Housebuilder Barratt Redrow has unveiled plans to boost shareholder returns by £400 million over the year ahead as it comes under pressure from an activist investor.
The group said it would buyback around £386 million of shares over the year to July 2 next year, with a further £14 million set to be paid through dividends.
It comes after Barratt Redrow has faced calls from Phoenix Asset Management Partners – which is Barratt’s third largest investor with a stake of around 5% – to launch share buybacks of up to £1 billion a year and warned it would “escalate” its campaign if no action was taken by Barratt.
It has argued that Barratt’s shares are undervalued and that there is a widening gap between its share price and the value of its assets.
David Thomas, Barratt’s outgoing chief executive, said on unveiling the investor returns plans that “deploying capital through an expanded share buyback programme is currently the most effective way to create long-term shareholder value”.
He suggested there may be more plans to appease investors on the horizon.
“We are focused on further enhancing our cost base efficiency and we have additional opportunities to optimise our capital employed to enhance returns for shareholders,” he said.
The housebuilder’s shares lifted 4% in morning trading on Wednesday, but it follows recent hefty falls, with the stock down nearly a third in the past year.
Phoenix said it welcomed the buyback announcement, adding that it sees the potential for “further improvement in returns over time”.
Gary Channon, founder and chief investment officer of Phoenix, said: “The board’s decision to return capital through buybacks, while the shares trade so far below their worth, is a step forward for shareholders.
“Every share bought back creates lasting value for those who remain.”
Barratt – which became the biggest player in the sector after Barratt’s £2.5 billion deal to buy Redrow in 2024 – has cautioned over rising build costs and the potential for interest rates to stay higher for longer due to the Iran war, which has dampened buyer demand across the sector.
In its update on Wednesday, the group said it remains on track to meet market expectations for underlying pre-tax profits of £559.5 million for the year to June 28, which would be an increase on the £488.3 million reported in 2024-25.
The firm expects home completions at the higher end of guidance, at 17,662.
It is guiding for completions in 2026-27 of between 17,700 and 18,200.
But it cautioned that house price inflation is set to be “minimal” over 2026-27 and that build costs could rise by 3% to 4% after ramping up in recent months.
Barratt said build costs picked up pace from 1% in its first half to the end of December, to 3% in the final six months.
The firm said: “Recent volatility in global energy prices and supply chain disruption may increase build cost inflation in 2026-27.
“However, the extent of any impact remains uncertain and will depend on movements in energy prices, broader market conditions and the pace at which supply chains normalise.”
The group hopes to offset rising build inflation through cost cutting and supply chain management.
Barratt announced in March that Mr Thomas will be retiring in September, when he will hand over the reins to incoming chief executive Dean Banks.
Mr Thomas will remain available as an adviser until March 3 next year.
