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    BTRW.L · LSE · Consumer Cyclical

    Barratt Redrow plc

    Also onConsensus Drift

    Implied value per share

    GBp 320.52

    Market price

    GBp 305.70

    Implied upside

    +4.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages just 0.39% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 320.52+4.8%
    Exit multiple
    GBp 424.21+38.8%
    Market price
    GBp 305.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m184m368mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 5.7bnGBP 5.8bnGBP 5.9bnGBP 6.0bnGBP 6.1bn+1.9%
    EBITGBP 495.8mGBP 505.3mGBP 515.0mGBP 525.0mGBP 535.1m+1.9%
    NOPATGBP 371.8mGBP 379.0mGBP 386.3mGBP 393.7mGBP 401.3m+1.9%
    Add depreciation & amortisationGBP 36.0mGBP 36.7mGBP 37.4mGBP 38.1mGBP 38.9m+1.9%
    Less capital expenditureGBP -56.9mGBP -58.0mGBP -59.1mGBP -60.2mGBP -61.4m+1.9%
    Less increase in working capitalGBP -10.4mGBP -10.6mGBP -10.8mGBP -11.0mGBP -11.3m+1.9%
    Free cashflow to firmGBP 340.6mGBP 347.1mGBP 353.8mGBP 360.6mGBP 367.6m+1.9%
    Discount factor0.94920.85520.77050.69420.6255-
    Present valueGBP 323.3mGBP 296.9mGBP 272.6mGBP 250.4mGBP 229.9m-8.2%
    Present Value Of The ForecastGBP 1.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.247Reported 1.369, pulled toward 1.0 (Blume)
    Cost of equity11.36%Risk-free + beta x equity risk premium
    Cost of debt6.50%Implied cost of debt of 25.5% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationGBP 4.2bn94.3% of capital
    Total debtGBP 255.2m5.7% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC10.99%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareGBP 3.21

    64% of EV

    Forecast FCFF, final year
    GBP 367.6m
    Capex at depreciation, working capital in reinvestment
    GBP 410.4m
    Less reinvestment at g/ROIC (22.7% of NOPAT)
    GBP -93.4m
    Capitalised
    GBP 317.0m
    ROIC (WACC floor)
    11.0%
    Terminal value, undiscounted
    GBP 3.8bn
    Terminal value, discounted
    GBP 2.4bn
    Enterprise value
    GBP 3.8bn
    Less net debt
    GBP -714.4m
    Equity value
    GBP 4.5bn

    Exit at 10.7x EBITDA

    Value per shareGBP 4.24

    74% of EV

    Terminal value, undiscounted
    GBP 6.1bn
    Terminal value, discounted
    GBP 3.8bn
    Enterprise value
    GBP 5.2bn
    Less net debt
    GBP -714.4m
    Equity value
    GBP 5.9bn

    Spread between methods: 28%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.99%3.793.803.813.823.83
    9.99%3.463.473.483.493.50
    10.99%3.193.203.213.213.22
    11.99%2.972.972.982.992.99
    12.99%2.782.782.792.802.80

    Outlined: this model. Green text: above today's price of 3.06. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year1.9%0.3%-1.6pp
    EBIT margin8.7%8.2%-0.5pp
    Discount rate11.0%11.6%+0.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.