Homebuilder Barratt Redrow cuts completions target but firm demand lifts shares

By Raechel Thankam Job and Yadarisa Shabong

Sept 16 (Reuters) - Barratt Redrow, Britain's biggest homebuilder, lowered its home completions target on Wednesday, echoing wider strains as planning bottlenecks and cautious buyers stall the housing market's fragile recovery.

But an improving reservation rate, a strong order book and a forecast-beating profit helped lift its shares by over 8%, as investors looked for signs that demand was holding firm.

Its net private weekly reservation rate from June 29 to September 6 rose to 0.62 from 0.55 a year earlier, while forward sales as of September 6 were 11,200 homes, up from 10,593.

Even so, the company expects to deliver between 17,500 and 17,900 homes in the year ending June 2027, down from earlier guidance of 17,700 to 18,200, and cut its average sales outlet expectation to about 405 from 415.

British builders have long complained that regulatory hurdles complicate the approval process and hold back build targets, with a lack of government support on affordability also weighing on demand.

"We are creating generational inequality in not allowing younger people to be able to access the property ladder. And I think the government is well aware of that," said CEO David Thomas, who hands over to Dean Banks next week after more than a decade in the role.

While rivals have also called for cuts to the stamp duty, a property tax, the government has so far resisted ahead of next month's budget.

Quilter Cheviot analyst Oli Creasey said he expects the volume cut to pressure margins and earnings per share further.

COSTS AND INCENTIVES WEIGH ON PROFIT

The Middle East conflict has also reversed early signs of recovery, reigniting inflation worries and lifting interest rates and costs, forcing many UK homebuilders to cut profit targets.

The Bank of England is nonetheless expected to hold rates steady on Thursday, despite surging oil prices, offering some relief.

Barratt Redrow has leaned heavily on incentives such as part-exchange to support reservations, and anticipates these will remain elevated unless consumer sentiment improves. 

Those incentives, along with rising costs, weighed on its fiscal 2026 adjusted operating margin, which fell to 9.9% from 10.5%.

Adjusted pre-tax profit fell 7.1% to £572.8 million ($771.45 million), ahead of forecasts of £540.3 million, according to LSEG data.

($1 = 0.7425 pounds)

(Reporting by Ankita Bora and Raechel Thankam Job in Bengaluru; Editing by Subhranshu Sahu and Christian Schmollinger)