Barratt Redrow PLC (LSE:BTRW) shares topped the FTSE 100 on Wednesday after the housebuilder pledged to return £400 million to shareholders via buybacks and reported annual profits in line with expectations.
The FTSE 100 group said in a year-end trading update that it completed 17,667 home sales in the year to 28 June, at the top end of its guidance range and up from 16,826 a year earlier.
There was net cash of £772 million at year-end, well ahead of the £550-650 million range it guided to in April, helped by lower land spending and delayed building safety remediation payments.
In an update to the capital allocation policy, the board decided to replace almost all of its ordinary dividend with share buybacks, announcing a programme worth about £386 million that starts immediately.
The board said the shares trade at a 36% discount to tangible net asset value, making buybacks the preferred use of capital. A "nominal amount" of 1p per share will be paid as an ordinary dividend.
Chief executive David Thomas called it "a solid performance in a challenging market" and said the sector "continues to navigate macroeconomic and geopolitical uncertainty, alongside industry headwinds and subdued customer demand, which have weighed on market sentiment".
He added that the company is "very well positioned" and the "business model, strong balance sheet and further opportunities to optimise capital employed, such as the roll out of further synergy sales outlets, position us well to drive attractive returns for shareholders over the long term".
Looking ahead, the group expects to increase completions to 17,700-18,200 in the new financial year, including about 600 through joint ventures.
That guidance comes despite cutting its expected average number of active sales outlets to around 415 from previous guidance of 425-435 because of faster site closures and continued planning delays.
There is "minimal" house price inflation expected under current market conditions, though build cost inflation "could be circa 3-4%".
Shares rose just over 3% to 286.64p in early trading, while others in the sector were also carried higher by investor read-across. Vistry Group PLC (LSE:VTY) was up 1.4%, Persimmon PLC (LSE:PSN) 1.4%, Taylor Wimpey PLC (LSE:TW.) 1.0%, Bellway PLC (LSE:BWY) 0.9%, while Berkeley was little moved.
Broker Peel Hunt noted that completions were slightly ahead of the guided range, with adjusted PBT expected to be in line with the current City consensus forecast, and the order book is "only modestly lower" than the prior year.
With the planning backdrop continuing to pose difficulties, minimal growth in house prices and build cost inflation likely to be 3-4%, the business is "likely to see further gross margin pressure in FY27E" and, with admin costs and interest charges guided to increase by circa £40-45 million, this implied downgrades to its current PBT forecast of £568 million.
But analysts at Stifel said the outlook is "broadly where consensus is already" and growth "not predicated on better sales rates". Build cost inflation of around 3-4% compares to consensus at around 4%.
** UPDATE: Adds shares and broker comments **
