most price sensitive. Just wondered if there’s any more to say about that jump in reservations from the bulk side. Thank you.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Charlie, hi, good morning. Maybe if I start just in terms of pricing and incentives, and Mike could maybe just pick that up. The main point I would make on pricing incentives is that, we said on incentives, there’s no change from what we saw at the half year. We’re not feeding in a higher level of incentive to maintain reservations. I mean, to be very clear. You’ve got to remember that we’ve got a portfolio of more than 400 sites, and inevitably it is about the geography and it’s site by site within the geography. Mike can talk a little bit more about that. In terms of multi-unit, particularly, build-to-rent or PRS, we said back in 2025 that we felt running somewhere in the order of 5%-10% of our reservations through those channels was good for us.

Our commentary since then really has been that we have seen pricing being quite difficult, pricing that we wouldn’t necessarily want to pursue. My sense is that there’s probably a little bit more appetite in the market where people see that the private rental market is an attractive market to operate in. We can provide a portfolio across the country. Everything that we’ve done year to date has been relatively limited in size, but we do continue to look at opportunities to be able to expand that business within the overall portfolio, still believing that 5%-10% of reservations is achievable, even in the current market. Mike, do you want to pick up on pricing generally?

Mike Roberts, Chief Operating Officer / Finance Executive, Barratt Redrow plc: Yes. I probably start with that. I can answer your question directly. We’re not seeing that people are trying to drive a harder bargain in terms of the purchase process. I think it’s key to remember that we have a pretty structured sale process where we’re trying to match customers to houses and their requirements. I guess within that discussion, we talk about then the unaffordability. As part of that discussion, we feel we control the negotiation around the incentives available. On a site-by-site basis, we look at the incentives that we offer, and that’s related to individual sales rates per the sites and our current build stages available plots. We feel the incentives are very much in our control in terms of what we offer and what we’re prepared to provide to facilitate the sale.

It’s not really part of a negotiation, so to speak, from a customer point of view.

Charlie Campbell, Analyst, Stifel: Thank you very much. It’s very clear. Thank you.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thank you.

George, Conference Coordinator, Conference Services: We’ll now move to Clyde Lewis calling from Peel Hunt. Please go ahead.

Clyde Lewis, Analyst, Peel Hunt: Morning all. David, Mike, and John, I’m sure, is there in the background as well. I’ve got a few, if I may please, David. Just in terms of, I suppose, the land market, and I understand you’re sort of moving to that 3.5-year-four-year land bank target, are land prices not changing yet? Are they still sort of remaining stubbornly high and not really taking into account the high levels of incentives and difficult market?

David Thomas, Chief Executive Officer, Barratt Redrow plc: Okay. Clyde, I think the reality is that one of the things that we’ve shown in our presentations over the last few years has been the Savills Development Land Index, and I think that shows that there’s not been any substantial change in pricing. I think there’s two things as we look forward. There’s the macro event that is very obvious in terms of the Middle East. Secondly, I think that there is a lot of land that is going to come through planning if you look over the next 18 months, two years. We outlined in February that we have more than 100 strategic sites in the planning process. That is unprecedented levels of land for our business in the planning process. Now clearly it will take time.

It’s not all going to arrive in the near term, but that might be against a more normal level of 20 or 30 applications. I think you’ll see that reflected across the industry. If that large amount of land is going to appear, then you would assume that there’s plenty of land supply and that may play into land prices in the future, is the first thing. The second thing, just in terms of the market, we are trying to just bring in our land bank over a period of time. We’re not doing it in a rushed way, and we’ve been very clear that we do want to shrink the length of the land bank. If you look at the current market, while we all know that we need to understand reservation rates, we need to understand selling prices, and we need to understand build costs.

That all looks quite tricky at this point. I think generally, from our point of view, we see that there is a need to just slow down and be ever more selective about land intake.

Clyde Lewis, Analyst, Peel Hunt: Thank you. I suppose as a regular update on Help to Buy chatter, the government making any noises at all about considering it more closely at all?

David Thomas, Chief Executive Officer, Barratt Redrow plc: I think the short answer, Clyde, would be no, not that the government are talking to the industry about. We’ve been very clear, particularly over the last couple of years, that we do feel that some support from government is important in the market, particularly for first-time buyers. We’ve also been very clear that if there is a support program in the market that the housebuilders should pay for the support program, as we did when there was a support product launched in 2012, and the housebuilders paid prior to the launch of Help to Buy.

I think we’re not asking for something for nothing, but I think when you look at affordability, particularly for first-time buyers, and then you look at certain geographies such as London and the South East, it’s massively challenging. Hence, you’re seeing dramatic reductions in transaction level again, but particularly in the London market.

Clyde Lewis, Analyst, Peel Hunt: Thank you. My last one was really around. I’m certainly surprised you haven’t seen any slower levels of activity in terms of new reservations and interest levels from house purchasers. Do you think that’s because there is still a sizable cohort that have got their mortgage in principle from before the time that rates started to increase? Do you think there are other factors going on that people have actually sort of been sitting there waiting to get involved and they’re looking at the affordability squeeze that’s happening and thinking this is just going to be short term and therefore I’m happy to crack on?

David Thomas, Chief Executive Officer, Barratt Redrow plc: Well, Clyde, I think probably a lot of parts to that, but I think the starting point, which you touched on, is that when you look at the affordability equations, the affordability position has improved if you look over the last 12 months, more wage inflation, less house price increases, and we had seen reductions in mortgage rates. Secondly, yes, people who are in-market and who have reserved over the last, say, six-eight weeks would’ve likely had a mortgage offer in principle. They were very much in the market. I think also that you can see that people may want to lock into current rates, not being clear about where rates are going to go. I think all of that plays into it. I think it really just comes down to us having a longer time to look at how this plays out.

I’m sure for lots of different reasons, everyone would hope that the conflict can be resolved and we can see a bit more stability. The reality is we’ve just got to keep monitoring that position and keep monitoring our reservations on a week-to-week basis.

Clyde Lewis, Analyst, Peel Hunt: Okay, perfect. Thank you, David.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thanks, Clyde.

George, Conference Coordinator, Conference Services: Thank you, sir. Our next question coming from Zaim Beekawa of JP Morgan. Please go ahead. Your line is open.

Aynsley Lammin, Analyst, Investec0: Morning. Thanks for taking my questions. The first is just to come back on build cost inflation. I appreciate a lot of uncertainty in the market, but maybe you could speak about what’s different this time versus the previous time we saw build cost spike of material. I think we’re coming from different build rates across the industry. Secondly, just to follow up on the bulk sales, did you say that you’re having to do sort of discount a little bit more than usual to get these across the line at the moment? Thank you.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Yeah. Thank you. Good morning. First of all, if I just cover the second point first. No, absolutely not. We’re not doing deeper discounts to get bulk sales across the line. I think we’re very clear about the economics of it, and there are levels that we’re very happy to transact on, and we have done some large deals, if you look over the last two or three years, across a wide geographic range of our portfolio. We’re very clear about the values that we need to achieve, and we’re certainly not taking deeper discounts to achieve that. I think that’s not the case. The build cost, look, it’s kind of trying to step back. I would say that we saw a dramatic spike in build costs at the start of the war in Ukraine.

I think that the first most notable thing I think would be, first of all, those spikes were bigger than the spikes we’ve seen here, in terms of oil prices, energy costs, et cetera. Secondly, the industry was much busier than it is now. In 2021-2022, the industry was heading towards 250,000 completions, whereas if you look at commentary then, maybe we’re heading below 200,000 completions. There is definitely more capacity in the industry. Clearly that has to be helpful in terms of the way that build costs and build cost inflation evolves. Again, all of our supply chain is not affected in the same way. Some products have a very high energy content in production.

I think we’re very familiar with the different components of the production costs for our materials. We feel that we’re well-placed to navigate our way through that. We’re obviously a very big business. We’re buying a lot of building materials from the supply chain. Overall, I would say the starting point as at now looks slightly better than the starting point looked at the start of the war in Ukraine, because we haven’t seen the big spikes and the industry is not as busy as it was.

Richard, Moderator, Conference Services: Great. Thank you very much. Thank you, Richard. We’ll now move to Rebecca Parker, calling from Goldman. Please go ahead. Your line is open.

Rebecca Parker, Analyst, Goldman Sachs: Hi. I just wanted to ask on the outlet opening program, if you did see sales rates slow into 2027, how would you be thinking about that? Secondly, just wanted to ask on underlying pricing within the market and how you’re seeing that play out across the country, any geographical differences to call out there? I know you mentioned that London was a bit of a weak market.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Rebecca, thank you very much. Rebecca, sorry, just on the first question, could I just ask you to repeat just what it is you were referring to going into 2027? I just didn’t quite catch that.

Rebecca Parker, Analyst, Goldman Sachs: If sales rates slowed into 2027, if you would be thinking differently about that outlet opening program?

David Thomas, Chief Executive Officer, Barratt Redrow plc: Okay. Yes, I understand. Okay. Mike will pick up in terms of pricing and what we’re seeing across the country and so on. In terms of the outlet opening program, our lead times are obviously quite substantial, in terms of us approving land for purchase on a subject to planning basis and then obtaining planning. Really, when you look at the outlet numbers for FY 2027, I think we have a high degree of confidence that those outlet numbers will be delivered. There isn’t a huge amount of optionality around that. Clearly, the vast majority of the sites we’re already operating on, we’re coming off an average of 408, and we’re saying that we’re moving up to a midpoint of around about 430. The reality is, what happens from here isn’t going to have a big impact on that outlet count.

I think it’s much more about the outlet count as we move into FY 2028. We clearly are more cautious about essentially securing further outlets at this point in time. Now, we’ll obviously keep that under review, and we’ll update the market in July and update the market in September. What we’re referring to is approvals just now, where we’re backing the approvals down from 10,000-12,000, down to 7,000-9,000. That is largely what will fuel the FY 2028 outlet count. It really depends on what we approve essentially between now and probably September, October time, which will play into the FY 2028 outlet count.

Mike Roberts, Chief Operating Officer / Finance Executive, Barratt Redrow plc: Thanks. On the sales rates, and any change, and pricing, I suppose pricing, as you’d imagine, is pretty flat. We’re not seeing any movement. We’re not seeing any significant changes across the country. It’s just generally flat across the whole country from where we were and what we reported at H1. In terms of sales rates, we have seen an increase, as we’ve noted in Q3, which is positive, a similar sort of increase to what we normally expect this time of the year. Again, every region has shown a similar sort of increase and step up from H1 performance. It’s absolutely no movement between different geographical areas of the business. Certainly incentive levels remain pretty constant from H1 through to Q3 across all regions.

Pretty much a steady increase across the country in terms of sales rate, but the same across all geographic regions.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thanks.

Thanks, Mike.

George, Conference Coordinator, Conference Services: Thank you, Rebecca. Ladies and gentlemen, once again, as a reminder, if you have any questions, please press star one on your dial pad. We’ll now go to Allison Sun calling from Bank of America. Please go ahead.

Allison Sun, Analyst, Bank of America: Thank you. Good morning. I have a few questions. First is maybe following Rebecca’s question. If the volume is going to, let’s say, not doing as great as you were expecting in 2027, are you guys ready to give out more incentives or not? The second question is on the build cost inflation. I’m curious to know if you have thought what the worst case scenario could be? How high could those material costs could go up in 2027? My last question is, do you think you have a good pricing power when negotiating with those subcontractors? Because what I heard is, some key energy-intensive materials, probably the price is already up 15%-20%. If they do come up with a very high price increase, do you think you have ability to keep it lower? Thank you. Okay. Thank you.

David Thomas, Chief Executive Officer, Barratt Redrow plc: I think if I run through them. I think when you go through our portfolio and you look at our 400 sites, like any business, we’re trading volume and price every single week. How is the site selling? To what extent do we need to adjust incentives up or down? If we’re running incentives, just say at an overall level of 6%, 6.5%. The reality is some of our sites, we’re running incentives at 3%, and some of them will be running them above 6%, 6.5%. It will vary by site. The second stage is that some cases we need to either increase or reduce gross prices, and we’ll always be monitoring the gross price position as well. Where a home is sold subject to a mortgage, there are rules from the mortgage lenders about the levels of incentives.

You can’t just keep stepping up incentives. You’ve ultimately got to go to reduce gross pricing. We’ll carry on monitoring that week by week. I think the good news is that so far, we’ve not seen anything that’s required us to make changes to our incentive program from where we were in the first half of the year. In terms of material costs, I’m not going to give numbers. I think there’s no point in getting onto that train. We’ve given guidance for FY 2026. When we’re in a position to give guidance for FY 2027, we will do that, and we’re working hard to try to give some outline guidance, at least for July. We’ve got to sit down and talk to the supply chain.

I think you can look back. I made reference earlier to the war in Ukraine, and the reality is there’s plenty of published data about the way building material costs moved in light of that. Whilst it won’t be an exact correlation, it clearly has a strong correlation to oil prices and energy prices, general gas and oil prices. In terms of the supply chain, we feel we’re in a very good position with our supply chain partners. We believe that we deliver what we say we’re going to deliver. For our supply chain, I think it’s very, very important that we are signaling outlet growth for FY 2027. We’re going to be building and selling more from more outlets, which is a positive. In terms of our scale, we have more scale than anyone else in the marketplace. That is helpful.

As I touched on earlier, if the industry is a long way below capacity, and we were doing 250,000 homes in 2022, if we’re at 200 or sub 200, there clearly is a lack of demand for the supply chain, and if we are a big part of that demand equation, then that has to be helpful. Equally, we understand that we need a strong supply chain. We can’t simply say, well, we’re absolutely refusing any increases, because in that situation, then businesses become non-viable. I think because of the fact that it’s a kind of global crisis rather than specific to the U.K., there isn’t really going to be the opportunity for imports. That would often be an opportunity for us. If capacity was close to peak levels, then most of our materials can be imported, albeit that is clearly more expensive.

That isn’t going to avoid the issue. All manufacturers in Europe are going to be seeing the same cost pressures.

Allison Sun, Analyst, Bank of America: Thank you.

George, Conference Coordinator, Conference Services: Thank you much, Allison. We’ll now move to Chris Millington of Deutsche Bank. Please go ahead.

Chris Millington, Analyst, Deutsche Bank: Sorry, you probably thought you were all done, but a few left from me. Guys, I hope you’re all well. Just love to hear a bit more about how the affordable housing market is faring at the moment. I’d also welcome your thoughts on if we are going to see a slightly lower growth profile on volumes and maybe below where your targets are. Do you think there’s scope to do more on costs over and above what you’ve done through the Synergy targets? The last one, it’s maybe not the forum for this, but I’m going to ask it anyway, is capital allocation. We’ve obviously seen a big movement in the share price. You’re still quite weighted to dividends versus share buybacks. Do you think that’s the appropriate capital allocation policy?

Maybe you could weave in there, if we do throw off a bit of extra cash because of lower land spend, would that alter your thinking at all? Thank you, and sorry for the three.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Yeah, no, that’s fine, Chris. I was just saying Chris hasn’t asked a question. I’m sure he’s going to come on soon. If I just touch on capital allocation, the reality is our capital allocation is always under review from the Board. As you know, Chris, if you look over 10 years, we’ve shown that we have a lot of flexibility in terms of our capital allocation policies. We absolutely recognize the way that the share price has reduced. Equally, we recognize that having a strong balance sheet and having cash on the balance sheet is an important position to be in, as opposed to not having cash on the balance sheet and having debt. The Board will continue to look at that, and the next opportunity for any further guidance regarding that will be really in our September update.

We are running our 100 million share buyback program. We’re actively buying in the market on a day-to-day basis. Obviously we have our published dividend policy. We’ll keep all of that under review. I think that in relation to cost reduction, of course, clearly there isn’t a business in the world that can say we absolutely can’t reduce our costs. Of course, we can reduce our costs. I think that the combination with Redrow has allowed us to take very significant cost synergies out, which have only been accessible through that combination, would not have been accessible easily on a standalone basis. Whether it be our central overheads or whether it be looking at our divisional network, we always look at that. The reality is that this is not the time for making short-term decisions. We’ve got to see how the market plays out.

That’s an absolutely key thing. Therefore, what we should be doing is just stepping back and saying, "Okay, let’s look at the amount of land that we’re bringing in," as the key example in terms of original guidance, I think at GBP 800 million-GBP 900 million of cash outflow. That is the big cash outflow number, and we are obviously looking at that. In terms of the affordable housing market, I’d say generally, the affordable housing market is in a much better position, that there’s clearly been an above-inflation settlement. The position in terms of rent convergence looks as though it’s going to be resolved favorably for the housing association. The funding is in place. Now, there are probably some comment, which I know some of our peers have made, that the funding is very back-end loaded, in terms of FY 2026, FY 2027.

The reality is that funding is now coming through. You can apply for the funding. I think the HE position is materially better than it was, say, 12 months ago.

Chris Millington, Analyst, Deutsche Bank: Do you think, David, there’s any scope for higher affordable to offset lower private if we do see that trend happen with this backdrop?

David Thomas, Chief Executive Officer, Barratt Redrow plc: Yeah. Certainly if you look at the government’s ambitions in terms of affordable housing, particularly affordable rental, I think there’s plenty of scope for there to be more affordable housing delivered into the marketplace. It will largely depend on what the funding model is and the extent to which there is grant funding available beyond the 106 to deliver more affordable housing. That’s very much a matter for, in practice, both central and local government.

Chris Millington, Analyst, Deutsche Bank: Got you. That’s very clear. Thanks for your time.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Thanks.

George, Conference Coordinator, Conference Services: Thank you very much for your questions, sir. As we have no further questions, David Thomas, I turn the call back over to you for any additional or closing remarks. Thank you.

David Thomas, Chief Executive Officer, Barratt Redrow plc: Yeah, that’s great. Just to say, thank you very much, and thank you for the questions. We will be back on the 15th of July with our pre-close trading update. Thank you.

George, Conference Coordinator, Conference Services: Thank you, sir. Ladies and gentlemen, that will conclude today’s call. We thank you for attending. You may disconnect. Have a good day. Goodbye.

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