Barratt Redrow PLC (LSE:BTRW) shares edged higher on Wednesday after the housebuilder said it remains on track to meet full-year expectations after a solid third quarter, supported by slightly stronger cash and sales than reported in its interim results.
The FTSE 100 group reported a net private reservation rate of 0.64 per outlet per week, up from 0.62 a year earlier and 0.55 in the first half. Including bulk and rental deals, the rate rose to 0.67 from 0.63 a year ago.
Forward sales increased 11.2% to 11,395 homes, with a value of £3.54 billion, leaving the group 94% forward sold for the current financial year.
Total home completions in the quarter fell to 3,274 from 3,717 this time last year, reflecting what a strong comparative period ahead of changes to stamp duty.
Barratt said it remains on track to deliver between 17,200 and 17,800 completions for the year.
Net cash is now expected between £550 million and £650 million, ahead of previous guidance, helped by lower land spend and the timing of remediation payments.
Chief executive David Thomas called it a solid quarter, "with a resilient reservation rate underpinned by good customer demand".
He expects "limited impact" from the war in the Middle East in the near term, but said uncertainty around interest rates and build costs could affect the outlook beyond the current year.
Shares in the company rose over 2% in early trading, before gains were pared back. The shares are down almost 28% since the start of the war in Iran, which has raised oil prices and worries about inflation, denting hopes of interest rate cuts any time soon and therefore weighing on mortgage rates and on the housing market.
Mortgage rates were unchanged on the most recent update from industry data specialists, though Bank of England rate predictions have benefited from recent optimism around truce talks between the US and Iran.
Market analyst Mark Crouch at eToro said the update from Barratt Redrow is "unlikely to put investors' minds at ease, as the market is no longer in the mood to give housebuilders the benefit of the doubt".
Despite steady reservation rates and solid forward sales, he focuses on the share price, having recently slipped to levels last seen in 2013.
"UK house builders were already on shaky ground. Affordability constraints, elevated mortgage rates and patchy demand had begun to bite well before the latest onset of geopolitical uncertainty. Now, the risk is that higher energy costs feed through to build inflation, while interest rates stay higher for longer, squeezing both margins and buyers in equal measure.
"Against that backdrop, management’s more cautious stance on land and capital allocation feels less like discipline and more like necessity. The balance sheet remains robust, and Redrow synergies are coming through, but the direction of travel is what matters.
"For now, the sector feels caught in a tightening vice, and until there is clearer relief on rates or demand, it risks going from bad to worse."
Analysts at Stifel said the shares "appear oversold to us, if the UK's inflation shock is short and sharp, trading at 0.55x book, a 20% discount to the sector and the lowest multiple since May 2012".
** UPDATE: Adds share price and broker comment **