Barratt Redrow warns of significant profit hit from legacy costs

In recent financial reports, Barratt Redrow, a leading housebuilder in the UK, disclosed significant challenges it faced due to legacy issues following its acquisition of Redrow. The company reported a sharp decline in home completions for the fiscal year ending on June 29, with completed homes totaling 16,565, which fell below both the previous year's total of 17,972 and market forecasts of 16,800 to 17,200 units. This reduced output was predominantly attributed to difficulties in London, where fewer international and investor completions were recorded. Additionally, the firm warned that it would incur extra legacy property liabilities amounting to £248 million, with approximately £98 million stemming from fire safety and reinforcement problems identified during the latter half of the financial year. Despite these setbacks, Barratt Redrow noted that its adjusted pre-tax profits were in line with market expectations when excluding these adjustments. On a positive note, the company successfully achieved cost synergies of £69 million through its merger with Redrow, with long-term forecasts aiming for total savings of £100 million. The firm anticipates completions for the upcoming fiscal year to range between 17,200 and 17,800, including around 600 from joint ventures. Barratt Redrow has emphasized maintaining a goal of 22,000 completions per annum in the medium term. Chief Executive David Thomas expressed optimism about the company’s resilience amid challenging market dynamics, citing the persistent structural under-supply of housing in the UK as a potential driver for future growth. Analysts noted mixed reactions regarding the company’s performance and the broader market conditions, highlighting ongoing consumer caution and elevated mortgage rates, which have affected buyer confidence.