They don’t have a great outlook for next year, they reduced their dividend and cut on buybacks. (source FTSE 100 Live: Stocks hit as rising oil price sparks inflation fears | LSE:BDEV (proactiveinvestors.co.uk))
This is normal in my opinion, BDEV is going through a down cycle due to the current macro economical situation. According to what I have read, property is usually the first to be hit and usually the fastest to recover in a downturn. I will hold this stock for now, but I might reconsider my position once we are out of this cycle due to it’s high cyclicality. Do your own research.
They have also appointed a new board member Nigel Webb, which was working as Executive Committee at British Land Company plc (£LAND) which is a popular REIT.
UK House builders in general have been impacted by this report and are down today.
I guess it’s a case of consolidation that occurs in tougher market conditions (in comparison to conditions in past years).
Appears the markets believe it’s a good deal for Redrow, but slightly bad for Barratt based on the early share price swings.
Do you think it’s a good or bad deal @NeilB? From prior comments you work in/more familiar with the industry
Redrow hasn’t spent very long above 600p recently so a bump of ~84p will be well received and you’re getting to the ATH (I don’t know what dilution events, if any occurred during this time).
Redrow has a very strong brand and identity but seems to have struggled in scaling much past the mid-5000 houses a year.
If Barratt doesn’t barratt them up and “value engineer” out all of their design features then it’s good for both.
Wonder if the new government’s pledge on house building will allow Barrett to increase it’s capacity over the coming tenure. Reality is that there has to be the buyers out there to purchase these, probably at higher mortgage repayment rates than only a couple of years ago. I know I’m not looking forward to remortgaging and loosing my 1.9% interest rate.
There is, in theory at least, a built in demand every year from population growth. That said this can be lost in the confidence of the other 90-95% of people who are also making housing decisions. In reality most of the the time the decision made is not to make a decision and wait a little longer.
Barratt have the capacity to build much more a while a previous hiring freeze has dropped numbers a little the real test of the ambition will be post Redrow merger and how much of the duplicated capacity they keep around for growth.
They’ve already merged the companies as the CMA only highlighted a few geographic areas where competition issue would arse and these could be over come.
I was surprised that future competition over land aquisition and outlet sales wouldn’t have raised eye brows.
Vistry is setting pushing for a new model that not other major house builder has tried.
They’ve merged their way to a huge scale and also have a large partnerships division. A long side the % of affordable homes they’re required to build they build a further 30% they sell through partnerships. Many of these intuitions then either rent them or sell them as private shared ship. It enables them to off load slow selling ‘private’ units at a lower margin but it boosts cash flow.
