Redrow plans £80m land-buying spree

HOUSEBUILDER Redrow, owned by Wolverhampton Wanderers chairman Steve Morgan, has announced plans to raise up to £80m to embark on a land buying spree after securing planning conditions for several existing plots.

Executive chairman Mr Morgan, who stepped back in to embark a turnaround of the company’s fortunes three years ago, said the company had made “good progress” since he embarked on a strategy to return it to its roots providing quality family housing.

“We now believe the time is right to accelerate that strategy by taking advantage of the development opportunities we see. During the year to date we have secured planning on over 3,000 plots from our forward land bank, acquired new sites totalling £50m within Harrow Estates and commenced construction on our two largest London sites,” he said.

“There are an increasing number of land opportunities both in London and in the regions and as such we are looking to raise further capital to enable us to take advantage of these opportunities as they arise.”

The company is raising £19.4m through a share placing with Bridgemere Securities – a company owned by Morgan. It is paying 130p per share, which is an 11.1% premium on yesterday’s closing price.

Redrow is also looking to raise £60.2m by conducting an open offer for 46.3m new shares at the same price. The 3-for-20 offer will be underwritten by Bridgemere.

Although this will take his shareholding beyond 30%, the company will seek permission for him to waive an obligation to make a mandatory takeover offer as Bridgemere is underwriting the offer for no fee, meaning it will save “considerable” costs.

Alan Jackson, senior independent director of Redrow, said: “Since Steve Morgan returned to Redrow the Group has made significant progress under a compelling strategy that has seen the business re-established as one of the leading premier homebuilders in the UK.

“The time is now right to raise funds to accelerate that strategy so we can take advantage of development opportunities that we have identified.”

The company also updated the market with its progress since the start of 2011, stating that like-for-like sales were 2% in the 16 weeks to April 20, or 9% higher if figures from a London division which began last February are included.

The average selling price of its homes was up 12% at £207k excluding London, or up 20% at £223k including London.  

It also began selling its first central London development (One Commercial Street) in Asia.

“The response was excellent, with over 50 apartments being sold.”

Another major highlight was its Harrow Estates division buying up a chunk of the northern part of the Woodford Aerodrome site from Avro Heritage, the company owned by JCB heir Joe Bamford. This was the largest site acquired in a £50m spending spree on sites, which meant that net debt increased to £120m (2011: £80m) by the end of the period.

It added that pre-planning consultation was underway at Woodford, where it is planning a garden village site containing 800 homes.

Redrow started work on three more developments since the start of the year, bringing the number of active sites to 76. It expects this to reach 80 by the end of June.

“We have had a good run of forward land planning successes, which will deliver around 3,000 plots to the current land bank.  The land, which is spread over eight locations, will be drawn down over the next 12-18 months.”

Redrow added that it expected to achieve “good progress in the current financial year.

“Our sales per outlet are at the top end of industry comparables and like-for-like reservations are ahead of last year.”